Redemption Value

As the county takes recycling to the next level, will it toss out the group that started it all?



Used to be only hippies recycled. Back in 1971, when a ragtag crew of AmeriCorps volunteers and conscientious objectors (including current Assemblyman Wes Chesbro) launched the Arcata Community Recycling Center, hauling in your empties was like another form of protest -- a rejection of America's wastefulness and imperialism. Buoyed by the inaugural Earth Day in 1970, recycling showed that you were part of the small but growing community of those who got it.

In the nearly 40 years since, recycling has been systematically mainstreamed and streamlined. No longer do residents of Eureka and Arcata need to schlep and sort their containers, tossing green glass into this bin, brown into that one, number one plastics over here, cardboard over there and CRV bottles on the scale for some deeply satisfying redemption scratch. With the advent of mandatory curbside service in Eureka and Arcata -- and voluntary curbside expanding to unincorporated areas -- recycling is becoming nearly as simple (and impersonal) as taking out the garbage. Which is no coincidence: It's the garbage companies doing the pickup.

Such is the case across the country. As the environmental movement wended its way into legislation, governments began implementing incentives and mandates for waste diversion, like AB 939, California's Integrated Waste Management Act of 1989, which established solid waste diversion goals -- 25 percent diversion from landfills by 1995, 50 percent by 2000. It was through such laws that recycling began its transformation from altruistic practice of the conscientious few to government-funded industry. Community recycling centers like ACRC were soon bidding on municipal contracts worth tens, even hundreds of thousands of dollars, and garbage companies -- whose reputations for thuggery were as established as their truck routes -- took notice. By the mid-1980s they'd begun taking over the fledgling industry. Turned out, their model of curbside pickup and established shipping networks proved cheaper, more efficient and popular -- not to mention environmentally friendly -- than the community center model, which required diligence, know-how and car trips from each and every participant.

"By the '90s, nonprofits were all but dead," ACRC Executive Director Mark Loughmiller said recently from his office, a cabin-like room adorned with salvaged baubles and a recycled door-turned-amateur-mural. ACRC is now the oldest continually operating nonprofit recycling center in the country, though Loughmiller said the competition has gotten slim: "There's only about six of us left." Like so many proud, beer-and-soda-stained brethren before it, ACRC, the pioneer of local recycling, now stands on the precipice of extinction. Why? The explanation begins with the recession.

Not long after ACRC finished constructing an $8.1 million state-of-the-art processing facility on the Samoa Peninsula (in September 2007), the nation's economy fell into the trash bin. In a few short months, starting in late 2008, the average value for recycled commodities plummeted from around $145 per ton to just $18 per ton. Simultaneously, credit markets froze and interest rates skyrocketed. ACRC's monthly payments on the $5.75 million bond it had used to finance the plant shot from $15,000 to $70,000. Hemorrhaging money, ACRC slashed its budget by 40 percent -- laying off staff, reducing hours of operation and cutting managers' salaries by 15 percent. It wasn't enough. Throughout 2009, ACRC continued to bleed money.

And so this year, ACRC did something it had never done before: charge money for recyclables dropped off in Samoa -- a $60 tipping fee per ton of material. Members of the Humboldt Waste Management Authority, which represents the county and most of its cities (all customers of ACRC), were dubious. The way they saw it, no one asked ACRC to build that massive processing plant, yet here they were being forced to foot the bill. This was their perception, at any rate.

Disgruntled, HWMA's board -- comprised of elected officials from the county and constituent cities -- began looking into their options, and it turns out they have a few. Other agencies are willing to take the recycled material for free -- or even pay for it. ACRC, which has been the face of county recycling for nearly four decades, is now facing the distinct possibility of losing most or all of its major customers, a development that would almost certainly spell bankruptcy for the nonprofit institution.

By lunchtime at the Samoa processing facility, a crunchy layer of glass grit has settled on the concrete beneath the sorting cages. Within the corrugated metal walls of the 38,800-square-foot hangar, olfactory eddies of beer hops, corn syrup, bleach and countless mystery odors swirl, stirred by the ocean breeze that drifts in through the roll-up doors at either end. The pair of doors on the south wall sits in a temporary valley, which gets recreated daily between two repeatedly forming mountains -- one made of plastic containers, the other of paper and cardboard. (Hillocks of glass, much of it shattered, lie in other corners.)

Dual streams of recyclable materials -- paper and containers -- flow in from households and drop-off stations throughout northern Humboldt County, mostly hauled here by garbage companies, with an ever-smaller percentage from ACRC. On a drizzly Friday afternoon two weeks ago, a CAT 908 wheel loader trundled toward the paper mountain, thrust its metal bucket into the heap and raised its hydraulic mandible skyward, drooling office paper and shoe boxes. Mouth full, the tractor reversed, rolled back across the cement floor and dumped its fibrous load onto a clattering conveyer belt set into the concrete.

This belt escalates the material up a level and through a long gauntlet of employees in rubber gloves, neon vests and hard hats who pick through the debris on its way by, each worker nabbing his or her assigned variety of rubbish, cardboard here, newspaper there, and so on, hurling it into metal-mesh silos. When a silo fills up, an operator lifts a door at its base, spilling the material onto another belt, which lifts and dumps the stuff into a baler. Thus are the twin peaks of clutter at one end of the building sorted, compacted and excreted in fridge-sized loaves at the other end.

The facility is a leviathan, capable of processing nearly 100 tons of material per day. Currently, however, it's doing less than half that. Loughmiller said it was designed with an eye toward the future, the idea being for it to serve the county for the next 20-25 years. But when ACRC implemented tip fees in January, its customers began questioning the wisdom of building such a behemoth. "Their projections on the volumes that would come out of this community were way overestimated," City of Eureka Recycling Coordinator Miles Slattery said. “They built the Taj Mahal when they could have built something smaller and expanded as the volumes increased."

Early this year, city staff of both Arcata and Eureka, including Slattery, approached Jim Test, HWMA's executive director. They wanted to know whether this tip fee was reasonable. As it so happened, an analysis of the Samoa facility was already underway. In June 2009, HWMA hired IntelliWaste, Inc., a Novato-based waste management consulting firm, to perform a financial and operational review of the Samoa plant. The purpose of the review, according to the firm's report, was for HWMA to get a good sense of how well the place worked -- and how well it was managed -- before signing a multi-year contract with ACRC to use it.

The consultants spent months examining the finances, equipment and management of ACRC, and Loughmiller happily accommodated their scrutiny under the assumption that it was simply part of HWMA's due diligence before signing a long-term contract. In retrospect, contracts were exactly what his agency was lacking. Unlike garbage companies, which were weathering the collapse in recyclable commodities by cross-subsidizing -- using garbage profits to cover recycling losses -- ACRC was at the total mercy to a bear market. The agency had no choice but to pass the costs along to its customers -- governmental and otherwise -- who had no obligation to stick with ACRC through the lean times. (Commercial drop-off sites serviced by ACRC, like Popko in Willow Creek and Jackson's Recycling in Orick, survived because they only accept redemption-value materials.) It didn't help that ACRC's primary customers are governmental, a sometimes maddeningly deliberative group; the tip fees were subject to council approval, which can take months. “We lost half a million dollars dealing with municipal tonnage last year,” Loughmiller said. The tip fee wasn't just necessary, he reasoned, it was overdue.

But Test, Slattery and the members of the HWMA board weren't so sure. Eureka staff had already been approached by several companies outside the county offering to take their recycling materials for free, according to Slattery. Test decided to look into it. "We just started nosing around and talking to people," he said. One of those people was Jerry Ward, CEO of Solid Waste of Willits, a garbage and recycling processor in need of more volume for its own new recycling plant. They were already hauling green waste from Mendocino to Humboldt County and making the return trip with empty trucks. In January, Ward drove to Eureka with an accountant, and after assessing the situation he presented HWMA with a tempting alternative: Rather than charging them $60 per ton, his company would pay HWMA $25 per ton.

Loughmiller was on vacation at the time and didn't learn of the meeting until his return. The news was not welcome. "I was just beside myself," he said. It felt like a betrayal. As he saw it, ACRC had practically taught the county how to recycle. It was their facilities that allowed local municipalities to meet state garbage diversion mandates. Mandatory curbside pickup service, which was proving to be a huge success in Eureka and was just getting underway in Arcata, couldn't have been achieved without the Samoa plant. Or so Loughmiller thought. The loss of HWMA's business -- something he'd never before considered -- would be devastating. Suddenly, Test and HWMA had Loughmiller and ACRC over a barrel.

Things had never been exactly chummy between the two men. For one thing, Loughmiller resented HWMA's periodic free disposal events for hazardous and electronic waste because they took much-needed revenue away from ACRC. Also, HWMA had recently decided not to renew its contract with ACRC to run the West Hawthorne Street drop-off facility in Eureka, opting instead to simply run it themselves. But this new suggestion -- bypassing the Samoa facility entirely -- increased the friction dramatically.

"In January," Loughmiller recalled, "that's when the real pissing match started.” If HWMA bypassed Samoa, it would bankrupt ACRC, Loughmiller figured. His imagination took things a step further. “I'm sitting there going, 'If he bankrupts us, he'll basically then try to buy [the Samoa facility] on fire sale from the banks,' which is pretty scummy in my opinion.”

Test denies even considering this possibility, though he has considered other means of acquiring the Samoa plant. In fact, in commissioning the IntelliWaste report, HWMA requested an analysis of just such a scenario. This analysis was included in the final report, issued March 11, with the following caveat: “At the outset we should state that ACRC's Board of Directors and management made it clear that the Samoa Recycling Center was not for sale.” Setting that fact aside, IntelliWaste reached this conclusion: “[W]e believe it's financially very attractive for the Authority [HWMA] and ratepayers to purchase the facility.”

This was a conclusion Test had already reached. At Arcata City Council meetings in December and January, he stood up and made it clear that HWMA intended to take over the plant. Loughmiller responded angrily, saying it wasn't for sale. He sent letters and spreadsheets to staff in Arcata and Eureka, arguing that if they wanted to keep rates low long-term, the best strategy was to stick together. Recycling being a volume business, Loughmiller reasoned, consolidating tonnage in Samoa would mean cheaper processing for everyone involved. As a nonprofit, ACRC has access to grants and other funding sources unavailable to HWMA, he added, and its workers make 40 percent less.

At its April meeting, HWMA's board of directors discussed the IntelliWaste report's findings and the possible strategy of pursuing ownership of the Samoa facility. The board was more reticent about the idea than Test. Board member and County Supervisor Jill Duffy was concerned about ACRC being an unwilling seller. Fellow board members, including Eureka Councilmember Larry Glass and Arcata Councilmember Shane Brinton, worried about assuming ACRC's $5 million debt on the facility. With offers coming in from outside companies to take their tonnage for free, the board decided to let their suitors come to them. At next month's meeting they'll issue a request for proposals (RFP), allowing companies from the Bay Area, Willits and elsewhere to compete against local businesses like Fortuna's Eel River Disposal and McKinleyville's Humboldt Sanitation -- and, of course, ACRC, though Loughmiller said he's not sure if they'll even bother participating in the RFP process.

He resents the approach taken by HWMA for several reasons: First, he believes the IntelliWaste report put ACRC at a disadvantage by exposing its finances to other bidders. Second, he argued, other companies can undercut ACRC's fees only because of their garbage operations. If HWMA would simply remain loyal, he says, the improving commodities markets would allow fees to drop once again (in fact, they're set to drop from $60 to $50 per ton starting July 1). And contrary to popular belief, Loughmiller said, debt payments on the Samoa facility constitute a negligible percentage of their costs. Interest rates are back down to 0.3 percent, so monthly payments on the debt are just $800, he said. But his biggest objections are more personal and fundamental: The whole process shows a lack of appreciation for the history, expertise and 35 local jobs provided by the ACRC, he said, especially when compared to the deference shown to garbage operations. Why all this scrutiny of recycling, he wonders, when the tipping fee for garbage is more than twice as much?

“People don't mind spending $125 a ton to put it in a hole,” Loughmiller said. “But if you say spend $50 a ton to put it to a higher and better use they say, 'What?!' It just mystifies me." ACRC's Board of Directors will have to read the RFP before deciding whether or not it's worth participating, he said. “Obviously if we don't, that would mean the end of our organization.”

Test and members of the HWMA board said they do appreciate everything ACRC has done and continues to do for the community. As a matter of fact, Test said, there will be criteria in the RFP that tilt the scales in ACRC's favor -- like creation of local jobs and convenience for haulers. But the bottom line, he said, has to be what's best for the ratepayers of Humboldt County. “ACRC has been a local institution for over 30 years, and I've been a supporter of it for that long,” Test said. “The idea that they're in trouble really doesn't make me happy. … But I have a job to do, and it's different than their job."

Glass seconded this, saying loyalty to ratepayers trumps loyalty to ACRC. In choosing the best option, he said, HWMA's board will certainly weigh the assets of ACRC. “But you have to look at everything,” he said. “I'm the guy who's out here in Eureka advocating for local preference, and I totally believe in that. And I'm more than willing to give ACRC local preference, but only to a certain percentage.”

Recycling has changed in profound, fundamental ways in the 40 years of ACRC's operations. While it has become an activity shared by nearly everyone -- from citizens dutifully tossing containers into their 96-gallon bins to city and county governments finding ways to divert half their waste to recycling -- that doesn't necessarily mean we as a society deserve a pat on the back. If anything, recycling has simply enabled Americans to continue our wasteful ways without feeling quite as bad about it.

“Recycling is almost like a palliative: 'Oh, I can buy this junk because I can recycle it and it will make me feel better,'” Test said. “Well, it's just junk. Garbage. … Some of it you can recycle, and that's really nice. But it's not the fuzzy, warm thing that we hippies used to do back before it was mainstream … . It's a commodity business now. And we should be thinking about ways of reducing, not recycling."

This transformation into a commodity business goes a long way toward explaining why nonprofits have been systematically squeezed out, which isn't necessarily a tragedy, according to Arcata Councilmember/HWMA board member Shane Brinton. He said that while he sincerely hopes ACRC can emerge from this situation intact, the era of relying on nonprofits for recycling may have passed. “When organizations like ACRC started up, they were on the front lines, and they were extremely necessary because government wasn't doing what it needed to do,” he said. “I'm grateful to ACRC for getting it going and making it happen. But I think now we may be enlightened enough in the public sector to take on the responsibilities that should have been ours all along.”

Even Loughmiller admitted that, from a certain perspective, it makes sense for HWMA to take ownership of the Samoa plant. "I will never say that that's necessarily an inappropriate conclusion," he allowed. "It's one of many appropriate conclusions." This observation, and the tone in which it was delivered, betrayed a sadness and resignation that goes beyond cold realities like the potential loss of his livelihood and that of his 35 employees. For all the arguments Loughmiller presented for preserving ACRC, the central one seemed to go unspoken. There's a palpable nostalgia in Loughmiller and others for the romanticism of recycling as a mission, for the almost church-like community created by standing elbow to elbow with someone at a sorting table. To the people who love ACRC, it represents far more than just recycling, and its demise would be an irretrievable loss. "The reality is, to make an omelet you need to break a lot of eggs," Loughmiller said wistfully. "And we're just one of those eggs getting broken."

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