Biosolids Hauling Contract Renewal

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Damian Bates
5 years ago
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1 Biosolids Hauling Contract Renewal Large User Meeting December 14,

2 Agenda Background on Existing Agreement Notice of Intent to Renew Issues Raised by BDS Results of Negotiations What Other Facilities are Doing Benefits of Renewing with BDS 2

3 Background on Existing Agreement City entered into a Five (5) year hauling agreement with Schwing Bioset Technologies on July 22, 2004 Agreement took effect on February 15, 2005 Schwing Bioset assigned agreement to Biosolids Distribution Services, LLC (BDS) Agreement contains option of renewal for three (3) additional five (5) year periods Initial price per wet ton was fixed for first three (3) years, with a 3% CPI increase in subsequent seven (7) years Conditions for Renewal based on performance, price and mutual agreement 3

4 Notice of Intent to Renew City notified BDS on January 23, 2009 of its interest in renewing BDS expressed interest in renewing on January 30, 2009 As part of the renewal, BDS wanted to add certain provisions to the agreement BDS claimed that they were losing revenue due to limitations of the agreement 4

5 Issues Raised by BDS Agreement for Class AA hauling had no provisions for addressing escalating fuel prices Total quantity of Class AA hauled appeared to be falling, impacting BDS revenues Pending State of Florida regulation requiring a fertilizer license to distribute Class AA as a fertilizer 5

6 Results of Negotiations The agreement will be amended with contract neutral provisions (i.e. could benefit either party) for fuel price and biosolids quantity Extended for five (5) additional years from February 2010 Current hauling rate of $27.58 per wet ton will be increased by the 3% CPI to $28.41 on February 15,

7 Results of Negotiations Cont d Provision for fuel adjustment: Establish a Fuel Benchmark Price at the execution date The Stipulated Fuel Component - the fuel component of the hauling cost per wet ton - is $6.05 The Current Index Price will be compared to the Fuel Benchmark Price at beginning of each quarter If higher or lower by 5% or more, the entire difference in percentage will be applied to the Fuel Component Result will either increase or decrease amount paid per wet ton for hauling services for the entire quarter The Fuel Component shall not be subject to the 3% CPI increase per year 7

8 Results of Negotiations Cont d Provision for quantity adjustment: Establish a Benchmark Quantity for each quarter based on historic data The actual quantity of Class AA biosolids hauled is compared to the Benchmark Quantity for that quarter If higher by 10% or more the City will receive a credit; if lower by 10% or more the City will pay a surcharge The credit or surcharge will be 10% of the per ton rate in effect (excluding the Fuel Component) for each ton over or under the Benchmark Quantity 8

9 Results of Negotiations Cont d Provision for fertilizer conversion: Currently the SRWWTP permit does not require the conversion of biosolids to fertilizer BDS has not agree to provide such services at this time The parties agreed to negotiate in good faith with respect to any fees that may be due to the City in the future for such conversion Changes in law or requirements: The parties agree to negotiate in good faith with respect to adjustments in hauling rate regarding rule changes that may affect cost to BDS 9

10 What Other Facilities are Doing A number of other wastewater facilities in the tricounty area were surveyed Practically all the other facilities produce Class B A majority of the facilities (18) pay an average of $40 per wet ton for hauling and land application Most of the contracts have a fuel surcharge component and an annual 3% CPI 10

11 Benefits of Renewing with BDS BDS has consistently demonstrated reliability, courtesy and professionalism They have adequate sites in Palm Beach and Martin Counties to continue land application of the Class AA biosolids Even with the proposed amendments, their hauling rate per wet ton remains competitive For example, quantity provision could increase or decrease the basic hauling rate by $2.24 per wet ton Thus the rate could be $31.07 or $25.75 at least within the next year this would still be below the average $40 paid by other facilities 11

12 Questions 12

Participant Yield and 30-Day Average Yield

Participant Yield and 30-Day Average Yield and Average 2017 2018 2019 2020 Average Average Average Average January 0.99 1.00 0.64 February 0.97 1.01 0.67 March 1.03 1.07 0.72 April 1.1 1.15 0.79 May 1.11 1.16 0.83 June 1.18 1.23 0.91 July 1.29