Local Government Issues regarding the Container Deposit Scheme Susy Cenedese and Greg Freeman

Introduction Local Government perspective on CDS Background Drivers Recent study - Understanding potential impacts of CDS on kerbside collections Methodology Findings & recommendations Where to from here?

Local Government Business Interests Community Interests Environmental Interests Historically, community based recycling. Social Enterprise involvement Community has a strong identity with recycling Councils spend considerable finances on collection and processing Some risk exposure to recycling markets Councils can be exposed in longer term contracts Recycling is seen as an important environmental program Increased recycling saves valuable landfill space Extended producer responsibility Why is a CDS relevant to Local Government?

Schemes elsewhere in Australia

LGNSW position LGNSW supports an effective CDS in NSW that: includes a financial incentive for the return of each container is consistent with existing schemes in SA and NT places the responsibility for managing the lifecycle of beverage containers (financial and physical) onto the producer and the consumer of beverage containers, has the least number of exemptions in regards to container size and product type, delivers reasonable access across NSW by a variety of redemption points, makes eligible any in-scope containers presented through kerbside systems with the value of the deposit being returned to the council to offset waste charges, allows for an independent, non-profit body to coordinate the scheme, effectively contributes to reducing litter, and does not place any additional cost burdens on Local Government.

2012 Study The Local Government and Shires Associations of NSW commissioned MRA Consulting to undertake a study on the impacts (cost/benefits) of the introduction of a CDS on kerbside recycling and councils. The study found that a CDS similar to the SA model: Kerbside recycling would contain 17% less material. Due to the value of the unredeemed container deposits in kerbside, MRF revenues would be 31% higher. Recycling is likely to result in a payment as opposed to a charge to councils at the MRF gate. Councils’ overall recycling costs would be reduced by 19-47%. NSW councils could save $23 to $62 million annually on recycling costs.

2015 Study Understanding the potential impacts of CDS on Local Government Kerbside collections. The report was commissioned by LGNSW with funding from the NSW EPA. Research undertaken in late 2015 (prior to release of CDS Discussion Paper) Survey and report done by consultants, IEC The brief was to conduct a survey of all 152 Councils in NSW, to better understand the status of waste collection and processing contracts and the implications of a CDS for councils (financially, legally) Report completed in November 2015

Study Methodology Based on the project brief a questionnaire for all 152 NSW councils was developed by IEC in consultation with LGNSW. Relevant information was also sourced from the EPA’s latest Local Government Waste & Resource Recovery Data Report The questionnaire was designed using Survey Monkey, an established online cloud based survey and data analysis program. Assistance given from Regional Waste Groups in contacting councils Telephone follow ups undertaken A total of 104 councils responded

Survey Results Overall response rate by Councils was 68.4%, however as mainly lower population regional and rural Councils did not respond, the responses represented around % of NSW households based on EPA data. In terms of statistical confidence the 104 Council response rate is calculated at 95% confidence level with a margin of error of 6%, or 99% confidence level with a margin of error of 8%. However the response rate to each question varies, thus reducing the confidence levels and increasing the margins of error.

Recycling Services Offered

Who carries out recycling?

When does Contract expire? Around 50% of recycling collection contracts expire in the next 3 years

Does collection contract allow for variations? A total of 46 Councils (64%) indicated that the contracts allowed for change of law

Any penalty provisions for have ‘change in law’ ? Most Councils (71%) indicated that there are no specific penalty provisions in respect to variations brought about by legislative changes.

Who owns recyclables?

Who operates MRF? 72% of Councils deliver recyclables to contractor operated MRF’s. 7 rural and regional Councils send their recyclables to MRFs operated by social enterprise and 7 rural and regional Councils send their recyclables to MRFs operated by Council staff.

How are MRF activities paid for? 73% of Councils fund MRF activities through the Domestic Waste Management Charge.

Contract variations ? (MRF) A total of 35 Councils (55%) indicated that their contracts allow for variations.

Change in law provisions? (MRF) A total of 38 Councils (59%) indicated that their contracts can be amended if there are legislative changes.

Compositional Audits A total of 45 Councils (48%) indicated that they had undertaken compositional audits in the last two years. Many have not undertaken audits!

CDS refunds would be used to …?

Issues Raised Impacts on existing and planned collection and recycling contracts Lack of information about the details of the final CDS. CDS may result in councils bearing additional costs for collection and MRF processing. Convenience for residents in terms of travel distances to redeem deposits, particularly in rural and regional areas. Viability of existing MRF infrastructure reliant on existing and growing throughput. Regional councils and their communities may be disadvantaged by distances, transport costs and dispersed population. Costs arising though contract renegotiations may outweigh CDS benefits. Can income from CDS or savings in respect to domestic kerbside services be used for purposes such as litter control?

Findings 95% of all NSW households are receiving kerbside recycling services. Almost 90% of kerbside recycling collection services are provided by way of contract, with 34% expiring in the next two years and 30% expiring in greater than 5 years 72% of MRFs are operated by contractors and 10% by Councils, with 30% of contracts expiring in less than 2 years and 31% expiring in greater than 5 years. Most contracts contain change of law and dispute provisions. A CDS may have other implications in terms of changes to kerbside collection systems eg: materials collected, potential increased costs of kerbside collection utilisation of existing collection and recycling and infrastructure, costs of transport and processing, potential penalties arising from renegotiation of existing contracts.

Key Recommendations Seek to have advice issued to NSW councils that the pending CDS constitutes “extenuating circumstances” pursuant to Section 55(3)(i) of the LG Act. Councils be cautioned from entering into new contracts for recycling until after the CDS is legislated. Guidance be provided for any alternatives to entering into contracts. CDS design to minimise impacts on the established kerbside collection, transport and processing recycling systems and infrastructure in NSW. The CDS be designed so that regional communities are not disadvantaged with additional costs. The CDS be designed to minimise inefficiencies that will erode deposit income benefits to councils.

Key Recommendations (2) An Excel tool be developed to assist regional councils in transitioning to the proposed CDS eg to assist budgeting, resourcing, planning, plant and equipment reconfiguration, procurement and community education. Funding for independent experts, legal advice or other support measures to be made available to help councils renegotiate contract variations as a result of CDS. Details of the draft CDS to be disseminated to councils ASAP to provide more informed comments, and that the CDS design not be finalised until comments are fully considered by government.

Where to from here? Current advice to councils Avoid new contracts in short term; At minimum include CDS change of law provisions and seek zero change penalties Timing LGNSW role

Thank You Susy Cenedese Strategy Manager Local Government NSW Greg Freeman Managing Director Impact Environmental Consulting