Recyclable materials from the City's curbside and commercial blue bin recycling programs are collected as a commingled mix of plastic, paper, metal, and glass. The commingled recyclables are sorted into separate commodities at local facilities and shipped to mills that use the raw commodities in manufacturing. The majority of the mills were located in China.

Historically, during the last two decades, over two-thirds of California’s recyclables were sold in China where economic growth provided a demand for recyclables. However, in early 2016, the Chinese government changed its policy to reserve its domestic mill capacity for handling the increasing amount of recyclables from China’s rapid urbanization. This policy change, resulted in tighter markets and lowered the market value of recyclables in California.

The City once received revenue as high as $65 per ton for commingled recyclables. The value declined to zero in late 2017. Now the City has paid up to $148 per ton to accept City’s recyclables; the value fluctuates as the market value of recyclables change.  As the number of buyers of recyclables shrinks, recycling companies are charging more to recover their costs. The City is required to continue recycling programs in order to maintain compliance with state mandates despite the higher costs.

The City sends approximately 12,000 tons per year to local sorting facilities. At this time, MRC is the only sorting facility open. The City is currently working to implement a pilot program that will enable the City to process and sort recycling in-house at a lower cost. However, until the pilot program is established, utilizing other sorting outlets for recycling material remain necessary.

On April 24, 2018, the City entered Agreement #PW18-057 with MRC.  The agreement was a stopgap measure to allow recycling to continue in the wake of the unprecedented market shift described above.  The agreement amount of $40,000 was estimated to cover the remainder of FY 2017-18.  Since then, the following amendments were approved:

• Amendment No. 1 (June 20, 2018) extended term to July 1, 2019 and added $90,000 to the agreement (revised not to exceed $130,000).
• Amendment No. 2 (September 19, 2018) added $670,000 to the agreement (revised not to exceed $800,000).
• Amendment No. 3 (June 28, 2019) extended term to July 1, 2020 and added $900,000 to the agreement (revised not to exceed $1,700,000).

Proposed amendment No. 4 will extend the agreement’s term to October 31, 2020 and would add $630,000 to the agreement. If approved, the revised not to exceed compensation would be $2,330,000.

Staff recommends approval of the amendment. Refuse Enterprise funds provide funding for this agreement; therefore, there is no impact to the General Fund.