COUNTY OF SACRAMENTO
CALIFORNIA
For the Agenda of:
February 6, 2018
Timed: 9:45 A.M.

To:

Board of Supervisors

From:

Department of Waste Management and Recycling

Subject:

State Of The County’s Single Stream Recycling Program

Supervisorial
District(s):

All

Contact:

Doug Kobold, Waste Management Program Manager, 875-7087

Overview
At its meeting on October 31, 2017, the Board of Supervisors requested staff from the
Department of Waste Management & Recycling (DWMR) to report back with an update on the
County’s single stream recycling (SSR) program. The report was to include an update on the
current and future processing and market conditions for SSR material and be presented to the
Board before the release of any new Request for Proposals (RFP) for the processing of SSR
material.
Recommendation
Receive and file this report.
Measures/Evaluation
None.
Fiscal Impact
In the past, DWMR has realized up to $1.2 million (MM) per year in revenues through its SSR
material processing contracts. With changes in the recycled materials commodities markets, the
processing of SSR material is now a net cost to DWMR of approximately $1.9MM as estimated
for Calendar Year 2018. This includes approximately $800,000 in additional costs to reduce
contamination in the SSR material stream.

BACKGROUND
In April 1968, the County began collection operations for approximately 55,000 residential
customers in the unincorporated area of the county. In 2017, DWMR provided curbside
collection services to approximately 151,000 households, with another approximately 5,000
households serviced by Central Valley Waste Services under contract to the County for
residences located south of Calvine Road. Those residents south of Calvine Road received
functionally identical services to those serviced by DWMR.

 State Of The County’s Single Stream Recycling Program
Page 2

With the passage of Assembly Bill (AB) 939 in 1989, emphasis was placed on recycling in order
for the County to reach the State mandate of 25% diversion from landfill by 1995 and 50% by
2000. DWMR began collecting recyclables at the curb in 1990 with implementation of a threebin curbside recycling program. Additional efforts were needed to meet the next level of 50%, so
by 1997 DWMR began collecting green waste separately at the curb and in 1998, the three-bin
curbside recycling program was replaced by the SSR program. By changing to the SSR program
from three-bin, the collected tonnage increased from approximately 30,000 tons per year to
nearly 60,000 tons per year by the year 2000. Green waste collection in 2000 exceeded 80,000
tons per year. These programs, combined with other diversion efforts at the County facilities,
resulted in the County exceeding the State mandated 50% diversion in 2000. Details of
DWMR’s recycling programs are provided in the attached presentation. The evolution of
significant programs is described in the following section.
The first SSR material processing contract (Agreement No. 70147) was awarded to California
Waste Solutions, Inc. (CWS) of Oakland, California through a competitive RFP process with
service initiating in April 1998. That contract was based on recycling commodities market
indexes and a set processing fee. The annual value of this contract ranged from a cost to DWMR
of approximately $127,000 during 1998 to a high revenue to DWMR of approximately
$1,596,000 in 2004 and a similar revenue in 2005.
Table 1. SSR Material Values April 1998 – March 2006 (Indexed Pricing)

Apr 1-Dec
Jan-Dec
Jan-Dec
Jan-Dec
Jan-Dec
Jan-Dec
Jan-Dec
Jan-Dec
Jan-Mar 1

1998
1999
2000
2001
2002
2003
2004
2005
2006

Processed
Tonnage
12,568
46,702
57,112
56,819
56,344
60,812
60,982
57,192
6,778

Contamination
%
14.88%
23.74%
19.71%
24.18%
23.65%
23.92%
23.92%
23.92%
23.92%

Net
Revenue/(Cost)
($127,176)
$41,853
$1,141,882
$253,889
$636,673
$680,590
$1,595,699
$1,592,340
$180,342

Unit
Revenue/(Cost)
($10.12)
$0.90
$19.99
$4.47
$11.30
$11.19
$26.17
$27.84
$26.61

Due to the significant volatility of the market-priced structure of the SSR material processing
contract, in 2005 DWMR structured new recycling contracts based on a guaranteed value per ton
with only adjustments in unit value for California Redemption Value (CRV) changes or SSR
material composition. Table 2, below, reflects the changes in the unit revenue during that time
frame.
Table 2. SSR Material Values March 2006 – February 2013 (Fixed Pricing)
Processed
Tonnage
Mar 2-Dec
Jan-Dec
Jan-Dec

2006
2007
2008

41,081
44,611
42,086

Contamination
%
10.00%
(Assumed)
19.48%
19.38%

Net
Revenue/(Cost)
$818,698
$1,298,372
$1,001,842

Unit
Revenue/(Cost)
$19.93
$29.10
$23.80

 State Of The County’s Single Stream Recycling Program
Page 3

Jan-Dec
Jan-Dec
Jan-Dec
Jan-Dec
Jan-Feb 28

2009
2010
2011
2012
2013

39,686
38,739
37,463
36,936
6,393

19.59%
19.59%
19.59%
19.59%
19.59%

$835,814
$727,034
$564,400
$593,466
$92,353

$21.06
$18.77
$15.07
$16.07
$14.45

The unit revenue
evenue in 2006 shown above is lower than 2007 due to spot market sales of SSR
material generated from the North Area during a period when no long
long-term
term contract was in place
for that March – December 2006 time period. The value reflected in 2007 is more representative
of that point in time. The primary reason for the continued drop in unit revenue
evenue from 2007 to
2013 was changes in the CRV initiated by the State.
Following careful consideration of market trends, in 2012 DWMR returned to the market-based
type of contract based on favorable financial projections
projections. Figure 1, shown on the next page,
pa also
attached as Attachment 1 to this report, reflects market trends that occurred between the August
2006 RFP and the May 2012 RFP. Those values are representative of the domestic market value
for each commodity. This domestic value index has been used for DWMR’s various market
based SSR material processing contracts.
Figure 1: History of Paper Commodity Values (Domestic Markets) and SSR Pricing

While the individual domestic values have fluctuated quite a bit, the processors of the SSR
material typically sell their recycled commodities on the export market.. Figure 2, shown on the
next page,, reflects the commodity values for both export and domestic markets.
markets This graph is
also included in the presentation associated with this report. For the export market,
market the values

 State Of The County’s Single Stream Recycling Program
Page 4

for cardboard (Old Corrugated Containers or “OCC”) ((light fuchsia color line) have tended to
rise as reflected by the trend line shown. However, for the domestic market,, OCC has trended
down as shown by the dark fuchsia li
lines.
nes. OCC tends to represent ~36% of the total paper type
materials found in the County’s SSR Material. Other export trends for mixed paper (~46% of
the paper materials) and sorted papers (~18%) have tended to remain flat as shown by the light
green and light
ight blue lines in Figure 2. However, like OCC for the domestic market,
market both mixed
paper and sorted papers have trended down (dark green and dark blue lines). With the exception
of mixed paper which recently has declined fairly significantly on the exportt market,
market the export
values for OCC and sorted papers have fluctuated lately, but remain within normal tolerances of
the market trend for those materials.
Figure 2:: Paper Commodity Values History (Export vs. Domestic Markets)

Table 3,, below, reflects the fluctuations in net revenue and unit revenue to DWMR from March
1, 2013 through December 31, 2017. DWMR received net positive revenue from the SSR
material until October 2017. Due to changes in the market conditions for recyclable
commodities,
ommodities, the value of the SSR material is now a net negative value to DWMR.
DWMR This issue
will be discussed in more detail under the Discussion section of this report.
Table 3.. SSR Material Values March 2013 – December 2017 (Indexed Pricing)

Mar 1-Dec
Jan-Dec

2013
2014

Processed
ed
Tonnage
30,043
36,860

Contamination
%
24.48%
24.48%

Net
Revenue/(Cost)
$991,585
$1,124,823

Unit
Revenue/(Cost)
Revenue/
$33.11
$30.52

 State Of The County’s Single Stream Recycling Program
Page 5

Jan-Dec
Jan-Dec
Jan-Dec

2015
2016
2017

36,713
38,083
37,921

24.48%
24.48%
24.48%

$771,252
$869,629
$866,207

$21.01
$22.84
$22.84

DISCUSSION
As noted earlier, the value from the processed SSR materials has fluctuated significantly since
April 1998. Figure 3,, below, reflects the Revenues/(Costs) to the County since the first contract
with CWS in 1998.
Figure 3: Annual Revenue/(Cost) History

While the net value of the SSR material year-to-year
year has been positive, with the exception of
1998, a significant fluctuation in value occurred in September 2017 that resulted in termination
of the DWMR contracts in place at that time and impacted pricing of new contracts that were
executed to make up the shortfall in capacity
capacity.. With the early termination of Agreement No.
70628 with Sacramento Recycling & Transfer Station (SRTS), effective Sep
September
tember 12, 2017, the
unit value decreased from $33.74/ton revenue to DWMR under that contract to $32.64/ton cost
to DWMR under a new short--term contract, a fluctuation of $66.38/ton. This represented
approximately 1,200 tons per month of SSR material collected
ected in the South Area. Due to the
lack of available processing capacity as determined by DWMR staff, a second short-term
short

 State Of The County’s Single Stream Recycling Program
Page 6

contract was also executed with California Waste Recovery Systems (CWRS) that also began on
September 13, 2017 and has ranged in val
value from $0.68/ton revenue to DWMR in September to
negative values (cost to DWMR
DWMR)) of ($19.77)/ton, ($8.55)/ton, ($9.66)/ton for the months of
October, November, and December 2017, respectively. Agreement No. 70629 with Recycling
Industries (RI) was amended effective November 1, 2017 to reflect a cost to DWMR of
($35.00)/ton
/ton for 1,000 tons per month for November and December 2017. This retroactive
amendment was approved by the Board on December 12, 2017. In October, prior to adjustments
in the contract thatt resulted in a cost to DWMR
DWMR, the RI contract had a value of $15.00/ton
representative of the Floor Pricing included in that contract. The Market Value without that
Floor Pricing would have been a cost to DWMR of $1.12/ton. Agreement No. 70629 with RI
was terminated effective December 31, 2017. DWMR has also contracted with another SSR
material processor, Green Waste Recovery (GWR) of San Jose
Jose, to process material since
October 2017. The cost to DWMR for material sent to GWR has averaged $37.21/ton. Figure
Fig
4,
below, reflects the changing value of the SSR Material during 2017.
Figure 4: Monthly Revenue/(Cost) for 2017

Based on 2017 tonnage data and the costs for October, November, & December 2017, DWMR
staff estimates the processing cost of SSR material in calendar year 2018 may total as much as
$1.1MM.

 State Of The County’s Single Stream Recycling Program
Page 7

The primary cause for the change in market conditions has been the effects of the
implementation of the “National Sword” policy by the Chinese government. In June 2017,
DWMR staff learned of the “Environmental Protection Control Standard For Imported Solid
Wastes As Raw Materials – Waste And Scrap Of Paper Or Cardboard” issued by the State
Environmental Protection Administration of the People’s Republic of China (PRC) on December
14, 2005 with an implementation date of February 1, 2006. This national standard, which is
commonly referred to as the “National Sword” within the recycling industry, requires that
certain contaminates (trash) constitute no more than 1.5%, by weight, of segregated and baled
recyclable commodities, specifically imported waste paper. While National Sword was issued in
2005, there was very little to no enforcement by the PRC until 2013, when it enacted “Operation
Green Fence.” This 2013 action by the PRC was an attempt to reduce the amount of
contaminants found in recycled material bales being imported by recyclers into China, especially
those originating from the United States. By 2014, however, the PRC had relaxed enforcement
of Operation Green Fence on the assumption that the recycling industry would continue, on its
own, to reduce the amount of trash included in these bales of recyclable materials.
As a result of inaction by the recycling industry to reduce the trash in the bales following
Operation Green Fence, the PRC once again stepped up enforcement action by implementing
“National Sword 2017.” This latest action began on March 1, 2017 and is continuing today.
Under National Sword 2017, PRC customs officials have increased inspections of imported
recyclable materials, focusing on the quality of waste paper and plastics. Along with
representatives of brokering companies handling the sales of baled recyclable commodities, they
have also been conducting inspections of finished bales at the actual recycling facilities in the
United States, especially on the West Coast, to determine if the 1.5% standard contained in the
National Sword policy is being met. Based on research by DWMR staff and other experts in the
recycling industry, this standard can be met by using the proper equipment and processing
methods for recycling. Slowing of the processing lines is one of the methods used to improve
extraction of contaminants from the SSR material; however, slowing of the processing lines
increases the unit cost for processing, thereby lowering the net value of the SSR material.
On December 29, 2017, the PRC issued an amendment to its 2005 scrap import standards
revising the 1.5% maximum contamination standard to a 0.5% maximum standard, which will
take effect March 1, 2018. As a result of this action taken by the PRC, the domestic processing
industry has begun to take actions of its own. To meet this low contamination standard,
processors have had to drastically change how they process SSR material, such as slowing down
their processing lines, which in turn has force them to limit the amount of SSR material they are
willing to accept. Further, they are also beginning to limit the level of contamination in the SSR
material they receive at their facilities. It is the understanding of DWMR staff that some cities in
California with contamination rates of 50% or more in their SSR material have been completely
cut-off from processing by their normal processors. They have been told that there is no price by
which the cities can pay to have those highly contaminated materials processed. Processors are
now beginning to require 10% or less contamination in the SSR material they are willing to
receive. DWMR’s current average level of contamination is 25%.
In an effort to increase the value and acceptability of DWMR’s SSR material to local processors,
DWMR has embarked upon a Curbside Enhancement Program. This program is designed to
increase the use of various media types to convey messages regarding the SSR material program;
to increase the customer interface with DWMR staff to better educate the County residents on

 State Of The County’s Single Stream Recycling Program
Page 8

what is acceptable in the SSR program; to take immediate steps to inspect for contamination of
SSR material in curbside containers placed out by the residents for collection; and to develop
pilot programs to determine the best method(s) to achieve a goal of less than 10% contamination
in the County’s SSR material, consistent with expectations of processors.
Currently, DWMR’s SSR material is being processed under several short-term contracts for
processing as discussed above. DWMR staff may be releasing a new RFP during March or April
2018 for one or more long-term contracts with the following provisions: no floor pricing; allow
for an adjustment to the processing unit costs, include a seven to ten year contractual
commitment, and pricing based on the export market indexes. DWMR staff learned that the
floor pricing in the previous contracts represented too much risk in the current condition of the
commodities market. Further, with a long-term contract, the contractors were assuming more
risk than they were comfortable with due to potential changes in labor and equipment costs over
the life of the contract. Finally, changing the market value basis from the Domestic Market
Index to the Export Market Index will be more representative of the actual markets that most
processors use to sell the commodities they extract from the SSR material.
The changes that have resulted in the market value of the DWMR’s SSR material are significant,
fluctuating from an approximate $1.2MM/year revenue to an estimated $1.1MM/year cost, plus
an estimated $330,000/year for increased public outreach and another estimated $500,000/year
for contamination enforcement. This results in a shift of approximately $3.1MM/year, or
approximately $1.67/household/month in additional costs for the SSR material program.
FINANCIAL ANALYSIS
The County will experience a shift in costs for the processing of SSR Material in 2018 estimated
at $3.1MM/year or approximately $1.67/household/month due to current conditions of SSR
material processing and marketing. This situation may improve, but is substantially dependent
upon changes in the export market for recycled commodities throughout 2018 and beyond.

Respectfully submitted,

DOUGLAS SLOAN, Director
Department of Waste Management
and Recycling

APPROVED:
NAVDEEP S. GILL
County Executive

By:
MICHAEL J. PENROSE,
Deputy County Executive

Attachments: Attachment 1 – Market Value Trends for Single Stream Recyclables