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Acknowledgements
This Tool Kit has been produced with funds provided by Regions V
and VIII of the United States Environmental Protection Agency. A
collaborative Management Team, consisting of the following
individuals and organizations, has assisted in the coordination of
the research, development of the tools and editing of the final
document.
Deb Barton SD Solid Waste Management Association & Mid
Continent Recycling Association (MCRA)
Steve Danahy NE DAS
Jim Hart Perry Co. Recycling & Litter Prevention
Kathleen Jackson Headwates Co-op Recycling Project
Mickey Mills Bluegrass Regional Recycling
Kay Stevens Nebraska State Recycling Association (NSRA)
Sandi Sturm
Susan Waughtal
Jeff Weaver
Creative Conservation
Mower Co. Recycling
Special thanks to Deb Barton of the SD Solid Waste Management
Association and Mid- Continent Recycling Association (MCRA) for her
early work on the MCRA Cooperative Marketing Manual, as well as her
assistance with facilitating the management process for the
ambitious timeline of this project.
Additional thanks to those who so generously contributed their
knowledge and experience by allowing us to reproduce (or borrow
liberally) from their sample writings, contracts and tools. Tools
were contributed by the following individuals as well as members of
the management team.
Kathy Guerin of the Maine Resource Recovery Association, Bangor,
Maine James Steffen & Associates, Overland Park, Kansas Ray
Lariviere of Southeast & East Central Colorado Recycling
Association Horizon Unlimited of Emmettsburg, Iowa Northeast
Recycling Council, Brattleboro, Vermont Cuyahoga County,
Ohio.
Cooperative Marketing Tool Kit
A. Organizational Tools
................................................ 14
Cooperative Marketing Tool Kit
C) Processing Tools
D) Cooperative Profile Survey Results
E) Resources
COOPERATIVE MARKETING
I. INTRODUCTION
This document seeks to educate the reader about the meaning and
nature of Cooperative Marketing. It will also present an array of
tools for recyclers to use in creating efficient, sustainable
recycling programs at local and regional levels. It is itself a
product of cooperation among a diverse assembly of public and
private sector partners whose range of expertise spans practical,
hands on recycling, theoretical research and governmental service.
This Tool Kit is being produced through the joint effort of the
Management team consisting of representatives from the States of
Kentucky, Nebraska, Minnesota, North Dakota, South Dakota,
Colorado, and Montana. It is hoped that this combination of
experience and resources will successfully identify and communicate
the most beneficial types of tools that existing programs have
tested and found useful.
A telephone survey has been conducted to identify as many active,
functioning cooperative programs as possible throughout the United
States. A copy of the survey instrument and a list of these
programs, along with personal contacts, phone numbers and
addresses, can be found in Appendix D of the Tool Kit.
Discussions and samples of organizational structures, contracts,
specifications and specialty program descriptions are also included
in the manual, where space permits. Additional samples are also
included in the Appendices. Complete sets of sample tools can be
accessed by telephone request to either the NSRA office (402)
444-4188 or the SEMEREX office (507) 252-9536.
11. OVERVIEW
Cooperative Marketing is an approach that is as old as agriculture
in this country. Most rural communities recognize their local
co-ops as significant contributors to the local economies because
of the ranges of services they provide and the depth of their local
investments.
The concept of the "Cooperative" model in managing recycling is
rooted in the time- honored tradition of coalition building, a
strategy used to reach specific goals through the collaborative
efforts of often disparate entities. Coalitions have succeeded by
forging alliances between individuals and groups whose history may
be one of conflict, opposition or competition, but whose common
bond is the desire to solve an agreed-upon problem.
Coalitions create win-win solutions by:
Identifying common needs, Opening channels of communication, and
Pooling resources.
A recycling cooperative consists of a group of individuals,
communities or businesses of varying sizes and types, organized
around a desire to maximize recycling efforts and improve local and
regional solid waste management systems by creating greater
opportunities with economies of scale.
The cooperative can be "loose-based" or it can be more formally
structured:
Loose-based Cooperatives usually begin with informal arrangements
between groups based on agreed-upon goals. Decisions within this
context usually involve casual agreements to act jointly to meet a
need or solve a problem. Usually all structured coalitions or
cooperative organizations evolved out of the loose-based model.
Decisions based on practicality and a minimal amount of structure
are the most effective when enacted in an atmosphere of cooperation
and equity. This approach can often become difficult to maintain,
however, since agreements are not legally binding, and their
success depends solely upon the good will and philosophical
consensus of the participants. If the market fluctuates radically,
agreements often crumble under the economics of profit and loss or
shifting political alliances.
Structured Cooperatives involve formal incorporation or
organization by member groups, selection of a democratic body to
make decisions and possibly the hiring of staff. As revenues are
generated, increased and spent, equipment or land purchased and
contractual relationships established, administrative oversight
becomes more necessary.
The organization of a recycling cooperative in both cases has as
its sole purpose the marketing of recyclables by "making bulk", a
term used in the cooperative marketing of agricultural
commodities.
A recycling cooperative can operate similarly to an agricultural
marketing cooperative. In general, members unite to combine their
commodities and either contract for collection processing and
marketing services or acquire the equipment necessary to allow them
to go direct to market using their own pooled resources. The co-op
brings large and small generators together so that the materials
recycled are collected and processed in significant quantities to
introduce greater reliability into the marketing process. A co-op
can pool information and conduct research to identify the condition
of the local recycling and solid waste infrastructure. It can also
research end markets to find out what end users are paying for
materials, monitor the variations in these prices, and clarify
specifications and standards for material marketing.
There are major benefits to organizing to cooperatively recycle.
Through contracts, participants can create or access complete
collection, processing and marketing services for recycled
commodities and share both risks and revenues. By absorbing some of
the risk from market shifts, contracts provide a safety net to the
buyers and reliable collection services for the sellers. Complete
and accurate market information becomes the cornerstone of contract
negotiations, since both the seller and the buyers have the
same
: information. This knowledge is then used to develop contracts
that protect the recyclers in soft markets and benefit both
recyclers and the generators when prices are good.
Table 1 lists some benefits that are potentially available to both
buyers and sellers in a cooperative recycling effort.
TABLE 1
Seller Buyer I I
Maximum diversion Reliable, long-term consistent flow of quality
non-contaminated materials
Cost control Maximum access to materials with minimum labor /
costs
Empowerment of small and medium generators
Ability to capitalize equipment based on guaranteed, accessible
supplies
Standardized program policies and practices
Clear, consistent rules for participants to follow
Greater transportation efficiencies
More predictable profits
Share of revenue if markets are healthy
The history of agriculture has much to offer rural recyclers to
help them understand, influence and participate in the recycling
marketplace,
Share of risk if market prices drop
111. COOPERATIVE MARKETING TOOLS
The definition of "tools" in the context of this manual is "useful
approaches that successful cooperatives in a number of geographic
areas have developed and tested in their operations". Because of
the diversity of active programs throughout the United States by
type, orientation, size and location, as well as the complexity of
recycling in general, some unilateral decisions have been made in
dividing a large number of approaches into the following general
categories of tools:
A. Organizational Tools
The sheer multiplicity of currently active cooperative recycling
program types makes it impossible to define every co-op approach in
detail. It is possible, however, to divide these initiatives into
three general categories and outline the most effective
organizational structures. It is expected that programs will
continue to evolve into "hybrid" forms that correspond to local
needs, politics and the capacity of existing service delivery
systems.
The three primary co-op structures that will be explored in this
manual include the following:
Non-Profit Cooperatives that include official membership from both
the public and private sectors, such as the Bluegrass Regional
Recycling Association (BRRA) and the Western Wisconsin Recycling
Association (WWRA).
Public Cooperatives, whose voting members are limited to City,
County or State representatives, fall into this category. An
example co-op is the Southwest Public Recycling Association (SPRA).
To illustrate the difficulty of strict organizational definitions,
both BRRA (mentioned above) and SPA are non-profit organizations;
however, their membership is limited to public entities.
Private Cooperatives consisting of large and small businesses in
either a geographical region or industrial tract are growing in
size and number as business and industry recognize the potential
for achieving significant cost control by diverting wastes from
landfills. Any consumer cooperative would fall into this
category.
B. Finance Tools
Finding money to cover the cost of organizing a recycling
cooperative is probably the single most difficult step recyclers
must face. Co-op planners must address their financial dilemma by
finding answers to the following questions:
What will the proposed expenditures be by category (capital vs.
operating)?
How much money is needed in each category and when?
Who should bear the burden of program costs?
What are the available resources to assist in raising funds?
What alternative funding sources are available?
Do the existing local solid waste service rates contain incentives
to minimize waste?
Are local decision makers in control of these rates? To what
extent?
What will the administrative costs associated with a particular
funding mechanism be?
Recyclers are nothing if not inventive, when it comes to financing
their cooperative efforts. Finance tools that have been proven
successful will be explored, including the following:
a) Membership Fees b) Brokerage Fees c) User Fees (based on
services provided) d) Grants
It is important to note that no cooperative has been able to
survive with any one form of financing. Diversity is the key and
each sample approach will be outlined.
C. Contract Tools
Ten years ago it was a rarity to see a contract in place between a
local recycler and the mill or manufacturer. So called "gentlemen's
agreements" prevailed and when markets tilted, the local recycler
had little recourse but to sit and wait for the demand to return so
they could move their recyclables. In today's marketplace,
contracts are not only more common they are increasingly complex.
Examples include master contracts that are indexed to "move" with
the market, are based on standardized specifications and frequently
are the result of competitive bidding.
The contract Tool section of this manual will focus on contracts
that protect both the buyer and the seller and assist cooperative
organizers in creating stable supplies and prices.
D. Processing Tools
The processing priority of co-ops is the bulking up of commodities
and transporting of them to market as quickly and profitably as
possible. The obvious goal is to minimize labor and transportation
costs and maximize market prices. Several approaches for innovative
collection and transportation of recyclables will be explored, as
well as descriptions of the need for standards in processing,
precise tracking of volume or weight and systematic record
keeping.
E. Specialty Tools
Creating a cooperative is similar to building a pipeline. Once it
is organizationally and financially constructed, a lot of things
can be funneled through it. Cooperative structures can amass
quantities of like products and efficiently access markets. A host
of tools has been created by co-op organizations to deliver special
or innovative services.
Some examples that will be explored include the following:
Combined contracts for recycling/solid waste services.
Community education, waste assessments or training on standardized
processing approaches.
Material exchanges for businesses that generate hard-to-recycle
wastes.
Cooperative purchasing that allows businesses or communities to
join forces to demand favorable prices or closed-loop purchases of
recycled content products or service contracts that they would not
be able to attract singly.
The economic development potential for organized cooperatives is
also substantial. An organized group of generators that can
guarantee a clean, consistent, reliable supply of raw materials can
become a key player in attracting investors in creating new, local
manufacturing capacity.
The agribusiness co-op model allows commodities7 producers, large
and small, to participate in the marketplace with greater
efficiency, control and profit. Cooperatives have also diversified
into the processing and manufacturing arenas as a way of
creating
more stable markets for these commodities. By making and selling
higher value-added products they generate more profits and further
increase market stability for the participating members.
The importance of building cooperation into the organization
process has to be consistently emphasized. Without cooperation,
small and medium size communities and businesses cannot maintain a
stable link with markets -let alone make profits, create jobs and
build new businesses.
A. ORGANIZATIONAL TOOLS
The type of structure a cooperative marketing organization adopts
will depend upon the make-up of its members and the objectives of
the group. Think of cooperative marketing in terms of an economic
alliance, rather than a political alliance. If the recycling
players are counties and municipalities it will, of course, be a
political alliance as well, but the primary relationship is based
on economics.
There are four basic structural models for cooperative marketing
groups, with a myriad of variations:
a. Legal Cooperative b. Non-profit Corporation c.
Inter-governmental Agreement or Joint Powers Board d. Loose-based /
Informal Alliance
Each structural model has characteristics that enable or limit its
activities. The ideal structure for any recycling cooperative
marketing group will depend on the composition of its membership or
customers and the specific objectives the group wants to
accomplish. Will the organization hire staff? Does it want the
ability to contract for collection processing services or end
markets? Will it want to obtain grants from state agencies or
foundations? Will it be comprised of public or private members, or
both? If both, how will marketing and financial decisions be
made?
Le~al Cooperative:
An organization does not have to BE a true "Cooperative" to do
cooperative marketing of recyclables. A "Cooperative" has a
specific legal definition and, in actuality, most of the recycling
cooperative marketing groups surveyed on this project are NOT true
cooperatives.
Cooperatives by definition are consumer-oriented businesses. They
engage in consumer-directed production and distribution of goods
and services. They are owned by the consumer, who is the customer
or patron. In the pure sense this means that the cooperative
answers not to the public at large, but to their own customers or
members. In the context of waste management, it is sometimes
difficult to identify just who & the consumer. Throughout this
Tool Kit, "consumer" will be used to describe generators of solid
waste and recyclables. These are individuals, businesses,
institutions or organizations. Consistent with the agriculture
analogy, consumers are "farmers" who "grow" solid waste that must
be managed through disposal or recycling.
Consistent with this definition of cooperatives, Jerry Voorhis,
leader in Cooperative development and former U.S. Senator from
South Dakota describes the four basic principles of cooperative
structures as follows:
1. Open Membership - Comprised of a group of people with a common
need who decide to voluntarily join together to pool their capital
investments and own, control and use their own enterprise.
2. Democratic Control - Each member has one vote, regardless of the
number of shares they held.
3. Limited Return on Investment - Sometimes returns are not paid at
all on investments.
4. Patronage Refund - At the end of the year when all the books are
balanced, set asides are made for education, welfare and reserves
or other expenses, and all bills are paid. The remaining portion is
returned to the patrons in the amount they utilized or invested in
the cooperative. Marketing cooperatives use various methods of
distributing net savings at the end of the fiscal year. These
include patronage refunds, dividends, absorption of prior years7
losses, contributions to employee margin- sharing plan and
combinations of any and all of these elements.
A cooperative can include both private and public sector
representatives. A true cooperative has the flexibility to do
anything a business can do. It can enter into
' contracts and agreements, hire staff and acquire property.
Cooperatives are governed by Boards of Directors elected by members
or shareholders. Net income is traditionally distributed to its
members annually.
Examples of a recycling cooperative that conforms to the legal
co-op model are extremely rare. There are two basic reasons for
this.
First, traditional dynamics of local recycling economics serve
vested interests and are over-dependent on volunteers. Recycling
services in nearly every location are provided by a diverse mix of
service providers, volunteers and public-sector decision makers.
There is often little (or no) understanding of the negative
economic impacts of free or under-funded recycling services forced
to complete, head-to-head, with fully-funded disposal services.
Professional service providers also frequently perceive organized
groups of consumers/rate payers as a threat. There is also an
almost universal mythology in place that collection and processing
of recyclables must survive solely on the basis of market prices,
while collection and disposal of waste is fully funded by the
security of monthly fees. These facts represent significant
barriers to formal organizations owned or managed by a single
consumer-controlled entity.
Secondly, the dominance of public policy in driving local solid
waste and recycling management decisions makes it very difficult to
create recycling cooperatives that operate like businesses. City,
State and County government has a history of discomfort in
funneling dollars into the hands of private enterprise. Creating
revenues that are distributed back through consumer-based
cooperatives is a scary prospect for the average public
official.
Research conducted by the Nebraska State Recycling Association
since 1991, has involved development and demonstration of a
consumer-based co-op model in several geographic areas in Nebraska,
as well as several trials in other states in cooperation with Mid
Continent Recycling Association (MCRA). These efforts to create a
viable, independent, consumer entity to market recyclables
cooperatively in the Midwest has failed. Failures can be attributed
to several conditions, including the following:
Dominance of the service base by a local recycler who perceived
organized generators as a threat.
Disposal systems (landfill and/or hauling enterprise) publicly
owned and operated as revenue generators.
Lack of stringency in implementing the bid process.
Member communities contributing no capital investment (shares) to
organizational costs.
The processor's refusal to document market prices for co-op
members.
Apathy among Board members due to the imminent construction of a
dirty Material Recovery Facility (MRF) which was assumed would make
source separation of recyclables "unnecessary".
Participants with little understanding of the true full costs of
their local service system.
Lack of willingness among units of government to sponsor
consumer-control groups with project oversight.
Like a traditional Cooperative, a Non-profit Corporation's
membership structure may consist of both public and private
members. It also has the ability to hire staff, enter into
contracts and agreements and acquire property. It is also governed
by a Board elected by its members. A non-profit organization is
also limited by its Internal Revenue (IRS) status in the types of
direct services it can and cannot provide.
The main difference between a Non-profit Corporation and a
Cooperative is that any net income that the corporation has at the
end of the year does NOT return to its members. It can be used for
program purposes or reinvested in the operation or expansion of the
corporation, while in a Cooperative any net income MUST be
distributed to its members.
Joint Powers Agreement 1 Intergovernmental Agreement:
When counties or municipalities or states have the responsibility
for carrying out recycling, cooperative marketing can be structured
through a Joint Powers or Intergovernmental Agreement. This type of
a collaboration can especially benefit recyclers in rural regions
where recycling is already fairly well established.
This type of structure is governed by a Board of elected government
officials [County Commissioners, in the case of a Joint Powers
Board (JPB)] who approve all budgetary, policy and contractual
actions of the organization. The organization may use public funds
to carry out the program, but the approval of each participating
county may be required for some obligations. If authorized in the
Agreement, a JPB can hire staff, contract for services and acquire
property. Organizations formed by Intergovernmental Agreement must
also comply with the state's bidding process and open meeting
laws.
While only public entities can be voting members of this type of
organization, private recyclers and businesses may participate (but
not vote) if the JPB Agreement is written to allow it. The
Southeast Minnesota Recycling Exchange (SEMREX) is an example of a
co-op structured under a Joint Powers Agreement. The SEMREX JPB
includes private recyclers in its cooperative marketing
.-, program. While they do not have a vote, they are welcome at
meetings and their concerns are given fair consideration.
A major challenge for this type of cooperative marketing
organization is that public officials serve on many committees and
may not be willing or able to meet frequently enough to carry out
the day-to-day activities of the organization. They also are not
usually experts on recycling markets or related solid waste
matters. The SEMREX JPB has alleviated this concern by forming a
"Technical Committee" comprised of recycling staff from each member
county, who meet monthly to carry out the day-to-day operations of
the organization and make policy and budgetary recommendations to
the Board.
It is imperative that participants in an Intergovernmental
Agreement have a unified mission and begin from a point of trust.
Constructing a comprehensive organizational document that has been
reviewed and approved by each member's Attorney sets the stage for
successful cooperation.
Informal Cooperative:
Many existing Cooperative Marketing organizations first started as
an informal alliance of recyclers, united in philosophy and joining
forces to improve their marketing clout or expand their processing
capabilities.
While informal cooperatives have the advantage of being flexible;
they can fall apart if all members are not committed to a common
vision and a sense of equity. Informal cooperatives are also
limited in their ability to raise funds through grants or
foundation money. Foundations are reluctant or may be explicitly
prohibited from providing grants to an organization lacking an
established structure and decision-making process. Government
entities may also be unable to give grants to an organization that
is not formally incorporated.
Key benefits of forming a recycling alliance are to share in the
cost of collection, processing, and transportation, and to enjoy
the higher prices paid for top-quality material in large volumes.
Since informal cooperatives do not have the ability to sign
contracts or to own property, they do not fully realize these
benefits.
The concept of Cooperative Marketing is closely related to
Regionalization, but is not the same thing. Cooperative marketing
involves a collective approach to marketing recycled commodities to
stabilize prices for the individual, smaller recycling programs by
cooperatively selling higher volumes of materials. Regionalization
can involve a formal organization structure, such as a solid waste
authority or a Regional Council of Governments, as well as
accomplish some of the goals of cooperative marketing. The primary
difference, however, lies in the decision making and membership
structure in place and the focus on the joint needs of the
consumers/users of the system.
TABLE 2
Cooperative Marketing Organization Structures.
Examples of some forms of cooperative organizational structures can
be found in Appendix A. Included are:
Copy of Joint Powers Agreement from Southeast Minnesota Recycling
Exchange (SEMREX) Rochester, Minnesota.
Informal Alliance
I
Copy of Memorandum of Understanding from Industrialized Nebraskans
Organized for Recycling Management, Lincoln, Nebraska.
Membership
Decision-making
Income Distribution
Contracting ability
Grant Eligibility
Other characteristics.
Copies of a Municipal Membership Agreement from the Maine Resource
Recovery Association.
M a 1 Cooperative
Not limited
Non-profit
Public/Private
Established by by-laws. Usually, policy set by Board, day-to-day
decisions by Exec. Dir.
Retained within organization.
Provides image as a solid venture
Joint Powers Boardl Inter Gov'tal Agree.
Public only. (Privates may participate if allowed by By-laws, but
may not vote.)
Board of Elected Officials
Eligible
Must comply with bidding process & open meeting laws.
Decision-making process can be cumbersome & slow.
FINANCE TOOLS
Getting a cooperative marketing program going and keeping it going
are two different things!
Typically, the funding that gets a cooperative marketing program
off the ground for the first couple of years is a grant. But grant
money periodically runs out, often comes with constraints, and is
an unreliable source of revenue. It is important to design ongoing
funding mechanisms to sustain the organization.
A menu of successful funding devices includes:
a. Membership Fees b. Brokerage Fees c. User Fees (based on
services provided) d. Grants
a) Membership Fees
Membership fees are common among cooperative marketing groups. They
range from one-time fees to annual fees and token amounts to
significant sources of revenue. Even if the membership fee is not a
significant source of revenue, it represents a tangible commitment
the member has made to the organization and this is
important.
Establishing a fair membership fee can be a contentious process.
Should small, family-run recycling businesses pay less than a big
business? Should a larger, more urban county pay more than a
poorer, rural county with a smaller population? While some
cooperatives have decided on a flat membership fee, others resolve
this issue with a per-capita fee or tiered fee based on
population.
Per capita fees are traditionally levied by a public body to
generate supplemental funding for co-op operating expenses based on
the number of households or individuals within a geographic area.
These fees require action by a local body with the authority to
appropriate tax revenues.
b) Brokerage Fees
A brokerage fee is a fee charged, by load, of material marketed
through the cooperative marketing program. It is paid by the
members for the costs associated with identifying the best,
closest, most profitable market for a commodity. This type of fee
is usually viewed as fair and appropriate, because members who
market more loads through the organization are paying
proportionately to the service received. Most recyclers are
familiar with the concept because they have probably worked with
brokers. The advantage of participating in a well-run
cooperative marketing group is that the market prices, freight
costs and brokerage fees can be defined totally up-front. It is not
unheard-of for the prices quoted by a private broker to include
"hidden" fees or freight costs. In addition, it is also uncommon
for brokers to pass unexpected price increases at the mill on to
the recycler.
A brokerage fee may be a flat, per-ton or per-load fee, or, it may
be a percentage of the revenue received for the material marketed.
Each approach has advantages and disadvantages.
A flat fee is a more reliable source of revenue per volume of
material, since it doesn't fluctuate, but when market prices are
high, the organization does not benefit from the improved market
conditions. A flat fee can be established to cover the co-op's true
cost of handling the transaction, but this causes materials with
low market value less attractive to market through the
cooperative.
With a percentage or indexed fee, the revenue received is dependent
on the whims of the market place. The co-op enjoys increased
revenue right along with the recycler when markets are strong, but
when prices plummet, so will the brokerage fee revenue. Recycling
markets tend to fluctuate, and these ups and downs make it
difficult to budget or plan for the future.
C) ~roceising Fees
Processing fees are handling fees implemented by co-ops to cover
the actual costs, based on tonnage, of bulking up materials by
shredding, densifying, baling, containerizing or otherwise
accumulating mass quantities of each commodity. A well-run co-op
can tell its members to the penny, what each of these steps
actually cost. Specificity in calculating true costs and
communicating this information to customer/generators is a key
element in building a healthy financial structure around an open,
honest relationship with the contracting processor.
An example of specific charges for services or supplies is shown
below in Table 3. Bluegrass Recycling of Lexington, Kentucky
recruits co-op members with a clear picture of what the costs will
be for these items.
TABLE 2
BRRC CHARGES As of December 22,1997
3. Labels $ .0725 each 4. Baling Wire 5. Bill of Ladings 6.
Transportation 7. Driver's Time 8. Trailer Rent 9. Brokerage Fee
10. Processing Fee 1 1. Replacement Fee 12. Facility Fee
Since this co-op consists of a network of affiliated processing
facilities, needs for supplies as well as volume processed will
vary. Having fees clearly outlined up front as part of the
agreement allows participants to budget and plan, and it
facilitates clearer communication in contracts.
d) User Fees
Recycling cooperatives are in a position to provide a host of
services to their community and business members. These services
are described in greater detail in the Specialty Tools section of
this manual.
User fees are charges levied for any services provided. .One way
for a recycling cooperative to create stable revenues is to charge
for services it can provide based on its expertise. In a solid
waste context, service fees include curbside collection and
delivery of garbage to a disposal facility. Users are charged based
on frequency (once or twice a week) in the case of most homeowners
and frequency and volume or weight, in the case of commercial
generators. User fees are collected directly, through bills issued
periodically by the hauler or the local governing body as part of a
utility bill.
The majority of user fees collected from these consumerlrate payers
are calculated based on a "one-size-fits-all" philosophy; however,
there is growing interest in moving toward Unit Based Prices (UBP)
innovations throughout the country.
Data collected by many researchers shows that recycling rates and
material quantity and quality are significantly impacted by
implementation of a local UBP by as much as 30% or more. It is
rare, however, that users of these services make the critical
connection between aggressive recycling and reduced costs.
The more successfully the co-op members divert material from
landfills, incinerators and other disposal sites, the greater the
service they are providing to the local disposal industry. What few
recyclers realize is that their recycling success is resulting,
first and foremost, in increasing the profit margins of local
disposal interests and reducing the overall costs incurred by the
local community through avoided landfill costs. How many rural
volunteer recyclers have been told by their garbage hauler or town
council, "We can't afford to pay for your services"?
The potential for diverting maximum waste volume from landfills and
re- configuring monthly solid waste cost of service based on well
organized, cooperative recycling is huge. As mentioned earlier in
the Overview, there is a need to craft finance structures that are
sustainable because they are:
1) Diverse 2) Volume Based 3) Service Driven 4) Equitable 5 )
Integrated into the whole solid waste finance structure.
Finally, discussions of user fees for managing cooperative
recycling services must never be isolated from the discussion of
overall solid waste system costs.
In the last five years, the cost-per-ton at landfills, as well as
the monthly costs to consumers, have risen dramatically. These
facts alone are indicators that the market for user-fee-based
cooperative management structures may become more successful in the
future than they have been in the past.
e) Grants
Grant funding is by its very nature seed money for launching
cooperatives. State and Federal grant dollars can be powerful
drivers for initiating cooperative efforts. The wisest method for
distributing grant funding to start up a co-op is enforcement of
criteria that requires organizers to match, dollar-for-dollar the
grant money used as start-up capital. Furthermore, grant funders
would do well to establish criteria that require local
communities/businesses seeking grant dollars to demonstrate that
they have acted to integrate ongoing funding into their disposal
budget so the co-op will be at least as sustainable as the local
bond- funded landfill or transfer station.
Unfortunately, these criteria are largely absent from most grant
programs. It is more common that grant programs are used to create
recycling co-ops that are wholly dependent on market prices for
their survival once the grant evaporates, so that when the market
dries up, so does the co-op.
It is also true that grants are fickle and subject to political
winds that have little or nothing to do with the serious economic
forces of supply and demand that govern markets. Grant dollars can
create a strong foundation for a well-organized co-op, if they are
part of a well thought out business plan that addresses all aspects
of an integrated financing strategy.
It is interesting to note that in surveying forty-five (45) active
cooperatives, no financial "models" were offered. Survey
respondents defined their financial
Types of Funding
FB Grants I
CONTRACT TOOLS
The subject of "contracts" is one that falls into two broad,
general categories. Recycling organizations, businesses or
cooperatives have developed a range of tools for contracting for
collection/processing services and for end markets7 purchases of
commodities. For this discussion, these two types of contracts will
be labeled "Service" and "Supply" contracts.
a) Service Contracts can be as broad as combined solid waste and
recycling contracts between the co-op organization and service
providers or as narrow as a simple agreement to provide baling or
granulating services, by commodity.
An example of combined cooperative contract strategy is outlined in
detail in Appendix B in "A Consumer-Driven Recycling Strategy"
prepared by James Steffen & Associates (JSA). This approach
addresses the potential clout available to a cooperative structure
dedicated to managing joint service contracts. The purpose of this
type of contract is to manage effective competition among those
established public and private firms that already offer waste
management and recycling services. Note that this type of contract
is only possible if a new, non- vested management entity is formed
to manage this arrangement.
Examples of service contracts focused on transportation, processing
and marketing agreements; also found in Appendix B, include an
agreement used by the Southeast and East Central Regional Recycling
Association to provide "voluntary ... pickup, consolidation and
sale of certain types of recyclable materials within the southeast
and east central region of the State of Colorado". Also included is
the Collection Agreement for the Headwaters Cooperative Recycling
Project in Montana and a Regional Recycling Contract for
Emmetsburg, Iowa.
It is difficult to compress service contracts into a defined
template, since recycling is by its nature a complex set of
activities. Each of these agreements is crafted to meet the
political and material needs of local programs. What organizers
will find most useful is to review a range of approaches and create
a hybrid that fits local requirements.
b) S u p ~ l v Contracts
A "Guide to Supply Contracts for Recyclables" produced by the
Northeast Recycling Council (NERC) in April of 1993, represents a
useful framework upon which a co-op organization can craft
commodity-specific sales agreements. According to this guide the
topics addressed in contracts for the supply of recyclables can be
reasonably divided into four fundamental areas:
1 Background 2. Obligations of the Parties 3. Administrative
Details, and 4. Legal Details.
These topics are presented in this document in the above order to
provide a general guide to organizing a contract, however,
contracts can be organized in a variety of ways (e.g.,
administrative details may not necessarily precede legal details).
Clarity should be the rule. Your legal counsel is likely to have
forms with which he or she is comfortable. In addition, each of
these areas is not usually clearly marked as such in a
contract.
Background is the opening section of any contract, where "recitals"
or declarations are placed. These recitals identify each of the
parties and describe the background and purpose of the contract.
These need not be overly long, but some care should be taken in
drafting them because, in the event of a dispute over a provision
in the body of a contract, the recitals may be looked to for
evidence of the underlying intent of the parties.
Statements declaring the legal authority of the parties to enter
into the contract are also found in this section and, frequently,
documents formally authorizing the individuals signiilg the
contract (the "signatories") to enter the contract on behalf of the
party are attached.
Identification of parties to a contract should include addresses
for both the principal place and local place of business or
operations, and the name and title of the person(s) negotiating and
signing the contract. Private sector parties should also identify
their state of incorporation.
The recitals or declarations often begin with "Whereas7'.
Typically, the final clause in this section begins with "Therefore"
and states that there is an exchange of "consideration", i.e., each
party is giving the other something of value and acknowledges the
adequacy of the consideration. This is an important formality.
Without exchange of consideration, the agreement is merely an
unenforceable promise.
The recitals are often followed by a section, which defines key
terms used throughout the contract (alternatively, definitions are
sometimes dispersed throughout the contract). Clearly defined terms
are a helpful tool in avoiding ambiguity in the agreement. These
terms are often capitalized throughout the contract and referenced
to the definition section.
c) Obligations of the Parties
Most contracts include a section referred to as either "Scope of
Services", "obligations of the Buyer and Seller", or "Obligations
of the Parties". It is the "guts" of the contract, which sets forth
the undertakings of the parties involved. This is the area in which
issues unique and specific to supplying recyclables are
laid out (just as the Scope of Services in a contract to provide
waste hauling). For this reason, this Guide focuses primarily on
the topics addressed in this area.
In general, every contract to supply recyclables should
address:
Quality Quality Control Quantity Transportation Price, and
Term.
Some of the topics listed above require relatively extensive
coverage of the legal considerations pertaining to them, while
others do not. Checklists of the critical provisions that should be
included in a supply contract can be found in the entire document
in Appendix B.
d) Administrative Detail
Administrative details include all items related to how
transactions carried out under the contract will be tracked,
documented and verified (logistical items such as those related to
transportation and delivery are included in Obligations of the
Parties). Administrative items include:
Payment Invoicing Transfer of Funds, and Crediting.
e) Legal Details
This document is not intended to substitute for legal counsel but
touches on several of the provisions that will be particularly
critical in determining the overall strength of a contract. It is
especially important that Suppliers obtain assistance from legal
counsel on sections dealing with issues of interpretation and
enforceability of a contract. The topics listed below are not
unique to contract for the supply of recyclables. The provisions of
some of them are standard to all contract formats, for others they
may be unique to the agreement. Those provisions include:
"force majeure" Security Issues (provisions to secure performance)
Default and Remedies.
A complete copy of this guide can be found in Appendix C.
The best Supply Contracts are negotiated to be linked or indexed
with the market so that co-op members can benefit from or share in
high market prices and also share the risks of
. low markets. Historically, the recycler (processor or end market)
assumed the entire burden of risk and, in return, reaped all of the
rewards when the market did well.
An indexed contract protects the recyclerbuyer from losses and
protects the generatorlseller with shared profits. This approach
depends on several conditions to be successful:
Use of a nationally known market reporting entity, i.e. Chicago
Yellow Sheet.
Honest documentation from the buyer on end market prices.
Accurate, uniform measures (weights) at both the source and
destination of each commodity.
Standardized quality control.
The optimum goal for the use of recycling supply contracts is to
push the industry toward "open pricing". This means buyers would
bid for recycled commodities in an open context, based on accurate
data, and standardized specifications on quality and
quantity.
Some key points to remember when contracting with service providers
or buyers are provided by organizers from the Headwaters Co-op in
Montana, and include the following:
For bid or quote jobs, such as a purchase or special fabrication
project, a deadline is appropriate, but the penalty has to be
proven in most cases. Put a reasonable penalty in your special
projects appropriate to what you can prove in court that it will
cost you if it is not done on time.
Plan ahead.
a Check references before signing with anyone. Make sure bids come
with more than one reference.
Do not believe that you can omit the deadline or the penalty.
Including a penalty will also force your contractor to ask
questions that will define all parts of the contract more fully for
you and the contract.
Be flexible within limits. The better and more specific the
requestlplan makes both sides of any agreement or contract
invaluable for both sides.
Remember that engineers always have a fudge factor of at least 10%.
Give yourself at least 10% on time and on money estimates for
budgeting special construction
projects. Allow a greater percentage for projects in which you are
not certain of all the variables.
Legal Counsel is worth the cost. If you cannot afford legal
counsel, you cannot afford to get into a contract. Have all
contracts/service agreements reviewed by Legal Counsel prior to
signing them.
Samples of supply contracts can be found in Appendix B with the
first being a simple format from JSA's Consumer Cooperative Model.
This model involves competitive bidding for each commodity, based
on written, standardized specifications. Options are negotiated
with additional commodities reflected by adding attachments, as
needed.
An "agreement" with Recycler for Recycling old newspaper and
magazines in Cuyahoga County Ohio is an example of an indexed
contract, linked to the Official Board Markets.
Additional sample commodity-specific contracts from Southwest
Public Recycling Association are also included, as well as generic
samples of both Service and Supply Contracts.
D. PROCESSING TOOLS
Over half of the 45 cooperative marketing groups surveyed as part
of this project offer materials processing services as part of
their programs. Cooperative processing makes sense for the same
basic reason that cooperative marketing does: it achieves
efficiency and economy of scale by integrating the financial
resources, expertise and volume of available commodities of the
entire region.
A recycling cooperative getting started in a region with little or
no established recycling infrastructure has the opportunity to
build a comprehensive processing, marketing and transportation
system and avoid duplication of efforts.
When cooperative marketing is being initiated in a region with many
local recycling programs already in existence, each doing its own
thing, cooperative processing is more tricky because each recycler
has a vested interest in retaining ownership and control of its own
equipment and materials. Yet, even these recyclers can benefit from
some degree of cooperative processing and transportation. One
approach to harnessing this diversity of existing collection and
processing capacity is with contracted services as outlined in the
Contract Tools section. Multiple processing agreements can be
crafted to address specific commodities; for instance, a processor
with specialized equipment can absorb a single material from the
region to make bulk.
a) Centralized Cooperative Processing
The Bluegrass Regional Recycling Association in Kentucky has
developed a successful, statewide program that serves as an
excellent model for a recycling cooperative based on centralized
processing capabilities.
BRRC believes that the optimum recycling program is
curbside-collected, source- separated, with pick-up services
provided by a hauler or local unit of government. However, such a
system is a hefty investment, beyond the reach of most rural
regions; so BRRC has designed a plan in which a region may
gradually grow to that optimum system.
There are four levels of collection service in this approach:
1. Central Office -- Is the single point of contract with the
buyers, keeps records of all materials marketed in the system and
administers pay-backs for materials.
2. Processing Centers - Centralized hub of the system, has complete
processing capabilities and warehousing capacity.
3. Satellite Centers - Strategically sited for collection of
materials in a permanent facility justified by sufficient volumes
collected, material is sent to processing center for baling and
marketing.
4. Mobile Units - A truck with a van trailer that operates in a
community on a scheduled basis, serves in a collection capacity
(hauling materials collected to a processing center), has an
education role in communities new to recycling. Can be used to
extend regional boundaries once a satellite center is
established.
A community does not invest in a facility until it has built up its
recycling activity through mobile collection units that deliver
materials to the processing center for preparation to market.
Eventually, the community earns revenue from the sale of materials
collected by the mobile unit and the construction of a satellite
facility is justified. When enough volume of materials is being
handled by the satellite center, it may become a processing center.
Development of the common optimum recycling program is a
step-by-step process. Each level is built upon the success of the
previous level and paid for by the revenue earned from the
recyclables marketed.
The over-arching principle at each level of BRRC's system is that
of uniform quality of materials. Material collected by each mobile
unit is exactly like that collected by any other mobile unit or any
satellite center. A bale produced at any satellite center is
exactly like that of the hub center. BRRC's markets are willing to
pay a premium price because they are confident that material coming
out of any BRRC facility will measure up to the organization's
strict specification standards. BRRC accomplishes this through
training and by requiring each facility to have identical
equipment. BRRC is able to purchase its equipment at a very good
price because it is purchasing the equipment in quantity.
b) Uncentralized Processing
When a group of existing recyclers are collaborating to improve
recycling through cooperative marketing, cooperative processing
presents some opportunities, but also many challenges.
First, there are potential political barriers when public recyclers
are involved. A county may be reluctant to handle materials from
outside the county or from a private recycler. Among private
recyclers, the intrinsic competitive and proprietary nature of
business presents barriers.
Secondly, each member has invested in its own equipment, policies
and procedures. These may vary widely from member to member. Bales
produced by the different equipment will vary in dimensions and
density. Materials specifications may be entirely different. One
county may collect all plastic bottles of resin types #I-7
commingled; another may only collect #1 and $2 plastics, separated.
Such variation limits the amount of collaboration that can be done
in processing and transportation to market.
The Southeast Minnesota Recycler's Exchange (SEMREX) is such an
alliance of public and private recyclers, each with its own unique
system. SEMREX found that the best opportunity for creating a
uniform specification for collection and processing of material is
when new materials are added to the list of materials it markets.
One such opportunity was textiles. Textiles must be moved quickly
so as not to absorb moisture or odors from the recycling facility,
but most SEMREX members require as long as a year to amass a full
load of textiles. SEMREX has worked closely with its members to
meet strict processing and quality specifications for textiles. By
processing relatively uniform bales of this material, more frequent
joint loads from several members can be shipped, moving fresh
material more quickly to market. Members who do not have the
appropriate equipment available take their textiles to another
member for processing, with both sharing in the market revenue. The
success of SEMREX7s joint processing/marketing of textiles has
paved the way for similar collaborations with other
materials.
Cooperative processing and transporting of materials is a complex
business that relies heavily on coordination and creative use of
resources. Key to successful coordination of large quantities of
recyclables from multiple sources to centralized buyers at optimum
prices hinges on the need for complete and accurate systems for
tracking material flow. A thread that runs consistently throughout
the business of cooperative recycling is the need for good market
information. As has been stated many times, if farmers knew as
little about grain markets as recyclers know about glass and paper,
there wouldn't be an agriculture economy.
c) Transportation
Whether a co-op plans to provide or contract for collection
services, the primary goal is always going to be maximum
efficiency. In buying collection equipment, purchase price is not
always the largest contributing factor in a purchase decision. For
example, labor costs are by far the most critical item in the
purchasing decision. Over time, the additional labor required to
support a multi-person vehicle will outweigh the increased purchase
price of a vehicle designed for a one-person crew. In addition to
crew design, automatic transmissions are more cost efficient when
numerous stops are required. Compactor trucks can be used for
single materials, but can also be adapted to collect more than one
material simultaneously. Obviously, there are many factors to be
considered when purchasing recycling equipment.
In smaller communities, trucks with pickup, van, dump or stake-type
bodies and a variety of trailers can be used for separate
collections of recyclables. These vehicles may be adapted by adding
compartments for collection of more than one material at-a-time.
Lower purchase price and the opportunity to use existing equipment
make these trucks an economical choice.
One problem with using existing equipment is that traditional
garbage trucks, while having large capacities, may not necessarily
be energy efficient; particularly when the route covers many miles.
Some rural communities have found long- term program costs to be
lower for newly designed vehicles that are lighter and have larger
or smaller capacities are more maneuverable in tight
quarters.
It is often helpful to think of your recyclable materials in terms
of material features rather than types of materials, when it comes
to the identification of equipment needs.
Materials that intertwine or wrap, such as corrugated paper,
newspaper, HDPE, PET and metals.
Materials that are breakable, such as glass, wood pallets,
polystyrene and demolition waste.
Materials that are pliable, such as tires, carpet, foam padding,
mixed paper and LDPE (plastic bags).
Organic materials, capable of decomposition.
The Western Wisconsin Recycling Association is also pursuing the
innovative idea of purchasing a small trucking company to provide
transportation services for its member's loads. This venture could
provide transportation at a more reasonable cost, while generating
revenue to support the organization. All of 'WWRA7s members must
commit to this program for it to be a success.
d) Equipment
If a co-op is planning to invest in equipment, there are some
generic considerations that may assist planners in making wiser
equipment decisions. Decision makers must consider capacity or
throughput and price, as well as overall program goals and material
availability. While a variety of specialized recycling equipment is
available, it is possible to adapt existing solid waste equipment
for recycling uses as well as some types of storage bins and
containers. If a recycling facility has sufficient volumes, a
situation that is likely in a cooperative context, materials
brokers may even supply equipment as a component of a marketing
agreement.
Balers - Balers crush and compact materials into large rectangular
blocks. Balers make the materials uniform in size and reduce volume
for easier storage and shipping. Both vertical and horizontal
balers are available, and their capacities differ greatly. Your
community's waste volume will determine the type of equipment to
purchase. For example, if a smaller community will not be producing
large amounts of the material, they may not want to spend the
additional money for the automatic tying feature. Manual
tying of a bale can take five to seven minutes, however, the price
difference between automatic and manual tying systems is
significant. Volume is also a critical concern when deciding
whether the program warrants an automatic conveyor system. The
following features are important when selecting a baler:
Processing Capacity Size and Weight of Output Bales Types of
Materials to be Processed.
It is important to know if buyers or end markets have bale size or
weight requirements before any equipment is purchased. It is also
important to understand the difference between a vertical and
horizontal baler.
Vertical Baler - This type of baler creates a bale by use of a
hydraulically powered ram that travels up and down in a vertical
fashion within the framework of the baler. These are the most
common balers, and are typically found in grocery stores and other
retail operations baling OCC.
Horizontal Baler - This type of baler creates a bale by use of a
hydraulically powered ram that travels left to right in a
horizontal fashion within the framework of the baler. These balers
are higher output units, and are more typically found in industrial
plants and medium to large recycling centers.
OTHER RECYCLING EOUIPMENT
Hammermills - Materials that can be crushed or broken are processed
with hammermills, crushers and chippers. Glass, wood and demolition
waste fall into this category. Hammermills are high-speed machines
with rotating blades that grind materials into a specific size.
They are noisy, high maintenance machines, but they have a
widespread application and versatility in processing materials to
different sizes. Hammermills have been used to process large brush
and yard waste for compost, glass for asphalt and automobile scrap
for salvage.
Can Crushers - Can crushers either flatten or crush cans for
transport. Some machines have special features that feed the
crushed can directly into a truck. Once again, using the
information from your waste assessment, the committee needs to
determine how much recycled material your communities will
generate, and decide on the type of equipment needed to handle the
volume.
Densifiers - Densifiers compact aluminum better than crushers, and
produce uniform briquettes which are easy to stack and transport.
Densifiers can also be used to compact white goods and steel
cans.
Chippers - Chippers are slower-speed machines for processing wood
products. Chipped products can be used for fuel or mulch.
Glass Crushers - Glass crushers are used to reduce volume.
Additional features include screens or trommels to remove paper and
aluminum contaminants.
Shredders - Shredders are used to process pliable materials such as
paper, soft plastics, tires, carpet and foam products. Shredders
operate at slower speeds than hammermills. Shredded products vary
from one to twelve inches, and are not uniform in size or shape.
Some shredders can be used for a variety of materials, including
papers and metals.
Auxiliary Equipment:
Conveyor systems maximize processing efficiency. Magnets are useful
in separating ferrous materials. Fluffers adapt balers for baling
newspapers and high-grade office paper. Air systems control dust
and separate light from heavy materials. Screens and trommels
control the sizing of the product, and can eliminate dirt and other
contaminants. Loading and transportation equipment includes
portable loading docks, as well as front-end loaders and forklift
trucks to move materials. Scales are very necessary when tracking
recyclable materials for transport and sale.
A simple checMist containing a simple step-by-step process to
assist planners in designing their specifications for equipment can
be found in Appendix C.1.
Outdoor Equipment Usage - Operation of any recycling equipment
outside of a shelter is usually not recommended. Certain equipment
such as large balers and can processing equipment can be used
outside, but they are the exception. It is highly recommended that
before placing any recycling equipment outside for use, that the
distributor andlor manufacturer be contacted. Electrical controls,
contacts and other machine components can be damaged by driving
wind, rain and cold temperatures.
E. S~ecialtv Tools
Because of its collaborative nature, a cooperative marketing
organization is in the perfect '
position to offer additional recycling-related services that can
strengthen the organization and improve local recycling
performance. Examples of some of the innovative programs and
services developed by cooperative marketing groups are described
below:
Waste Assessments
A Waste Assessment (or Audit or Evaluation) is a walk-through of a
business or institution to examine what is currently being done
with waste and to identify opportunities to reduce, reuse or
recycle and contain costs. Recommendations are made for alternative
ways to handle the waste, helping the business save money and
conserve resources through waste abatement.
By ferreting out previously unrecovered recyclables in this way,
recycling cooperatives can increase their marketing volumes. Many
businesses are eager to recycle, but need the expertise the
cooperative can provide to figure out the logistics. Businesses are
usually willing to invest time and energy to collect and store
materials when they realize the savings from avoided waste disposal
and possible revenue from the recyclables.
Some recycling cooperatives charge for the waste evaluation, or ask
for a portion of the money saved by waste reduction measures taken
as a result of the Waste Assessment. Some organizations provide it
as a free service, anticipating increased revenue from increased
recycling. A cooperative formed with city or county membership can
build the cost of the service into its membership fee.
Coo~erative Purchasing
Cooperative marketing members can use their combined clout to
obtain better prices on supplies and services. The Bluegrass
Regional Recycling Association purchases balers, trucks and other
equipment at the best possible price, because it purchases for
several members at a time using strict, uniform specifications for
this equipment. Other .
cooperative marketing organizations have saved their members money
by cooperative purchasing of recycled content office supplies and
baling wire or problematic materials such as fluorescent tubes.
Cooperatives are also ideal structures for closed-loop purchasing
contracts for things like fluorescent tubes or cleaning chemicals.
One hospital, institution or office building would have a difficult
time attracting bids for small amounts of product with a
closed-loop provision. Ten hospitals, institutions or office
buildings can not only attract bids but conceivably at a lower unit
cost.
The SEMREX group routinely plans joint education efforts, where the
cost of printing or production of a radio or television ad is
spread among member counties. In addition to the obvious benefit of
cost-sharing, they appreciate the increased effectiveness of a
consistent message being sent to the entire region.
Materials Exchange
Materials Exchanges are reuse programs based on the principle that
one person's trash is another person's resource. A Materials
Exchange is a database listing potentially reusable materials
either available or wanted. Examples of frequently exchanged
materials include buckets and drums, pallets and packing peanuts.
Both parties making the exchange save money, through reduced
purchasing costs and avoided cost of disposal.
Because of the high cost of transporting relatively low-value
materials, Materials Exchanges are most successfully implemented on
a regional level. A Cooperative Marketing organization with a
broader mission of waste reduction may strengthen its programs by
implementing a Materials Exchange. SEMREX has made its Materials
Exchange an integral component of its program. When SEMREX performs
a Waste Evaluation for a business, it identifies waste materials
that can be recycled and directed to SEMREX7s Cooperative Marketing
program. Waste materials that can be exchanged on the SEMREX
Materials Exchange, and possible items business might be able to
obtain through the Materials Exchange, offer additional services.
Businesses are very appreciative of this full service
approach.
The greatest challenge to operating a Materials Exchange is
sustaining the program financially. Some Exchange programs have
implemented a participation fee, and some request a portion of the
money saved through exchange. SEMREX has been successful in
charging a brokerage fee on a few exchanges that were valuable
enough to charge a fee. In addition, SEMREX has developed a
Web-based database program for materials exchange, called
WebExchange, and is now marketing the service. SEMREX hopes that
through sales of the WebExchange software, exchange fees and
revenues from increased cooperative marketing, the SEMREX Materials
Exchange will eventually be self- sustaining.
Market Develo~ment
Throughout the history of recycling in the United States, even as
recycled quantities and numbers of programs increase, the primary
barriers continue to be inadequate funding, distance to frequently
unreliable markets, over-dependence on volunteers, and a serious
lack of discipline and order in the marketplace.
For many years, recyclers have found money and received grants to
purchase balers, shredders, densifiers and containers. They have
educated themselves and others that recycling is a good thing to
do, that it makes economic sense and that it is part of our
responsibility as citizens. The proof of recycling's success is a
steadily growing pile of recyclables, successfully shipped to
distant markets, all accomplished in spite of the economics.
.. - Through all of this toil, one long-cherished dream among
recyclers has always been the creation of local markets for
recyclables. Doing so will arm these communities to recycle,
because of the economics of a local market are far more favorable
than the
' economics of transporting commodities to distant markets for very
low prices. Like most really good ideas, this one is easier said
than done. Creating manufacturing capacity to absorb the
recyclables generated by local recycling programs is a complex task
that can be simply depicted in the following table.
KEY ELEMENTS of MARKET DEVELOPMENT
The challenge is deciding which step is first. It is the classic
chicken and egg puzzle.
Most programs are attracted to the wonders of new technology -
"magic machines that make garbage go away". The point that is most
critical, however, is that the most important first step is related
to supply. Identifying, quantifying and gaining control over the
supply and exerting economic power over potential feedstock at the
source is essential if the local market dream is to come true. No
factory is going to expand or initiate investments anywhere based
on guesswork about raw materials.
Identify End- MarketsIBuyers
This process will be hastened by heeding the following
pointers:
Manufacturing Capacity
Financing LandIZoning Buildings Equipment supply End-markets
Accurately track waste and recyclables and costs for both, at the
local level. This is the key first step upon which the organization
process must be based.
Develop supply-related information representing a critical mass of
knowledge and power that will influence changes in both policy and
practice, which will lead to economic development.
Fight for collection and processing efficiencies. Resist
re-inventing the wheel. Use every available resource, share
equipment, require collaboration of haulers and service
providers.
Create cooperative/multi-jurisdictional management entities that
integrate everyone into the process and run the entities like
businesses. Invest in
competitive bidding, written standards, specifications, contracts
and franchise agreements.
Be alert to locally generated business, institutional or industrial
by-products that may represent feedstock for new business start-up.
Examples would be bulk quantities of organics, industrial waste
glass, metals or fiber - the more the better. Small-scale factories
that make value-added products like compost, glass tile, molded
crumb rubber, concrete, paper pulp or fabricated plastic products
will all grow out of identified centralized quantities of these raw
materials. Small spin-off businesses designed to make products from
so- called "wastes" are the wave of the future.
Be alert to innovation that can integrate recyclables into existing
manufacturing processes. Remember, every recycled-content product
in the marketplace is produced by a for-profit business. Private
enterprise will become the recycler's best friend as high quality,
cooperative supplies of feedstock are made available.
An example of a new enterprise that intends to create a
local/regional market for mixed grades of paper based on
cooperatively-driven supplies is Firstar Fiber, Inc., a planned
tissue and toweling mill to be located in Eastern Nebraska. Below
is a scrap paper "Procurement Protocol" developed by Firstar
planners to solicit supply commitments for the mill.
Firstar Fiber Procurement Protocol
Firstar Fiber, Inc., seeks to build a pulp and paper mill in the
Omaha area, with startup projected in 1999. A modified sorting
operation (that is, a smaller one targeting fewer grades) was
slated to begin in 1998. The pulp and paper mill will require
approximately 90,000 tons per year (tpy) of scrap paper to produce
tissue and toweling grades of paper. To obtain this level of
supply, the sorting operation will accept and high grade
approximately 143,000 tpy of various low-grade mixes, including
residential mixed paper, undelivered bulk mail and mixed office
paper. As currently envisioned, the sorting plant and pulp and
paper mill will be sited at separate locations. The sorting
operation will have the capability to accept baled materials by
either truck or rail, and loose loads from roll-off containers,
semi-trailers and packer trucks. The mill will receive only based
paper, either from the sorting operation or from suppliers of
pre-sorted grades, by truck or rail.
Tonnage Targets
The following are only annual projections. A definitive engineering
study will refine these numbers, although contracts will provide
for minimum and maximum levels to be delivered.
Residential Mixed Paper (RMP) 41,000 tons Magazines (OMG, PS-10)
28,000 tons Undelivered Bulk Mail (UDBM) 41,000 tons White Ledger
1,000 tons Mixed Office (MOP) 31,000 tons Colored Ledger 1,000
tons
For each of these grades, except for the white and colored ledgers,
Firstar will seek to secure contractual commitments for at least
75% of its furnish needs. For white and colored ledgers, which will
represent a small percentage of its needs, it will rely mostly on
spot market purchases to fill its needs.
Terms and Preferred Partners
Firstar Fiber will show a preference to partner with suppliers who
demonstrate the following:
Interest in a long-term contract (a minimum of three years).
Enthusiasm for set floor and ceiling prices and indexing with
published market prices. Ability to supply significant quantities
of the targeted material (with a special emphasis on RMP, UBM and
OMG). Acceptance of a hold-harmless clause for delays or failure to
accept contracted tonnages. Professionalism and a track record to
supply quality material. Interest in investing. Willingness to be
one of several suppliers.
A careful review of the standards in this protocol indicates the
planner's interest in working with entities with the ability to
guarantee volume and quality projections, reliably and
consistently. Few independent programs can meet these standards. An
organized cooperative, however, can not only meet the standard, it
can use their material commitments to leverage a percent of
ownership of the mill. A mill whose shareholders are regional
programs committed to reliably supplying the mill are heavily
invested in the business's success. This is a healthier integration
between generator and end market than the more traditional
relationship between local recyclers and the distant, mysterious
corporate marketplace.
This innovative "co-op driven" economic development strategy can be
applied in an unlimited number of areas, ranging from paper mills
to glass tile factories.
Education
Cooperatives are about creating critical mass -- in terms of
material, people and money. An organized cooperative can pool
customer lists to create conduits that are not limited to paper,
glass and aluminum. These same conduits can be used to distribute
educational material to homeowners, businesses and decision-makers
about the social, economic and environmental benefits of
recycling.
Good educational strategies are transformed into excellent ones by
virtue of co-ops ability to treat all generators of recyclables as
valued investors.
All recycling education programs have certain commonalities. Some
points to be integrated in co-op educational planning include the
following:
Activists/Volunteers - This group represents the "choir". There is
no need to preach to them, they are already convinced. In fact, a
greater challenge is holding them back long enough to plan wisely.
This manual is designed to give them tools to organize their energy
and commitment and help them build an effective, cooperative
% 0
'enterprise. The kind of education this group needs is the in-depth
understanding of the dynamics of the local waste dollar. By
absorbing this knowledge, activists can influence their friends,
families, neighbors and decision-makers.
Participants or users of recycling services come from all walks of
life and have a wide range of recycling attitudes and biases. These
range from "Recycling is a dumb, expensive waste of time", to
"Recycling is a moral and ethical obligation upon which the future
of the planet depends" and a host of attitudes in between. The
challenge is to identify these beliefs and build on the strongest
areas of support.
Telephone surveying and door-to-door canvassing are two of the most
powerful tools for measuring local interest in recycling, as well
as identifying further education opportunities. Small communities
are far more accessible through personal contacts and established
channels of communication than are large cities.
Direct mail surveys can also be used if there are financial
resources available. Remember, a ten percent response rate to a
direct mail survey, is considered good by the pros so this may not
be the best method for reaching and communicating with all of your
neighbors.
Sign-in Logs - If a local volunteer recycling program has been
in-place, begin using sign-in logs. Have everyone who brings
recyclables in sign their name and address. Maintaining these user
logs can give organizers a picture of where their supporters are
how or if their local participation is growing. These logs are the
basis for
establishing a communication network. This network is used to feed
information back on progress, goals and objectives.
' Logs are used very effectively to influence local elected
officials when contract, organizational or financial decisions are
being made. It is difficult for the Mayor to pooh-pooh recycling
when faced with a list of recyclers representing 213 of her
constituents.
As stated earlier, cooperative marketing programs are diverse and
vary in size, geographical locations and approaches used. This
diversity can also be found in the methods of educational outreach
used by each type of program. What follows are examples of some
co-op strategies designed to educate members and
constituents.
Bluegrass Regional Recycling Corporation (BRRC) in Kentucky is a
statewide program that embodies 32 counties and 40 cities. They
offer ongoing train-the-trainer sessions to their Affiliate
Coordinators. The coordinators are taken through the cooperative's
processing facility which doubles as a training facility. The
center also has an audio/visual room, film library and recycled
product display to be used by the public. BRRC has made special use
of sign-in logs at all of their drop-off centers. These logs are
particularly useful when county officials at contract time.
Outreach is offered to the schools by the trained coordinators. New
sign-ups receive articles to be used in local media sources. A
display is exhibited at existing conferences and workshops around
the state, and BRRC also hosts their own annual conference.
SEMREX utilizes volunteers from the Americorp VISTA program to
provide businesses with waste evaluations. Businesses are then
offered many options for their waste, such as joining SEMREX's
cooperative marketing program or the waste exchange. Most
memberships come from referrals.
Although each county is responsible for their own education
efforts, SEMREX offers joint advertising and public service
opportunities. This approach spreads a consistent message
throughout the region, and saves valuable economic resources. The
counties are also offered a joint volunteer training for public
education providers.
Western Wisconsin Recycling Association (WWRA) is a non-profit
program which includes 34 individual programs. Wisconsin is a
mandatory recycling state which proven to have unique
challenges.
Wisconsin is divided into units. WWRA is responsible for one of
these units, plus the management of 34 programs. Each unit is
responsible for education within its region. WWRA assists the other
units within the state with their education programs and also
partners with the state of Wisconsin on two conferences each year.
Networking with other state level groups offers partnership
opportunities with their programs.
The most beneficial tool is their 800 number. A quarterly
newsletter is used to draw new members. WWRA is also linked into
other organizations' e-mail list serves and articles submitted to
affiliated groups.
Collaboration that combines the resources of a diverse mix of
interested parties can be a dynamic educational took, as many
cooperative organizations have learned. Jointly sponsored public
service announcements (PSA's), press releases, workshops, seminars
and training programs are examples of cooperative educational
strategies.
APPENDIX A Organizational Tools
1. Joint Powers Agreement for the Southeast Minnesota Recyclers'
Exchange (SEMREX)
2. Maine Resource Recovery Association's Municipal Membership
Agreement
JOINT POWERS AGREEMENT for
PREAMBLE
THIS AGREEMENT IS MADE by and between the Counties of Blue Earth,
Dodge, Fillmore, Freeborn, Mower, Olmsted, Rice, Steele, Waseca and
Winona. Other Counties may enter this Joint Powers Agreement
retroactively, as provided herein.
This Agreement is made pursuant to Minnesota Statutes, Section
471.59, the Joint Powers Act. Each of the parties to this Agreement
has been duly authorized to enter into the Agreement by its
respective Boards of Commissioners.
It is the intention of the Counties to jointly cooperate to provide
for the greatest public service benefit possible for the member
counties.
The name of the Joint Powers Board shall be the Southeast Minnesota
Recyclers' Exchange (SEMREX)
The term of this Agreement shall commence when the Counties have
signed the Agreement.
ARTICLE I - PURPOSE
The purpose of the SEMREX Joint Powers Board shall be to protect
the environment of the southeast Minnesota region through regional
recycling cooperative marketing ventures and market development
strategies, materials exchange efforts, innovative public education
efforts, buy recycled initiatives and other projects deemed
appropriate by its members.
ARTICLE I1 - JOINT POWERS
By this Agreement, the Counties of Blue Earth, Dodge, Fillmore,
Freeborn, Mower. Olmsted, Rice, Steele, Waseca and Winona. and
other counties as may join, are jointly empowered to act on behalf
of the several Counties and to take such actions as may be
necessary from time to time as empowered by this Agreement and
subsequent amendments hereto.
ARTICLE III - JOINT POWERS BOARD
The activities contemplated by this Agreement shall be administered
and carried out by the SEMREX Joint Powers Board. The Joint Powers
Board, hereinafter termed "The Board", shall be in existence for
the duration of this Agreement.
4. Voting Representation
The Board shall consist of one voting member and one alternace fiom
each County. These . members shall be selected by the County Boards
of their respective counties. Each county
shall have one voting representative on the Board; if the voting
representative is absent, the alternate shall vote.
Each participating county shall individually decide if their voting
representative and alternate shall receive a per diem, andlor
receive reimbursement for travel and other necessary expenses while
engaged in their official duties, and each Member shall be
responsible for paying any claims for per diem, travel and
expenses.
B. Officers
The Board shall select fiom among its members a Chair, a
Vice-Chair, and a Secretary, who shall serve in their respective
capacities for two-year tenns. Officers may serve successive terms
No voting representative of the Board shall forfeit the right to
vote by virtue of appointment as an officer of the Board. A vacancy
in any of the offices shall be filled by election at the next Board
meeting. The duties of the officers are as follows:
1 The Chair shall preside at all meetings of the Board. The Chair
shall appoint all standing committees of the Board, and shall be an
ex-officio member of all standing committees
2. The Vice-Chair shall assume the responsibilities of the Chair in
time of his or her inability to serve.
3 . The Secretary shall keep the minutes of all Board meetings and
ensure that the financial matters of the Board are addressed.
C. Meetings
The Board shall meet at least twice annually as a total Board and
at the call of the Chair. Times and places of regular and special
meetings shall be fixed by the Board or the Chair.
-411 meetings of the Board shall be conducted in a manner
consistent with the Minnesota Open Meeting Law, Minnesota Statutes
Section $471.705.
A quorum shall consist of attendance of at least fifty percent
(50%) of the voting representatives of the member counties.
Approval of any contracts, expenditures, or any other action
requiring a vote of the Board requires a positive vote by a
majority of voting representatives present, subject to the quorum
requirements.
ARTICLE IV - BOARD POWERS AND DUTES
The Board shall have the authority to purchase or lease land or
facilities, equipment. materials, supplies and to contract for
services. The Board shall have the authority to provide for finding
through borrowing, grants, or through lease or purchase contracts.
All contracts. payments for claims, and applications for grants
shall be approved by a majority vote of the Board and signed by the
Chair and Secretary
The Board may appoint or employ staff as may be necessary to carry
out the purpose of this Agreement. including but not limited to, a
Coordinator, legal counsel, and other such staff as may be deemed
appropriate
The Board may contract with any entity to provide the necessary
equipment, consultation, andlor other services that may be required
in order to carry out the purposes of this A, oreement.
The Board may provide for funds through borrowing, leaselpurchase
agreement, or other methods as most beneficial to the operation and
financial support of programs and activities conducted pursuant to
this agreement.
The Board may collect cooperative marketing fees on the materials
marketed through SEMREX, and market development contributions and
other fees as deemed necessary, from member counties.
ARTICLE V - ALLOCATION OF COSTS
The Board shall receive from the Coordinator each July an annual
budget covering the administrative costs of the Board and to carry
out the purposes of the Agreement. The budget shall be approved by
a majority vote of the Board members present.
ARTICLE VI - FISCAL AGENCY
The Board may, by majority vote, designate a SEMREX member county
to act as the Fiscal Agent for the Board for a two-year term, which
may be renewed by mutual consent. The Fiscal Agent shall establish
an account to ensure proper record keeping for all receipts and
expenditures. There shall be strict accountability of all hnds and
complete reporting of all receipts and disbursements by the Fiscal
Agent. In exchange for serving as Fiscal Agent, the market
development contribution will be waived for the years the county
serves as Fiscal Agent.
ARTICLE V1I - AUDIT RECORDS
The Fiscal Agent shall allow Members and the State of Minnesota,
pursuant to Minnesota Statute fj 1'6B.06, Subd. 4 (1 99 I),
including the Legislative .4uditor or the State Auditor, access to
its records, at reasonable hours; including all books, records,
documents, and accounting procedures and practices relevant to the
subject matter of this Agreement, for the purpose of audit.
Members shall maintain financial and other records, and account in
accordance with the requirements of the State of Minnesota. Each
Member shall maintain strict accountability of all fiinds and
maintain records of all receipts and disbursements.
ARTICLE VI3U - AFFIRMATIVE ACTION
No person shall illegally, on the grounds of race, creed, color,
religion, sex, marital status, public assistance status, sexual
preference, handicap, age or national origin, be excluded from full
employment rights in, participation in, be denied the benefits of,
or be otherwise subject to unlawful discrimination under any
program, service or activity hereunder.
ARTICLE M - WITHDRAWAL, DISSOLUTION, OR TERMINATION
A. Withdrawal
Any member may withdraw fiom participation in the Board upon the
following conditions:
1 Members' governing boards;
2. Payment to the SEMREX Board of any damages related to civil
judgments or administrative penalties for which the remaining
Members may be liable;
L) . Payment to the SEMREX Board of the withdrawing Member's
proportional share of the Boar