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To:
Special Joint Meeting of Works Committee and Policy and Finance
Committee
From: Barry H. Gutteridge, Commissioner, Works and Emergency
Services
Subject: Toronto Integrated Solid Waste Resource Management
("TIRM") Process Category 2, Proven Disposal Capacity Residual Solid
Waste Disposal Capacity Options Supplementary Report
Purpose:
The purpose of this report is to present to the Joint Committee
a set of supplementary recommendations in connection with the award
of contracts for residual disposal capacity under the Toronto Integrated
Solid Waste Resource Management ("TIRM") Process.
Financial
Implications and Impact Statement:
The recommendations contained in this report will have the following
financial implications.
The effect of diverting 300,000 tonnes per year from the Keele Valley
Landfill Site ("Keele Valley") in the years 2001 and 2002, through
a contract award to Republic Services of Canada Inc., will provide
an additional nine months of service life at Keele Valley, resulting
in a closure date of December 31, 2002. The net savings to the City
through the provision of nine months of additional disposal capacity
for residential and private sector waste, less the cost of diverting
300,000 tonnes per year for two years, is approximately $15 million.
The financial impact on the 2003 budget based on increased transport
and disposal costs, loss of margin on private sector revenues, and
the loss of tonnages from the private sector (anticipated when Keele
Valley closes) is approximately $52 million.
The costs associated with the proposed award of contracts contained
in the recommendations of this report are reported in an In Camera
report from the Chief Financial Officer and Treasurer.
Recommendations:
It is recommended that:
1). Should the Joint Committee and Council choose not to
consider options involving the extension of the service life of
the Keele Valley Landfill Site beyond 2002, then the Commissioner
of Works and Emergency Services be authorized to conduct final contract
negotiations as follows, to addition to satisfactory resolution
of additional contractual matters and exceptions as identified by
the Commissioner of Works and Emergency Services to be detailed
in an In Camera report;
with Republic Services of Canada Inc., for a "no put or pay" contract
for tonnages above 100,000 tonnes per year for a flexible combined
term of up to 20 years, to manage the private sector waste received
by the City of Toronto for disposal; and
(b) with Rail Cycle North Ltd. for a "no put or pay" contract for
a term of 20 years to encompass only the residual municipal solid
waste disposal needs of the City of Toronto and the Greater Toronto
Area Regional Municipalities of Peel, York and Durham, under the
terms and conditions of the Memorandum of Understanding between
the four participating municipalities;
And, subject to approval of Recommendations No. 1 (a) and (b) including
satisfactory resolution of additional contractual matters and exceptions
as identified by the Commissioner of Works and Emergency Services
to be detailed in an In Camera report, it is recommended that:
2)
the commencement date of the contract award to Republic Services
of Canada Inc., be January 1, 2001 at a rate of 300,000 tonnes of
solid waste, both municipal and private sector solid waste, per
year for two years less a day in order to facilitate a December
31, 2002 closing of the Keele Valley Landfill Site, and from and
after January 1, 2003, on the basis of the "no put or pay" basis
as set out in Recommendation No. 1(a);
3) the commencement date of the contract award to Rail Cycle
North Ltd., be January 1, 2003;
4) the Commissioner of Works and Emergency Services be authorized
to enter into discussions with Onyx Arbor Hills Landfill Inc. to
determine if the existing disposal contract with Onyx Arbor Hills
Landfill Inc. can be renegotiated on the basis of the conditions
identified by the Commissioner of Works and Emergency Services as
detailed in an In Camera report;
5)
the Commissioner of Works and Emergency Services be requested to
undertake the contract negotiations, referred to in Recommendations
1, 2, 3, and 4, listed above, and authorized to report to the Council
meeting of August 1, 2 and 3, 2000 on such negotiations;
6) the Regional Municipality of Durham be invited to continue
to dispose of its municipal solid waste at the Keele Valley Landfill
Site from January 1, 2001 until its closure at a disposal fee reflective
of the market price as determined through the TIRM Process and that
the Commissioner of Works and Emergency Services report back through
Committee to the Council meeting of October 2, 3, and 4, 2000 on
any price agreement;
7) effective January 1, 2001, the Commissioner of Works and
Emergency Services be authorized to adjust from time to time the
solid waste management disposal fee at Torontos transfer stations
by up to 15 percent upwards or downwards by giving two weeks public
notice;
8)
the Commissioner of Works and Emergency Services be authorized to
share under confidential agreements with the Regional Commissioners
of Works for Durham, Peel, and York the detailed contract terms
of the proposed contracts with the appropriate Respondents in order
for them to finalize their due diligence processes and to develop
recommendations to their respective Regional Councils;
the Commissioner of Works and Emergency Services be authorized to
develop with the Regional Commissioners of Works for Durham, Peel,
and York a formula for the partial recovery by Toronto from the
Regional Municipalities of (i) the costs of the TIRM Process and
(ii) the study costs in connection with the environmental assessment
of the Adams Mine undertaken by the former Metro Toronto as reflected
in the per tonne service fee credit given by Rail Cycle North Ltd.,
such formula to be based on a contributing tonnage percentage to
a contract with Rail Cycle North Ltd.; and
10) City Council request the Regional Councils of Peel, York,
and Durham to formally confirm no later than September 18, 2000,
their agreement to enter into a joint contract in partnership with
the City of Toronto for the disposal of residual municipal solid
waste.
Background:
On Thursday June 22 and 23, 2000 a Joint Committee meeting was held,
comprised of the Policy and Finance Committee and the Works Committee
to consider several staff reports regarding the proposed award of
contracts under the TIRM Process. The Joint Committee deferred consideration
of the staff reports and various communications until a further
joint meeting of the committees. In addition, the Commissioner of
Works and Emergency Services was requested to undertake the following:
"Contact all of the respondents, in writing, for confirmation of
the terms and conditions of their proposals and request that they
provide final and best pricing scenarios on their proposals, including
a separate price for dealing with the private sector (ICI) waste,
including consideration of road and rail options, by sealed submissions
to be made no later than June 30, 2000, at noon to the Chief Financial
Officer and Treasurer for further evaluation and report thereon,
in conjunction with the Commissioner of Works and Emergency Services,
to the aforementioned joint meeting of the Policy and Finance Committee
and the Works Committee."
Additional information requests were also made of staff. An accompanying
staff report provides responses to the information requests.
The five TIRM Respondents (Category 2, Proven Disposal Capacity)
were duly contacted and all five responded to the request for best
and final pricing scenarios. The information received has been factored
into the In Camera report titled "TIRM Disposal Options Financial
Analysis Final & Best Prices" from the Chief Financial Officer
and Treasurer.
This report presents a revised set of recommendations for the Joint
Committees consideration and presents the rationale for these recommendations
in the next section of this report. The report from the Commissioner
of Works and Emergency Services, dated June 19, 2000, provided a
set of recommendations linked to the extension of the service life
of Keele Valley to 2006. That report also provided a summary of
the need for new disposal capacity, Councils policy direction,
the TIRM planning process, and descriptions of the proposals from
the final group of top-qualified Respondents.
Comments:
This report carries recommendations to contract with Rail Cycle
North Ltd. ("RCN"), for residual municipal solid waste disposal
needs only and with Republic Services of Canada Inc. ("Republic"),
to dispose of the private sector waste received by the City of Toronto,
subject to satisfactory resolution of additional contractual matters
and exceptions to be pursued through final contract negotiations.
The RCN contract can only be recommended for consideration if the
final terms and conditions only apply to the 1.3 million tonnes
per year of municipal waste proposed for inclusion under the contract.
There can be no associated restriction on the Citys ability to
contract separately and independently for the private sector tonnage
which it processes.
The proposed option would enable:
contracting for the best combination of road and rail based disposal
solutions, with the majority of the waste to be transported by rail;
providing the City with "no put or pay" provisions, aside of 100,000
tonnes per year for the Republic contract, which in any case has
a 5-year initial term and flexibility in extension thereafter;
a combined "shared solution" for the Greater Toronto Area ("GTA")
Regional Municipalities of Peel, York, and Durham, and the City
of Toronto;
the service life of Keele Valley continuing to the end of 2002 which
provides an additional nine months of favourable disposal costs
for the City of Toronto and for York Region, and of additional time
for the construction and commissioning of RCNs Adams Mine Landfill;
favourable per tonne disposal and transportation prices offered
resulting from a competitive marketplace response;
the City to continue to provide a service to the private sector
and enable stable disposal prices for businesses of all sizes;
minimization of any potential risk of border closure;
the flexibility to meet and exceed diversion goals through the introduction
of new diversion facilities and engagement of new and emerging technologies;
and
the City maintaining its reserved right to engage municipal employees
to haul waste by truck or third party private sector haulers.
The City of Toronto currently manages over 600,000 tonnes of private
sector waste per year. Solid waste is received at our transfer stations
and at Keele Valley. We anticipate that we will receive approximately
500,000 tonnes per year at our transfer stations following the closure
of the Keele Valley. A contract award to Republic would result in
Republic disposing of approximately 500,000 tonnes of private sector
waste per year, with such amount subject to regular review and adjustment.
As the City manages private sector waste on a fee for service basis,
the actual volume of waste received will vary due to economic factors
and other disposal options offered by companies in the disposal
business. Therefore, a contract with Republic must be approached
as a "no put or pay" contract, aside of the 100,000 tonnes per year
minimum that Republic has identified as the minimum amount they
would be prepared to receive. This latter amount of 100,000 tonnes
per year would be contracted as a "put or pay" component of a contract.
A contract award to RCN would provide the means to achieve a shared
solution by Toronto, Peel, York, and Durham, for their residual
municipal solid waste disposal capacity needs of some 1.3 million
tonnes per year. RCN has identified under its "no put or pay" base
proposal the requirement for an initial provision of 1.3 million
tonnes of solid waste per year.
The proposal, however, currently contains the stipulation that before
the "no put or pay" provision could be invoked by the City, it would
be required to divert all of the 500,000 tonnes of additional solid
waste it currently disposes of before tonnages within Rail Cycle
Norths 1.3 million tonne per year contract could be reduced through
diversion. Given that the City wishes to contract completely separately
for its private sector solid waste, it would be necessary for RCN
to agree to remove this restriction.
In the event that the proposed shared solution does not materialize,
as a result of a negative response by the GTA potential partners,
Toronto would need to consider alternative contract awards to meet
its municipal solid waste disposal needs.
Conclusions:
As requested, this report has presented an alternative option, with
associated recommendations, for the award of contracts for solid
waste disposal to those presented in the report from the Commissioner
of Works and Emergency Services, dated June 19, 2000, which recommended
the extension of the service life of Keele Valley to 2006.
This reports alternative set of recommendations would result in
a dual contract award process, with Republic disposing the private
sector solid waste the City receives and RCN disposing the residual
municipal solid waste from Toronto and the GTA Regions of Peel,
York, and Durham.
Contact:
Lawson Oates, B.A., M.E.S.
Manager, Strategic Planning
Solid Waste Management Services
Works and Emergency Services
Metro Hall, 19th Floor
Phone: 416-392-9744
Fax: 416-392-4754
E-mail: loates@toronto.ca
Angelos Bacopoulos General Manager, Solid Waste Management Services
Barry H. Gutteridge Commissioner, Works and Emergency Services
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