Omaha has been bracing to pay more to recycle residents’ plastic, paper and aluminum. This week, city officials got their first look at the new bill: up to $4 million.
Mayor Jean Stothert and the City Council have for months discussed the need to set aside up to $2 million in the 2021 city budget for recycling costs. But when the city unsealed the sole bid to process recycling Wednesday, officials learned that the estimated cost could double.
Stothert told The World-Herald that the bid from current processor Firstar Fiber is “so unacceptable” that she’s considering all options, including rebidding the contract with a different approach.
“I am stunned with the ($4 million) bid received from Firstar Fiber, which would put unneeded stress on the already tight city budget,” she said.
If the bid is accepted for 2021 through 2026, the city would go in one decade from profiting from recycling to paying $4 million a year.
City officials have said a $2 million cost could be managed without a tax increase. It’s unclear what might happen if the recycling contract costs $4 million.
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Firstar Fiber CEO Dale Gubbels said the company needs the new contract so his company can invest more than $3 million in upgrades to its sorting plant near 108th and I Streets. Those improvements would help Firstar more quickly and efficiently separate recycling from garbage, Gubbels said.
Omaha only recently started paying to recycle. The city pays Firstar $25.92 per ton to process Omaha’s recycling, the same rate the city pays the landfill to accept a ton of garbage.
Under the new bid, Omaha would pay up to $200 a ton for recycling. That’s near the high end of the recycling market nationally and above the $110 a ton Firstar is charging many of its commercial customers.
But the city expects to pay Firstar less than $200 per ton. The Public Works Department estimates that it will pay about $150 a ton, based on the current prices for recycled materials and the volume expected.
The reason for the difference: The city gets to reduce what it pays per ton to its recycling processor based on the selling price of recyclables. The city is able to deduct 60% of the revenue from the cardboard, newspaper and aluminum that Firstar sells.
Omaha would pay the full $4 million only if the market for recycled goods gets worse, said Jim Theiler, assistant director of Public Works. The city could also pay less than $150 a ton if the market for recyclables improves, or perhaps even make money.
In June, Firstar threatened to stop accepting the city’s recycling if the city didn’t renegotiate its deal that runs through the end of 2020. That’s when the city negotiated the $25.92-a-ton payment. Before that, the city broke even.
Firstar, with 120 employees, was the only company to bid on processing Omaha’s recycling for the next five years. The two other companies that submitted bids this week, FCC Environmental and Waste Management, submitted bids only to haul recycling to Firstar from local drop-off sites, not to process it.
Now the clock is ticking: Omaha recently approved a 10-year, $24.2 million-a-year trash contract that includes covered 96-gallon recycling carts for residents. That contract is set to begin in 2021.
In many cities that have switched from trash cans to the larger carts, including Bellevue, people have recycled twice as much.
Public Works estimates that Omahans will recycle about 20,000 tons of waste in the first year of the new contract, which is how officials came up with the $4 million-a-year estimate. Public Works is formally reviewing Firstar Fiber’s bid, a process that could take a month or more.
Council member Pete Festersen, who represents north-central Omaha, said the city must make recycling a priority. He said he doesn’t object to the city seeking another round of bids. But, he said, the city should work to strengthen recycling service and keep it from being interrupted.
“There’s no question the city needs to continue to support an effective recycling program,” Festersen said.
Several council members, including west Omaha’s Brinker Harding and Aimee Melton, have pressed the city to budget for recycling costs.
“It will be a challenge to the administration and the City Council to make sure it’s properly budgeted and paid for,” Harding said.
Harding and Melton, in separate interviews Thursday, said they want to make sure the bid is reasonable and that the materials that Omahans separate actually get recycled. Other cities have seen recycling contractors send items to the landfill that were supposed to be recycled. Omaha’s bid contains penalties for doing that.
If the bid falls short on either count, they said, they want Stothert and Public Works to take another look at it.
“I’m not going to rubber stamp $4 million,” Melton said.
Disruption in the recycling market is one reason the city pursued a five-year contract, instead of matching the new 10-year trash contract, officials said.
China has stopped buying American recyclable materials in recent months, forcing recycling processors to find other markets and cutting into prices.
Gubbels and other recycling processors nationally have scrambled to renegotiate local recycling contracts to stay in business.