City Remains Silent on Renegotiating Curbside Recyclables Pickup Deal with Republic Services

SAN ANGELO, TX — After the trash forums were completed and the people had their say, from the City we are met with the sound of silence, said the local Republic Services managers. The City promised the results to a citizen survey forthrightly after the final trash forum. It took our Texas Public Information Request to finally obtain the results.

At issue is an August 2018 request from Republic Services, the City’s incumbent and exclusive trash pickup vendor, to modify the trash collection contract to account for the increased cost of curbside recycling. Butt’s Recycling, a local company, sits in the catbird’s seat and is able to demand just about any price it wants to process recyclables within the City of San Angelo. Republic gave them the exclusive contract to intake its curbside recyclables in 2014 and no other local recycling company remains in business.

According to Republic Services, Butt’s now wants $160 per ton, which is a high number, when compared to the tipping fee for trash at the landfill that runs just $37.48 per ton.

Republic’s 2014 contract, modified in 2016, promises one time per week trash pickup and every other week pickup of recyclables. The reason stated by all sides as to why Butt’s wants so much more is because the bottom of the recyclables market fell out last year. Butt’s cannot make enough money reselling bundles of recyclable material like they could in 2014 when the original agreement was made. They are making the cost up with much higher processing fees.

Residential recyclable pickup amounts to an average of 337 tons per month, according to City of San Angelo data for all of 2017. Of that, net recyclables materials, or the stuff that can be bundled and sold, is 248 tons per month. San Angelo’s contamination rate averages 26 percent.

If these numbers hold, Butt’s wants $53,920 per month on average to continue processing Republic’s recyclables haul. That monthly recurring expense, Republic’s Regional Manager Davy Daniels told City Council, is unsustainable. Daniels didn’t ask for a specific remedy, but gave a slate of options, ranging from eliminating recycling altogether to increasing monthly fees on San Angelo residents. The City Council instructed staff to organize a series of public forums and delayed any decision on negotiating with Republic until citizen feedback was received.

The forums were completed Oct. 4. Since then, the City Council has only held the trash contract discussion during secret executive session meetings, but not uttered a word in public. What is the City up to?

Republic Services is perplexed, too. At his office on Hughes St., Davy Daniel, General Manager of the West Texas Division of Republic Services, said Republic is prepared to continue the trash contract as-is. But he is concerned that the partnership with the City of San Angelo is strained to the point that there has been almost no contact with Mayor Brenda Gunter, the council members, or even City staff on his wide-ranging request to help them find a solution to the change in recycling market conditions.

“They didn’t even talk to us at the TML convention,” Republic’s Municipal Manager for West Texas, Joe Spano, added. The Texas Municipal League holds an annual conference; this year it was Oct. 10-12 in Fort Worth, days after the final forum here. Municipal executives like city managers and elected municipal officials, along with vendors of goods and services attend. It’s a big deal. Republic sponsors a party each year there. No one from San Angelo attended as they had in the past.

Gunter was not available for comment, but Councilman Harry Thomas said City Attorney Theresa James ordered staff and council to avoid contact with officials from both Republic Services and its competitor Texas Disposal Systems while the request to change the contract is still in the air. ‘

“We can’t even comment in public on the Republic deal,” Thomas said.

Since August, Republic’s recycling processing contract with Butt’s has been week-to-week. Spano said the two companies are close to signing a new longer-term contract with the much higher tipping fees for processing recyclables. But neither Republic official is hopeful the City will work with them for a solution.

Davy explained that while Republic is a huge corporation, the West Texas Division is run like a smaller business unit. He’s responsible for his division’s profit and loss. How the contract went down before Davy, and even before his predecessor Rat Grothaus, arrived has plagued the person sitting in the San Angelo General Manager seat for almost half a decade.

Republic pulled out all the stops overselling its recycling capabilities to a gullible City Council and staff in 2014. Republic sold its “state of the art” recycling process using a partnership with a local recycling vendor. Every home in the city will have curbside pickup, a first for this kind of municipal service in any tier 2 or 3 West Texas city. A Republic C-Level executive named Reid Donaldson told the San Angelo Apartment Association in August 2014, a month after the contract was inked, that Republic is “bringing what is considered the highest level of technology in recycling to the city San Angelo.” He went on to explain that West Texas would soon have a Material Recovery Facility, or MRF. The MRF is mentioned in the trash pickup contract, though there are no specifics on a timeframe or if one would be built. Donaldson told the apartment managers the MRF would be built here “within nine months,” or in early 2015.

There likely was no intention by Republic to invest $12 to $15 million in an MRF here. Instead, Butt’s built an 8,000-square-foot metal shop to house used sorting equipment Republic loaned or sold to them.

“We’d have to process 3,500 tons of recyclables per month to justify the cost of an MRF,” Davy explained. San Angelo’s recyclable yield is less than 10 percent that. Davy clarified that 3,500 tons was needed at the current market conditions.

“What we used to get $70 per bail for we’re lucky to get $10,” Davy said.

Drastic increases to trash pickup fees to municipalities when recyclables are involved are starting to pop up in the news elsewhere. The City of Penn Hills, Arizona is considering a 43-percent increase to continue using Republic Services curbside-recyclable pickup service. The deal will exclude many materials once thought to be recyclable, like type 3-7 plastics, glass, and tires.

In some areas of Philadelphia, Republic actually pulled out of the market, and competitor Waste Management stepped in, after Republic pitched the city on increasing its recycling processing fees from $16 to $170 per ton.

Davy said the Republic’s model for making money on recyclables is being formulated in larger municipalities that take into account the market conditions.

While trash pickup has two cost components, the cost of running the trash truck routes and the cost of paying the landfill to dump it, recycling has four centers. They are pickup, recycling processing, dumping the residual, and the income from selling the remaining recyclables on the open market.

At $60,000 per month in processing fees, the cost to continue recycling with Butt’s, comes to about $2 per residential customer. There are approximately 30,000 residential pickup accounts with the City. Davy explained that when considering the four-stage recycling cost centers, a deal could be cut where the City gets an annual rebate based upon the gross revenue the recyclables fetched over the year.

That way, the residents can participate in any upside in the recyclables market, should it recover, and Republic’s P&L here locally is more stable during down market times.

What Davy called a “transparent pricing structure” will help solve other problems with San Angelo’s recycling efforts, like contamination. If citizens knew that providing more careful attention that what is placed inside the green recycling bins was not contaminated would lead to a bigger payoff, or annual rebate, it will be easier to get more onboard.

Republic Services’ CEO Don Slager was quoted in WasteDrive explaining, “We need to push through to a new model that gives us predictable consistent returns in that business and then shares the upside with customers, if they do a good job and a responsible job with the contamination."

In the four City forums, and from the survey results, what stands out is that San Angelo residents are proud of their curbside recycling program and want it to continue. Of the 2,743 who answered the City curbside recycling program survey, 93.29 percent indicated they use the curbside recycling service. About half indicated this was because they want to save the environment, and the other half indicated it was because of the convenience.

The survey was an online poll conducted on the City of San Angelo website, so the data isn’t scientific.

Despite this, 1,657 of 2,740, or 60 percent of respondents in the City of San Angelo survey, said they were unwilling to pay more for curbside recycling.

Thomas said his policy position, and what he has heard from the five other council members and mayor before the city attorney’s gag rule, is that not he or anyone else on council will approve an increase in residential service fees. Mayor Brenda Gunter went one step further and called out the 50-cent per month surcharge on residential customers for not providing 500 tons per month of recyclables.

“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.

Gunter is advocating cutting $15,000 per month out of residential trash pickup instead of a price hike.

What if a deal cannot be made with Republic? Expect stricter compliance with the trash contract’s details, such as Republic pushing to declare more recyclable loads ineligible for processing at the Butt’s facility, and put into the landfill anyway.

The last chance cure for Republic is to give the City 180 days notice and pull out altogether. I asked City Attorney Theresa James in the parking lot when leaving the last trash forum in October, “Republic doesn’t have any way in that contract to have the City pay them back for those fancy automated garbage trucks, does it?”

“You can read the contract as well as I can,” she answered.

You can too. Here it is.

More on the curbside-recycling impasse:

• In San Angelo, Curbside Recycling is No Longer Sustainable
• Republic Services, City of San Angelo Inch Towards War Over Curbside Recycling
• Study: San Angelo Commercial Trash Rates are 183% Higher than Abilene's
• Republic Services Under Fire for Overpromising, Under-Delivering Recycling Promise to San Angelo
• VIDEO: Dolcefino is Back and Saying Republic Should Honor the Curbside-Recycling Deal
• LIVE! TALK: The Origins of San Angelo's Trash Controversy