I! OFcouncil.london.ca/CouncilArchives/Agendas/City... · bags as an acceptable container on the...

Agenda Item # Page #

TO:

FROM:

1

CHAIR AND MEMBERS COMMITTEE OF THE WHOLE

MEETING ON FRIDAY, FEBRUARY 26,2010

PAT McNALLY, P.Eng. GENERAL MANAGER OF ENVIRONMENTAL

SUBJECT

1 8 ENGINEERING SERVICES & CITY ENGINEER I! ADDITIONAL INFORMATION ON RFP 08-03

DESIGN, CONSTRUCTION AND OPERATION OF A MATERIAL RECOVERY FACILITY

II RECOMMENDATION II That on the recommendation of the General Manager of Environmental & Engineering Services Department & City Engineer, the following actions BE TAKEN with respect to the design, construction and operation of a Material Recovery Facility (MRF):

(a) The February 22, 2010 report to the Special Board of Control Meeting BE RECEIVED for information;

As previously submitted to the Environment & Transportation Committee Report, February 8, 2010 (Agenda Item #9, Design, Construction and Operation of a Material Recovery Facility and Related Program Changes):

(b) Development of a regional MRF BE APPROVED it being noted that there will be a decrease in operating costs to the City of London for a larger regional MRF as compared to a MRF for London only;

The collection and processing of the existing list of materials in the City's recycling program plus aerosol cans, with a start date to coincide with the opening of the regional MRF or shortly thereafter, BE ENDORSED it being noted that a decision on including other plastic bottles (#3, #6 and #7), other plastic packaging (e.g., #I clamshells) or other recyclable materials will be made in late 2010 or 201 1;

Civic Administration BE DIRECTED to report back to a future meeting of the Environment and Transportation Committee with analysis on the implications of eliminating plastics bags as an acceptable container on the City's recycling program including:

i. ii.

iii. iv.

(c)

(d)

a review of other Ontario municipalities and a list of advantages and disadvantages an overview of curbside and multi-residential container types used in two stream recycling systems an implementation plan for the phase out of plastic bags an implementation and financing plan for the provision of an additional Blue Box or comparable container for London curbside households; it being noted that a plan for subsidized recycling carts for multi-residential buildings owners will be presented to the Environment & Transportation Committee in March 2010 holding a public participation meeting; v.

Civic Administration BE DIRECTED to submit a report every three years to Environment and Transportation Committee which updates program requirements and adjustments, impact of Provincial legislation and regulation, long term forecast of future waste diversion capital requirements, revenue and the portion of any operating surplus from the MRF that could be directed to the Waste Diversion Reserve Fund.

(e)

As previously submitted to the Board of Control on February 10, 2010 (Agenda Item # I6 Update on RFP 08-03 Design, Construction and Operation of a Material Recovery Facility):


plF1 2

(f) The proposal submitted by Miller Waste Systems Inc., 8050 Woodbine Avenue, Markham, ON L3R 2N8, for the Design and Construction of a MRF at their proposed total price of $21,126,787.64 exclusive of G.S.T., BE ACCEPTED;

A contingency allowance of $300,000.00 for the Design and Construction of the MRF BE APPROVED;

Genivar BE AUTHORIZED to carry out detailed design review and contract inspection for the said project in accordance with the estimate, on file, at an upset amount of $70,000 exclusive of G.S.T. based upon the Suggested Schedule of Fees for Engineering Projects, recommended by Professional Engineers of Ontario and in accordance with the Procurement of Goods and Services Policy Clause 15.2;

A letter of gratitude be sent to Waste Diversion Ontario (WDO) to acknowledge industry's contribution of $4,390,340 towards the Regional MRF;

The proposal submitted by Miller Waste Systems Inc., 8050 Woodbine Avenue, Markham, ON L3R 2N8 for the Operation of the MRF, for a six (6) year period, at their proposed monthly processing fees, BE ACCEPTED;

That funding for this project BE APPROVED as set out in the Source of Financing Report attached hereto as Appendix "A;

Civic Administration BE DIRECTED to develop annual draft operating budgets with future annual savings from the Blue Box recycling program being directed to the Waste Diversion Reserve Fund for the first three years of operation for the MRF;

(m) Civic Administration BE AUTHORIZED to undertake all the administrative acts that are necessary in connection with this purchase; and

Approval hereby given BE CONDITIONAL upon the Corporation entering into a formal agreement or having a purchase order, or contract record relating to the subject matter of this approval.

(9)

(h)

(i)

(j)

(k)

(I)

(n)

I PREVIOUS REPORTS PERTINENT TO THIS MATTER

Relevant reports that can be found at www.london.ca under City Hall (meetings) include:

.

.

Additional Information on RFP 08-03 Design, Construction And Operation of a Material Recovery Facility, Special Board of Control (BoC) Meeting on February 22, 2010 Update On RFP 08-03 Design, Construction And Operation of a Material Recovery Facility, Board of Control (BoC) Meeting on February I O , 2010, Agenda Item # I 6 Design, Construction and Operation of a Material Recovery Facility and Related Program Changes, Environment and Transportation Committee (ETC) Meeting on February 8,2010, Agenda Item # 9 Comments on Environmental Bill of Rights Registry From Waste to Worth: The Role of Waste Diversion in the Green Economy, ETC Meeting on January 25,2010, Agenda Item #7 Update on RFP 08-03 Initial Design of a Material Recovery Facility, BoC Meeting on November 18,2009, Agenda Item #9 RFP 08-03 Design, Construction and Operation of a Material Recovery Facility, Board of Control (BoC) Meeting on June 3, 2009, Agenda Item #6 Update on the Design, Construction and Operation of a Material Recovery Facility and Related Program Changes, ETC Meeting on June 1,2009, Agenda Item #13 Infrastructure Stimulus Fund - 2"d report, Committee of the Whole Meeting March 27, 2009, Agenda Item # I Recommended Changes to the Recycling Program, ETC Meeting on March 17,2008, Agenda Item #9 Extension of Recycling Program Contract to Coordinate with Current Request for Proposals, BoC Meeting on January 16,2008, Agenda Item #4

Agenda Item # Page # 3

Update on Materials Recovery Facility Request For Proposals (RFP), ETC Meeting on August 7,2007, Agenda Item #22 Update on Waste Diversion Projects and Reports, ETC Meeting on July 9. 2007, Agenda Item #7

I BACKGROUND

PURPOSE

The purpose of this report is to provide additional information regarding a proposed regional Blue Box Material Recovery Facility (MRF). Council requested that additional information be made available for a special Committee of the Whole meeting on February 26, 2010 prior to making a recommendation on whether or not to proceed with the establishment of a regional MRF and entering into an agreement with Miller Waste Systems.

CONTEXT

A summary of the previous reports to Council on this matter is provided in Appendix A. Key recommendations from Council are summarized below and provided in Appendix A.

Date ~ ~

July 2007 ETC & Council

August 2007 ETC & Council

June 2009 Board of Control & Council

November 2009 Board of Control & Council

February 2010 Board of Control

Summarv of kev Recommendations

Approval of short list of bidders for MRF Request for Proposals (RFP)

Five companies short listed to respond to a Request for Proposals (RFP) for a new Materials Recovery Facility.

Staff directed to report back on design and operational concepts being included as part of the Materials Recovery Facility RFP.

Approval of main terms of RFP

Staff directed to issue RFP to design, build and operate a publicly owned, privately operated MRF and allow bidders to submit alternative proposals.

Staff to Report Back on Status of Stimulus Funding

The award of the Regional MRF contract to Miller Waste Systems be referred back to Civic Administration for a further report to Board of Control on the status of negotiations with respect to federal and provincial funding for MRF.

Approval of initial design work on Regional MRF

Miller Waste Systems authorized to carry out the initial design of the regional MRF at a cost of $379,496.

Approval of contractor for the Regional MRF

Staff recommended the proposal from Miller Waste Systems be accepted subject to the terms and conditions stated in the recommendation. Board of Control directed staff to provide answers and comments to a number of questions at a special Board of Control meeting.

Estimated costs incurred on the MRF Project since early 2007 are approximately $600,000 and can be broken down as follows:

A special Board of Control Meeting took place on February 22, 2010 to provide answers and comments to 10 questions posed by Board of Control on February 10, 2010. These questions were:

$100,000 for the Request for Qualifications and the Request for Proposal processes $120,000 for zoning approval, site plan approval and other engineering costs $380,000 for initial design costs


1. What opportunity or impact does the Toronto Request for Proposals (RFP) for mixed waste processing have on the City of London and the Regional Blue Box MRF?

2. Are there new technologies or facilities that have become available that the City should be considering right now for Blue Box recyclables?

3. Are there new technologies or facilities that have become available that the City should be considering right now?

4. How will new, next generation and emerging technologies be addressed as part of the City’s short and long-term waste management strategy?

5. Provide more details on the business plan for the proposed regional MRF

6. Is City financing and/or ownership of the MRF facility still appropriate?

7. How does the design and operation of Regional Blue Box MRF address future changes to recycling?

8. If there are still unanswered questions, can we take a few more months (say two months) to get more information before making a final decision?

9. What happens to the business plan for the proposed Regional Blue Box MRF under extended producer responsibilities and changes to the Waste Diversion Act?

I O . What happens if municipalities within southwestern Ontario find a better opportunity to process their recyclables?

DISCUSSION

Information specifically requested by Council as well as a number of key questions/comrnents raised during the Board of Control meeting on February 22, 2010 are summarized below in Table 1. More detailed information on some of the question is provided in Appendix B.

Table 1 - Overview of Staff Responses

Information Requested

I. Can we negotiate with Miller Waste Systems to finance this facility or extend the length of the operating contract?

?. What has the Province stated about Municipal recycling programs with respect to proposed changes to Provincial legislation and full extended producer responsibility?

Summary Comments

This is the subject of an in-camera report from the City Solicitor.

October 2009, From Waste to Worth: The Role of Waste Diversion in the Green Economy, Minister’s Report of the Waste Diversion Act 2002 Review

‘Yfxtract) Executive Summary - Transitioning Existing Programs

Setting phased end dates for each existing program with corresponding milestones to move existing programs to the proposed new framework

Developing transition plans, in consultation with stakeholders, for each program

Keeping the current framework in place for existing programs until transition is complete”


:. What has the Association of Municipalities of Ontario (AMO) stated about municipal recycling programs with respect to proposed changes to Provincial legislation and full extended producer responsibility?

1. I f the City did not use Gas Tax Funding for the MRF, what alternatives would there be for the Gas Tax funds?

5. What are the advantages and disadvantages of Miller financing (and therefore owning the MRF during the financing period) so that the Federal Gas Tax allotted for the MRF can be used on other projects?

ebruary 1,2010, AMO, Regional Public Works :ommissioners of Ontario (RPWCO) and Municipal Waste ssociation (MWA) comments to the Minister on the Waste Wersion Act 2002 Review

Extract) Transitioning Existing Programs

Municipal assets stranded as a result of this plan should be assessed and appropriately compensated for based on a number of factors, including the value of the Certificate of Approval, infrastructure and operational equipment, and land value which includes appropriate Official Plan designation and zoning.

Municipal collection, processing and disposal contracts stranded or shortened as a result of this plan should be assessed and compensated for based on a number of factors including the value of the contract, fines and penalties that may arise as a result of shortened contracts.

In October 2005, Municipal Council approved an allocation of $54.8 million of Federal Gas Tax funding from 2005 to 2009 to different divisions and programs in the City based on the recommendation of Finance and Federal Gas Tax guidelines. Solid Waste was allocated $9.5 million of this total.

On February 4, 2010, Committee of the Whole approved the proposed allocation of $108.4 million of Federal Gas Tax funding from 2010 to 2014. Solid Waste was allocated $3.5 million each year for a total of $17.5 million. Final approval of allocation is part of the 2010 Budget deliberations.

Total Federal Gas Tax allocation for Solid Waste for 2005 to 2014 is $27 million over the ten year period. It was intended that the majority of the allocation to Solid Waste would be used for the MRF.

Changing the allocation of Federal Gas Tax funding, either that which was already allocated or the 2010 to 2014 allocation, would require approval from Municipal Council for 2005 to 2009 and for 2010 to 2014 would need to be presented and discussed at Municipal Council 2010 final Budget approval session on March 2, 2010.

Projects eligible for Gas Tax Funding are:

“Environmentally sustainable municipal infrastructure projects within the following categories:

Public transit, water, wastewater, solid waste, local roads, bridges and tunnels, including active transportation infrastructure (e.g. bike lanes), capacity building and community energy systems (e.g. retrofit municipal buildings and infrastructure)

Additional comments are provided in Appendix B

tdvantages ’ If Federal Gas Tax funding was allocated to other

projects in the City, there are two scenarios.

o Scenario One: Funding is applied to projects which are eligible for Federal Gas Tax funding but are planned to use debt because their current Gas Tax allocation has been used up, would be financed with


i. What are the advantages and disadvantages of continuing to use Merchant Capacity (privately owned and operated facility) so that the Federal Gas Tax allotted for the MRF can be used on other projects7

7. What are the advantages and disadvantages of a third party financing the MRF so that the federal Gas Tax allotted for MRF can be used on other projects?

"debt free" money. Avoided debt costs on $17.6 million over 20 years at our current rates through Infrastructure Ontario (OIPC) are $1.35 million per year for 20 years, a 0.33% reduction on the 2010 tax rate.

o Scenario Two: Funding is applied to new projects which were not using Federal Gas Tax funding already. There are operational and/or public benefits specific to each new project but there would be no financial advantage to this scenario.

b If this approach is taken, Scenario Two is recommended to reduce the infrastructure gap. Even with these additional funds the need across the roads, water, sewer, transit, facilities and solid waste areas far outstrips this additional funding.

Disadvantages

t Private sector financing would be between $450,000 and $500,000 per year higher than City debenture financing for the MRF assuming that all existing City and Waste Diversion Ontario conditions remain unchanged.

Ydvantages

D The same advantages as discussed in question 5 above regarding funding other projects with Federal Gas Tax funding would also apply in this scenario.

Disadvantages

B A merchant MRF has an estimated net additional operating cost of approximately $30 million or more over 20 years as compared to a City owned MRF. Further details on the business case comparing Merchant Capacity and a City owned MRF can be found in the February 22, 2010 report to Board of Control.

The following strategic advantages of owning the MRF would be lost:

o Less control to adapt to new technologies or collect new materials

o Ability to control the location of the MRF and therefore gain synergies with other solid waste handling operations

o Ability to control location of the MRF and keep the iobs associated with the MRF in London

~ ~~~

Advantages . The same advantages as discussed in question 5 above regarding funding other projects with Federal Gas Tax funding would also apply in this scenario.

Disadvantages

Third party financing for municipal infrastructure in Ontario has been very contentious. The cities of Windsor, Waterloo and Toronto were unsuccessful when they entered into such agreements with MFP Financial Services Ltd. Options still exist for municipalities, but the numerous recommendations from the MFP inquiries in Waterloo and Toronto do not support entering these types of arrangements without significant due diligence being performed and a thorough understanding of the deal by both the City Administration and Municipal


1. What are the advantages and disadvantages to using debentures to finance the MRF so that the Federal Gas Tax allotted for MRF can be used on other projects?

3. Why did Halifax, Ottawa and Halton choose to have the private sector finance their MRF?

Council

Third party financing would have to be tendered. The City would not be able to "shop" for third party financing to support the current proposal from Miller.

I Ontario Regulation 266/02 of the Municipal Act outlines strict criteria for entering into third party financing.

t Outside legal and finance professionals would have to be engaged to review the third party financing agreement, or the City risks suffering from the same issues that Windsor. Waterloo and Toronto faced.

idvantages

B None.

Disadvantages

B There is no advantage to issuing debt for one project versus another project at the City. The overall debt costs would remain the same. The allocation of Federal Gas Tax funding across the City was already approved by Municipal Council and was designed to "share" the benefit of "debt free" funding across the divisions and programs that have projects that best qualify for gas tax funding.

Staff have not been able to determine the specific reasons inrhy these three municipalities have chosen to pay private sector capital costs as part of the annual operating costs. General experience suggests that municipalities make these decisions to meet the needs of the community at that point in time. Available details are as follows:

Halton and Ottawa

The MRFs in Halton and Ottawa are privately owned, operated and financed. The City pays the operator of the MRF a fee which covers the operator's capital and processing cost.

Halifax

Halifax financed the original MRF and equipment from capital reserves in 1990.

financed through an RFP process with private processing contractor and municipal ownership at end of contract term.

Miller Waste Systems was awarded the most recent contract to operate MRF and finance a sort line upgrade ($1 million capital project) in April 2009:

o As part of their monthly payments to Miller, Halifax

Some subsequent upgrades (at least 2) have been

pays back Miller for the capital - it is amortized over 10 years

o The contract is for 5 years and a municipal option to renew a renegotiated 5 year contract

o If they don't renew, then Halifax buys out the remaining capital owned by Miller.

Other Municipalities

Additional information on the financing models of other municipal MRFs is provided in Appendix B.

Agenda Item # Page # a

10. Why did the regional London MRF cost more than the Durham MRF?

FINANCIAL SUMMARY:

Scenario

3ty owned MRF financed with Federal Gas Tax

City owned MRF financed with jebenture; Federal Gas Tax used to fund new City infrastructure xoiect (Scenario Two)

City owned MRF financed with debenture; Federal Gas Tax used to fund existing City infrastructure Droiect (Scenario One)

Private Sector Processing Capacity (Merchant MRF); Federal Gas Tax used to fund new City infrastructure project (Scenario Two)

Merchant capacity; Federal Gas Tax used to fund existing City infrastructure project (Scenario One)

City owned MRF financed by contractor; Federal Gas Tax used to fund existing City infrastructure project (Scenario One)

City owned MRF financed by 3d party; Federal Gas Tax used to fund existing City infrastructure project (Scenario One)

~ ~ ~

B The cost to construct the Region of Durham MRF was $16.6 million. The Region of Durham chose to use $14.8 million (89%) in Federal Gas Tax for the project.

B The construction costs increased by 25% between the award of the Durham MRF (May 2006) and the proposal submission by Miller Waste Systems to the City (June, 2008) based on the Ontario Construction Exchange Industrial-7 Metro Areas Construction Price Index.

t The equivalent cost of the Durham MRF would be $20,600,000 in June 2008. The cost to construct the proposed regional MRF submitted by Miller Waste Systems in June, 2008 was $22,000,000.

It should be noted the regional building proposed by Miller for London is 20% larger than the Durham MRF

Further details on the cost of the Durham MRF and the cost of other recently constructed, large-scale MRFs is presented in Appendix B.

Comments

Estimated operating profit of $44 million over 20 years

Total City Savings - $44 million


Contributed $17.6 million to infrastructure gap

Total City Savings - $17 million


Reduce debt costs of $27 million over 20 years

Total City Savings - $44 million . Estimated operating profit of $7 to $14 million over 20

Potential for short term cost increases due to greater

years

EPR uncertainty on the private sector; this could reduce short term operating profit even further

Contributed $17.6 million to infrastructure gap

Total City Savings - $7 to $14 million

Estimated operating profit of $7 to 14 million over 20

Potential for short term cost increases due to greater

years

EPR uncertainty on the private sector; this could reduce short term operating profit even further . Reduce debt costs of $27 million over 20 years

Total City Savings - $34 to $41 million

Estimated operating profit of $7 million over 20 years . Reduce debt costs of $27 million over 20 years Total City Savings - $34 million . Estimated operating profit less than $7 million over 20 years Reduce debt costs of $27 million over 20 years

Total City Savings - less than $34 million


ACKNOWLEDGEMENTS: This report was prepared with assistance from; Alan Dunbar, Manager, Financial Planning and Policy; Mike Losee, Manager - Solid Waste Engineering and Anne Boyd Coordinator- Waste Diversion.

WESLEY ABBOTT, P. ENG. DIVISION MANAGER

RECOMMENDED BY:

ORD, M.A., M.P.A. PAT McNALLY, P.ENG. ENVIRONMENTAL PROGRAMS 8 GENERAL MANAGER OKE~VIRONMENTAL 8

y:\sharedLsolwaste\etc-boc reports\rfp 08-03 mrf additional information cow.doc

Appendix " A - Summary of Key Reports Appendix " B - Detailed Responses

cc: Vic Cote, General Manager of Finance & Corporate Services &Acting City Treasurer Martin Hayward, Director, Financial Planning & Policy & Acting Deputy City Treasurer


APPENDIX A Summary of Key Reports

A summary of key previous reports to Council on the proposed regional MRF is summarized below;

Meeting ETC July 9, 2007

Summary

Direction Provided

ETC August 7, 2007

Summary

Direction Provided

Summary

Direction Provided

Summary

Report Jpdate on Waste Diversion Projects and Reports, Agenda Item #7

4n update on the outcome of the RFQ to supply a MRF under a Design, 3uild and Operate contractual relationship was provided. Five companies Mere recommended to be short listed to respond to a Request for ?roposals (RFP) for a new Materials Recovery Facility.

Zanada Fibres Ltd., Halton Recycling Inc., Metro Waste Paper Recovery Inc., Miller Waste Systems and Waste Management (WM RA Canada Inc.) were approved to be short listed to respond to a RFP. Staff were directed to report back on the design and operational concepts being included as part of the Materials Recovery Facility RFP.

Update on Materials Recovery Facility Request for Proposals (RFP), Agenda Item #22

An update on the status of the MRF RFP was provided to ETC and Council and approval for the key features of the RFP was sought. Staff directed to issue an RFP to design, build and operate a publicly owned MRF and allow bidder's to submit alternative proposals

Staff were directed to issue an RFP to design, build and operate a publicly owned MRF that included the following key elements; provide a six year operating term plus two, one year renewal options, obtain pricing for a "London Only" facility (40,000 tonnes per year) and a "Regional" facility (75,000 tonnes per year), obtain pricing for three options of recyclable material packages and allow bidder's to submit alternative proposals. Staff were directed to report back to ETC on the outcome of proposal evaluation.

Update on the Design, Construction and Operation of a Materials Recovery Facility and Related Program Changes, Agenda Item # I6

An update was provided and support requested for the development of a City owned privately operated regional MRF subject to the project receiving approval for Federal and Provincial Stimulus funding. Additiona information was provided on how the MRF is designed for potential changes including adding additional materials to be recycled, and on the capital and operating costs of the new MRF. Approval was also sought for the materials to be recycled in the new MRF when it opens, to phase out the use of plastic bagslgrocery sacs as collection containers, and on how to handle surpluses from the operation of the new MRF.

The complete resolution from Council is provided at the end of this summary table.

RFP 08-03 Design, Construction and Operation of a Material Recovery Facility, Agenda Item #6

It was recommended that conditional on approval of Federal and Provincial Stimulus Funding, the proposal submitted by Miller Waste Systems for Design and Construction of a MRF be accepted, the proposa submitted by Miller Waste Systems for operation of the MRF for a six yea1 period be accepted, and staff be directed to develop draft operating


Direction Provided

BoC November 18,2009

Summary

Direction Provided

ETC January 25,

Summary

Direction Provided

ETC February 8, 2010

Summary

Direction Provided

BoC February IO, 2010

Summary

Direction Provided

Summary

Report )udgets with surpluses for the first three years of MRF operation.

The complete resolution from Council is provided at the end of this summary table.

Update on RFP 08-03 Initial Design of a Material Recovery Facility, 9genda Item #9

4pproval was sought for the initial design of a new municipally owned, xivately operated MRF, at Miller Waste Systems proposed price of 6379,496 conditional on entering into a formal agreement or purchase xder.

Approval was granted subject to an update that was provided to the Municipal Council at its meeting on November 23, 2009.

Comments on Environmental Bill of Rights Registry from Waste to Worth: The Role of Waste Diversion in the Green Economy, Agenda Item #7

It was recommended that the City of London endorse and forward comments to the MOE which supports the overall direction in the report Extended Producer Responsibility and Zero Waste Principles and additional comments regarding specifics of transition planning, disposal levy's, inclusion of municipal assets and the recognition of the current integrated nature of waste management,

The comments as presented were endorsed and to be forwarded to the MOE

Design, Construction and Operation of a Material Recovery Facility and Related Program Changes, Agenda Item #9

It was recommended the City of London support construction of a 75,000 tonne per year regional MRF, approve the materials to be recycled in the new MRF, approve the information required to consider the possible phase of the use of plastic bags as collection containers, and direct staff regarding future of reporting about waste diversion programs.

No action was taken on the report pending receipt of the additional information requested by Board of Control and Council.

Update on RFP 08-03 Design, Construction and Operation of a Material Recovery Facility, Agenda Item # I6

Approval was sought for the establishment of a regional MRF using financing from Federal Gas Tax Funding for a revised (smaller) project as opposed to Federal and Provincial Infrastructure Stimulus Funding.

Staff were directed to prepare additional information regarding the feasibility of using the Mixed Waste Processing facility that the City of Toronto is proposing adjacent to the Green Lane Landfill, the possibility 01 developing a joint City of London and City of Toronto MRF project, and a detailed balance sheet regarding the current regional MRF proposal to be presented at a special BoC meeting.

Additional Information on RFP 08-03 Design, Construction and Operation of Material Recovery Facility

Additional information regarding the Toronto RFP for a Mixed Waste Processing Facility, potential new Blue Box or other technologies, the


Meeting I---- I Direction

Provided

Report regional MRF business plan, the appropriateness of Federal Gas Tax financing, regional MRF design flexibility to address future changes, impacts of delaying a decision, and the impacts of EPR

Staff were directed to provide additional information regarding the proposed MRF including alternative private sector financing mechanisms for a special Committee of the Whole meeting on February 26, 2010.

Full Council Resolution pertaining to June 1,2010 ETC Report, Agenda Item # I6 Update on the Design, Construction and Operation of a Materials Recovery Facility and Related Program Changes

That, on the recommendation of the General Manager of the Environmental and Engineering Services and City Engineer, the following actions be taken with respect to the establishment of a City-owned, privately- operated, Materials Recovery Facility (MRF), subject to the project receiving approval for Federal and Provincial Stimulus Funding:

(a) the development of a regional MRF BE APPROVED; it being noted that there will be a decrease in capital and operating costs to the City of London for a larger regional MRF as compared to a MRF for London only;

(b) the collection and processing of the existing list of materials in the City's recycling program, with the addition of empty aerosol cans, BE ENDORSED; it being noted that a decision on whether or not to include other plastic bottles (#3, #6 and #7) or other materials will be made in 2010;

(c) the use of plastic bags to contain curbside recyclables BE PHASED OUT by October 30, 2010; it being noted that an implementation and financing plan for the phase out, including the potential provision of an additional Blue Box for all London curbside households, will be provided at a future meeting of the Environment and Transportation Committee (ETC);

(d) the Civic Administration BE DIRECTED to submit a report every three years to the ETC which updates program requirements and adjustments, impact of Provincial legislation and regulations, long-term forecast of future waste diversion capital requirements, revenue and the portion of any operating surplus from the MRF that could be directed to the Waste Diversion Reserve Fund; and

(e) the Director of Environmental Programs &Solid Waste BE THANKED for his role in securing funding from Waste Diversion Ontario;

it being noted that the atta&ed presentation was received from the General Manager of Environmental and Engineering Services and City Engineer and Director of Environmental Programs and Solid Waste with respect to this matter. (2009-W08-00).

Full Council Resolution pertaining to June 3,2010 Board of Control Report, Agenda Item #6 RFP 08-03 Design, Construction and Operation of a Material Recovery Facility

That clause 6 of the 16th Report of the Board of Control be referred back to the Civic Administration for further report to the Board of Control, at the earliest possible date, on the status of negotiations relative to federal and provincial funding under the Building Canada Fund.

Clause 6 reads as follows:

6. That, on the recommendation of the General Manager of Environmental & Engineering Services & City Engineer, the following actions be taken with respect to the design, construction and operation of a Material Recovery Facility (MRF) conditional on approval of Federal and Provincial Stimulus Funding for this project (Project No. SW6047), namely:


(a) the proposal submitted by Miller Waste Systems Inc., 8050 Woodbine Avenue, Markham. for the design and construction of a Materials Recovery Facility at its proposed total price of $21,221,282.24, BE ACCEPTED:

(b) a contingency allowance of $600,000 for the design and construction of the Materials Recovery Facility BE APPROVED;

(c) Genivar BE AUTHORIZED to carry out a detailed design review and contract inspection for the said project in accordance with the estimate, on file, at an upset amount of $70,000 (exclusive of GST) based upon the Suggested Schedule of Fees for Engineering Projects, recommended by Professional Engineers of Ontario and in accordance with Council Policy 7(9A), Clause (e);

(d) the proposal submitted by Miller Waste Systems Inc., 8050 Woodbine Avenue, Markham, for the operation of the Materials Recovery Facility, for a six (6) year period, at its proposed monthly processing fees, BE ACCEPTED;

(e) funding for the design and construction phase of this project BE APPROVED as set out in the Sources of Financing Report attached hereto as Appendix "A:

(f) the Civic Administration BE DIRECTED to develop annual draft operating budgets with the surplus from the operation of the MRF going to the Waste Diversion Reserve Fund for the first three years of operation of the MRF;

(9) the Civic Administration BE AUTHORIZED to undertake all the administrative acts that are necessary in connection with this project; and

the approval given herein BE CONDITIONAL upon the Corporation entering into a formal agreement or issuing a purchase order or contract record relating to this matter (RFP 08-03). ( ~ 0 8 - 0 0 )

Agenda Item # Page I# 14

APPENDIX B

Detailed Responses

1. Can we negotiate with Miller Waste Systems to finance this facility or extend the length of the operating contract?

This is the subject of an in-camera report from the City Solicitor.

2. What has the Province stated about municipal recycling programs with respect to proposed changes to Provincial legislation and full extended producer responsibility?

October 2009, From Waste to Worth: The Role of Waste Diversion in the Green Economy. Minister's Report of the Waste Diversion Act 2002 Review

The full copies of sections 8 and 9 are reprinted below

8

It is important that our existing programs move to the new framework to promote efficiency, innovation and competition for all waste diversion requirements. We recognize that this transition will necessitate the engagement of many stakeholders, and must be carried out over a reasonable period, allowing all stakeholders sufficient time to plan for and adjust to new roles and responsibilities.

Transition will affect all stakeholders - producers, IFOs, WDO, municipalities, consumers, and the waste management service industry. The transition process must give them the opportunity to participate fully and fairly. Existing lFOs need sufficient time and resources to plan for their potential operation as a materials management scheme under the new approach; consumers should be consulted about familiar and popular collection methods, such as blue box curbside collection and return-to-retail programs under MHS W or WE€€ programs; and municipalities must be given sufficient time and support to effectively manage the effect of transition on their investments and infrastructure, their labour contracts and on service levels to their constituents.

We also heard from many stakeholders specifically on the transifion of the Blue Box program. Many have mentioned that because of its size, complexity, shared responsibility model and entrenched collection method, the Blue Box program requires some additional focus and time to ensure an effective transifion. In particular, attention will need to focus on ensuring that consumers experience minimal disruption of services and that desired diversion objectives continue to be achieved.

The ministry proposes:

Transition: Moving existing programs to the new framework

That the government set regulated phased end dates for each existing program with corresponding milestones and requirements to move existing programs to the proposed new framework with minimal disruption, following consultation with affected parties and the public.

o Milestones for moving to the new framework (such as registration and plan submission) will work backwards from the current program plan expiry date so that all stakeholders are aware of requirements and have an opportunity to meet them.

That transition plans be developed, in consultation with stakeholders, for each program


o Address issues such as moving from monopoly-based model to a competitive individual responsibility model, existing contracts, complaints, IF0 transition and public awareness.

That a unique transition plan be developed for the Blue Box program - recognizing its long history of shared responsibility - to ensure minimal disruption of services, and so that desired diversion objectives continue to be achieved.

Keeping the current framework in place for existing programs until the transition is complete

o Keep the terms of the existing diversion program plans in place so that commitments and investments that have made by stakeholders are not undermined.

9 Moving Forward

The proposals outlined in this report are informed by a clear understanding that we must continue to build on our commitment to the environment and our past successes in waste diversion to do even better, They are guided by a long-term vision of zero waste, and rooted in the widely-accepted principle that producers of waste must be responsible for paying to manage it. These proposals were conceived in consultation with stakeholders and members of the public, and they will be refined following additional consultation. We are looking to design a waste diversion framework whose benefits will be felt for years to come. It is an undertaking that must transcend short-term concerns. We know that if we are going to get it right, we have to reflect a wide range of views and concerns. We want to hear from producers, retailers, recyclers and waste management service providers. We also want to hear from municipalities, environmental non-governmental organizations, schools, hospitals, and members of the public. And we want to hear from you.

3, What has the Association of Municipalities of Ontario (AMO) stated about municipal recycling programs with respect to proposed changes to Provincial legislation and full extended producer responsibility?

A complete copy of the February 1, 2010 AMO, Regional Public Works Commissioners of Ontario (RPWCO) and Municipal Waste Association (MWA) comments to the Minister on the Waste Diversion Act 2002 Review submission can be found on-line at AM0 at: http://www.amo.on.ca/AM/Tempjate.cfm?Section=AMO Watch Filel&Template=%2FCM%2FC ontentDisplay.cfm&ContentlD=l56735

4. If the City did not use Gas Tax Funding for the MRF, what alternatives would there be for the Gas Tax funds?

In October 2005, Municipal Council approved an allocation of $54.8 million of Federal Gas Tax funding from 2005 to 2009 to different divisions and programs in the City based on the recommendation of Finance and Federal Gas Tax guidelines. Solid Waste was allocated $9.5 million of this total.

On February 4, 2010, Committee of the Whole approved the allocation of $108.4 million of Federal Gas Tax funding from 2010 to 2014. Solid Waste was allocated $3.5 million each year for a total of $17.5 million, or $27 million over the ten year period. Excerpts from the November 4 report to Board of Control on the Federal Gas Tax allocation are presented below at the end of this question.

It was intended that the majority of the allocation to Solid Waste would be used for the MRF. If this funding was not used for the MRF, Solid Waste has some alternatives (i.e., landfill gas power plant, leachate management and methane gas related projects) but would likely not require their full allocation under the Federal Gas Tax guidelines as some Solid Waste costs are not eligible for Federal Gas Tax. For instance, funding cannot be used for purchasing property,


one of the greatest needs for Solid Waste currently. Furthermore, funding could not be applied to the full cost of replacement garbage packers because the guidelines state that the project must be incremental, that is “either enabled a projects implementation, enhanced its scope or accelerated its timing”, although funding could be applied to the incremental cost of acquiring more fuel efficient vehicles.

Changing the allocation of Federal Gas Tax funding, either that which was already allocated or the 2010 to 2014 allocation, would require approval from Municipal Council.

Excerpts from the report “Federal Gas Tax Allocation - 2010 - 2014” - Board of Control JNovember 4,2009)

History

The transfer of Federal Gas Tax revenues under the new deal for cities and communities was introduced in 2005. An agreement was signed between the Federal Government and the Association of Municipalities in Ontario (AMO) in order to provide suitable distribution of the funds and reporting of the expenditures.

Requirements of the Agreement:

Part of the original Municipal Funding Agreement Guide dated October 2005 spoke to the requirements of the agreement:

1. Eligible projects:

“Environmentally sustainable municipal infrastructure projects within the following categories: Public transit, water, wastewater, solid waste, local roads, bridges and tunnels, including active transportation infrastructure (e.g. bike lanes), capacity building and community energy systems (e.g. retrofit municipal buildings and infrastructure)” (Page 1)

In addition, the guide goes on to define environmentally sustainable projects and acceptable outputs (Page 13-17)

“1. to extend the asset lifespan bv several vears. These projects can include resurfacing existing roadways and structure rehabilitation.

a.

Projects involvina restoration and rehabilitation of existina assets in order

... restoration and rehabilitation of existing assets avoids the need to demolish existing assets and construct new assets, thereby minimizing negative impacts on the environment.

... newer, more efficient technologies and materials are used and existing negative environmental impacts (e.g. leaching) are eliminated.

Allowing roads and bridges to deteriorate leads to load restrictions on these facilities. This results in increased travel distances to vehicles accessing local industries, commerce and agriculture thereby increasing GHG emissions. Bridges with load restrictions can also cause considerable additional travel distances to school buses.

2. Projects incorporatinq siqnificant quantities of recycled and reclaimed materials. Examples of these projects can include cold-in-place pavement recycling, expanded asphalt recycling and granular base reclamation

3. lnstallation of turnina lanes. These projects include the construction of leff turn lanes, right turn lanes, leff slip around lanes and right turn tapers.

4. Traffic sianal installation, traffic sianal uoaradina and traffic sianal co-ordination projects. These projects include the installation of new traffic signals, upgrading traffic signal installations and projects to co-ordinate the timing of traffic signals in urban areas. They can also include intelligent transportation systems that manage and coordinate traffic more efficiently.”

b.

c.

2. lncrementality of funding -federal gas tax funding cannot be used to offset other capital funding sources:

Agenda item # Page #

Bridges 0.5 0.5 1.0 1.0 1.5

27

4.5

"Municipalities must also clearly demonstrate that the funding used for a project is incremental. That is the funding either enabled a projects implementation, enhanced its scope or accelerated its timing. This requirement has been placed on all parties to the GTF [Gas Tax Funding) Agreement. As we a// know there is a significant infrastructure deficit - the goal of the GTF Agreement is to address this deficit. Canada and Ontario have agreed not to reduce other infrastructure funding sources and municipalities are agreeing not to displace current capital investment or use the revenue to reduce municipal taxes. The revenue must result in increased investment in environmentally sustainable municipal infrastructure equal to the amount of revenue received. To do otherwise would not address the infrastructure deficit."

2005-2009 Allocation

In October 2005, Council approved the following distribution of expenditure priorities for Federal Gas Tax revenue for 2005 to 2009.

Table 1 - Federal Gas Tax Allocation for 2005 to 2009

CiTYOF LONDON FEDERAL GAS TAX PRIORITIES

($ millions) 2005 2006 2007 2008 20091 Total

Infrastructure Gap Wastewater 1.0 1.0 1.0 1.5 Roads 3.0 3.0 4.0 4.5

Transit' Solid Waste Bicycle Lanes & Tharnes Valley

*Transit Funding from pm\incial gas tax is not shown in this Table

5. What are the advantages and disadvantages of Miller financing the MRF (and therefore owning the MRF during the financing period) so that the Federal Gas Tax allotted for MRF can be used on otherprojects?

6. What are the advantages and disadvantages of continuing to use Merchant Capacity (privately owned and operated facility) so that the Federal Gas Tax allotted for the MRF can be used on other projects?

7. What are the advantages and disadvantages of a third party financing the MRF so that the Federal Gas Tax allotted for MRF can be used on other projects?

8. What are the advantages and disadvantages to using debentures to finance the MRF so that the Federal Gas Tax allotted for MRF can be used on other projects?

All information available for these four questions is provided in the main body of this report.

Agenda Item #

Municipality

18

MRF Owner Who Financed MRF

Page #

1

Bluewater

Guelph

Niagara Region

9. Why did Halifax, Ottawa and Halton choose to have the private sector finance their MRF?

Information on financing for larger MRFs in Ontario as well as Halifax and Winnipeg are presented below:

Municipalities Municipalities Non-profit

Municipality Municipality Municipality

Municipality Municipality Non-profit -

Peel Region

Quinte Region

Toronto MRF 1

Contract/ Financing

Term

MRF Operator

Municipality Municipality Private

Municipality Municipality Private - Municipality Municipality Private -

I I I I

Municipally owned, financed and operated

York Region Municipality Municipality Private

Municiaallv owned and financed. arivatelv oaerated

Hamilton

Durham Region 1 Municipality 1 Municipality I Private 1

Municipality owns building.

process paper products Municipality Contractor owns equipment to

Essex Windsor I Municipality I Municipality I Private I

Ottawa

Toronto MRF 2

Kingston I Municipality I Municipality I Private I

Private Private Private 4 years

Private Private Private 7 years

Private

Waterloo Region I Municipality 1 Municipality I Private 1 -

10 years

5 years Private I

1 I Municioalitv owns buildina. .~ Contractor financed equipment

Sudbury 1 Municipality 1 and Municipalitv purchased Private I IO years

I I back over Ib'years. I I Municipally owned, privately financed and operated

Halton Region I Private 1 Private I Private 1 6 years

Halifax

Winnipeg

Municipality

Private

Municipality financed original MRF and equipment in 1990. Subsequent upgrades have been financed by contractor, with municipal ownership at

end of contract term

Private i


1 19

io. Why did the regional London MRF cost more than the Durham MRF

Information on the cost of the Durham MRF was presented in the main body of the report. The information of this MRF and other MRFs constructed in Ontario in the last 5 years is summarized below.

The capital cost of the three large MRFs constructed in Ontario (Durham Region MRF by Metro Waste, Peel Region MRF by Waste Management and York Region MRF by Miller) in the last five years were compared to the cost of the facility proposed by Miller for London. The capital cost for these facilities are presented in Table 2 and were compared on both a cost per square metre constructed and the cost per tonne of processing capacity provided.

Notes: a) Prices adjusted to second quarter 2008 which is the date of the Miller Waste Systems submission. Prices adjusted based on the Ontario Construction Exchange Industrial-7 Metro Areas Construction Price Index.

b) TS = Two Stream processing c) SS = Single Stream processing

The comparison found that the regional MRF proposed for London:

The higher capital cost per tonne of processing capacity than two other recently constructed MRFs is not unexpected for two reasons. First, these MRFs have greater processing capacity (greater than 100,000 tonnes per year) than the London MRF and therefore have the advantage of greater "economies of scale". Second, the specifications in the London RFP required larger tipping floor space for incoming materials and larger storage area for processed materials than most MRFs which increases the cost of the building without adding processing capacity. This was done because some recently constructed MRFs have quickly been constrained by the lack of space resulting in operational issues.

An engineering cost estimate of the facility proposed by Miller was prepared by Genivar and HMI Business Management Solutions. This independent engineering estimate was consistent (within 2%) with the submitted proposal price.

Overall, the price proposed by Miller Waste System is considered good value.

has the lowest capital cost per square metre compared to the other three MRFs has a lower capital cost per tonne of processing capacity than one of the other three MRFs

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