The plastic, newspaper, cardboard and cans that Omaha residents separate into green bins could end up in a landfill if Omaha doesn’t pay its recycling partner more.
First Star Recycling said it might stop accepting Omaha’s recycling if the city won’t negotiate new contract terms before the deal ends in 2020.
The company is prepared to pay a $60,000 penalty and end the contract early if talks with Public Works prove fruitless, The World-Herald has learned.
The reason: First Star says it’s losing money after a near-collapse of the national and international markets for recycled materials.
How bad is it? Cardboard, for example, used to bring First Star $100 a ton. Now it sells for as little as $15 a ton. Even aluminum cans, which had sold for $1 a pound, now sell for about 50 cents.
First Star wants to charge Omaha a tipping fee of up to $100 per ton of waste it drops off to recycle. Currently, it doesn’t charge the city.
Paying the fee would cost Omahans an extra $1.7 million a year, or nearly $1 per month per household, if residents recycle as much as they did last year, 16,973 tons, according to Public Works. And the amount Omaha pays in fees could increase if people recycle more. If, in theory, Omaha took all the material residents now recycle to the landfill, the city would pay about $440,000 to dispose of it.
The city, which has been in talks with First Star about the fees for months, argues that the recycling contract should be re-bid to keep the process fair and open to all potential bidders.
Similar fee increases have driven some other large cities, such as Philadelphia and Memphis, out of recycling entirely or into more limited recycling programs that incinerate or throw away less valuable materials.
City Councilman Rich Pahls, who represents southwest Omaha, said First Star has the city “under the gun.”
First Star processes recycling from more than two dozen communities, including Omaha and Lincoln. It is already charging smaller waste haulers new tipping fees, including Papillion Sanitation, which picks up recycling in Douglas and Sarpy Counties.
The business model for recycling has shifted from one where businesses and organizations were paid to recycle to one where most groups pay fees to recycle, said Craig Moody, managing principal of the Verdis Group, which works with businesses, governments and nonprofits on sustainability.
One way that businesses and organizations have offset higher recycling fees is to separate out cardboard, one of the most valuable materials to recycle, said Brent Crampton of Hillside Solutions. That keeps the cardboard from being contaminated by food and other waste, he said, and lowers labor costs for recycling processors.
Some haulers are taking more material to another recycling company, Nebraskaland, which has a smaller operation, Crampton said. Nebraskaland did not return calls seeking comment.
Many haulers are increasing prices to reflect the new recycling fees.
First Star, in a letter to one hauler obtained by The World-Herald, said its future tipping fees could rise again to match whatever fee Omaha agrees to pay.
Some Sarpy County residents have seen their costs for recycling jump 30% on their garbage bills.
Lincoln, too, is hearing from its recycling partners about higher costs, but it still sees a future for recycling, said Jon Carlson of the Mayor’s Office.
Omaha might be unable to negotiate the changes First Star wants without running afoul of laws meant to keep bids fair and open, city officials say.
In a June 28 letter to First Star, Deputy City Attorney Bernard in den Bosch suggested cutting the contract short and bidding it out again. He wrote that the city could pay First Star the $25.92-per-ton fee Omaha pays to dump garbage at the landfill until the contact can be bid again. That’s about one-fourth of the fee that First Star wants to charge.
The city, which once made money on recycling, now breaks even, Mayor Jean Stothert said. Under First Star’s proposal, recycling would cost the city money.
“I want to make sure people know this is coming,” Stothert said at a recent town hall meeting on roads. “It won’t be cheap.”
She also wants reassurances from First Star that the company is recycling what Omaha residents send their way, and not taking the less profitable material to the landfill.
First Star CEO Dale Gubbels said his company is storing more material than before on his property to maximize profitability by timing when it sells recyclables, but First Star does not and has no plans to cherry pick more valuable waste and dump the rest.
Stothert’s 2020 budget proposal, unveiled Tuesday, didn’t include funding for recycling fees. The City Council would have to approve it as new spending.
Projecting the costs could be tough. The larger, 96-gallon carts Omaha will get as part of its next trash contract could spur more recycling.
Bellevue, for example, nearly doubled the amount of tonnage it was recycling after the city switched from garbage cans to carts last year, Gubbels said.
First Star and other recycling advocates say they hope the market rebounds from China’s 2018 decision to stop buying American plastic and paper waste.
“The situation is supply and demand,” Gubbels said. “The demand has dropped with China out of the picture.”
That’s a big reason why cardboard and plastic is stacking up outside of First Star’s recycling facilities near 108th and I Streets.
While much of the recycling from the Midwest stays in the U.S. or heads to Mexico, many domestic companies pay less than Chinese firms did.
First Star, which employs 120 people at its Omaha plant, also needs to invest about $3 million to update its facilities to process what people toss out today, mainly different types of plastic, Gubbels said.
Councilman Pete Festersen, who represents parts of north-central Omaha, said he hopes the city will remain committed to recycling.
“It’s critical that we maintain a viable recycling program now and in the future,” he said.
But any effort to change or rebid the recycling contract before its completion needs to be fair to all potential bidders, including new ones, he said.
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The city is unlikely to see a flood of new bidders, Gubbels said, because building a new recycling facility in the Omaha area would cost a new bidder about $25 million.
That’s why he said he’s confident his company will get what it needs from the city, because, to him, First Star is still the best bet for taxpayers.
He said the environmental good that comes from recycling, including a reduction in the amount of plastic that ends up in oceans, is worth the public investment.
“We do have competition, unfortunately,” Gubbels said. “It’s called a landfill.”