Guide for Funding Food Scrap Recycling

Resource
February 28, 2020

Matt Nager for NRDC

After two years of working in depth in our model cities, Denver and Baltimore, on food waste, NRDC’s Food Matters team distilled its knowledge, learnings, and best practices into a suite of tools and solutions that cities can easily adopt and adapt to their needs. This wide range of tools is an outgrowth of the Policy and Program Toolkit detailing specific strategies that cities can implement to reduce food waste.

As is the case with most long-term endeavors in cities, addressing food waste requires sustained funding, both public and private. As our toolkit emphasizes, the greatest gains from tackling food waste come first from preventing it from happening, followed by implementing strategies to rescue and donate surplus food. So resource allocations should prioritize these strategies. However, even if we maximize prevention and donation, there will still be a need to manage inedible parts of food and other food scraps through recycling (e.g., composting). Below, we offer tips for funding food scrap recycling strategies at the city level, as well as a few pointers on how to approach food rescue funding.

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First Steps

Foundational to acquiring funding to support food waste work in your city is understanding the scope and landscape of the problem. To begin:

  • First, estimate a local baseline level of how much food waste is being generated and from what sources, and assess the potential for increased rescue of surplus food. Cities can estimate their baseline food waste by conducting a waste audit or by deploying the NRDC baseline calculator tool. Often cities don’t know where to focus their efforts in addressing food waste. By estimating baseline generation, cities can determine the easiest entry points and biggest opportunities. For many cities, restaurants and households waste the most food but also have the most locations; some cities may prefer to start with lower-generating sectors that have fewer locations, such as food manufacturing/processing. Read more about the NRDC baselining tool here.
  • Next, conduct assessments of the existing local landscape for both food rescue and food scrap recycling, always keeping in mind opportunities to prevent food waste from happening in the first place. Evaluate the current capacity of food scrap recycling infrastructure, community organizations and locations that could be suitable for community composting, food rescue partners positioned to rescue more food, the number of food rescue and last-mile food distribution organizations, and potential food donors. Also assess existing local policy related to food waste, as well as opportunities for updated or new policies such as increased liability protections for food donors or volume-based waste pricing for generators. You can then use the landscape assessment to create a streamlined list of strategy recommendations that will work best for your community.

As mentioned above, before diving into an organics recycling strategy, consider opportunities for food waste prevention. Not only does this have the greatest environmental benefits, but prevention solutions are also generally the most cost effective, since they often entail increasing operational efficiency. We suggest adopting a holistic approach to your food waste strategy budget, so that savings from waste reduction can be applied to recycling or rescue programs. For example, in Denver, the Solid Waste Management Division is implementing innovative, low-cost ways to integrate food waste prevention messaging into its general solid waste strategy. By doing this, the city is able to educate residents on how they can prevent food waste in their own households, thus decreasing the amount of overall waste going to landfill and municipal composting. This, in turn, may eventually lower solid waste collection costs for residents and the city.

Although there is no “one size fits all” solution to getting projects funded in cities, there are common strategies that many cities have successfully adopted. Cities can look to both internal and external mechanisms for funding, including general city funds, taxes and fees, municipal bonds, and innovative public–private partnership models. Some cities have created new revenue streams, such as charging for garbage pickup service, to increase funding for waste prevention efforts. Cities might also consider seeking funding through county and state grants or loans, philanthropic organizations, or other creative options.

Public-private partnership models

If you are exploring a public-private partnership, there are several considerations to keep in mind including:

  • Marketing material
  • Market risk
  • Who’s responsible for equipment replacement and future investment
  • Term length and return on investment
  • Workforce capability
  • Desired role for city department, looking toward the future

Public–private partnerships, can be more successful if:

  • all parties have status and legitimacy
  • pre-existing claims are recognized/respected
  • there is some overlap in competencies
  • all parties are transparent and accountable
  • the minimum needs of each party are met
  • the city has adequate capacity to conduct monitoring and evaluation
  • the private-sector partner has sufficient financial resources

Scoping a Food Scrap Recycling Financing Assessment

For many cities, diverting food scraps from the landfill through municipally managed curbside collection or community drop-off locations is a high priority. Collection of food scraps must be accompanied by sufficient organics processing capacity to be successful. That’s why, once your landscape evaluation has given you a better understanding of your city’s processing infrastructure needs, we suggest conducting a financing assessment, as was done in Denver and Baltimore. This will help you determine the types and levels of financing your city would need to carry out the desired strategies for expanding food scrap collection and processing. Many cities also do feasibility studies, which can be costly, but which offer in-depth information around the practicality of a proposed infrastructure plan (such as a transfer station for organic waste).

Whether a financing assessment is conducted in-house or by outside consultants, it is important to scope the assessment based on what projects are feasible and desirable for your community, as determined by the landscape assessment and by other pertinent city goals, plans, or needs. Consider including the following questions in the scope of your assessment (or answer them in advance of the assessment):

The scale of the operation

What type of organics recycling processing facility will work best to meet the needs of your community, now and in the future?

  • Do you want to commingle yard and food waste, or process them separately?
    • Is there existing yard waste collection infrastructure that could be repurposed to collect food scraps as well?
    • Is there existing organics processing that could be enhanced to add food scrap recycling?
  • Does your city want to build its own large-scale organics processing facility?
    • Do you have land available, or ideas for identifying land?
    • Is the necessary food scrap collection infrastructure in place, or should options for collection be added to the financing assessment?
  • Does your city have capacity to add food waste to a municipal or regional wastewater treatment plant or other form of anaerobic digestion?
  • Does your city transport organic waste to a larger regional processing facility, and would you need to build additional waste transfer stations to add capacity?

What is your preferred scale of project development?

  • Can you include small- and/or medium-scale community composting?
  • How much food waste do you estimate your city generates? Do you have short-, medium-, and long-term projections of generation?
  • What resources (time, funding, etc.) are you allocating to the preferred food waste strategies of prevention and rescue, and what are your projections for the amount of food removed from the waste stream from those efforts?
  • Do you want to focus on recovering commercial/institutional or residential food waste first? Or do you want to tackle both streams concurrently? This could be determined by several factors, including:
    • Unique challenges that each sector poses, such as existing policies on private hauler permitting or volume-based pricing
    • Cost effectiveness
    • Percentage of potential organics diversion from each sector

Use your answers to these questions to help “right-size” the estimated scale and specifics of the organics recycling infrastructure additions or expansions needed in your city.

Potential financing opportunities

After identifying your desired scale of operations and other needs, consider financing opportunities directly related to those parameters.

Include questions such as the following in the scope of your financing assessment:

  • What are the estimated costs and potential revenue streams related to new investments in large-scale food scrap recycling infrastructure?
  • What financing and funding mechanisms can support greater city-level investment in food scrap recycling?
  • What types of funding streams should be considered?
  • What types of funders/financers in the city could support this investment?
  • Are there opportunities to create innovative public–private partnerships?
  • Are there local, regional, or state funding opportunities? These could include:
    • Bonds (municipal, general obligation, etc.)
    • Millage/property taxes
    • Private sector capital
    • Economic development agencies
    • Grants
    • Loans
  • What cities have done something similar? Can you learn from how a neighboring county, city, or state has added or expanded organics recycling?

How Denver and Baltimore Conducted Food Scrap Recycling Financing Assessments

In Denver and Baltimore, we worked with Resource Recycling Systems (RRS) to conduct research on financing strategies for mid- to large-scale food scrap recycling. Through the landscape assessments conducted in each city, it became clear that Denver and Baltimore had different food scrap recycling infrastructure needs and opportunities, pointing to the need for city-specific financial assessments.

Denver’s Financing Assessment: A National Facilities Scan and Peer Case Studies

In Denver, officials were especially interested in learning about how other cities had successfully financed transfer stations or new compost processing facilities. Denver was exploring large-scale infrastructure projects to ramp up its existing compost collection program, and learning directly from other cities was a helpful step in understanding how feasible this would be. RRS conducted a financing assessment composed of the following:

A national scan of compost facilities. The RRS study provided an overview of innovative funding options for food scrap recycling, many of which could also apply to wasted food prevention, food rescue, and other interrelated community food system work. Some specific funding sources suggested in the report included:

Detailed case studies including three compost facilities that could serve as financing models for Denver. The case study research included a scan of contracts, capacity metrics, involved entities (public, private, or partnership), financing mechanisms, and overall costs. Key takeaways from the study included the following:

  • Permitting/overhead/operating costs vary by state and region.
  • There are some hurdles to overcome to generate revenue from organics processing alone including creation of end markets and local waste policy; potential sources of profit for a compost facility include sales of finished compost and tip fees.
  • The footprint of a compost facility should be large enough to store green waste and to include an area for mixing and blending material.
  • Site operators should be able to juggle material around as different feedstock becomes available; it is valuable to have access to a transfer station to sort and ship materials.

Denver officials were also interested in learning about different financing structures (including public–private partnership) for transfer station infrastructure as well as specific composting processes for processing facilities. Overall, the report recommended two types of composting processes for Denver in order to strike a balance between costs and the ability to process larger percentages of food waste.

  • Open windrow: This is often the most cost-effective processing option. However, it requires more land than other systems and typically limits the proportion of food scraps (as opposed to carbon-rich feedstock) to about 15 percent.
  • Aerated static pile: This option allows more food scrap–intensive processing but is considerably more expensive to build and operate. It requires less land than windrow systems.

Profiles of several community composting models and how each of those was funded and created. Small-scale composting operations and models analyzed included: demonstration and community leader training sites, worker-owned cooperatives, home-based or homesteader hubs, community gardens, school-based operations, drop-off networks, collection entrepreneurs, and farms. Funding for small-scale operations generally came from: private donors, university collaborations, grants, crowdsourcing, and loans.

Baltimore’s Financing Assessment: Facility Input, Siting, and Local Funding and Financing Options

In Baltimore, city staff wanted to explore the unique local conditions needed to build a new processing facility as well as bolster community composting. Since a residential compost collection program and a compost processing facility managed by the city did not yet exist, staff were particularly interested in two things: assessing the siting and construction of a new composting facility near Baltimore; and performing an available-properties assessment to determine various sites’ potential for composting activities at all scales.

In Baltimore, the financing assessment included:

An analysis of food scrap policies and initiatives and funding opportunities. After starting with an overview of different composting and digestion technologies and a capital and operating expense comparison of each, the report outlined recommended approaches for financing the construction of a new organics processing facility. As in Denver, the two recommended approaches to compost processing in Baltimore were open windrow and aerated static pile.

Next, the report reviewed specific local financing and funding options including private and public city-based regulatory models, public–private partnerships, and public ownership.

An evaluation of small-scale organics recycling options. The report profiled the effectiveness of different operational models and potential funding sources for a variety of small-scale self-managed and on-site organics recycling options. This section was similar to the small-scale organics section in the Denver report, which makes sense given that the potential partners and existing conditions in each city were also similar.

An assessment of the costs of establishing and scaling composting operations on specific sites owned by the city of Baltimore. The report mapped and profiled several city-owned sites identified as potential candidates for locating an organics processing facility and ranked those sites based on suitability for Baltimore’s needs and the quality/conditions of the land. The report also identified potential siting challenges, considerations regarding equity, and recommendations and next steps. Ranking of each site was based on the following considerations:

  • Land costs/current ownership (ex. 100% city-owned or co-owned)
  • Extraordinary site costs (foundation, site upkeep, etc.)
  • Stormwater permitting
  • Environmental permitting
  • Distance to groundwater
  • Distance from generation
  • Distance to market
  • Opportunity to co-locate with other infrastructure such as a transfer station or existing landfill
  • Potential for finished compost contamination based on existing site/land conditions or existing groundwater contamination
  • Interference with current site use

Important Considerations Regarding Equity

In addition to the above factors influencing site ranking, it was also a priority for Baltimore to explore considerations around equity. Composting presents an opportunity to support the local economy and neighborhoods when facilities hire from the community, living wages are paid, and workers have a right to organize. On the other hand, it is important to ensure that compost facility planning incorporate input from frontline communities historically underserved and disproportionately impacted by waste activities. These and other equity concerns should be a priority for all cities to consider when scoping potential sites for organics processing.

What About Funding Food Rescue?

While many cities are focused on financing food scrap recycling collection and processing infrastructure, it is also important to consider opportunities to fund activities higher on the food waste hierarchy, such as food rescue. Since food rescue is often funded philanthropically and is not typically revenue-generating, city involvement in food rescue efforts may need to rely on innovative funding sources as well as outside partnerships.

When building a food rescue strategy in your city, it is critically important to involve the food rescue community and its stakeholders, not only to inform such an effort but to help establish partnerships and create funding plans. Any successful city-level food rescue financing strategy will require robust community buy-in, ownership, and engagement.

When assessing food rescue funding with the input of local partners and stakeholders, we suggest that cities consider:

  • Investing in ongoing staffing and maintenance
  • Establishing funding streams and support systems to encourage food rescue–related social enterprise
  • Creating dedicated transportation services for rescued food
  • Offering financial incentives to encourage grocers or other large institutions to increase donation of particularly desirable types of food
  • Using a tax credit (or other fiscal incentive) for donation of specific food commodities (e.g., fruits and vegetables) or foods with particular origins (e.g., Colorado Proud products)
  • Making one-time investments such as grants to grocers or large institutions for setting up internal fresh food donation programs
  • Identifying potential resources for general operating costs and strategic investments (such as cold-storage infrastructure) for last-mile organizations
  • Exploring philanthropic and private sector funding opportunities
  • Establishing a revolving loan fund or social impact bond to incentivize innovation in for-profit or nonprofit food rescue

It may also be helpful to refer to existing case studies of organizations working to generate revenue to finance their food rescue or other food repurposing operations. In 2017, NRDC published several case studies highlighting examples from around the country, including:

Additional case studies can be found on the Food Matters website.

If your city or organization has an innovative approach to financing food waste prevention, food rescue, or food scrap recycling, we want to hear from you. To learn more about the RRS financing reports, please contact foodmatters@nrdc.org.