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How Indy’s new recycling deal could cost taxpayers millions



First in a NUVO series: The Covanta contract: money to burn

(NOTE: This is the first of several stories on the city’s new contract with Covanta. Find PART TWO here. This story will be updated.)

The lawsuit — and its appeals — are over a year old: two paper companies and an Indy citizen are taking the city of Indianapolis to court.

Over trash. Garbage. The stuff we leave by the curb.

The plaintiffs are suing the city for entering into a new agreement with a firm called Covanta, the company that burns Indy’s trash for steam that it can turn into power and sell. The new agreement includes a recycling plan that critics are calling inefficient at best, and there are questions about the lack of public discussion regarding that contract.

And the suit further notes that Indy’s got the potential to be throwing away a very large stack of taxpayer dollars, along with any possibility for the city to improve its recycling programs.

In fact, what’s become the most contentious clause of the contract prevents Indy from improving its recycling capabilities through 2028 — or pay a penalty of $4 million per year. Every year. Through the end of the deal.

RELATED: NUVO's first story on this issue was published in June, 2014

The central premise of the suit, brought by Graphic Packaging International, Inc., Rock-Tenn Converting Co. and one Cathy Weinmann, is fairly simple: Indianapolis has signed a new contract with a firm called Covanta without “the appropriate application of the Waste Disposal Statute, Ind. Code 36-9-31, controlling such contracts and the process by which they are entered into.” The suit also alleges that the new plan — and the plant Covanta intends to build to support that plan — gives every advantage to Covanta and provides only negative outcomes for Indy’s households. The details paint a pretty grim picture for Indy’s ability to adopt new recycling technologies as they’re sure to develop in the next two decades.

For Graphic Packaging and Rock-Tenn, the agreement will mean less recycled paper that can be converted for other uses — less resources for their manufacturing processes. For Weinmann and every other taxpayer in Marion County, it potentially extracts millions of dollars in revenue that could be spent on bridges or cops. And for City-County Council Vice President John Barth (D, at-large), it’s a “method of continuing to burn trash under the guise of recycling” that may command a price tag that outweighs the savings the city claims it will create.

The trash stream and the cash stream

Indy first signed a contract to engage in this burn-for-energy process with Covanta’s forerunner, the more graphically named Massburn, thirty years ago. The agreement has morphed over time, but the most recent iteration of the deal with Covanta has two big appeals: Indy appears to be on the hook for less trash to ship to Covanta, and Covanta is offering Indy what’s known as “one-bin” recycling.

That means everything you chuck goes into a single can, and the folks at Covanta separate the re-usable stuff from what they can burn — or what winds up in a landfill. There’s no curbside bin for you to deal with. Toss it and forget it.

It’s a kind of recycling that was first popular roughly twenty years ago. The process was abandoned as too inefficient — until firms like Covanta began claiming that technological advances in their separation process coupled with cost-savings and consumer comfort made one-bin recycling a no-brainer for a town like Indy.

Covanta wants to build what they call an “ARC,” an “advanced materials recovery center,” that’ll separate the goods from the not-so-good, the stuff that can have a second life without going into an incinerator or into a landfill. It’s what seems like an elegant solution to a long-running problem — ensuring that every Indy household will participate in a recycling program without lifting a finger. Only about 10 percent of Indy households subscribe to the curbside pickup provided by independent contractors. It’s an out-of-pocket cost that isn’t covered by the thirty bucks every Indy household annually pays for solid waste removal. (Two things to note: that 10 percent figure doesn’t cover the folks who take their recyclables to open bins like those provided at Broad Ripple park or in front of Sam’s Club on 86th Street, and that $30 fee is roughly a third of what our neighbors in Lawrence and Beech Grove shell out.)

RELATED: Insight from a Covanta reference

The big problem with the “ARC” that Covanta’s proposed, though, is that the process allows for a lot more contamination than the homeowner-sorted, put-the-recyclables-in-a-separate-bin system. That pizza box that’s soaked in pepperoni grease isn’t usable once it’s contaminated, and mingling trash instead of separating it before it goes to a recycling facility ups the percentage of material — especially absorbent products like paper or cardboard — that goes right into the burners. It’s why the common term for a facility like the one Covanta’s proposing is commonly called a “dirty MRF (materials recovery facility).”

But Covanta’s given the city what looks to be a pretty good deal with this particular dirty MRF: they’ve dropped the tonnage the city needs to provide. That’s a big incentive, considering that Indy has been paying fines for shorting Covanta the fuel they need for the fires. For years the city was supposed to provide Covanta 300,000 tons of garbage annually; the actual average has run right around 262,000 tons from Indy households. Missing that mark has meant millions in fines paid by the city to the firm Indy’s hired to torch its trash — since 2008, Indy’s forked over 2.3 million.

With the new contract and the proposed ARC, Covanta dropped the required tonnage down to 260K, clearly a mark under the average. For now.

Here’s the rub in that regard: packaging is getting lighter. As technology improves and new containers use less materials to do the same job as the boxes and jugs they’re replacing, the bulk weight of what you’re tossing is dropping. Felt a plastic water bottle lately? Seen the marketing distributed by companies who are reducing waste? That tonnage is dropping as companies figure out how to package things more cheaply — while looking “greener” in the process.

What’s not dropping are the tax breaks Covanta gets out of the gate: the new facility will cost the city 70 percent of Covanta’s taxes — up to four million bucks.

With the deal, Covanta’s not required to hit any marks — though the company’s initial stated goal is to recycle 18% of what comes into the plant. In fact, paragraph 44 of the original filed complaint states: “The Agreement places no minimum recyclable recovery requirement on Covanta.”

Additionally, to ensure that the stream into the incinerator stays robust, Covanta’s managed to include language in the deal that might actually punish Indy’s taxpayers if the city looks for ways to improve its recycling options.

A de facto $4 million gag order

Here’s the clause in question, the one that has those who’ve actually read the agreement concerned:

Section 9.06 City Responsibilities

(c). If, during the Term, and except for Existing Programs … the City implements, proposes or provides for a program or official action through an ordinance, resolution, contract, franchise, or official press announcement or publication, which requires, incentivizes or promotes separation of any Recyclables from Acceptable Waste prior to delivery ... the parties acknowledge that the company will suffer material damages the full scope of which are difficult to determine and accurately specify … The liquidated damages will be calculated as of the City Program Commencement Date and will be equal to $333,333.33 per month, multiplied by the number of months remaining in the then-current term of the service agreement. 
(Boldface added. You can find the entire contract at the bottom of this story; the section mentioned is on page 67.)

Even though Covanta claims those “material damages” they’d suffer are ambiguous — “the full scope of which are difficult to determine and accurately specify” — they’ve specified a penalty, alright: Four million dollars a year.

For the entire length of the contract.

Quite a bit more than the current half-million in penalties we’ve been paying, right?

Councilman Barth — who says he’s been working on this issue for a while now — is pretty direct with his displeasure. “There’s a huge financial incentive for the city not to do better with its recycling plans,” Barth tells me during a phone conversation. “This contract has been put in place as a means of preserving Covanta’s business model,” which is to burn trash for profit. It’s a model that’s rapidly becoming outmoded as other cities across the globe start to expand their recycling programs.

Find PART TWO Of our series here

Locking down Indy’s recycling options with a single technology through 2028 may prove extremely counterproductive as technology progresses. Although Covanta’s part of the agreement states that the company will look for ways to improve the process, again, the deal doesn’t include any specifics — there aren’t any numbers that Covanta has to hit. Like any technology, recycling science is evolving rapidly. (Think about this illustration: compare a website you visited or a car you drove in 1998 versus one you used in 2010 — that twelve-year gap makes for some staggering differences.)

The other problem’s one of language: the 1985 agreement defined the term “city” as “the Consolidated City of Indianapolis, Indiana, acting by and through the Department of Public Works.” Some of the legal minds working on the suit can’t seem to agree on who that definition might cover: could a City-County Councilor encouraging — “promoting” — more curbside recycling on his or her Facebook page, for example, be construed as acting on the “city’s” behalf, and therefore have violated the terms of the deal to the tune of $4 million annually?

(NOTE: We’ve asked the Mayor’s office for comment on this part of the contract, and we’ll update the story as soon as we receive said comment.)

The trouble with single bins

Barth’s of the opinion that with “dedicated, focused leadership,” Indy could model its recycling program after one like Seattle’s — or even improve its efforts to match the current recycling levels seen in Lawrence. When Barth had a chance to discuss the Covanta deal with Mayor Greg Ballard, the administration expressed to Barth that they felt confident in Covanta’s technology — and that with Indy’s current low recycling rates, this was the best solution.

But Jeff Miller, a Republican member of the City-County Council representing the 19th District, is among quite a few people who doesn’t think that the numbers of those who really recycle in Indy is as low as one-tenth.

“I think I might’ve read the quote in NUVO,” says Miller, referring to Covanta’s stated defense of their plant: “Covanta would not invest $45 million into building the Advanced Recycling Center if the intention was to just burn the material. That simply doesn't make any business sense.” (NUVO, Sept. 2015) “I don’t think somebody’s lying, but I think the counterpoint that ‘Only 10 percent of the city’s residents do curbside recycling’ — OK, bump that up a little more. I don’t do curbside, but I take it somewhere myself.”

Miller points out he’s not alone: “You look at those [public recycling] bins? They’re stuffed. Every time I go.”

“I think this should have been the second solution. It’s not bad to capture what you can. It wouldn’t be bad to encourage people through a campaign of some kind to recycle what they can — but there are people who aren’t going to recycle no matter what.

“We should’ve been looking at a more progressive solution to get as much recycled the right way first.”

Miller’s not entirely happy about the way the deal was struck, either: “The process was tricky because Covanta already had an agreement from the beginning. It was pretty far along before anyone knew it was even being discussed. I don’t want to say the mayor didn’t give … the IRC (the Indiana Recycling Coalition, who’ve been lobbying for alternatives that recycle more goods) a chance, but in their defense, when you’ve got like a month to put together a proposal — I don’t remember the exact amount of time, but it wasn’t much — that’s really tough.”

THE IRC POSITION: An op-ed and a ink to their petition

The IRC understands that Covanta’s participation in a broader strategy could work, that the recyclable material that escapes the due diligence of good citizens could be sent to a MRF, and that which is too far gone could be turned into energy. But the best solution for Indy might be the kind of combo-platter that Miller supports: use Covanta’s MRF as a backup.

The other issue with the new agreement has to do with behavior: the city’s about to train the next generation that throwing everything into a single receptacle is now perfectly “green.” And those who currently subscribe to curbside recycling might be encouraged to drop that monthly bill.

Cathy Weinmann, the non-corporate entity named in the lawsuit, lives about a mile-and-a-half from Covanta’s current plant. She says she’s seen attitudes shift already:

“When I talk to people around here about it, well-informed neighbors of mine, [they say], ‘When that comes up, we won’t have to pay to recycle anymore. It’ll be free.’”

“But don’t they (Covanta) make most of their money off of burning trash?”

See related PDF Covanta_contract_new.pdf
Find PART TWO of our series here


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