‘Foreign Law’ at Core of New Recycling Pact; 3 Central Arkansas Cities Debating Price

by Emily Walkenhorst | December 3, 2018, Arkansasonline.com

Whether Waste Management can increase customer recycling prices based on changes in “foreign law” is at the core of the negotiations over the company’s new recycling contract with three central Arkansas cities.

The mayors of Little Rock, North Little Rock and Sherwood have yet to agree to new contract terms, more than a month after each city’s council was asked to approve a new contract. The Sherwood City Council did not vote, and the Little Rock and North Little Rock City Councils approved the contract pending a review of the final proposal.

Waste Management currently provides curbside recycling in the three cities, which together have 91,564 residential homes.

Little Rock Mayor Mark Stodola said the mayors will meet today to discuss what they want to see in a new contract.

“I’m hoping that we’ll come up with an answer on that and get this thing put to bed,” Stodola said.

Subjecting customers to an automatic price increase in the event that another nation changes its recycling laws is not appropriate, North Little Rock Mayor Joe Smith said. The cities have no lobbying power in other countries, he said.

Smith said he doesn’t think Waste Management should have “carte blanche” to raise rates without going through an extended notification and negotiation phase with the cities.
“If they absolutely, totally have to do it, I would be fine with it, but they’ve got to give us an out,” he said.

For Smith, that means the cities would have three to six months after a suggested price increase to decide if customers can pay it or to find a better recycling arrangement elsewhere.
George Wheatley, Waste Management public sector services manager for the company in Arkansas and other Southern states, said a clause for price changes related to foreign law changes is standard for his company. Most anticipated legal changes have already happened anyway, he said.

“We think we have a firm foundation to stand on with the uncontrollable changes and foreign law, and they think we don’t,” Wheatley said.

China stopped accepting most recyclable materials from U.S. businesses last year when it cracked down on “contamination” to what the businesses said was an unreasonable standard. The country, on a years-long path to creating a circular recycling system, once bought about 40 percent of Waste Management’s recycling. Now, it doesn’t buy any.

U.S. manufacturers can’t keep up with the boom in domestic supply of recyclable materials, pushing prices down to unprofitable levels.

To complicate matters, about one-third of materials placed in recycling carts is considered “contamination,” either because the material is not recyclable or because it has been compromised in some other way, such as by being rained on.

That forces Recycle America, the Waste Management subsidiary that sorts the recycling, to call another Waste Management-subsidiary hauling company and pay to take the contaminated materials to Two Pine landfill, which is owned by Waste Management but charges the hauling company per ton for garbage taken there.

Waste Management executives have told their state offices to include a “foreign law” clause in each new recycling contract.

Wheatley provided documents on three recent contracts for Braintree, Mass.; Terrell Hills, Texas; and Nashville, Tenn. The Braintree and Terrell Hills contracts state that changes to “applicable law,” which includes the laws of other nations, can change the terms of the agreements. The Nashville contract states that changes related to foreign law may be proposed, but the parties must ultimately agree to them.

That is similar to what Wheatley most recently proposed to the central Arkansas cities.
Waste Management’s most recent offer is for a much shorter time span than three to six months.

The cities would have 30 days to decide whether the price increase is acceptable, under the company’s proposed contract language. If they don’t accept it, Waste Management can terminate the contract, effective within 45 days after written notice.

That proposal will not work, Craig Douglass, executive director of the Regional Recycling and Waste Reduction District, told Wheatley in an email last week. The district is the regional state solid waste agency in Pulaski County and is helping facilitate contract negotiations.

“Further, your proposed 45-day WM termination period is unworkable, as well. Lawyers would most likely say ‘arbitrary and capricious,'” Douglass wrote.
The cities’ proposal of a six-month window with a verifiable 25 percent revenue loss to Waste Management still stands, Douglass wrote.

The Arkansas Democrat-Gazette obtained drafts of contracts and correspondence regarding them since October through Arkansas Freedom of Information Act requests submitted to Little Rock, North Little Rock and the district. Sherwood officials said they did not have records separate on what the district provided.

In an interview, Wheatley said that just determining the impact of a legal change could take months. During that time, the company could already be losing money, he said.
City and company leaders also have discussed how the company would flag problem recyclers. Waste Management has declined to check each recycler’s cart before loading materials into the truck, calling it impractical.

But the company has proposed detecting problem areas, where they would check carts and flag the ones clearly containing contamination, Wheatley said. Owners of problem carts might get postcards or phone calls from the company or other warnings that items in their carts were violating recycling rules.

According to correspondence, city leaders had been concerned that under this system the company would refuse to pick up recycling on entire streets or in whole neighborhoods, rather than refuse only the problem individuals.

But Wheatley said the company plans to still serve people who do not appear to have problematic recycling carts.

Most of the rest of the contract is already agreed upon.

Residents will not be able to recycle glass. The market for that on scales as small as the three cities, for the price the cities would want, has dried up, Wheatley said.

Sherwood Mayor Virginia Young said she looked at glass-only curbside pickup a few months ago. She said she doesn’t remember the price the city was quoted, but she remembers it was not an amount she believed residents would want to pay.

Young laments the changes in recycling and the recycling market that she now sees as less stable than before.

“It seems that the future of recycling long-term is perhaps going to be different than what we’ve been experiencing the past five to six years,” she said.

City residents would pay $4.14 per month for curbside pickup beginning April 1, an increase from $2.99 currently. Starting April 1, 2020, they would pay $4.29 per month.
Mayors expressed concern over the price increase but have acknowledged that it’s a better deal than most cities have for curbside recycling in the United States.

Nonetheless, residents have complained on social media, at North Little Rock City Hall and to the Arkansas Democrat-Gazette about glass recycling going away and about the amount of materials being transported from Recycle America to the landfill.

“If you look at it, residents are charged each month to essentially keep Waste Management in business making money from our trash,” one North Little Rock resident wrote to the newspaper.
Wheatley has said he does not know how much the subsidiary companies charge one another. He said the company estimated earlier this year that Recycle America and the hauling company, Little Rock Hauling, spent about $35,000 each month processing and landfilling contaminated items.