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7A Page 16 ATTACHMENT 1 Commodities Guarantee Commodity sales, along with tipping fees, are SBWMA's main sources of revenue. Tipping fees are the charges levied upon a ton of waste, which is delivered to various landfills, depending on the waste category. The guarantees, offered by proposers that they will deliver a set. commodity amount, is as crucial as operating costs to the SBWMA. Commoditi.es are recyclables. They .consist of aluminum cans that can be turned into the state for CR V funds, glass sold to bottlers, paper and cardboard sold to overseas mills. Commodity prices have been historically high in the last few years, but market prices fell dramatically in October 2008, making commodity guarantees questionable. SBWMA 's Due Diligence Process The Grand Jury learned that SBR planned to run the Shoreway Facility as a "satellite" operation from its headquarters in Los Angeles. At what point the SBWMA discov~redth.is fact is not clear to the Grand Jury. SBR expects to receive additional funds annually from SBWMA because of its '~mjsca1culations and omissions." The Grand Jury has learned, subsequent to SBR's selection as Shoreway Operations Contractor, that it renegotiated, on May 19,2009, to decrease its recyclin.g revenue guarantee to $6.75 million. However, SBWMA is still in deliberations with SBR and has not established a final amount to operate the Shoreway Facility. On March 29, 2009, HBC wrote a letter to the SBWMA contesting its basis for the selection of SBR. (see Attachment 1) Additionally, the Grand Jury learned from different sources that there is concern about ongoing' problems with Community Recycling, one of the two SBR partners. The Local Enforcement Agency for Los Angeles has issued forty-two outstanding Notices of Violations to Community Recycling Sun VaHey Recycling and Transfer operations. Twenty-six of the violations concern pennitting. Community RecyCling is operating without the correct pennit. The other sixteen violations are for vector~ bird and animal control; training; hazardous, liquid, or special waste . containment; scavenging; traffic control; cleaning; reporting; and load checking. In addition, on February 26, 2009, during a SBWMA Board meeting, a member of the Teamsters Union distributed a letter from Teamster's Local 396 of South em California. The letter stated the union had Umajor labor problems" and "horrible working conditions'; with Community Recycling. SBR claims it has good union relationships. SBWMA 's Management Conduct Allied was one of the proposers that submitted for the contract to haul garbage and run the Shoreway Facility. The decision to recommend either HBC or SBR to operate the Shoreway Facility in August 2008 meant that Allied's bid to operate the Shoreway Facility was rejected. Shortly after its bid was rejected, Allied submitted an alternative proposal to the SBVlMA that addressed the ever-increasing cost proposed by the SBWMA to build the new Shoreway Facility. The request to consider this alternate proposal for building the MRF was denied by the SBWMA, due to what-the SBWMA had described as "non-compliance with th~ RFP requirements." The denial prompted Allied to contact the press and city council members for a hearing. 12