DateMarch 16, 1999

To:Works and Utilities Committee

Economic Development Committee

Budget Committee

From:Barry H. Gutteridge, Commissioner, Works and Emergency Services

Subject:Industrial Waste surcharge Agreements (all wards)

Purpose:To advise the Committee of the various impacts which would result from a unilateral termination of all existing industrial waste surcharge agreements by January 1, 2000.

Funding Sources, Financial Implications and Impact Statement:

Terminating all existing industrial waste surcharge agreements will mean the loss of approximately of $8 million per year in revenue.

Recommendations:

It is recommended that:

(1)the City not proceed with the unilateral termination of all existing industrial waste surcharge agreements by January 1, 2000;

(2)subject to approval of Recommendation (1), the current Compliance Program with Monetary Concession Policy be expanded to include not only new surcharge companies and existing surcharge companies facing substantial increase in surcharge but also existing surcharge companies wishing to reduce or eliminate their surcharge assessments; and

(3)also subject to approval of Recommendation (1), Committee adopt the recommendations contained in my report (November 20, 1998) entitled Industrial Waste Surcharge Agreement - Pizza Pizza Limited, 58 Advance Road, with terms and conditions satisfactory to the City Solicitor and the Commissioner of Works and Emergency Services.

Council Reference/Background/History:

City Council, at its meeting held on February 2, 3 and 4, 1999, had before it Clause No. 4 of Report No. 1 of the Works and Utilities Committee entiltled "Industrial Waste Surcharge Agreement - Pizza Pizza Limited", in which it recommended:

(1)the adoption of the report dated November 20, 1998, from the Commissioner of Works and Emergency Services;

(2)that the Commissioner of Works and Emergency Services be requested to advise those industries with existing Industrial Waste Surcharge Agreements that such agreements will be terminated by January 1, 2000, and that staff provide assistance wherever possible similar to that provided to Nestle Canada Inc. in cleaning up sewer discharge; and

(3)that no further agreements be approved.

The Works and Utilities Committee reported, for the information of council, having requested the Commisioner of Works and Emergency Sercives to:

(1)send out the Nestlé Canada Inc. model to all those companies that have Industrial Waste Surcharge Agreements with the City of Toronto, with a suggestion that the City would be willing to negotiate similar initiatives; and to invite all parties to a workshop or forum on this topic in order to provide information to such industries regarding strategies for reducing industrial waste; and

(2) submit a report to the Committee on:

(i)the banning, as well as phasing out, of such agreements;

(ii)the deployment of staff presently engaged in auditing industrial and commercial operations; and

(iii)the doubling of fees charged, in the interim.

Council also had before it, during consideration of the aforementioned Clasuse, a report (January 29, 1999) from the City Solicitor advising Council of the legal implications of the unilateral termination by the City of all existing industrial waste surcharge agreements by January 1, 2000.

Council also had before it, during consideration of the aforementioned Clause, the following communications with respect to the implications of the recommendations of the Works and Utilities Committee regarding the Waste Surcharge Agreement with Pizza Pizza and other existing industrial waste surcharge agreements:

(i)(January 29, 1999) from Ms. Anne Dubas, President, CUPE Local 79; and

(ii)(February 2, 1999) from Ken W. Holmes, Vice-President, Operations, Campbell Soup Company Limited.

Council struck out and referred this Clause back to the Commissioner of Works and Emergency Services for further consideration and report thereon to the Works and Utilities Committee; and Council directed that the Commissioner of Works and Emergency Services also submit a copy of such report to the Econnmic Development Committee for comment thereon to the Works and Utilities Commitee.

Further, the Budget committee, at its meeting on March 5, 1999, had before it a report (March 3, 1999) from the Chief Administrative Officer on the subject of Water and Wastewater 1999 Operating Budget, recommending, among other matters:

(5)the General Manager, Water and Waste Water, in consultation with the Chief Financial Officer and Treasurer, report back to the Budget Committee on the overall financial impact of the termination of industrial waste agreements.

Comments and/or Discussion and/or Justification:

By-law No. 153-89 establishes wastewater sewer discharge limits and prohibits the discharge of certain toxic materials. The By-law also allows for the limits of suspended solids and biochemical oxygen demand (BOD), which are treatable at our treatment plants, to be exceeded if the company is willing to enter into a surcharge agreement to pay for the additional cost of treatment. No surcharge agreement is allowed for the discharge of untreatable wastes such as heavy metals. About 85 per cent of the companies with surcharge agreements with the City are in the food processing sector, e.g. dairy processing, tofu processing, slaughterhouse, brewery, candy production, sugar refining, cake and pastry production, etc. The remaining 15 per cent is a mixture of industrial and commercial launderers, used paper recyclers, and household cleaning and personal care product manufacturers. Their discharges are high in organic matter which is treatable waste at each of the Water Pollution Plants and not detrimental to the quality of sewage sludge.

The Committee's recommendations to unilaterally terminate all existing Industrial Waste Surcharge Agreements and not allow any further agreements to be approved by January 1, 2000 will impact industries in the following ways:

(1)Most industries would be unable to arrange for alternative treatment on site or to make other alternative arrangements due to the short notice period proposed;

(2)Those that are unable to arrange for alternative treatment on site to meet the By-law limits by January 1, 2000 will immediately face prosecution under By-law No. 153-89;

(3)We are aware of treatment systems costing as much as $10 million in capital costs and $2 million in annual operating costs. Seventy per cent of the companies with surcharge agreements are paying less than $30,000, while most small biological treatment systems (e.g. biofilters) can cost between $100,000 to $300,000, not including the annual operating and sludge disposal costs. A number of small companies may find the Capital and Operating costs for on-site treatment prohibitive;

(4)It may also be very difficult for many industries to install effluent treatment systems to comply with the By-law due to space limitations;

(5)The purpose of surcharge agreements is to avoid the proliferation of small private sewage treatment plants throughout the community for biological treatment. These plants may have problems with odours or upsets due to the less efficient biological treatment provided at small plants when compared to a centrally operated sewage treatment plant;

(6)Industries operating biological treatment systems will be required to transport sludge from these plants through their local communities to disposal locations, thus increasing truck traffic and air pollution;

(7)Effluents from food processing firms, which account for 85 per cent of our sucharge companies, are best treated by a biological plant similar to our sewage treatment plants. Agriculture Canada, due to health reasons, will not allow such a plant to be located in the same facility.

It is true that in November 1986, the Region of Peel considered requiring any new industry moving into Peel since 1986 to meet the sewer use by-law limits ( i.e. no surcharge agreement allowed) and terminating all surcharge agreements in January, 1990. They had to abandon this policy on September 11, 1989, due to serious negative economic implications.

On the issue of deployment of staff presently engaged in auditing industrial and commercial operations, we anticipate that with all the 157 surcharge companies without a surcharge agreement come January 1, 2000, a majority of them will not be in compliance of the By-law and we need the resources to enforce the By-law. Currently we have 22 inspectors and 33 per cent of their work involves sampling, negotiating and maintaining surcharge agreements. The remaining 66 per cent of their work involves enforcing the By-law on those companies that are not eligible for surcharge plus finding new companies who can be put on surcharge.

The City Legal Department has advised that the current policy for administering the Compliance Program with Monetary Concession is not equitable in that it is only available to companies entering into new surcharge agreements and existing surcharge companies facing substantial increase in surcharge costs. Consequently, it is proposed to expand our current Compliance Program with Monetary Concession Policy to include all existing surcharge companies wishing to reduce or eliminate their surcharges.

We therefore propose the following guidelines for considering applications for Compliance Program with Monetary Concessions:

(1)all companies who have existing surcharge agreements, including new companies seeking their first agreement and companies facing substantial increase in their surcharge costs, are eligible to apply;

(2)the applicant must commit in writing, in the form of a Compliance Program with specific program activities, commencement dates, completion dates and program costs, to reduce their waste loading by up to 50 per cent;

(3)the reduction in surcharge could be for a period of between one and three years, depending on the time required to complete the program for waste reduction;

(4)pollution prevention would be the preferred option for waste reduction. End-of-pipe treatment would be approved only if there are no pollution prevention options available;

(5)an applicant can only be granted one Compliance Program with Monetary Concession per lifetime; and

(6)at the end of the Complaince Program period, the companies who are unsuccessful in reducing their waste loading to within By-law limits must resume paying surcharge based on the actual waste loading at that time.

Potentially we could lose $4 million of the $8 million revenue if all the existing companies with surcharge agreements take advantage of this new policy. But realistically, the true financial impact is hard to predict, as a majority of food processing companies will not be able to install biological treatment systems on site due to Health Canada regulations. Further, some industries may find the capital expenditures to provide on-site treatment can not be justified given the economic incentives the City provides under the Monetary Concession Programme.

Financial Impact

We currently have 157 Industrial Waste Surcharge Agreements with companies across the new City. These agreements result in the annual revenue of approximately $8 million. We have consulted with the Finance Department and they have advised that with the termination of these agreements there will be an impact of about 2 per cent on the water rate.

Also, without the surcharge agreements we would have no revenue to support the Compliance Program with Monetary Concession policy ( the "Nestlé Canada Inc. Model") to rebate companies up to 50 per cent of their surcharge if they wish to reduce or eliminate their surcharge by installing wastewater treatment systems.

Potential Impact on Biosolids Quality

The majority of our surcharge industries are food processors, e.g. dairy products, tofu processing, meat and fish processing, etc. Their wastes contain, in additon to high organic wastes (BOD) which we surcharge, nitrogen in both organic and inorganic forms, which ends up in biosolids. This enhances biosolids nutrient content and makes it more desirable for beneficial use. Ontario's Guideline for the Utilization of Biosolids and Other Wastes on Agricultural Land determines whether biosolids are acceptable for beneficial use based on nitrogen to metal ratios. By eliminating all existing surcharge agreements, with the majority of them in the food sector discharging high nitrogen bearing wastes, will result in a reduction in the nitrogen content of our biosolids. With beneficial use we must pay particular attention to the nutrient content of the biosolids, otherwise it would undermine our current plan to eliminate incineration and get into the beneficial reuse of biosolids.

Legal Implications

Under the terms of the surcharge agreement, the City may terminate the agreement at any time only where there is an emergency situation of immediate threat to any person, property, plant or animal life, or waters. This is not the case with the present surcharge agreements.

The City Solicitor has submitted a report (January 29, 1999) to City Council at its meeting of February 2, 3, and 4, 1999 in which he concluded that "If all the Industrial Waste Surcharge Agreements were terminated by January 1, 2000, as recommendated by the Works and Utilities Committee, the City would be open to a large number of claims for breach of contract, and could be liable to pay a substantial amount of damages to those with whom it had entered into Industrial Waste Surcharge Agreements. If the City wished to terminate all existing Surcharge Agreements, it would have to provide a reasonable period of notice to the affected parties."

The City Solicitor also advised Council that if the City tries to drastically increase the fee charged in the interim, this approach could likely be successfully challenged. The Supreme Court of Canada has recently held that the amount of a fee charged for a service provided must bear a reasonable connection to the cost to the City in providing that service.

Economic Development Impact

The purpose for the economic incentives under our Compliance Program with Monetary Concession Policy was to provide industries with the opportunity to upgrade their facilities to minimize their surcharge. By terminating all surcharge agreements industries would not be able to take advantage of the economic incentives provided under the Compliance Program with Monetary Concession Policy as we would have no revenue to support such a program. Similarly, the Compliance Program with Monetary Concession allows a three year phase-in whereas the proposal to terminate surcharge agreements by January 1, 2000 is only months away.

We have consulted with the Economic Development, Culture and Tourism Department and they have advised that depending on the cost of on-site treatment versus the surcharge costs, Toronto industries may have a competitive disadvantage compared with industries in other municipalities. Without any economic incentives, a majority of surcharge companies will find the cost of installing a treatment system prohibitive. By denying industries the choice of entering into a surcharge agreement with the City, many industries will be forced to terminate their operations in Toronto and potentially move to other jurisdictions that allow surcharge agreements, such as Regions of Peel, York, Durham, Halton, and Hamilton-Wentworth.

Conclusions:

The 157 companies with Agreements need time to assess their potential for, and legal position of, installing on site treatment. The City needs to take a proactive approach with the companies and offer them options and solutions to their discharges that exceed our current By-law limits. In this regard staff could undertake both a communication plan and an education workshop or forum on this issue if the recommendations in this report are approved.

The Committee should not proceed with the termination of all existing Industrial Waste Surcharge Agreement by January 1, 2000 for the reasons noted above. Further, it is recommended that for equity reasons, all existing surcharge companies be considered under the Compliance Program with Monetary Concession Policy.

Contact Name:

Mr. Vic Lim, P.Eng.

Manager, Industrial Waste and Storm Water Quality

Quality Control and System Planning

Telephone: (416) 392-2966

Fax: (416) 397-0908

e-mail: vic_lim@metrodesk.metrotor.on.ca.

Michael A. Price, P.Eng., FICEBarry H. Gutteridge

General ManagerCommissioner

Water and Wastewater ServicesWorks and Emergency Services

iwatermi.wpdFile no. 1047.22