Mayor Harry Kim defended his decision to cancel a 10-year compost agreement before the Hawaii County Council on Tuesday evening.
“I truly thought every single decision I made was right by law and was right for the people of this island,” said Kim, who emphasized what he saw as a “tremendous cost factor” in the contract that took effect last July.
But several council members appeared skeptical of the decision or expressed disappointment that they weren’t consulted prior to the termination notice being sent Feb. 17 to Hawaiian Earth Recycling. The contract includes ongoing mulching services at county solid waste facilities and construction of a $10.3 million composting facility next to the Hilo landfill.
Kona Councilwoman Karen Eoff, who was part of the previous council that authorized the bond for the project, said she was proud that the county was going to be on the cutting edge of waste diversion. The facility would use food scraps to generate compost.
“That was a high point for the previous council,” she said. “… It’s kind of hard to embrace where we are going now.”
For now, the council is taking more time to review the issue before giving the administration the go-ahead to pursue a new contract for mulching of green waste. Those services will end June 30 when the contract is terminated.
A resolution authorizing a request for proposals for a three-year deal was postponed to March 21.
Council members said they wanted time to read a staff analysis of the contract that Kim said he used to make the decision.
“We can’t make a good decision unless we (see the document),” Council Chairwoman Valerie Poindexter said.
Council members also heard from Hawaiian Earth Recycling representatives and employees who highlighted the popularity of their product.
“Down Pahoa side, there’s a lot of rock,” said employee Bob Manuel. “They can take mulch home and plant things. They grow food for their families.”
The company also has warned the county that terminating the deal could be costly.
On March 1, Senior Vice President John Brigham said in a letter to county officials that the company would seek more than $4 million to reimburse expenses it incurred under the contract, including preparing for construction of the composting facility. He alleged the county acted in bad faith, which could allow it to seek more.
County Corporation Counsel Joe Kamelamela in a written response Monday said the county was acting within the contract, which contains a “termination for convenience” clause.
He said the allegation was an “emotional response based solely on conjecture” and that Hawaiian Earth Recycling “would be well-advised to not attempt to unjustly enrich itself through unjustifiable claims and demands for additional payments that are not supported by the contract or the law.”
A claim for reimbursement, which is allowed under the contract, would be reviewed by the county and subject to nonbinding mediation prior to litigation, Kamelamela said.
Hawaiian Earth Recycling Executive Director Mark Cummings told the council the company remains interested in amending the contract to address the administration’s concerns.
“We have this agreement. We believe we were in good stead with you,” he said.
Kim reiterated he didn’t have a problem with the company’s performance.
But he said the agreement was a “bad contract except for the contractor.”
“I don’t blame private business,” Kim said. “Private business is there to make money.”
In addition to capital costs, operational expenses would be between $2.9 million and $4.5 million a year, according to the Department of Environmental Management. The contract includes minimum annual payments that would reach $4 million after the composting facility is completed.
In the July 2015 through June 30, 2016, fiscal year, the county paid $2.1 million for the mulching operations under a previous contract, according to the county Finance Department.
Kim said he doesn’t think enough food waste would be diverted to justify the cost. The contract doesn’t address food waste from residences.
BioEnergy Hawaii’s proposed waste-to-energy plant in Waikoloa could complicate composting plans if constructed since it also would use organic waste. BioEnergy’s draft environmental assessment says the project can coexist with the “county’s proposed efforts to recover organic materials, but may also relieve the county from having to incur the expenses of organics diversion.”
Hilo Councilman Aaron Chung said he remembered when Kim proposed a costly waste-to-energy plant about a decade ago when he was mayor previously.
“Harry, you pitched a waste-to-energy program at $125 million,” Chung said, adding he sees the composting facility as “manini” in comparison.
He then asked Kim if that BioEnergy project was a reason for terminating the agreement. Kim repeated that his issue was what he saw as a flawed contract.
Marvin Min, Hawaiian Earth Recycling operations manager, said between 26,000 and 28,000 tons of green waste and untreated pallets are mulched each year in West Hawaii and between 10,000 and 11,000 tons in East Hawaii. The process includes treatment for invasive species.
Cummings said Hawaiian Earth Recycling would donate 1 million compostable bags for residents to use for their food scraps if the county provided a pickup service.
Kim said he supports composting but not the contract.
“I did not understand why the county was responsible for the payment of so many things,” he told the council. “… You ask a question like: Who’s paying for the facility? Who is paying for the transportation? Who’s paying for the gathering? Who is paying for the container? Every question I asked, because of the red flags that came up, was the county.”
Cummings said the contract was the impetus of the county. Hawaiian Earth Recycling was the only company to respond to the county’s requests for proposals.
Asked for a response to Kim’s statements about the contract, he said: “I think it’s a matter of perspective. You put the best information forward based on what was given to us to respond to.”
Kim, who shook hands with Cummings after the meeting, said Wednesday he remains open to discussions with the company.
“I look at this filing for claims as their right, but how I look at it, I hope this will bring an opportunity for further discussion,” he said. “And that’s where we are. I know this seems like a major problem after yesterday. To me, it’s not.”
Kim said he welcomed questions from the council. He said he spoke with Poindexter before canceling the deal.
In the meantime, Kim said the county is reviewing its options in case a new mulching contract isn’t in place by July 1 or when the contractor begins demobilization. That could include the county renting equipment and doing the mulching itself temporarily, storing green waste or rehiring Hawaiian Earth Recycling under a temporary contract.
Kim said he was advised he couldn’t substantially change the contract without going through another request for proposals.
Under the contract, Hawaiian Earth Recycling turns green waste and untreated pallets into mulch, which is available for free at the Hilo landfill, West Hawaii landfill and Kealakehe transfer station.
That product would be combined with food waste after the composting facility is constructed. Cummings said the compost would then be sold if there was a strong market for the product, while mulch would remain free for residents.
Email Tom Callis at tcallis@hawaiitribune-herald.com.
