Zero Waste Case Study: Napa
In the early 1990s, the City of Napa began partnering with private sector contractors to cost-effectively reduce waste. The community is an innovative leader in using public/private contracts to support zero waste goals.
The city and long-term cost-plus contractor, Napa Garbage Service, built the City of Napa Materials Diversion Facility under a 50/50 equity share agreement. This recycling and composting facility, located nine miles out of town, was built by the contractor as an approved expense of its contract extension.
- Collection of trash, curbside recycling and yard waste collection
- Materials Diversion Facility processing services.
- All agreements or exceptions to the contract would be made in writing
- Proposers would be eliminated if they contacted elected officials outside of established public meetings or interviews with city regarding their proposals
- The gatehouse and weigh station would be staffed by the city and the city would receive revenues and pay the contractor(s) for their services
- A requirement for 100% new vehicles and processing equipment (because allowing used equipment would benefit existing contractors)
- A ten-year contract with four optional one-year extensions
- A new payment system that compensates contractors for the services rendered that is unrelated to service fees or rates.
The city held a mandatory proposer meeting at which the roughly 25 companies in attendance agreed to the terms laid out in the RFP. In the end, three proposals were submitted. Although the city could have chosen separate contractors for each service (collection and processing), Napa selected Napa Recycling and Waste Services to provide both services.
Bidders were required to provide written exceptions to the contract in their proposals. The winning company had no exceptions. In contrast, one company submitted a proposal with over 600 exceptions to the contract.
The city’s technical staff reviewed and summarized the proposals and advised the City Council via an ad hoc committee of two out five elected officials, and all contract award decisions were ultimately made by the City Council in open sessions.
- Indexed For Inflation: The contractor is guaranteed 3% profit margins above original proposal costs. The following specified proposal costs are indexed over time:
- Fuel: Blended Compressed Natural Gas (CNG) and Diesel
- Labor: Consumer Price Index
- Non-labor Processing Costs: Producer Price Index
- Material Revenue Sharing: The city receives 70% of recyclable material sales income, and 30% goes to the contractor.
- Division of Labor: The city operates the MDF gatehouse and scale. The contractor operates the MDF, markets material, and provides education and outreach services.
- Incentive Payments: The city pays the contractor per ton Processing Area Payments if materials processed exceed contractual baseline levels. The baseline levels were established by the city with projections of city-delivered materials, contracted County of Napa materials and public self-haul users at a 50% rate. Additional compensation for volumes processed above the established baseline is contingent on the contractor achieving a minimum 80% of the baseline for each area of the facility (i.e., Materials Recovery Facility (MRF), Composting, Wood and Construction & Demolition (C&D) plus processing aggregate volumes over the baseline tonnage threshold.
- Cost Reviews: Every third year of the contract the city and the contractor conduct a cost review to reset the baseline based on three specific reopeners: growth, new programs and/or legislative changes. For example, the contract was based on 21,000 residential customers but in 2008 the contractor serviced 21,500 residential customers received additional “per household” compensation based on original proposal costs.
- New Programs: The contractor and the Napa have worked together to develop innovative zero waste programs including a color sorting glass, non-bottle rigid plastics, carpet recycling and pilot commercial/special event food composting.
- Processing Residuals and Contaminants: The contractor ships some MRF fines, residual materials that comes off of the end of the container sort line, to another facility for additional processing. This has decreased the MRF residual materials landfilled from 8-9% to 5-6%.
- Public Administration: The city serves as the system administrator, managing the gatekeeping, scales and accounting. Municipal facility ownership and administration of key facilities reduced costs and has supported public interest facility management.
- Transparency: The mandatory pre-proposal meeting provided a thorough explanation of the RFP, and the City Council held open meetings to award the contract.
- Aligned Interests: There is mutual interest in expanding diversion and recycling because Napa increased the financial stake the contractor has in recycling.
- Flexibility: The contract allows the city and the contractor to change the scope of the contract. For example, the contractor noticed large amounts of whole colored bottles in the pre-sort area so they proposed adding two more sorters to separate bottles by color making them more valuable in recycling markets.
- Co-Location: City and contractor staff share offices at the facility supporting strong communication and information sharing.
- Adjustments to New Operations: In 2007, a contractor affiliate began operating the nearby transfer station for municipal solid waste and mixed Construction, Deconstruction and Demolition (CD&D). The city does not operate this facility so the city and the contractor are reviewing the incentive structure to maintain transparency and trust.