In San Angelo, Curbside Recycling is No Longer Sustainable

SAN ANGELO, TX — In July 2014, the San Angelo City Council at the time heralded in a new era in trash collection. Then-Mayor Dwain Morrison, who throughout the year prior, bemoaned the loss of the best trash collection service in the nation, or as he said “two men on the back of a truck,” was satisfied he had bridged several interest groups and their objectives with one $250 million exclusive trash contract to a Fortune 500 company, Republic Services.

The contract traded the antiquated and labor-intensive three-man trash collection crew with a one-man mechanical arm truck and its signature 96-gallon carts that now line our streets instead of the alleyways in the city. It also provided Republic a price increase.

The deal satisfied three constituencies, but was fragile. First, the hallmark of the trash deal was the inauguration of curbside recycling. San Angelo residents could feel good about protecting the environment—and preserving scarce West Texas landfill capacity—through an easy-to-use curbside recyclable pickup service once per week for about the same monthly rate as regular trash pickup in comparable cities. And no other west Texas city has curbside recycling even to this day. San Angelo enjoyed the aura of being more progressive than its peer cities.

Because the residential rate was subsidized by dumpster fees paid by San Angelo businesses that did not vote, the cost was more manageable for poorer residents and seniors on fixed incomes, particularly those in Lake View, Mayor Morrison’s core constituency. At the same time, through a rate structure that was increased during negotiations between Republic and City officials upward over Republic’s initial low bid, City Manager Daniel Valenzuela was able to make the solid waste enterprise fund whole again with a cash infusion from Republic worth nearly $17 million over 10 years, with about half of it paid upfront, as a condition for Republic being awarded the exclusivity contract. See this article for details.

Now, a little over four years into the 10-year trash collections and landfill management contract with the City of San Angelo, its hallmark achievement of curbside recyclable pickup for over 30,000 residential customers is in peril.

Republic’s Regional Municipal Manager Joe Spano introduced Republic’s General Area Manager David Daniel who explained to council Tuesday that the cost of continuing the current curbside recycling program is unsustainable for his company.

The primary problem, he said, was that global markets don’t want recyclables anymore, particularly China, the country that up and until this year was the largest consumer of U.S. recyclables.

“China was 40 percent of the recyclable market until 2018. Now they are 10 percent and they will take no more mixed paper,” Daniel said. Mixed paper, or newsprint and paper you throw away from your mailbox, was about 20 percent of the recyclable stream China purchased until this year and 25 percent of the San Angelo recyclable stream.

The only recyclable that remains marketable in 2018 is uncontaminated cardboard, Spano explained after the council meeting. Cardboard is usually collected in San Angelo from business customers, not residential customers. Discarded pizza boxes, though cardboard, are ineligible because pizza boxes are contaminated with pizza debris.

“In 2018, literally the world of recycling has changed. It’s not just a San Angelo issue,” Daniel said.

The Republic representatives want to renegotiate the residential trash pickup portion of the 2014 contract to eliminate or drastically reduce curbside recyclable pickup. They had options, Daniel said, depending upon what direction the council wanted to go.

Mayor Brenda Gunter was short with the garbage guys. She asked for support from the council to not give a directive to City staff to move on the issue until a series of town hall meetings with citizens was held. She said that the trash contract was such a contentious issue in 2014 that not formally receiving citizen input would be a political mistake.

Councilman Tom Thompson asked what the size of the problem was monetarily. Daniel said it was between a $700,000 and $1 million annual problem.

In an exclusive interview after the meeting, Spano said Butts Recycling is charging Republic $150 per ton for receiving recyclables. To put that figure into perspective, the tipping fee at the City of San Angelo landfill is less than $50 per ton to dump trash there. In all, Republic is spending about $55,000 per month inputting recyclable refuge into the Butts Recycling stream, Spano said. What’s more, the Republic contract with Butts ended August 1, so Republic is operating on what Spano described as a week-to-week basis with the locally owned recycling provider.

The Republic representatives said the recyclable market is unsustainable for the corporation to continue offering curbside recycling at the monthly residential rate agreed upon in 2014, even with the monthly $0.50 surcharge, or penalty, per customer. Residential customers are charged the fee because collectively, they are not reaching the 500 tons per month of recyclables goal. Nor can Republic sustain curbside recycling after earning the annual automatic 2.9 percent increase in residential trash pickup rates that is also in the contract.

The Republic representatives hinted that if council didn’t cure the problem, then Republic would ask for a trash collection rate increase from the City to continue the currently unsustainable curbside recycling program.

Councilman Tommy Hiebert noted that the City negotiated and executed the trash contract in good faith. “What if we want to stay with the current contract?” he asked. Daniel answered, “We would come back to council with an exact figure the change in the market would be. It would be a cost increase to the City.” Hiebert pressed. He wanted to know why the services and prices already negotiated and agreed upon in the 2014 contract could not be upheld?

At this point, City Manager Daniel Valenzuela stepped in and said that to continue this portion of the discussion, input from City Attorney Theresa James was required. “We’re not prepared at this point to discuss this,” he said.

At that, all discussion about what was originally agreed upon in the signed and executed 2014 contract was shut down.

When we reached Bob Gregory, CEO of Texas Disposal Systems, or TDS, yesterday afternoon in his Creedmoor office southeast of Austin, he said he was not surprised. It never was the intention of Republic to continue the curbside recycling program. It was a bait and switch tactic by Republic to render his opposing bid worthless, he said.

He recounted the history of the trash negotiations. He noted that his company’s original bid was for every-other-week trash collection and his bid was lower than Republic’s and did not include the 2.9 percent annual increase. Republic trumped his bid, he said, with an every week curbside recycling bid that was lower than his.

“No city has ever been successful with a weekly curbside recyclable schedule,” Gregory said. His company has the curbside recycling pickup contract for the City of Austin.

Last year, Republic successfully reduced the weekly curbside recyclable pickup schedule to every other week by offering a monthly, rather than quarterly, bulk pickup collection service in exchange.

Despite the reduction in convenience for citizens to recycle, the $0.50 per residential trash customer penalty for not providing 500 tons of recyclables per month remained in effect (monthly, citizens currently provide 350 tons of recyclable intake, 25-30 percent of that is contaminated, according to Republic). This was not lost on Mayor Brenda Gunter Tuesday.

“We would no longer consider conversation about the 50 cents per customer for not meeting goals. Just so we’re talking the same language,” she said.

Later in the meeting, the mayor pressed the Republic representatives, hinting that she was expecting a further price reduction than just an elimination of the 50-cent penalty.

“If you reduce the amount of curbside recycling, your costs do down,” Gunter said.

The worldwide crash in the value of recyclables is true, and because of this, the stage is being set for another citywide fight over trash. Mayor Gunter, through her statements Tuesday, seems to be positioning herself for a great negotiation position. At the State of the City address last month, she was asked if the curbside recycling program was on the table along with reducing commercial trash collection rates—the highest in west Texas. She said “yes” and “yes.”

Meanwhile, TDS sees another opening to submit a new bid for San Angelo’s trash collection contract. The contract is, after all, about to be renegotiated. How much of the contract will be on the table hasn’t been determined yet, but if the mayor couples commercial trash rates with residential collection, it may tip the first domino. And could open the City up for a legal fight with Republic.

Republic isn’t without leverage. The City of San Angelo landfill is one of two that Republic operates in the area. The other landfill, owned by Republic in Abilene, has a longer lifespan. Republic could choose to haul San Angelo trash to its landfill in Abilene, denying the City of San Angelo its cut of its landfill’s monthly trash tipping fees.

The trash contract may also provide Republic some protection. In Section 9.E of the contract, it states, “Other than the annual rate adjustment provided under Sections 9.D and 9.G (the 2.9 percent annual increase and $0.50 per month per customer for failure to collectively reach 500 tons of recyclables respectively), or material changes in Provider’s costs of operations such as labor markets for which Provider seeks a rate increase from the City Council from time to time under this Section 9.E, no other increase in rates shall be authorized under this Special Contract unless such increase is the subject of a request by Provider (Republic) for a rate adjustment subject to review and approval by City Council in accordance with Section 5.C.” Section 5 involves a Provider request in rate increase due to a change in federal, state or local laws that increase Republic's expenses.

Towards the end of the contract, it states that Republic can terminate the contract with cause, “If the City Council denies a rate adjustment duly requested by Provider pursuant to Section 5 or Section 9.E herein of this Special Contract.”

The good news is, according to the contract, Republic must give the City 180 days notice before terminating trash pickup.