The bitter breakup at the MRF
From the October, 2016 issue
After just a week on the job, new city administrator Howard Lazarus terminated the city's contract with ReCommunity, the company that's processed recycling at the city's Materials Recovery Facility for the last twenty years.
"I talked to [acting city administrator] Tom Crawford before I moved up here about significant safety concerns at the MRF," the soft-spoken Lazarus explains. (Like everyone else, he pronounces it "murf.") "It was an operation safety matter that had to be addressed immediately. We don't want anybody to get hurt, and we don't want the taxpayers to be on the hook for a potential wrongful death or injury."
Mayor Christopher Taylor doesn't recall exactly when he first became aware of the situation, but it was "not years ago, but not weeks ago." Taylor looked into it but won't say what he found. "At this point, as a matter of ongoing litigation ..." the attorney-mayor smiles and lets the sentence trail off.
ReCommunity is suing the city for breaking the contract, which still had six years to run. Sean Duffy, president of the North Carolina company, says the termination is unprecedented in his thirty-three years in the business: "We do get complaints, [but] nothing has ever escalated to this level."
Duffy admits there have been injuries at the MRF but says "injuries are not unusual when you're handling heavy equipment." Rather than safety concerns, he believes the city wanted out "because it wasn't making money any more. The markets [for recyclables] have gone down. When things were good, they were fine. But when they weren't receiving big revenue checks, it was a whole different look."
Lazarus says that "is absolutely not true. It was singularly because of the unsafe operation of the facility. There were documented nonresponsive safety issues that led to their termination."
Though ReCommunity employed the workers, the city owns the MRF, so it could be liable for injuries there. But that's not the only possible impact on the city budget. When commodity prices were high, materials
sold by the MRF helped pay for the city's green agenda. Now prices have crashed, leaving taxpayers on the hook.
Aaron Burman says he was "shocked" at the contract termination. "The city had a good deal with ReCommunity," says Burman, who spent ten years with the locally based and nationally known Resource Recycling Systems. The contract, he says, gave the city "the vast majority of the revenue" from MRF sales.
The city doesn't know how much money it got from ReCommunity. When the Observer asked for figures for the past decade, we were told the information didn't exist--and we would have to pay more than $6,000 if we wanted the city clerk to compile it.
ReCommunity's Duffy has a total for the last five years: "From 2011 to 2015, the City made nearly $2 million from the sale of recycled materials collected from third parties and approximately $1 million from City materials," he emails. "When commodity prices reached historic lows in 2015, revenues generated from recyclable materials did not cover the cost to operate these facilities."
That's plausible, Burman says. Commodities fell so far that "the value of a ton [of recycling went] from $125 to $35--and a MRF costs $45 a ton to operate."
The contract with ReCommunity had an upside and a downside. The city shared the profits when the MRF made money--but if revenue fell below costs, it had to cover the losses. The company's suit claims that's why the city wanted out.
Duffy says that Ann Arbor shortchanged his company even before it broke the contract. "We spent tremendous amounts of money to repair" the baler that prepared materials for shipment, he emails. The city finally agreed to replace it and split the cost. "We contributed $1,158,000 excluding the millions we spend in normal maintenance," he writes. "They contributed $136,000." By his calculation, ReCommunity is owed "$180,000 for processing fees, and for the remaining repairs we made. That's about $1.2 million total."
The new baler went online in July. That same day, the company claims, the city gave it one day's notice to clear out. The MRF hasn't sorted a recyclable since.
Lazarus explains in an email that "extreme wear on the sorting line equipment at the MRF, as well as damage to and/or removal of safety/protections on the equipment [means] the sorting line equipment cannot be operated in a proper and safe manner at this time." He says he won't know when it might resume until he gets a consultant's report.
"We all understand that there are folks in the community who are not happy with what we did," Lazarus says. "But it was based on the business aspect of it. We can't stay stagnant and stuck in bad contractual relationships."
No one's unhappier than Mike Garfield of the Ecology Center. Garfield says he has "no first-hand information" about the dispute between the city and ReCommunity, so he won't comment on that. But he strongly opposes the city's interim plan for handing recyclables: it hired Waste Management, the country's biggest solid waste disposal company.
"Waste Management takes a solid waste approach to recycling that focuses on landfills," Garfield charges. "Their business plan revolves around trash. They make their money off of trash. Their commitment to their shareholders is to make the most money, and they make the most money off of their landfills."
Since getting the Ann Arbor contract, Garfield says, Waste Management has "been accepting unsorted recyclables, compacting them through the baling machine, and shipping them to Akron, where they get unbaled and run through their sorters there. This is the worst possible way that recyclables can get processed. You might lose up to a third of the material to the landfill."
"Waste Management stepped up as a short-term partner when we needed to do something different," says Lazarus. Though city council recently extended the contract by four months, "this was never intended to be a long-term solution. We have a request for proposals out that will give us an interim operator for about twelve to eighteen months" while the city reevaluates its recycling program. "The policy direction is something for the council to address," he says. "My job is to give them creative options."
The interim contract will pay Waste Management close to $900,000 for crunching recyclables and hauling them to Ohio. Could the company get the MRF contract long-term? "It's possible," Burman says. "They already handle the commercial [trash] collection in the city and operate a number of landfills in the area. They also run MRFs and do composting, but they're not investing in recycling. They fired their whole recycling staff two years ago."
Lazarus won't rule out hiring Waste Management. "Over the long term we'll seek out partners that help us achieve our values the best and get the best value. There's a tradeoff between community value and cost of operation."
Garfield sees it differently. "The city should be putting money into its MRF and getting a good operator to run it." But he fears that instead the city "could shut down the MRF or sell it."
Lazarus won't rule that out either. After "retooling" the facility, he says the city will use the MRF again, but it may be city-owned only "for now. The two things that will drive the discussion are how well we can meet the community's values and what are the right business decisions to make."
Sean Duffy says the right business decision would have been to work with his company to repair the MRF and keep it operating. Commodity prices have recovered enough, he emails, that had Ann Arbor honored their contract, "the City would again be generating revenues from the sale of recyclable materials processed at the facility."
[Originally published in October, 2016.]
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