Report Prepared by: Bill Osmer, Public Works Manager Water Quality Control
Title
SUBJECT: Approval of Two Separate Agreements for the Harvesting and Brokerage of Wastewater Treatment Plant Land Application Crops with McLaughlin Hay Service, Inc., in the Annual Amount of $250,000 for Harvesting Services and San Joaquin Hay Grower’s Association for Brokerage Services; Each Agreement for a Two (2) Year Term Beginning June 1, 2020 Through May 31, 2022, with an Option to Extend the Agreements for Two (2) Additional One (1) Year Term(s)
REPORT IN BRIEF
Considers approving two separate agreements, one with McLaughlin Hay Service, Inc., in the amount of $250,000, for harvesting services and the other with San Joaquin Hay Grower’s Association for brokerage services of Wastewater Treatment Plant Land Application fodder crops.
RECOMMENDATION
City Council - Adopt a motion:
A. Approving the agreement for harvesting services with McLaughlin Hay Service, Inc., for the harvesting of the Wastewater Treatment Plant Land Application Area fodder crops; and,
B. Approving the agreement for brokerage services with San Joaquin Valley Hay Grower’s Association for the brokerage of said crops; and,
C. Authorizing the City Manager or the Assistance City Manager to execute the necessary documents.
Body
ALTERNATIVES
1. Approve, as recommend by Staff; or,
2. Approve, subject to other than recommended by Staff; or,
3. Deny; or,
4. Refer to Staff for reconsideration of specific items; or,
5. Continue to a future meeting.
AUTHORITY
Charter of the City of Merced, Section 200.
CITY COUNCIL PRIORITIES
As provided for in the 2019-20 Adopted Budget and 2020-21 Proposed Budget.
DISCUSSION
The Wastewater Treatment Facility (WWTF) Land Application Area (LAA) serves as an environmentally friendly way of disposing the biosolids that result from the process of treating wastewater. The biosolids are a soil amendment for the approximately 749 acres of farmland that grows fodder crops for local farmers and ranchers. Since farming is not the primary objective of the LAA, the LAA does not have the staff or equipment to harvest the crops, nor does LAA staff have the contacts in the farming industry to sell the hay. Therefore, the WWTF contracts the harvesting and brokerage of the crops.
A Request for Proposal (RFP) for harvesting and brokerage services was issued in March 2020.The RFP allowed vendors to propose on one or both of the harvesting and brokerage services. Staff received 3 responses for brokerage services and 2 responses for harvesting:
Brokerage:
Commodity Connection, Inc.
McLaughlin Hay Service, Inc.
San Joaquin Valley Hay Growers Association
Harvesting:
Derek Mumby
McLaughlin Hay Service, Inc.
In order to determine which proposals best serves the City’s interest, staff compared criteria for harvesting, such as the total cost of harvesting (chopping, raking, baling and road siding) as well as the number, type, and age of the equipment; for brokerage services, staff compared the percentage per ton of harvest and the volume of hay brokered. All vendors were compared in regards to experience of handling large volumes of hay and silage. After careful consideration, staff recommends McLaughlin Hay Service for harvesting and San Joaquin Valley Hay Growers Association for brokerage services.
The contracts will be for a period of two-years, commencing on June 1, 2020 and ending on May 31, 2022. The City shall have the option of renewing the agreements for two (2) additional one-year periods.
The harvesting and brokerage of alfalfa, silage corn, and winter forage crops was previously combined in a single contract awarded to McLaughlin Hay Service; this allowed the cost of harvesting services to be deducted from proceeds of the sale of the fodder crops. The proposed contracts split harvesting and brokerage services, which creates an expense out for harvesting and a larger revenue in for the brokered hay.
McLaughlin Hay Service will harvest crops at a cost of $42 per ton. Staff estimates the following tonnage:
• Alfalfa: 500 acres at 7 tons/acre = 3500 tons x $42/ton = $147,000
• Summer Sudan Silage: 160 acres at 4.5 tons/acre x 2 cuttings = 1440 tons x $42/ton = $60,480
• Winter Hay: 250 acres x 4 tons/acre = 1000 tons x $42/ton = $42,000
The grand total to harvest all crops is just under $250,000 per fiscal year. The contract term will be commence on June 1, 2020; requiring approximately $30,000 in harvesting cost for the remainder of fiscal year 2019-20.
Revenue from the sale of the fodder crops is dependent upon the amount and type of crop harvested, as well as current market rates. For comparison, in the current FY 19/20, the City has received $600,303.57 for the sale of crops to date. The amount includes the vendor reducing out harvesting and brokerage costs. This revenue is used to cover the costs of purchasing seed, fertilizer and other soil amendments, as well as producing and tending to the crops. San Joaquin Valley Hay Growers Association will broker the harvested crops, retaining 5% of the sale price and submitting the remaining amount to the City.
IMPACT ON CITY RESOURCES
Funding is available within Fund 553 for the harvesting cost of approximately $30,000 in FY2019-20. The remainder of the contract amount is included in the FY2020-21 proposed budget. The contract cost for future years will be budgeted with the annual budget process.
No appropriation of funds needed for brokerage services as the broker deducts their percentage from the proceeds of the sale of the fodder crops.
ATTACHMENTS
1. McLaughlin Hay Service, Inc. Contract
2. San Joaquin Valley Hay Grower’s Association Contract