Winona County Commissioners discussed the county's year-old $788,000 curb-side recycling contract Tuesday. It was the first board discussion about the recycling program since a Winona Post investigative report earlier this month, which revealed that the full board was not given information about a significant contract dispute between the county and its recycling provider, Veolia Environmental Services.
The Winona Post article included information discovered in over 750 e-mails between county staff members and Veolia employees. The communications showed that one month into the five-year contract, Veolia issued an invoice to the county that made it clear that there was a major difference between the way the company, and the county, interpreted the contract. Veolia believed the agreement called for a $25 fee each time a recycling tote was emptied for commercial and multi-family services, while Winona County was under the impression that it would only be charged $25 each time a truck stopped to empty a cluster of recycling containers. Since some commercial and multi-family stops have 10 to 20 totes, the difference in contract cost based on Veolia's interpretation of contract language would have been a $900,000 increase above the original $730,000 annual cost. Although the board chair and vice chair were alerted to the massive invoice increase, the full board was not made aware of the situation. County staff instead told Veolia representatives that a cost increase of that magnitude would likely require the contract to be re-bid, since the second lowest bid was only about $100,000 over what the county had believed to be Veolia's bid for the service.
Because of the county's legal mandate to select the lowest bid for such a contract service, county staff told Veolia employees that the county board would only consider a payment increase if the request for more money were to cover some sort of added service—and not the disputed contract language. For the majority of 2012, county staff deliberated with Veolia reps over the disagreement through repeated communications and refused to pay portions of its recycling bill that included what it believed to be an inflated price. The full board was told that other problems had arisen with the recycling program, such as the need to provide alley pick-up on some streets in the city of Winona, and the difficulty in reaching the most rural residents. In November, the Winona County Board, with commissioner Marcia Ward dissenting, voted to give Veolia an additional $58,000 annually for the service.
On Tuesday, new board chair Wayne Valentine said he had asked for the recycling program to be on the board agenda in order to discuss the contract issues raised in the Winona Post article. However, commissioners did not comment on the $900,000 contract dispute, nor the lack of information provided to the full board about the problem.
Winona County Planning and Environmental Services Director Jason Gilman said he believed the reason for the dispute was that there had been a change in management at Veolia when the program began, so county staff were no longer dealing with the same employees as in the past. "Our initial reaction was one of dismay," said Gilman of the $900,000 disagreement. He said the county attorney and administrator were both made aware of the problem early on.
"I think part of the concern was related to why the board wasn't notified immediately," continued Gilman. "That was principally because we didn't know what we were working with yet." In the end, he said, Veolia officials adjusted the request for more money, dropping the contract language disagreement and instead basing its request on "added services." Gilman said Veolia claimed it was not making a profit from the contract and was considering backing out of the agreement. The next highest bidder would cost the county $100,000 more, and there would likely be legal fees if the county and Veolia were to sever their agreement, said Gilman, "not to mention the public issues."
"I understand we have a contract," said Ward. "I think we really need to show some real prudence in managing that contract. It's a lot of money."
Because the county was paying Veolia a certain fee each time recyclable goods were picked up, Ward suggested that it could reduce the cost of the program if the large totes were emptied less frequently than once per week. She also questioned whether alley pick-up was really an "added service," wondering why the company began providing pick-up in the alleys in the first place. Gilman said the company began alley pick-up initially, even though the contract called for curb-side services. When more residents then asked for their recycling containers to be emptied in the alleys, Veolia said it would "take care" of the situation, Gilman explained. After alley pick-up had been established, he added, Veolia then asked for more money because of it.
Ward expressed concern about the sustainability of the recycling program. The county has a reserve fund with more than $1 million for the program, but collects less than $250,000 in solid waste per-parcel fees each year. With a nearly $800,000 annual cost, Ward wondered when the county would have to tap property taxes in order to pay for the program.
Winona County Administrator Duane Hebert said the drop in commodity prices for the recyclable materials added to the cost of the contract. The county initially anticipated being reimbursed about $20,000 more annually for the revenue generated from the sale of the materials than was realized in 2012. Even with a more than 65 percent increase in materials collected, the drop in commodity prices still added to the cost of the program. Unless there is a major increase in commodity prices, said Hebert, recycling will never pay for itself. "These programs are heavily subsidized," he said. There is nothing the county can do about the market for the materials, added Hebert, but in terms of participation, the program has been "wildly successful."