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ANALYSIS: The current agreement with ReCommunity contained a provision for ReCommunity to consider the acceptance of single stream materials at a processing fee of $78 per ton. This was an expected increase from the $59.49 per ton dual-stream processing fee. Hypothetically, if we applied the Consumer Price Index adjustment to these fees since 2012,the 2015 rates would equate to $79.90 per ton for single stream and $60.94 per ton for dual-stream materials. The current agreement is based on a payment methodology using an Average Market Value (AMV) approach wherein both the set composition of our materials and the monthly Southeast USA regional average commodity prices for the materials are used to cover the transportation, processing, and marketing services. If the AMV was above the processing fee,the agreement included a 75.1%revenue share to SWDD of any revenue above and beyond the processing cost. However, there was no payment to ReCommunity if the AMV was below the processing fee, i.e., ReCommunity bore the total risk of a depressed market. In terms of the assignment, ReCommunity is a willing party in that this allows them an opportunity to terminate their part in the contract while allowing SWDD an opportunity to continue the framework of the agreement with Tropical Recycling. Tropical Recycling is interested in providing a seamless transition to SWDD; however, has requested additional considerations in the assignment due to the current depressed market, their additional transportation costs, and to protect their financial investments. Specifically, Tropical Recycling has requested 1) a total processing rate of$88 per ton with the same 75.1% revenue share; 2) a base term of five (5) years with an option for an additional two (2) year term with mutual agreement between both parties; and 3) to apply any negative balance to offset future payments; however, SWDD is not responsible for any negative balance upon termination of this agreement. Staff concurs that in the last year the market prices for recycled materials have declined substantially. In fact, commodity pricing is at a historic low. At the time we issued the original RFP in November 2011, the AMV was at $175 per ton; however, in June 2015, the AMV is $85 per ton. This is related to the drop in oil prices, other global economic factors and some increase in contamination of single stream materials.As a result,there is a likely trend that recycling processing services will likely become a net cost to SWDD at current market prices where this was a net revenue stream previously. In evaluating the assignment of the ReCommunity agreement to Tropical, staff finds that the increase in processing fee is justified given the current market situation and their additional transportation costs. Staff is also comfortable with the additional term which will allow both SWDD and Tropical Recycling a smooth transition and a reasonable time-frame to work from. Overall,staff recommends Board approval of the assignment. SWDD Agenda-Single Stream Recyclables Transfer,Processing and Marketing Agreement Update Page 2 of 3 223