Each year all across northern Illinois, municipalities and other government agencies play a lottery. It’s not the kind of lottery that pays off in cash, though. In fact, even winners have to pay up. Just how much they pay, well, that’s the gamble.
The name of the game? Rock salt.
And in 2014, the game got goofy. Following a harsh winter, where communities were sent scrambling to find additional supplies for their streets, prices for salt are all over the map.
When the numbers came in to the towns in late summer, some were pleased and some were shocked.
Brookfield, for example, ordered 1,320 tons of salt for which it will pay the Detroit Salt Company $53.10 per ton. That’s the exact same price Brookfield paid for salt in 2013.
Things weren’t so rosy for North Riverside, which must pay the Morton Salt Company $74.21 per ton this year versus the $50.67 it paid in 2013. But that doesn’t even compare with Riverside, which — even though it ordered its salt at the same time as North Riverside and is receiving it from the same vendor — got socked with a bill of $109.21 per ton, a 122-percent increase compared to last year.
After spending about $30,000 for rock salt last year, Riverside — which also increased its order from 600 tons to 1,000 tons after last year’s brutal winter — will pay at least $109,000 for salt this winter.
Each March the state of Illinois’ Central Management Services accepts orders for rock salt for the following winter. If a municipality qualifies, it can renew its contract from the prior year. Or a municipality can put in an order with the CMS, which then puts the orders up for bid.
Brookfield renewed its 2013 contract, which allowed it to order up to 10 percent more salt and guaranteed the price would not be more than 5 percent higher. Next year, according to Brookfield Public Works Director Dan Kaup, the village won’t be eligible to renew and will face the gamble Riverside and North Riverside took this year.
Riverside Public Works Director Edward Bailey said he could have renewed last year’s contract, but chose not to. If Riverside faced another winter like last year’s, he feared the village would run out of salt for its roads.
“The biggest risk is you’re ordering the same amount as the year before,” said Bailey. “Is that going to be adequate for this year? If you run out, you’re done.”
That actually happened in Brookfield last year, said Kaup. After using up the village’s entire allotment, he had to buy another 140 tons from a company that bags salt for retail stores.
Once the CMS receives the orders, salt companies bid on them, naming the price the municipality must pay. Prices in 2014 have come in as high as $137.69 per ton; that’s what Schaumburg School District 54 is paying for the 300 tons it ordered.
But salt companies aren’t required to offer the same bid price to all customers they bid on. They don’t even have to bid on orders they don’t want.
As a result, more than 180 governmental agencies across Illinois didn’t even have their orders bid on by salt companies, leaving them to fend for themselves in the open market, where prices are typically higher.
Illinois municipalities last saw salt prices spike like this in 2008, after another very snowy winter. Also that year, no salt company made a bid for Brookfield’s order and the village was left to fend in the open market, where it paid four times as much for salt as it did in 2007.
With the Midwest getting socked with snow last year, salt companies’ supplies are lower. And because of last year’s winter some communities, like Riverside, are asking for more salt. Both of those factors have contributed to the higher prices.
“The harsh weather this past winter season depleted road salt supplies and created significant costs in production, sourcing, transportation and distribution, which is affecting prices this year,” said Denise Lauer, director of communications for the Morton Salt Company.
Matt Brown, chief procurement officer for the state of Illinois, said that while many factors contribute to the price of salt, the biggest one is supply. And right now, supplies are low.
“The number one factor to control price is whether or not the commodity is scarce,” said Brown. “If it is, there’s less opportunity to control [other contributing factors].”
As for why Riverside is paying so much compared to its neighbor to the north, even though both have the same supplier, Brown compared it to gasoline prices.
“It’s the same reason that when I went to Shell to fill up this morning it was $3.21 and then in the afternoon it was $3.87,” said Brown. “The product is so heavily commoditized that, per ton, there are an array of charges” that change constantly.
“The distributor gets to a point where the numbers converge and he says, ‘Here is the point where the price of salt changes,'” said Brown.