1. Recycling Reimagined Overcoming Today’s Challenges…
Tracy Nestor
Senior Area Manager
Municipal Sales
Mid-Atlantic Area

2. Today’s Agenda Introduction Our Understanding:
Evolving Ton
Recycling Life Cycle
Trends in Markets
Trends in Products / Stream
Impacts to Providers
Route Assumptions and Risks
Approaches to Recycle the Recycling Model
4 Contractual Approaches
Partnership
Service Changes
Flat Rate Increase
Contamination Fees
More Information

3. The Recycling Life Cycle
Factors Driving Costs
Participation rates – Higher participation, while the goal, drives more costs
Pounds per set-out – plays a significant role in service cost per household
Commodity mix – changes in the stream can impact processing costs
Residual/contamination – drives additional direct costs
Commodity value – direct impact on any returns

4. Trends in Markets
Glass has negative value in most markets, unless supported by subsidies
Corrugated Cardboard has decreased in price per ton for last 5 years
End markets impacted by global slow-downs

5. Trends in Material
Trends
Implications
Material no longer in circulation
18M tons in 2000  ~2M in 2015
Lighter-weight and limited end markets
HDPE  off-spec PET
Lighter-weight and flexible packaging not recyclable
Tin can  copolymer pouch
Waste minimization increasing pressure on total waste and recycling tons

6. Lightweighting of Material
Lightweighting requires processing of more material to yield a ton of marketable commodity
1. Pulp & Paper Weekly, Official Board Markets, 2016
3. International Bottled Water Association. Retrieved from

7. Importance of Public Education
Yard Waste
Styrofoam
Pizza Boxes
Food Contamination
Clothing

8. Examples of Education

9. Effects on Current Recycling Businesses
Collection Prices do not cover costs
Unable to subsidize from commodity sales
Light-weighting leads to more items per load
We have more material to process per ton
Lack of Public Education and Contamination drives additional costs
Cross contamination
Disposal costs from residual
2011
2015
Tons Collected
Net Revenue
Working harder to process more tons, for a fraction of the revenue

10. https://youtu.be/0d_QeQIzwEY

11. Municipal Contract Example
City of ABC
Volume based MSW and carted recycling service
13,000 units
85% participation
23.5 lbs./week set out
Assumed 10% residual
Assume material value covers processing costs

12. Impact of Assumptions
Accurate assumptions are key to sustained profitability
Cannot control market factors impacting recycling
An alternative economic model is required
Get new excel file

13. Four Approaches to Durable Contracting
Partnership – Contracts structured to cover costs, with shared upside from commodities
Service Changes – Potential changes can yield lower costs, without change in pricing to community
Flat Rate Increase – Common approach to reconciling contracts
Contamination Fees – Recognize added costs when contamination passes a certain level
Contract terms need to be durable to facilitate success

14. Critical Contractual Elements
Partnership
Approach Definition
Negotiated Variable Rate based on service delivery AND commodity values and material stream, date certain
Periodic material audits
Collaborative public education
Critical Contractual Elements
Transparent market/cost-based mechanisms (as applicable)
Comprehensive audit procedures, including frequency
Indexed commodity value matrix, or similar
Clear responsibility of parties
Pros
Solves for volatility
Incorporates material mix
Shared Risk/Reward – partnership
Transparency
Cons
Changing/unpredictable pricing
Customer confusion
Route based characteristics
Potentially less competitive

15. Critical Contractual Elements
Service Change
Approach Definition
Modification of level of service, frequency or size
Implemented at start of contract or mid-term
Requires public outreach and education
Critical Contractual Elements
New rate in payment schedule, or similar
Complimented with contamination limits
Clear responsibility of parties
Potential recordkeeping or reporting (if desired by City)
Pros
Risk mitigation
Potential reduced operating costs
Potentially more competitive
Cons
Managing through change
Does not eliminate volatility
Does not protect against further downside
Capital requirements (potential)

16. One-time Price Increase
Approach Definition
Increased revenue to cover cost of service AND lower value material stream
Implemented at start of contract or mid-term
Critical Contractual Elements
New rate in payment schedule, or similar
Potential language for automatic ‘opener’ language (based on major changes)
Pros
Risk mitigation
Keep all upside in commodity markets
Cons
Does not eliminate volatility
Does not protect against further downside
Potentially less competitive

17. Separate Contamination/Glass Fee
Approach Definition
Pre-determined fees for glass and/or contamination; based on frequent audits
Glass fee binary or percentage based
Contamination fee percentage based
Requires public education component
Critical Contractual Elements
Agreed upon acceptable levels of glass/contamination
Fee rate(s) in payment schedule (likely tabular form)
Customer options to avoid/mitigate
Clear responsibility of parties
Pros
Risk mitigation
Potential reduced operating costs
Potentially more competitive
Cons
Changing/unpredictable pricing
Community confusion (don’t recycle at all)
Lower recycling participation

18. Let’s do our part to protect, preserve
and sustain recycling.
Help your residents learn more about the issues facing recycling and how to address them at RepublicServices.com/Sort-Smarter.