(City Council at its Special Meeting on April 28 and May 1, 1998, amended this Clause by adding thereto the following:

"It is further recommended that:

(1) the report dated April 9, 1998, from the City Solicitor, entitled 'Implementation of a Deposit/Return System for Wine and Spirit Containers', embodying the following recommendation, be adopted:

'It is recommended that, should City Council wish to proceed with the implementation of a deposit/return system for beverage containers, the Province of Ontario be requested to enact legislation granting the City the power to do so.';

(2) City Council endorse the following Resolution which was adopted by the Council of the Township of Hagarty and Richards at its meeting held on January 20, 1998:

'WHEREAS the ratepayers of the municipality of Hagarty & Richards and all municipalities in Ontario are paying for ever-increasing costs of recyclable items; and

WHEREAS the Brewers' Retail in Ontario maintains a deposit and refund system for their containers;

NOW THEREFORE BE IT RESOLVED BY THE HAGARTY & RICHARDS COUNCIL THAT the manufacturers of products placed in containers be required to offer a deposit and refund system for the return of these containers to the place of purchase once empty.';

(3) City Council endorse the proposal of the Essex-Windsor Solid Waste Authority pertaining to the pilot project as embodied in the communication dated March 24, 1998, addressed to the Minister of Consumer and Commercial Relations, from the General Manager, Essex-Windsor Solid Waste Authority, for a deposit/return system for LCBO containers at three communities within the County of Essex;

(4) all LCBO containers be banned from the City of Toronto's blue box program and landfill sites effective September 1, 1998;

(5) the deposit/return system and by-law being developed by City staff include a provision which would allow City Council to include or exclude various beverage container types, such as cans;

(6) the Minister of Environment be requested to set up a product stewardship program that makes producers fully responsible for the economic costs and environmental impacts of the products and associated packaging they produce over their life cycle and that eliminates municipal taxpayer subsidies for the collection, reuse, recycling and disposal of these products and associated packaging;

(7) the product stewardship program include: zero waste to disposal as an ideal to work toward to motivate continual improvement; the 3Rs waste management hierarchy; fair and equitable treatment of all producers, whether domestic or foreign; a convenient system for consumers to return products to producers; and phase-out of non-refillable beverage containers over the long term;

(8) the Minister of Environment be requested to establish a multi-stakeholder consultation on methods for meeting refillables targets which takes as a given that a comprehensive deposit/return system with increasing levels of refillable beverage containers across a broad array of beverage types will be in use in Ontario;

(9) the Province of Ontario be requested to:

(a) institute, through regulation, a comprehensive deposit/return system for beverage containers, with specific refillables targets set and a timetable for achieving these targets;

(b) develop an education and promotion program regarding deposit/return systems, product take-back and reuse;

(c) provide a share of the environmental levy to pay for the City's recycling program; and

(d) introduce legislation to allow refillable containers in the wine and agricultural industries;

(10) the regulation require that empty beverage containers be returned to retail stores with adequate compensation for retailers to fully cover their handling costs;

(11) the Commissioner of Works and Emergency Services be requested to:

(a) develop a communications program to have homeowners return their wine and spirit containers to the point of purchase, such communications program to include an announcement of a wine and spirit container take-back program in the next issue of the City of Toronto's 'Waste Watch' newsletter; and

(b) bring forth a by-law to require a deposit/return system in the City of Toronto for all other beverage containers;

(12) the Commissioner of Works and Emergency Services, in consultation with the City Solicitor, be:

(a) requested to submit to the next meeting of the Works and Utilities Committee, a draft by-law for a deposit/return system for LCBO containers sold in the City of Toronto; and

(b) authorized to retain outside counsel, if necessary;

(13) the Commissioner of Works and Emergency Services be requested to submit a report to the Works and Utilities Committee on:

(a) establishing a depot system which would allow residents to return wine bottles, soft drink containers, etc., on a voluntary basis, for recycling; and

(b) the use of bottle return machines that provide a cash refund and the possibility of having the program sponsored by non-profit volunteer groups;

(14) at such time as the by-laws come forward, the Commissioner of Works and Emergency Services be requested to submit a report to the Works and Utilities Committee on the costs and benefits of keeping aluminum cans as part of the Blue Box system, such report to include:

(a) employment in the aluminum recycling industry;

(b) environmental implications; and

(c) potential loss of municipal revenue;

(15 ) the Commissioner of Works and Emergency Services be authorized to organize a one-day conference, to be held in the Council Chambers of Metro Hall, during late May or early June, 1998, which will address the economic and environmental costs and benefits of implementing comprehensive deposit/return regulations for beverage containers in Ontario, with presentations by academic and professional guest speakers who are knowledgeable concerning these issues;

(16 ) funds not to exceed $15,000.00 be provided from the Works and Emergency Services Department's budget for promotion and education to pay for the costs associated with the conference, including the reasonable per diem travel and accommodation expenses of guests speakers, promotion of the conference, and related expenditures;

(17) a session of the conference be devoted to discussing the development of a Province-wide strategy to create a coalition of municipalities and environmental organizations interested in achieving comprehensive deposit/return regulations for beverage containers sold in Ontario and in achieving full product stewardship for all other packaging waste such that the management of this waste results in zero municipal cost to Ontario municipalities; and

(18) the City Clerk be requested to forward a copy of the foregoing resolutions to the Minister of Consumer and Commercial Relations.")

(City Council on April 16, 1998, deferred consideration of this Clause to the Special Meeting of Council to be held on Tuesday, April 28, 1998.)

The Works and Utilities Committee recommends that:

(1) City Council reiterate its request to the Province of Ontario to permit Province-wide implementation of a deposit/return system;

(2) the Province of Ontario be requested to pass enabling legislation to permit deposit/return in the City of Toronto; and

(3) that the Provincial opposition parties be advised of such action.

The Works and Utilities Committee reports, for the information of Council, having:

(1) requested the Commissioner of Works and Emergency Services and the City Solicitor to:

(i) develop a proposal for such enabling legislation;

(ii) continue their investigation to determine whether a deposit/return system could be implemented without enabling legislation;

(iii) submit a report directly to Council for its meeting on April 16, 1998, on legal remedies for the implementation of a deposit/return system; and

(iv) submit a report to the Committee at its next meeting, scheduled to be held on April 22, 1998, on measures that can be undertaken with respect to licensing at the retail or distribution level;

(2) requested that Mr. Robert Power, solicitor with the firm of Outerbridge, Miller, Sefton, Willms and Shier, be invited to appear before the Committee at its next meeting; and

(3) noted that appropriate arrangements will be made related to the organization of an event on Earth Day, April 22, 1998, or in Earth Week, respecting deposit/return systems.

The Works and Utilities Committee submits the following report (March 18, 1998) from the Interim Functional Lead for Solid Waste Management:

Purpose:

To provide City Council with sufficient information to decide whether the implementation of deposit/ return for wine and spirit and other beverage containers is appropriate.

Funding Sources, Financial Implications and Impact Statement:

Adoption of this report will have no immediate influence on the costs of the City's waste management system. However, if the volume of waste managed under the system is reduced with the implementation of a deposit/return system for recyclable or reusable items, the annual cost of the City's waste management system is estimated to be lower. Deposit/return for only wine and spirit containers is estimated to reduce the cost of the City's waste management system by approximately $1,000,000.00 per year following full implementation. Comprehensive deposit/return for all alcoholic and non-alcoholic beverage containers is estimated to reduce the cost of the City's waste management system by approximately $4,750,000.00 per year following full implementation. These figures are based on 1997 actual expenditures and revenues, however, they are applied to preliminary estimates of recyclable materials in the waste that is landfilled.

Recommendation:

It is recommended that this report be received for information, and be considered in conjunction with the confidential report submitted by the City Solicitor.

Council Reference/Background/History:

Previous resolutions of the former City of Toronto and Metropolitan Councils and their committees, which are background to this report, are summarized in Appendix A.

At its meeting of January 14, 1998, your Committee requested that a report be submitted on:

"(i) the implementation of a deposit/return system for all beverage, wine and spirit containers in the City of Toronto; and

(ii) the implications of withdrawing the collection of such materials from the Blue Box Program."

At its meeting of February 4 and 5, 1998, City Council adopted the recommendation of your Committee that:

"(A) (1) ... in addition to the Council direction to staff of September 24 and 25, 1997, by the adoption of Clause No. 4 of Report No. 12 of The Environment and Public Space Committee, as amended, the Commissioner of Works develop a plan to mandate a deposit/return system being established for wine and spirit beverage containers sold in the new City of Toronto;

(2) ... the Solicitor, in consultation with the Commissioner of Works, report on any legal remedies that may be used to help establish a deposit/return system for wine and spirit beverage containers sold in the new City of Toronto;

(3) ... the Commissioner of Works' and Solicitor's reports be presented to the appropriate Committee of the new City of Toronto Council at the first available opportunity; and

(4) ... the Commissioner of Works pursue this matter with his peers across the Province of Ontario;

and further, that the appropriate City officials be authorized and directed to take the necessary action to give effect thereto;

(B) that the Province of Ontario be requested to:

(1) immediately mandate a deposit/return system for all beverage, wine and spirit containers; and

(2) reimburse the City of Toronto in the amount of approximately $2.2 million for the costs of handling Liquor Control Board of Ontario containers; and

(C) the Association of Municipalities of Ontario be requested to support the aforementioned recommendations with respect to deposit/return systems."

(Clause No. 1 of Report No. 1 of The Works and Utilities Committee.)

City Council, at its meeting of February 4 and 5, 1998, amended the above-mentioned clause by adding the following:

"It is further recommended that the Interim Functional Lead for Solid Waste Management, in responding to the direction of the Committee, be requested to separate the issue of wine and spirit containers from the issue of all other beverage containers when reporting thereon to the Committee."

At its meeting on February 11, 1998, your Committee reviewed a report dated January 28, 1998, from my Department entitled "Deposit/Return System for Wine and Spirit Containers in the City of Toronto and Implications of Withdrawing Collection of These Materials in the Blue Box Program", in which it was noted that the Waste Management Transition Work Group of the Works and Transportation Service Review Team is currently assessing, in detail, information previously developed by the various parts of the City regarding the issues of product stewardship, blue box funding and beverage container deposit/return so as to develop a consistent set of data that reflects information developed by the constituent components of the City, and that the information developed by this Group will be before your Committee at its meeting of March 25, 1998.

Executive Summary:

This report addresses the implications for the City of instituting a comprehensive deposit/return system for all beverage containers excluding milk containers. In this report, wine, spirit and beer beverage containers will be referred to as alcoholic beverage containers, and other beverage containers will be referred to as non-alcoholic beverage containers. It is also assumed that beverage containers returned under a deposit/return system will be recycled, and that the rate of return of containers under a deposit/return system is 85 percent of the total sales. Refill of containers is not specifically addressed in this report. The estimated quantities and costs in this report are preliminary and subject to refinement as the accounting systems of the constituent municipalities of the City are brought to a common basis, and as additional information is developed regarding generation rates for recyclable materials.

Comprehensive deposit/return for all beverage containers is estimated to decrease the City's overall waste management costs by approximately $4,750,000.00 per year, increase waste diversion from landfill measured by weight from 15 percent to 17.4 percent (excluding organic yard waste diversion of 59,000 tonnes per year, or approximately 7 percent) and reduce the amount of material landfilled in the City by approximately 24,000 tonnes per year, or an approximate diversion increase of 2.5 percent. Carbon dioxide emissions would be reduced by approximately 34,000 tonnes per year and would contribute to 0.6 percent of the City's goal of greenhouse gas reduction, based on the Metro "State of the Environment" Report, 1995. The estimated flow of alcoholic and non-alcoholic beverage containers to landfill and virgin materials required, with and without deposit/return, are shown in Figures 1 and 2.

The report concludes that deposit/return for alcoholic and non-alcoholic beverage containers will be financially beneficial to the City, will significantly improve the performance of the City's waste management system and will strengthen the financial and operational stability of the blue box and other City waste diversion systems.

Comments and/or Discussion and/or Justification:

Method of data gathering and analysis:

The data in this report, with the exception of greenhouse gas (GHG) emissions, is a result of analysis carried out by a staff team with representation from most of the former Area Municipalities and the former Metro Works Department. The overall analysis is the result of a combined effort of this subgroup. The staff team used an independent financial auditor as a reference in the development of their costing model and to review the findings presented in this report. However, a detailed audit of the costs was beyond the scope of the involvement of the financial auditor. The data presented in this report is the best information available at this time. It is emphasized that the issue of cost allocation for waste management activities is complex and that the costs and quantities estimated in this report are derived from the constituent parts of the new City of Toronto with seven different accounting systems and seven different data management systems. The quantities of recyclable materials in garbage collected by the City are estimates utilized in the Preliminary Metro 3Rs Strategy prepared by the Metro Works Department, dated November 28, 1996.

Diversion and fixed cost assumptions:

All estimates of cost savings resulting from deposit/return shown in this report are based on 85 percent of all containers returned under a deposit/return system and 20 percent of the collection and transfer costs of recyclable materials being fixed and not related to volumes of recyclable materials collected and processed. In order to confirm the conclusions of this report, a sensitivity analysis was carried out using lower capture rates under deposit/return, higher fixed costs for collection and transfer and lower overall estimated generation rates for containers. This analysis resulted in a range of cost saving estimates up to 20 percent lower than shown in this report.

As a result of this sensitivity analysis, it is concluded that the costs and quantities shown in this report are realistic and representative of the best information available at this time, and that it is appropriate to make policy decisions based on this information. However, it is also emphasized, as noted above, that all estimates of costs and generation and diversion quantities are subject to further review and refinement. In this report it has also been assumed that residents use their blue boxes to recycle beverage containers to a far higher level than they use the blue box to recycle other containers of the same material. This assumption was made to ensure that the estimated savings resulting from deposit/ return are not overstated.

In the report it has also been assumed that a deposit/return system will capture 85 percent of eligible materials from both the recycling and garbage streams of waste. It is likely that, under a deposit/ return system, most eligible containers subject to a deposit would be removed from the blue box where they are visible, but would not be removed from the garbage. Because we have estimated that the average net recycling cost for container materials is greater than garbage collection and disposal costs, the effect of these assumptions is to potentially understate savings resulting from deposit/ return. The above assumptions were made because there is no local information regarding actual set out of these types of containers in the blue box under a deposit/return system.

Analysis year for costs and implications for potential operational change:

Costs in this report are estimated using the City waste management system expenditures and revenues for 1997. System costs will change as new disposal capacity and processing capacity are added. However, the cost changes for options shown in this report will also apply to future system costs.

Issues related to deposit/return:

Your Committee has requested that a report be presented which addresses a number of complex and interrelated issues. In order to clearly address these issues, the report is broken down into six sections as follows:

(1) Existing waste management costs and estimated waste management costs following a deposit/ return system;

(2) Implementation of deposit/return for wine and spirit containers and/or non-alcoholic beverage containers;

(3) Compatibility of deposit/return system with blue box recycling system;

(4) Responsibility for waste management costs;

(5) Funding support from the Province of Ontario for recycling programs; and

(6) Global greenhouse gas emission impacts.

(1) Existing waste management costs and estimated waste management costs following a deposit/ return system:

(a) Estimates of quantities in the existing recycling system and in the garbage:

The performance of the City's existing recycling system can best be understood in considering the volumes of materials collected in the blue, grey and green box system and the amounts that are collected as garbage. In estimating these amounts, it should be noted that collected and processed quantities of recycled materials are known as a result of weighing under the City's data management system. However, the total quantity of the same material types contained in garbage collected by the City is an estimate based on waste surveys and other information. This estimate is based on an analysis carried out and reported in the Preliminary Metro 3Rs Strategy prepared for the Metro Works Department, dated November 28, 1996. The estimates of large fractions of eligible recyclable waste, such as paper and glass, can be estimated with greater certainty than estimates of small fractions of waste, such as aluminum cans. The accurate estimation of high value materials in the waste stream, such as aluminum, is important in considering future waste management systems, and the level of resources that should be expended to recover such materials.

The quantities of garbage and recyclable materials described in this report do not include privately collected garbage and recyclable materials. However, the impact of deposit/return on greenhouse gas emissions from privately collected recyclable materials is assessed. It is estimated that approximately 940,000 tonnes of private sector waste is generated in the City, approximately 640,000 tonnes of which was delivered to our facilities, and approximately 300,000 tonnes of which was exported to other disposal and recycling facilities. Other data sources used in calculating the estimated quantities of materials used to conduct the analysis in this report include the Canadian Soft Drink Association (CSDA) website, the Recycling Council of Ontario and the Ontario Ministry of the Environment.

While there is little evidence to support the position that more beverage container waste is recovered through the blue box than other container waste, over the next several months staff will be attempting to determine with greater certainty the relative amounts of these various beverage and non-beverage containers which exist in the waste stream.

(b) Estimated impacts of deposit/return on costs and quantities of recyclable materials landfilled and associated benefits:

Table 1 shows the quantities of blue box materials that would be captured by a deposit/return system and the alcoholic beverage container and/or non-alcoholic beverage container quantities of the same materials that would not be landfilled in the City's disposal system under a deposit/return system and the cost savings resulting from the removal of these materials from the recycling and landfill system. A deposit/ return system would also increase the City's diversion rate by approximately 2.5 percent and reduce the total amount of landfill of beverage containers, as shown in Table 2.

As can be seen from Table 1, based on current prices received for materials, deposit/return for alcoholic and non-alcoholic beverage containers is estimated to result in cost savings of approximately $4,750,000.00 per year and increase diversion from landfill by approximately 21,000 tonnes per year, based on a return rate of 85 percent for all beverage containers. The estimated cost savings shown in Table 1 are based on the avoided costs of not recycling and landfilling the various materials, of which alcoholic and non-alcoholic beverage containers are made. These cost savings per tonne of material are different from the average cost of recycling and landfilling, as shown in Table 3A.

For comparison, Table 3B shows estimated costs of the management of municipally collected waste based on market prices for fibre materials and the expected future cost of landfill disposal of approximately $50.00 per tonne. The estimated flows of alcoholic and non-alcoholic beverage containers, landfill and virgin material requirements each year are shown in Figures 1 and 2.

(2) Implementation of deposit/return for alcoholic and/or non-alcoholic beverage containers:

The City Solicitor will report separately to your Committee on any legal remedies that may be used to help establish a deposit/return system.

(3) Compatibility of deposit/return with blue box recycling system:

Under deposit/return for alcoholic and non-alcoholic beverage containers, the cost of the City's waste management system would decrease by approximately $4,750,000.00 per year. Therefore, the City will have relatively more resources to support the remaining waste management programs. This should strengthen the blue box program and make it easier for the City to pursue other waste management approaches such as organics processing. This would achieve higher levels of diversion of City waste from landfill than would be the case for similar expenditure of City funds without deposit/return. This conclusion is supported by conclusions contained in a report (January 27, 1993) entitled "Bottle Bills and Curbside Recycling: Are They Compatible?", prepared by the United States Congressional Research Service, which states:

"Studies suggest that local governments would achieve a greater diversion of solid waste from curbside disposal at a lower cost per ton if both a bottle bill and a curbside collection program were in place."

(4) Responsibility for waste management costs:

Much of the recent publicity regarding waste management costs has failed to address the issue of who should pay these costs. Waste management costs can be paid through municipal taxes, user fees or by the producer. Each of these options is reviewed below.

(a) Municipal Taxes:

The existing waste management system, which is largely funded through municipal taxes, has a net cost of approximately $77,000,000.00 per year and, based on the estimates shown in Table 4, could increase in cost to approximately $126,000,000.00 per year in 2002 with no increased waste processing capacity. A significant portion of the taxes that fund the system are paid by commercial businesses that receive no City waste management services (generally retail and office and industrial premises). Because there are no direct costs to the users for waste management services, there are no direct incentives to the users of the system to divert waste from landfill or to purchase goods that minimize waste management and environmental impacts. There are also no financial incentives for manufacturers to produce and market products that minimize waste management and environmental impacts.

On the other hand, the existing property and business tax funded waste management system results in a universal and cost-effective waste management system, for which the gross cost is currently about 10 cents per day, per person receiving service for collection, processing and disposal of all municipally collected waste.

(b) User Fees:

User fees result in the user paying the actual cost of waste management services. Such fees can range from a flat rate per residence to a weight based or per container fee. In many municipalities where user fees have been implemented, recycling is provided free, which results in increased recycling and reduced garbage disposal. As can be seen from Table 3A, recycling of container materials is more expensive than landfilling these materials; hence a shift towards increased recycling of many container materials will increase the cost of the waste management system and the total fees required.

Unless a municipal monopoly is maintained, private waste management operators may be able to offer waste management services (which may not include comprehensive recycling services) to residents at a lower cost than any user fees charged by the City. If residents transfer to service by private contractors, this could result in financial instability of a user fee based municipal waste management system, and contribute to a need to charge increased fees to the remaining users of the system or to reduce services provided. The actual introduction of user pay will also introduce a cost for collecting fees which will increase the cost of the waste management system.

In summary, user pay is likely to result in increased recycling. Increased recycling of container materials, other than aluminum, will result in increased costs to residents. User pay will also result in decreased municipal taxes charged to businesses. It could also result in financial instability of the existing comprehensive City waste management system.

(c) Producer Responsibility (Product Stewardship):

Under this system, the producer of a product is responsible for waste management costs either by designing the product such that it does not impact the municipal waste management system (as is the case for Ontario beer containers), or by contributing financially to the cost of the waste management system (as was formerly the case with Ontario Multi-Material Recycling Inc. (OMMRI)).

Deposit/return is a form of product stewardship. Full product stewardship encourages the producer to minimize the impacts of the products on the waste management system, and allows the producer to do this in an innovative and entrepreneurial fashion. This allows private sector creativity to minimize costs and product environmental impacts.

Product stewardship models can be bureaucratic, and it is important to design such systems to minimize bureaucracy and maximize the potential for innovation. Of course, the "producer" does not actually pay for the cost of product stewardship: this cost is actually borne by the purchaser of the product as noted in the Executive Summary of this report. However, these increased costs may be lower than the reduced cost of municipal waste management, resulting in an overall saving to the consumer. Various studies have been produced to date with no conclusive evidence as to whether the net cost to the consumer increases or decreases under product stewardship.

The alcoholic and non-alcoholic beverage industries, with the exception of the Ontario beer industry, which currently manages its own containers, would encounter additional costs in managing the containers of their products under such a system. These additional costs have not been stated by the affected industries. However, the beer industry advised in 1997 that the net cost of the existing system of deposit/return for beer containers is approximately $40 million per year for Ontario or $7 million per year for beer sold in Toronto. In 1997, the beer industry sold approximately 1.8 billion containers. The net cost for managing each beer container is approximately 1.8 cents. Approximately 315 million beer containers are marketed per year in Toronto. Excluding beer, approximately 43 million glass alcoholic beverage containers are marketed in the City by the LCBO, along with approximately one million PET alcoholic beverage containers. Additional alcoholic beverage containers are marketed by other wine stores. Approximately 600 million non-alcoholic containers are marketed each year in the City.

This report concludes that deposit/return for alcoholic and non-alcoholic beverage containers will be financially beneficial to the City, will significantly improve the performance of the City's waste management system and will strengthen the financial and operational stability of the blue box and other City waste diversion systems.

(5) Funding support from the Province of Ontario for recycling programs:

While the Province of Ontario has provided substantial financial support to establish waste diversion programs, this financial support has diminished in recent years as the programs have matured. It may be reasonable to request the Province to allocate some or all of the Environmental Levy (approximately $37 million per year) on LCBO containers to municipal waste diversion programs, recognizing the impact that LCBO containers have on those programs. This would enable municipalities to bring waste diversion programs into a more financially sustainable position while the Province addresses in detail the potential for a Province-wide deposit/return system.

(6) Global greenhouse gas (GHG) emission impacts as a result of recycling versus new production of alcoholic and non-alcoholic beverage containers:

Deposit/return systems are commonly used for both refilling containers and recycling of recovered materials. Information regarding the relative environmental merits of using deposit/ return for the refilling or recycling of containers is somewhat inconclusive. Recent evidence suggests that when comparing containers of the same materials, refilling containers approximately eight or more times has lower impacts than recycling containers. However, in estimating reductions of energy use and CO₂ emission reductions for the purpose of this report, it has been assumed that all recovered materials will be recycled rather than reused. Greenhouse gas reduction estimates are solely based on the amounts of material that will be recycled instead of landfilled under a deposit/return system.

It is estimated that deposit/return for all alcoholic and non-alcoholic beverage containers will reduce the City's contribution to global CO₂ production by 34,000 tonnes per year or 0.6 percent of the City's GHG reduction goal based on diversion of container materials, other than glass from landfill to recycling, under deposit/return. This is summarized in Table 5. This analysis excludes an estimate of greenhouse gas reductions for increased glass recycling because GHG reduction data for glass recycling was unavailable from the source document used in this calculation.

A report for the United States Environmental Protection Office entitled "Preliminary Analysis: The Costs and Benefits of Bottle Bills," January 1995, states:

"Elevated recycling rates due to bottle bills (*) reduce many types of air and water pollution including greenhouse gas emissions. One possible method of evaluation of these benefits, the system of evaluation developed in the Tellus Institute Packaging Study, suggests that the reduction in emissions would be worth $1.60 per capita annually. Most of the benefit is due to reduced power plant emissions resulting from the increase in aluminum recycling. Greenhouse gas emissions from bottle bills could amount to 1.74 million metric tons of carbon nationwide, again largely due to the increase in aluminum recycling."

* The term "bottle bill" legislation refers to deposit/return for drink containers in the United States.

The evaluation conducted by City staff also indicates that, of all subject materials, the elevated recovery of aluminum associated with overall increased material recovery under deposit/ return would result in the greatest contribution to reduced CO₂ emissions. Approximately 29,000 tonnes (85 percent) per year of reduced CO₂ emissions are estimated to result from increased aluminum can recovery.

As noted earlier, there is some uncertainty concerning the total quantity of aluminum and the total quantity of aluminum beverage containers in the municipally collected waste stream. However, because deposit/return systems are considered to be highly effective at removing subject materials from both publicly and privately collected waste, the benefits with regard to CO₂ reduction described above are likely to be achieved regardless whether the subject material is generated by individuals whose waste is collected either publicly or privately.

It is also important to understand that material volumes contribute to the generation of CO₂ emissions in the collection and transfer components of waste management systems. For example, one collection vehicle can carry approximately seven tonnes of paper and, for each tonne of paper collected, approximately 4.4 litres of fuel are used and 12 kilograms of CO₂ are emitted. Two collection vehicles are required to carry approximately seven tonnes of blue box container materials, which result in the use of approximately eight litres of fuel, and the emission of approximately 22 kilograms of CO₂ (approximately 183 percent of the amount for the collection of a tonne of paper) for each tonne of blue box material collected. If the composition of blue box container materials changes, for example, by substituting lower density containers for higher density containers, then the number of collection vehicles required for the collection of a given weight of containers will increase, and hence, CO₂ emissions per tonne of material collected will increase. These potential reductions in CO₂ emissions resulting from deposit/return are not included in the estimates shown in Table 5.

Summary:

Under a deposit/return system for alcoholic and non-alcoholic beverage containers, it is estimated that the City's diversion rate will increase by approximately 2.5 percent and annual waste management costs will decline by approximately $4,750,000.00 per year. Carbon dioxide emissions will decrease by approximately 34,000 tonnes per year, contributing up to 0.6 percent to the City's goal of 20 percent greenhouse gas reduction.

Based on the analysis described in this report, there will be significant cost benefits to the City and environmental benefits in implementing deposit/return for alcoholic and non-alcoholic beverage containers. These benefits must be weighed against the increased costs and inconvenience to consumers that will result from the implementation of deposit/return for these containers.

Contact Name and Telephone Number:

John Warren, Director of Operations and Sanitation

Toronto Community Council Area

Phone: (416) 392-1846; Fax: (416) 392-0396

E-Mail: "jwarren2@city.toronto.on.ca"

Appendix A

Resolutions of the Former City of Toronto and Metropolitan Councils

and Their Committees

At its meeting of September 22 and 23, 1997, in considering Clause 97 contained in Report No. 11 of the City Services Committee, the former City of Toronto Council:

"1. Requested that the Commissioner of City Works Services, in consultation with the Metro Commissioner of Works and other area municipality Works Commissioners, determine the full system costs for managing non-refundable alcoholic and non-alcoholic beverage containers in the municipal solid waste stream, including the costs associated with garbage and recyclable material collection, transfer, marketing, and disposal of non-recovered beverage containers for the consideration of the Council of the new City of Toronto.

5. Endorsed, in principle, the action taken by North York City Council, supported the extension of the North York By-law to all beverage containers, and deferred passage of a by-law to impose recycling/disposal charges upon the retailers and producers of all beverage containers for the consideration of the new City of Toronto's Council in 1998 and, in the meantime, instructed the appropriate City staff to consult with staff of the other Area Municipalities and Metro with respect to determining the costs of collection and disposal and monitoring the operation of any municipal by-laws coming into force before the end of 1998."

At its meeting of December 10 and 18, 1997, the Metropolitan Council adopted the recommendations of the Environment and Public Space Committee:

"(1) That in addition to the Council direction to staff of September 24 and 25, 1997, by the adoption of Clause No. 4 of Report No. 12 of The Environment and Public Space Committee, as amended, the Commissioner of Works develop a plan to mandate a deposit/return system being established for wine and spirit beverage containers sold in the new City of Toronto;

(2) that the Solicitor, in consultation with the Commissioner of Works, report on any legal remedies that may be used to help establish a deposit/return system for wine and spirit beverage containers sold in the new City of Toronto; and

(3) that the Commissioner of Works' and Solicitor's reports be presented to the appropriate Committee of the new City of Toronto Council at the first available opportunity."

(Clause No. 2 contained in Report No. 13 of The Environment and Public Space Committee, adopted by Metropolitan Council at its meeting of December 10 and 18, 1997.)

Table 1

Estimated Impact of Deposit/Return (85% Capture)

on Recycling and Landfill Volumes and Costs

Based on 1997 Costs and Managed Volumes*

* Includes materials managed in the City's waste management system, excluding waste delivered to City facilities under private contracts and directly from agencies, boards and commissions.

Deposit/return impact based on 85 percent return rate for all beverage containers.

Table 2

Estimated Impact of Deposit/Return (85% Capture) on City's Waste Diversion Rate

For Municipally Collected Wastes

* Excluding diversion of 59,000 tonnes of organic yard waste (approximately 7 percent waste diversion) and other organic waste diversion. As a consequence of excluding these items, this stated diversion rate is different from the different diversion rate shown in a separate report to your Committee regarding the City's overall diversion of waste from landfill. Also excluding privately collected and privately delivered wastes and wastes from Agencies, Boards and Commissions.

Table 4

Estimated Financial Impacts of Increased Landfill Costs

and Decreased Revenues for the Sale of Fibre

on the City's Waste Management Costs

* Excludes costs and revenues from private waste disposal and cost of processing of compostable materials. The existing net cost of the waste management system including these items is approximately $77,000,000.00 per year.

** The amount shown represents the current net annual revenue from the acceptance of commercial wastes at the City's Keele Valley Landfill Site.

Table 5

Estimated CO₂ Equivalent Reductions

Resulting from Comprehensive Deposit/Return on

Alcoholic and Non-Alcoholic Beverage Containers

* ECO₂ is the equivalent impact of CO₂ emissions for all gasses emitted in virgin material or recycling processing (including such activities as resource mining and transportation).

The Works and Utilities Committee also submits the following communication (March 12, 1998) from the City Clerk:

City Council, at its meeting held on March 4, 5 and 6, 1998, adopted, without amendment, the following Motion:

Moved by: Councillor Mihevc

Seconded by: Councillor Adams

"WHEREAS the Province may be considering the issues of deposit/return in this year's budget due in April; and

WHEREAS the City has a tremendous interest in this matter and would benefit from a move from disposable to refillable beverage containers; and

WHEREAS a workshop or day long conference on Earth Day would be an opportunity for highlighting the issues and advancing the City's interests;

NOW THEREFORE BE IT RESOLVED THAT the Chief Administrative Officer be given the authority to organize an event on Earth Day, April 22, 1998, or in Earth Week, to highlight the viability of deposit/return systems; and be requested to submit a report to the Works and Utilities Committee for its meeting to be held on March 25, 1998, on this proposal."

The Works and Utilities Committee also submits the following report (March 19, 1998) from the Interim Functional Lead for Solid Waste Management:

Purpose:

To undertake an analysis of the actual costs of recycling and landfilling programs provided by the City of Toronto, and to compare these costs with other published information.

Funding Sources, Financial Implications and Impact Statement:

This report identifies current costs, and will have no impact on the City's operational budget.

Recommendation:

That this report be received for information.

Background:

In January 1998, a number of articles were published regarding the City of Toronto's recycling and landfill costs, and the numbers quoted were questioned by some people regarding their accuracy.

The Commissioner of Works and Emergency Services made a commitment to report to the March 25, 1998 meeting of the Works and Utilities Committee with a review of the costs of recycling and landfill. In order to address the costs associated with the recycling and landfill programs, it was necessary to create a staff team that had a member from each of the Works Departments of the previous seven municipalities. This committee has attempted to prepare more accurate estimates of the total quantity of recyclable materials in the municipally collected waste stream. This staff team has worked diligently and compiled a huge amount of raw data from which to identify costs for the existing recycling and landfilling programs. Staff were assisted in the exercise by an external consultant for KPMG who has advised an appropriate cost accounting for the program.

Discussion:

It has become very clear that trying to identify a single cost per tonne for recycling and landfilling is very misleading and can fluctuate considerably when we attempt to define the value of providing a program according to the net cost of operations. The cost of recycling and landfilling different materials varies significantly and is impacted by the density of the material, the collection processing and disposal costs of the different materials and, more importantly, the market value of any material sold. For example, materials such as newspapers which have a high density and high contract value under the existing contract have a low recycling net cost, whereas materials such as Polyethylene Terephthelate (PET) which have low density and low value per cubic metre of material collected and processed end up having a high recycling net cost per tonne. It has become clear that the average recycling net cost cannot be used in determining how changes in our recycling program will affect City costs. The impact of adding or deleting a specific material in the recycling program could be considerably different from the average recycling net cost, depending on the market value of the material at any point in time and the density of the material and hence its processing and collection cost relative to average program and collection costs.

We determined that we would need specific external advice to assist our internal staff committee in managing its efforts to develop a model which would identify and account for the costs of conducting our programs on a full-cost basis under generally accepted accounting principles. In common with many municipalities in Ontario, the new City of Toronto and the seven predecessor municipalities have structured their financial records in a manner which is designed to support the preparation of financial statements and accountability to budgeted estimates that are based on accounting principles prescribed by the Ministry of Municipal Affairs and Housing. While it is important that these needs be met, systems structured to meet only these requirements often fall short of being able to generate consistent information about the costs of programs for two reasons:

(1) all the costs relative to the delivery of each program may not be accounted for in the accounts of the department delivering the program; and

(2) the modified cash basis accounting methodology prescribed by the Ministry of Municipal Affairs and Housing does not include some costs (e.g., consumption of capital assets and some employment related costs) on the full accrual basis needed to completely account for the program delivery cost. A full accrual basis of accounting would be needed in order to compare City of Toronto costs with, for example, comparable private sector program costs.

To address these shortcomings and ensure a high level of accuracy in the costing of programs, a few municipalities have developed "activity-based costing" models and systems for certain key programs. The predecessor municipalities had not yet conformed their accounting practices. This has provided us with additional challenges. Only the Scarborough Public Utilities Commission of the former municipalities had moved to an activity-based costing model to obtain true program costs.

Staff are confident that our internal processes in place to determine the tonnages of recycling materials actually collected and processed give us very accurate information. Other than the tonnages of material sold to the market, however, the information that was not readily available was the generation rates of the various materials that are eligible in our recycling programs. The generation rates are required in order to obtain estimates of the amount of material that is going to landfill in the waste stream and is not being separated at source by our customers.

It was therefore necessary for us to estimate, or use available generation rates for the various materials, such as those provided in the "Preliminary Metro 3Rs Strategy Draft Report" (November 28, 1996), so that we could determine the estimated quantity of each type of eligible recyclable material that is not collected in our current blue box program. The only way for the City of Toronto to obtain better estimates of the amount of material that is in the waste stream that really should be in our recycling program is for us to conduct waste audits on a regular basis. This requires periodically sampling the waste stream and pulling apart garbage bags to gain an insight as to the amount of material ending up in our landfills that should have been recycled.

The Audit Function on this Project:

In order to provide the staff team with appropriate advice, we asked the City Auditor to provide us with the names of three firms capable of assisting the group in our undertaking. It turns out that one of the names put forward is the current auditor for the former Cities of Scarborough and York who is, and will be, completing the audits of accounts for the 1997 fiscal year. Accordingly, we invited Bob Correll of KPMG to assist the team in addressing the costs that should be associated with recycling and landfill programs. Bob Correll is also actively involved with a number of finance-related committees involving municipal officials, and in April, will become the Chair of a task force reviewing the issue of accounting for physical assets by local governments for the Public Sector Accounting and Auditing Board of the Canadian Institute of Chartered Accountants. The auditor will attend the Committee to discuss the advice provided to staff in the development of the costing model and to answer questions that may be raised with respect to the process.

Amount of Recyclable Material Ending up in Landfill:

We are often asked how much material that is collected in the blue, grey and green box systems of our recycling program actually does end up in the landfill site. The material known as residue refers to non-marketable materials that were collected in the City's recycling program yet are ineligible to be sold to the markets. While some of the material is removed at curbside by our collection staff, there are many materials that do end up in our processing facility that should not have been in the system. These ineligible materials that are residual to the process are then transported to the landfill site for disposal. Table 1 below shows the tonnes of residual material that were collected in the City's recycling program in 1997, but due to their ineligibility for our markets, had to be taken to landfill.

Table 1

Amounts of Recyclable Materials collected in Blue, Grey and Green Box Program

Actually Recovered and Delivered to Landfill - 1997

Costs of the Recycling and Landfilling Programs:

When reviewing costs, it is important to bear in mind the difference between our gross expenditure for the program and the net cost which takes into account the current value received for marketable products. As indicated earlier in the report, the market value for recyclable material can fluctuate considerably for some materials, such as aluminum, fibre and plastics. For example, the current price enjoyed by the City for fibre material is locked in at a price considerably above the current market value. When this contract is retendered, there may be significant differences in the revenue received. It is difficult therefore to continue to compare the net costs of our system, and in this report we have attempted to start with gross expenditures and then deduct revenue so that in future we can continue to compare gross expenditures for our programs.

When reviewing both the gross and net costs outlined in this report, it is important that one should not assume that by eliminating any given class of material from collection, the collection costs can be reduced by the specific cost that we have allocated for that class of material. It will still be necessary to collect all of the other materials and a significant component of collection costs relates to the activity of travelling between individual collection points, as well as travelling to and from the yards, transfer stations and material recovery facilities. As identified in our report on deposit/return, significant volumes of recyclable materials have to be excluded from collection in order to reach a threshold which will result in significant cost savings.

It is also necessary to take into account the volume taken up by any element contained in our recycling program, not just the weight component, when considering the impact of adding or deleting materials from eligibility in our program. As can be seen from the revenue from sale of materials, shown in Table 3, aluminum cans are very light yet contributed significantly to our total revenue in 1997. Conversely, materials such as PET contributed a relatively small amount to the total revenue. Revenues from paper fibre amounted to 67 percent of total recycling revenues received in 1997.

Any average cost used, or net cost of our recycling program is merely an average cost of all of the materials taken at one point in time based on the current composition in our system and the current revenue rates for the marketable materials.

Table 2 below shows the 1997 costs of recycling and landfilling compared with the cost for recycling and landfilling published earlier this year. While we do have the breakdown of material of actual tonnages of material collected, processing and sold, we do not have reasonable estimates of the tonnage of each eligible material that goes in the waste stream because it is not separated at source by our customers. We have therefore grouped the materials picked up in our blue box and our grey and green boxes to compare so that the costs of fibre materials and container materials are separated, but the costs of individual container materials are not separated. In effect we have a basket of different materials and to allocate collection, processing and disposal cost per individual material is inappropriate. Any such cost would definitely not represent the incremental cost of deleting this particular material. Table 2 shows that the average net cost of fibre recycling is much lower than the average net cost of container recycling. This is due to the higher density of fibre and its lower collection cost per tonne, and the higher revenue received from fibre as shown below. The costs of recycling and landfilling different types of materials are shown in more detail in Table 4. Landfill costs are shown in Tables 2 and 4 as a uniform cost per tonne. In fact, different materials have different densities in landfill. However, little empirical data is available regarding landfill densities, and no variation in unit cost is shown in the analysis. More work is required to understand the cost of landfilling individual types of recyclable materials.

Table 2

Comparison of Previously Published Recycling and Landfill Costs

and Costs Shown in this Report

* Residue disposal and Metro administrative costs.

** Excludes cost of waste haul to USA (1997 costs).

*** Includes cost of haul to and disposal of waste in the USA.

Revenue from Sale of Materials:

Table 3 below shows the total revenue received for each eligible recyclable material for the City of Toronto in 1997. It is important to note that the revenue for the recyclable materials can vary considerably from year to year, and in the case of aluminum the City of Toronto obtains quotations every two weeks due to the volatility of the market price for aluminum.

Table 3

Revenue Received for Recyclable Materials - 1997

Table 4, attached, shows the existing relative costs of recycling and landfilling based on current prices received by the City, which averages a gross cost of $101.63 per tonne for recycling before revenues, $77.70 per tonne after revenues for recycling and $86.00 per tonne for landfill. As can be seen from Table 4, while the average cost of recycling is $77.70 per tonne after revenues, the average cost of fibre recycling is $100.00 per tonne before revenues, $4.55 per tonne after revenues, whereas the average cost of container recycling is $382.35 per tonne before revenues and $264.71 per tonne after revenues. The gross cost of recycling container materials is much higher than the gross cost of recycling fibre materials because the lower density container materials are more expensive to collect and process per tonne of material. There are wide variations in the costs of recycling containers of different material composition. Only aluminum containers result in a net revenue for recycling, while all other containers result in net costs, some of which are very substantial.

Estimates of Quantities of Material in the Recycling and Waste Streams:

The performance of Toronto's existing recycling program can best be understood by considering the amount of material actually collected in the blue, grey and green box systems, and estimating the amounts of the same material that are not separated out by our customers and are therefore collected as garbage. Based on the City's data management system, we have fairly accurate tonnages of material that is collected, processed, and sold to markets as a result of weighing all of the material both entering and leaving our system. However, the total quantity of the same types of materials contained in the garbage is an estimate based on waste surveys and other information. Our estimates are based in part on analysis carried out and reported in the Resource Integration Systems Inc. (RIS) study conducted for the Metro Works Department as part of the preliminary Metro 3Rs Strategy. It is easier for us to accurately estimate the larger volumes of materials such as paper and glass than it is the smaller volumes of items such as aluminum cans. However, the accurate estimation of high value materials such as aluminum is important to us in considering future waste management strategies to recover such materials from the waste stream. The quantities of materials described in this report do not include privately collected recyclable material and garbage. All of the figures are based on our existing programs and the impact of a deposit/return system is discussed in a separate report to the Committee.

Summary:

When considering the previously published figures of average recycling and landfill costs mentioned above, it should be noted that the six previous Area Municipalities used different methodologies when reporting their program costs. The differences between these methodologies have been addressed, but future work in bringing all accounting systems to the same basis will result in further refinements of stated unit costs. The previously published costs were also based on 1998 projections and collection volumes for recyclable materials, whereas the revised costs were based on 1997 actual costs and marketed volume of recyclable materials. Future projected changes in recycling and landfill costs are addressed in our separate report dated March 18, 1998, entitled "The Issues Associated with a Deposit/Return System for Alcoholic and Non-Alcoholic Beverage Containers." We found it necessary to engage the services of our external auditor in order to standardize the elements that should be reported as part of cost allocation, and it was through this process that we determined the difference in the original reporting values. Based on the advice given by the auditor, we believe that these figures more accurately represent the costs of our two programs based on 1997 figures. Even though the 1997 expenditures have not been audited, we believe these numbers more accurately reflect the costs of the programs.

As outlined in our report on deposit/return implementation and impacts, there are large amounts of recyclable materials ending up in our landfill due to the fact they are not being separated at source by residents and businesses. The cost of managing and landfilling these materials that should ideally be separated out is considerable, and if through mechanisms such as deposit/return we can extract these materials, then the performance of our waste management system will improve, costs will decrease, and there will be less material going to our landfill site.

Environmental Benefits of Recycling Programs:

The analysis shown in this report indicates that overall net recycling costs are similar to landfill costs. However, these net recycling costs are dependent on fluctuating material prices and the cost of recycling individual materials varies significantly. Due to the large quantity of paper waste in the recycling and garbage waste streams, the price of paper is the most sensitive factor in determining net recycling cost.

This conclusion does not negate the validity of the blue box program. There are significant environmental benefits from recycling, including reduced greenhouse gas emissions, reduced resource use, reduced consumption of landfill space and reduced leachate emissions. The analysis highlights the fact that some individual recycling activities are more expensive than others, and other techniques of waste management such as reduction and reuse may result in improved environmental results, possibly at lower overall costs. A separate report to your Committee addresses this issue, with respect to the concept of deposit/return for alcoholic and non-alcoholic beverage containers.

The analysis also suggests that in considering future waste management strategies for the City, other concepts such as "two stream" collection/processing and centralized composting and mixed waste processing should be addressed in detail, because, even if deposit/return is instituted for alcoholic and non-alcoholic beverage containers, large amounts of eligible recyclable materials (other containers and fibre) will remain in the recycling and garbage stream. These other methods have the potential, possibly in tandem with the blue box program, to capture large amounts of these materials and improve the environmental performance of the City's waste management system.

This report, together with the report regarding deposit/return, also highlights the issue of needed material recovery facility (MRF) capacity. Decisions regarding expansion of MRF capacity should have regard for potential changes in container processing requirements as a result of institution of deposit/return for alcoholic and non-alcoholic beverage containers and/or mixed waste processing.

Conclusions:

The detailed analysis described in this report has resulted in reassessment of average recycling costs, after revenues from the sale of materials, from $59.00 per tonne to $77.70 per tone. However, the analysis has shown that market prices for materials are a very significant factor in net recycling costs, and that the cost of container recycling (blue box materials) is significantly higher than fibre recycling costs, particularly as a result of current high revenues received for fibre materials.

Assessments of future changes to the City's waste management system must include detailed analysis of the impacts of changes in collection on processing costs and revenues for the individual materials affected by the changes so that accurate predictions of the expected cost impacts of those changes and the impacts of future market prices can be made. It is also necessary to carry out more analysis to understand the landfill costs for different types of materials. This will assist in gaining a better understanding of the true costs of landfill and a better understanding of the relative costs of recycling and landfill for individual materials.

Contact Name and Telephone Number:

John Warren, Director of Operations and Sanitation

Toronto Community Council Area

Phone: (416) 392-1846; Fax: (416) 392-0396

E-Mail: "jwarren2@city.toronto.on.ca"

The Works and Utilities Committee reports, for the information of Council, having also had before it during consideration of the foregoing matter the following communications:

(i) (March 16, 1998) from the City Solicitor submitting a confidential report respecting implementation of a deposit/return system for alcoholic and non-alcoholic beverage containers;

(ii) (January 27, 1998) from Mr. John Jackson, Coordinator, Citizens' Network on Waste Management, requesting the opportunity to appear before the Committee regarding deposit/return systems and refillables as components of a new materials management strategy for the City of Toronto; and forwarding a copy of a report entitled "A Strategy to Promote Refillables & Reuse in Ontario", and a communication to the Minister of Environment and Energy with respect thereto;

(iii) (January 27, 1998) from the Clerk-Treasurer, Township of Hagarty & Richards, advising that the Council for the Township of Hagarty and Richards is requesting endorsement of a resolution dated January 20, 1998, wherein it is resolved that the manufacturers of products placed in containers be required to offer a deposit and refund system for the return of these containers to the place of purchase once empty;

(iv) (March 14, 1998) from Mr. Jeffrey F. Stuart, New York City, forwarding an article from the March 10, 1998 edition of The New York Times respecting the issue of refillable beverage packaging; and

(v) (March 24, 1998) from Mr. Joseph P. Hruska, Vice President, Municipal Development, Corporations Supporting Recycling (CSR), requesting that if the report dated March 18, 1998, from the Interim Functional Lead for Solid Waste Management is not received for information, the Committee defer consideration of this report until its next meeting.

The following persons appeared before the Committee in connection with the foregoing matter:

- Mr. John Jackson, Coordinator, Citizens' Network on Waste Management;

- Mr. Geoff Rathborne, Vice-President, Market and Technical Development, CSR: Corporations Supporting Recycling; and

- Mr. Anthony G. van Heyningen, Manager, Environmental Affairs, Canadian Soft Drink Association.

(A copy of Figures 1 and 2 referred to in the foregoing report dated March 18, 1998, has been forwarded to all Members of Council with the supplementary agenda for the Works and Utilities Committee meeting of March 25, 1998, and a copy thereof is on file in the office of the City Clerk.)

(City Council on April 16, 28 and May 1, 1998, had before it, during consideration of the foregoing Clause, the following report (April 9, 1998) from the City Solicitor:

Purpose:

The Works and Utilities Committee, at its meeting of March 25, 1998, received a confidential report from the City Solicitor respecting implementation of a deposit/return system for alcoholic and non-alcoholic beverage containers sold in the new City of Toronto. The report was submitted further to the direction of Council in adopting, at its meeting of February 4 5, and 6 1998, among other recommendations, the recommendation of the Works and Utilities Committee to adopt the recommendations contained in Clause No. 4 of Report No. 12 of Metro's Environment and Public Space Committee, adopted as amended by Metro Council. One of those recommendations was:

"(2) that the Solicitor, in consultation with the Commissioner of Works, report on any legal remedies that may be used to help establish a deposit/return system for wine and spirit beverage containers sold in the new City of Toronto;"

The Committee requested that a public report be submitted directly to Council for its meeting on April 16, 1998.

Recommendations:

It is recommended that, should City Council wish to proceed with the implementation of a deposit/return system for beverage containers, the Province be requested to enact legislation granting the City the power to do so.

Comments:

(a) Waste Management Legislative Framework:

The only explicit legislative authority to authorize the implementation of a deposit/return system arises pursuant to the prohibition contained in subsection 88(1) of the Environmental Protection Act ("the EPA"). That subsection states:

"No person shall use, offer for sale or sell any packaging, container or disposable product or any material for use in packaging, containers or disposable products contrary to this Act or the regulations."

Subsection 176(7) of the EPA provides statutory authority for extensive Provincial regulations relating to the sale of containers, including, in part:

(i) defining "returnable" containers;

(ii) regulating the amount, terms and conditions of deposit;

(iii) regulating the stocking, display, sale, advertising and offering for sale of any container (including only in a class of container that may be prescribed);

(iv) requiring the placement of a mark on containers respecting any payment to be made for their return;

(v) requiring and regulating the payment of refunds; and

(vi) requiring and regulating the acceptance and collection of any container.

Therefore the authority to implement a deposit/return system is expressly provided for by a regulatory scheme under the provisions of the EPA.

There are no similar legislative provisions providing the City with the authority to pass a by-law requiring a deposit/return system for beverage containers within Toronto. The City's waste management powers flow from section 208.2 of the Municipal Act (hereinafter referred to as the "Act") which states as follows:

"A local municipality may pass by-laws to establish, maintain and operate a waste management system."

In turn a "waste management system" is defined as facilities and services owned, operated or controlled by a municipality for the management of waste. The City's waste management powers are restricted therefore to the establishment of its own system and not to the regulation of waste management generally. For greater certainty, section 208.6(3) of the Act states that a by-law of a local municipality applies only to a waste management system of the local municipality.

Given that the City does not currently have the express power or necessarily incidental powers to regulate waste management in order to compel a deposit/return system, the discussion that follows focuses on two subject areas relating to municipal powers:

- the legislative changes contemplated by enactment of a new Municipal Act, the draft of which is currently the subject of public consultation, and

- other powers contained in the Act that may indirectly compel implementation.

(b) The New Draft Municipal Act:

The new Draft Municipal Act (hereinafter referred to as the "Draft Act") has been released for public consultation. If enacted in its current form, it would confer on municipalities the capacity, rights and powers of a natural person for the purpose of exercising its authority under any Act. Municipalities would also have governmental powers within broad spheres of jurisdiction, including "Health, safety, protection and well-being of people and the protection of property" and "Waste management". The governmental power would include the ability to prohibit as well as regulate and to provide for a system of licences and approvals. There are, however, statutory restrictions surrounding the mandates that are granted. The statutory restrictions are either general, specific or residual.

General: A by-law is without effect to the extent of any conflict with a provincial or federal Act, a regulation or enactment (e.g., approval or permit) made under such an Act. If a matter is subject to provincial regulation, a by-law (including licensing conditions) is without effect to the extent that it prohibits or regulates the matter in substantially the same way or in a more restrictive way than the provincial regulation.

Specific: In the "waste management" sphere of jurisdiction, a municipality does not have power to pass by-laws regulating or prohibiting with respect to systems owned by or operated by or on behalf of a person other than the municipality.

Residual: The Province may by regulation restrict the power of municipalities under the Municipal Act or any other Act.

In short, the proposed Draft Act would not broaden the ability of a municipality to implement a deposit/return system and in fact, by addressing "waste management" specifically to state that a municipality cannot regulate systems owned or operated by others, may be considered more restrictive in terms of a municipality being able to implement such a system.

(c) Other Powers Indirectly Compelling Implementation of a Deposit/Return System:

Examples of indirect approaches to implementation based on other powers besides the waste management power include:

(i) the short-lived enactment last year by the City of North York of a by-law enacted pursuant to the provisions of section 220.1 of the Act to compel service fees from vendors of alcoholic beverage containers (with exemptions for deposit/return systems), and

(ii) the argument that has been made by deputants that the City has the legal authority to establish a scheme for deposit/return by using its general licensing powers (Part XVII.1 of the Act).

Before embarking on any specific discussions of such indirect approaches, however, the existence of a general limitation on the authority of Council to enact by-laws should be pointed out. This limitation or restriction can be expressed as:

(i) the inability of municipalities to enact by-laws that conflict with provincial legislation, and

(ii) the courts' wariness of colourable attempts by governments to legislate indirectly when direct powers to legislate have been prohibited.

Accordingly, while the consideration of specific approaches are discussed below, any by-law based on such approaches would likely be found invalid for the following reasons:

(i) Any such by-law would likely be viewed by the courts as a colourable attempt to regulate in the area of waste management beyond the City's current powers, and

(ii) It is likely that any such by-law, even if otherwise found to be within the power conferred on the municipality, would be considered to be invalid as being in conflict with provincial legislation. In this respect, where a by-law enacted pursuant to a general statutory delegation of authority deals with subject matter which is dealt with in a comprehensive way in a provincial statute, courts have held such by-laws to be ultra vires the municipality. For example, in the case of Superior Propane v. York (City), (1995) 23 O.R. (3d) 161, the Court of Appeal for Ontario considered a by-law of the City of York passed under the general authority delegated to the City by the Planning Act. This by-law purported to regulate the storage and distribution of propane in the municipality. The Court declared the by-law ultra vires the municipality on the basis that "the Energy Act, R.S.O. 1980, c. 139, and the regulation enacted under it contain a comprehensive scheme to regulate propane dispensing, installation, handling and storage and that these matters are not subject to legislative authority by municipalities."

Subject to the above caveat and the conclusion that arises from it, as stated above, there are four approaches, discussed below, that have been considered in the preparation of this report in relation to the potential to implement a deposit return by-law. The approaches based on use of service fees and licensing have been the subject of public commentary and deputations. The approaches are as follows:

(1) deposit/return as an exemption ancillary to the imposition of service fees under section 220.1 of the Act;

(2) deposit/return as an exemption ancillary to the imposition of licensing fees or as a condition of licensing pursuant to section 257.2 of the Act;

(3) deposit/return as an exemption ancillary to the imposition of waste management fees or as an "incentive" authorized pursuant to the powers contained in section 208.5 (waste management powers) of the Act; and

(4) the use of the municipal residual power, i.e., the health safety and welfare section of the Act;

(1) Deposit/Return as an Exemption Ancillary to Service Fees:

This option has been foreclosed. The former City of North York enacted a by-law in September of 1997 which provided for the imposition of service fees on vendors of alcoholic beverages. The service fees imposed were based on the cost recovery from the major wineries, including the LCBO, of the municipal waste management of alcoholic beverage containers. The by-law would have allowed an exemption from the payment of service fees based on implementation of a deposit/return system.

The Province quickly filed Ontario Regulation 352/97 amending Ontario Regulation 26/96 in relation to the fees and charges permitted under the general provision of section 220.1 of the Act. By that Regulation, a municipality cannot impose fees or charges under section 220.1 which relate to the management (including collection, disposal, reuse and recycling) of waste except when a person who directly or by means of an agent discards the waste at the municipal facility or through the municipal service. The relevant part of the regulation is attached as an appendix to this report.

At the present time, an argument is being made that this Regulation only addresses "waste" and not the "recycling" of material. This argument would appear to be contrary to the explicit language of the Regulation which indicates that management includes recycling.

In addition, the argument fails to recognize that the powers and authorities of municipalities with respect to recycling emanate from the power granted under section 208.2 of the Act to establish and maintain a waste management system. Under section 208.2 of the Act, a waste management system is defined to include the processing and recycling of waste. Therefore, it is my opinion that the intent and subject matter of the Regulation would appear to be clear.

The current provisions in the Act on service fees would be carried over to the Draft Act.

(2) Deposit/Return as an Exemption ancillary to Licensing Fees or as a Condition of Licensing:

Section 257.2 of the Act was enacted by Bill 26, the Savings and Restructuring Act, 1996 and provides for the general licensing powers of municipalities. By-laws may be passed for licensing, regulating and governing any business carried on within the City. "Business" does not include a manufacturing activity or an industry except to the extent that it sells its products or raw material by retail; nor does it include the selling of goods by wholesale. Classes of businesses may be defined with separate licensing and regulation of each class.

An argument has been made that the section provides broad licensing powers to municipalities such that a licensing by-law could be framed similar to the North York by-law discussed above. Licensing fees, by this argument, could be imposed coupled with the power to exempt any business or person establishing a deposit/return system from all or any part of the licensing by-law. A class, the argument goes, could constitute the Liquor Control Board of Ontario (the "LCBO").

The current section 257.2, however, is, at the least, ambiguous about the extent to which licensing fees may be used to raise monies. Subsection 257.2(3) states as follows:

"In setting the amount of fees to be charged for a licence, the council shall take into account the costs of administering and enforcing the by-laws of the municipality licensing businesses."

In the one case to date referring to section 257.2 of the Act (Ontario Private Campground Association v. Harvey (Township)), the Court referred to the express limitation of costs imposed by the subsection.

It should be noted that the Draft Act would appear to clarify the intent of the subsection. By subsection 143(7) of the Draft Act, a municipality cannot impose a licensing fee which exceeds the cost of administering and enforcing the by-law. Subsection 143(7) states as follows:

"The total amount of fees to be charged for licensing a class of business shall not exceed the costs of administering and enforcing the by-law or portion of the by-law of the municipality licensing that class of business."

Even assuming the breadth of the licensing powers as argued (in fact, the courts will apply a strict construction in interpreting a licensing by-law based on the proposition that such by-laws interfere with the common law rights of the person obliged to secure a licence to carry on a business in the municipality), the courts, in any event, will examine the legitimacy of the proposed licensing scheme and, in particular, the "business" that is being licensed. In respect of the imposition of fees specifically, the Supreme Court of Canada has recently indicated that a central question is whether "...the levy or tax [is] merely ancillary, or adhesive, to the licensing scheme of regulating or prohibiting a trade, or is it essentially a fiscal imposition, or taxation, under a form of disguise or a colourable concept?" It is likely that a court would find that the imposition of the licensing fees in question or of a condition simply to implement a deposit/return system is a colourable attempt either to recover service fees or engage in an area of waste management regulation not otherwise permitted and not part of a valid business regulatory scheme within the jurisdiction of the municipality.

It should also be pointed out that the Minister of Municipal Affairs may make regulations under the provisions of the Act exempting any business or class of business from all or any part of a business licensing by-law of a municipality and imposing limitations on the exercise of the licensing power. This has some importance given the willingness shown to date by the Province to pass regulations limiting the imposition of service fees.

This regulation making power of the Minister under the licensing section of the Act has in fact been exercised. Regulation 379/97 was filed in October, 1997. It states that there is no power in a municipality "to impose any condition with respect to the sale or service of liquor, as defined in the Liquor License Act, as a requirement of obtaining, continuing to hold or renewing a licence issued by the municipality". Section 143 of the Draft Act also repeats this prohibition. It may be argued that any condition pertaining to deposit/return in respect of vendors of alcoholic beverage containers affects the sale of liquor under the regulation.

In respect of the suggested approach to require vendors of alcoholic beverage containers to obtain a licence and, in particular, the LCBO, it is likely that such a municipal licensing by-law would be held invalid. Aside from any arguments that the LCBO may be a Crown agent and, as such, not bound by municipal regulation, a court would likely find that there was conflict with the provincial legislation governing alcoholic beverages and the LCBO and that the City's licensing and regulatory scheme could not be considered legitimate in the face of an existing provincial governance scheme. Under the Liquor Control Act, the Province has extensive existing regulatory jurisdiction over the LCBO and the major vendors of alcoholic beverages. Section 8 sets out the power that the Lieutenant Governor in Council has to make regulations. It states that:

"8. (1) The Lieutenant Governor in Council may make regulations,

(a) governing the purchase, distribution and sale of liquor;

(b) governing the keeping, storage or transportation of liquor;

(c) governing the operations of government stores or classes of government stores;

(d) governing the product and pricing of liquor sold in government stores or classes of government stores;

(e) governing the issuance of authorizations for government stores by the Liquor Control Board;

(f) prescribing the conditions that apply to authorizations for government stores or to authorizations for classes of government stores;

(g) prescribing standards for liquor manufactured, purchased, distributed or sold in Ontario;

(h) requiring the payment of fees;

(i) requiring manufacturers, wineries that manufacture Ontario wine, persons operating government stores and persons importing liquor to furnish the Board with such returns and information respecting the manufacture, purchase, distribution or sale of liquor as is prescribed;

(j) governing the purchase of liquor under a permit issued by the Liquor License Board of Ontario and requiring the payment of such fees on such purchases and prescribing the amounts thereof;

(k) exempting any person, product or class of person or product from any provision of this Act or the regulations;

(2) A regulation may be general or particular in its application.

(3) Any provision of a regulation may be subject to such conditions, qualifications or requirements as are specified in the regulation."

Under the Draft Act there is express provision in relation to conflict between provincial and municipal regulations. By proposed subsection 17(3) of the Draft Act, the conditions of licensing cannot prohibit or regulate a matter dealt with by provincial regulation in substantially the same way or in a more restrictive way.

(3) Deposit/Return as an Exemption Ancillary to the Imposition of Waste Management Fees and as an Incentive:

An argument is being made that section 208.6 of the Act provides authority to a municipal council to pass by-laws establishing fees for the use of any part of its waste management system, that it provides broad powers to establish fees which vary on any basis that council considers appropriate and provides for an exemption for any person from such fees. The argument goes on to indicate that the section also includes the ability to establish incentives, including tax credits and rebates, to encourage the reduction and reuse or recycling of waste. The argument is put forward that the use of the word "incentive" refers to a "public policy purpose" which, coupled with the fees power, would allow the enactment of a by-law very similar to the North York service fee by-law without the ability of the Minister to pass a Regulation prohibiting such fees.

However,

(i) by subsection 208.6(3) of the Act, a by-law to establish, maintain and operate a waste management system applies only to the waste management system of the local municipality. Therefore, a by-law cannot purport to regulate facilities or systems outside the collection system of the local municipality;

(ii) a court would likely see this as an indirect attempt to circumvent the express prohibition in the regulation, referred to above, relating to waste management service fees made under section 220.1 of the Act. This is particularly the case as the press release accompanying the service fee regulation stated that the LCBO was not a user of the blue box system. The press release stated, in part:

"The Municipal Act gives municipalities powers to charge for the use of municipal services, including waste management services. A charge against vendors or manufacturers is not a user fee unless the vendor or manufacturer is the one disposing of the waste material. The regulation clarifies this."; and

(iii) the argument neglects the fact that the usual and reasonable definition of an "incentive" is something which in its nature stimulates or encourages, such as a payment or concession to stimulate greater productivity by workers. This common definition appears to be reinforced by the inclusive reference in the clause to tax credits and rebates. Such a definition would appear to be contrary to the "stick" of direct regulation with no "carrot" as a reward.

It should also be noted that under the provisions of the Draft Act, the Province is proposing to do away with any independent fee authority as set out in section 208.6 of the Act other than the general fees section replacing section 220.1 (service fees) of the Act.

The Draft Act specifically would provide by its proposed section 20 that, with regard to the waste management sphere of jurisdiction, a municipality will not have the power to pass by-laws regulating or prohibiting systems and facilities owned by or operated by or on behalf of a person other than the municipality. This would therefore preclude any extension of the breadth of the "incentive" argument.

(4) Use of Health Safety and Welfare By-law Powers:

The use of section 102 of the Act was considered. It provides as follows:

"Every council may pass such by-laws and make such regulations for the health, safety, morality and welfare of the inhabitants of the municipality in matters not specifically provided for by this Act and for governing the conduct of its members as may be deemed expedient and are not contrary to law."

Aside from the fact that the requirement for a deposit/return system does not deal with nuisance or health and safety matters, this general residual section would not be applicable in the face of express provincial legislation dealing with the subject matter in the EPA.

Under the proposed provisions of the Draft Act, the power now set out in section 102 of the Act is carried over to a sphere of jurisdiction entitled "Health, safety, protection and well-being of people and the protection of property". Specifically the Draft Act proposes that a municipality may pass by-laws respecting matters that, in the opinion of council, affect or could affect the health, safety, protection and well-being of people or the protection of property. The opinion of council would not be open to review by any court.

The qualification to this, however, is that the opinion must be arrived at in good faith. It would be open to a court to review any deposit/return system established on the basis of this power as an argument would likely be made that this was a colourable attempt to circumvent the specific prohibition concerning the sphere of "waste management" and that the basis of the regulation is economic and, in any event, not related to health and safety. The provisions concerning conflict in the Draft Act also apply to any by-law under this authority.

Conclusions:

The City currently has no legislative authority, either direct or indirect, to compel the implementation of a deposit/return system for beverage containers. A review of the Draft Act indicates that the City would not be receiving any powers that would change the present situation. Should City Council wish to proceed with the implementation of a deposit/return system for beverage containers, the Province would have to enact legislation granting the City the power to do so.

Contact Name:

J. Anderson, Senior Solicitor, 392-8059.

Ontario Regulation 352/97 Prohibiting Service Fees

For Waste Management

Ontario Regulation 26/96 is amended by adding the following sections:

5. (1) A municipality or local board does not have the power to impose fees or charges on a person under section 220.1 of the Act which relate to the management (including collection, disposal, reuse and recycling) of waste except on a person who, directly or by means of an agent, discards the waste,

(a) through a waste collection service or at a waste management facility of the municipality or local board, as the case may be: or

(b) through a waste collection service or at a waste management facility of any other municipality or local board to which the municipality or local board imposing the fees or charges pays costs related to the management of waste.

(2) Subsection (1) does not prohibit a municipality from imposing fees or charges on a person which relate to the clean up or collection of litter or other waste which has been illegally disposed of on any land.)

(City Council also had before it, during consideration of the foregoing Clause, the following report (undated) from Councillor Judy Sgro, North York - Humber:

Recommendation:

It is recommended that the Commissioner of Works and Emergency Services and the City Solicitor be requested to submit to the next meeting of the Works and Utilities Committee a by-law requiring that all beverages sold in the City of Toronto be subject to a deposit/return system.

Background:

Council has before it the recommendations of the Works and Utilities Committee respecting a strategy for implementing a deposit/return system for beverage containers sold in the City of Toronto. The City solicitor has been asked to present a proposal for enabling legislation to permit deposit/return in the City of Toronto, and to submit a report directly to Council on legal remedies for the implementation of a deposit/return system.

The previous Metro Council has been requesting that a by-law be brought forward that would require that all beverages sold in the City be subject to a deposit/return system since October 9, 1996. Council at that time approved that:

"The Commissioner of Works be requested to submit a report to the Environment and Public Space Committee on ways in which a deposit return system could be implemented within Metropolitan Toronto; and that enabling legislation be sought in that regard."

Since then we have had one delay after another and the City has continued to front the costs associated with the recycling and landfilling of beverage containers, at an annual cost of at least $4.75 million.

Rather than dwell on the extent of municipal jurisdiction, or whether a by-law would be successful, we should be putting forward the most defensible by-law possible and taking our chances in the courts.

It has always been my position that a deposit/return system should be implemented across the Province, by the Provincial Government. Its reluctance to act forces municipalities to take whatever steps are necessary to insure that the economically and environmentally superior option is implemented within our own jurisdiction. At the same time, we should be working with other municipalities in the GTA to insure that a uniform by-law is put in place in as many jurisdictions as possible.

I would remind my colleagues that it was not too long ago that we were warned that we had no legal authority to regulate lap dancing. Notwithstanding, we implemented a by-law which was followed by many other municipalities and that ultimately resulted in lap dancing being banned throughout much of the greater GTA.

We must be equally proactive on this issue in order to be successful and I ask for your support at Council to have a draft by-law presented to the Works and Utilities Committee at the earliest possible opportunity.)

(City Council also had before it, during consideration of the foregoing Clause, the following communication (April 22, 1998) from the City Clerk:

The Works and Utilities Committee reports, for the information of Council, having received the attached report dated April 16, 1998, from the City Solicitor and the attached communication dated April 20, 1998, from Mr. Robert G. Power, Outerbridge, Miller, Sefton, Willms & Shier, Barristers and Solicitors, respecting the matter of a deposit/return system for beverage containers; and having directed that the aforementioned report and communication be referred to Council for consideration with this matter at its special meeting to be held on April 28, 1998 (Clause No. 1 of Report No. 3A of The Works and Utilities Committee).

Background:

The Works and Utilities Committee on April 22, 1998, had before it a report (April 16, 1998) from the City Solicitor respecting a deposit/return system for beverage containers and measures that can be undertaken with respect to licensing at the retail or distribution level, as requested by the Committee at its meeting on March 25, 1998; and recommending that the report be received for information.

The Committee also had before it a communication (April 20, 1998) from Mr. Robert G. Power, Outerbridge, Miller, Sefton, Willms & Shier, Barristers and Solicitors, in response to the Committee's invitation to appear before the Committee at its meeting on April 22, 1998, advising that he would not be available to attend the meeting due to a prior out-of-town commitment; and providing arguments for the City of Toronto to pursue a deposit/refund system within its jurisdiction, despite any regulatory restrictions that the City may currently face.

Councillor Judy Sgro, North York Humber, appeared before the Committee in connection with the foregoing matter.)

Purpose:

The purpose of this report is to report, as requested by the Committee at its meeting held on March 25, 1998, on measures that can be undertaken with respect to licensing at the retail or distribution level.

Funding Sources, Financial Implications and Impact Statement:

There are no funding implications as a result of this report.

Recommendations:

It is recommended that this report be received for information.

Council Reference/Background/History:

At its meeting on March 25, 1998, the Works and Utilities Committee had before it an in-camera report from the City Solicitor with respect to legal remedies for the implementation of a deposit/return system. The Committee requested that a report be submitted to the Committee, at its meeting on April 22, 1998, on measures that can be undertaken with respect to licensing at the retail or distribution level.

Comments and/or Discussion and/or Justification:

Under subsection 257.2(1) of the Municipal Act (the "Act"), the council of a local municipality may pass by-laws for licensing, regulating and governing any business carried on within the municipality. A business may be licensed even though the business is carried on from a location outside the municipality so long as any part of the business is carried on within the municipality.

By subsection 257.1(1) of the Act, a "business" is defined in broad terms. There are, however, a number of exceptions to what may be licensed as a business. A business does not include the following:

(a) a manufacturing activity or an industry, except to the extent that it sells its products or raw material by retail;

(b) the selling of goods by wholesale; or,

(c) the generation, exploitation, extraction, harvesting, processing, renewal or transportation of natural resources.

"Wholesale" is not a defined term in the licensing provisions of the Act. The ordinary meaning would therefore apply. Generally speaking, wholesale can be considered the sale of goods or commodities for resale by retailers as opposed to a sale to the ultimate consumer.

In the context of the prior report from the City Solicitor commenting on the implementation of a deposit/return system, a store selling beverages directly to the public would be a business within the meaning of the business licensing provisions of the Act. A distributor of beverages, whether that distributor be the manufacturer itself or a bottling company, selling beverages in containers to a major retail chain such as Loblaws, would not be considered a business as it would be selling goods by wholesale.

Typically, the legislation in provinces which have deposit/return systems incorporate distributors in the definitions of those upon whom deposit and refund obligations are imposed, as provisions for payment by distributors and the marking of beverage containers (as being subject to deposit) are considered essential elements of the system. For example, in the new British Columbia "Bottle Bill", a definition of "brand owner" is provided for and includes the manufacturer of a beverage, an importer of a beverage and the person who distributes a beverage. The same all inclusive definition is provided for in the definition of "manufacturer" in the relevant Alberta regulation.

Contact Name:

J. Anderson, Senior Solicitor, 392-8059.)

(A copy of the communication (April 20, 1998) from Mr. Robert G. Power, Outerbridge, Miller, Sefton, Willms & Shier, Barristers and Solicitors, referred to in the foregoing communication dated April 22, 1998, from the City Clerk, is on file in the office of the City Clerk.)

(City Council also had before it, during consideration of the foregoing Clause, the following communication (April 15, 1998) from Councillor Joan King, Seneca Heights:

Enclosed please find the Association of Municipalities of Ontario's (AMO's) position regarding the Recycling Council of Ontario's (RCO's) Roles and Responsibilities draft consultation paper. The Task Force members will be meeting with Minister Norm Sterling and will emphasize the need for financial support for the blue box. Wendy Stewart from Ottawa Carleton is chairing the Task Force.)

(A copy of the Association of Municipalities of Ontario (AMO) Policy Report (March, 1998) entitled "AMO's Response to the Recycling Council of Ontario's Recycling Roles and Responsibilities Draft Consultation Paper", referred to in the foregoing communication, is on file in the office of the City Clerk.)

(City Council also had before it, during consideration of the foregoing Clause, the following communication (April 27, 1998) from Councillor Joan King, Seneca Heights:

The Minister of the Environment, Norm Sterling, requested the Recycling Council of Ontario (RCO) to "recommend short and long-term options to address product stewardship issues, particularly as they relate to funding initiatives for curb side recycling programs".

The RCO has completed its report which will be submitted to the Minister this week.

For your information, I am sending you a copy of the summary of possible Provincial initiatives, copy attached.

As you can see, the cost for a deposit return system for non-alcoholic beverages is significant ($79.8 million). This figure was based on a review of total amortized capital and operating costs per returned container in other jurisdictions. It suggests that $0.08 per container would be a reasonable gross cost per container in a mature return-to-depot system. Using a cost of $0.08 per returned container, the total system cost for containers consumed at home, net of unredeemed deposits and material sales, would be $79.8 million per year.

The most cost efficient system would be to have the LCBO on deposit/return and all other beverage containers in a municipal system paid for by a levy. The total cost would be $52.0 million with 581,000 tonnes recovered. With all beverage containers on deposit/return the total cost would be $126.5 million with 618,000 tonnes recovered.

The consumer will pay the cost. Surely a Blue Box system for non-alcoholic beverage containers with LCBO containers under deposits costing $52.0 million makes more sense than a system with all beverage containers under deposits costing $126.5 million. These figures are for retrieval of beverages consumed at home.

I think we should ask the Province to institute deposit/return for the LCBO across Ontario and to require all other producers to pay the $48.6 million cost to recover their materials from the Ontario waste stream.

Glenda Geis, the consultant used by the RCO, would be pleased to meet with the Works and Utilities Committee to discuss the report and all the details within it.)

(A copy of the summary of Provincial initiatives, referred to in the foregoing communication, is on file in the office of the City Clerk.)

(City Council also had before it, during consideration of the foregoing Clause, the following communications from various persons and organizations regarding the implementation of a deposit/return system for beverage containers:

(i) (March 24, 1998) from the General Manager, Alcan Rolled Products Company, addressed to Councillor Betty Disero, advising of initiatives undertaken by Alcan with respect to aluminum recycling, and enclosing background material in this regard;

(ii) (March 31,1998) from the Regional Director, Ontario, Canadian Council of Grocery Distributors;

(iii) (April 1, 1998) from the President, Crown Cork & Seal Canada Inc.;

(iv) (April 3, 1998) from the Director, Sales and Marketing, Metal Beverage Container Operations, Ball Packaging Products Canada, Inc.;

(v) (April 6, 1998) from the Manager, Environmental Quality, Procter & Gamble Inc.;

(vi) (April 9, 1998) from the Vice President, Municipal Support, Corporations Supporting Recycling (CSR);

(vii) (April 15, 1998) two communications from the President and CEO, Canadian Soft Drink Association (CSDA);

(viii) (April 17, 1998) from the Vice President, Public Affairs, The Oshawa Group Limited;

(ix) (April 21, 1998) from the Association of Municipal Clerks and Treasurers of Ontario, forwarding, for information, a copy of a resolution enacted by the Corporation of the Township of North Dorchester on April 6, 1998; and

(x) (April 28, 1998) from Councillor Judy Sgro, North York - Humber, addressed to the President and CEO, Canadian Soft Drink Association, responding to the President and CEO's letter dated April 22, 1998, and enclosing an article titled, "Has Pepsi Canned the Sixpack?".)

(City Council, at its Special Meeting on April 28 and May 1, 1998, amended this Clause by adding thereto the following:

"It is further recommended that the Commissioner of Works and Emergency Services be directed to ensure that consultation takes place with the surrounding industrial and residential community and that a plan be developed for integrating the proposed facility into the industrial community in a way that makes the industrial community an integral part of the process.")

(City Council on April 16, 1998, deferred consideration of this Clause to the Special Meeting of Council to be held on Tuesday, April 28, 1998.)

The Works and Utilities Committee recommends the adoption of the following report (March 11, 1998) from the Interim Functional Lead for Solid Waste Management:

Purpose:

The purpose of this report is to provide a rationale for proceeding with the evaluation of the proposals for the mixed waste recycling and organics processing demonstration facility, and to seek approval to open the price proposals for the short-listed respondents to the Request for Proposals.

Funding Sources, Financial Implications and Impact Statement:

There are no immediate financial implications of these recommendations. Staff propose to report back after evaluation of the proposals with capital and operating budget implications of the proposed facility. Based on preliminary estimates, the combined amortized capital and operating cost of the demonstration facility is projected to be in the $75.00 - $85.00 per tonne range. The projected $8 million capital cost has been provided for in the proposed 1998-2002 Capital Works Program under Project C-SW004-Recycling Facilities. Since the facility would be operational in late 1999, there are no operating budget implications for 1998.

Recommendation:

It is recommended that staff be authorized to open the price proposals and complete the evaluation process for the short-listed respondents to the Request for Proposals for a mixed waste recycling and organics processing demonstration facility, and report back to Committee with recommendations.

Council Reference/Background/History:

At its meeting on April 9, 1997, the former Metropolitan Council adopted, with amendments, Clause No. 1 of Report No. 4 of The Environment and Public Space Committee, which recommended, in part, that:

(1) authority be granted to the Commissioner of Works for an expenditure of $100,000.00 after municipal GST rebate, within funding limits previously approved, to engage a qualified engineering consultant to prepare the Request for Proposals for the design, construction and operation of a 20,000 tonne per year composting and mixed waste processing demonstration facility, and to evaluate responses; and

(2) subject to approval of the above recommendation, the Commissioner of Works be authorized to issue a Request for Proposals for the design, construction and operation of a 20,000 tonne per year composting and mixed waste processing facility capable of processing both source-separated organic waste and mixed waste.

Subsequently, at its meeting on July 2 and 3, 1997, Metropolitan Council adopted, with amendments, Clause No. 1 of Report No. 9 of The Environment and Public Space Committee which recommended "that Metro Toronto commit to a waste diversion target of at least 50 percent of residential waste by the year 2006."

Staff had recommended the target of 50 percent waste diversion by 2006 based on the analysis of waste diversion options presented in the "Preliminary Metro 3Rs Strategy - Draft Report" by Resource Integration Systems Ltd. (RIS), dated November 28, 1996. Staff also advised that the 50 percent diversion target could be achieved through an expanded Blue/Grey Box recycling system, together with some combination of organics composting and/or mixed waste processing.

In September 1997, staff issued a Request for Proposals (RFP) for the design, construction and operation of a 20,000 tonne per year mixed waste recycling and organics processing demonstration facility at the Dufferin Transfer Station located in the former City of North York.

The RFP closed on January 8, 1998, and a total of seven proposals was received. An RFP Evaluation Committee consisting of staff from the Works, Finance, and Legal Departments, as well as MacViro Consultants Inc. (the consultants who prepared the RFP document), is conducting an evaluation of the Technical Proposals to develop a short list. The proposal call is a two-envelope process in which the price information is opened only if a respondent's proposal is short-listed. Direction from Council is now requested prior to opening the price proposals.

Discussion and Justification:

The mixed waste recycling and organics processing demonstration facility is a key element of the strategy to achieve 50 percent waste diversion by 2006, because it will be used to determine the role that mixed waste processing and source-separated organics processing facilities will play in achieving the diversion target. The utilization of one or both approaches is essential to achieving this 50 percent target.

The facility is being designed to accept both a mixed waste stream (15,000 tonnes per year) and a source-separated organics stream (5,000 tonnes per year). The design will be flexible to allow the facility to be converted to a dedicated mixed waste processing plant or a dedicated organics composting plant after the demonstration phase.

This strategy was developed to manage financial risks by allowing the City to test both processing approaches prior to committing to develop full-scale processing capability, and by building a facility that has the flexibility to be modified to perform a range of diversion functions in the future.

The specific objectives for constructing the demonstration facility are as follows:

(1) to demonstrate the successful operation of a mixed waste recycling and organic processing facility within City of Toronto boundaries, the operation of which is considered an essential component in achieving a overall waste diversion rate of 50 percent or higher in the City;

(2) to provide a facility at which various 3Rs systems approaches can be tested, including:

(a) processing of mixed waste from apartment buildings and municipally collected commercial locations;

(b) processing source-separated organics from single-family households and municipally collected commercial locations; and

(c) processing the wet (organic) fraction of a residential wet/dry system; and

(3) to construct a modular facility which, after the demonstration phase, can be expanded into a full-scale mixed waste recycling and organics processing facility, or a source-separated organics processing facility.

Each of these approaches listed in point (2) above would provide useful input into the selection of a preferred 3Rs strategy, while the facility itself could be adapted to play a major role in any future 3Rs systems. For instance, if separate organic waste collection and processing is demonstrated to be technically and economically viable, it could lead to a decision to implement a three-stream system for all single-family residences, and the facility could be expanded to accommodate up to 50,000 tonnes per year of organic waste. Alternatively, if mixed waste processing is proven viable, the facility could be expanded to process up to 100,000 tonnes per year of mixed waste from apartment buildings. Even if a decision is made that no organics composting or mixed waste processing of residential waste was required, the facility could process organics-rich mixed waste from commercial areas serviced by municipal collection trucks.

We have received seven proposals in response to the RFP for a mixed waste recycling and organics processing demonstration facility from the following respondents:

(1) AGRA Monenco Inc., in association with Wright Environmental and Machinex Inc. (AGRA);

(2) B.W.S. Composting, a joint venture of M. Sullivan and Son and Bennett and Wright Group Inc.;

(3) Groupe Conporec Inc. and Kamyr Enterprises Inc.;

(4) Miller Waste Systems;

(5) Organic Waste Conversion;

(6) Recycling and Composting Alliance, a joint venture of Stinnes Enerco, The State Group, and RRT Design and Construction (Alliance); and

(7) Stone and Webster Canada Ltd., in association with Canada Composting Inc.

The proposal screening and evaluation process being undertaken by the RFP Evaluation Committee involves the following four steps, as described on pages 26-30 of the RFP document:

Step (1) Initial screening of the technical proposals to ensure compliance with the minimum requirements set out in the RFP.

Step (2) Detailed technical evaluation of the remaining submissions.

Step (3) Requests for supplemental technical information and cost information from selected respondents to obtain comparable information required for decision making. At the completion of this step, proposals undergoing further consideration will form the short list.

Step (4) Opening of price proposals from the short-listed respondents and determination of the proposal that provides the best overall value to the City of Toronto.

As a result of the Step (1) screening, the following respondents are still under consideration:

(1) AGRA;

(2) Miller Waste Systems;

(3) Alliance; and

(4) Stone and Webster.

Each of the facilities proposed by the above respondents involves front-end processing to remove recyclables from the mixed waste stream, and then processing of the organic fraction to produce compost material. Three of the proposals involve aerobic composting technology, while the fourth (Stone and Webster) involves anaerobic digestion technology producing both compost and biogas for energy production. The proposed facilities all guarantee a minimum of 60 percent diversion from the mixed waste input stream and 90 percent diversion from the source-separated organics input stream. With respect to compost material produced from the mixed waste stream, the selected respondent does have the option of paying the City of Toronto $50.00 per tonne to manage the material on their behalf, if they are unable to secure markets.

The selected respondent will be responsible for designing, constructing and then operating the facility for a one to three-year period, and will be fully responsible for marketing all output material. The City of Toronto will own the facility which will be located at our Dufferin Transfer Station property at 35 Vanley Crescent in North York.

Based on preliminary estimates, the demonstration facility is projected to cost approximately $8 million to design and construct, and have a net operating cost of $30.00 - $40.00 per tonne, for a combined amortized capital and operating cost of $75.00 - $85.00 per tonne. Although the projected cost for this facility is higher than anticipated future waste transfer and long haul disposal costs, there are strategic benefits to testing the technology on a small scale before making major capital investments. The design will be modular to allow for future facility expansion to achieve greater economies of scale, once the facility is proven to be viable. Based on preliminary estimates, a full-scale mixed waste recycling facility is projected to cost $60.00 to $70.00 per tonne to build and operate.

Prior to opening the price proposals and completing Step (4) of the evaluation process, we are requesting direction from the Works and Utilities Committee and Council on how to proceed.

Assuming that a decision is made to proceed with the proposed demonstration facility, the following planning steps need to be taken in future years:

(1) test 3Rs systems involving source separated organics composting and mixed waste processing, utilizing the proposed demonstration facility (1999-2000);

(2) based on test results, decide on the future role of mixed waste processing and source-separated organics composting (2001); and

(3) proceed with implementation of the required processing capacity and collection system modifications, in accordance with the decisions made above (2001-2006).

A decision not to proceed with the demonstration facility would have the following ramifications:

(1) achieving 50 percent waste diversion by 2006 would not be possible under the planning approach to 3Rs facility development as previously adopted by the former Metropolitan Council. City of Toronto Council would need to adopt a new planning approach to identifying a preferred 3Rs strategy with new timelines for 3Rs facility development and diversion targets; and

(2) the residual waste volumes required for disposal would have to be reviewed given that Toronto's Environmental Assessment (EA) Draft Terms of Reference for Long-Term Waste Disposal is based on four planning principles, one of which is that the 3Rs Strategy will identify residual waste quantities requiring disposal. The submission of the EA based on the Terms of Reference would have to await the adoption of a revised planning approach to identifying a preferred 3Rs strategy.

Conclusions:

Based on the important role that the proposed demonstration facility has in terms of both 3Rs system planning and long-term disposal planning, it is recommended that we be authorized to complete the proposal evaluation process and report back to Committee with recommendations.

Contact Name:

Andrew Pollock, Senior Manager - Waste Diversion and Planning

Solid Waste Management Division, Metro Hall

Phone: (416) 392-4715; Fax: (416) 392-4754

E-mail: Andy_Pollock@metrodesk.metrotor.on.ca

(City Council, at its Special Meeting on April 28 and May 1, 1998, had before it, during consideration of the foregoing Clause, the following chart, submitted by the Commissioner of Works and Emergency Services:

Mixed Waste Recycling and Organics Processing

(1) No change to householders disposal habits for mixed waste processing i.e., continue to place waste in green garbage bags and place them out for collection.

(2) Reduces the amount of waste going to the Keele Valley landfill site thereby extending the landfill's life expectancy.

(3) A public information meeting was held in the area around the proposed facility to educate the neighbours about the facility, however, the turnout was very low.

(4) Allows the City of Toronto to determine if mixed waste processing is a viable option, particularly for waste from apartment buildings.

(5) As shown on the sketch below there will be minimal impact on the truck traffic coming into the site as the 15,000 tonnes of mixed waste required annually to operate the plant at full capacity will come from the waste already going into the adjoining transfer station. The other 5,000 tonnes of organic waste may be redirected to the site from other transfer stations.

Annual flow of waste at Dufferin Site prior to Mixed Waste Facility being constructed	Annual flow of waste at Dufferin Site after Mixed Waste Facility is constructed
75,200 Tonnes Total Tonnes into site: 75,200	60,200 Tonnes 15,000 Tonnes 5,000 Tonnes Total Tonnes into site: 80,200

Respectfully submitted,

BETTY DISERO,

Chair

Toronto, March 25, 1998

(Report No. 3A of The Works and Utilities Committee, including additions thereto, was adopted, as amended, by City Council at its Special Meeting on April 28 and May 1, 1998.)

Clause Page

1 Deposit/Return System for Alcoholic
and Non-Alcoholic Beverage Containers 3256

4 Mixed Waste Recycling and Organics
Processing Demonstration Facility 3304