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March 20, 2000
To: Works
Committee
From: Commissioner
of Works and Emergency Services and City Solicitor
Subject: Waste
Transport and Disposal Agreement with Browning-Ferris Group of Companies,
and Proposed Acquisition of the Arbor Hills Landfill by Superior
Arbor Hills Landfill Inc.
Purpose:
The purpose of this report is to seek City Council's consent to
the change in ownership of the Arbor Hills Landfill, Northville,
Michigan, pursuant to Article 17.3 of the Waste Transport and Disposal
Agreement (the "Agreement'), between the City of Toronto and
the Browning-Ferris Group of Companies.
Financial Implications
and Impact Statement:
There are no financial impacts arising from this report.
Recommendations:
It is recommended that:
(1) Council consent to the change in ownership of the
Arbor Hills Landfill from BFI Waste Systems of North America Inc.
to Superior Arbor Hills Landfill Inc. and approve Superior Arbor
Hills Landfill Inc. as the subcontractor of the Browning-Ferris
Group of Companies for the disposal component of the Waste Transport
and Disposal Agreement subject to,
(a) the completion of technical and financial due diligence
to the satisfaction of the Commissioner of Works and Emergency Services
and the City Solicitor; and
(b) the completion of any legal documentation, if deemed
necessary by the City Solicitor, to evidence the conditions forming
the basis of the consent and approval as set out in this report;
(2) Staff be authorized to execute any legal documentation
referred to in Recommendation No. 1.
Background:
On December 23, 1996, the former Metro Toronto entered into a contract
with the Browning-Ferris Group of Companies ("BFI") for
the provision of landfill disposal capacity at the Arbor Hills Landfill,
located near Northville, Michigan. The contract, formally known
as the Waste Transport and Disposal Agreement (the "Agreement"),
commenced on January 1, 1998 and proceeds to January 1, 2003. Under
the Agreement the City can dispose of up to 500,000 tonnes of solid
waste per year.
In 1999, BFI was merged with Allied Waste Industries Inc. ("Allied").
Prior to the completion of the merger transaction, the U.S. Department
of Justice undertook a review and ordered the divestiture of the
Arbor Hills Landfill from that transaction. Superior Arbor Hills
Landfill Inc. ("Superior"), a subsidiary of Vivendi S.A.,
a multi-national corporation based in France, has offered to purchase
and manage the Arbor Hills Landfill. Prior to that transaction taking
place, the City of Toronto (as the successor to Metro Toronto) must
provide its consent of the transfer in ownership and approve of
Superior as a subcontractor to the BFI contracting parties.
Under the provisions of the Agreement, any change in ownership of
the landfill constitutes a default under the agreement unless the
City consents to the transfer. Such consent, however, is not to
be unreasonably withheld.
Canadian Waste Services Holdings Inc. ("CWS"), has proposed
to purchase the shares of BFI Canada, thereby assuming the haulage
contract for Toronto's solid waste destined for the Arbor Hills
Landfill. BFI Canada will continue to be bound by the terms and
conditions of the haulage component of the Agreement and will continue
to sub-contract to the current haulage contractor.
At its meeting of July 27, 1999, City Council adopted a joint report
(July 12, 1999) from the Commissioner of Works and Emergency Services
and the City Solicitor regarding the Agreement. At that time Council
consented to the change in ownership of BFI. However, the consent
was limited to the Allied merger and CWS share transaction. The
consent did not include consent to the change of ownership of the
Arbor Hills Landfill.
Comments:
As a precursor to this report, we requested from BFI clarification
regarding the following matters:
indemnification on the same terms as provided in the current Agreement;
agreement that the terms and conditions of the current Agreement
would continue to apply;
confirmation that the City will not incur any legal costs related
to this change in ownership;
an understanding regarding how the haulage component of the contract
will be carried out; and
confirmation that American Ref-fuel's Niagara Falls, New York energy-from-waste
facility will continue as the alternate disposal site.
The subsequent replies are summarized below.
Indemnification:
BFI (with Allied as the new owner) will continue to be bound as
the contracting (and indemnifying) party in the Agreement.
Terms and Conditions:
While there is a landfill ownership transfer and the subcontracting
of the disposal component to Superior, there are no changes to the
terms or conditions of the Agreement. In particular, the obligations
of BFI under the Agreement will not be affected by the City's consent
to the transfer of ownership.
Legal Costs:
Superior has agreed that it will bear the reasonable costs that
the City would otherwise incur for financial and technical due diligence
with respect to Superior's ability to perform on the disposal aspect
of the Agreement, as well as the reasonable legal costs and expenses
in connection with the change in ownership of the Arbor Hills Landfill.
Haulage:
As discussed in the "Background" section of this report,
CWS, the intended owner of BFI Canada, has advised that it will
maintain the terms and conditions of the haulage component of the
Agreement and continue to sub-contract to the current haulage contractor.
Alternate Disposal Site:
We have been advised that American Ref-fuel's energy-from-waste
facility located in Niagara Falls, New York, will continue as the
alternate disposal site.
Conclusions:
Based on satisfactory responses to our concerns regarding the transfer
of ownership of the Arbor Hills Landfill we are recommending that
Council consent to the change in ownership of the Arbor Hills Landfill
from BFI Waste Systems of North America Inc to Superior.
This will be subject to the completion of technical, legal, and
financial due diligence to the satisfaction of the Commissioner
of Works and Emergency Services and the City Solicitor.
Contact Us:
Mr. James Anderson
Director, Municipal Law
Legal Services
Phone: 416-392-8059
Fax: 416-397-5624
Email: jandersl@toronto.ca
Mr. Lawson Oates, B.A., M.E.S.
Manager, Strategic Planning
Solid Waste Management Services
Phone: 416-392-9744
Fax: 416-392-4754
E-mail: loates@toronto.ca
Barry H. Gutteridge H.W.O. Doyle Commissioner of Works and Emergency
Services City Solicitor
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