City terminates services of recycling company; move could save $150,000

bmusgrave@herald-leader.comJune 24, 2014 

Auditors discovered several safety violations at the city's recycling center and noted previous violations weren't corrected.


Lexington has terminated the services of Bluegrass Regional Recycling Corp. as part of its efforts to solve long-standing problems at the city's recycling center. The move comes six months after a scathing audit found widespread problems at the facility on Thompson Road.

The January internal audit showed that the city never had contracts with surrounding counties and cities to process those jurisdictions' recycled goods and did not have a contract with Bluegrass Regional Recycling, which markets the recycled goods to buyers.

Bluegrass Regional Recycling has been the center's broker and handled its accounting since 1992.

Charlie Martin, who was tasked in January with overseeing changes at the center, told the Urban County Council's Environmental Quality Committee on Tuesday that he initially was going to retain the services of Bluegrass Regional Recycling. But after looking at what the company actually did, he decided it was more efficient for the city to take over accounting and marketing. The city already had an employee who marketed recycling, Martin said.

That move probably will save the city $100,000 to $150,000 a year, he said.

Martin said it took six months to develop contracts or memorandums of understanding with schools and other cities and counties for recycling because Lexington had to determine whether it could absorb Bluegrass Regional Recycling's duties.

The company's services were terminated June 10. Contracts with the schools and other cities and counties were sent June 12. Those entities have until October to sign the contracts.

The lack of contracts has been a problem for more than a decade. Lexington's internal auditors found that the recycling center did not have contracts with surrounding counties in an August 2004 audit. It was never corrected. Approximately 15 other jurisdictions and private contractors such as Rumpke use the city's recycling center.

Mickey Mills, executive director of Bluegrass Regional Recycling Corp., said his organization was not surprised about the city's decision to terminate the company's services.

"They have moved in the direction of in-housing for some time," Mills said.

Bluegrass Regional Recycling is a nonprofit that was started in 1992 to market recycled goods regionally. At one time, it ran the city's recycling center.

Mills said it would not have to lay off any employees as a result of the city's decision.

"We've seen this coming for some time," he said. "We will make it through the transition period."

The Material Recovery Facility, or the recycling center, receives recycling from Fayette County residents, and from schools, private businesses and other counties and cities. The recycling center charges $35 a ton to those entities for sorting and processing. Bluegrass Regional Recycling acted as a broker to sell the recycled products — such as plastic — to buyers. For its services, it was paid $7 a ton by Fayette County and the affiliates.

Lexington will receive that $7 fee beginning in July.

Fayette County residents pay for recycling through their property taxes. Although the recycling operation generates revenue, it is not self-supporting. But because the accounting at the center was so poor, it was difficult to tell whether other jurisdictions were paying enough to cover costs, officials have said.

Councilman Ed Lane said during Tuesday's meeting that he supported recycling but was concerned that lax recordkeeping had made it impossible to know whether the city was charging enough to cover its costs.

"I don't think we should be doing recycling for the adjacent counties if they aren't paying their fair share," Lane said. "I'm not saying that they aren't paying their fair share, but we don't know for sure. That's why we have to get the accounting accurate."

Auditors issued 12 findings about management at the recycling center, many which centered on improving inventory and financial controls. For example, auditors noted that Bluegrass Regional Recycling received an overpayment of $9,341 in May and June 2013 because of problems with record keeping and accounting.

Bluegrass Regional Recycling repaid the city when notified of the overpayment, the audit said. Auditors also noted there was an excessive amount of overtime at the center during the past three years.

Martin said Tuesday that he had monitored overtime since the audit was released, and "overtime has decreased by 63 percent."

Other key changes at the center include hiring a program manager to oversee operations. The program manager is working to correct many of the problems cited in the audit, Martin said. He told the council during a February meeting that he wanted to hire a director to oversee the recycling center, but Martin said Tuesday that he changed his mind after finding someone in the department who had knowledge of the operations.

Several security and safety problems at the center also have been fixed.

Martin said the next steps would include further improvement in the center's accounting and recordkeeping so the city can determine exactly how much it costs to process recycling versus how much it charges.

"What we have found is a lot of inefficiencies," Martin said. "We have spent a lot of time reducing our operational costs, reducing our overtime so we can arrive at a real number at what it costs to process recycling."

Beth Musgrave: (859) 231-3205. Twitter: @HLCityhall.

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