The largest element of the ‘bin collection’ overspend is due to a badly advised previous administration with officers who did not understand the complexity of the commercial PFI finance deal for the building and running of the recycling scheme. The contract was based on the Council making ‘profit’/payback against the management fee provided the value of recycling was above certain levels- however the contractor had a clause that meant they would get a fixed fee even if the recycle market price dropped – which is now the case. Instead of being paid by the contractor the Council have lost all profits/rebates and paying for a service that had not been budgeted.
The cost is likely to increase even further now that the market price for plastics from recycling has dropped due to restrictions being imposed by China. – there is something like 60+ years to run on the PFI.
This whole project made no commercial sense for the Council – only the contractor was in a win, win situation.
Ratepayers of Wrexham will pay millions over the duration of the contract