Municipalities in Ontario anticipate their first cheque as part of the Waste Diversion Ontario (WDO) funding of half the province-wide net cost of municipal recycling programs sometime in 2003. At the heart of the program is the “Municipal Funding Allocation Model” that allocates the funds amongst 190 programs.
What will municipalities do with the WDO funds? For some it will go straight into general revenue, for others it will be used to help upgrade sadly neglected program components such as aging equipment or insufficient promotion and education budgets. Still other municipalities will use the funding to expand their diversion program, such as investing in capital and operational changes to increase recycling either through adding new materials or increasing the capture rate of existing materials.
Funds are calculated for each municipality based on a number of variables, including provincial average costs and revenue (not individual municipal costs), the tonnage of each material stream, and population density, and materials revenue. Greater funding goes to programs that have lower population density and to smaller programs.
The model distributes 40 per cent of the funds based on weight and 60 per cent on volume of the recyclables. This means that more funding is allocated to lighter-weight materials such as boxboard and plastic, and less is allocated to more dense materials such as glass and newspaper.
A “Municipal Working Model” developed by TorontoPerth, Ontario-based REIC LimitedPerth, shows how funds could change as a result of program changes. For example, what happens if new materials are added, or the capture rate of specific materials is increased?
The model compares current capture rates of each material stream with a “best practices” scenario. It identifies new tonnes diverted, increased revenue, WDO funds and other financial benefits. It compares this with the added costs to expand the program and provides a “break-even” contractor rate for adding new materials. The results should only be used as general indications since actual fund levels will change from year-to-year.
Increasing capture rates and adding new materials would significantly increase funding. For instance, in 2001 the City of Hamilton marketed 25,972 tonnes of recyclables from nearly 200,000 households.
A full year of WDO funds would be approximately $830,000 or $32 per tonne. Best practices could increase the capture of the basket of goods from under 50 per cent to around 75 per cent, for a total of 42,000 tonnes — a 64 per cent increase in recycling.
But Hamilton’s WDO funds would triple to over $2,500,000, averaging $60 per tonne. In addition to $1,700,000 in new funds the 16,000 new tonnes also generate new net revenue of $1,400,000 (based on three-year average revenue). If the municipality applies a diversion credit of $75 per tonne diverted (to reflect reduced landfill costs) there is an additional benefit of $1,200,000 for a total benefit of $4,300,000.
But what is the cost to capture an additional 16,000 tonnes? New costs include trucks, expanded MRF facilities, and new processing and promotion costs. The breakeven cost of the additional tonnage is around $265 per new tonne. If the municipality can capture the additional tonnage for less than $265 a tonne it will be ahead (net costs decrease). If the costs are greater than $265 per tonne net costs will increase. What those costs are and what is an acceptable cost (or benefit) is up to the municipality to determine.
Hamilton adopted a new Solid Waste Management Master Plan in December 2001 and set an aggressive target of 65 per cent diversion from landfill. The model helps to show effects of program changes on diversion and costs and serves as a tool to evaluate options that will achieve best practices and reach its 65 per cent target.
The model also shows the effects of incremental changes. For example, Hamilton plans to add polycoat/aseptic containers to its program. The model suggests that should result in an addition of 266 new tonnes that would generate revenue of $55 and new funds of $155 per tonne for total new revenue of over $55,000.
The City of Brockville services 8,290 households with its recycling program. In 2001 it marketed 1,652 tonnes of material. This would generate $65,000 of WDO funds or $39.25 per tonne. For many materials the city is close to a “best practices” program, thanks largely to a one-bag limit that has been in place since 1996. Extra bags cost $2 each. By adding a wider range of plastics and increasing capture rates for boxboard and mixed paper, Brockville could increase its tonnage to over 2,000 tonnes a year and funds to $50 a tonne for a total WDO funds of $102,000. Although under its current contract the contractor keeps all revenue ($50,000 in new revenue), the city reduces its waste costs by $126 for every tonne of new recycling. That would generate a diversion credit of $50,000 a year for an expanded program. The breakeven cost for expanding Brockville’s program is $325 a tonne for the new tonnage.
Investing this “new” WDO money funding to increase diversion can have the added benefit of increasing funds in subsequent years. In other words, investing today to pay dividends in the future.
Robert Argue is president of REIC Perth, based in Perth, Ontario. E-mail Robert at email@example.com