Budget Shock
By John Swartz
There has been a disruption in the recycling cycle and Orillia council found out at Wednesday’s budget committee meeting it’s going to cost dearly. The day before, tenders for a new garbage and recycling collection contract were opened and everyone present lost their breath.
“The information we received through the tender process, instead of a $83,000 increase, it is a $528,829 increase. It is a significant increase. Even worse that’s half a year increase. The tender comes on mid-year, so we’ll be looking at a similar increase in 2021,’ said Jim Lang, the City’s treasurer.
This means the months of work administration has done to organize the 2020 budget went right out the window because the City can’t just say, well, we’ll not collect garbage next year.
“To be very honest with you, we’re in as much shock as everybody around the table here,” said Andrew Schell, director of environmental services. “I didn’t sleep a wink last night after hearing (of) the contract, trying to understand it. The challenge when you look at it, OK, now we’re faced with this, what do we do? We haven’t had the chance to evaluate all this.”
This problem started a year ago when China cut imports of plastic for recycling from North America by 96%. The plastic we were shipping to China to be turned into things we buy back, and then send back after use, rinse and repeat, and has been stuck in storage in every municipality across Canada. Canada did not have the foresight to create our own capacity to complete the recycling process, other than sending it away.
This doesn’t mean Orillia’s plastic going to recycling was going to China, but with a whole continent backing up, even regular buyers of plastic can’t handle the glut.
It wasn’t a surprise to staff the next contract would be higher, but the size of increase was.
“Our original intent is we were going to see a 15 to 20% increase, which is what we put in the budget,” said Greg Preston, who runs the City’s waste program.
Councillor Tim Lauer wanted to know if there was anything Orillia could do to avoid some of the costs in the new contract; Orillia pays by the ton, so the less we put at the curb, the lower the actual cost.
“This is really bad news in another way,” Lauer said. “For all our efforts in recycling and creating a very successful program, now we’re paying. Is there a solution somewhere in the recycling program? Do we need to redirect, instead of encouraging people to recycle we have to get into do not use?”
Lauer was referring to putting the onus on sellers, in part, rather than consumers regarding packaging – and for consumers to be conscious of how much packaging comes with what they buy, and maybe switch to products with less layers of plastic wrap. Preston agreed and said they are reviewing everything to do with the contract and not allowing some things anymore could be part of the plan.
“We need to ensure that what’s collected at the curb is what should be there,” Preston said, adding many other communities do not collect as much as we do in Orillia, and they are leaving things at the curb that they can’t recycle.
Does The City Have To Pay Someone Else?
Counicllor Ralph Cipolla had another option.
“What happens if we re-tender?” Cipolla asked. Mayor Steve Clarke added the City recently retendered a road project that came in a lot higher than budgeted.
“We have that opportunity in the RFP to cancel the process and re-issue the RFP,” said Preston. “What we’re hearing though from other municipalities is that they are also seeing similar issues, similar cost increase. I don’t suspect we’ll see any difference.”
Cipolla then asked about another option.
“Have we investigated having our own garbage pickup?”
Preston said they have started a review of the contract and operations since opening tenders on Tuesday, but it’s early. Starting an in-house garbage pickup means having to buy trucks (currently 7 trucks are used in Orillia), and staffing, which is another issue because all across Ontario there is a driver shortage. Schell added that’s not all, there’s other infrastructure Orillia doesn’t have, sorting facilities and maintenance of equipment is included in contracts with private companies to consider.
Joining with the County was also asked about as an option. Clarke said there is a sorting station being built near Orillia and it’s a possibility to investigate.
“I would urge us to expand that to include the City of Barrie. They use the same contractor I believe as the County. We may be reaching a point where the three jurisdictions working together could assume that risk and obviously not have to pay the profit margin the private contract would have in the same way that we have our own roads department,” said councillor Ted Emond.
Council questioned various other aspects, some of which was about refining the recycling program to not include some of the things currently collected in Orillia’s award winning recycling program, and some of which was about market fluctuation’s effect (i.e. China starts taking recycling again, or capacity to use recycled plastic develops in North America, or prices come up high enough for raw plastic for recycling to balance out the cost of collecting).
Preston said there is a 50/50 revenue sharing clause should anything occur to bring down the contractor’s costs. Orillia’s CAO, Gayle Jackson added there is a cancellation clause the City could use after three years. Preston said that was mainly because the Ontario Stewardship program will end in 2023 when recycling costs are shifted to producers, not municipalities (Ontario Stewardship reimburses municipalities up to 50% of blue box costs, but with a 2 year lag (Orillia got it’s cheque for 2017 this year)). If the City went with its own pickup, rather than contracting, it would have to do so now, or wait three years.
“My concern is we have 6 months in order to try and correct this, so I’m wondering what’s the downside if we go out to tender now?” asked Cipolla, pushing to re-tender right away. “Even if we save only $100,000 it’s worth it.” Clarke thought it won’t work.
“We don’t really have a full 6 months. Any kind of company that is going to take over a contract, especially if they are not the existing company, they have to invest in people and infrastructure, vehicles, etc., they need a few months lead in time,” Clarke said.
Council can’t be blamed for trying to find a way to wiggle out of this one. This one item will raise the budget increase proposed from 3.28% to 4.09% – assuming no cuts to requests. And, the 2021 budget will have an additional $528,829 because the contract starts in June and the 2020 amount is half of a full year increase. In the end garbage and recycling pickup will jump from $1,069,869 to $2.1 million
Council could eliminate the $500k extra expense by not approving some requested service enhancements, dipping into reserves this year, or cutting back on planned contributions to reserves from the 2020 tax levy. It simply does not appear they can avoid the pickup contract increase at this time, and taxpayers will be stuck with it for at least three years.
