July 13, 1998

To:Works and Utilities Committee

From:Angelos Bacopoulos

General Manager of Solid Waste Management Services

Subject:Waste Management Collection Costs

Purpose:

To identify the cost(s) of curbside and bulk lift waste collection in Toronto, based on the operating systems of the six (6) former municipalities.

Funding Sources, Financial Implications and Impact Statement:

There are no financial implications associated with the adoption of this report.

Recommendations:

That the Works Department, in conjunction with the Finance Department, develop a costing framework which provides a uniform set of guidelines and principles for all activities and programs within the Solid Waste Management Division and which will provide accurate and standardized cost accounting and will allow for an activity based costing analysis.

Council Reference/Background/History:

At its meeting of April 22, 1998, the Works and Utilities Committee directed the Commissioner of Works and Emergency Services to submit a report providing a comparison of costs for both curbside and bulk lift waste collection in the former municipalities which now comprise the City of Toronto.

Comments and/or Discussion and/or Justification:

Due to the different cost structures and financial systems in each former municipality, the guidelines set forth by an independent financial auditor for a previous analysis were used as a reference so as to attempt to provide uniformity in the development of the 1997 curbside and bulk lift garbage collection costs reported by each former municipality. These guidelines also prescribe the treatment of indirect costs associated with providing the collection service. Costs include items budgeted within Solid Waste Management and costs incurred by other Divisions for services supporting garbage collection.

Some municipalities charge cost items directly to the activity performed, while others may charge the same cost item to an administrative account, departmental account or corporate account. In the latter three cases, for the purposes of this report, most cost items have been estimated and allocated to the garbage collection activity based on such criteria as employee time or as a percentage of the total solid waste tonnage collected. Each municipality was responsible for determining the amount allocated for these costs.

Where appropriate, the following cost components were reported by each former municipality. Where actual costs were available, they were utilized. Otherwise, costs were estimated and allocated to the garbage collection activity. In some cases, due to former municipal policy, it was not appropriate to include any cost estimates.

(a)Direct Labour Costs

These costs include the hourly rates and benefits of each person responsible for collecting garbage. These are actual costs and are dependent on the number of permanent and casual employees required to carry out the activity.

(b)Truck Rental

This includes the total cost for truck rentals in 1997. Costs reported are only for those vehicles that collect garbage. These are actual costs and are dependent on the fleet size in each operation and the truck rental rates charged to the activity.

(c)Miscellaneous Expenditures

These costs include all incidentals directly related to the operation (i.e., safety equipment and radio dispatch). These are actual and estimated costs and are dependent on the operational requirements of the reporting municipality.

(d)Front Line Supervision

These costs include the wages, benefits and vehicle costs of those employees who provide the direct supervision to the collectors. These are actual and estimated costs and are dependent on the number of supervisors, salaries, benefits and the vehicle rental rate charged to the activity.

(e)Operational Management and Administration

These costs include all remaining management, administrative staff, promotion, building and maintenance, engineering, I.T., by-law enforcement and any other administrative functions necessary to the operation. These are actual and estimated costs. These cost items tend to be charged outside the activity in most municipal reporting systems and may be incurred departmentally or corporately. It is for this reason that an estimate has been applied for such

costs. However, corporate costs not charged directly to the activity, but related to such items as finance, human resources, legal, purchasing etc., have not been included in any costs reported by the former municipalities. While it is recognized that these services are part of the cost of doing business, with the current inconsistences in the treatment of such costs, it was not possible to accurately apportion these costs by activity.

(f)Workers Safety Insurance Board Cost (formerly WCB)

This is the cost of employees on WSIB at any time during 1997. These are actual costs incorporated into this analysis.

(g)Modified Workers Cost

This is the cost to Solid Waste Management for employees on modified duties regardless of which Department they were assigned to.

While the above methodology was used for the purposes of this report, it is important to note that differences in costing and reporting methods continue to partially contribute to cost variances between the former municipalities. In order to provide an equitable manner in which to evaluate the costs incurred by each municipality the total cost has been divided into two categories. The comparable costs, such as the direct labour, supervision, fringe benefits and miscellaneous costs, which have been calculated using common accounting principles are in one category. The uncomparable costs, such as truck rental, modified worker, etc., which have been calculated using differing accounting principles amongst the various former municipalities, have been put into another category.

Comparable Costs

Direct operating costs including labour, supervision, fringe benefits and miscellaneous are known costs. Table 1 summarizes these costs for curbside garbage collected by municipal staff (non-contracted). Wage rates are for the direct labour required to collect the product. Salary rate differences shown are a result of the varying policies and collective agreements in the former municipalities. Once standard wage rates are established across the City, direct operating costs can be compared without bias. Supervisory costs will differ among municipalities based on operational requirements and the number of supervisors required to oversee front line employees and first level supervisors.

Uncomparable Costs

(a)There are differences in the modified work program costs reported by each former municipality. The modified worker costs and WCB costs are long term costs which would remain with the City whether collection services were being provided by private sector or public sector forces.

(b)Administration and non-budgeted costs including promotion costs related to the activity, salaries and benefits related to administering the activity and other related costs (i.e., by-law enforcement, customer service) will vary among municipalities based on staffing levels, operational requirements, building maintenance costs etc. In addition, the former City of Toronto is the only municipality that budgets for services that are incurred to cover some functions that may be considered to be corporate (i.e., cost control, payroll and personnel).

(c)Each former municipal operation may differ based on previously determined operational needs and budgeting rationale. For example, some municipalities included the costs associated with furniture and large item collection within the curbside refuse collection budget while others have identified it as a separate budget activity.

1. There is a variation in the rate charged for the use of vehicles from one municipality to another. The rate is based on varying accounting principles which do not allow for a fair cost comparison. Table 2 summarizes the uncomparable costs associated with each of the former municipalities that collect curbside garbage with municipal staff.

1. Table 3 and Table 4 summarize the total costs associated with providing curbside garbage collection and bulk lift garbage collection, respectively, in each of the former municipalities. As three of the six municipalities use a combination of municipal and contract forces, both direct and indirect costs have been appropriately allocated. It is important to note that certain costs would remain within the activity even if the entire operation were to be contracted out. For example, municipal staff would still be required to supervise the daily operation and administer the program (i.e., by-law enforcement, promotion, education and customer service).

Conclusions:

While every attempt has been made to provide an accurate costing analysis, further work is required to ensure that costs related to such things as building maintenance, human resources and general governance are reported in a consistent manner. In addition, common fleet/labour rates and accounting methods must be developed in order to standardize costs for programs previously provided by the former municipalities.

Contact Name:

Catharine Daniels, Waste Management Analyst

Solid Waste Management, Scarborough District

Phone: (416) 396-5205

Fax: (416) 396-4156

E-Mail: daniels@city.scarborough.on.ca

Angelos BacopoulosBarry H. Gutteridge

General ManagerCommissioner

Solid Waste Management ServicesWorks and Emergency Services

:kl reports\9.rpt

Table 1

Comparable Costs for Non-Contracted Curbside Garbage Collection

Table 2

Uncomparable Costs for Non-Contracted Curbside Garbage Collection

Table 3

1997 Curbside Garbage Collection Costs

Nb:Units Served = Residential and Commercial, where applicable, within the activity

*Includes automated garbage collection.

**As of April 1998, Scarborough combined the furniture and large item collection with curbside garbage collection.

Table 4

1997 Bulk Lift Garbage Collection Costs

Nb:Units Served = Residential and Commercial, where applicable, within the activity.

Each former municipality provides 2x/week bulk lift garbage collection.

*The total cost includes the collection of furniture and large items placed in bulk bins from multi-family residences. The other municipalities report furniture and large item collection as a separate budget item or include the costs in the curbside collection budget.