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HomeMy WebLinkAboutWD-98-86TOWN OF NEWCASTLE REPORT File # . Res. # By -Law # MEETING: THE GENERAL PURPOSE AND ADMINISTRATION COMMITTEE nAW DECEMBER 15, 1986. REPORT #: WD -98 -86 SU&JECT: RECYCLING RECOMMENDATIONS: FILE #: It is respectfully recommended: That the recommendations of the Area Municipalities' Joint Staff Response to the Regional Proposal on Recycling, be endorsed. ...2 Page 2 Report No. WD -98 -86 Background: On September 8, 1986, Council referred correspondence Item D -2 from the Region of Durham to Public Works for a report. In the summer, a series of meetings had been initiated, including Region staff and Public Works representatives of the area municipalities to discuss the future of recycling in the Region of Durham and the possible cost sharing arrangements involving local and regional governments. Report: The Public Works Officials from the area municipalities have co- authored a joint report outlining their recommended action. The Area Municipalities' Joint Staff Response to the Regional Proposal on Recycling is attached hereto. The Region is requesting that the area municipalities agree to cost share a joint Region of Durham /Durham Recycling Centre/ Region wide recycling program "for at least a five year period and preferably ten years ". The "Area Municipalities' Joint Staff Response to the Regional Proposal on Recycling" suggests that some of the assumptions incorporated in the financial forecasting of the proposed recycling program are suspect and that the financial viability of the proposal is very sensitive to the accuracy of assumptions used. Due to concerns such as the security, financial and otherwise, of future markets for recyclables and the large capital investment required on behalf of the Region, it was the concensus of the area municipality Public Works Officials that an alternative program be considered whereby the capital investment and risk related to such items as fluctuating markets would be minimized. ...3 Page 3 Report No. WD -98 -86 Recommendation No. 2 suggests that a publicly tendered contract would offer these advantages: Although it is more costly, at least for the short term, to participate in recycling, there would appear to be moral and philosophical resasons to recycle. The aspect of making it possible for the public to participate in addressing the dilemma of waste disposal which will be facing most Canadians in the near future perhaps justifies the popularity of the recycling concept. It is interesting to note that for now, the choice of a method of waste disposal is landfill due to economic reasons, where perhaps such alternatives as energy from waste and incineration seem to make sense. On the other hand, the choice seems to be to recycle because it makes sense even if economically it is a losing proposition. The coice of whether or not to participate in a recycling program should rest with each municipal Council. It is suggested that the choice is more clearly the area municipality's if the recycling program is not a regionally operated program. Some disadvantages that should be considered related to a decision to reject the Region's proposal are seen as follows: - It may result in effectively putting Durham Recycling Centre Inc., out of business after having been the driving force behind the establishing of recycling in Durham Region; Iii Page 4 Report No. WD -98 -86 - If Durham Recycling Centre Inc., choses to cease operation prior to a private contract having been implemented, there may be a period of interuption in the recycling service offered to the public; - Some Ministry of the Environment funding available to municipalities for recycling may be lost. - If the key assumptions made in the financial forecasting of the Durham Region /Durham Recycling Centre Inc. program prove to be accurate, it could happen that it will cost as much or more to recycle by contract than it would have with Durham Recycling Centre Inc. - There may well be more local municipal staff time required to set up and co- ordinate a private program than the Regional proposal. The question of how to proceed with recycling in the Region of Durham (i.e. Regional or private) is not a simple one. As outlined above, there would appear to be advantages, disadvantages, and unknowns related to both proposals. As well, there would appear to be some pressure for a commitment as soon as possible to the Region's proposal related to some possible timing related funding arrangements through the Ministry of the Environment. Also, the problems being experienced by Durham Recycling Centre Inc., with respect to their present accomodations are becoming more urgent every month. ....5 Page 5 Report No. WD -98 -86 Notwithstanding the above mentioned disadvantages, it is recommended that the recommendations of the Area Municipalities' Joint Staff Response to -the Regional Proposal on Recycling, attached, be endorsed. Respectfully submitted, Gordon J. Ough, P. Eng., Director of Public Works. GJO:jco December 8, 1986. Recommended for presentation to the Committee Lawrenc�/ Kotseff, Chief Adm istrative Officer. 1986 12 04 AREA MUNICIPALITIES' JOINT STAFF RESPONSE TO THE REGIONAL PROPOSAL ON RECYCLING RECOMMENDATION 1. That the Area Municipalities continue to support and participate in recycling collection programs with the knowledge that for many years it may be more costly than conventional means of refuse disposal. 2. That, accepting the probable higher cost for recycling over the conventional means of refuse disposal, the Area Municipalities only participate in an expanded recycling program on a basis by which the costs, except for inflation and population growth, can be known in advance, and to ,achieve_ this, that the program be undertaken on a publicly tendered contract basis. 3. That a joint area -wide recycling collection program be developed by those Area Municipalities wishing to participate with a view to a commencement date in early 1988. 4. That the Region of Durham be requested to contribute as a diversion credit to the participating Area Municipalities, 50 per cent of the prevailing tipping fee for the tonnage collected under the program in each of the respective municipalities. 5. That the Area Municipalities approach the Ministry of the Environment to determine the eligible funding for an area -wide project under the Ministry's Municipal Recycling Support Program. 6. That a copy of each Area Municipality's action on this Report and a copy of this Report be forwarded to the Regional Municipality of Durham. REPORT Introduction The principles of removing reuseable materials from the waste stream has been in effect for many years, particularly in the European countries and, recently, is gaining momentum on this continent. The increasing problem in finding suitable and acceptable lands which are available for waste disposal, particularly in highly urbanized centres, has caused environmentalists to seriously address the issue of recycling. Society is becoming increasing cognizant of the long term problems created by waste disposal, the wastage of resources and energy and, most importantly, the lands required to accommodate the burial of wastes. A few years ago, most recycling in Ontario was undertaken on a voluntary basis and gradually these programs ,are evolving into municipally recognized operations. The Province of Ontario initiated some years ago incentives to the recycling programs by providing funding to the individual organizations involved in such programs. However, as is often the case, these programs are initiated and when the funding is removed, the -municipalities are left with the decision as to whether to continue or not and, if the alternative, to bear the costs. PY IWAZ Today recycling has also become a household word and municipalities are being Increasingly pressured into implementing a recycling component in their refuse collection and disposal service. Environmental control has become a highly sensitive issue. The Area Municipalities of the Region of Durham now find themselves at this stage. It is extremely difficult to support on the basis of economics, the merits of recycling for the Durham Region. However, keeping in mind the long term need to conserve lands for other than landfill disposal and, most importantly, the environmental interest and involvement by the public in recycling and the general sensitivity relating to the development of landfill sites, the matter of recycling is here to stay and therefore it is incumbent upon the municipal government to initiate and maintain a recycling program. However, it is equally incumbent for government to maintain a recycling program which is the most economical and which meets the individual needs of each of the Area Municipalities. Because of the _uncertainty of the long term costs of recycling programs, it is essential that the capital investment and therefore the long term risk be closely scrutinized. Durham Recycling Centre Inc. Recycling in the area first began in 1976 when a group of volunteers established a drop - off depot in the Oshawa Centre parking lot. Due to the perseverance and enthusiasm of these volunteers, combined with other interested members of the public, interest in this recycling concept steadily increased. In 1980, Durham Recycling moved to their present facilities at 711 Wilson Road South, k y# Oshawa. In the summer of 1980, they embarked on a pilot newspaper collection program within the City of Oshawa and, in 1981, a weekly newspaper collection program was permanently initiated and within three years had expanded to include all residential properties within the City, other than apartment and townhouse developments. In early 1985, a similar volunteer group initiated a newspaper collection program in Pickering and, in the summer of 1985, amalgamated with Durham Recycling. A curbside collection program of newspaper, glass and cans was commenced in the Town of Ajax this past summer. In 1984, the Town of Whitby commenced a pilot program of curbside collection being undertaken using municipal staff. This recycling collection program has now been assumed by Durham Recycling, and it is intended to cover the entire urbanized section of the Town. In the area municipality of Newcastle, Durham Recycling is providing curbside ,collection of newspapers in Bowmanville and service drop -off depots in the villages of Orono, Newcastle and Hampton. The Durham Recycling Centre handles all of the above recyclable material from their facilities at Wilson Road South. Their warehouse facility is approximately 3,500 sq. ft. in area and does not have sufficient space for a proper recycling facility. In addition, the design of the building does not lend itself to an efficient operation. There is no question that if Durham Recycling is to meet the recycling needs of all of the Area Municipalities, their facilities must be increased and be of a design that can create an efficient operation. i (0� -3- The funding for the Durham Recycling is presently derived from Ministry of the Environment subsidy, diversion credits from the Area Municipalities and recovery from the sale of recycled materials. This past year, the Area Municipalities and the Region have made direct grants to Durham Recycling to offset their operating deficits. A point that should not be overlooked is the voluntary help which members of the community have provided to the Durham Recycling which in itself is probably the greatest contributing factor to the initial success of the Centre. Durham Recycling Centre Inc. is now a non - profit organization with a staff of fifteen and five trucks. Region of Durham's Waste Management Stud In October of 1984, Council - adopted a resolution which provided that the firm of MacLaren Engineers be retained to undertake a study with respect to the "medium and long term strategies for disposal of solid waste in the Region ". In May of 1985, MacLaren presented a final report entitled "Waste Management Study - The Regional Municipality of Durham ". In addressing the recommendations of the MacLaren Report, Regional Council adopted the following recommendation on July 3, 1985, regarding recycling and source separation: "a) THAT in order to reduce the volume of waste presently being landfilled, recycling become a prime component of the Region's Waste Management Program; b) THAT the Ministry of the Environment be approached to determine the funding available to the Region under their Source Separation Program; c) THAT all area municipalities be encouraged to provide multi - material source separation programs in order to reduce the volume of waste requiring disposal; d) THAT the area municipalities be requested to continue to provide recycling collection programs; e) THAT the Director of Operations assume resonsibility as the Regional Recycling Co- ordinator on an interim basis; f) THAT since the area municipalities will receive a financial benefit as a result of lower waste volumes collected and lower payment for the use of landfill sites, they be encouraged to share these savings with the recycling operator in the form of diversion credit; g) THAT in order to make recycling a financially viable operation, the concept of the Region providing financial assistance in the form of a diversion credit be endorsed; h) THAT authorization be given to negotiate with Durham Recycling Centre Inc. for a long term agreement to provide a centralized processing, marketing and promotional service for a Region -wide recycling program." -4- On October 9, 1985, Regional Council approved a further motion as follows: "a) THAT the area municipalities in the Region currently involved in recycling be requested to provide a commitment to market recovered materials through the Durham Recycling Centre; b) THAT in order to provide a market for recycled materials, the area municipalities and the Region be encouraged to investigate the purchase of materials manufactured from recycled material; c) THAT the Region fund 40% of any operating loss experienced by the Durham Recycling Centre for the period October 1, 1985 to March 31, 1986 for operations in the City of Oshawa to an upper limit of $10,000.00; and, d) THAT Works staff investigate and report on the feasibility of the vacant CLOCA building at 100 Whiting Avenue and other sites being renovated ' Jh for use by the Durham Recycling Centre. The report to include an estimate of cost and whether provincial and /or federal funding is available." On April 23, 1986, Regional Council adopted the following resolutions: "THAT the Region of Durham make application to the Ministry of the Environment for a grant for a proposed recycling depot." and "THAT the current arrangement for payment of 40% of the operating losses of the Durham Recycling Centre for their operations in the City of Oshawa which expired on March 31, 1986 be continued for the balance of 1986." Regional Proposal - Recycling and new Facilities for Durham Recycling On July 16, 1986, Regional staff presented to Regional Council a report entitled "The Financial Implications of Purchasing or Leasing New Facilities for Durham Recycling Inc." Regional Council adopted the following recommendations, as contained in the referenced Report: "a) THAT the matter of purchasing or leasing a new facility for Durham Recycling Centre Inc. be referred to the Waste Disposal Study Group for a report in conjunction with the 1987 Annual Review of the Financing and Operations of the Solid Waste Disposal System in order to investigate alternative sources of financing for presentation to Council in September; b) THAT a copy of joint Report #86 -60 of the Commissioner of Finance, #146 -86 of the Commissioner of Works be forwarded to each area municipality for review and comments pertaining to the cost sharing of the projected operating deficits for Durham Recycling Centre Inc. (D.R.C.I.) and that each municipality respond by way of Council resolution; c) d) - 5 - THAT staff of the Works Department be granted the authority to negotiate with the area municipalities to determine a possible cost sharing arrangement; and, THAT staff proceed with invitational bids to allow for this information to be available at the time the report is prepared in September." Subsequent to the adoption of the above resolution, Regional staff prepared a draft proposal which would set forth a cost sharing arrangement between the Region and the Area Municipalities. A copy of this proposal is appended as Attachment No. 1 to this Report. In brief form, the Region's proposal is as follows: 1) The Region would _be_ the control co- ordinating body for recycling. 2) The Durham Recycling Centre would act as the recycling operator. 3) The Area Municipalities would become active participants. 4) The Region would provide the capital funding relating to the provision of new facilities for Durham Recycling (estimated at $600,000) and household containers for the purpose of curbside collection (estimated at $363,600). 5) The Region would fund the annual operating deficits for Durham Recycling. 6) The Area Municipalities would pay to the Region the equivalent amount of the tipping fee per tonne based upon the tonnage collected and processed by Durham Recycling. 7) Any surplus in total revenues over total operating costs at year end would be credited to the Area Municipalities and, conversely, any deficit would be paid by the Area Municipalities. The Region's analysis of the recycling operation indicated that the program, based on assumptions made by Durham Recycling and Regional staff, would operate at a surplus in each year of the five -year projections. This projection is shown in Table 1 below and, over the five -year period, shows an accumulated surplus of $271,921. The revenues are diversion fees paid by the Area Municipalities equivalent to the gate price which would be paid if the material was taken to the Regional landfill site. TABLE 1 Annual Accum. Operating Container Building Total Surplus Surplus Year Deficits Costs Costs Costs Revenues (Deficit) (Deficit) 1 $ 0 $ 95,923 $ 97,650 $ 193,573 $ 207,371 $ 13,798 $ 13,798 2 0 95,923 97,650 193,573 255,981 62,408 76,206 3 49,115 95,923 97,650 242,688 312,425 69,737 145,943 4 150,964 95,923 97,650 344,537 377,815 33,278 179,221 5 167,056 95,923 97,650 360,629 453,329 92,700 271,921 Total $ 367,135 $479,615 $488,250 $1,335,000 $1,606,921 $ 271,921 t -6- There was no consultation with the Area Municipalities' staff before adoption of the assumptions. Comments of Area Municipalities on Region's Proposal As the "Region Proposal" affected all of the Area Municipalities, representatives of these lower tier municipalities held meetings with Regional staff and likewise arranged a meeting with several of the larger waste systems contractors. At the meeting with the Regional representatives, the Area Municipalities' staff expressed major concerns with the validity of some of the assumptions. The Region was requested to undertake a new five -year projection based on alternatives to three of their original assumptions, as follows: 1) The labour rate was increased from the original $8.85 /hour to $12.35 /hour, which represents prevailing Union rates. 2) The employee benefits were increased from 18 per cent to 24 per cent of gross wage. 3) The floor price of newspaper was reduced from $55 /tonne to $50 /tonne. The revised five -year projection of the proposed Regional recycling operation, using the three aforementioned alternative assumptions, is shown in Table 2. TABLE 2 In comparing the two scenarios (Table 1 vs. Table 2), it shows a net difference in operating costs of $1,334,797. Projections of the cost of a recycling operation are affected by many variables that are difficult to predict and the large variance in the above projections lends credibility to this fact. There are several major concerns which the Area Municipality representatives feel are fundamental to the decision being recommended by the Region. (i) The construction of a recycling facility from public funds is a large investment and the financial risk in such an undertaking is high because of the number of unknown variables. A comparison of Table 1 vs. Table 2 illustrates this point. Annual Accum. Operating Container Building Total Surplus Surplus Year Deficits Costs Costs Costs Revenues (Deficit) (Deficit) 1 $ 44,637 $ 95,923 $ 97,650 $ 238,210 $ 207,371 $ (30,839) $ (30,839) 2 117,305 95,923 97,650 310,878 255,981 (54,897) (85,736) 3 341,654 95,923 97,650 535,227 312,425 (222,802) (308,538) 4 571,240 95,923 97,650 764,813 377,815 (386,998) (695,536) 5 627,096 95,923 97,650 820,669 453,329 (367,340) (1,062,876) Total $1,701,932 $479,615 $488,250 $2,669,797 $1,606,921 $(1,062,876) In comparing the two scenarios (Table 1 vs. Table 2), it shows a net difference in operating costs of $1,334,797. Projections of the cost of a recycling operation are affected by many variables that are difficult to predict and the large variance in the above projections lends credibility to this fact. There are several major concerns which the Area Municipality representatives feel are fundamental to the decision being recommended by the Region. (i) The construction of a recycling facility from public funds is a large investment and the financial risk in such an undertaking is high because of the number of unknown variables. A comparison of Table 1 vs. Table 2 illustrates this point. - 7 - (ii) Once a Regional recycling facility is constructed and a Regional operation is in place, all of the municipalities would be committed to the costs of such a system for an indeterminate time. Although the Region has requested a commitment for only five years, at the end of that time, the system would be entrenched and would be difficult to disband. (iii) The analysis by the Region did not address the cost of purchasing a new, larger baler which would be highly desirable for a more efficient processing operation. This type of baler could cost approximately $500,000. There may be other expenditures which have similarly been overlooked in the Region's analysis. (iv) The Region's financial analysis is based on assumptions which are very fundamental to the viability of their recommendation, but yet are extremely difficult to substantiate. For example, with the legislation on aluminium cans scheduled for enactment in the fall of 1987, it was assumed that within a four -year period from 1988 to 1991, a total of 540 tonnes of aluminium will be derived at a market price of `a $990 /tonne. This assumption results in a revenue $5349600. However, if a deposit on such cans were instituted, the volume set out for recycling could drastically change. It should be further noted that recycling contractors for other municipalities are not allowing for such revenue in their contract financing. (v) The Ministry of the Environment's subsidy would extend for different periods for each municipality, but all subsidy would end by the end of the fifth year. The sixth year of operation would be. non- subsidizable. (vi) Durham Recycling would be, in essence, a public- funded, operating department and answerable only to the Region but funded by the Area Municipalities. It is our belief that, at this stage in the development of recycling programs, it would be preferable to deal in fixed price contracts and that capital expenditures be avoided. (vii) The operation of a recycling program is directly related to the curbside collection of municipal refuse and it is our view that such a program should be under the control ;q r of the Area Municipalities. The Regional proposal could be looked upon as a first step for the Region to assume services which are under the jurisdiction of the Area Municipalities. Area Municipalities' Proposal 1) That the Area Municipalities continue to fully endorse and participate in recycling programs with the knowledge that for many years it may be more costly than the conventional means of refuse disposal. 2) That, based on the assumption that elected representatives of the Area Municipalities wish to continue in recycling, at a probable higher cost for recycling over the conventional means of refuse disposal, the Area Municipalities only participate in an expanded recycling program on a basis by which the costs, except for inflaton and population growth, can be known in advance. To achieve this, the program should be undertaken on a publicly tendered contract basis. It is suggested that such a contract be on a five -year term with a tentative commencement date of 1988. There are three main reasons for recommending a public tendering procedure. A fully competitive quotation for the recycling program will be achieved, the total - 8 - actual costs of the program will be easily identifiable, and there will be minimum risk to the municipalities without long term capital investment. Because the Region consists of both urban and rural- oriented type municipalities, the tender should, in all likelihood, specify curbside collection in the urban areas and drop -off depots in the rural areas. During the fifth year of the contract, the Area Municipalities could then review and evaluate the recycling program and bring forward any further recommendations prior to retendering. 3) That the Region be requested to contribute as a diversion credit to the Area Municipalities, a percentage of the prevailing tipping fee for the tonnage collected under the program in each of the respective municipalities. As a result of an expanded recycling collection program, there will be a reduction in the tonnage of waste which would otherwise be placed in the Region's sanitary landfill site. Because of this reduction, the life of the landfill site is extended, which is a benefit to the Region in deferment of higher landfill costs in the future. In view of this, the Region should recognize this benefit in a tangible way, which would also serve as an incentive for the Area Municipalities to provide and undertake a more extensive recycling program. It is realized that a reduction in the waste tonnage through the recycling programs does not necessarily mean a corresponding equal reduction in operating expenses of the landfill site, therefore 50 per cent of the prevailing tipping fee is recommended. 4) That the Area Municipalities approach the Ministry of the Environment to determine the eligible funding for an area -wide project under the Ministry's Municipal Recycling Support Program. The Ministry of the Environment has allocated funds to support the various recycling programs throughout the Province. The funding is used to offset the operating losses experienced on any eligible recycling project, and further, to assist in specific capital outlay costs associated with the program. The funding available is limited. Some of the agencies within the Region have been granted such funding and are presently at different years in the Ministry's five -year funding assistance program. It would be the Area Municipalities intention to make application for any eligible funding which might be available. It is realized that the number of years for which Area Municipalities would receive subsidy will vary. - 9 - Respectfully submitted, i F. J. Hull, P. Eng. Director of Works Town of Ajax k G. ugh, P. 94g. Director of Public Works Town of Newcastle R. . H u chi -mso� Director of Public Works Town of Pickering R. G. Kester Administrator - Treasurer Township of Uxbridge U/ 60 G. S. Grah .C.T., C.M.C. Clerk- Administrator Township of Brock F. E. Crome, P. Eng. Commissioner of Works City of Oshawa uddie, A.M.C.T., C, M. C. Clerk- Administrator Township of Scugog R. A. uwahara, P. Eng. Director of Public Works Town of Whitby n777))) DURHAM The Regional Municipality of Durham Finance Department Durham Towers, BO Bond Street West, P.O. Box 818, Oshawa, Ontario Canada, Lt H 888 (418) 571.3311 J. L GARTLEY, C.M.A. Commissioner of Finance and Treasurer September 16, 1986. Mr. F. Crome Commissioner of Works City of Oshawa 50 Centre Street South Oshawa, Ontario L1H 3Z7 Dear Sir: RE: New Facilities for Durham Recycling ATTACHMENT NO. 1 1 y SEP 1 71986 PUBLIC WORKS CITY OF OSHAWA Further to our meeting of August 27, 1986 with respect to recycling activities within the Region, staff of the Region have prepared a draft proposal which sets forth a cost sharing arrangement between-the Region and the area municipalities. This proposal encompasses many of the concerns expressed at the meeting and represents what we believe to be a fair and equitable means of sharing the costs associated with a Region -wide recycling program. The draft proposal is based on two main elements: 1) The Region will act as the central coordinating body for municipal involvement and as such will be responsible for all recycling costs. 2) This program will be funded through a diversion fee paid by the area municipalities and not to exceed the prevailing gate price charged at Regional landfill sites. Also attached is a status report presented to Council by -the Works and Finance Committees on September 20, 1986. As indicated in the report, it is anticipated that a final proposal will be presented to Regional Council in late October. In light of this timetable, we wish to convene a second staff meeting of the area municipalities and the Region to discuss our proposal in order to arrive at a mutually agreeable cost sharing arrangement which could be presented to our respective Councils. A meeting has been scheduled for 1:30 p.m., Tuesday, September 23, 1986, in the Works Department Boardroom, 105 Consumers Drive, Whitby. Once again, any additional staff members you may wish to have attend would be most welcome. - 2 - In preparation for this meeting, I am forwarding to you a brief report outlining the proposed cost sharing arrangement. This report incorporates the financial analysis distributed at the last meeting with the exception of slightly revised debt charges associated with the new facilities and curbside containers. I thank you in advance for your kind consideration. Should you wish to discuss any aspect of the proposal prior to the meeting, please contact myself or Mr. J.R. McCorkell of the Region's Works Department. Yours truly, G.A. Paterson, Director of Admin. & Financial Services PNR:vw Encl. c.c. J.L. Gartley W.A. Twelvetrees J.R. McCorkell 1. INTR 1.1 1.2 2. COST 2.1 2.2 2.3 2.4 TABLE OF CONTENTS THE OPERATION AND CAPITAL EXPENDITURES OF DURHAM RECYCLING CENTRE INC. PROPOSED COST SHARING ARRANGEMENTS BETWEEN THE REGION OF DURHAM AND AREA MUNICIPALITIES tj/-�''() Page No. 3DUCTION July 16, 1986 Regional Report ......................... 1 Region's Commitment to Recycling ...................... 1 SHARING ARRANGEMENT Cost Sharing Proposal .. ............................... 2 Costs of Proposal ...... ............................... 3 Diversion Fee Revenues . ............................... 4 Excess of Revenues Over Costs ......................... 4 `W 3. CENTRALIZED APPROACH 3.1 Rationale .............. ............................... 5 3.2 Need For Region -Wide Program .......................... 6 4. CONCLUSION .................... ............................... 6 I. INTRODUCTION 1.1 July 1986 Report On July 16, 1986, staff of the Regional Works and Finance Departments presented to Council Report No. 86 -60 (Finance)/ 146 -86 (Works) regarding The Financial Implications of Purchasin or Leasing New Facilities or urham Recycling Inc. his report detailed current recycling practices in the Region; Regional involvement in recycling; grant programs offered by the Ministry of the Environment; history of Durham Recycling Centre Inc. (D.R.C.I.); projected five year operating deficits of D.R.C.I.; and, financing alternatives of new facilities for D.R.C.I. After much discussion, Regional Council adopted the following recommendations contained in that report: "a) THAT the matter of purchasing or leasing a new facility for Durham Recycling Centre Inc. be referred to the Waste Disposal Study Group for a report in conjunction with the 1987 Annual Review of the Financing and Operations of the Solid Waste Disposal System in order to investigate alternative sources of financing for presentation to Council in September; b) THAT a copy of joint Report #86 -60 of the Commissioner of Finance, #146 -86 of the Commissioner of Works be forwarded to each area municipality for review and comments pertaining to the cost sharing of the projected operating deficits for Durham Recycling Centre Inc. (D.R.C.I.) and that each municipality respond by way of Council resolution; c) THAT staff of the Works Department be granted the authority to negotiate with the area municipalities to determine a possible cost sharing arrangement; and, d) THAT staff proceed with invitational bids to allow for this information to be available at the time the report is prepared in September." 1.2 Region's Commitment to Recycling In the past two years, Regional Council has generally accepted the general concept of "recycling" within the Region and on several occasions has committed itself to increased financial involvement. In May of 1985, Council adopted a series of resolutions regarding waste management as recommended by MacLaren Engineers. The cornerstone of these recommendations was that "recycling become a prime component of the Region's Waste Management Program ", and that "all area municipalities be encouraged to provide multi - material source separation programs in order to reduce the volume of waste requiring disposal ". - 2 - I. INTRODUCTION, cont'd 1.2 Region's Commitment to Recycling, cont'd An integral part of these and subsequent recommendations has been the endorsement by Council of Durham Recycling Centre Inc. as the principal agent in the Region to provide "a centralized processing, marketing and promotional service for a Region -wide recycling program ". Consequently, the Region has assisted in searching for new facilities, and providing payment of 40% of the operating losses incurred by D.R.C.I. for their operations in the City of Oshawa. 2. COST SHARING ARRANGEMENT BETWEEN REGION AND AREA MUNICIPALITIES 2.1 Cost Sharing Proposal The following is proposed by the Region for consideration by the respective area municipalities for administering recycling activities and sharing of the estimated costs. 1) The Regional Municipality of Durham, Durham Recycling Centre Inc., and the eight area municipalities enter into agreements which designate the following roles in a Region -wide recycling program: a) The Regional Municipality of Durham act as the central coordinating body for administration and handling of recycling activities within the Region; b) Durham Recycling Centre Inc. act as the recycling operator in the Region of Durham for recycling programs involving the Region and /or the area municipalities; c) The area municipalities become active participants through a cost sharing arrangement with the Region and D.R.C.I. 2) The Region agrees to provide the funding for the following costs related to recycling within the Region: a) annual operating deficits of Durham Recycling Centre Inc.; b) capital costs and /or resulting debt charges related to the provision of new facilities for D.R.C.I.; c) capital costs and /or resulting debt charges related to the provision of household containers for the purpose of curbside collection of multi - materials (glass, paper, tin and aluminum). ` 3) All costs incurred by the Region will be recovered through a diversion fee paid by the area municipalities and based upon tonnes collected and processed by Durham Recycling Centre Inc. The diversion fee is not to exceed the prevailing gate price per tonne charged by the Reainn at itc lanHfill zitac WIE Lff 2. COST SHARING ARRANGEMENT BETWEEN REGION AND AREA MUNICIPALITIES, cont'd • 2.1 Cost Sharing Proposal, cont'd 4) Any surplus of total revenues over total costs will be credited to the area municipalities at the end of the fiscal year based on adjusted diversion fees for the next fiscal year. Conversely, any deficit of total revenues over total costs will be charged to the area municipalities at the end of the fiscal year based on adjusted diversion.fees for the next fiscal year, assuming these fees do not exceed the prevailing gate price per tonne charged by the Region at its landfill sites. Any shortfall in funds will be recovered by the Region from the area municipalities through the Region's General Levy Requisition. 2.2 Costs of Proposal As the central coordinating body, it is recommended that the costs of operating a curbside collection program be borne by the Region (refer to Schedule 1). These costs can be grouped into three main categories: 1) Operating Deficits of D.R.C.I. - The regional /municipal shares of the operating de kits after M.O.E. funding are estimated as follows: Year 1 $ 0 Year 2 0 Year 3 49,115 Year 4 150,964 Year 5 167,056 Total $367,135 These deficits are based upon recovering about 10% of the solid waste collected in urban areas and about 4% in rural areas in Year 1. From Years 2 to 5, these recovery rates have been conservatively increased by 1 %. 2) Curbside Container Costs - The capital costs of purchasing sufficient containers to implement a Region -wide curbside collection program are estimated to be about $363,625. Should the cost be spread over a five year period, annual debt charges of $95,923 would result (10% rate of interest). M - 4 - 2. COST SHARING ARRANGEMENT BETWEEN REGION AND AREA MUNICIPALITIES, cont' 2.2 Costs of Proposal, cont'd. 3) Cost of New Facilities - From preliminary analysis of the invitational bids, the cost of the new facilities has increased from previous estimates of approximately $500,000 (net of $50,000 Provincial grants) to about $600,000 (exclusive of land costs). Annual debt charges for this revised capital requirement of $600,000 will approximate $97,650 (10% rate of interest for a term of ten years). It is estimated that the total costs to be borne by the Region over a five year period are as follows: Year 1 $ 193,573 Year 2 193,573 Year 3 242,688 Year 4 344,537 Year 5 360,629 Total $1,335,000 2.3 Diversion Fee Revenues j From a Regional perspective, a new recycling processing facility located in Durham is viewed as an alternative method to landfill sites for the disposal of solid waste. The centralized recycling proposal is contingent upon the assumption that individual area municipalities would pay a diversion fee for recyclable waste entering a recycling facility up to a maximum of the prevailing gate price per tonne charged at the Region's landfill site. This assumption is based on the premise that the area municipality would incur this cost without a recycling program. The revenue projections for the recycling operations are based upon the Region charging the prevailing gate price at its landfill sites (currently $17.21 per tonne in 1986) for all solid waste diverted to the recycling facility. The following table outlines the estimated revenues generated by Durham Recycling Inc. for the period 1987 -1991 assuming a 5% annual increase in the diversion fee: Recycled Total Year Tonnes Rate Revenue 1 11,476 $18.06 /tonne $207,371 2 13,494 18.97 255,981 3 15,684 19.92 312,425 4 18,060 20.92 377,815 5 20,634 21.97 453,329 min 2. COST SHARING ARRANGEMENT BETWEEN REGION AND AREA MUNICIPALITIES, cont'd. 2.4 Excess of Revenues Over Costs Given the estimates of costs and revenues over the five year period, it is clearly evident that a diversion fee equal to the prevailing gate price at the landfill site would more than exceed the associated costs. Over the five year period, it is estimated that a surplus of $271,921 will accumulate. Annual Accun. Operating Container Building Total Surplus Surplus Year Deficits Costs Costs Costs Revenues (Deficit) (Deficit) 1 0 95,923 97,650 193,573 207,371 13,798 13,798 2 0 95,923 97,650 193,573 255,981 62,408 76,206 3 49,115 95,923 97,650 242,688 312,425 69,737 145,943 4 150,964 95,923 97,650 344,537 377,815 33,278 179,221 5 167,056 95,923 97,650 360,629 453,329 92,700 271,921 TOTAL $367,135 $479,615 $488,250 $1,335,000 $1,606,921 $271,921 NOTES: (1) Refer to Section 2.1 regarding funding of annual surpluses and deficits. (2) The above analysis assumes that both Ajax and Pickering will pay the prevailing gate price per tonne for all diverted recyclable material (in Year 1, Pickering recovery is estimated at 1,920 tonnes and Ajax recovery at 1,260). 3. CENTRALIZED APPROACH 3.1 Rationale Over the past several years, Regional Council has committed itself to the concept of recycling and has included it as an integral part of its overall Waste Management Program. This commitment is based on the belief that diversion of recyclable material from solid waste entering landfill sites will prolong the life of the existing sites. Other municipal governments have recently experienced recovery rates ranging from 10% - 15% of landfill volumes. Given that the Region's commitment is to the concept of recycling as a viable alternative to landfill disposal, an administratively practical program must be established to provide curbside collection of recyclable materials across the eight area municipalities within the Region to coordinate the following facets: 1) liaison between the recycling operator and the eight area municipalities 2) administration of provincial funding programs 3) collection of diversion fees 4) nrmmotinn and education 3. CENTRALIZED APPROACH, cont'd 3.1 Rationale, cont'd 6) provision and funding of centralized processing facilities 7) financing of operating deficits of the recycling operator. The administration of these responsibilities can most effectively be accomplished through a central agency rather than on a municipality -by- municipality basis. It is proposed that the Region assume these responsibilities. In addition, this type of arrangement is preferred by the Ministry of the Environment and has been successfully implemented in the Region of Halton. Should this program not proceed on a centralized coordinated basis but rather on a municipality -by- municipality basis, then each municipality would be responsible for securing Provincial grants, entering into contracts with the recycling operator and the Region, funding and distributing curbside containers, promotion, and paying their share of the operator's operating deficits. From the perspective of both the recycling operator and the Province, dealing with eight separate municipalities would be cumbersome. 3.2 Need for Region -Wide Program The cost and revenue projections included in this report are based on the assumption that a Region -wide program of curbside collection is instituted in all residential areas that currently receive weekly collection of refuse. Certain economies of scale are achieved by including all these areas. Should one or more municipalities decide not to participate in the recycling program, the costs of collection and processing may vary for the remaining municipalities. 4. CONCLUSION It is imperative that the Region and into a commitment for recycling with Council resolutions which approve an arrangement for at least a five year This is necessary to establish a suci arrange for appropriate financing. the area municipalities enter Durham Recycling Inc. through agreed upon cost sharing period and preferably ten years. :essful recycling program and to The recommended cost sharing proposal provides the following advantages based on the foregoing assumptions and analysis: 1) There should be no impact upon budgets of the area municipalities except noted above for Pickering and Ajax (Section 2.4). 2) There will be minimal budget impact to the Region other than increased administrative costs. 3) The approximate $1.1 million capital expenditures will be self- sustaining through diversion fee revenues. 4) The coordination by the Region will provide an efficient and effective administration of the recycling program. 7i:�i jvl__� rya September 10, 1986 /September 16, 1986 TO: The Finance and Works Committees FROM: J.L. Gartley, Commissioner of Finance W.A. Twelvetrees, Commissioner of Works RE: REPORT #86 -66 OF THE COMMISSIONER OF FINANCE REPORT #171 -86 OF THE COMMISSIONER OF WORKS INTERIM REPORT REGARDING THE STATUS OF THE NEGOTIATIONS BETWEEN THE REGION AND THE AREA MUNICIPALITIES CONCERNING THE FUNDNG OF NEW FACILITIES FOR DURHAM RECYCLING CENTRE INC. RECOMMENDATION: THAT this report be received and forwarded to Regional Council for information. REPORT: At its meeting of July 16, 1986, Council authorized staff to negotiate with the Area Municipalities with respect to a possible cost sharing arrangement for the expanded operation and a new facility for Durham Recycling Centre Inc. (D.R.C.I.) and that each municipality respond by way of Council resolution (copy attached). Council also directed staff to proceed with invitational bids for new facilities for U.►?.C.I. This information was'to be presented to Council in September in conjunction with the Annual Review of the Financing and Operations of the Solid Waste Disposal System. On August 27, 1986, a meeting was convened between staff of the Region and the Area Municipalities to discuss possible cost sharing alternatives. Additional information was provided regarding revised operating deficit projections of Durham Recycling Centre Inc. for the years 1981 through 1991. This data is now being reviewed by the respective Area Municipalities and a follow -up meeting is tentatively scheduled for September 23, 1986 to finalize a cost sharing proposal and to present cost information of new facilities as received in the invitational bids. By early August, staff finalized the drawings and specifications for the proposed new facilities required by Durham Recycling Centre Inc. Several local firms were asked to submit invitational bids which were received during the week of September 8, 1986. These bids are currently being reviewed and the relevant cost information will be incorporated into a final proposal to be presented to the Area Municipalities and Regional Council. It is anticipated that a final report regarding cost sharing arrangements for Durham Recycling Centre Inc., together with a report on the 1986 (Annual) Review of the Region's Solid Waste Disposal Operation, will be presented to Council on October 22, 1986. However, the submission date for these reports is contingent on receiving early favourable responses (by way of Council resolution) from all Area Municipalities on cost sharing arrangements for recycliny. THE REGIONAL MUNICIPALITY OF DURHAM MEMORANDUM TO: W.A. Tw vetrees commission C of Works FROM: C.W. Lundy, A.M.C.T. Regional Clerk RE: Direction as per minutes of: V/� July 16, 1986 COUNCIL July 16, 1986 Item 1. Joint Report Report of Finance bWorks Committees 1 • FINANCIAL IMPLICATIONS OF PUR:HASING OR LEASING NEW FACILITIES FOR DURHAM RECYCLING CENTRE INC. (86 -60 (Finance) 146 -86 (Works)) RECOMMENDATIONS TO COUNCIL a) THAT the matter of purchasing or leasing a new facility for Durham Recycling Centre Inc. be referred to the Waste Disposal Study Group for a report in conjunction with the 1967 Annual Review of the Financing and Operations of the Solid Waste Disposal System in order to investigate alternative sources of financing for presentation to Council i n Sep tembe r. b) THAT a copy of joint Report #86 -60 of the Commissioner of Finance, #146 -8b of the Commissioner of Works be forwarded to each area municipality for review and comments pertaining to the cost sharing of the projected operating deficits for Durham Recycling Centre Inc. (D.R.C.I.) and that each municipalilty respond by way of Council resolution; c) THAT staff of the Works Department be granted the authority to negotiate with the area municipalities to determine a Possible cost sharing arrangement; and d) THAT staff proceed with invitational bids to allow for this information to be available at the time the report is prepared i n September.