GreenYes Digest V98 #123

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Fri, 22 Jan 1999 17:29:59 -0500

GreenYes Digest Sun, 31 May 98 Volume 98 : Issue 123

Today's Topics:
EcoCycle vs. Monopoly
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Support EcoCycle - Send letters and faxes!

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Date: Sun, 31 May 1998 01:07:30 -0400 From: "Bill Sheehan" <> Subject: EcoCycle vs. Monopoly

[Letter in support of EcoCycle, forwarded from Peter Anderson. P.S. Please weigh in if you haven't -- with a brief letter! See Dave Kirkpatrick's msg. --Bill Sheehan]

TO: Boulder County Recycling and Composting Authority members

Re: Boulder County MRF Bids

The purpose of this letter is to bring to your attention pressing financial reasons for municipal governments to give great weight to the maintenance of independent providers of recycling services, most particularly through Eco-Cycle's bid to operate Boulder's new material recovery facility (MRF). The paramount issue for you, I believe, is how consolidation trends in the solid waste industry are going to spill over to the operation of your MRF, and, thereby, impact how much public funds will be required to maintain the facility.

For the past ten years, in addition to recycling issues, I have closely studied trends in how the structure of the solid waste industry is changing. Unless reversed, my opinion is that those trends strongly suggest that, by the year 2000 or shortly thereafter, a handful of publicly traded national firms will control prices for solid waste services in most markets. Already, BFI and many regional consolidators have given indications that can be interpreted to signal a willingness to let USA Waste be the price leader in order to increase the industry's profitability above market levels. Furthermore, USA Waste's past record suggests that it is not unwilling to simply buy out any other regionals which break ranks. As to privately-owned independents acting as a rein on collusive pricing, by 2005, according to Deutsche Morgan Grenfell's analysis, fewer than 7% of the market will remain out of the hands of the consolidators.

As to whether normally occurring competitive forces can upend a trash oligopoly, it is true that there are few barriers to entry in the hauling industry. But, since the period 1988-1991, there have arisen major hurdles in most markets to anyone attempting to newly enter the landfill and transfer station market, which is an insurmountable bottleneck for potential new hauling competitors.

On its most direct level, this means that, after several years of intense competition and flat or falling prices, we should expect to see sharply higher prices for hauling waste and recyclables because the consolidators have persisted to their apparent end game and are close to locking up many markets. As it pertains to your pending MRF contract, moreover, there is an additional level of concern.

For not only should we expect to see monopoly profits levied on all waste and recycling services, but, in addition, the publicly traded firms are under enormous pressure from Wall Street to produce higher earnings growth than the market averages in order to sustain high stock valuations. In this regard, the industry's opinion has been quite clear: processing recyclables is a low margin business that does not fit into their growth plans.

What does this mean? To the extent that the two for-profit private bidders become acquired by national consolidators in the industry, the Boulder MRF will probably not be considered an operation deserving of serious management attention. Whether it will be retained instead of divested will probably turn to a significant extent on whether the acquirer wants to keep it out of a possible competitor's hands =97 not on any desire to improve efficiency or find new markets. That result, then, would lead to higher operating costs and lower revenues, above and beyond the overall monopoly levy.

Of course, there is no way with any certainty to know the ultimate fate of those two private bidders. But the trends in the industry are very suggestive. Few of us, I am sure, would want to bet the ranch that they would turn down takeover bids with, for example, a 30% premium over current market values. At the same time, the fact that several publicly traded consolidators are again enjoying price/earnings ratios above the market average seems to indicate that Wall Street is willing to continue financing further consolidation of the industry, presumably until all private independents are gone. The critical distinguishing fact here, though, is that takeovers of financially viable non-profit operations are far more difficult to navigate because the management of non-profits cannot by law themselves receive the enormous payouts that private owners can receive in a takeover, and, to the same effect, there are no rapacious stockholders to be bought off.

It is for these reasons that I believe it would be in the financial interest of Boulder to do everything possible =97 and accepting the substantially lowest bid does not seem that far a stretch =97 to invest in an insurance policy that the MRF contractor will remain independent providing continuity of management and management support and efforts to improve efficiency and continually search out the best end markets will continue unabated.

Certainly, if you have any further questions, please do not hesitate to call us for more information. In any event, thank you in advance, for your consideration. I hope that you find this perspective profitable for your community. Personally, I have long seen the preservation of a strong non-profit sector in the recycling industry of vital financial importance to all of us. The additional educational component and dedication of that sector, which is more well known, is only the icing on the cake.

And, if you want to learn more about structural changes in the solid waste industry and how they may affect Boulder, let me know if you'd like to order a copy of our report on the subject.


Peter Anderson President PA/ji_____________ Peter Anderson RecycleWorlds Consulting 4513 Vernon Blvd. Ste. 15 Madison, WI 53705-4964 Phone:(608) 231-1100/Fax: (608) 233-0011


Date: Sat, 30 May 1998 07:56:46 -0400 From: Beth Graves <> Subject: Out of Office AutoReply: GreenYes Digest V98 #122

I will be traveling for work the week of May 25-29, returning to the office June 1, 1998.

Beth Graves


Date: Sat, 30 May 1998 05:37:47 -0700 (PDT) From: "David A. Kirkpatrick" <> Subject: Support EcoCycle - Send letters and faxes!

GreenYes subscribers -

I tried to send the message below to the GreenYes listserv on 5/17/98 but the listserv was down. It appears to be running again... so here goes. **Please excuse the length.** Faxes to board members and emails to the media are still vitally needed to support EcoCycle. The public hearing I refer to below went well for EcoCycle, with more than 300 citizens turning out to support them, but their prospects for winning the MRF bid are still *very much* in the air. Thanks to those of you who have already sent letters. If you have not, please help out ASAP if you can.

David Kirkpatrick =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D

Grassroots Recyclers - (Originally sent 5/17/98)

I have just returned from Colorado's state recycling conference and am writing to ask you to fax letters of support early this week to support EcoCycle in their bid to operate a new upgraded MRF for Boulder County. As many of you know, EcoCycle is a 22 year old non-profit recycler that has been a leader in community-based recycling via block leader programs, excellent public education, and innovative processing and materials marketing in Boulder, CO. Eric Lombardi, EcoCycle's executive director, has been active in GRRN, was our spokesman at the rally at Coke in Atlanta last spring, and has pushed recycling advocacy in the NRC, NonProfit Recyclers' Council, and GRRN for years. EcoCycle has helped Boulder to achieve high recycling rates and built the community consensus for the passage of a recycling fee which is funding the new MRF to allow for even greater waste reduction. =20

Now it is time for us to lend a hand. A committee of the Authority is recommending that a waste hauler win the MRF bid, despite EcoCycle's lower cost and greater expertise in recycling. A key meeting is occuring this Wednesday, May 20. Please fax a letter of support for EcoCycle to the Authority members listed below with a copy to EcoCycle. I have listed the members in order of priority, so if you are able to send just a few, start at the top of the list. Many of you sent letters supporting Arcata (CA) Community Recycling Center a few months ago, resulting in that key grassroots recycler winning a contract renewal. Let's do it again! A copy of my letter to the Authority is below for more details. (Sorry for the length of this message... for your letter just a short statement of support for EcoCycle would be fine -- just getting it in ASAP is most important.)

Name, Affiliation, Fax # =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D Eric Lombardi, EcoCycle, 303/444-6647 ------------------------- Boulder County Recycling and Composting Authority members: Lisa Morzel, City of Boulder, 303/441-4478 Eric Doering, City of Longmont, 303/776-6344 Jana Mendez, Boulder County, 303/441-4525 Tom Mayer, City of Louisville, 303/497-1700 Terry Andrews, Town of Lyons, 303/443-0084 Karen Klassen, Town of Superior, 303/499-3677 Debbie Langerak, Town of Erie, 303/665-3557 Karen Stuart, City of Broomfield, 303/438-6234 Brook Svoboda, City of Nederland, 303/444-0393 Dennis Buck, City of Lafayette, 303/665-2153=20 Arlan Lazere, Town of Jamestown, 303/652-8409

For Letters to the Editor Supporting Eco-Cycle ---------------------------------------------- (Note: the area code for all these fax numbers is 303.) Daily Camera, Fax: 449-9358, Colorado Daily, Clint Talbot, Editor, Fax: 443-9357,= Boulder Weekly, Joel Dyer, Editor, Fax: 494-2585, Boulder Planet, Gregory Todd, Editor, Fax: 415-1210, Daily Times Call, Curt Anderson, Managing Editor, Fax: 678-8615, Broomfield Enterprise, Fax: 466-8168, no e-mail, (Wed is deadline) Louisville Times & Lafayette News, Cynthia Campbell, Managing Editor, Fax: 666-6602, e-mail:, (Wed is deadline day. To fax wait for recording & hit 33 start.) The Mountain Ear, Kay Turnbaugh, Editor, Fax: 258-3547 , Niwot Tribune & Lyons Recorder, Walt Kinderman, Editor, Fax: 823-6633, no e-mail =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D KIRKWORKS MEMO

TO: Boulder County Recycling and Composting Authority members FROM: David Kirkpatrick, Principal, KirkWorks SUBJECT: New Recyclables Processing Center Bids for Boulder County DATE: May 17, 1998

I am writing to give a North Carolinian's perspective on your upcoming selection of a firm to design, build and operate a recyclables processing center for Boulder County. I am a recycling economic developer who promotes the growth the recycling industry nationwide through recycling investment forums and economic and industry research. I had the opportunity to visit Denver and Boulder last week as a keynote speaker for the annual Colorado Recycling Conference. While in your majestic state, I had the chance to read the report prepared by R. W. Beck dated March 30, 1998 evaluating the three bids for the Boulder Processing Center. As you know, the report ranked EcoCycle's proposal the lowest and recommends negotiating a contract with a local waste hauler. I have several concerns with this recommendation and wanted to share these with you prior to your upcoming meetings. I ask that you enter this comments into your public record of that meeting as an outside perspective on your decision.

First, let me commend your authority for investing in recycling. The wide range of recovered material to be processed, the increased recovery rates anticipated, the educational focus, the attention to green building and landscaping practices, and the attention to long term markets are all great features of your RFP that many other communities would be well served to follow. Recycling advocates around the country have often seen Boulder as a bright spot in nation, demonstrating that cost-effective recycling programs and high levels of community participation are possible even in states with low landfill tipping fees and long distances to materials markets. However, I fear that you may stall further progress if you choose the wrong firm to implement your next steps.

Boulder has an asset that is sadly lacking in most localities -- a community-based, non-profit recycler with an excellent educational, civic participation, materials processing, and marketing track record. Indeed, in 1982, I visited EcoCycle to learn best practices as we designed a new curbside, drop-off and block leader recycling program for Durham, NC -- SunShares. With the early leadership of Pete Grogan and more recently Eric Lombardi and many other dedicated staff, EcoCycle has been an innovator in recycling volunteerism, materials market partnerships, commercial recycling, and materials processing. Programs around the country have "recycled" EcoCycle's innovations as documented in the trade press, at National Recycling Congresses, in national awards, and through their regular= newsletter.=20

Sometimes it takes an outsider to help folks to realize the jewel they have in their own hometown, so let me list some of the benefits I see to working with a locally based, professionally managed non-profit recycling= organization:

1) Community investment - You know that every dollar invested in EcoCycle will be spent in your community, supporting local jobs and economic development. As a non-profit, any retained earnings will be spent furthering local waste reduction and environmental goals, not exported to an out-of-state or local corporate owner.

2) Long term local responsiveness - EcoCycle is headquartered in Boulder and has operated recycling programs there for twenty years. They will not be distracted by new projects in other cities, but will be focused on effectively serving your local communities. Of the other two bidders, one is headquartered in NC and was recently bought by a Maine company. The other is a Boulder-based waste hauler which could be bought out by one of the waste hauling giants that are rapidly consolidating the waste industry yet have little interest in innovations in recycling.

3) A sole focus on recycling - EcoCycle's primary mission is waste reduction and recycling, while that of the other two respondents is financial return to shareholders. EcoCycle has been willing over the years to "push the envelope" of recycling due to its mission, breaking new ground in markets that were not initially commercially feasible.

4) Local material marketing expertise - EcoCycle has pioneered marketing a range of materials in a region of the country with poor access to ports for exports and few end use manufacturers which use secondary materials. Their partnership with Weyerhaeuser for paper marketing is one excellent example of their foresight in assuring long term markets. The local waste hauler recommended by the R.W. Beck report has very limited materials marketing experience and subcontracts this entire function to another company, as stated in the report. From my experience operating a MRF for seven years, materials marketing expertise and contacts combined with good public education and processing systems are essential for generating the highest revenues from the facility. EcoCycle has demonstrated these competencies fully on limited budgets in recent years and could excel in a properly designed and funded facility.

5) Educational and civic involvement brilliance - I have been impressed by the educational programs of EcoCycle over the years. Their regular newsletter is the best of the many community recycling newsletters I receive from across their country. Their block leader programs has been duplicated in NC, MN, CA and other states. An organization that combines education with materials processing in uniquely suited to the "lifestyle change" mission of recycling and Boulder is lucky to have one. I was pleased to see that your RFP highlighted the educational aspects of the processing facility and am convinced that EcoCycle would be your best bet for building in such features and more importantly for consistently reaching out to schools, businesses, and community groups over the coming years.

Given all of these benefits to contracting with your own community-based recyclers, I can think of only a few reasons why you might choose to contract with another company for the next phase of your recycling efforts: - a poor track record - poor management - inability to grow to meet future demands - excessively higher cost

However, in the evaluation report, it is clear that EcoCycle's track record, management, and ability to expand were either not questioned or highlighted as strengths. Finally, instead of being the most costly, EcoCycle was the most cost-effective bid by far -- $7 million vs. $11 million and $12 million in capital costs for the other bidders. Counting annual operating costs and deducting higher landscaping costs of the other bidders, the report still calculates the Net Present Value of EcoCycle's bid over five years being 30% and 33% lower respectively than the other bidders.

With all of the attention to saving local taxpayers' money I have seen with respect to recycling programs across the country, it is encouraging (I guess) to see Boulder County ready to spend more. But to spend more and get less? =20

The best analogy I can think of would be if a company had had a dedicated employee for twenty years -- let's call him Ernie. He has been doing an excellent job on a low salary and with an old typewriter and a cramped office. He is fully committed to the company and its mission and is rooted in the community. Now the firm has the funds for a position that Ernie is uniquely qualified for, and the company can afford a good sized office and a high-tech computer system to allow him to be much more productive. Instead, the firm decides to offer the job to Wally, someone without the demonstrated skills or commitment to its mission. Not only that, Wally requires a salary 30% higher than Ernie. I would suggest the company take a fresh look at its hiring, promotion and retention practices!

In reading the R.W. Beck report, I got a sense that at every evaluation point, EcoCycle's strengths were de-emphasized while those of its competitors were overweighted. On cost, the capital costs (on which EcoCycle excelled) had no impact on the evaluation score. Conversely, expertise in construction design and management, on which the for-profit bidders scored higher, were weighted significantly in two different evaluation measures. EcoCycle's strengths in education and materials marketing did not have much impact on the scores. Meanwhile, EcoCycle's proposal was singled out for critique on several technicalities, while the shortcomings of the other two bidders somehow did not result in such a separate critique.

I qualify all of my comments by noting that I have only read the R.W.Beck report, not the initial RFP or the three individual responses. I respect that each of the authority members and staff have worked diligently and thoroughly to choose the best system for Boulder's recycling future. Yet, I wanted to take this time to share an outside perspective for your consideration. While I have been a fan of EcoCycle for many years (can you tell?), I have written this letter independently and unsolicited by EcoCycle. Rather, as someone who works to see the recycling industry succeed in the U.S., I have a very direct self-interest in hoping that EcoCycle continues to grow and thrive. We do not lack for standardized MRFs around the country operated by national firms or waste haulers. However, well managed non-profit recyclers are few and far between yet contribute disproportionately to the innovation, advocacy, and heart that are necessary for recycling to reach the next level in our nation. So ironically, your local decision truly will have national impacts. Please make the right one!

Sincerely,=20 David Kirkpatrick --------------------------------------- KirkWorks =09 good works for the good earth =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D Address: Post Office Box 15062 Durham, NC 27704-0062 USA Voice: 919/220-8065=20 Fax: 919/220-9720=20 Email: Website: =20 =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D= =3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D=3D


End of GreenYes Digest V98 #123 ******************************