GENERAL COMMITTEE - COMMUNITY SERVICES AND ENVIRONMENT
TO:	Mayor and Members of Council
FROM:	Peter Loukes P. Eng., Director Operations
PREPARED BY:	Claudia Marsales, Manager Waste Management
DATE OF MEETING:	December 5, 2005
SUBJECT:	Waste Diversion Ontario (WDO) Funding Distribution

RECOMMENDATION:

THAT the report titled “Waste Diversion Ontario (WDO) Funding Distribution” be received;

AND THAT the Region be requested to calculate Markham’s 2006, 2007, and 2008 WDO payments based on a distribution formula that rewards program performance and diversion achieved.

PURPOSE:

The purpose of this report is to respond to the Region’s request to the Local Municipalities for input into the development of a distribution policy for future WDO funds.

BACKGROUND

In February 2004, the Ministry of the Environment approved a five-year blue box funding plan to reimburse municipalities up to 50% of their net blue box recycling costs. For various reasons, municipalities actually receive considerably less than 50% of their net program costs. For 2005, the Region and the Local Municipalities will receive approximately $2.6 million from the WDO based on 2003 recycling data. Markham’s share will be approximately $580,000, or about 25% of its budgeted 2005 recycling costs.

Since blue box recycling in York Region is a shared responsibility, the Region retains a percentage of the WDO money to fund a capital reserve for the replacement of the new recycling facility and distributes the balance to the Local Municipalities. Currently, funds are distributed based on net program costs, reflecting the WDO’s funding model.

Regional staff have indicated that future WDO funds could be distributed based on program performance and diversion achieved rather than costs, and has asked the Local Municipalities to indicate their preference.

FINANCIAL CONSIDERATIONS:

The WDO has stated its intention to move away from a cost based funding program towards a funding formula that provides increased funding to municipal blue box programs that are most cost effective at diverting recyclables from landfill. The funding model is in the process of being re-worked and is expected to reward efficient and high diverting programs in the future.

Markham has set an aggressive diversion target of 70%. The introduction of Mission Green and 3-Stream collection has increased Markham’s diversion rate from 35% to 66%. In addition, collection efficiencies were implemented with no significant operating cost increase.

The WDO has confirmed that the Region of York will receive Blue Box funding totaling $2,714,748 in 2006. The Region will retain 50% or $1,357,374 of this funding and redistribute the balance to the Area Municipalities.

Depending on the response from the Area Municipalities to the Region’s request to indicate a preferred method for funding redistribution, the Region will redistribute WDO funding to the Area Municipalities either on their relative program performance and diversion rates achieved or each program’s relative recycling costs. This report recommends that funding be redistributed based on relative program performance and diversion rates achieved.

Moving from a cost based to a performance based funding distribution model may result in an estimated initial estimated 2% reduction in funding in 2006 as 2006 funding is based on 2004 data. In years 2007 and 2008, Markham’s funding share may increase as the WDO moves toward a funding model based on program performance and efficiency rather than cost.

Table #1 outlines the estimated impact on the 2006 Waste Management budget of moving to a program performance model in 2006. The 2006 Waste Management Operating Budget includes $450,000 for WDO funding revenues.

TABLE #1

2006 WDO PAYMENT

FUNDING SCENARIO	ESTIMATED PERCENTAGE SHARE*	ESTIMATED *2006 WDO PAYMENT	2006 BUDGET	Fav./(Unfav.)
WDO payment based on costs	35%	$475,081	$450,000	$25,081
WDO payment based on program performance	33%	$447933	$450,000	($2,067)
Scenario Difference	2%	($27,148)

* estimated because Markham’s costs and program performance percentage share is relative to the other eight Area Municipalities

** 2006 WDO payment is based on 2004 data

CONCLUSION:

Under the current ‘cost’ based distribution model, Local Municipalities with high operating costs are rewarded without consideration for increasing blue box diversion or implementing collection program efficiencies.

The 2006 Waste Management Operating Budget includes $450,000 for WDO funding revenues. Markham be about $2,000 under budget in 2006 if the Region distributes WDO funding based on program performance and diversion but, will see increased revenues in 2007 and 2008 as a result of the new expanded recycling program.

It is proposed that the Region be requested to distribute WDO funding for 2006, 2007, 2008 based on program performance and diversion achieved.

Peter Loukes, P.Eng. Director, Operations

Jim Sales Commissioner of Community and Fire Services