Recycler: City ordinance is trashing our business

FORT COLLINS — Gallegos Sanitation Inc., the largest single-stream recycling company in Fort Collins, says it stands to lose hundreds of thousands of dollars this year because of a new contract under which it is charged to drop off and process the recyclables it collects. Formerly, Gallegos actually was paid for the recyclables it delivered to the county processing facility.

The losses have Gallegos pleading with the city to change a decades-old ordinance that prohibits it from charging customers a separate fee for recycling, company officials said.

Waste Management operates the Larimer County Recycling Facility. The new contract lets Waste Management tie the price it charges to process and ship recyclables to international commodities prices for recycled materials. That market has softened considerably in recent months due to low demand from China and the West Coast port strikes.

Waste Management, which was the sole bidder on the county contract, processes the recyclables and hauls the bales in semi-trucks to the Denver metro area for shipment.

Waste Management said the new contract’s pricing structure is critical to maintaining an economically viable processing operation.

“As markets have shifted downward in the last few years, WM has subsidized the cost of recycling in the area, due to our prior contract with Larimer County,” said Waste Management spokeswoman Lara Rezzarday in an email.

“The recycling commodities market is down due to low demand and WM has to offset the cost of collecting and processing recyclables that are bringing in lower value,” Rezzarday said. “Recycling is a global business and is impacted by events like the price of oil dropping and the strikes that recently ended on the Western ports.”

But haulers said the new pricing structure is increasing their costs dramatically. In December, for instance, Gallegos earned $18 per ton in rebates from Waste Management. Now it being charged $34 per ton for the recyclables it drops off to be processed and shipped.

Gallegos drops off about 1,000 tons of waste per month for processing by Waste Management at the facility, and as a result it lost $34,000 in April. At that rate, Gallegos could lose more than $400,000 within a year, company executives say. Gallegos has gone as far as to encourage customers in its newsletter to reuse certain recyclables instead of immediately recycling that waste.

“It is really a damaging situation to us as a local, privately owned business,” said Matt Gallegos, controller for Gallegos Sanitation.

Gallegos says it cannot simply raise its rates to recover its recycling costs because a 1996 city ordinance requires the company to provide free recycling.

However, the city says it cannot prevent Gallegos from raising its trash rates.

“There’s nothing in the ordinance that prevents the haulers from raising their rates,” said Susie Gordon, senior environmental planner for the city of Fort Collins. “But the way (the ordinance) is designed is that as part of your trash service in Fort Collins, recycling is provided at no additional charge.”

The ordinance, developed to encourage residents to recycle, requires haulers to offer a range of trash can sizes to all residents who live in single-family homes or apartments. Haulers such as Gallegos also must provide curbside recycling to these customers at no additional charge.

Gallegos said the city should let the company add a surcharge for recycling.

“We need to be able to encourage (the city) to change some of the ordinance to reflect… the real cost of picking up people’s trash and recycling,” owner and vice president Art Gallegos said.

Gordon said the city plans a comprehensive review of the ordinance over the next few months.

“We’ll be asking for a lot of participation from the community as well as the trash haulers and other stakeholders who have important perspectives to provide to that process,” she said.

Other companies in the region pay much less for recycling and in some cases continue to receive payment for recyclables. In Boulder County, Western Disposal receives $2.50 per ton to drop off residential recycling at the Boulder County Recycling Center, said Bryce Isaacson, vice president for sales and marketing. The company received $5 per residential ton of recycling last year.

That situation could change based on the declining market for recyclables, resulting in Western Disposal receiving no pay for the materials it drops off at the Boulder County facility. Western Disposal, however, does not budget to receive any revenue from recycling although, at the same time, it includes recycling in its trash service rates.

“If we were like Gallegos, we’d have to look at readjusting our rates,” Isaacson said. “If all the sudden you’re being charged, then your costs are higher because you’re having to pay to drop it off.”

Other organizations also lose money. In fact, Larimer County has subsidized recycling to the tune of $5 million over the past 24 years since the county built the recycling center in 1990, said Stephen Gillette, the county’s solid waste director. From 1990 to 2014, recycling facility revenue totaled $18.9 million, while expenses exceeded $23.9 million.

The county offsets the loss with revenue from the overall solid waste budget, much of it funded by fees charged to landfill users.

“Recycling is not free: never has, never will be,” Gillette said. Waste Management has “not been making money. You cannot stay in business if you’re not making money: That is why this contract is based on market indices.”

Similarly, Gallegos says it has never made money from recycling, although now it has gone from in the red to bright red on recycling operations.

“These are huge impacts,” Matt Gallegos said. “It hurts us to see what’s ahead.”

Steve Lynn can be reached at 970-232-3147, 303-630-1968 or slynn@bizwestmedia.com. Follow him on Twitter at @SteveLynnBW.

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