HomeMy WebLinkAboutWD-84-86TOWN OF NEWCASTLE
REPORT File #
6g-
Res-
By-Law #
MEETING: THE GENERAL PURPOSE AND ADMINISTRATION COMMITTEE
DATE: OCTOBER 20, 1986
REPORT #: WD -84 -86 FILE #:
SUB.ECT :
RECYCLING
RECOMMENDATIONS:
It is respectfully recommended:
That Report WD -84 -86 be received for information.
REPORT:
Resolution C- 408 -86 of the May 26, 1986, Council requested staff to review
and report on the communications received from the Ministry of the
Environment introducing a new Municipal Recycling Support Program; and
Resolution C- 725 -86 of the September 8, 1986 Council Meeting requested staff
to report on the outcome of meetings concerning the possible cost sharing by
area municipalities of the projected operating deficits for Durham Recycling
Centre Inc.
....2
Page 2
Report No. WD -84 -86
On October 9, 1986, a letter of October 6, 1986 was received from G.A.
Paterson, Director of Administration & Financial Services (see attached)
requesting the area municipalities to respond to Regional Council by way of
Council Resolution as to the agreement (at least in principle) to the
proposed cost sharing arrangement involved in the funding of new facilities
for Durham Recycling Centre. Representatives of the Public Works
Departments of the area municipalities have been holding a series of
meetings over the past several months to discuss this proposal as well as
the future direction for recycling in the Region of Durham.
At the conclusion of the latest such meetings, on October 10, 1986, 'there
were still some outstanding issues to be resolved and some concerns with the
current proposal presented in the Region's letter of October 6, 1986. The
Region was represented at -the October 10, 1986 Meeting and aware that an
immediate response to their October 6, 1986 letter will not be forthcoming.
Council will be kept informed of any further developments with respect to
recycling and the possible construction of new facilities for Durham
Recycling Centre. It is expected that a response to the letter of October
6, 1986 will be possible in mid November.
GJO: jco
October 20, 1986.
Respectfully submitted,
4
Gor n J. 0 gh, P. Eng.,
Director of Public Works.
n77777D)))
DURHAM
The Regional
Municipality
of Durham
Finance Department
Durham Towers,
60 Bond Street West,
P.O. Box 618,
Oshawa, Ontario
Canada, L1 H 8B6
(416) 571 -3311
J. L. GARTLEY, C M A
Commissioner of Finance
and Treasurer
October 6, 1986
Mr. D.W. Oakes,
Acting Administrator,
Town of Newcastle,
40 Temperance St.,
Bowmanville, Ontario.
L1C 3A6
Dear S,1'r :�
RE: New Facilities for Durham R
RECEIVED
(
OCT X31986
BY
ADMINISTRATOR'S OFFICE
F'
OCT 1986
Tm :?; ;V 0 F ; t �{ ;, , `� E
CLMji DE AkNINT
cling Centre
Further to our meeting of September 23, 1986 regarding the
financial analysis of proposed recycling activities within tho'
Region, please find enclosed two computer spreadsheets which
detail the projected operating deficits and funding (Attachments
#1 and #2).
1.
Scenario I - Base Case: Dated August 26, 1986
This scenario incorporates the cost and revenue forecasts for
a five year period as developed by Durham Recycling Centre.
Inc. (D.R.C.I.) and the Region. Revenues were based on
current floor prices for all commodities and relatively
conservative estimates for recovery rates of recyclable'
material from the waste stream. Operating costs were
forecasted by D.R.C.I. based on current non - unionized rates
and included an average wage rate of $8.85 per hour-in Year 1
and inflated at an annual rate of 8 %.
2.
Scenario II - Revised Case: Dated October 1, 1986
^�
This scenario includes three major revisions to assumptions
as suggested at our meeting of September 23, 1986:
a) wages were increased from an average rate of $8.85 per
r
hour to $12.35 per hour to reflect union rates;
b) benefits were increased from 18% of gross wages to 24 %1of,
gross wages to reflect union rates;
b) the floor price of newspaper was reduced from $55 per
jtonne
to $50 per tonne.
FILE
2 - V
In comparing the two worksheets, it is evident that the three changes in
assumptions result in substantially increased operating deficits
throughout the five year period. The results of the analysis may,
perhaps, be deemed a "worst case" situation. The major portion of the
increase is due to the changes with respect to wages and benefits. The
following table outlines the difference between the two scenarios and the
impact that each factor contributes to the difference.
IMPACT OF FACTORS CONTRIBUTING TO DIFFERENCE
BETWEEN SCENARIO I (BASE CASE) AND SCENARIO II (REVISED CASE
The impact of the wage and benefit factors is cause for concern. Unless
municipalities are forthcoming with additional funds beyond the current
tipping fee to meet the higher expenditures, the introduction of union
based salary and benefit schedules into a non - profit organization may very
well jeopardize the financial viability of the entire project. Therefore,
the assumption of whether or not the recycling operation is faced with
higher labour costs is very significant and may not be subject to any
degree of certainty until the expanded operation actually commences.
The table below summarizes the impact of these additional expenditures
upon the M.O.E. funding and municipal share of costs.
M.O.E. & MUNICIPAL FUNDING REQUIREMENTS FOR
SCENARIO I (BASE CASE) AND SCENARIO II (REVISED CASE
NET DEFICIT
SCENARIO II - REVISED CASE
FACTORS
CONTRIBUTING TO DIFFERENCE
M.O.E. Municipal
Base
Revised
Total
Increased
Increased
Decreased
Total
Year
Case
Cause
Duff.
Wages
Benefits
Paper Price
Diff.
1
64,615
64,615 -
328,667
284,030
44,637
2
32,977
1
64,615
328,667
264,052
162,699
61,187
40,166
264,051
2
32,977
382,575
349,598
218,794
83,576
47,228
349,598
3
149,290
574,500
425,210
262,254
108,062
54,894
425,210
4
243,341
701,865
458,524
270,230
125,084
63,210
458,524
5
211,255
683,092
471,837
262,421
137,195
72,221
471,838
Total
701,478
2,670,699
1,969,221
1,176,398
515,104
277,719
1,969,221
The impact of the wage and benefit factors is cause for concern. Unless
municipalities are forthcoming with additional funds beyond the current
tipping fee to meet the higher expenditures, the introduction of union
based salary and benefit schedules into a non - profit organization may very
well jeopardize the financial viability of the entire project. Therefore,
the assumption of whether or not the recycling operation is faced with
higher labour costs is very significant and may not be subject to any
degree of certainty until the expanded operation actually commences.
The table below summarizes the impact of these additional expenditures
upon the M.O.E. funding and municipal share of costs.
M.O.E. & MUNICIPAL FUNDING REQUIREMENTS FOR
SCENARIO I (BASE CASE) AND SCENARIO II (REVISED CASE
SCENARIO I - BASE CASE
SCENARIO II - REVISED CASE
Net
M.O.E. Municipal
Net
M.U.E.
Municipal
Year
Deficit
Share Share
Deficit
Share
Share
1
64,615
64,615 -
328,667
284,030
44,637
2
32,977
32,977 -
382,575
265,270
117,305
3
149,290
100,175 49,115
574,500
232,846
341,654
4
243,341
92,377 150,964
701,865
130,625
571,240
5
211,255
44,199 167,056
683;092
55,996
627,096
Total
701,478
334,343 367,135
2,670,699
968,767
1,701,932-
Increase
from Scenario
I to Scenario II
1,945,156
610,359
15334,797
NOTE:
See Attachment
#1 for the impact
of the $1.3
million increase on the
total deficit
including annual building
and container costs and
diversion credit
revenues.
- 3 -
It must be emphasized that the potential Provincial capital grants of
about $100,000 for the building and containers has not been incorporated
into either scenario. Should the grants actually be forthcoming, they
would offset deficits shown in the analysis or be used as an offsetting
factor against presently unforeseen capital costs. Also, it must be noted
that Scenario II (Revised Case) is a very pessimistic scenario. While
wages have been substantially increased to reflect union rates, potential
revenue increases due to possible annual commodity price increases (e.g..
5% per year similar to inflationary cost increases assumed in both
scenarios) and higher recovery rates have not been incorporated into
either scenario.
As noted in the July report of Regional Council, Regional staff were
instructed to negotiate with the area municipalities to determine a
possible cost sharing arrangement ". The letter of September 16, 1986
included the proposal of the Region's administration which was discussed
at the most recent meeting of September 23, 1986. Including the
attachment, it is our understanding that all requests for data have been
met.
In addition, as mentioned at the recent meetings, agreements between the
Region and area municipalities and the D.R.C.I. will be negotiated
following approval in principle of the cost sharing arrangement. The
agreements will include negotiated funding of potential municipal shares
of surpluses /deficits between the area municipalities and the Region.
It is now incumbent upon each area municipality to respond to Regional
Council by way of Council resolution as to the agreement (at least in
principle) to the proposed cost sharing arrangement. Thank you, in
anticipation of an early response, and for your assistance in this matter.
In the meantime, if you wish to discuss any aspect regarding the above,.
please contact myself or Mr. J.R. McCorkell of the Region's Works
Department.
Yours truly,
U.A. Paterson, Director,
Admin. & Financial Services.
PNR:vw
Encl .
c.c. J.L. Gartley
W.A. Twelvetrees
J.R. McCorkell
�f
ATTACFHENT #1
TOTAL DEFICIT INCLUDING OPERATING DEFICITS,
CONTAINER AND BUILDING COSTS, AND PREVAILING DIVERSION
CREDITS FOR THE BASE CASE AND REVISED CASE SCENARIOS
1) BASE CASE - SCENARIO #1
TOTAL $367,135 $479,615 $488,250 $1,335,000 $1,606,921 $271,921
2) REVISED CASE - SCENARIO #2
Operating Container
Year
Deficits
Costs
1
44,637
95,923
Annual
117,305
Operating
Container
Building
Total
4
Surplus
Year
Deficits
Costs(1)
Costs(2)
Costs
Revenues(3)
(Deficit)
310,878
255,981
(54,897)
97,650
535,227
312,425
(222,802)
1
0
95,923
97,650
193,573
207,371
13,798
2
0
95,923
97,650
193,573
255,981
62,408
3
49,115
95,923
97,650
242,688
312,425
69,737
4
150,964
95,923
97,650
344,537
377,815
33,278
5
167,056
95,923
97,650
360,629
453,329
92,700
TOTAL $367,135 $479,615 $488,250 $1,335,000 $1,606,921 $271,921
2) REVISED CASE - SCENARIO #2
Operating Container
Year
Deficits
Costs
1
44,637
95,923
2
117,305
95,923
3
341,654
95,923
4
571,240
95,923
5
627,096
95,923
TOTAL $1,701,932 $479,615
3) Difference
$1,334,797
$488,250 $2,669,797 $1,606,921 $(1,062,876)
$1,334,797
NOTES:
Tq- $363,625 capital cost debentured for 5 years at 109'0.
(2) $600,000 capital cost debentured for 10 years at 10%.
(3) Based on prevailing gate price at Regional landfill sites.
$1,334,797
Accum.
Surplus
(Deficit)
13,798
76,206
145,943
179,221
271,921
Amin.
Surplus
(Deficit)
(30,839)
(85,736)
(308,538)
(695,536)
(1,062,876)
Annual
Building
Total
Surplus
Costs
Costs
Revenues(1)
(Deficit)
97,650
238,210
207,371
(30,839)
97,650
310,878
255,981
(54,897)
97,650
535,227
312,425
(222,802)
97,650
764,813
377,815
(386,998)
97,650
820,669
453,329
(367,340)
$488,250 $2,669,797 $1,606,921 $(1,062,876)
$1,334,797
NOTES:
Tq- $363,625 capital cost debentured for 5 years at 109'0.
(2) $600,000 capital cost debentured for 10 years at 10%.
(3) Based on prevailing gate price at Regional landfill sites.
$1,334,797
Accum.
Surplus
(Deficit)
13,798
76,206
145,943
179,221
271,921
Amin.
Surplus
(Deficit)
(30,839)
(85,736)
(308,538)
(695,536)
(1,062,876)