2009 Draft Solid Waste Management Operating Budget and 2009 Draft Capital Budget and Forecast

Transcription

1 Treasurer s Report

2 TO: Chair and Members Corporate and Emergency Services Committee Engineering and Public Works Committee FROM: Stephen Cairns, Commissioner of Finance and Corporate Services A.J. White, P. Eng., Commissioner of Engineering and Public Works DATE: January 28, 2009 SUBJECT: 2009 Draft Solid Waste Management Operating Budget and 2009 Draft Capital Budget and Forecast REPORT NO: CES RECOMMENDATION THAT the 2009 Draft Solid Waste Management Operating Budget and the 2009 Draft Capital Budget and Forecast presented in Report No. CES be approved; AND THAT the 2009 user fees as outlined in Appendix C of Report No. CES be approved, effective April 1, ORIGIN Prudent management as well as section 290 (1) of the Municipal Act requires that each year municipalities prepare and adopt a budget for the purposes of the municipality including amounts sufficient to pay all debts falling due within the year, amounts required to be raised for sinking funds and amounts required for any board, commission or other body. Committee and Council s review of Appendix A: 2009 Draft Operating Budget - Solid Waste Management, and Appendix B: 2009 Draft Capital Budget and Forecast - Solid Waste Management as attached to Report No. CES represents formal compliance with section 290 (1) of the Municipal Act.

3 BACKGROUND The District Municipality of Muskoka is responsible for solid waste management including waste disposal and waste diversion. The District Municipality of Muskoka is directly responsible for program administration and, with the assistance of outsourced labour and equipment, provides service for the operation of the landfill sites and transfer stations. Through a third party contract, The District Municipality of Muskoka provides for the collection of household recycling and waste material and for the processing of household hazardous waste and recycling materials. The contract contains an agreed upon mechanism for annual price adjustments that have been incorporated into the 2009 Draft Budget. The existing contract terminates on November 18, Waste Disposal operations are comprised of three landfill sites and seven transfer stations as follows: Landfill Sites: - Town of Huntsville - Stisted Landfill - Town of Bracebridge - Rosewarne Drive - Town of Gravenhurst - Beiers Road Transfer Stations: - Township of Lake of Bays o Baysville o Dorset o Sinclair o Dwight - Township of Muskoka Lakes o Eveleigh Road - Township of Georgian Bay o Tower Road o Baxter Collection of household waste is provided through weekly curbside pickup for the months of May to October and bi-weekly pickup for the months of November to April. Household recycling collection is done on a weekly basis throughout the year. There is curbside pickup for approximately 33,474 households with an additional 13,095 households being served through drop-off points at the various depots located within the District. The District Municipality of Muskoka is also responsible for the processing of Household Hazardous Waste. Collection is done on a drop-off basis at six sites located in each of the Area Municipalities. 2

4 ANALYSIS 2009 Draft Operating Budget Solid Waste Management The 2009 Draft Operating Budget attached as Appendix A, shows a net levy increase of $546,647. The primary causes for the increase can be categorized as follows: Contractual price adjustments built into primary contracts $305,150 (under Major Contracts) Reduction in sales from Recyclable Material and Scrap Metals $292,000 Annualized cost of Kitchen Organics Program and expansion by 1,500 households $123,490 One-time decrease in transfer to the Solid Waste Reserve Funds ($150,000) Provision for new Household Hazard Waste Funding announced in 2008 ($160,520) Service level changes in Georgian Bay as recommended by Area Council ($50,545) Other costs (see details under Major Budget Drivers) $187,072 Total $546,647 The draft budget includes an increase of 2% in operating costs. However, due to an anticipated reduction in revenues, the net impact is a 6.2% increase in the Solid Waste Management Levy. After taking into account an assessment growth of 1.4% the overall impact on the Solid Waste Management Property Tax Rate is 4.8%. The 4.8% represents the aggregated impact; rate adjustments will vary by Area Municipality. The amount of variance between municipal taxpayers will depend on approval of a net levy methodology by Council. Solid Waste Management Budget-to-Budget Increases 150, ,000 50,000 0 (50,000) (100,000) 3 (150,000) Personnel Employee Related Expenses Materials & Supplies Purchased Services Major Contracts Transfer to Others Financing / Reserves Minor Capital Service Level Changes 60,000 8, (75,030) 15, Intedept'l Charges Base Budget Adjustments 7,800 62,483 (1,800) 32, ,657 0 (150,000) (8,600) 38,280 Revised: Dec 17/08-2

5 Major Budget Drivers Expense Category Item $ Increase (Decrease) Personnel Annualized wages and benefits are based on projected wage and benefit costs, 2009 planned work schedules and job evaluation results. 7,800 Total $ Increase (Decrease) Georgian Bay Service Level Change: 2 Equipment Operators 60,000 67,800 Employee Related Expenses Fleet Rates: A review of the internal fleet rate, associated maintenance and repair experiences and a revision to extend the useful life has resulted in lower rates for 2009 for equipment primarily used at the landfill sites. 62,483 Georgian Bay Service Level Change: Fleet 8,000 70,483 Materials & Supplies Minor adjustments (1,800) Purchased Services Consultant: Beiers Road Landfill (11,500) Sub Contractor: largest increase due to disposal of electronic waste 45,145 Advertising: decrease in Kitchen Organics, increase in Hazardous Waste (8,000) Major Contracts Other minor adjustments 6,550 32,195 Curbside Pickup - Waste, Recycling, Large Items, Leaf and Yard Waste, and Kitchen Organics: base adjustment 245,445 Georgian Bay Service Level Change: addition of curbside pickup in Port Severn area. 75,820 Remote Bins and Front End Lift (FEL) Pickup: base adjustment 131,450 Georgian Bay Service Level Change: reduced FEL pickup charges with closure of depots / remote bins sites. Removal of tipping fee component of lift charges (see tipping fees for corresponding reduction in revenues) (230,785) (389,000) Roll-offs and haulage: base adjustment 65,375 Georgian Bay Service Level Change: increase in roll-offs at Baxter Transfer Station to reflect diversion from closed sites. 125,020 4

6 Expense Category Item $ Increase (Decrease) Kitchen Organics Program Service Level Change: expansion of existing routes in three main urban areas. Georgian Bay Service Level Change: elimination of MCS contract for site cleanups in Georgian Bay and use of internal staff (see increase in labour costs). 55,755 (109,100) Recycling Process: storage fee for recyclable material 15,000 Security Contract: base adjustment 39,487 Total $ Increase (Decrease) Other adjustments 28,160 52,627 Transfer to Others Georgian Bay Service Level Change: bear-proof container rebates 15,000 Interdepartmental Charges To reflect increased costs and time devoted to the Solid Waste Management function. The largest components of the increase are from Finance at $14,500 and Engineering at $10, ,280 Minor Capital Items (8,600) Financing / Reserves A one-time reduction in the contributions to the Solid Waste Reserve Funds to offset reduction in revenue derived from the sale of recyclable material. (150,000) Subtotal 115,985 Operating Revenues $5 increase in tipping fee rate as of April 1, 2009 and adjustment of revenue based on trends in the amount of waste disposed at sites. Decrease in FEL tipping fee (see corresponding decrease under Major Contract FEL fees) 86,998 (389,000) Increase in Provincial Funding for Household Hazardous Waste. 160,520 Decreased Recycling Rebate from sale of recycled material and scrap metals. (292,000) Other revenue adjustments 2, ,662 Total Base Budget Adjustments 546,647 5

7 Reserves and Reserve Funds Reserves and reserve funds play a significant role in financing the replacement, upgrade and expansion of critical infrastructure for the Solid Waste Management operations. By prudent management of these funds The District Municipality of Muskoka can stabilize year-over-year budgetary fluctuations, better match costs of financing infrastructure to use and benefits derived from that infrastructure, and provide financial flexibility to avoid and / or respond to periods of high and low interest rates. The following table highlights the reserve and reserve funds used in financing the Solid Waste Management operations. Fund Purpose Source of Funding Solid Waste Management Solid Waste Capital Reserve Fund Solid Waste Operating Reserve Fund To finance the replacement, upgrade and expansion of infrastructure related to Solid Waste Management along with related studies. To provide funds to stabilize year-overyear fluctuations in the annual operating budgets and/or finance unforeseen budget over-runs. Special Solid Waste Levy (as noted above in Financing / Reserves section) Special Solid Waste Levy The projected balances in these reserves, based on annual contributions and capital funding commitments, are shown in the Capital Budget and Forecast (Appendix B) section of this report. In general, the Solid Waste Capital Reserve Fund shows a positive balance in the fund throughout the 10-year forecast. In 2008 the annual contribution increased by $150,000 to $1,650,000. In 2009, staff is recommending a one-time reduction in the contributions to the Solid Waste Reserve Funds of $150,000 to offset the dramatic reduction in revenue derived from the sale of recyclable material. The forecast is that the market for recyclable material will be soft throughout In 2010, when the market for this material is restored, the annual contributions to the Solid Waste Reserve Funds will be restored as well. This one-time reduction in contributions does not impact the viability of the reserves and once restored, the annual contribution of $1,650,000 will sustain the fund over the forecasted period without the requirement to increase the level in the foreseeable future. NOTE: In 2016, the annual contributions to the Area Municipalities of $1,366,000 in recognition of the transfer of the existing landfill sites to the District in 1996 will end. These funds can be redirected into the Solid Waste Capital Reserve Fund to fund projected site expansions beyond the current 10-year forecast. 6

8 Impact of Service Level Changes Included under the Service Level Change column on page 3 of Appendix A is the net impact of two service level changes totaling $7,970. The first service level change relates to the elimination of several remote bin and depot locations, expanded hours at the Baxter and Tower Road Transfer Stations, and expanded curbside pickup in the Port Severn area. The details of the service level changes are contained in Appendix D of this report. The second service level change relates to a minor expansion of the Kitchen Organics pickup area by 1,500 households within the existing urban centres of Bracebridge, Gravenhurst, and Huntsville Capital Budget and Forecast The 2009 Capital Budget reflects $2,115,000 in expenditures as shown in Appendix B of this report. The major projects contained in the 2009 Capital Budget is $200,000 to upgrade the Baxter Transfer Station, $550,000 for compliance and final cover at McLean Transfer Station, $250,000 for compliance and final cover at Stisted Landfill Site and $500,000 for compliance and final cover at the Beiers Landfill Site. Over the remaining 9 years of the forecast, $10,010,000 is budgeted for a combination of site expansions, site closure and study costs, which is comparable to the $10,040,000 contained in the 2008 budget forecast over a similar period. The provision for a new disposal facility is not scheduled until after the 10-year forecast period. A $7,000,000 provision for this facility is included under the Year 11 to 20 column in Appendix B and has been included for information purposes only. All of the projects contained within the 2009 Draft Solid Waste Management Operating Budget and 2009 Draft Capital Budget and Forecast are being financed through the Solid Waste Capital Reserve Fund. Impact on User Fees and Special Service Levy Tipping Fees The current tipping fee is $110 per tonne (a shortfall of $5 per tonne) as determined in a 2003 study, which determined The District Municipality of Muskoka cost of disposal at $115 per tonne. Based on the 2009 budget the estimated cost per tonne for disposal of the waste including financing and administration is $167. It should be noted that the $167 figure is based solely on the 2009 budget and does not take into account long-term commitments and/or actuarial projections as to existing and potential liabilities. Until a detailed financial plan is completed, based on the future direction of Solid Waste Operations, an interim rate increase of $5 per tonne effective April 1, 2009 is recommended. Levy Allocation The Solid Waste Management net bottom line is allocated through a Special Service Area Levy. The allocations between the Area Municipalities are based on the level of service provided to each Area. Within the Area Municipalities, the Solid Waste Management Levy is proportioned to the individual taxpayers based on assessment. Although the intent was to allocate costs on the level of service provided to each Area Municipality, historically, the final amounts levied have not reflected this goal due to a number of factors including the variability and fluctuation in statistical 7 Revised: Dec 16/08

9 information on which to calculate the cost allocations between municipalities, and the requirement to refine the accounting records to accurately reflect the proposed funding arrangements. As an interim solution, the 2008 Solid Waste Management Levy for the Area Municipalities was based on applying the percentage increase in the Operating Budget for 2008 to each of the Area Municipalities 2007 levy. A special Solid Waste Financial Review Committee was established in 2007 with the mandate to review the existing levy allocation methodology, to investigate alternative methodologies or means of funding the Solid Waste Management function, and to report back to Council its findings and recommendations for consideration prior to the 2008 budget deliberations. The Committee met on several occasions throughout 2007 / 2008 and although a great deal of refinement of the data occurred, no final recommendation was forthcoming as to an alternative methodology to fund the Solid Waste Management function. The following table reflects the existing methodology used to calculate the Solid Waste Net Levy allocation. Collection Disposal Recycling Processing Current Allocation Methodology Allocated based on actual costs Curbside Collection Number of household pickups per contract Depots Actual cost of depot operations located within the Area Municipality Remote Bins Actual cost of remote bin operations within the Area Municipality (net of the tipping fee component of lift charge) Allocated based on percentage share of municipal waste disposed Landfill Net cost of operating the 3 landfill sites Transfer Stations Net cost of operating all 7 transfer stations Financing and Reserves Budgeted provisions to fund solid waste management facilities Kitchen Organics Program Net operating costs of program Allocated based on percentage share of estimated material collected from the Area Municipalities Net cost of processing after crediting sales from recycled material Final determination of the net levy allocation between the Area Municipalities does not have to be made at this time in order to approve the 2009 Draft Operating and the 2009 Capital Budget and Forecast for Solid Waste Management. A special meeting of the Solid Waste Financial Review Committee will need to be scheduled prior to the adoption of the 2009 Tax Levy By-law in April Staff will prepare several options for the Committee to consider in order to recommend to Council an appropriate methodology to be used in the preparation of the 2009 Solid Waste Management Levy. 8

10 Attached Appendices and Schedules Appendix A: 2009 Draft Operating Budget Solid Waste Management These schedules include a narrative commentary followed by the budget schedules themselves. In most cases there is an object summary of the functional section by major category of expenditure and revenues. This is followed by a net levy summary (the bottom line) of each cost centre that is included in the functional object summary. In reviewing these schedules please note the following: 1. The 2008 actual figures are as of December 9, 2008 and do not include all of the year-end entries. For example, accrual entries for last pay in 2008, December tipping billings, and invoices received in January 2009 related to The schedules are broken down into two main sections: General Waste Management and Recycling and Diversion, with the net levy share being 72% and 28% respectively, versus the 80 / 20 split in The summaries for each section include each respective collection cost (i.e. curbside, depots, transfer station, etc.) however the individual budgets for the collection activities are combined and discussed under the General Waste Management section. a. Each section includes an object summary followed by a net levy summary page. The net levy summary page contains three summaries: an operating summary, a summary related to the general waste function and a summary related to the recycling / diversion function. The operating summary includes the budget for services related to that function (landfill site, depots, etc.) for services performed directly by the District. The other two summaries include budgets for services performed through third party contracts for the respective function. Appendix B: 2009 Draft Capital Budget and Forecast Solid Waste Management The first schedule within this appendix provides a listing of proposed capital projects to be constructed within the period from 2009 to The second two schedules within this appendix show the funding source for these capital projects (in this case 100% of the funding is derived from the Solid Waste Capital Reserve Fund) and the status of the Solid Waste Reserve over the 10-year time frame along with recommended contribution levels from the Solid Waste Management Operating Budget. The third schedule within this appendix includes an itemized list of Minor Capital requests. 9

11 Appendix C: Solid Waste Management User Fees A schedule showing a list of Solid Waste Management user fees as currently charged, as recommended, and as incorporated into the attached 2009 Draft Operating Budget, effective April 1, Appendix D: Georgian Bay Service Level Change Appendix E (Water and Sewer Section): A schedule showing the full-time equivalent staffing levels for rate supported budget departments. Respectfully submitted, Respectfully submitted, Stephen Cairns A.J. White, P. Eng. Commissioner of Finance and Commissioner of Engineering and Corporate Services Public Works 10