Memorandum TO: HONORABLE MAYOR AND CITY COUNCIL. FROM: Toni J. Taber, CMC City Clerk. SUBJECT: SEE BELOW DATE: December 18, 2015

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1 CITY OF Srr SAN JOSE CAPITAL OF SILICON VALLEY TO: HONORABLE MAYOR AND CITY COUNCIL COUNCIL AGENDA: ITEM: 7.1 Memorandum FROM: Toni J. Taber, CMC City Clerk SUBJECT: SEE BELOW DATE: December 18, 2015 SUBJECT: Recycle Plus Curbside Material Audit RECOMMENDATION As recommended by the Transportation and Environment Committee on December 7, 2015: (a) Accept third party studies of single-family residential recyclables characterization and hauler recycling facilities operations; (b) Direct staff to return to Council in March 2016 with proposed updated contract language, if applicable, in Districts A and C, to reflect changes discussed in this report for Council consideration; and (c) Direct staff to implement pilot studies to (1) process recyclables residue from Districts A and C to recycle organic waste, (2) issue larger garbage carts for single-family residences in focused areas; and return to Council with any recommended program changes as part of the budget process.

2 CITYOF ~ SAN JOSE CAPITAL OF SILICON VALLEY TO:'TRANSPORTATION AND ENVIRONMENT COMMITTEE T&E AGRNDA: 12/07/2015 ITEM: (d) 4 Memorandum FROM: Kerrie Romanow I SUBJECT: RECYCLE PLUS CURBSIDE MATERIAL AUDIT Approve::rs CS S ':\ ( v DATE: November 30, 2015 Date RECOMMENDATION a) Accept third party studies of single-family residential recyclables characterization and hauler recycling facilities operations; b) Agendize this report for discussion at the December 15,_ 2015 Council meeting; c) Direct staff to return to Council in February 2016 with proposed updated contract language, if applicable, in Districts A and C, to reflect changes discussed in this report for Council consideration; and d) Direct staffto implement pilot studies to (1) process recyclables residue from Districts A and C to recycle organic waste, (2) issue larger garbage carts for single-family residences in focused areas; and return to Council with any recommended program changes as part of the budget process. OUTCOME : This report will inform and suppmi staff and hauler efforts to impr<?ve the residential recycling program. BACKGROUND To help improve the Recycle Plus program in summer 2014, the Environmental Services Department (ESD) requested the City Auditor to evaluate the single-family curbside recycling program. The May 2015 Auditor's Report was presented to Council on September 15,2015 where the report discussed completion of: A third-party recyclables characterization study (Attachment A), Review of material recovery facility (MRF) operating procedures (Attachment B), and Enhancements to education and outreach efforts and increased enforcement on customers who continually place non-recyclables in recycling carts (update in Attachment C). Supplemental memoranda from Council members on September 11,2015 and September 15, provided additional recommendations to the audit. Council decided to defer discussion on

3 November 30,2015 Page2 the supplemental recommendations until after consultant studies were completed and the findings could be considered. Two haulers collect and process the materials in the single-family recycling carts, California Waste Solutions (CWS) (Districts A and C, about 75 percent of total single-family residences) and Green Team of San Jose (GreenTeam) (District B, about 25 percent of single-family residences). GreenTeam also provides recycling collection for multi-family residences Citywide. The existing residential system dates back more than 20 years. The City's three recycling service districts were created in 1993, and the current "Recycle Plus" program model was designed in 1999 and implemented in The hauler contracts were odginally set to expire in.2013; however, in June 2010, Council approved new agreements with all four Recycle Plus service providers (GreenTeam, Green Waste Recovery, Garden City Sanitation, and CWS) with extended terms through June In 2008 the Recycle Plus program began to incorporate the processing of garbage to recover and recycle organics and recyclables from the black garbage cart, and divert them from landfill disposal (also known as "backend processing''). In , Council approved a seven-year plan to phase in backend processing for all single-family residences; currently, 40 percent of single-family residences are phased in. Backend processing was implemented for multi-family residences (apartments, condos) in July 2008 and more than doubled the multi-family recycling rate from approximately 36 percent to 79 percent. ANALYSIS The recyclables characterization study revealed that compared to 2008, San Jose residents have significantly reduced the total amount of household waste set out at the curb (see Table 1). Residents are choosing less paper-intensive options, like electronic outlets for news over printed newspapers, which has contributed to a decrease in the overall amount of recyclables collected. For example, in 2008 newspaper consisted of 16 percent of recyclables collected, versus 7 percent in This waste reduction trend aligns with the City's efforts to encourage residents to reduce, reuse, then recycle. District A District B District c Table 1: Garbage & Recycling, 2008 & 2015 (lbs/household/week) Oct Sept2015 Total at Curb (Garbage/Recyclables) Recyclables only Total at Curb (Garbage/Recyclables) Recyclables only Total at Curb (Garbage/Recyclables) Recyclables only %change -5.7% -13.3% -9.9% -19.3% -10.8% -18.8%

4 November 30,2015 Page 3 This significant drop in per household recyclable material collected may have made achieving the contractually required recycling targets more challenging for the haulers; the targets are based on the amount of recyclables recovered compared to the total amount of garbage and recycling collected. Additionally, the amount ofrecyclables residue sent to the landfill by the processing facilities has also increased significantly in recent years. Recyclables residue is the remaining non-marketable material after processing at the MRF. Figure 1 illustrates the decrease in the single-family recycling rate over the past 8 years as a result of the drop in recyclable tons collected and recovered annually. 100,000 90,000 80,000 70,000 "' 60, ,000 Eo< 40,000 30,000 20,000-10,000 - Figure 1: Material in Recycling Cart % 07/08 08/09 09/ 10 10/ 1 I 11/ 12 12/ 13 13/ 14 14/15 L::...:J Recycled -Land filled -a-sfd Recycling Rate 35.0% 25.0% Recyclables Characterization Study The Auditor's recommended recyclables characterization study was completed in November 2015 by Cascadia Consulting Group. The consultant sotted a total of approximately 70 samples City-wide, with 22 to 25 samples of material sorted from randomly selected recyclables collection routes in each collection district over a one-week period. The study found that the proportions of recyclables and non-recyclables collected in the residential recycling stream has not changed dramatically in any collection district, or City-wide, as compared to the 2008 characterization of single-family recyclables (see Table 2)., Table 2: Composition of Single-Family Recyclables Collected Recyclable Non-Recyclable District A 73% 68% 27% 32% B 73% 78% 27% 22% c 75% 79% 25% 21% Overall 74% 74% 26% 26%

5 November 30,2015 Subject: Recycle P lus Curbside Material Audit Page 4 During the same week as the waste characterization, Garden City Sanitation, the contracted garbage hauler for Districts A and C, started a food waste collection pilot by providing one of two specialized collection carts to 6.7 percent (6,500 households) of the single-family households in District A (97,000). Cascadia estimated that truck samples from routes not involved in the food waste pilot had slightly more non-recyclable materials (3. 7 percentage points) and food waste (2.4 percentage points). They concluded that it was highly unlikely that there is a statistically significant difference between the portion of non-recyclable and compostable organics materials in samples from routes patticipating in the food waste pilot and routes outside the pilot areas. Conservatively, adding an estimated 6 percent to the 27 percent non-recyclables in District A to account for any impact of the food waste pilot would increase the 2015 non-recyclable total to 3 3 percent and would not change the assessment that 2015 results are near-equivalent to the results from The 2015 Cascadia study also evaluated the marketability of the recyclable material collected. As shown in Table 3 below, the landfilled, non-marketable material for Districts A (33.7 percent) and C (32.7 percent) is similar to the findings of a May 2015 study CWS provided to Council that reported 39.9 percent ofrecyclables collected were not marketable. Cascadia found that approximately 60 percent of the non-marketable materials are compostable organics, including food-soiled paper (such as pizza boxes and other paper food containers). Other non-marketable materials include composite glass, household hazardous waste, and medical waste.. T a bl e 3. R ecyc I a bl es St u d ly C ompan son Study Marketable* Non Marketable* 2015 CWS study, Districts A & C 60.1% 39.9% 2015 Cascadia, District A 66.3% 33.7% 2015 Cascadia, District C 67.3% 32.7% *The CWS study uses the terms "Recyclable" for "Marketable" and "Non-Recyclable" for Non-Marketable. Material Recovery Facility Operations Study Per their agreements, the recycling haulers must process all recyclable materials collected; any material that remains after processing may contain a minimal amount of clean recyclable material that escaped sorting. As shown in Table 4, the tons of recyclables collected decreased by 12.7 percent for District A and C, and 16.2 percent for District B. During the same period, the percentage of material the haulers were able to recover at their processing facilities decreased by 16.9 percent for Districts A and C, and about half a percent for District B. One possible cause for the decrease from Districts A and Cis that since November 2013, CWS has not been able to sell post-processed material to another facility for additional processing, and the material has been landfilled. The combination of decreased recycling tons collected and lower MRF recovery rates, has led to a decrease in recyclable tons recovered of 27.4 percent in Districts A and C, and 16.6 percent in District B.

6 November 30, 2015 Subject: Recycle Plus Cur bside Material Audit PageS Table 4: Recyclables Recovered Oct Sept2 015 Of< o c h ange Recyclables collected (tons) 84,449 73, % Districts A&C MRF Recovery Rate(%) 82.9% 68.9% -16.9% Recyclables recovered (tons) 70,049 50, % Recyclables collected (tons) 25,322 21, % District B* MRF Recovery Rate(%) 88.4% 88.0% -0.5% Recyclables recovered (tons) 22,394 18, % *In 2008, Dtstnct B recyclables were processed at a MRF operated by Greenfeam. As of Apnl2014, District B recyclables are processed at a MRF operated by Green Waste Recovery. As covered in the Auditor's report, ESD retained a consultant to assess both CWS and Green Waste MRF's to evaluate current equipment and operations (GreenTeam's District B residential recyclables are processed by Green Waste Recovery). The report, completed by Sloan Vazquez, LLC, a solid waste planning and management services consultant, is provided as Attachment B..1 Recycling Markets Per the agreements with the City, haulers keep all revenue from the sale ofrecyclables they recover. This arrangement incentivizes the contractors to find markets for potentially recyclable materials and is common in solid waste contracts across the Bay Area. Any risk the haulers assume for market volatility is compensated by the City ratepayers in the monthly per household payment to the haulers. Recycling markets cycle up or down depending on changes in demand for recycled materials, including manufacturing and consumer behavior. Since early 2013, the haulers have reported increasingly stringent standards for selling cleaner commodities to overseas markets. This can result in buyers rejecting more recyclables that do not meet changing and more stringent specifications. As noted in the Auditor's repoti, CWS and GreenTeam experienced drops in recycling sales by 26 percent and 8 percent respectively from 2008 to The impact of this tougher market standard, coupled with the operational change of not reprocessing recyclables, tracks parallel with the decreased recycling rates and asso~iated penalties for CWS (see Table 5). I.. I The Recycle Plus agreements allow for some flexibility as recycling markets change. Haulers may request that additional commodities be added to the approved list of items that count towards the recycling requirement. For example, since April 2014, organics and soiled paper from District Bare recovered at the Green Waste MRF and sent for composting, instead of being landfilled, reducing the amount of recyclables residue sent to landfill. Similarly, the recycling rates in Districts A and C would increase if the organic waste found in the Cascadia study was recovered and composted.

7 November 30, 2015 Page6 Contractual Recycling Requirements and Penalties As explained in the Auditor's report, the contractual recycling rates for Districts A and C were not met in 2011 through 2014, resulting in the penalties as shown in Table 5. The penalty for 2015 is estimated at $560,000 and would be assessed in the first quarter of2016 per the terms of CWS's agreement. During this same time period GreenTeam met its contractual recycling targets and was not assessed penalties. T a bl e 5 : R es1 'd en f Ia I R ecyc r m g R a t es an d P en a If 1es District A District C District District B District B A&C Penalty Year Req'd Actual Req'd Actual Penalty Req'd Actual % Est.23.7%* 35% Est. 26.6% Est. $560,000 35% Est %* $ % 23.7% 35% 26.7% $576,520 35% 36.4%* $ % 27.9% 35% 29.9% $283,644 35% 38.0% $ % 30.6% 35% 33.6% $37,280 35% 38.4% $ % 29.6% 35% 34.7% $0 35% 37.2% $ % 30.4% 35% 34.9% $0 35% 36.7% $0 "Per contract terms, these recychng rates do not mclude recycled matenal recovered fi om backend processmg ofsmgle-famtly garbage. The contractually required recycling targets of30 percent for District A and 35 percent for District C may be challenging to achieve given the total drop in recyclables set out for collection, the changing recyclables markets, continued presence of non-recyclable materials in recyclables carts, and operational changes. Near Term Efforts A.ll four current Recycle Plus agreements expire in June2021. Preparation for the procurement to replace the current Recycle Plus agreements has begun with the waste characterization study and pilots discussed in this report. Next steps include researching program modifications through early 2017 and returning to Council twice in 2017 for 1) approval of new program goals, objectives, and policy direction, and 2) approval to proceed with recommended program design. The Request for Proposals is planned to be issued, evaluated, and contract awarded by late 2017, and hauler mobilization and roll-out would begin in July 2019 for a July 2021 service sta1t. In order to increase the single-family recycling rate during the approximate five year remaining term of the current Recycle Plus contracts, staff recommends the strategies discussed below.,' a) As a pilot, City re-processes residual material destined for landfill from the CWS MRF to recover organics and any recyclables. Data from the recyclables characterizations indicates that about two-thirds of non-recyclables from Districts A and C are compostable, so this approach could increase the recycling rate for Districts A and C, while potentially reducing or eliminating CWS recycling requirement penalties and disposal costs (CWS delivered 24,000 tons of matelial to landfill in 2014 at a cost of approximately $1.2 million). This option ~auld require a rate increase but likely significantly less than other options below.

8 November 30,2015 Page 7 b) Pilot larger garbage carts for single-family residences in focused areas and explore alternative r ecycling education responsibilities. Staff would measure the impact that larger garbage carts have on the amount ofnon-recyclables in the recycling cart. Staff could also explore the costs and benefits of the City taking on more of the education and outreach efforts. c) Adjust contractual recycling rate targets for Districts A and C. CWS contract could be amended to adjust the recycling rate targets to better account for the declining amount of recyclables collected at the curb. This approach could reduce or eliminate CWS recycling penalties, and City could assist with paying recycling residue disposal costs. However, this option does not address the low residential recycling rate. Alternative short term strategies for Council consideration include: d) Expedite the Council-approved plan to phase in backend processing of garbage for a portion or all of the remaining 60 percent of single-family households as early as July In , Council approved seven-year plan to phase in backend processing of garbage for all single-family residences. Currently, 40 percent of single-family residences are phased in. During first full year of the program, recycling rates increased from approximately 35 to 85 percent in the program specific area, and eight percent for the singlefamily program overall (29 percent to 37 percent). Based on results, this alternative could be a more cost-effective usc of ratepayer funds to increase recycling than reprocessing residual materials from the CWS facility. This approach would require rate increase, but could be minimized depending on other rate considerations, including the projected low annual hauler cost of living increase for CWS contract could be amended to change the recycling rate calculations to credit backend processing results toward recycling targets, thereby reducing or eliminating CWS recycling requirement penalties. e) Defer major program modifications, such as backcnd processing or re-processing of MRF residue, until the residential contracts are re-bid. This approach does not address the declining recycling rate, and annual recycling rate targets would potentially continue to not be achieved in Districts A and C, while recycling residue disposal costs continue at historically high levels. Long Term Considerations There are several other strategic opportunities to improve service in the next generation of Recycle Plus agreements. These include redesigning district boundaries so that they better account for household size and new housing developments; defining a standard diversion calculation for all districts; having a combined garbage and recycling service from one sole contractor per district so that the separate handling of garbage and recycling is replaced with a solution that targets recycling all waste generated at each household (recently implemented with the City's upgrade of commercial solid waste system in 2012); and other program modifications that are cost-effective to ratepayers and achieve higher recycling rates. Furthermore, the cun-ent

9 November 30, 2015 Page 8 collection district boundaries were established nearly 25 years ago and need to be reconfigured to achieve mo.re efficiency and effectiveness for the collection routes, including reducing greenhouse gas emissions. The districts will be designed to facilitate participation by large and small hauling companies. Staff anticipates that the City will continue to provide disposal services through a separate agreement; proposers would not need to provide disposal. ; The new agreements would also need to comply with legislation and regulations that impose stricter standards and goals on waste management programs. For example, in October 2015, Governor Brown signed bills that will increase the recycling of food waste and other organic materials. One of these, AB 876, requires local governments to plan for the building of sufficient composting and anaerobic digestion infrastructure to process the organic waste generated in their jurisdictions over a 15-year period. Further, the state's Air Resources Board has set a target of effectively eliminating the disposal of organic waste by The new agreements would be designed to support compliance with these and other new legislative or regulatory standards, as well as achievement of the Council-adopted resolution that established a goal of Zero Waste to landfill by EVALUATION AND FOLLOW-UP This report recommends that Staff return to Council with contractual options for consideration in February PUBLIC OUTREACH/INTEREST This recommendation will be posted on the City's website as part of the December 7, 2015 Transportation and Environment Committee agenda. COORDINATION This report has been coordinated with the City Attorney's Office and the City Manager's Budget Office. COST SUMMARY/IMPLICATION Staff will include any cost associated with updated contract language and pilots when it returns to Council in February Costs associated with the pilots are projected to be minimal within the existing program budget.

10 TRANSPORTATION AND ENVIRONMENT COMMITfEE November 30, 20 I 5 Page9 CEQA Not a Project, File No.PP10-069(a), Staff Reports that involve no approvals of any City Actions. Is/ KERRTE ROMANOW Director, Environmental Services For questions please contact: Jo Zientek, Environmental Services Department Deputy Director, (408) Attachment A - Single Family Recyclables Characterization Study, November 2015 Attachment B - MRF Equipment Condition Report and Evaluation of MRF Operations, November 2015 Attachment C-Update on Single Family Recycling Outreach and Enforcement Efforts