Glenda Gies WDO Moderator Reasonable Cost Bands Glenda Gies WDO Moderator

Blue Box Cost Containment WDO’s Cost Containment Plan submitted to Minister on July 12, 2004 approved on December 30, 2004 Minister requested an accelerated timetable Reasonable Cost Bands implemented in 2006 rather than 2008 as proposed

Blue Box Cost Containment MIPC’s task measure program performance determine “reasonable” program performance define Reasonable Cost Bands in relation to program performance all to be completed by June 2006 to apply Reasonable Cost Bands to 2004 net system cost for calculating 2006 stewards fees

Our Speakers for this Session Guy Perry – E&E Factor Technical Services, Stewardship Ontario Stewardship Ontario representative on MIPC Andy Campbell – Reasonable Cost Band Agreement Director, Solid Waste Management, Region of York municipal representative on MIPC Question & Answer Session

Efficiency & Effectiveness Factor Guy Perry Stewardship Ontario Member of MIPC’s Cost Containment Team

Measuring Recycling Program Performance Dual objectives of Blue Box Program defined by Minister increasing diversion (60% target) cost containment – reducing system cost or minimizing increase as diversion increases Typical measures cost ($/tonne or $/household) gross cost, revenue, net cost recovery (kilograms/household/year or tonnes/year or %) Blue Box Program Plan (BBPP) identifies these measures Cost containment plan measure both cost & recovery proposed efficiency & effectiveness

Calculating Efficiency Efficiency = program performance on cost Measured using net program cost per tonne of Blue Box materials recovered Net Cost/Tonne = Net Program Cost divided by Tonnes BB Material Recovered Net Program Cost = Gross Program Costs – Program Revenues Lower net cost per tonne indicates higher efficiency

Calculating Effectiveness Effectiveness = program performance on diversion Measured using program recovery rate (% recovery) Recovery rate (%) = Recovery of BB material divided by Generation of BB material Recovery = Tonnes of material marketed as reported in annual WDO Datacall Generation = estimated materials generated based on historic province-wide waste audit data cross-checked with steward data Higher recovery rate indicates higher effectiveness

Calculating Generation Generation = estimated materials generated based on historic province-wide waste audit data cross-checked with steward data Waste generation estimates are based on historic waste audits throughout province audits in single-family (large & small urban & rural) & multi-residential Cross-checked waste audit results with steward reports & for some materials, replaced waste audit figures newsprint, LCBO glass, telephone directories, paint cans, aluminum foil

Calculating Generation (2) For each municipality, calculated generation based on households of each type Extensive waste audit program underway to refine these generation estimates over time more than 28 SF audits & 12 MF audits

Combining Efficiency & Effectiveness E&E Factor combines program efficiency & effectiveness for overall performance measurement Better performers tend to have lower E&E factors higher efficiency (lower cost) in numerator higher effectiveness (higher % recovery) in denominator

Example: 2004 E&E Factor

Reasonable Cost Bands Agreement Andy Campbell Regional Municipality of York Member of MIPC’s Cost Containment Team

Reasonable Cost Bands Agreement What are “reasonable” costs?

MIPC’s Task Given Minister’s request, identify options that would determine reasonable costs to achieve net system cost reduction Negotiations took place in June 2005 Compromise reached & approved by AMO, WDO & Stewardship Ontario boards

Negotiated Options Option Description Pros Cons Program Net Costs Include costs for each program up to a threshold Simple to apply Using net cost does not consider performance on recovery Component Net Costs Focuses on elements of each program Considers variation program elements adding to precision of analysis Effectiveness & Efficiency (E&E) Factors Include costs for each program up to a threshold defined by the selected E&E factor Considers performance on recovery & the effect on cost More difficult to apply Component Effectiveness & Efficiency (E&E) Factors Include costs for each program element for each program up to a threshold defined by the selected E&E factor for each program element Considers variation in individual program elements Most difficult to apply Problems with different aggregation of data

Reasonable Cost Principles All programs have room for improvement Reasonable costs are better than current costs Effectiveness & Efficiency (E&E) Factor will be used to measure performance of better performing programs existing eight municipal program groups used Defined by a percentile percentiles will be decreased for 2007 over 2006 so that cost bands in 2007 reflect better performance over 2006

Reasonable Cost Definition E&E factor calculated for each program in each “cost band” grouping Reasonable Cost E&E factor calculated as mean plus one standard deviation of E&E factors for better 75% performing programs Reasonable Cost E&E factor converted to Reasonable Costs for each affected program by multiplying by its recovery rate

Municipal Cost Band Groupings

How Reasonable Cost Was Applied

The Negotiated Compromise $24M reduction to overall net system cost over two years $10M in year 2006 $14M in year 2007

Reasonable Cost Impact (2006)

How is Program Funding Calculated? Apply Municipal funding Allocation Model (MFAM) Reduce funding for programs higher than the Reasonable Cost E&E Factor for each municipal grouping

MFAM Elements & Factors material density factor population density factor revenue discount factor Municipal Elements tonnage marketed by material by municipality population per hectare based on 2001 census data Note: that there is a glass factor separate and apart form the other ‘Material density factors’ “it is simply a further adjustment to the density of glass to account for extra costs for glass despite its high density.”

MFAM & Reasonable Cost Municipal Datacall submission $5M funding reduced from poorer performing programs based on E&E factor MFAM Max & min threshold applied Adjustments made to correct for any reporting corrections from previous year 10% late submission penalty applied to applicable programs

2006 Impact

“Best Practice” by 2008 What does “Best Practice” mean for you? identifying “Best Practice” possible further reduction in funding financial incentive to modify your program to align with “Best Practice” performance

Summary 2006 funding 2007 funding 2008 funding $10M reduction applied to 2004 net Blue Box system cost applied to poorer performing programs based on E&E factor minimum threshold set at 23% 2007 funding $14M reduction will be applied to 2005 net system cost in the same way as for 2006 2008 funding “Best Practice” costs

Questions & Answers

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On-line ‘What-If’ Tool Glenda Gies WDO Moderator

What-If Tool Municipal Funding Allocation Model four workshops in spring 2004 municipal participants consistently requested user-friendly model so municipalities could run their own scenarios MIPC responded by developing a ‘What If’ tool

What-If Tool Designed to test how program changes would have affected funding, revenue & recovery rates By modifying material recovery rates & households served in your last Datacall submission Identifies what your funding would have been if the program changes had been implemented prior to that Datacall year Cannot predict future funding as this is affected by actual Blue Box system gross cost, revenue & net cost in future years materials collected & tonnes marketed by all other Ontario Blue Box Programs in future years

Our Speaker for This Session Bob Argue – Demonstration of ‘What If’ Tool President, REIC Perth Executive Director of ecoPerth, (a non-profit, volunteer organization working on climate change) consultant to IWDO on development of Municipal Funding Allocation Model (MFAM) consultant to WDO on modifications to MFAM retained to develop a user friendly ‘What If’ version of MFAM for municipal use

Live Demonstration of the ‘What-If’ Tool Bob Argue REIC Perth

Log-In

2004 Municipal What-If Tool

Summary Funding

Example of a High Recovery Scenario

Table of Contents

Household Equivalents

Available Materials

Table of Contents

Build Your Own Scenario

Example of Scenario Graph

Questions & Answers

Thank You! Waste Diversion Ontario, www.wdo.ca Stewardship Ontario, www.stewardshipontario.ca Association of Municipalities of Ontario, www.amo.on.ca