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Zanker Road Resource Management, Ltd. (Zanker) operates the Construction, Demolition and Inert (CDI) and Green Waste (GW) facilities at the Yolo County Central Landfill (landfill). In October of 2014 Governor Brown signed AB 1826, requiring businesses to recycle their organic waste on and after April 1, 2016, depending on the amount of waste they generate per week. This law also requires that on and after January 1, 2016, local jurisdictions across the state implement an organic waste recycling program to divert organic waste generated by businesses, including multifamily residential dwellings that consist of five or more units. Organic waste means food waste, green waste, landscape and pruning waste, nonhazardous wood waste, and food-soiled paper waste that is mixed in with food waste. The landfill will begin its food waste composting program on April 1, 2016 to allow the County and local cities to meet the jurisdictional requirements. The new program requires the landfill to add two new fees, one for commercial loads of mixed food waste and the second for commercial loads of food waste. In addition, due to the increased costs to process the food waste, and as described below, the drop in market rates for wood waste, the rate for green waste and wood waste will be increased by $2.00 per ton. Table 1 of Attachment A lists the new and revised compensation rates.
Since the commencement of Agreement 15-31 in April 2015, economic conditions have dramatically reduced the value of recycled commodities. Zanker has absorbed the impact of this market decline for many months, but with no recovery in sight, Zanker is requesting an increase in the rate Zanker receives from the County for CDl processing. Zanker has increased its tipping fees this year at both its Sacramento and San Jose operations due to the current market conditions, and will be increasing its tipping fees at both San Jose and Sacramento operations again on January 01, 2016 to address the anticipated market conditions.
Under the agreement, Zanker receives mixed loads of materials that are separated into a variety of marketable materials including metal, wood, cardboard, paper, concrete and plastics. Zanker sells these commodities to various end users or other recyclers throughout the world. Worldwide and local commodity markets have seen a significant reduction in value, resulting in lower revenue for all recyclers. The four major recyclables impacting Zanker's operations from this market shift are wood (Biomass), metals, cardboard and plastics. The following paragraphs provide details on the recent market shift for these materials.
Biomass.
When Agreement 15-31 was signed, Zanker anticipated that 100% of the recycled wood waste would be marketed as Biomass to facilities throughout California. Biomass is wood waste that is combusted to heat a boiler to produce steam and create electricity. Due to legal and legislative events, many Biomass facilities have shut their doors creating an oversupply of wood waste and causing the market price to drop substantially. As of November 1st, 2015, 24 operating facilities maintain active roles in processing wood waste for electricity. This number is expected to drop to approximately 7 facilities by the year 2020. As a result, Zanker’s anticipated 2015 revenues from the sale of Biomass to these facilities will fall from $24 per bone dry ton (BDT) to less than $0 per BDT. By 2020, the industry predicts wood waste recyclers will pay, instead of sell, all wood waste to Biomass facilities. Wood waste accounts for over 25% of a typical CDI load. Pricing for biomass generated from the Yolo County operations was estimated at $24 - $30 per BDT. Several facilities have expressed interested in the biomass, but cannot accommodate any new contracts due to current market conditions. Zanker currently has an offer for $0.00 BDT for the biomass fuel.
Metals
Asian countries control what happens in the metals markets within California. Last year at this time, Zanker was receiving over $130 per ton at its Sacramento operations for the metals recovered. Currently Zanker receives $35 ton for the same material. Metals constitute a substantial percentage of the revenue from the CDI processed and the projected prices for 2016 do not forecast a promising year.
Cardboard and Plastics
Cardboard and Mixed Rigid Plastics have also suffered a similar fate as metals. At the beginning of this year, Zanker was receiving $100 per ton at its Sacramento operations for both commodities. Today, the price has fallen to $75/ton and $20/ton, respectively. Projected prices for 2016 is also concerning since high grade/high quantity generators will be favored over CDI operations.
Revenue loss Calculation
These changes in market prices are anticipated to significantly reduce the revenue Zanker receives from recycling biomass products, metals and plastics. The revenue loss due to the current and foreseeable market conditions is estimated to be approximately $200,000. Based on these numbers, staff recommends approving Zanker’s request for a CDI rate increase of $8.00 per ton to $49.00, as well as the green/wood waste increase of $2 per ton and the two new fees for food waste and food waste mixed with yard waste of $46.00 and $55.75 per ton, respectively. |