3.       SOLID WASTE FLAT FEE FUNDING IMPLEMENTATION REPORT  


RAPPORT DE MISE EN ŒUVRE DU MODÈLE DE FINANCEMENT À FRAIS FIXES DES SERVICES DE GESTION DES DÉCHETS SOLIDES

 

 

COMMITTEE RECOMMENDATIONS

 

That City Council approve: 

 

1.                  A differential flat fee for residential curbside garbage collection and multi-residential bin tipping garbage collection, and that the 2006 fees for residual garbage collection and landfill disposal be set at:

a.      $78.90 per household receiving residential curbside garbage collection; and

b.      $32.40 per household receiving multi-residential bin tipping garbage collection.

2.                  An incremental base budget increase of $650,000, including 5 FTE to support the new billing and collection methodology, to be funded in 2006 by a one-time contribution from the Citywide Reserve Fund.

 

 

RECOMMENDATIONS DU COMITÉ

 

Que le Conseil municipal approuve :

 

1.                  l'imposition de frais fixes différentiels pour le service de collecte des ordures en bordure de la rue, dans le cas des résidences uniques, et le service de collecte des ordures au moyen de conteneurs basculants, dans le cas des immeubles multirésidentiels, les frais en 2006 pour la collecte des ordures ménagères et leur enfouissement dans une décharge contrôlée étant fixés à :

a.      78,90 $ par ménage pour le service de collecte des ordures en bordure de la rue;

b.      32,40 $ par ménage pour le service de collecte des ordures au moyen de conteneurs basculants;

2.                  une augmentation marginale de 650 000 $ du budget de base, y compris 5 ETP, pour la mise en place de la nouvelle méthode de facturation et de collecte, à financer en 2006 par un prélèvement ponctuel sur le Fonds de réserve général de la Ville.

 

DOCUMENTATION

 

1.                  Chief Corporate Services Officer’s report dated 11 April 2006
(ACS2006-CRS-FIN-0010).

2.                  Extract of Draft Minute, 18 April 2006.

 

Report to/Rapport au :

 

Corporate Services and Economic Development Committee

Comité des services organisationnels et du développement économique

 

and Council / et au Conseil

 

11 April 2006 / le  11 avril 2006

 

Submitted by/Soumis par: Greg Geddes, Chief Corporate Services Officer/

Chef des Services généraux

 

Contact Person/Personne ressource: Marian Simulik, Acting Director, Financial Services and  City Treasurer/Trésorière municipale par intérim

Financial Services/Services financiers

(613) 580-2424 x 14159, Marian.Simulik@ottawa.ca

 

City Wide

Ref N°: ACS2006-CRS-FIN-0010

 

 

SUBJECT:

SOLID WASTE FLAT FEE FUNDING IMPLEMENTATION REPORT  

 

 

OBJET:

RAPPORT DE MISE EN ŒUVRE DU MODÈLE DE FINANCEMENT À FRAIS FIXES DES SERVICES DE GESTION DES DÉCHETS SOLIDES

 

 

REPORT RECOMMENDATIONS

 

That Corporate Services and Economic Development Committee recommend that City Council approve: 

 

1.         A differential flat fee for residential curbside garbage collection and multi-residential bin tipping garbage collection, and that the 2006 fees for residual garbage collection and landfill disposal be set at:

a.      $78.90 per household receiving residential curbside garbage collection; and

b.      $32.40 per household receiving multi-residential bin tipping garbage collection.

2.         An incremental base budget increase of $650,000, including 5 FTE to support the new billing and collection methodology, to be funded in 2006 by a one-time contribution from the Citywide Reserve Fund.

 

 

RECOMMANDATIONS DU RAPPORT

 

Que le Comité des services organisationnels et du développement économique recommande au Conseil municipal d’approuver :

 

1.         l'imposition de frais fixes différentiels pour le service de collecte des ordures en bordure de la rue, dans le cas des résidences uniques, et le service de collecte des ordures au moyen de conteneurs basculants, dans le cas des immeubles multirésidentiels, les frais en 2006 pour la collecte des ordures ménagères et leur enfouissement dans une décharge contrôlée étant fixés à :

a.      78,90 $ par ménage pour le service de collecte des ordures en bordure de la rue;

b.      32,40 $ par ménage pour le service de collecte des ordures au moyen de conteneurs basculants;

2.         une augmentation marginale de 650 000 $ du budget de base, y compris 5 ETP, pour la mise en place de la nouvelle méthode de facturation et de collecte, à financer en 2006 par un prélèvement ponctuel sur le Fonds de réserve général de la Ville.

 

 

EXECUTIVE SUMMARY

 

In July 2005, City Council approved the implementation of an alternative method to fund solid waste services to achieve transparency of costs and fairness in the funding of the program, and to increase the incentive to divert materials from landfill.  

 

The new model enacts two different and distinct methods of funding City solid waste services:  waste diversion/recycling costs will continue to be funded by all City of Ottawa tax classes from the assessment based tax bill, and costs for residual garbage collection and landfill disposal fee will be funded only by residential and multi-residential properties through the implementation of a uniform flat fee.  

 

This report recommends that a different flat fee be established for customers receiving curbside residual garbage collection service, as compared to customers receiving bin collection service.  For purposes of setting the 2006 flat fees, it is estimated 76,000 of these units receive bin collection service, and 235,000 receive curbside pickup.  However, approximately 50,000 of these properties require individual review to verify which charge, curbside or bin collection, is appropriate, and the number of units to receive the charge.

 

Based on the budget split between bin collection costs and curbside collection costs and applying the estimated 2006 units expectation, a curbside rate of $78.90 per year, and a per door bin pickup rate of $32.40 is required.  The weighted average for these two fees is $67.50 as compared to the average of $71.00 as presented in the July 2005 report.

 

An additional $650,000, including 5 FTE is required to be added to the 2006 operating base budget, to support the new billing and collection process.  These additional costs were not included in the 2006 Budget as approved by City Council in December 2005, and are therefore recommended for one time funding from the Citywide Reserve Fund in 2006. 

 

For 2006, the Garbage Collection and Disposal Flat Fees will be applied as a unique line on the final tax bill, but staff will continue to work towards the transfer of this fee to the water bill, or in future the utility bill, in 2007.

 

Financial Implications

Base service costs of $21.0 million were included in the 2006 Budget approved by City Council in December 2005, and is factored in the 3.9% equivalent tax increase.  Additional budget increases of $650,000, including 5.0 FTE, will be funded on a one-time basis in 2006 from the Citywide Reserve Fund.  Permanent funding for these additional costs from the Garbage Collection and Disposal Fees, as required, will be subject to 2007 Budget approval

 

Public Consultation/Input

A period of extensive public consultation was implemented in the Spring of 2005 for the Integrated Waste Management Master Plan – Strategic Service Delivery Update.   The consultation period for the 2006 Draft Operating Budget also offered further opportunity for public review of the shift of costs from the tax bill to the flat fee billing process.

 

 

RÉSUMÉ

 

En juillet 2005, le Conseil municipal a approuvé l’adoption d’une méthode différente de financement des services de gestion des déchets solides de manière à assurer la transparence de l’administration en ce qui concerne le coût de ces services, à rendre équitable le financement de ceux-ci et à encourager davantage le recyclage des déchets.  

 

Le nouveau modèle repose sur deux modes différents de financement des services de gestion des déchets solides : les coûts de réacheminement et de recyclage des déchets continueront à être assumés par toutes les catégories de contribuables, à partir de la facture de taxes établie d’après l’évaluation foncière, tandis que les coûts associés à la collecte des ordures résidentielles et à la gestion des décharges contrôlées seront absorbés uniquement par les propriétaires de résidences et d’immeubles à logements multiples grâce à l’imposition de frais fixes uniformes.  

 

Le rapport recommande l’établissement d’un tarif fixe différent pour les clients dont les ordures sont ramassées en bordure de la rue et pour ceux dont les déchets sont retirés d’un conteneur sur la propriété même. Aux fins de la détermination des tarifs fixes pour 2006, on estime que pour 76 000 unités résidentielles, les ordures seront retirées d’un conteneur installé sur la propriété tandis que pour 235 000 autres, elles seront recueillies en bordure de la rue. Pour environ 50 000 propriétés, cependant, une vérification individuelle devra permettre de déterminer le type de collecte qui convient et le nombre d’unités qui assumeront les coûts du service.

 

Comme les crédits budgétaires alloués à l’enlèvement des ordures sont répartis entre la collecte en bordure des rues et le vidage des conteneurs et compte tenu des prévisions concernant le nombre d’unités à servir en 2006, il faut fixer à 78,90 $ les frais annuels qui devront être imposés pour l’enlèvement des ordures en bordure des rues et à 32,40 $ ceux qu’il faudra exiger pour le vidage des conteneurs. La moyenne pondérée de ces deux tarifs est de 67,50 $ alors que celle qui avait été présentée dans le rapport de juillet 2005 s’établissait à 71 $.

 

Un relèvement budgétaire de 650 000 $, y compris cinq ETP, doit être ajouté au budget de fonctionnement de base afin de soutenir le nouveau processus de facturation et de collecte. En effet, les coûts supplémentaires occasionnés par la mise en œuvre de la nouvelle formule ne figuraient pas dans le budget de 2006 approuvé par le Conseil municipal en décembre 2005; c’est pourquoi un financement non renouvelable à même le fonds de réserve de la Ville est recommandé en 2006.

 

Pour cette même année, les frais fixes pour la collecte et l’élimination des déchets figureront sur une seule ligne sur la facture finale de taxes, mais le personnel continuera à travailler pour que ces frais soient portés à la facture des services d’eau ou des services publics en 2007.

 

Répercussions financières

Un montant de 21 millions de dollars a été inscrit pour les services de base dans le budget de 2006 approuvé par le Conseil municipal en décembre dernier et est pris en compte dans l’augmentation de taxes équivalente de 3,9 %. Un relèvement budgétaire de l’ordre de 650 000 $, y compris cinq ETP, fera l’objet en 2006 d’un financement non renouvelable à même le fonds de réserve de la Ville. Le financement permanent de ces coûts supplémentaires à partir des frais perçus pour la collecte et l’élimination des déchets est conditionnel à l’adoption du budget de 2007.

 

Consultation/Commentaires du public

Au printemps 2005, le public a été longuement consulté au sujet du document intitulé Plan directeur de la gestion intégrée des déchets – Le point sur l’exécution stratégique. La période de consultation sur le budget préliminaire de fonctionnement de 2006 a également permis aux résidents d’examiner les changements prévus au processus de facturation, lesquels visent à faire en sorte que les services soient financés par des frais fixes et non plus à même le compte de taxes.

 

 

BACKGROUND

 

City Council has approved the implementation of an alternative method to fund solid waste services to achieve transparency of costs and fairness in the funding of the program, and to increase the incentive to divert materials from landfill.  

 

In April of 2003, as part of The Solid Waste – Integrated Waste Management Master Plan Strategic Directions and Phase 2 Next Steps (Report ACS2003-TUP-UTL-0001), City Council recommended:

 

“That the City endorse, as a minimum, full cost accounting principles for solid waste services to identify the total cost of the residential waste management system.”

 

In July of 2005, as part of the Integrated Waste Management Master Plan - Strategic Service Delivery Update (Report ACS2005-PWS-UTL-0008), City Council recommended:

 

‘That staff develop a comprehensive utility funding concept based upon the recommended hybrid model contained in this report providing service to urban, suburban, rural residential and rural villages for implementation in January 2006.”

 

The referenced hybrid model enacts two different and distinct methods of funding City solid waste services:  waste diversion/recycling costs will continue to be funded by all City of Ottawa tax classes from the assessment based tax bill, and costs for residual garbage collection and landfill disposal fee will be funded only by residential and multi-residential properties through the implementation of a uniform flat fee.   The principles behind the new funding methodology were:

 

·        In support of environmental stewardship and sustainable landfill, Waste Diversion costs are shared by all tax classes;

·        Residual garbage collection costs are imposed on benefiting users only, as identical charge for identical service;

·        Transparency of cost to the user; and

·        Potential incentive for increased diversion.

 

At the time of that report, the residential flat fee did not differentiate between curbside bag and multi-residential bin collection method, and was anticipated to be $71.00 per household based on 2005 costing.  It was also noted in that report that staff would complete further analysis and update costing before making the change from the full assessment based model.

 

With the approval of the 2006 Budget, City Council has confirmed the hybrid model for funding of the solid waste program, and the creation of a new Solid Waste Reserve Fund to provide for the projected costs of the residual garbage collection and landfill programs.  

 

The purpose of this report is to confirm the 2006 program costing, the new differential flat fees, and the vehicle for implementation of the flat fee billing to residential and multi-residential properties receiving residual garbage collection and landfill disposal services.

 

DISCUSSION

 

Differential Flat Fees

 

This report recommends that a different flat fee be established for customers receiving curbside residual garbage collection service, as compared to customers receiving bin collection service.  The rationale for the differential fee is primarily attributable to the difference in the service provided, and the associated costs.  Multi residential bin tipping service is less labour and equipment intensive than curbside pickup service, and therefore less costly.   For 2006, approximately 24% of the City’s combined total residential units are estimated to receive bin collection service, while the 2006 contract cost for the service represents only 12% of the 2006 Budget provision for total garbage collection services.   Without a differential fee, the multi-residential customer would be paying more than the cost related to the provision of their garbage collection service which would likely be passed on to the tenants in the form of a rent increase.  A differential fee approach advances the concept of user pay even further than was approved in July 2005, as users with a lower cost service will now pay a lower fee.  The principle of users paying an identical charge for an identical service level is maintained.

 

At the time of preparation of this report, it is estimated there are approximately 311,000 residential and multi-residential dwelling units that receive residual garbage collection service from the City.   For purposes of setting the 2006 flat fees, it is estimated 76,000 of these units receive bin collection service, and 235,000 receive curbside pickup.  However, approximately 50,000 of these properties require individual review to verify which charge, curbside or bin collection, is appropriate, and the number of units to receive the charge.

 

2006 Costs to be Funded Through Flat Fee Billing

 

As referenced in Appendix 1 of this report, the 2006 Operating Budget as tabled estimated direct operating costs of residual garbage collection and landfill programs of $18.9 million.  Resulting from budget deliberation, an additional reduction of $45,000 has been applied.  This emanates from approved motions to increase user fees by 3.5%, and the allocation of the reduction in corporate inflation provision, offset by the elimination of the collection of tipping fees from charitable organizations.

 

Other 2006 supporting costs were included in the tax supported budget as tabled, and with full costing of the Solid Waste program are more appropriately funded from the solid waste fee.  These costs include:

 

 

These costs, which total $2.139 million, will now be shifted from taxation to user fee, and do not change the City’s combined levy and fee supported requirement of a 3.9% increase in 2006.  

 

As illustrated in Appendix 1, the 2006 total revised budget to be recovered from the garbage collection and disposal flat fee is $21.0 million.  Of this total cost, multi-residential bin collection and disposal costs represent approximately $2.5 million, with the balance of approximately $18.5 million budgeted for curbside collection and disposal.   All indirect costs, such as landfill, are allocated based on projected tonnages collected from the residential and multi-residential sectors.

 

Based on the budget split between bin collection costs and curbside collection costs and applying the estimated 2006 units expectation, a curbside rate of $78.90 per year, and a per door bin pickup rate of $32.40 is required.  The weighted average for these two fees is $67.50 as compared to the average of $71.00 as presented in the July 2005 report.

 

Under the full costing concept, a contribution is recommended to begin funding the calculated landfill closure/post closure liability for the City’s three landfills, Nepean, Springhill, and Trail Road.   Reporting of this liability for costs of closure and post closure is a requirement of the Environmental Protection Act and the Public Sector Accounting Board (PSAB).  To date, while the City of Ottawa has reported on this liability no funding has been provided.  At the time of this report, the present value of the reported liability as at December 31, 2005 is expected to be $10.797 million.  However, as no contribution has yet been budgeted in 2006, it is rather recommended that contributions begin in 2007 to ensure funds are in place at the time of the site closures. 

 

Finally, an additional $650,000, including 5 FTE is required to be added to the 2006 operating base budget, to support the new billing and collection process.  As part of moving the garbage collection fee from the tax bill to the water bill the entire database on both the water system and the tax system will require a significant amount of work as the number of units, property types and civic addresses for each account will need to be validated.  Staff also has to ensure a solid waste bill is warranted and if so determine whether a bin or curb pick-up rate is applicable for condominiums, smaller multi-residential buildings, etc.   In addition, all 311,000 tax accounts will have be linked to their corresponding water account via the use of a crosswalk table. With new accounts coming on stream at different stages and from different sources for tax versus water, tracking and reconciliation will be a complex and on-going challenge.  In addition to the work required to generate the charge, unpaid amounts will have to be collected, calls and complaints will have to be handled by Revenue staff and supplementary bills and write-offs will have to be reviewed and adjusted to cover the solid waste charges for new properties or undergoing changes.

 

These additional costs were not included in the 2006 Budget as approved by City Council in December 2005, and are therefore recommended for one time funding from the Citywide Reserve Fund in 2006.  The permanent funding of these costs from the Garbage Collection and Disposal Fees will be subject to 2007 Budget approval.

 

Vehicle for Flat Fee Billing and Collection

 

Staff in Financial Services, in consultation with Legal Services, has completed a detailed review of billing options.  For 2006, the Garbage Collection and Disposal Flat Fees will be applied as a unique line on the final tax bill. 

 

The tax bill is the best vehicle for timely and accurate billing in 2006, but staff will continue to work towards the transfer of this fee to the utility bill in 2007.

 

Staff reviewed the possibility of placing the residual garbage collection and disposal fee on the City’s existing water bill.  For 2006, the tax system provides the most accurate and reliable database for this Citywide billing, primarily due to the fact that there are over 40,000 residential and multi-residential properties that receive residual garbage collection services from the City, but are not currently resident on the water billing system.  These properties are primarily in the rural areas, where no City water service is provided.  In time these properties could be added to the water billing system, but this will necessitate an increase in data manipulation and mailing costs.  In the interest of administrative and cost effectiveness, and to avoid the addition of an entirely new bill to be received by an estimated 40,000 properties six times per year, for 2006 the flat fee will be imposed on the final tax bill.

 

Staff also considered using the City’s water billing system for only the customers currently resident on the system, with the balance of the primarily rural customers to be billed as a flat fee on the tax bill.  Upon review with Legal Services, it was felt that this inconsistent methodology could be construed as unfair to the rural resident who is billed only once per year while the primarily urban customers would receive multiple pro-rated bills over the course of the year. 

 

The use of the water billing system would also add complexities to landlord-tenant relationships.  For example, a townhouse or condominium complex with multiple units may receive either curbside garbage collection or bin tipping collection.  That same group of units may currently receive individual water bills at the tenant level, or a single water bill payable by the landlord.   Applying the fee to the tax bill eliminates a level of review and in many cases a requirement to create additional accounts in the water billing system.  As with all assessment-based taxes, the flat fee can be passed on by the landlord to the tenant through their leases.  The use of a flat fee on the final tax bill eliminates a level of potential confusion for landlords and tenants who have differing accountabilities for payment of water bills.

 

The flat fee will be collected in a like manner as assessment based municipal taxes, and be subject to the same penalties and interest accruals, at 1.25% per month.

 

For 2007 and beyond staff will continue the review and matching of property data in the water billing system, and provide a status report for the usage of the water billing methodology prior to approval of the 2007 Budget.

 

The flat fee will appear as a unique line on the final residential tax bill in 2006.  Should the ongoing review of billable residential properties deem that the 2006 rate is insufficient or overstated; the required adjustment will be applied to the 2007 fee.    

 

CONSULTATION

 

A period of extensive public consultation was implemented in the Spring of 2005 for the Integrated Waste Management Master Plan – Strategic Service Delivery Update.   The consultation period for the 2006 Draft Operating Budget also offered further opportunity for public review of the shift of costs from the tax bill to the flat fee billing process.

As per Ontario Regulation 244/02 of the Municipal Act, public notice of the City’s new fee initiative was provided in the Ottawa Citizen and Le Droit on March 30, 2006. 

 

FINANCIAL IMPLICATIONS

 

Subject to City Council approval, the 2006 Garbage Collection and Disposal fees will be billed only to residential and multi residential units receiving the service, through a flat fee on the final 2006 tax bill.

 

Base service cost of $21.0 million were included in the 2006 Budget approved by City Council in December 2005, and is factored in the 3.9% equivalent tax increase.

 

Additional budget increases of $650,000, including 5.0 FTE, will be funded on a one-time basis in 2006 from the Citywide Reserve Fund.  Permanent funding for these additional costs from the Garbage Collection and Disposal Fees, as required, will be subject to 2007 Budget approval.

 

 

SUPPORTING DOCUMENTATION

 

Appendix 1 – Solid Waste Management Program 2006 Budget and Funding Scenario

 

 

DISPOSITION

 

Legal Services will incorporate the new Garbage Collection and Disposal fee, interest and billing methodology in the new solid waste by-law to be brought forward in 2006.

 

The Revenue Division of the Financial Services Branch will implement billing and collection processes as detailed in this report.

 

Financial Services staff will report back to Council prior to the approval of the 2007 Budget on the recommended billing methodology for 2007 and beyond.

 

 

 

APPENDIX 1

2006 Solid Waste Services Budget and Funding Scenario


 

 


            SOLID WASTE FLAT FEE FUNDING IMPLEMENTATION REPORT

RAPPORT DE MISE EN ŒUVRE DU MODÈLE DE FINANCEMENT À FRAIS FIXES DES SERVICES DE GESTION DES DÉCHETS SOLIDES

ACS2006-CRS-FIN-0010

 

Greg Geddes, Chief Corporate Services Officer; Marian Simulik, Acting City Treasurer; and, Ken Hughes, Manager, Revenue appeared before the Committee on this item.  Mr. Geddes provided an overview of the staff report and the PowerPoint presentation is held on file with the City Clerk.  

 

Although, John Dickie, Eastern Ontario Landlords Association (EOLO) did not speak to this item, the written documentation he submitted with respect to Item 2, 2006 Tax Ratios and Other Tax Policies, (which is held on file with the City Clerk) also indicated EOLO’s support for staff’s recommendations for this item. 

 

Councillor Jellett indicated he was concerned with the proposed five FTE’s and $650,000 and sought clarification from staff as to how long it would take to complete the work detailed in the report.  Mr. Geddes advised these positions would be necessary for 2006 to determine which accounts receive bin service and which receive curbside service.  In the 2007 budget, staff will include a recommendation with respect to the ongoing requirements and this would be identified as a budget pressure.    

 

Councillor Cullen referred to page 28 and noted the City would begin to collect contributions to replace the landfill (beginning in 2007).  He noted the report estimates the cost of closure and post closure to be $10.9 million.  He sought confirmation of his understanding that this did not include the cost of a new landfill.  Staff confirmed this and noted further, that as part of the preparation for the new Long Range Financial Plan, there will be discussions with Public Works and Services about a contribution plan for a new landfill site and an analysis of this will be included in the LRFP.

 

Councillor Stavinga noted that 70% of the waste problem is attributable to the institutional and industrial sector and that this huge issue must be addressed.    Further, she stressed the importance of the City looking at more innovative ways to deal with waste (i.e. as opposed to landfill). 

 

The staff recommendation was then approved.

 

That Corporate Services and Economic Development Committee recommend that City Council approve: 

 

1.         A differential flat fee for residential curbside garbage collection and multi-residential bin tipping garbage collection, and that the 2006 fees for residual garbage collection and landfill disposal be set at:

a.   $78.90 per household receiving residential curbside garbage collection; and

b.   $32.40 per household receiving multi-residential bin tipping garbage collection.

2.         An incremental base budget increase of $650,000, including 5 FTE to support the new billing and collection methodology, to be funded in 2006 by a one-time contribution from the Citywide Reserve Fund.

 

                                                                                                CARRIED