Authorization to Amend Solid Waste Facility Operating Agreement by and between the City of Melrose and Waste Management of Massachusetts.

Transcript (~25 min @ 11:12)

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▶ 11:11 Devin Romanul: All right. Up next, order number ID 2026-1382, authorization to amend solid waste facility operating agreement by and between the City of Melrose and Waste Management of Massachusetts.

▶ 11:27 Speaker 4: Good evening. Good evening. Thank you. First of all, I just would like to introduce Mr. Jim Nocella. Jim is representing Waste Management here tonight and will be able to answer some of the technical questions you might have from his side of this operating agreement that is in front of you. First and foremost, thank you very much for this consideration. This is a critical part to the DPW's operation, as well as a critical component to the services that we provide and the costs that are associated with the solid waste and recycling curbside pickup program for the City of Melrose. A handful of years ago, Waste Management approached the city and talked about the permit For operating the transfer station was about to expire. And it also coincided with the end of a current lease that will expire in 2029 for the operation of the transfer station, which is located up on Route 99. So a little bit more than a year ago, the city assembled a team of all the stakeholders that have a vested stake in coming up with a new agreement so that we could come and put forth in front of you what we feel is a very fair and equitable agreement. We think at this point it's more for the city of Melrose, which I'm sure Mr. Nocella does not want to hear, but I think that it's also fair for the residents. And what is in front of you is a 20-year agreement that we will enter with Waste Management. They are the preferred vendor. And in return, Waste Management will be constructing a brand-new transfer station on the Route 99 site. They've submitted some conceptual documents, some designs that we have approved and will work through as we get into the construction phase of the project. We will still maintain ownership of this property, and those capital improvements are owned by the operator when this agreement takes place. They will also negotiate the process of re-permitting the site. Our permit as it exists right now, we understand will not pass, and Waste Management possesses the expertise to navigate through that process. They already hold the permit for the site, so it makes it a little bit easier. I'll let Mr. Nocella get into that if there's any questions. But it just makes it that much easier for us to operate, construct, and then take advantage of the new agreement, the new transfer station. What that means to the residents of Melrose is roughly $450,000 to $500,000 a year in revenues, and that comes from the host payment to the city, property taxes that Waste Management pays to us, savings in our trash contract. We have reduced tipping fees. Those costs are negotiated into this contract, as well as labor and transportation costs that are saved in the current agreement with Casella. We are able to direct those trucks to the transfer station. No waiting. They never leave the city, thus we don't realize the costs that are associated to transport the trash, the recycling, out of the city. To me, I want to first congratulate, but more importantly, thank the city, my colleagues in the city. I think the city is very lucky to have the CFO, the assessor, planning and development, solicitor, the mayor's administration, and anybody else that was involved in creating this agreement that's in front of you tonight for Waste Management to operate this facility, but also at zero cost to the city, construct a brand-new transfer station that will be permitted properly, and just the advancements on that site alone. So at that, I thank you very much for the consideration, and I also thank my colleagues for contributing to what we feel is a very fair agreement for the city and something that sets us up very well for the next 20 years.

▶ 15:42 Speaker 2: Councilor Williams. Thank you.

▶ 15:45 Speaker 4: I'm curious

▶ 15:48 Ryan Williams: excuse me, since you brought up the permit, Mass DEP is the permitting body? Correct.

▶ 15:53 Speaker 3: What does the permit cover, and what parts of our current permit

▶ 15:55 Speaker 4: do you feel

▶ 15:58 Speaker 3: are not likely to be

▶ 16:02 Speaker 4: seen favorably?

▶ 16:03 Speaker 2: Yeah.

▶ 16:03 Speaker 3: Good question. So this facility is very old and does not meet the current standards. Now, as it's operating, you get the so-called grandfathered piece of it. But a few years ago, the stormwater regulations were readjusted, and in order for this facility to be able to meet those regulations, it needs to be relocated, or you would have to stop operations that happen up above where the city operates the compost facility. And that's not a good thing for the city. That's a vital operation. So the only way that we could see to be able to meet those new stormwater regulations was to relocate that facility and rebuild it in an area where it will not be impacted by the stormwater issues that we have. Additionally, the state has reached out to us multiple times looking for a game plan to replace the facility just because of its age and just the way it sits. It's a pretty tight area. So we think that this plan will satisfy all those parties. And are there

▶ 17:29 Speaker 4: air permit requirements for the facility or just water?

▶ 17:31 Speaker 3: No, it's water and then the normal regulations, which would be since we're staying on the permitted footprint of the property, we would have to still meet all of those current obligations. Are you guys looking to move the new building further back

▶ 17:52 Speaker 2: into the property? Correct.

▶ 17:54 Ryan Williams: So you're going to build the new one- Concurrently with the other operation, and that way when you're ready to demolish the old one- Mm-hmm ... you don't have to interrupt your operation. There'd be no interruption of service, right. Yeah. So what do you do with the space that is currently where the old building

▶ 18:07 Speaker 3: stands when that's torn down? So what we would do with that, we'll level that and grade it, and then the city will be able to use that parcel For some of the operations that go on a little further up in the hill, which will make it easier for them to operate.

▶ 18:28 Speaker 3: I see. Will there be any increased room for snow dumping

▶ 18:30 Speaker 4: or anything of that nature at the site?

▶ 18:33 Speaker 3: That won't be materially impacted the way we're going to do it. Okay. Yeah. All right. Appreciate that. Thank you.

▶ 18:42 Devin Romanul: You're welcome. Thank you, Councilor Williams. Any other councilors?

▶ 18:48 Speaker 2: Vice Chair Vandiver.

▶ 18:49 Kimberly Vandiver: Sorry, could you clarify your comment about the snow dumping? You said that would materially impact the plan or wouldn't?

▶ 18:56 Speaker 3: Would not be. Would not? Yeah. Okay. That's correct.

▶ 19:01 Speaker 2: Councilor Park.

▶ 19:02 Speaker 3: Thank you. Can you talk to us a little bit about how you

▶ 19:09 Speaker 1: derive the 20-year plan as opposed to something that's more conventional, like a 10 year? And also, does this new transfer station

▶ 19:17 Speaker 3: allow us to extend the services to a larger

▶ 19:21 Speaker 1: area, given the fact that it's a brand new station, and it's not servicing just Melrose?

▶ 19:26 Speaker 3: Yeah. Today, it serves outside of Melrose as well. So it does have some regional capacity, if you will. The 20-year mark is actually more common in these types of facilities because of the investment that you have to make through the permitting and the construction in order to be able to make the financial side of it work for the city. We have multiple agreements with different transfer stations, some in which cities actually participate in the construction cost. That idea I raised was summarily- Mm-hmm ... thwarted at me quickly. So I understand that.

▶ 20:19 Speaker 4: I think the right word is declined.

▶ 20:21 Speaker 3: It was declined, yes. That's better. So the way that we looked at making it financially viable so that the city would continue to see not only the revenues they receive, but some modest increases as well, was to use a 20-year timetable. And again, it's more common to do that in these types of facilities than, let's say, a collection contract where you might be looking at a five or a 10-year term. Well, the current agreement that we're under had up to 30 years of life on the contract itself. But the prior one was a 20-year lease as well. So it's not without precedent.

▶ 21:07 Speaker 4: And to continue with what Mr. Nocella said, that was a major consideration for us, how do we know the value of that property over the course of 20 years? It's almost impossible, right? You don't know what they're going to do in the quarry next door, where aggregate is. You don't know any other future developments. So one of the safeguards we wanted to put in is the ability to revisit it and to possibly exit if there's some sort of a drastic change in that parcel if the city needs or wants to do anything else, whether another opportunity pops up. So that was a consideration as well. And I think a 20-year agreement is about right. It's about right, because normally we're going to enter into a 10 and have a 10-year option anyways. So let's just make it 20 right out of the bat. The city has no investment in the construction of a new facility, and then we will always be able to revisit it and then possibly exit early. There'll be language for that.

▶ 22:09 Speaker 3: So there is an exit clause?

▶ 22:11 Speaker 4: There would be. Through proper notifications and such, yes, sir.

▶ 22:15 Speaker 3: One final question. So I know that the majority of this transfer station will

▶ 22:22 Speaker 1: be utilized by Melrose. Can you give me a rough idea in

▶ 22:24 Speaker 3: terms of percentage of what other neighboring towns and areas would

▶ 22:27 Speaker 1: use this transfer station?

▶ 22:30 Speaker 4: Yeah.

▶ 22:31 Speaker 3: Well, Melrose has actually done a phenomenal job at reducing waste through the collection program that we've put out, which is, I guess the good news. So, Melrose itself will use up about 20% of the capacity, maybe a little bit less than that, of what's currently coming through the facility. And then the majority is, there is some Melrose waste that's commercial waste that gets disposed of there, not associated with the city collection contract, and then the rest would be from regional areas around the city.

▶ 23:12 Speaker 2: Thank you. Vice Chair Vandiver.

▶ 23:15 Kimberly Vandiver: Thank you. A few other questions. Given that it's a 20-year contract, is there anything we can do to future-proof it, and given that this facility, we'd like it to last a while, in terms of future-proofing on future environmental regulations and safety and whatnot? Are we looking ahead towards doing the top of the line there?

▶ 23:40 Speaker 3: Yeah. So this facility obviously will be built under the newest regulations. So there will be no further grandfathering of how the facility is built. We'll have to meet all today's standards. There are things that we're looking at in the future, and some of that might be loading into containers versus trucks, and containers that could actually go on the rail system as opposed to being trucked. And that's a real environmental plus in terms of waste gas emissions. So we'll be looking at that. But as part of the agreement, we'll be obligated to maintain the facility and keep it up to standard, meet all the regulations. So as things age in the facility, we'll be maintaining that and repairing that. And again, that would be at no cost to the city.

▶ 24:36 Kimberly Vandiver: Great. And following up on the other counselor's question, I saw in section four, I see a note about termination for cause. Is that what you were referring to? For cause, to me, implies that something went wrong. Is that the-

▶ 24:51 Speaker 3: Right. There's termination for cause, and then there's a provision in there for a land taking if the city were to have to take the property back.

▶ 25:02 Kimberly Vandiver: Okay, great. And then I saw in there, there's a 3.5% annual increase, but then there's also a 3.3%. When does the 3.3% come into play?

▶ 25:11 Speaker 3: So, this was one of the provisions that the financial team for the city wanted to spell out clearly that in no case would the total revenue increase, which is a combination of property taxes and host community fees, fall below a 3.3% threshold level. And so we put that in there for clarification purposes. The host fee itself, which we pay on every ton that comes through the facility, will go up by 3.5%, and then the other components of the revenues would make up the rest, and the city wanted to make sure that didn't fall below the 3.3% threshold.

▶ 26:02 Kimberly Vandiver: Great. I appreciate that. Thank you so much.

▶ 26:04 Devin Romanul: Yeah. Next, I have Counselor Williams. Yeah.

▶ 26:07 Ryan Williams: Vice Chair Vandiver asked the question that I was going to ask, but I wanted to just clarify that what this means is that the city always receives $75,000 a year, and then it grows at least 3.3%, but not more than 3.5% each year. Correct. So this year it's 75%. I'm sorry, $75,000. Next year it's $80,000.

▶ 26:32 Speaker 3: The year after that it's, whatever, $87,000.

▶ 26:34 Ryan Williams: Mm-hmm. And then the additional fees-- And I will say that it would be nice to have the whole contract here. We have the amendments that are being made, but we have lots of

▶ 26:44 Ryan Williams: references to sections that we can't review or don't know what they say.

▶ 26:49 Speaker 3: The additional payments, which you described as--

▶ 26:55 Speaker 4: What did you describe them as?

▶ 26:55 Speaker 3: Well, in the agreement, the additional payments are targeted to be the property taxes. Yes. That's right. Okay.

▶ 27:06 Ryan Williams: Thank you. Those payments can reduce a portion

▶ 27:08 Speaker 2: of the fee, but there's a floor-

▶ 27:10 Ryan Williams: Correct ... that they can never go lower than. Yeah. And that floor is the $75,000 plus 3.5%

▶ 27:17 Speaker 3: annually. Yeah. That was one of the reasons why we likely weren't before you eight months ago, is negotiating through that. Our concern, obviously, is we're going to build a facility, and we have no idea what the assessed value would be. And so we spent a lot of time going back and forth to talk through that, and that's where we arrived at that threshold of 3.3%.

▶ 27:42 Speaker 4: Okay. All right. Appreciate it. Thank you. Yep.

▶ 27:45 Speaker 2: Other counselors? Counselor Shen.

▶ 27:51 Jason Chen: Yep. Thank you. And thank you to Mr. True for walking a few counselors and I through this a few weeks ago. And thanks to Mr. Nocella for being what sounds like a really good partner with the city for a long time.

▶ 28:07 Speaker 2: About the value of the host payment, that $75,000,

▶ 28:13 Jason Chen: did we have a discussion about the overall profit that Waste Management makes by operating the site long term? I want to know that that $75,000 going up at 3.3% is on the right order of magnitude given how much it allows you to be more profitable overall. Any comments on if we've had open book conversations about your overall business? And I understand the risk that you're taking, and you need to be compensated for that as well. And I know that the 20-year term does also help you pay back your capital, but I haven't seen that overall open book to make sure that the city is getting the most in terms of host payments and of compensation as part of this operating lease. And I fully understand that it's a partnership on both sides with risks.

▶ 29:07 Speaker 3: Yeah, it is. And as far as open book profit and loss, typically as a private enterprise because of our competition, things that we just cannot open and share. But what you can do is evaluate either some of our other operations to see what level of host payments are made, as well as others. And I guess one example I would tell you is, first of all, I'm not sure about where the $75,000 is coming from. So the annual host community payment is $215,000. And when you look at that, it's comprised of a payment per ton for the material that comes through the facility. And so our host payment is $1.62 a ton. However, because we offer a minimum monthly payment, really what the city experiences is more something on the order of $3.75 when you look at how much material comes through and what we pay on that host benefit. The newest facility, not one of ours, that has been developed in the state is out in Leominster, and that host community agreement, it's public record, is paying $0.70 a ton with no minimum. So when you try to evaluate is the city getting a good deal, I think those are some of the comparisons you can make. In our business model, a transfer station is really not a very profitable venture. It's kind of a means to an end. So it's a way to get material from point A to point B. And they typically do not generate a lot of profit. And that's part and parcel why the negotiations took a long time, is the city was trying to get their best deal, and I've got to also protect the interest of the company. And so I think Mr. Troupe probably said it well, that we kind of maybe didn't get what we wanted, and the city got more of what they wanted on this deal. But it still makes sense, I think, to be done.

▶ 31:41 Speaker 4: Yeah. And the 75,000, just for clarification, is based on property taxes and additional payments that are made by Waste Management to the city through the course of the agreement.

▶ 31:54 Jason Chen: If there's, in the future, let's say five years from now, Waste Management wanted to change your operations to run a lot more solid waste through there, and it made that site more profitable, is there a way for us to revisit the host payments?

▶ 32:12 Speaker 3: Yeah, because we would have to seek the city's approval to modify the permit. So, the permit is the permit, right? It's 600 tons a day maximum. And so in order to be able to run more volume, which potentially could make it more viable, more profitable, we would have to come back to the city. And at that point in time, we'd have to negotiate whatever the benefits needed to be at that point. Great question.

▶ 32:49 Jason Chen: Thanks. And do you see any risk to doing the capital improvements? I think it was about $3 million when Mr. Troupe and I last talked, and it'll take about three years. But are there risks to you to getting that permit, or do you feel like you've done this many times, and it's just a matter of doing the work and doing the paperwork with the state?

▶ 33:11 Speaker 3: Yeah. The investment they were expecting is actually $5 million to be able to go through permitting, through construction. There are risks. There are always risks, but as we look at this facility, we've operated it for a long time, we know the property. We don't see a hurdle that we feel like we're not going to be able to meet. Early on, though, we will have a meeting with the DEP to go over the preliminary plan, and at that point, we'll get feedback from the state on what our plan is for the reconstruction. And we'll know if there are things that we just can't do. But I don't foresee that.

▶ 34:05 Devin Romanul: Okay. Thank you to you both. Yeah. You're welcome. Thank you so much. Up next, I have President Freeman.

▶ 34:11 Bradley Freeman: Thank you very much. I think with these negotiations, I think as you said, there's always a give and take with these. And everything I've heard is Waste Management's been a wonderful partner to the city, and I personally think we're fortunate to have the transfer station here because, as Mr. Troupe said, the sheer amount of volume that Casella does on a daily

▶ 34:28 Bradley Freeman: basis, not having to go up to their station and being able to remain in Melrose, I think is a huge win. So when you factor that in with the host payments and

▶ 34:36 Bradley Freeman: the fact that Waste Management's been a good neighbor, I'm really comfortable with this. And with that, I will make a motion to recommend.

▶ 34:42 Devin Romanul: Second. Motion to recommend made by President Freeman, seconded by Councilor Finocchiaro. On discussion, up first I have Vice Chair Vanderberg.

▶ 34:49 Kimberly Vandiver: Thank you. I'll be quick. And I'm also supportive of this in general. But since the 600 tons a day permit amount was mentioned, I'm curious what the current tonnage through the site is at right now.

▶ 35:02 Speaker 3: It runs about 300 tons a day.

▶ 35:06 Kimberly Vandiver: Okay. Yeah. And will the new facility provide more capacity beyond what's there now? Is it hitting capacity limits and the new one will give more capacity?

▶ 35:16 Speaker 3: Hopefully it'll be more efficient because we'll have a better runway to get up into the facility, and we'll construct the facility a little bit larger. Again, we're constrained by the site assigned area that we could build in, but we expect to be able to build a facility a little bit larger. So that would allow us to get trucks in and out faster without having delays.

▶ 35:44 Speaker 1: Okay, great. Thank you.

▶ 35:45 Devin Romanul: You're welcome. Terrific. Any other councilors on discussion? With the motion on the floor and duly seconded, no discussion, Madam Clerk, will you please call the roll?

▶ 35:53 Speaker 1: Yes. Councilor Vanderberg? Yes. Councilor Chen? Yes. Councilor Finocchiaro? Yes. Councilor Jamaleddine? Yes. Councilor Karamcheti? Yes. Councilor Obremski? Yes. Councilor Park? Yes. Councilor Williams? Yes. President Freeman? Yes. Chair Romanul? Yes.

▶ 36:09 Devin Romanul: That motion passes. Motion passes and will come before us in our next full council meeting. Gentlemen, thank you so much. Thank you. Have a good evening. Appreciate it. That being our last item on our agenda, I'll entertain a motion to adjourn. Motion to adjourn. Motion made by Councilor Finocchiaro. Second. Seconded by Councilor Jamaleddine. On discussion. Seeing none, Madam Clerk, will you please call the roll? Yes.