Composting company seeks $4M compensation

Hawaiian Earth Recycling isn’t going to let Hawaii County go scot-free after canceling its 10-year compost agreement.

In a letter to county officials Wednesday, Senior Vice President John Brigham said the company would seek more than $4 million to cover expenses it incurred under the contract if Mayor Harry Kim’s termination notice isn’t rescinded.

Kim, who ended the agreement in its first year due to concerns about cost and logistical issues, said the county would not have to pay a penalty to get out early.

But the contract does allow the company to seek reimbursement for some of its expenses if the agreement covering mulching operations and construction of a $10.3 million composting facility is terminated.

Those costs could be substantial and could include lost profits if the county acted in bad faith, Brigham warned. The contract went into effect last July.

“The county’s anticipated liability for the latter will result in dramatically higher damages than the county administration anticipates,” he said.

Expenses the company wants to be reimbursed for include engineering, permitting, bonds, attorney and consultant fees, and new equipment. Construction of the composting facility had not started.

Kim said he stands by the decision to cancel the agreement.

“I firmly believe the action taken was absolutely the right thing to do for Hawaii County concerning waste management and finances and everything else connected to it,” he said.

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 County Council will take up the issue this week when it reviews a request for proposals for a new contract covering only mulching of green waste, such as tree trimmings, during the Finance Committee meeting Tuesday. They also will hear from Kim and Hawaiian Earth representatives, who have been asked to attend the Environmental Management Committee meeting the same day.

Kim said he will attend.

Puna Councilwoman Eileen O’Hara, who chairs the Environmental Management Committee, said she is concerned the county is acting hastily and doesn’t see the timeline for a new contract as reasonable.

The cancellation notice terminates the contract June 30. The county needs a new contract in place the next day for free mulch to continue to be available for residents.

For that to occur, the County Council needs to approve the issuance of a request for proposals, the county needs to select a bidder and then negotiate a contract.

“We’re asked to assume we have a new contract ready to roll July 1, 2017,” said O’Hara, a former county recycling coordinator. “I think that’s highly unrealistic.”

Even before June 30, the contractor could have to stop mulching green waste at least a month prior so it can work through the supply it already has, said Marvin Min, Hawaiian Earth operations manager. The company handles mulching operations at the Hilo landfill, the West Hawaii landfill and the Kealakehe Recycling &Transfer Station.

“We’re trying to work with the county,” Min said. “The contract took three years to build.”

Kim said the new contract would be less complicated since it won’t include construction of a composting facility.

“The goal is to have a seamless transition from this contract to the next one,” he said.

Bill Kucharski, county Environmental Management director, said the county could store green waste if a mulching service was temporarily not available.

“Our plans are to do everything we can to continue accepting green waste and not have a break in service,” he said.

Kucharski said the county could allow the contractor to continue mulching up until the last day.

O’Hara said storing green waste could put the county in violation of its permit with the state Department of Health. She said the county can only store so much.

O’Hara said she also is concerned the county is souring its relationship with one of the few companies that does this kind of work in the state. It was the only company to bid on the last contract.

“We have a company doing a really good job on mulching,” she said. “Why would we rush this and basically send them away?”

Kim, who reiterated he doesn’t have a problem with the company’s performance, said he doesn’t think the county is sending a bad message to the business community.

“That’s not a factor,” he said.

The composting facility would have diverted food waste, mainly from hotels and restaurants, that currently goes into the landfills.

Kim issued a termination notice Feb. 16. He said he supports more composting but didn’t like that the county would be responsible for supplying a minimum amount of organic waste for the facility.

Planned placement of the composting facility next to the Hilo landfill was opposed by the Keaukaha-Panaewa Farmers Association due to its proximity to farm lots.

Kim said he didn’t cancel the contract because of that issue.

O’Hara said she also was concerned that the county would not be able to provide enough food waste to satisfy the composting agreement.

“It’s pretty apparent to me that the county was not prepared to deliver on their requirement in this contract,” she said.

But the councilwoman said such requirements could have been delayed.

“I don’t think that the citizens are going to be well-served by this cancellation versus modification to the contract,” she said.

Kim said the county’s attorneys advised him that he couldn’t substantially change the contract without going through another request for proposals.

EJ Noeau, a Panaewa resident, said he depends on the free mulch to support his farm, which has little natural soil. While loading mulch in his flatbed Thursday, he said he heard the contract was canceled and was concerned about losing the service.

“If you use this mulch anything can grow,” Noeau said. “This is magic.”

Email Tom Callis at tcallis@hawaiitribune-herald.com.