Global devaluation of recycling materials creates financial, environmental dilemma in Lakeway

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A growing global crisis represented by ongoing devaluations in recyclable materials is presenting negative effects in Lakeway for consumers, officials and waste-management employees.

Operating costs for recycling services have risen to the point that managers of Waste Connections of TX Inc., with whom Lakeway is contracted for its waste-management services, now have to pay to take recycled materials from customers to the recycling plant, according to city documents.

That means that Austin-based Balcones Resources, the recycling company through which Waste Connections of TX deposits its recycled materials, now charges money to Waste Connections of TX rather giving a rebate for the materials.

Waste Connections representative Steve Shannon said at the Dec. 17 Lakeway City Council meeting that in 13 states right now, recyclables are being thrown in the landfill.

“What’s happened is that the supply right now is much greater than the demand,” Shannon said

The resulting financial decisions placed before Lakeway officials led to an at times heated debate over which should take precedence—mandating contractual obligations or continuing to act environmentally in the face of rising costs and declining profits.

The city of Lakeway has a revenue-sharing agreement with Waste Connections under the two entities’ existing five-year contract that began in April 2017. A 50/50 split takes effect provided the value of net revenue of recyclables matches or exceeds $35 per ton—a figure that has not come to fruition during the life the contract.

Oakley explained that Balcones Resources measures the value of recycled materials per ton through the net processing fees the materials bring in as well as a mix of indices that establish the value of recyclables.

Waste Connections requested of Lakeway approval of a 23 percent flat rate hike for recycling services from $4.25 to $5.23 per month due to what the company cited as a fluctuating commodities market.

A letter from Shannon dated Aug. 22 states that the economic crash of the global recycling market has rendered a rate hike necessary, as recycling has become more expensive than landfill disposal.

Following due diligence from Lakeway staff, a now-tabled agreement was drafted that sought to either reimburse or charge customers, depending on the impact of the quarterly value of recyclables. That would have taken effect Jan. 1, 2019.

The change states that on top of a customer’s base rate for solid-waste services, “the proportionate monthly value of recyclables shall be credited to each residential customer’s account or charged on the customer’s subsequent bill in the event that the value reported by the city’s contractor is positive or negative, respectively.”

A city document states this language would have given solid-waste customers a rebate or provided revenue for Lakeway’s solid-waste fund to cover the costs contained in the city’s recycling and solid-waste disposal services agreement.

City officials pressed Shannon and Progressive Waste District Manager John Harris about repeated requests for bailouts from the city in the form of raised rates since the contract began, to which Shannon and Harris replied that the situation caught everyone by surprise.

“It’s not going to get any better in the future,” Shannon said. “So we ask for an adjustment now so that we don’t continue to bleed.”

At one point during the discussion council members Laurie Higginbotham and Louis Mastrangelo effectively framed the city’s dilemma. Mastrangelo said that while for the most part he agrees with policies that benefit the environment, Waste Solutions’ request was not fair.

“I’ve never had a contract in my life where the vendor came back to me and said, ‘Hey, we know we have a contract, but our costs are going up, and we’re going to have to charge you more,’” Mastrangelo said. “That’s part of the model when you build a contract, in my opinion.”

Higginbotham replied that she agreed with Mastrangelo in principle, but the circumstances preclude what would otherwise demand sound contractual obligations.

“We have to decide as a community: Do we want to recycle?” Higginbotham said. “These aren’t the bad guys who are coming here and saying, ‘I’m jacking up your prices.’ Everybody in this industry is in their boat. So we have to decide: Are we going to pony up during this time of global crisis to make sure we maintain this [service]for residents, or are we going to say, ‘Screw it,’ and put it in a landfill? I’d rather protect the environment.”

Following public input that largely showed community support for recycling services, council concluded talks with an agreement to return to the issue at its next meeting with the goal of looking into ways to retain the service but reduce the costs.

The next Lakeway City Council meeting will be Jan. 22.

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Brian Rash
Brian has been a reporter and editor since 2012. He wrote about the music scene in Dallas-Fort Worth before becoming managing editor for the Graham Leader in Graham, Texas, in 2013. He relocated to Austin, Texas, in 2015 to work for Gatehouse Media's large design hub. He became the editor for the Lake Travis-Westlake publication of Community Impact in August 2018.
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