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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