The decision by the Western Placer Waste Management Authority (WPWMA) Board of Directors in 1993 to build a facility that did not require customers to sort their materials was controversial at the time, although not to the extent that it would have been in other California communities of a more liberal mindset. The controversy intensified after the facility was built and did not seem to be living up to financial and operational expectations. By 1997 there were grave concerns voiced by the Placer County Grand Jury as the WPWMA faced several lawsuits, was involved in a serious dispute with the MRF operator (Nortech Waste Inc.) and appeared poised for a death spiral of diminishing material and revenues requiring higher rates leading to a loss of more revenues and a default on its $27 million bond issuance. By 2004, however, the WPWMA had recovered so successfully that it was able to pull $19.5 million from reserves to pay off all outstanding bonds 10 years into the 20-year payback period.
Avoiding the Death Spiral
There were a number of factors that contributed to saving the JPA and bondholders from a very bad outcome after the construction of the WPWMA MRF. The most important, which was not within the control of the WPWMA, was an improvement in the economy and a corresponding growth in housing construction and the wastestream (see Figure 1 for a summary of waste received over time). Of the actions taken by the WPMWA and Nortech, these were the most important:
- Maintaining control of the wastestream by enforcing flow-control agreements signed before bonds were sold
- Creating new waste categories with lower tip fees to recapture waste that had been disappearing due to the $68-per-ton MSW tip fee (see Table 1 showing evolution of tip fees over time)
- Leadership shown by the WPWMA board in amending agreements with Nortech to adjust to changing circumstances in spite of public criticism
- Actions taken by the City of Roseville and City of Lincoln to require construction debris from their communities to be hauled to the WPWMA MRF
- Creativity by Nortech in changing the emphasis from recovery of cardboard, whose quantities had been greatly reduced through source-separation programs (as discussed below), to materials more difficult to recover and market
- After the initial shock and recovery from the early years (1995-1998), the facility continued to evolve in a number of ways. What follows is a very brief summary of the most important lessons learned in the areas of equipment and processing techniques, contracting and procurement, and financial management.
- Lessons Learned: Equipment and Processing Techniques
Although an extensive discussion of equipment is beyond the scope of this article, a few key points are worth mentioning.
Lesson 1–Mixed wastestreams require considerable presorting and postsorting. The original facility design did not dedicate enough picking stations for presorting materials before they reached the sizing equipment (trommels or finger screens), or for post-sorting and final cleaning of materials prior to baling. When it redesigned the facility in 2005, Nortech, in conjunction with MRF equipment supplier Machinex, added presort stations for six people per line to pull out large and potentially damaging materials before the waste ran through the trommels for its initial screening. The company also added stations for a total of eight more sorters between the trommels and the disc screens that perform the next mechanical separation function. Employing a combination of optical and mechanical screening technologies found most often in clean MRFs, Machinex’s system was able to handle a wide variety of material. According to Eric Oddo, WPWMA program manager responsible for oversight at the facility, presorting has “increased the operational runtime of the facility and decreased equipment breakdowns.”
Experience at the WPWMA MRF has shown that magnets in a mixed waste facility pick up many contaminants along with the ferrous material unless light items such as sheet plastic, paper, strapping material, etc., have been removed upstream. Consequently, post-sorting of ferrous materials recovered by magnets is necessary to remove contaminants and potentially explosive devices such as aerosol cans, propane cylinders and the occasional mortar, flare, or hand grenade.
Lesson 2–Choose equipment appropriate for your wastestream. The original MRF utilized a combination of trommels and finger screens to size material. As compared with finger screens, the trommels (adjustable for 8-inch to 10-inch openings) proved much more effective in spreading out the loads and improving the presentation of materials to sorting personnel. Due to the nature of the WPWMA wastestream, the finger-screen openings were easily masked by large objects and jammed when confronted with many common types of material found in mixed waste, including lumber and large metal objects. Additional personnel were required to monitor the finger screens at all times. Nortech replaced the finger screens in 2011.
Vibrating conveyors were utilized in the original MRF design to move material past the sorting stations. This technology was commonly used in the lumber industry and had proved to be durable and effective for moving heavy materials. A real disadvantage of this conveyance system, though, was the inability to adjust the speed to compensate for changing waste loads, marketing objectives, and staffing levels. The vibrating lines also caused stress to the building and equipment supports. Nortech removed the last of the vibrating conveyors in 2011 and replaced them with belt conveyors.
The lengthy aluminum live floors used to convey incoming materials from the tip floor to the trommels wore out quickly in this environment and were replaced with all-steel live floors. In addition, Nortech replaced approximately half of the longest (170-foot) live floor with a Z-pan conveyor to reduce maintenance and downtime.
Lesson 3-Be prepared to adjust to changing commodity markets. One of the primary advantages of a mixed waste MRF is the flexibility to adjust sorting emphasis and techniques quickly, without the need to re-educate the public regarding what materials are acceptable in their recycling bin. On the other hand, a mixed waste MRF must deal with whatever components of the wastestream no one else finds profitable to remove. Any material that can be source-separated and hauled away for no cost is not subject to flow control; therefore, increasing commodity values can result in loss of valuable materials to private recycling companies and can increase the difficulty of meeting contractual diversion standards and financial goals. As an example, an increase in the value of corrugated cardboard containers in 1996 had a huge impact on the WPWMA MRF because Nortech had targeted cardboard for a large share of the recovery.
One of the ways Nortech and the WPWMA adjusted to the reduction in cardboard was by installing equipment to further screen 2-inch-minus residue coming from the disc screens to a three-eighths-inch-minus consistency to produce an approved alternative daily cover for the WPWMA landfill. This line also included a magnet that continues to recover around 180,000 pounds per year of household batteries that would otherwise end up in the landfill, and an eddy current separator, which is important in the recovery of aluminum, brass, copper, gold jewelry, and coins.
Markets can also affect operations when commodity values fall. In an effort to improve recovery of paper and further separate containers from residue, in 2006 the WPWMA invested $1.7 million to install disc screens immediately before the sorting stations. This equipment proved effective at sorting fibers from containers and resulted in an increase in recovery of containers and mixed paper while markets were strong and specifications for marketing mixed paper were loose. Unfortunately, Nortech’s general manager, Paul Szura, reports that when paper market specifications tightened, paper that had been baled after one negative sort off the disc screens was no longer acceptable. Nortech currently must either positively sort the material or rerun the negatively sorted material a second time. As a result, paper recovery has not increased as expected.
Lesson 4-Eliminate foodwaste. Foodwaste deteriorates rapidly, contaminating paper products and damaging machinery. Removal of foodwaste through source separation programs is highly recommended. This can be accomplished cheaply by sending restaurant loads straight to the landfill; unfortunately you also lose containers and cardboard this way. If you wish to maximize diversion, a separate route for collection of foodwaste is necessary.
Lesson 5-Prepare for large quantities of hazardous waste. One of the most surprising aspects of operating a mixed waste facility has been observing the large amounts of hazardous, universal, and e-waste recovered off the sorting lines, even though the WPMWA offers free drop-off of household hazardous waste and e-waste seven days a week and holds one-day events in more rural areas. Paul Szura estimates that 30% of the materials by weight that are shipped out as hazardous, universal, or e-waste are recovered from mixed waste. If accurate, this means that over 900,000 pounds per year of wastes that should not be buried are pulled off the sort lines. According to Eric Oddo, “While most of the commonly understood household hazardous waste materials such as oil, paint, and antifreeze have been removed from the wastestream by the generator and delivered to the WPWMA’s HHW facility, the vast majority of the 214,000 pounds of household batteries and 35,000 pounds of oil filters processed at the WPWMA’s HHW facility each year were recovered from the sorting of the mixed wastestream at the MRF.” Preventing the burial of these materials is a significant and sometimes unrecognized benefit of mixed waste MRFs. The cost of disposing of hazardous materials has also been an unanticipated budgetary impact.
Lesson 6-Build redundancy into facility design. The first MRF design lacked redundancy in a few key areas. For example, a failure in the residue load out line would shut down the entire plant. Nortech greatly improved redundancy during the 2006 expansion.
Lessons Learned: Contracting and Procurement
Lesson 7-Establish MRF operator compensation with agency goals in mind. Should a contract for processing mixed solid waste call for paying the operator based on tonnage processed or tonnage recovered? Under either method of payment, the agency must establish a minimum requirement for recovery of material, expressed as a percentage of incoming tonnage, to ensure its objectives are met. Excessive emphasis on paying for tonnage processed encourages the operator to run material through the facility at a speed and with an employee complement that just meets the minimum requirement. Completely relying on recovered tonnage creates more budgetary uncertainty for both the operator and owner. It could also put the operator at serious risk if there are changes in the wastestream composition, which could lead to claims and repeated requests for waste composition studies. The WPWMA agreement with Nortech used a combination of the two methods by paying a processing fee per ton, requiring a guaranteed minimum recovery level and offering an incentive payment for waste recovered beyond that level. Nortech also received 100% of the market value of the recyclables (this was recently modified as discussed below), which provided an incentive to recover high market value material beyond any contractual requirement.
The agreement with Nortech set the incentive payment equal to the avoided cost of transport and disposal of residue from the MRF. This seems like a logical approach as it theoretically protects the WPWMA from financial impacts if the operator is very effective at recovering materials; however, some elements of this avoided cost are seen far into the future (e.g., site acquisition, development, and permitting), so there will be a budgetary impact if the incentive payment includes these cost components. Agencies without substantial reserves may want to include only the more immediate savings, such as landfill liner and cover construction, payments to landfill operators, and installation of gas control and monitoring equipment, when calculating an incentive payment. Another option would be to cap the incentive payment at a defined dollar amount per year. On the other hand, agencies that wish to greatly stimulate recovery may set the incentive payment at a level far exceeding any immediate or long-term savings.
When developing a COLA formula, leave a portion of the fee (say 10%) unchanged by the COLA throughout the agreement to reflect fixed costs that do not increase for the MRF operator. Find a combination of indices that reflect your operator’s costs and are readily available on the Bureau of Labor Statistics website. Beware of placing too much emphasis on indices with high volatility from year to year (e.g., fuel).
Lesson 8-Retain a share of the revenue from recyclables. During the early and mid-1990s there was significant concern regarding how markets for recyclable materials would react to a large influx of recovered materials as agencies initiated programs to meet the mandates of AB 939. Some analysts expected markets to tank as materials swamped the existing mills and reprocessing centers. Others expected markets to improve because an increase in materials would stimulate development of new facilities. The WPWMA Board of Directors did not want any liability associated with wildly fluctuating markets, so it placed all the responsibility and reward for marketing materials on Nortech. This decision was criticized by some observers as markets for many materials improved significantly over time. WPWMA negotiated a new agreement with Nortech in 2010 that provides for revenue sharing during periods of high market prices, while preserving the WPWMA’s insulation from market downturns.
Lesson 9-Be prepared for changes in wastestream composition. A heated dispute broke out between WPWMA staff and Nortech immediately after construction of the MRF over a change in wastestream composition caused by loss of cardboard to commercial recyclers. Although the Joint Powers Authority members initiated their own commercial cardboard recycling programs very quickly and directed their haulers to sell all collected materials to Nortech-thus allowing Nortech a share in profits from marketing these materials-Nortech still demanded a reduction in the guaranteed minimum recovery level. This was understandable, since Nortech had based its recovery model on a wastestream that no longer existed, and the Member Agencies were benefiting from the recovery of cardboard through a different means. Unfortunately, under these circumstances the agreement required the parties to conduct a new waste composition study and renegotiate, but did not specify a mathematical outcome. To anticipate and resolve these potential conflicts, consider either: a) preparing a mathematical model in advance to determine the outcome when the wastestream composition changes, or b) providing narrow guidelines for the negotiation to protect the interests of both parties. In either case, it should be made clear that some wastestream changes are inevitable, and the MRF operator is expected to adapt and recover other material if necessary (although perhaps not to the same extent) so the agencies can still meet their overall recovery goals.
Lesson 10-Prepare for changes in waste stream quantity. After a period of very slow growth, the WPWMA service area became one of the fastest growing in California. Although financially beneficial, rapid growth created its own problems as the WPWMA and Nortech struggled to develop capacity within their permitting and physical limitations. The option of sending unsorted waste straight to the landfill on busy days was always available, but never preferred. During one phase, Nortech added an extra Saturday shift. Then it moved to a four-hour second shift and later an eight-hour second shift. The four-hour shift required longer landfill hours, and the eight-hour shift required storing 200 tons of MRF residuals in 10 trailers each night. In 2007, the WPWMA completed an expansion that doubled the size of the processing capacity at a cost of $27 million. Similarly, the compost pad was expanded several times to accommodate ever-increasing amounts of source separated greenwaste as member agencies added a second can for curbside collection of yard clippings. Most of these changes required negotiations and adjustments that could likely have been addressed during development of the original contract.
Lesson 11-Consolidate landfill and MRF contracts. The WPWMA owns a Class II landfill that preceded the MRF and sits on a contiguous parcel, thus making it easy to haul MRF residue to the landfill on internal haul roads. This proximity created concern in the beginning that having the same contractor operating the MRF and landfill could provide the opportunity for “midnight runs” of MRF residue to the landfill to artificially improve the MRF recovery statistics. There was also a general unease with placing all site responsibility in the hands of one contractor in case there were financial difficulties, operational problems, or a legal dispute. For these reasons, the MRF and landfill operations contracts were purposely kept separate and on staggered terms. In 2006 Nortech formed a subsidiary company that successfully bid on the landfill operations contract. This actually turned into a positive development for a number of reasons, including cost savings to WPWMA and greater commitment by Nortech to solve site problems on a global basis. In 2010 the WPWMA signed contract amendments with Nortech that aligned both contracts on a common termination date.
Lesson 12-Establish meaningful performance tests. Setting up a good performance testing regime when you can’t exactly replicate build out conditions can be tricky, but is essential to proving you have received an integrated facility that meets your expectations. When developing contracts, make sure you will have the upper hand in negotiations if a performance test fails. Include provisions that require the operator to redesign or reconfigure the facility to meet performance standards.
Lesson 13-Select a project delivery method that minimizes finger pointing. The original MRF construction and the subsequent expansion to double the size were both accomplished using a design/construction-management/operate delivery method. First, a request for proposals was sent out and the proposals evaluated. Then the WPWMA contracted with two firms to prepare 30% designs of the proposed projects and solidify the cost proposals, including a not-to-exceed construction budget. After the top firm was selected, it completed its 100% plans and specifications for onsite improvements and equipment, which were submitted for bidding as public works projects. Nortech brought on joint venture partners with construction expertise to assist with both design and construction management. During both construction projects, issues arose that required resolution between the designer/CM firm, owner, and builder. Nortech was highly motivated and well positioned to resolve these problems because of its status as designer and long-term operator. Design/build/operate agreements can also minimize finger pointing, if allowed under local statutes.
Lesson 14-Establish material recovery preferences (if any) in the operating agreement. Does your agency have policy goals that would dictate which materials should be recovered? Although Nortech was required to propose what percentage of each material it would target for recovery from the mixed wastestream, the operating agreement does not require them to meet individual targets by material type. This freedom has allowed them to effectively adapt to a changing waste stream and market environment over time. On the other hand, some agencies might be disappointed to have significant percentages of their diversion achieved through recovery of alternative daily cover, wood, and concrete, while seeing large quantities of paper in the landfill-bound residue. If recovery of particular materials is important to your agency, you could consider specifying recovery by material type. Be aware, though, that by doing so you are complicating contract compliance accounting functions and adding to administrative costs. Another option would be to initiate source separation programs for specific materials that are difficult to recover from mixed waste streams.
Lessons Learned: Financial Management
Lesson 15-Establish long-term financial forecasts. When an agency is dealing with long-term commitments, such as closing landfill cells and replacing MRF equipment, developing a financial forecast that extends out at least 20 years is a necessary first step towards establishing tipping fees and reserve accounts to insure coverage of all future commitments. Forecasts should be updated annually.
Lesson 16-Pay off bonds early, if feasible. When provided with the opportunity in 2004 to either: a) repay all outstanding bonds utilizing existing reserves, or b) lower tipping fees, the WPWMA board chose to repay the bonds and reduce interest payments by $7.5 million over 10 years (net savings after deducting loss of investment income was approximately $4.2 million). Although many elected boards would have jumped at the opportunity to lower current fees, this choice allowed the WPWMA board to hold tipping fees steady for several years while internally funding other capital projects from the interest savings.
After an initial rough start, the approach of combining some source separation programs (in particular, residential greenwaste and commercial cardboard) with a mixed waste MRF has proved highly effective in meeting diversion and financial goals for the agencies that combined to form the Western Placer Waste Management Authority. Lessons learned through the 17-year evolution of the WPWMA MRF and composting facility can be applied in other jurisdictions with similar goals.
Looking to the future, the WPWMA and Nortech continue to explore new technologies and methods for improving overall performance and recovery. Residual materials from this MRF may prove ideal for emerging technologies such as anaerobic digestion or gasification because materials considered contaminants have been removed through the sorting process. A report from HDR Engineering regarding the feasibility of utilizing residue from the WPMWA MRF for the production of energy or other useful commodities is expected by December 2012.