How much revenue is retained by municipalities from the sale of recyclables? Are they getting a good deal?
In provinces such as British Columbia and Alberta, larger municipal programs historically retained most of the revenue. Municipalities in Quebec, on the other hand, have contracted operations entirely to the private sector and retain no revenue.
With information on municipal program costs increasingly available through sources such as Ontario and Nova Scotia’s “data calls” and reporting in Manitoba, the ability to assess program costs is growing. Along with this comes a rising awareness of the potential impact of revenue sharing.
In 2004, most of the larger programs in Ontario (representing 82 percent of the tonnes recovered in the province) retained all or some of the revenue from the sale of their recyclable material. In Manitoba, programs are incorporating “revenue sharing thresholds.” In Quebec at least one program recently incorporated revenue sharing into its contract.
A guide to cost-effective municipal recycling contracts, being developed as part of the Blue Box program in Ontario, will recommend that municipal programs retain one hundred percent of the revenue since a contractor generally will build in contingency to cover the risk they assume. This also avoids problems when a private company does take on too much risk and a drop in commodity prices jeopardizes the viability of the operation. This has generally occurred in times of strong commodity prices and competitive markets.
Even if municipalities don’t have adequate resources to market their own materials, the guide recommends sharing only a small portion of the revenue as an incentive to maximize revenue, or at least require reporting of revenue by contracted operators so that the municipality can fully understand the cost of the service provided. Over time, the data available on the impact of revenue sharing on program costs will continue to expand and all municipalities will be better positioned to realize the full value of their recyclables.
Note:The model recycling tender tool is currently being tested in trial communities. For more information on this project, contact email@example.com or watch for information coming soon towww.stewardshipontario.ca
Contact Damian Bassett at 416-594-3457, ext 3457 or visit www.csr.org (CSR Sheet located under “Publications”)