Tipping Fees and Trucking Block Management Contracts for Orcas Waste

By Margie Doyle

San Juan County Public Works Director Frank Mulcahy freely admits he was surprised last July by the response from Orcas Recycling Services (ORS – The Exchange) when his department sent out a Request for Proposals (RFP) for managing the Orcas Transfer Station. Now, the County Council, Public Works Staff, ORS and its sole competitor/contract partner for the managing contract, Cimarron Trucking, are negotiating to provide separate contracts, as directed by the County Council on Sept. 11 for “economically viable contracts with Cimarron Enterprises and Orcas Recycling Services that includes a division of services as modified in the staff recommendation with the addition of adding under A. (Cimarron Enterprises) a new #3: “Help fund community outreach services;” staff should conclude contract negotiations in time to allow for a transition of site operation by December 15, 2012; staff may choose to reallocate some services if deemed necessary to avoid service interruption; approval of this motion is subject to satisfactory review of any outstanding legal issues that have not yet been addressed to date relative to past lawsuits.”

Two meetings on Orcas Island in recent weeks —  a discussion led by ORS with the community and Mulcahy and Ed Hale on Sept. 19 and an extensive public comment session on Sept. 25 during the regular meeting of the County Council on Orcas Island – clarified the sticking points in coming to a solution for the only profitable transfer station under County control.

Those points are:

• Revenues needed from operations (the tipping fees paid by both the island route collectors — currently San Juan Sanitation — and by self-haulers to implement continued and improved recycling mandates);
• Transport needed for off-island dumping or recycling of materials that can’t be recycled on the island;
• The overall picture of providing off-islands hauling for Lopez and San Juan Islands’ transfer stations as well as the Orcas operation;
• The looming Dec. 31 deadline to re-negotiate contracts with Waste Management, the international garbage hauling company to which Cimarron is sub-contracted.

Though the proposal from ORS was not expected, Mulcahy said, the county staff has worked, under the direction of the Council, to determine how best to contract out services for managing the Orcas transfer station. (In the bigger picture, the county is also working with San Juan Island’s site, which must be negotiated in partnership with the municipality of Friday Harbor; and with Lopez Island’s site, which is working toward operations as a taxing district.)

Mulcahy has struggled with the flexibility inherent in this RFP, and with Council direction. He said on Sept. 19, “The decision was made not to put constraints on the way self-haul was done. Speaking frankly, we want to see self-haul continue and wanted the Exchange to have better access and at the same time keep form losing money in handling garbage.

“When we got two proposals it was pretty tough… Cimarron had the edge, but the last guidance from the council was to try to align the services with the strengths and assets.”

At that meeting, Ed Hale, County Public Works staff, said, “ORS is still looking for a partner to dispose of the waste, and make [the transfer station] something that ORS can operate.”

In coming before the Council on Sept. 25, members of the ORS Board of Directors documented their progress in obtaining capital funds and waste disposal expertise, and described their efforts to secure an end disposal arrangement as at an impasse.

ORS Board Treasurer Jared Lovejoy said that the ORS non-profit had worked out “a situation” with Orcas Freight Lines and [local hauler] Charlie Nigretto. They had also negotiated with Idaho Waste, which operates out of Burlington, but, said Lovejoy, “It’s hard in this scenario with Waste Management because of its relationship with Cimarron.

“If ORS got the contract, we don’t think Waste Management  would turn away from us. But it is a bit of a Catch 22.”

Lopez Council representative Jamie Stephens asked Lovejoy, “If [ORS] got the contract tomorrow, who would haul?”

Lovejoy replied that the answer was unclear, “due to contingent commitments haulers may already have with Cimarron Trucking Company, which is also in competition for management  – and fees –  of the transfer station’s tipping floor.”

At its Sept. 25 session regarding the Orcas Transfer Station  management contracts, the council heard for nearly two hours from members of the citizenry, most of them in support of either awarding the tipping floor contract to Orcas Recycling Service (ORS “The Exchange) or delaying a decision regarding the management.

County Public Works/Solid Waste staff member Ed Hale opened the hearing by summarizing the contract negotiations for the council.  “We have met bumps in the road when both parties interested in major services. The council has expressed concern that both contracts needed to be financially viable; the sticking point is who’s going to operate tipping floor,” Hale said.

He told the Council that the Orcas transfer station management contract negotiators are “not ready to give a recommendation to the council; we see Cimarron as a short term operator and ORS as long term operator.” Hale said that it was the negotiators’ hope that they would have a recommendation for the Council at its Oct. 9 meeting.

“Keep in mind that the system running now has no path forward past the end of year,” Hale said. “The whole picture changes when Waste Management’s contract renewal comes up next year.”

During the public access session, Susan Malins, ORS Board member, spoke to the Council’s concern for off-island disposal: “ORS must secure trucking and disposal agreements with Cimarron and its long-standing associate [Waste Management]. But if Cimarron signs [a contract with ORS to haul off-island] they’ll lose the [Orcas transfer station] contract and so they reject [an off-island hauling] contract with ORS.

“This is a dilemma, an impasse. Recycling alone not sufficient to pay expenses. If we got the contract [to manage the tipping floor] tomorrow, Cimarron would subcontract with us; it’s the business they’ve been doing and we would like to have them do that, and we would like to do what we’re expert in. Our management of the transfer station is sensible and cost effective.

“This a legacy issue for every one of us.”

For its part, Cimarron Trucking attorney Norm Wietting maintained that Cimarron could not continue to operate in the future as it does currently, with the County managing the tipping floor and Cimarron hauling waste off-island by a trucking contract.

He reminded the Council that he’d cautioned them about the “Negatives of splitting the waste stream” when the County decided to support the publics’ desire for three separate transfer stations on Lopez, Orcas and San Juan Islands. “Now, “Wietting said, “You’re talking about splitting further at the Orcas site; [into hauling and recycling waste]. When you split that small of a waste stream, it’s difficult to make the models work.

“The model that splits tipping floor from transportation doesn’t really work,” Wietting said. He added that Cimarron was still committed to “waste reduction and community outreach…. We hope to have a program where the citizens will work with Cimarron.”

Council member Lovel Pratt asked for clarification of Wietting’s assertion that “the model that splits the tipping floor from transport doesn’t work.”

“Isn’t  that the model that works today?” Pratt asked.

Wietting answered that Cimarron expected to be involved in trucking waste off-island from all three county transfer stations; if the Orcas site separates tipping fees from transport fees, it “doesn’t work,” he said.

Council Chair Patty Miller then said that Cimarron’s proposal “just looked at Orcas,” and referred to the statement in the Cimarron proposal “where we split self haul garbage and give that to ORS.”

Wietting said again that the current status of the Orcas transfer station could not continue into the future. “We can do trucking regardless but …  there’s not enough to do the operations and capital improvements as suggested.”

Miller said Cimarron’s assertion that if the contract is “split out in two separate managements, there’s not enough margin… is similar to the ORS argument.”

Pratt countered, “But that’s what we have now, with the county providing the management.”

Wietting said that Waste Management had said “rates are going up if there’s any talk  of an extension. If you take today’s rate and contracts and take out disposal and transport at the rates San Juan Sanitation [on-island garbage and recycling haulers] must pay, then there’s not enough to manage both ORS and Ciamrron transportation.”

Dave Polis, recently added to the ORS Advisory Board as a waste disposal expert, spoke of his experience in investigating waste disposal and recycling, starting county and municipal waste programs and working with direct haulers and rail transport. He described his personal relationship with the first president of the national garbage collection and hauling firm, Waste Management, who told Polis, “You know more than anyone else in waste hauling.”

He stated definitively, “Waste Management does not want to take on recycling programs, period.”  Polis claimed that about 80 to 90% of the garbage hauled off-island “is nothing but recyclable material; there are many uses for it here on the island.”

Toward the end of the public comment session, Orcas East Council member Richard Fralick again asserted the ORS need for “a source to off-load true waste off island.”

At the conclusion of the morning’s public comment session, Council Chair Miller asked Public Works staff to follow up considerations for an “economically viable component” for the management of the transfer station. “If you come back and say it’s not economically viable to split it, we have to have a new proposal.”

Miller added, “ORS’ [negotiations with] Allied Waste fell through, with Idaho Waste and a local company [also] fell through. Now ORS is suggesting Cimarron. It would be helpful for me to hear from staff if you think any of those three are truly viable alternatives for ORS. We can’t award the contract otherwise.”

The public comment session opened with a statement by Steve Diepenbrock describing “a pervasive feeling of urgency.”  Upon review of the county auditor’s fiscal reports over the last five years, Diepenbrock found that the solid waste operations on Orcas had been positive for the past two years. He said, “We do have time to reconsider the situation; move beyond combativeness and build collaboration and in the meantime consider the county’s management of the transfer station.”

Erroll Speed, member of the ORS board of directors, spoke of  a shift that occurs as we travel across the Salish Sea “where values matter more than money: where we can effect change in the status quo.

“We want to determine our own future — how we steward islands, how we handle solid waste.”

Speed asked for the council’s support in taking “a  quantum leap forward” and dealing with solid waste and its disposal by giving ORS the contract to manage and operate the [Orcas] transfer station as a business, values and culture model.”

In a letter read to the council, Walter Corbin proposed that with Cimarron continuing to haul waste from route collection and self-haulers, and ORS managing recycling, the Orcas transfer station would be “more efficient than when the county managed it.” Both entities should be allowed a reasonable overhead “stipend,” Corbin concluded.

Sharon Abreu spoke in favor of moving toward “another model no matter who operates the facility. We have many, many resources here, not the least of which is human resources.”

Jared Lovejoy addressed ORS’s current financial status of $250,000;  of which $50,000 is cash on hand.  He urged the council to award the tipping floor fees to ORS, and continue the contract to Cimarron for off-island hauling. “It seems like a great option,” Lovejoy said, while decrying the “impossible situation… of  creating a contract out of a directive that isn’t based on numbers.” He asked the council to change its directive “so we can go back to the table with something based on numbers.”

Pete Moe, President of the ORS board, read from a prepared statement that was circulated at the meeting,  “If ORS/The Exchange is granted the contract, [transfer station profits] will be reinvested in the community. We will create a better reuse facility, a composting program, a construction waste recovery program, and more. All of these programs will create local jobs.”

Moe addressed council concerns regarding transfer station operation experience, financial backing and “a signed mainland transport/landfill contract.”

Moe said that the ORS advisory committee includes Solid Waste Management experts, attorneys, CPAS and construction experts.; he added that Cimarron has never run a transfer station and added, “Last time they tried, they ended up in a protracted lawsuit with Skagit County.”

Moe cited the increased financial support obtained by the ORS/TheExchange non-profit.

Regarding the problem of mainland transport, “We believe that if the county were to support our efforts, rather than fight them, we could easily obtain a mainland transport/landfill contract.”

Council member Rich Peterson questioned Moe on his contention that the County has ‘fought’ ORS. “It seems we’ve tried extensively to work through this,” Peterson said.

Moe said, “We feel [that by] the Council saying Cimarron should have the bulk side, we don’t feel we’ve had a lot of cooperation.”

Lance Evans, Executive Director of the Orcas Island Chamber of Commerce, speaking for its board, recommended the “Great value to Orcas Island economy with a local vendor being selected as  [Orcas transfer station] vendor. The Chamber recognizes the County has other factors to consider; it is not officially recommending any contractor, but we believe in the value in supporting local entities.”

Patty Cook asked questions about a lawsuit and counter-suit between Cimarron and Skagit County regarding a contract to manage the transfer station in Skagit  County, the sale of the contract, and its termination three years into a 30-year contract.

Council Chair Miller replied that the council is following up on those issues. “The Prosecuting Attorney has responded, the staff has additional questions, and [Cimarron’s litigation history] is clearly part of the process.”

Jean Dickerson cited her own experience as a landscape gardener as “paying a lot for compost, which is a large percentage of what we’re shipping as waste off the island. To see the county now take the opportunity to turn a waste facility into a resource facility would be one more feather in our cap. The County hasn’t hesitated in the past to do something for the first time,” she added.

She asked the Council to “Support the community instead of looking at what’s best financially for a corporation. Look at what’s best for the community.”

Leith Templin advised the Council to spend more time on the management contracts. “This is huge for Orcas, for San Juan, for Lopez; it has been a county problem for 15-plus years without resolution; now we’re in a crisis.

“It’s frustrating to hear that now we’re in a hurry. Please extend the contract to give the people here a chance to iron out with you the problems. Please give us that chance,” she said.

Sadie Bailey said, “The Orcas Transfer Station is making the county solid waste profits every year. Is the county counting on Orcas to shore up the rest of county operations?”

Scott Lancaster asked if the “model that Lopez has come up with is viable for ORS…One of the biggest factors in [the parcel] fee vote was people wanted the county out of waste management.” He suggested the county extend the process for one year “to give ORS time to ask people for a fee.”

Lancaster further said, “There is no reason Cimarron wouldn’t want a piece going forward. The whole thing driving the current process is the contract ending the end of this year; if we can extend it, we can come up with a solution.”

Velma Doty reminded the Council that it bears the “responsibility no matter how this is sorted out; it has to be financially stable and that’s all there is to it.

“The citizens rejected the proposal to pay for it, even though the county was in a million dollars debt. Things won’t change much. It has to be that it pays for itself; or it will be back in your lap and you’ll be back in the solid waste business again. Good luck.”