HWMA Drops ACRC – February 16, 2011

Wednesday, February 16, 2011

Daniel Mintz

Eye Correspondent

HUMBOLDT – The Arcata Community Recycling Center will lose all its municipal customers – 60 percent of its business – and its survival is uncertain.

Representatives of the governments that compose the Humboldt Waste Management Authority (HWMA) unanimously voted to pursue a contract from an out-of-town company at their Feb. 10 meeting. Once the new contract with the Willits-based Renewable Waste Systems (RWS) is established, ACRC’s recyclables tonnage will drop from 10,000 tons to 4,000.

To the HWMA boardmembers, including Arcata Councilmember Michael Winkler, the decision was clear-cut – ACRC responded to a request for five-year contract proposals with an offer to process recyclables at a cost of $65 a ton. Renewable Waste Systems is offering to pay the HWMA $8 a ton.

Put another way, ACRC’s proposal would have cost the HWMA $2.2 million over the five-year contract period while RWS promises $280,000 in revenue.

Mark Loughmiller, ACRC’s executive Director, described the impacts of the switch to HWMA boardmembers before they took the vote. “Loss of this tonnage will effectively shutter the operation,” he said, referring to the operation of the center’s Samoa recycling facility. “And so not only does it impact the employees at Samoa, it will impact every employee, it will impact the thrift store in Arcata and it will impact the drop-off.”

The Samoa facility was built to serve the entire county and has a 20,000 ton processing capacity. ACRC has $5 million in outstanding bond debt related to its construction and Loughmiller said if it closes, “It just drags everything down with it.”

But in an interview the next day, he said he might have overestimated the impacts. “It’s more fair to say we’re assessing our options,” he continued.

Asked what the options are, Loughmiller declined to go into detail but downsizing is certain. “We’ll have to assess how to continue operating with 4,000 tons,” he said, adding that it might not be until this summer before the tonnage from the county and the cities is lost.

“If we’re looking at 4,000 tons, we will have to cut, cut, cut,” Loughmiller said.

Those cuts would severely downscale ACRC’s workforce. There are 35 employees now and 21 of them are involved in processing. The others work in ACRC’s vocational education program, its various drop-off sites and the Arcata-based Recyclables Depot thrift store.

Should the ACRC declare bankruptcy, it would sell its assets and then pay off its multi-million dollar debt. Loughmiller said that because ACRC is a non-profit entity, the state’s attorney general would investigate the cause of bankruptcy and make sure that leftover money is spent on a similar purpose.

He said bankruptcy isn’t being planned for at this point. “I don’t think it’s fair to say that this will put us out of business.”

But Loughmiller suggested otherwise at last week’s meeting and there were already serious doubts about ACRC’s stability.

During the public comment session, Arcata Councilmember Shane Brinton – who was on the HWMA board before Winkler – referred to the circumstances of his replacement, saying that ACRC boardmembers successfully lobbied Arcata City Council members to appoint Winkler because they thought he’d be more receptive.

“There have been a lot of anti-competitive moves throughout this process,” Brinton said. “I think what we’re seeing is an organization that is scared of not existing anymore.”

The county’s HWMA rep, Supervisor Virginia Bass, said it’s difficult to sacrifice 35 jobs but continuing with ACRC is too expensive. “I certainly don’t want to be responsible for putting someone out of business but at the same time, we have a responsibility to the ratepayers,” she said.

The ACRC has been intensely affected by interest rate hikes and market conditions. Eureka City Councilmember Linda Atkins noted the lack of pricing stability. “We can’t continue with a year-to-year, pendulum-swinging of rates,” she said.

Loughmiller had mentioned an alternative ACRC proposal that would assess processing costs every year and not charge anything for this year.

Winkler described the so-called “zero proposal” as “subsequent material” that’s outside of the Request for Proposals process. “And even though I would be very reluctant to take an action that would potentially eliminate jobs in this area, we have to evaluate these proposals on the basis of whether we can count on the numbers and stability of rates and what would be the effect on ratepayers,” he said.

Jim Test, the HWMA’s executive director, has written in staff reports that ACRC’s variable-rate interest payments could increase, triggering hikes in ratepayers’ bills. Another ACRC handicap is its use of dual stream processing, or separation of containers and fibers.

The HWMA envisions serving the entire county and single-stream processing is the most cost-effective way to do it.

Gerry Ward, the president of RWS, called attention to Test’s staff report, which stated the price differences between each proposal. The spread between the two proposals is highest in Arcata, where there’s a $28 per year difference for an average ratepayer.

Ward said his company is more stable because with an HWMA contract, it will get recyclables from both Humboldt and Mendocino counties. “We are confident that the price that we’ll give you will be stable for five years – we’ve given you a floor,” he continued, explaining that if the commodities market improves, payments to the HWMA will also increase.

It’s an offer the HWMA board couldn’t refuse. Winkler’s motion to begin contract negotiations with RWS was unanimously approved.

In an interview, ACRC Board Chairman Milt Boyd said going out of business is a “strong possibility.” He’s surprised by the decision.

“I’m really disappointed with having supported the representatives on that board,” he said. “Their mantra throughout was, ‘Jobs, jobs, jobs,’ and here we go, shipping those jobs out of Humboldt County.”

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