Further Development of Industrial Waste Surcharge

Agreements and Compliance Programs (All Wards)

The Works and Utilities Committee recommends the adoption of the following joint report (October29, 1998) from the Commissioner of Economic Development, Culture and Tourism and the Commissioner of Works and Emergency Services:

Purpose:

To set out a process for consulting with those companies that have sewer surcharge agreements with the City, and in particular the food processing industry, with respect to how the program could be used to strengthen the City's industrial base while at the same time reducing sewage loading.

Funding Sources:

The consultation process will require no additional funds.

Recommendations:

That the Commissioners of Works and Emergency Services and Economic Development, Culture and Tourism be requested to meet with companies that have surcharge agreements with the City, representatives of industry and environmental organizations and other government agencies for the purpose of discussing issues and opportunities related to the sewer surcharges, and that the Commissioners report on the results of these discussions and any opportunities for enhancing the surcharge program.

Council Background:

On October 7, 1998, the Works and Utilities Committee considered the Commissioner of Works and Emergency Service's report on the use of the sewer surcharge compliance program by Nestlé Canada. The Committee deferred the report to its November 4, 1998 meeting and requested the Commissioners of Works and Emergency Services and Economic Development, Culture and Tourism to submit a joint report to the Committee on the use of this program to further the development of the food processing industry, so as to reduce excessive sewage loading while at the same time enhancing the industry in the City.

Comments:

The City maintains approximately 157 Industrial Waste Surcharge Agreements with companies across the new city. By-law No. 153-89 establishes wastewater sewer discharge limits and prohibits the dumping of noxious or toxic materials. The by-law also allows for the limits to be exceeded in cases where the wastewater is amenable to treatment at the City's plants and where the company agrees to pay the City a surcharge for further treatment. These agreements allow the City to recover approximately $7.5 million per year which is used to pay for the additional costs associated with the treatment.

Currently, the City of Toronto offers a program called compliance program with monetary concession which forgives up to 50 percent of the increase in the value of a surcharge for up to three years. This is based on a commitment from a company that it will install an effluent pretreatment system capable of removing at least 50 percent of its waste loading. This allows a company to offset any required capital investment from its sewer surcharge savings.

The compliance program has the potential to create significant win-win benefits for the City, business community and environment. The City would benefit by reducing its waste treatment requirements and costs over time. This in turn makes more treatment capacity free for additional development across the City. A company can benefit by permanently reducing its operating expenses by lowering or eliminating the surcharge. The City's overall environment benefits by reducing the amount discharged to the lake. The amount of energy and chemicals used as part of the treatment process would also be reduced.

To date, the compliance program has been only used by three companies. There is a need to examine the program with respect to supporting its use by all of the existing companies currently paying surcharges. In the short term, the City should ensure that all of the companies paying a surcharge are fully aware of the existing compliance program. The program also has the potential to help improve the City's overall economic competitiveness in the long term. The availability of the program will make reinvestment in existing facilities more attractive, and can be used to encourage the establishment of new companies in the City. This will be particularly true of companies in the food processing sector.

The vast majority, about 85 percent, of the companies with surcharge agreements with the City are in the food processing sector. Recently, several small and medium sized companies have complained that their new surcharge assessment, or an increased assessment, is creating financial hardship. They have expressed concerns about their ability to pay and the impact the charges may have on the future viability of their businesses. Many of these companies would like to reduce these costs, however, this would require the installation of treatment facilities which would add additional capital costs.

The food sector plays a central role in the City's economy and has dynamic linkages that exist between its various components. Seventy percent of Canada's top food and beverage manufactures have headquarters in Toronto. It is one of the largest employment sectors and is composed of 10,798 establishments employing 120,937 people in the processing, retail, wholesale and food service sub-sectors. In total, the food sector accounts for 14 percent of the total business establishments in the City.

Food processing is also the City's largest manufacturing sector with the number of firms in the sector increasing by 10 percent since 1991. Food processing has one of the highest economic impacts of all types of manufacturing activity and is strategically linked to other economic sectors including tourism, bio-technology, packaging, environmental/recycling and advertising. The income multipliers for food processing are at least twice as high as those in such important U.S. manufacturing industries as pharmaceuticals, concrete, steel mills, televisions, motor vehicles and aircraft.

The City is fortunate to have the largest concentration of food processing firms in Canada. We cannot take this for granted. To date, the Economic Development Office has implemented a strategy of business retention which focusses on working with existing companies in order to facilitate their growth and retain local employment. The Economic Development Office has been involved with the expansion activities of Central Bakery, Nestlé Canada, Redpath Sugars, St. Helen's Meats, Cadbury Chocolate and others. The new investment in these operations over the last four years has totalled over $180 million, of which about $10 million was for new construction.

The purpose of the City's business development and retention strategy is to deliver a program which will recognize the contribution to the City made by existing firms, and encourage these companies to maintain and grow their operations in the City. One of the key components of this program includes working with individual companies to ensure that they are able to effectively and competitively operate in the City. It is important that the City maintain a competitive position with other locations in Ontario and Canada by assisting companies to control their costs, and thereby receive more value from a City location. There are a number of specific projects that should be developed and/or made more available to the industry. The projects could include the City's energy audit and retrofit program and the further development of the City's sewer compliance program which assists companies to eliminate their sewer surcharge by making capital improvements to their wastewater handling procedures.

Conclusions:

The compliance program has the potential to create significant win-win benefits for the City, business community and environment. These include reducing sewage treatment costs, making more sewer capacity free for new development, reducing business operating costs and reducing discharges to the lake. In the short term, the City should ensure that all of the companies paying a surcharge are fully aware of the existing compliance program.

The sewer surcharge issue needs to be reexamined from the perspective of both improving the environment and improving business operations, particularly for the food processing sector. In order to explore this opportunity and determine what changes to the compliance program are warranted, staff are recommending that the Works and Emergency Services and the Economic Development, Culture and Tourism Departments be authorized to meet with companies that have surcharge agreements with the City, representatives of industry and environmental organizations and other government agencies for the purpose of discussing issues and opportunities related to the sewer surcharges, and that staff report further on the results of these discussions and any opportunities for enhancing the surcharge program.

Contact Name:

Kyle Benham, Senior Economic Development Officer

Economic Development Office

392-1004

Vic Lim, Chief Engineer

Water Pollution Control Division

392-2966