PORT ANGELES — Waste Connections has sued the city of Port Angeles for $4.8 million in unpaid fees, citing breach of contract and a collapse in the global recycling market.
City officials deny the claims in the June 2 lawsuit and have taken steps to prepare for a legal fight.
The City Council voted unanimously last week to approve a $40,000 added expenditure to Foster Garvey PC, the Seattle firm that is representing the city in mediation — and now litigation — with Waste Connections.
“Really what is happening is Waste Connections is asking the ratepayers of the city of Port Angeles to pad their profit margin, and I don’t think that’s acceptable,” Council member Mike French said before the Dec. 1 vote.
“I think that we should stand up against that and stand up for our ratepayers.”
The city entered into a 20-year contact with Waste Connections in 2005 to construct and operate the Regional Transfer Station in west Port Angeles.
Waste Connections agreed to perform ancillary functions such as the transportation and disposal of solid waste, recycling, handling of moderate-risk waste and the operation of the Blue Mountain Transfer Station east of Port Angeles, city attorney Bill Bloor said.
Waste Connections in 2017 began making a series of claims against the city for additional compensation, Bloor told the council.
“Every time that we received a claim, we evaluated it, and most of those claims in the beginning had no merit at all,” Bloor said.
Waste Connections hired an attorney in 2019 and “continued to make large claims that we didn’t agree with, and we don’t agree with,” Bloor said.
With mediation still in progress, Waste Connections filed a lawsuit in Clallam County Superior Court in June seeking “at least” $4.8 million in damages for the disputed claims.
Public Works and Utilities Director Thomas Hunter estimated that the impact to ratepayers would be between $1.6 million and $2.2 million were a judge to rule against the city.
“There are some very, very large downstream impacts to how this all shakes out,” Hunter told the council.
Three of the six components in the city’s 2005 agreement with Waste Connections are in dispute: transportation and disposal, recycling and moderate-risk waste.
“None of the city’s articulated reasons for denying the rate modifications are valid under the terms of the agreement,” according to a 10-page complaint filed by Waste Connections attorney Alexander Wu of the Seattle firm Hillis Clark Martin & Peterson P.S.
Waste Connections can adjust or modify rates based on inflation, the cost of recycling and other factors, Wu said.
“Since 2017, the market for recycling has changed dramatically,” Wu said in the lawsuit.
“For example, in March 2017, the resale rate for commingled recycling was $82.56 per ton. Then in March 2018, the resale rate for recycling fell to negative $62.32 per ton.”
Waste Connections, which is based in Texas and has millions of customers throughout the U.S. and Canada, is entitled to revenues from the sale of recyclable commodities to offset the costs of the collection and hauling of recyclables and other less profitable or unprofitable services, Wu said.
“The recycling resale market collapsed in early 2018 due in significant part to China’s ban on importing plastics and other materials for recycling, which began in January 2018,” Wu said.
In response to market conditions, Waste Management in 2018 proposed the following rate adjustments for recycling:
• A $2.15 per month increase for residential recycling customers.
• A $343.22 per month increase for commercial recycling customers.
• A $24.82 per month increase for commercial OCC, or old corrugated cardboard/containers, customers.
• A $5,063 per month increase in the service fee paid by the city for Regional Transfer Station commingled recycling.
• A $5,144 per month increase in the service fee for Blue Mountain Transfer Station commingled recycling.
In addition, Waste Connections requested a $25.57 per ton increase for long-haul transport and disposal of acceptable waste and a $76.15 per ton increase for long-haul transport and disposal of self-haul tires.
Transportation and disposal account for a $3.8 million share of the disputed claims.
Waste Connections also sought a $73.59 per hour increase for the disposal of moderate-risk waste, according to the lawsuit.
“The city denied the rate modifications requested by Waste Connections, but the reasons for the city’s denials are invalid even though the city has repeatedly changed them over time,” Wu said.
The city hired Stephen DiJulio of Foster Garvey to represent the city in mediation.
“Mr. DiJulio is probably one of the half-a-dozen lawyers in the state who are really, really familiar with the solid waste industry, with their practices, with their contracts,” Bloor said before the council vote.
“We feel like we have been very lucky to have him representing the city.”
The $40,000 expenditure to DiJulio’s firm raised the not-to-exceed amount to $64,900.
“In the grand scheme of things, the amount of dollars that we’re talking about today really could pale in comparison to the outcome one way or the other,” Hunter said of the pending litigation.
French said he hoped the city could avoid costly litigation through successful mediation.
Council member Lindsey Schromen-Wawrin said the lawsuit had forced the city’s hand.
“Frankly, the other side sued us, so we are in court,” Schromen-Wawrin said.
“We’re going to defend ourselves, and we’re going to defend the interests of the Port Angeles ratepayers and, also, everybody in Clallam County who all pay fees at the transfer station.”
French said the city had the “correct interpretation” of its contract with Waste Connections.
“I’m grateful that we found an attorney who specializes in this,” Mayor Kate Dexter said.
“It seems a very reasonable amount to pay to potentially save our ratepayers a whole lot of money.”
Reporter Rob Ollikainen can be reached at [email protected].