Non-key. This report is open to the public.

Transcription

1 Subject: East Kent Waste Project update on changes Director/Head of Service: Head of Housing, Community Safety and Environmental Services Decision Issues: Decision type: Classification: CCC Ward(s): Summary: To Resolve: These matters are within the authority of the Executive Non-key This report is open to the public. All This report reminds members of the basis of the previous council decision on this project and advises upon revisions which have arisen from the Competitive Dialogue process and from development of the Inter Authority Agreement, including changes in the way the enabling payments are made to Canterbury. The report sets out some further recommendations to enable the project to develop with Canterbury s participation. that the net disposal savings generated by the new service arrangements be retained by KCC. that the enabling payments to Canterbury be limited to 462,692 per annum. that the Alternate View payment to Canterbury be set at 260,000 per annum. that, provided the overall waste diversion increases in East Kent, KCC will share 50% of the resultant savings with East Kent districts. The allocation between districts to be based on a simple formula pro rata to populations. that the Head of Housing, Community Safety and Environmental Services be delegated authority to agree any variations necessary to facilitate completion of the agreement, provided such variations do not impact adversely the council s finances by more than 50,000 per annum. that the side letter from KCC set out at Appendix 4 be noted. that the revisions to appendix 3 of Inter Authority Agreement (IAA) are agreed and a legally binding agreement based on those revised terms be entered into. that the Head of Legal and Democratic Services be delegated authority to complete the legally binding

2 agreement. Next stage in process Enter into a legally binding agreement with Kent County Council and the other East Kent district councils. SUPPORTING INFORMATION 1. Introduction 2 Detail In January and February 2010 the Executive, Overview and Scrutiny Committee and Council considered proposals for the East Kent Joint Waste Project and agreed: 1) that the Memorandum of Understanding (MoU) be taken forward, and that a legally binding agreement with the County Council be entered into based on that MoU. 2) that delegated authority be given to the Head of Legal and Democratic Services to prepare and complete a legally binding agreement incorporating the requirements set out in Appendix II to the MoU. 3) that delegated authority be given to the senior officer for waste management in each authority to take all the steps necessary to facilitate the East Kent Joint Waste Project. The background to the project is that the Kent Joint Municipal Waste Management Strategy requires future waste management services to develop beyond those that currently exist so as to achieve effective cost minimisation across both the collection and disposal authorities. In East Kent, the East Kent Waste Management Group, consisting of officers from the four East Kent District Collection Authorities and Kent County Council as Disposal Authority was charged by the Leaders and Chief Executives to develop a cost effective collection and processing proposal across the authorities to deliver the following key aims: to minimise exposure to the escalating costs of waste disposal to deliver cost efficiencies in collection systems to increase the rate of recycling to develop a co-ordinated approach to managing waste across the two tiers of Local Government The East Kent Waste project has been a complex project. As part of this project - detailed modelling of differing collection methodologies was undertaken and compared with Alternative Views for each district (Canterbury, Dover, Shepway and Thanet). Agreement was reached between KCC and the four Districts as to the most effective collection methodology (referred to as the Nominal Optimum Model, or NOM). The details of the original NOM and Memorandum of Understanding (MoU) including the financial implications are set out in Appendix 1. The revenue and capital impacts to each district are set out below.

3 Authority Round saving Enabling payment Cost impact of NOM Alternate view payment Containerisation funding Canterbury 548k 548k 189k 202k Dover 375k 121k 121k 1,338k Shepway 584k 517k 517k 667k Thanet 233k 233k 1,148k Total 959k 1,419k 1,419k 189k 3,555k Based on collection savings generated in joint working elsewhere in the UK the financial assessment also assumed collection savings of 1 million and savings from a joint contract for collection and disposal of 0.5 million. Update on position The Competitive Dialogue has resulted in proposals for a different (and improved) collection service. The discussion also led to revised conclusions about the potential for collection savings and that has prompted Kent County Council to review its financial commitments. These developments were considered at the East Kent Joint Arrangements Committee on 19 May 2010 and since then, during the development of the Inter Authority Agreement based upon the MoU further issues have arisen which require member consideration. The Head of Legal and Democratic Services has advised that these matters fall within the authority of the Executive since the adjustments result in improved service and the Director of Corporate Services advises that financial arrangements do not take the matter outside the budget framework. Alternate NOM As anticipated in the initial reports, the Competitive Dialogue process has resulted in tenderers for the Dover/Shepway contract putting forward an alternative recycling and waste collection method. The new system called the Alternate NOM takes advantage of improvements in vehicle technology. A comparison of the main parts of the NOM and Alternate NOM are set out in the table below. Original NOM Fortnightly collection of kerbside recyclables including glass Co-mingled fortnightly collection of food and garden waste (Meaning only households that had a garden waste bin can have the food waste collected combined and composted) Alternate NOM Fortnightly collection of residual waste and collection of food waste in a separate compartment on the same vehicle. Fortnightly collection of recyclables (including glass), paper/card and food waste all in separate compartments on the same vehicle

4 Fortnightly collection of residual waste (to alternate with recycling collections) Fortnightly collection of garden waste (Under the alternate NOM we are able to charge for green waste collection in we chose to) Recycling /Composting rate 47% Recycling /Composting rate 60% Containers Residents in the district will be provided with the following containers for their waste Residual waste wheelie bin Food waste kitchen caddy and outside food bin Recyclables wheelie bin for plastics/cans/glass and box or satchel for paper/card Garden waste wheelie bin The collection charge for Canterbury would commence at the start of the new contract in Costs This alternate NOM will result in additional collection costs across East Kent and the competitive dialogue discussions have identified that the savings from the collection contract are unlikely to be the same it was first thought; therefore revised financial arrangements were considered and agreed by EKJAC as recommendations to partner authorities. For the original NOM, it was assessed that Canterbury s additional costs would be 548,000 which would be funded by an Enabling payment from KCC. In addition CCC would receive a payment of 189,000 as compensation for giving up the Alternative view. For the Alternative NOM - the assessed additional costs are only 462,000 (a reduction of 86,000) so that will become Canterbury s Enabling payment. However officers argued that CCC s compensation payment should increase as a consequence and that is now set at 260,000 (increased from 189,000). Under the Alternate NOM, Canterbury will be able to introduce charges for collection of garden waste, if it wishes and would retain that income. The changes in the collection method and recognition that savings in collection costs were not likely to arise on the scale previously envisaged led to negotiations which resulted in a move away from the principles of the disaggregation of benefits in the MoU agreed in January KCC s cost of funding containerisation is to be capped at million of which Canterbury will receive 202,000. The council will fund other container costs from the savings it makes from the reduction in recycling bags. The enabling payments to districts are to be fixed at the levels reported to EKJAC in May This means district councils carry the risk of tender prices significantly exceeding the sum assessed in the financial modelling. KCC has written a letter to say that it would commit to further discussion, on a non binding basis, in the event this happened.

5 The financial modelling assumes only 218,000 for collection contract savings rather than 1 million and these are shared equally amongst the districts and are to be deducted from enabling payments. Any collection contract savings above this figure will be retained by districts rather than taken into the project. Any additional disposal savings, above those assumed in the financial modelling, will result in a payment to districts collectively. It is proposed this is now shared pro rata to population which is a much simpler approach than in the original MoU. Disposal costs risks will now rest solely with KCC. The Enabling payments do not include or replace current payments made by KCC to districts for recycling/green waste credits, tipping away payments or recycling support costs. Appendix 2 sets out for comparison purposes the proposed financial implications for the NOM and the Alternate NOM. Changes to Inter Authority Agreement In the last few weeks there have been two significant changes to the Inter Authority Agreement. The Head of Legal and Democratic Services has advised that the withdrawal provision contained in the draft Inter Authority Agreement had been removed from the latest draft of the Agreement. That clause provided that any partner may withdraw from the partnership by giving not less than six months notice but not before such a proposal has been considered by the partnership and the withdrawal shall not take effect until the following 31 March. The withdrawing partner may be liable for costs incurred by one or more partners as a result of the withdrawal. The Management Team view was that either that clause should be retained or at least some withdrawal mechanism, and the consequences of it should be included in the Agreement. That principle has now been accepted. The other significant change is that the initial MoU indicated that the payments would be determined by the tender figure, which meant that if the tender figure was significantly higher than expected the payments to Canterbury would increase. However the revised Inter Authority Agreement which forms part of the MoU has set out fixed payments which are set out in the table below Fixed enabling payment Fixed alternate view payment Containerisation funding Canterbury 462, , ,000 Canterbury will receive fixed payments representing the additional collection costs of 462,692 and an additional annual payment of 260,000.

6 However the new MoU states that a set figure of 54,500 will be deducted from each of the enabling payments to represent a notional collection saving (This is Canterbury s proportion of the assumed 218,000 saving on collection contracts). 3. Relevant Council Policy/Strategies/Budgetary Documents This project delivers the principal objectives of the Kent Joint Municipal Waste Strategy. The project addresses the key environmental drivers for future service provision and development. 4. Consultation planned or undertaken Consultation has been undertaken with Local Authority staff including Section 151 Officers. 5. Options available with reasons for suitability Option 1 to accept the revised financial arrangement and proceed with the joint waste project. Option 2 to reject the revised financial arrangement and seek to renegotiate the terms of the MoU. 6. Reasons for supporting option recommended, with risk assessment The recommendation is for members to accept Option 1. This project has been both complex and time consuming. The revised financial arrangements do not put the council in a worse position, however there is an increased risk that moving from a formulaic payment structure based on tender prices to a set payment structure could cost the council money if the tender prices are significantly higher than predicted. This risk has been partly mitigated by a letter received from Cllr Alex King stating that in the event of increased costs, KCC would consider negotiating further. We have spoken to Colleagues in Dover and Shepway who have advised us that whilst they are unable to divulge the tender prices of their contract, they are comfortable with the prices which have been submitted. 7. Implications (a) Financial Implications the financial implications are set out in this report. (b) Legal Implications the Memorandum of Understanding (MoU) attached in Appendix 3 sets out the principles upon with the Partnership is founded. In order for the project to progress and to maximise the efficiency to be derived, all parties must commit to the undertakings within the MoU as amended. Other implications (c) Staffing/resource no changes from the report agreed in January 2010.

7 (d) Property Portfolio no changes from the report agreed in January (e) Environmental/Sustainability no changes from the report agreed in January Conclusions The East Kent Waste Project enables the implementation of the Kent Joint Municipal Waste Strategy in East Kent and in the process delivers significant benefits to Partner Districts and Kent County Council. In order for the project to proceed the revised financial arrangements need to be agreed. Contact Officer: Larissa Laing Telephone:

8 Appendix 1 Notional Optimum Model The original NOM was based upon: fortnightly collection of kerbside recyclables including glass co-mingled fortnightly collection of food and garden waste fortnightly collection of residual waste (to alternate with recycling collections) This arrangement was anticipated to take Canterbury s recycling rate to 51%. Members were advised there may be some amendment to this collection methodology if, through the Competitive Dialogue Procurement process tenderers propose variations on this methodology which generate further benefits. At the time of these January/February decisions, it was felt that the likely avoided disposal costs and benefits of the implementation of this system through financial modelling from were: Financial Aspects future costs of disposal are on average reduced by 2.9mn pa in this period overall recycling/composting performance in East Kent increases to 48% the cost of processing recyclate reduces and segregating paper plus card at the point of collection enhances its value To ensure that District Councils were not financially disadvantaged as a result of adopting the NOM, Kent County Council had undertaken to provide additional revenue funding of 1.419mn pa, taken from its project savings, to: allow for the additional costs of introducing the new collection system refund lost recycling income (where districts had chosen to be responsible for this) refund lost garden waste income (where districts had already implemented such charging) KCC had also undertaken to finance containerisation costs of 3.35m incurred by the districts to implement the changes in the service. Members were advised this funding level was indicative and may also vary subject to any changes in collection methodology derived from the Competitive Dialogue Process and future review of the council incomes in their baseline year. In table format the current revenue and capital impacts to each district was shown as: Authority Round saving Enabling payment Cost impact of NOM Alternate view payment Containerisation funding Canterbury 548k 548k 189k 202k Dover 375k 121k 121k 1,338k Shepway 584k 517k 517k 667k

9 Thanet 233k 233k 1,148k Total 959k 1,419k 1,419k 189k 3,555k Based on collection savings generated in joint working elsewhere in the UK the financial assessment also assumed collection savings of 1 million and savings from a joint contract for collection and disposal of 0.5 million. Alternative View The Alternative view referred to above was an assessment by each district of the cost implications of revising its own collection arrangements and adopting other practices, for example being responsible for the disposal of its own recycling materials and charging for garden waste collection. Canterbury assessed that it could save 737,000 by being responsible for its own end market income on recycling. The recycling rate would be 47%. If Canterbury also charged for garden waste collection the saving could rise to million but the recycling rate would fall to 36% and Canterbury taxpayers as Kent taxpayers could see additional costs through landfill fines. The council was persuaded not to pursue either of these options on the basis that it would carry greater risk through having to deal with market prices for recycling and that the future of recycling credits was uncertain. The council officers and members did negotiate however that Canterbury should receive some financial recognition for this and an additional payment of 189,000 per annum was agreed. Benefits Disaggregation There was also the potential for the council to share in the overall net saving through the Benefits Disaggregation formula agreed. The disaggregation of this benefit was to be based on the following principles: the investment made to change services will be refunded from disposal and collection savings before any benefits are distributed Canterbury City Council to receive additional funding of 189k pa to compensate for the shortfall between its Project View and the Alternative View (excluding garden waste charging) the remaining benefit (or overage) to be disaggregated between KCC and the District Authorities in accordance with the following: 50% Kent County Council and 50% District Authorities the benefit derived to the district authorities to be disaggregated in proportion to the number of households within each district area (subject to the agreement of an equalisation mechanism such that, over time, greater equity in KCC funding per household is achieved across all partner districts) Legal Aspects - MoU The MoU provided the basis for developing a legally binding agreement and included reference to the key areas of agreement required.

10 1 EKD and CCs are required to commit to the NOM collection methodology as refined and informed by the Competitive Dialogue Process in order to deliver materials in a single cost efficient manner, and 2 DDC and SDC must commit to deliver their specified recycling waste streams to the transfer points and facilities specified by KCC in accordance with agreed contractual conditions from October 2010, and 3 CCC and TDC must commit to deliver their specified recycling waste streams to the transfer points and facilities specified by KCC in accordance with agreed contractual conditions from April 2013, or earlier by mutual agreement, and 4 KCC will fund enabling payments and containerisation payments to the EKD and CCs in accordance with the EKD and CCs compliance with the NOM collecting methodology, and 5 KCC will provide processing capacity and or facilities for the materials collected by the EKD and CCs in accordance with the NOM collecting methodology in accordance with agreed contractual conditions, and 6 All parties agree to be bound by the disaggregation principles set out above in this report. The MOU outlined that the NOM would change; no Member decisions are required in respect of that. However, the financial arrangement in Appendix 2 will change if this report is accepted.

11 Project Savings NOM 000 Appendix 2 Alternate NOM 000 Gross Disposal Savings 2,897 2,960 Joint contract collection savings 1, Joint contract disposal and collection savings Gross project savings 4,397 3,178 Less Enabling payments 1,419 1,316 Alternate view payment to CCC Alternate view payment to TDC 0 1, ,707 2,789 1,471 Less Revenue cost of 463 containerisation 2 Adjusted net saving to KCC 1,008 Distribution of net savings benefits 50% to KCC % to KCC 1,008 50% to Districts on basis of households CCC DDC SDC TDC Note 1 It is assumed there will be some saving which is to be brought into the project savings by way of deduction from the enabling payments. This sum will be 54,500 per district. 2 Note 2 In the alternate NOM the revenue cost of containerisation will be funded by KCC rather than shared across the project.