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Home My WebLink AboutTIS 2021-07-12 Item 2D - Letter of Understanding - Renewal of Recyclable Market SurchargeTO: FROM: CC: DATE: SUBJECT: City of Tukwila Allan Ekberg, Mayor Public Works Department - Hari Ponnekanti, Director/City Engineer INFORMATIONAL MEMORANDUM Transportation and Infrastructure Services Committee Hari Ponnekanti, Public Works Director/City Engineer Mayor Allan Ekberg July 9, 2021 Renewal of Recyclable Market Surcharge Contract No. 12-027 ISSUE Waste Management (WM) is the solid waste and recycling provider in the city of Tukwila. WM requests that the city renew the 5% Commercial Recycling surcharge for two more years - beginning November 1, 2021 and ending October 31, 2023. BACKGROUND: Recycling Costs Waste Management (WM) presented to the Transportation and Infrastructure Services Committee in May 2019 regarding changes in the global recycling market resulting in increased costs. To offset the additional costs associated with recycling, WM initially requested an increase to the recycling rates. On [insert date] City Council approved two-year 5% Commercial Recyclable Cost surcharge, which went into effect on November 1, 2019. The surcharge was approved to be in place for two years, beginning November 1, 2019, and the parties agreed it could be extended by Council upon written request and clear justification from WM. DISCUSSION: Renewal of the Recycling Surcharge due to continued Recycling Costs WM has submitted the request for extending this 5% recycling surcharge for the rest of their contract, which is set to expire October 2023, due to continued operational costs in the global recycling market. Please see attached information to this extent. FINANCIAL IMPACT The proposed recycling surcharge only applies to commercial users, not residential. Even with the proposed increases, the solid waste and recycling rates remains below Tukwila's neighboring cities. The proposed surcharge would be in place for two more years, beginning November 1, 2021, and ending October 31, 2023. RECOMMEDATION Staff reviewed the material submitted by WM about the operational costs in the global recycling market. Staff agrees that this information is similar to the information submitted in May of 2019, when the Council approved the 5% Commercial Recyclable Cost surcharge to offset WM's costs associated with the weakening recycling market. Council is being asked to consider this item on the Consent Agenda at the July 19, 2021 Regular Council Meeting. Attachments: Letter of Understanding Letter from WM requesting the 5% surcharge for the next 2 years Financial Analysis of 5% Surcharge Extension Current Municipal Contract rates Tukwila City Hall • 6200 Southcenter Boulevard • Tukwila, WA 98188 • 206-433-1800 • Website: TukwilaWA.gav 13 July 12, 2021 Laura Moser Public Sector Manager Waste Management of Washington, Inc. 720 4th Avenue, Suite 400 Kirkland, WA 98033 RE: Letter of Understanding: Extension of Recyclable Market Surcharge - Comprehensive Garbage, Recyclables and Compostables Collection Agreement dated March 13, 2012, as amended Dear Ms. Moser, The purpose of this Letter of Understanding ("LOU") is to extend the recyclable market surcharge between the City of Tukwila ("City") and Waste Management of Washington, Inc. ("WM"). The City and WM executed Agreement No. 12-027, Comprehensive Garbage, Recyclables and Compostable Collection Agreement dated February 21, 2012 ("Agreement"). Pursuant to Letter of Understanding between the Parties dated June 4, 2019 and signed July 23, 2019, City and WM agreed to increase commercial rates by five percent (5%), effective November 1, 2019, to reflect increased costs in recyclables processing and marketing. This surcharge was only approved for a period of two years; however, WM was permitted to seek an extension of the surcharge for an additional two years by providing justification of the need to the City. WM has submitted a written request for an extension of the surcharge, and justification of the need to continue the surcharge. The purpose of this LOU is to confirm the City's approval of WM's request for extension of the surcharge for an additional two years, starting on November 1, 2021, ending on October 31, 2023. Page 1 of 2 14 By signing below, the City and Waste Management acknowledge their approval and acceptance of the terms of this LOU and acknowledges that this LOU: (a) creates a legally binding obligation upon the parties, (b) shall be governed and constructed in accordance with the laws of the State of Washington regardless of any conflict of law provisions, (c) sets forth the entire agreement between the City and WM with respect to the subject matter hereof and supersedes all prior negotiations, representations, understandings and agreements with respect to the subject matter hereof, and (d) may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Signatures transmitted electronically shall be deemed valid execution of this LOU and binding on the parties. Acknowledged and agreed upon by: CITY OF TUKWILA: By: Printed Name: Title: WASTE MANAGEMENT OF WASHINGTON, INC: By: Printed Name: Title: Date Signed: Date Signed: Page 2 of 2 15 June 11,2021 Mr. Hari Ponnekanti Public Works Director City of Tukwila 6300 Southcenter Blvd Tukwila, WA 98188 Sent via email only to: Hari.Ponnekanti@tukwilawa.gov RE: Recyclable Market Surcharge expiring October 31, 2021 Dear Mr. Ponnekanti, WASTE MANAGEMENT 720 4th Ave, Suite 400 Kirkland, WA 98033 The purpose of this letter is to request another 2 -year term for the Recyclable Market Surcharge set to expire 10/31/21. We understand the request must be made no later than 90 days prior to the expiration date and be accompanied by documentation justifying the request. Since November 1, 2019 when the increase became effective, we have continued to see fluctuating commodity markets and increased processing costs. Over the past 18 months (October 2019 through April 2021) our processing costs have increased to $136.46 per ton and commodity values have gone up and down with an average $26.60 per ton. Based on the commercial and multifamily tons WM collects, processes, markets for City of Tukwila customers our costs have increased 6.9% over this time frame. Attached is documentation showing the data for the basis of our request and justification. Therefore, we are asking that the current 5% recycle surcharge remain in place for another two-year period (11/1/2021 through 10/31/2023). Even though realistically, this does not cover our costs and is applied to the collection portion only and not the total rate for commercial and multifamily. WM appreciates your consideration of our request and looks forward to your response. As always, I am available to answer any questions you may have. Sincerely, Laura Moser Public Sector Manager (206) 391-9112 Lmoser@wm.com Attachments: 1). Financial Analysis for extension of 5 percent surcharge_061121_City Copy 2). 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R u&§> cea $110.34 $148.32 $190.75 $272.80 q LLnn 2 $ 507.01 $665.35 0\\\a E\t§ cu JJ`~ $113.98 $156.24 / Q \ o $363.40 $527.26 § e ƒ \2\;\ ® §\(# $124.59 $171.13 2 $316.37 $388.06 2 $673.57 x ) 7\\ `§ 2JJ`& 0 $159.83 $207.03 $301.44 $389.78 $566.45 ®2ƒ724 \k 2 ;®, ) 244` =o<(! to ƒ /!! cn k $138.84 $178.41 / $316.59 $454.79 G J ��)\ § \:p au G $102.24 2 $179.84 $234.24 $331.40 $434.03 1 Yard Weekly 1.5 Yard Weekly 2 Yards Weekly 3 Yards Weekly 4 Yards Weekly 6 Yards Weekly 8 Yards Weekly