Jilted ACRC Threatening Legal Action – April 4, 2011

Monday, April 4, 2011

Daniel Mintz

Eye Correspondent

HUMBOLDT – The Arcata Community Recycling Center’s 40-plus year old mission of advancing what was once considered the dream of environmentalist do-gooders is ending in the shadow of litigation.

Notice of an impending lawsuit follows last month’s decision by the Humboldt Waste Management Authority (HWMA) to cease doing business with Arcata Community Recycling Center (ACRC), the country’s most long-lived non-profit recycling center. The Authority is now in contract negotiations with the Willits-based Renewable Waste Systems, which substantially bested a proposal from ACRC in a competitive bidding process.

And in a March 21 letter to the HWMA’s board of directors, which is made up of elected officials from the county and various cities, Fortuna Attorney Tom Herman summarizes ACRC’s claim that it’s being driven out of business in a calculated effort to buy its Samoa processing facility at a low price.

The ACRC is alleging that the purpose of a 2009 study by the Intelliwaste Inc. firm on the center’s operations and financial status was misrepresented by HWMA staff. The study was purported to be focused on establishing a recycling contract, according to Herman’s letter, and the ACRC was “surprised” to find that “rather it was a study aimed at HWMA acquiring the Samoa facility.”

The ACRC wasn’t a willing seller and the HWMA board voted to pursue a Request For Proposals (RFP) process for a five-year contract for recyclables processing. Two proposals emerged, one from ACRC and the other from Renewable Waste Systems.

The latter proposed paying the HWMA eight dollars a ton for processing the recyclables of its member governments. The ACRC’s bid was to do the processing at a cost of $65 a ton, up from the $50 a ton it now charges the HWMA.

And the ACRC alleges that the RFP process is unfair, as the Intelliwaste study “disclosed all of ACRC’s operational costs and revenues in a public document.”

The finances of non-profit agencies like ACRC are publically available but Herman’s letter states that the information in the study “deprived ACRC of any fair opportunity” to compete in the bidding process “as all of its competitors had full access to every detail of its operations and finances.”

The ACRC eventually entered negotiations with the HWMA on the sale of its facility but no agreement was reached and the RFP process began. Renewable Waste Systems’ response was accepted — although ACRC is also claiming that the bidding process was violated because its competitor’s bid was submitted a day late, which has been refuted by HWMA staff and board members.

The survival status of ACRC is described in the letter. Herman writes, “If ACRC’s claims are not redressed, it will likely be forced to terminate its operations, default on its financing, dissolve itself into perhaps bankruptcy and terminate all of its Humboldt County employees.”

The letter warns of ACRC’s intent to sue for damages due to deprivation of civil rights through abuse of government powers, inverse condemnation of private property, improper bid processing and other alleged violations.

As an elected official, former Arcata Councilmember and Mayor Jim Test supported ACRC but his actions as the HWMA’s executive director will be focused on if a lawsuit emerges.

Because it might, Test couldn’t comment on any of the accusations. He did say that claims such as ACRC’s are routinely rejected and referred to his agency’s insurance carrier. That action is expected to be on the agenda of the HWMA board’s April 14 meeting and it will also be approved by each of the cities and the County.

The contract negotiations with Renewable Waste Systems are “going quite well,” Test said, and might be finalized in time for the upcoming meeting. The new processor is expected to start operating in May or June, said Test.

Recession impacts and the variable rate debt financing of the Samoa facility are factors that have swung ACRC’s rates over the last few years. The use of separated or dual stream recycling – which is believed to produce superior recycled materials but uses more sorters – is another factor in ACRC’s pricing.

In an interview, Loughmiller referred to Herman’s letter when asked about the claims and he declined to comment on them.

Asked about the impacts of losing the 6,000 tons per year of recyclables that HWMA’s member governments send to ACRC, Loughmiller said they will be severe.

When that tonnage stops, the 22 people who work at the Samoa facility will lose their jobs and the facility will be up for sale.

If it doesn’t fetch the $5 million needed to pay off the debt connected to it, ACRC’s Arcata facilities will have to be sold. Loughmiller said the Center for Hard to Recycle Materials in Arcata would close but if the ACRC is able to keep its Recyclables Depot thrift store open, five jobs out of the current 35 would be retained. Loughmiller’s job would be included among those lost.

It’s possible that the City of Arcata, local grocery stores or a private business would step in to provide hazardous materials and CRV drop-off services, Loughmiller continued.

He said the $65 a ton charge outlined in ACRC’s proposal was a “worst case scenario” for a five-year window that could include interest rate hikes and other curve balls.

Loughmiller has said that a one-year, cost-free proposal was also included in ACRC’s response to the RFP, but HWMA boardmembers – including Arcata Councilmember Michael Winkler, the City’s representative – viewed it as being outside the RFP process.

The separation between ACRC and the HWMA was brewing almost as soon as the business relationship began in 2007, when the Samoa facility was built. That year, ACRC was paying the HWMA $10 a ton but the recession undercut the recyclables market and the rate was flat-lined, then it rose to $60 a ton in 2009.

The drop to $50 a ton last year wasn’t nearly enough to placate member agencies that saw rate stability as their primary responsibility. And ACRC, the enduring symbol of locally-based recycling advocacy, is now poised to face some of its former friends in a courtroom.

“I still respect all the people I deal with – this is a disagreement and we feel this is the way to remedy it,” said Loughmiller. “They’re tearing apart something I put my heart and soul into.”



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