MANAGEMENT: Regional Agency Signs 20-Year Transfer Contract

In the face of rapidly diminishing landfill capacity, the Solid Waste Agency of Northern Cook County (SWANCC) recently has signed a 20-year contract for the operation of its Wheeling Transfer Station. The extended contract aims to en-sure stable tipping fees and to guarantee disposal capacity into the next century.

Located in northern Illinois, SWANCC is an intergovernmental agency serving 23 communities and 700,000 citizens who generate approximately 221,000 tons of ref-use annually. The 20-year agreement with Waste Services Inc. (WMI) and Groot Recycling, which has operated the transfer station since 1994, replaces the two parties' previous five-year contract.

The new contract, which expires in 2014, provides the county with many benefits. These include the elimination of the initial contract's put-or-pay clause, which could penalize communities for recycling. Under the new agreement, the a-gency pays only for the amount of waste actually delivered, with no guaranteed tonnage.

The new contract also includes fixed escalator clauses to ensure rate stability. For example, operations and maintenance fees will be adjusted at a rate of 80 percent of the change in the consumer price index for Chicago. However, Groot must justify the rate increases at SWANCC's request. Transportation costs will increase annually by the percentage change in the transportation index for Chicago and surrounding areas.

The contract also affords flexible termination options (see timeline). Contractual language allows the agency to end the agreement for convenience in 2004 with no financial penalties. Also, the contract can be canceled at any time if SWANCC decides to use any new disposal technology other than landfilling.

For now, the contract contains a temporary sub-agreement with WMI to provide landfill disposal for the county's baled garbage. However, the agency currently is siting its own disposal facility, the Northwest Cook County balefill, which will displace the current disposal agreement when it becomes operational.

Financially, the agency is in a good position with the new contract. "SWANCC members will save more than $1 million per year over the first four years from both price concessions and elimination of put-or-pay penalties," said C. Brooke Beal, the agency's executive director.

Beyond the savings, the agreement provides the agency and its members with the assurance of solid waste disposal at market-competitive rates. Also, SWANCC and its members receive a corporate guarantee against environmental liability stemming from use of WMI disposal facilities.

Improved market leverage is a key benefit for all parties involved in a public-private partnership. By joining forces, SWANCC and its member communities have in-creased their total refuse tonnages which bolstered their bargaining power in the contract. On the private side, Groot and WMI benefited from receiving significant quantities of solid waste.

SWANCC is not the only agency pursuing innovative contracts. Across Illinois, other counties and solid waste agencies also are realizing the advantages of aggregating garbage to increase market leverage; collaborating with the private sector also is on the rise.