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Slide 1
Stewards’ Consultation
September 1, 2005
Slide 2
Welcome
Slide 3 Morning AgendaMorning Agenda
10:3010:30 Welcome,Welcome, Damian BassettDamian Bassett
Blue Box Program Plan Updates & Blue Box Program Plan Updates & Amendments, Amendments, Derek StephensonDerek Stephenson
Proposed 2006 Program Rules, Proposed 2006 Program Rules, Gordon DayGordon Day
Q&A on Updates/Amendments & 2006 RulesQ&A on Updates/Amendments & 2006 Rules
2006 Stewards’ Fees, 2006 Stewards’ Fees, Guy PerryGuy Perry
Consultation & Further Amendments to Consultation & Further Amendments to BBPP, BBPP, Derek StephensonDerek Stephenson
Q&A on Stewards’ Fees & Further Q&A on Stewards’ Fees & Further AmendmentsAmendments
12:3012:30 Lunch (Webcast suspended)Lunch (Webcast suspended)
Slide 4
Today’s InstructionsToday’s Instructions
New participants in all stakeholder groupsNew participants in all stakeholder groups Webcast available in archives – 180 daysWebcast available in archives – 180 days 22ndnd audience listening on-line audience listening on-line
we’ll note the number as we change slideswe’ll note the number as we change slides email questions/comments email questions/comments from your regular from your regular
email program email program to the address below to the address below
Slide 5
Consultation Process & TimingConsultation Process & Timing
SeptemberSeptember
Presentation of proposed feesPresentation of proposed fees 11
Deadline for comments, 5 p.m. to Deadline for comments, 5 p.m. to [email protected]@stewardshipontario.ca
1212
Stewardship Ontario Board for approvalStewardship Ontario Board for approval
If approved, forward to next WDO If approved, forward to next WDO board meetingboard meeting
1919
Next WDO meetingNext WDO meeting
If approved, forward to MinisterIf approved, forward to Minister2828
Slide 6
Blue Box Program PlanUpdate & Amendments
Derek Stephenson
Slide 7
BBPP Update: 2005 Program YearBBPP Update: 2005 Program Year
First full calendar year for programFirst full calendar year for program Met all legal requirements under WDAMet all legal requirements under WDA On track for:On track for:
$51.3M direct payments to municipalities$51.3M direct payments to municipalities approved $5.1M in competitive grants to approved $5.1M in competitive grants to
improve effectiveness & efficiency of improve effectiveness & efficiency of municipal programsmunicipal programs
direct administration costs less than 5% of direct administration costs less than 5% of program costprogram cost
Slide 8
BBPP Update: 2005 Program YearBBPP Update: 2005 Program Year
Successfully negotiated cost containment Successfully negotiated cost containment plan with AMO plan with AMO
$2.5M investment in new glass market $2.5M investment in new glass market development approveddevelopment approved
Received & processed 2,000 reports from Received & processed 2,000 reports from stewardsstewards
500+ 500+ potentialpotential additional additional stewards stewards identified but not yet reportedidentified but not yet reported
Slide 9
BBPP Update: 2005 Program YearBBPP Update: 2005 Program Year
First charges have been laid under Act: First charges have been laid under Act: failure to reportfailure to report failure to pay feesfailure to pay fees both company & officers chargedboth company & officers charged
Completed first on-site audits of steward Completed first on-site audits of steward reportsreports
Slide 10
Original BBPP projected 815,000 tonnes Original BBPP projected 815,000 tonnes recycled & municipal payments of $54M recycled & municipal payments of $54M by 2004by 2004
End 2004 results: 824,000 tonnes recycled End 2004 results: 824,000 tonnes recycled & municipal payments of $55.5M& municipal payments of $55.5M
BBPP Update: 2005 Program YearBBPP Update: 2005 Program Year
Slide 11
Amendments to BBPP for 2006Amendments to BBPP for 2006
Minister’s decision on in-kind payments for Minister’s decision on in-kind payments for CNA/OCNA members with regards to their CNA/OCNA members with regards to their obligations to municipalitiesobligations to municipalities
Cost containment strategy including Cost containment strategy including agreements with AMO on reasonable cost agreements with AMO on reasonable cost bands & municipal administration costs bands & municipal administration costs
Slide 12
Amendments to BBPP for 2006Amendments to BBPP for 2006
Minister’s requirement that Stewardship Minister’s requirement that Stewardship Ontario & WDO administration costs be Ontario & WDO administration costs be cappedcapped no more thanno more than 5% of total program costs5% of total program costs
Minister’s direction on voluntary stewardsMinister’s direction on voluntary stewards
Slide 13
Amendments to BBPP for 2006Amendments to BBPP for 2006
Revised Stewardship Ontario governance Revised Stewardship Ontario governance model (when approved by Minister)model (when approved by Minister)
Changes to program rulesChanges to program rules 2006 fee rates2006 fee rates
Slide 14
Proposed 2006 Program Rules
Gordon Day
Slide 15
BackgroundBackground Rules changed annually:Rules changed annually:
update fee rates & datesupdate fee rates & dates improve clarityimprove clarity address shortcomingsaddress shortcomings
Board is considering three changes to Board is considering three changes to Rules for which they would like stewards Rules for which they would like stewards to provide commentto provide comment
Slide 16
Today’s Rules PresentationToday’s Rules Presentation
Copy of proposed 2006 Rules providedCopy of proposed 2006 Rules provided Changes to Rules denoted in 1 of 3 ways:Changes to Rules denoted in 1 of 3 ways:
UnderlineUnderline: annual change: annual change Bold ItalicsBold Italics: new additions; for your : new additions; for your
information onlyinformation only Boxed: 3 boxed sections; changes for Boxed: 3 boxed sections; changes for
commentcomment
Slide 17 Brand Owner Definition – Brand Owner Definition – What has been our experience?What has been our experience?
Many business models in placeMany business models in place some not clearly covered by Rulessome not clearly covered by Rules
Licensing arrangements wide-spreadLicensing arrangements wide-spread resulting in 2 possible “brand owners” in Ontarioresulting in 2 possible “brand owners” in Ontario
Need to assign obligationNeed to assign obligation must be logical, clear, fair & meet intent of programmust be logical, clear, fair & meet intent of program
Companies who have organized corporate Companies who have organized corporate structure for other purposes - exempt from fees structure for other purposes - exempt from fees related to Designated Blue Box Waste (DBBW)related to Designated Blue Box Waste (DBBW)
#1
Slide 18
Proposed Changes – Brand OwnerProposed Changes – Brand Owner
Recognize that trademark owner & Recognize that trademark owner & licensee may both reside in Ontariolicensee may both reside in Ontario
Clarifies “Private Label” manufacturers not Clarifies “Private Label” manufacturers not classified as licenseeclassified as licensee
#1
Slide 19
Proposed Changes – Brand OwnerProposed Changes – Brand Owner
In event of 2 brand owners in Ontario, obligation In event of 2 brand owners in Ontario, obligation assigned to party “more directly connected to assigned to party “more directly connected to production of DBBW, except Franchisor who production of DBBW, except Franchisor who shall be the steward.”shall be the steward.”
Reinforce that Franchisor is Brand Owner of Reinforce that Franchisor is Brand Owner of DBBWDBBW
Add “any person whose corporate name or Add “any person whose corporate name or business name registration includes trademark.”business name registration includes trademark.”
#1
Slide 20
Impact of Proposed ChangeImpact of Proposed Change
Close gaps in current RulesClose gaps in current Rules currently exploited by small number of companiescurrently exploited by small number of companies
Clarifies obligation in case of trademark owner & Clarifies obligation in case of trademark owner & licenseelicensee
Captures companies registered in Ontario who Captures companies registered in Ontario who benefit from sale of products, but do not meet benefit from sale of products, but do not meet current test of residencycurrent test of residency
#1
Slide 21 Designation of Steward – Designation of Steward – What has been our experience?What has been our experience?
Confusion around who is obligated for “service Confusion around who is obligated for “service packaging,” specifically unbranded packagingpackaging,” specifically unbranded packaging
Previous “franchisee supply” rule confusing to Previous “franchisee supply” rule confusing to understand & difficult to monitorunderstand & difficult to monitor created un-level playing field within certain sectorscreated un-level playing field within certain sectors
Most franchisees under sales or 15 tonne Most franchisees under sales or 15 tonne threshold threshold
Franchisor owns trademark & benefits from sale Franchisor owns trademark & benefits from sale of products with trademarkof products with trademark
#2
Slide 22 Proposed Changes – Proposed Changes – Designation of StewardsDesignation of Stewards
Add “Service Packaging” to defined termsAdd “Service Packaging” to defined terms Include “Service Packaging” to Brand Include “Service Packaging” to Brand
Owner, First Importer & Franchisor Owner, First Importer & Franchisor designationdesignation
Add new section (iv) to capture “Any Add new section (iv) to capture “Any person who delivers Service Packaging to person who delivers Service Packaging to consumers in Ontario” consumers in Ontario” to cover mail order/internet shoppingto cover mail order/internet shopping
#2
Slide 23 Proposed Changes – Proposed Changes – Designation of StewardsDesignation of Stewards
In a franchise system, Franchisor owns In a franchise system, Franchisor owns brand & trademarkbrand & trademark consistent with Minister’s direction & rules for consistent with Minister’s direction & rules for
other stewardsother stewards
Franchisor will be responsible for all Franchisor will be responsible for all DBBW within their franchise systemDBBW within their franchise system
#2
Slide 24
Impact of Proposed ChangeImpact of Proposed Change
Improves clarity around Service PackagingImproves clarity around Service Packaging including mail order/internet shopping companiesincluding mail order/internet shopping companies
Levels playing field for franchise operationsLevels playing field for franchise operations obligations consistent across similar competitorsobligations consistent across similar competitors
Increases number of franchisors obligated to Increases number of franchisors obligated to report & pay fees report & pay fees
Reduces quantity of exempted DBBWReduces quantity of exempted DBBW
#2
Slide 25 Steward Exemptions – Steward Exemptions – What has been our experience?What has been our experience?
Two tonnage thresholds confusing & Two tonnage thresholds confusing & raises questions about fairness of raises questions about fairness of programprogram
Some stewards attempt to report Some stewards attempt to report business operations separately to avoid business operations separately to avoid obligationsobligations
#3
Slide 26 Proposed Changes – Proposed Changes – Steward ExemptionsSteward Exemptions
Remove 75,000 kilogram (kg) threshold Remove 75,000 kilogram (kg) threshold exemption for newspapersexemption for newspapers
Resulting in only one 15,000 kg weight Resulting in only one 15,000 kg weight exemption for all DBBWexemption for all DBBW
Clarify weight exemption test in (ii) to Clarify weight exemption test in (ii) to include “the steward and its Affiliates” as include “the steward and its Affiliates” as currently applies in (i) sales exemptioncurrently applies in (i) sales exemption
#3
Slide 27
Impact of Proposed ChangeImpact of Proposed Change One consistent & clear weight exemption One consistent & clear weight exemption Clearly defined 15,000 kg applies to Clearly defined 15,000 kg applies to
steward & Affiliates steward & Affiliates net impact will reduce number of exempted net impact will reduce number of exempted
stewardsstewards
Handful of exempt OCNA stewards will be Handful of exempt OCNA stewards will be obligatedobligated however financial impact would be <$150/yrhowever financial impact would be <$150/yr
#3
Slide 28
Other Important ChangeOther Important Change
Reporting & payment schedule added as Reporting & payment schedule added as Schedule CSchedule C
Stewardship Ontario moving to quarterly Stewardship Ontario moving to quarterly payment schedule as originally plannedpayment schedule as originally planned
Reporting deadline remains March 31Reporting deadline remains March 31stst First payment of 25% in 2006 obligation due First payment of 25% in 2006 obligation due
March 31March 31stst penalty & interest if payment received after penalty & interest if payment received after March 31March 31stst last quarter payment due last quarter payment due December 1, 2006December 1, 2006
Slide 30
2006 Stewards’ Fees
Guy Perry
Slide 31
Topics to CoverTopics to Cover
Basis for calculating 2006 fees Basis for calculating 2006 fees Proposed 2006 Stewards FeesProposed 2006 Stewards Fees Next stepsNext steps
Slide 32
Blue Box Stewards FeesBlue Box Stewards Fees
Total industry cost downTotal industry cost down
~$~$61.261.2M for 2006 vs. $64.3M for 2005 (~5%)M for 2006 vs. $64.3M for 2005 (~5%)
~$~$74.374.3/tonne for 2006 vs. $82.5/tonne for 2005 /tonne for 2006 vs. $82.5/tonne for 2005 (~10%)(~10%)
Slide 33
Cost ContainmentCost Containment
Negotiated cost containment strategy with Negotiated cost containment strategy with municipalities:municipalities: apply “reasonable cost bands” based on better apply “reasonable cost bands” based on better
performing programsperforming programs instituted performance measure as basis for instituted performance measure as basis for
paymentspayments reduction in Blue Box System cost of $24M over next reduction in Blue Box System cost of $24M over next
two yearstwo years cap municipal administration costcap municipal administration cost payment to best practice costs in 2008payment to best practice costs in 2008
Slide 34 Agreed Net Blue Box CostAgreed Net Blue Box Cost
$0
$20
$40
$60
$80
$100
$120
$140
2001 2002 2003 2004
Municipal Reporting Year
Net
co
st (
mil
lio
n $
)
Net Cost (actual gross cost less 3-year average revenue)
Agreed Net Cost
Slide 35
* Due to difference in reported sales quantities & generation * Due to difference in reported sales quantities & generation estimates used to calculate previous years’ feesestimates used to calculate previous years’ fees
Key Elements of FeesKey Elements of Fees
Payments to Municipalities
91%
Program Delivery, MOE Enforcement &
WDO Charges5%
Administration & Start-up
3%
Anticipated Shortfall *
1%
Slide 36
Key Elements of Fees: Generation RatesKey Elements of Fees: Generation Rates
Generation estimates largely based on waste Generation estimates largely based on waste composition audits & some industry datacomposition audits & some industry data
Used last year generation ratesUsed last year generation rates accounting for population growth (1.26%)accounting for population growth (1.26%) extensive waste audit program underway, but extensive waste audit program underway, but
incomplete incomplete As for 2005, used most recent stewards’ data for As for 2005, used most recent stewards’ data for
newsprint, telephone directories, paint cans & newsprint, telephone directories, paint cans & LCBO glass packagingLCBO glass packaging these represent more reliable generation figures than these represent more reliable generation figures than
waste audit resultswaste audit results
Slide 37
Taken from 2004 annual municipal datacall reported by WDOTaken from 2004 annual municipal datacall reported by WDO
Overall recovery up ~6% from 779,843 tonnes to 823,627 tonnes
Recovery RatesRecovery Rates
200
2
200
2
200
2
200
2
200
2
200
2
200
3
200
3
200
3
200
3
200
3
200
3
200
4
200
4
200
4
200
4
200
4
200
4
0%
15%
30%
45%
60%
75%
Printed Paper Paper-basedPackaging
Plastics Aluminum Steel Glass
Re
co
ve
ry R
ate
(%
)
Slide 38
Gross CostsGross Costs
Reported by WDO from 2004 municipal datacallReported by WDO from 2004 municipal datacall up ~ 6.5% from $182.4M to $194.4Mup ~ 6.5% from $182.4M to $194.4M includes interest on municipal capital ($4.2M)includes interest on municipal capital ($4.2M)
deferred to 2006 negotiated as part of cost containment deferred to 2006 negotiated as part of cost containment strategystrategy
Use material specific costs from last year’s Use material specific costs from last year’s allocation study allocation study conditions not changed substantially across provinceconditions not changed substantially across province
preliminary work underway to address implementation of preliminary work underway to address implementation of single-stream recycling & combined recycling & organics single-stream recycling & combined recycling & organics collection in Torontocollection in Toronto
Slide 39
RevenueRevenue
Reported by municipalities to WDOReported by municipalities to WDO
$83.7M in 2004 from $65.6M in 2003$83.7M in 2004 from $65.6M in 2003
3-year average (used for obligation)3-year average (used for obligation)
$73.6M for 2006 fees from $64.9M$73.6M for 2006 fees from $64.9M
Relative prices will affect relative net costs & Relative prices will affect relative net costs & allocation among materialsallocation among materials
Slide 40 Industry Share of Blue Box CostIndustry Share of Blue Box Cost
Municipal$58.78M
Municipal$55.46M
Industry$55.46M
Cost Band $10M
Industry$58.78M
$0
$20
$40
$60
$80
$100
$120
$140
2003 2004
Pro
gra
m C
ost
(m
illio
ns
of
$)
Total $117.55 M Total $120.92 M
Slide 41
On Track with Program Plan On Track with Program Plan
Compared to original Blue Box Program Compared to original Blue Box Program Plan . . .Plan . . .for 2004:for 2004: plan forecast 814,700 tonnes to be recovered plan forecast 814,700 tonnes to be recovered
with an industry obligation of $54M with an industry obligation of $54M actual recovery was higher at 823,600 tonnes actual recovery was higher at 823,600 tonnes
with an industry obligation of $55.5Mwith an industry obligation of $55.5M
Slide 42
Allocation FactorsAllocation Factors
No change to the funding formula for 2006No change to the funding formula for 2006 same allocation factors & weightingsame allocation factors & weighting
recovery rate – 40%recovery rate – 40% net cost – 40%net cost – 40% equalization – 20%equalization – 20%
Slide 43 Program Delivery Costs for Program Delivery Costs for Market DevelopmentMarket Development
2003/2004 fees 2003/2004 fees $2.5M for glass $2.5M for glass 2005 fees 2005 fees $100K for plastics $100K for plastics
preliminary market development underwaypreliminary market development underway
For 2006:For 2006: no additional market development feesno additional market development fees
glass & plastics work ongoing & progress glass & plastics work ongoing & progress continues toward 60% diversion goalcontinues toward 60% diversion goal
this will be reviewed on an annual basisthis will be reviewed on an annual basis
Slide 44 Program Delivery, Admin & Start-upProgram Delivery, Admin & Start-up
Start-up$0.89M
Administration$1.17M
Direct Program Delivery$1.93M
WDO Charges & MOE Enforcement
$1.20M
Total: $5.2M
Slide 45
Difference between tonnes reported by stewards & estimates used for previous years fees
Stewards Reports vs. Fee EstimatesStewards Reports vs. Fee Estimates
Packaging & Printed Paper Packaging & Printed Paper Generation For 2004 FeesGeneration For 2004 Fees
20%
40%
60%
100%
1,285,000 tonnes
1,578,500 tonnes80%
Estimated Generation for 2004 Fees
Stewards Reports
Slide 46
Revenue Against TargetRevenue Against Target
For 2003/2004For 2003/2004 Previously estimated $1.1MPreviously estimated $1.1M
Board decision to spread over 3 years Board decision to spread over 3 years pay $369K each year pay $369K each year Actual $1.6M (as of Dec. 31 2004)Actual $1.6M (as of Dec. 31 2004)
higher re-filing, lower new stewardshigher re-filing, lower new stewards
For 2005For 2005 Additional 2003/2004 fees & interest of $635K in 2005Additional 2003/2004 fees & interest of $635K in 2005 Projected net shortfall at Dec. 31 2005 of $1.15MProjected net shortfall at Dec. 31 2005 of $1.15M
Recovery in 2006 FeesRecovery in 2006 Fees 50% ($575K) in 2006 fees50% ($575K) in 2006 fees
Slide 47Proposed Fee Rates Printed PaperProposed Fee Rates Printed Paper
Material2005 Fees
(¢/kg)
Proposed 2006 Fees
(¢/kg)Change
CNA/OCNA Newsprint 0.076 0.182
Non-CNA/OCNA Newsprint 0.786 0.757
Magazines & Catalogue 0.862 1.522
Telephone Directories 1.302 1.213
Other Printed Paper 9.029 7.668
Slide 48
Material2005 Fees
(¢/kg)
Proposed 2006 Fees
(¢/kg)Change
Paper Packaging 7.904 7.673
Plastics 13.907 13.556
Steel 4.745 4.601
Aluminum Food & Beverage Cans
-1.093 -0.476
Foil & Other Aluminum 5.502 3.577
Glass 4.003 3.41
Proposed Fee Rates PackagingProposed Fee Rates Packaging
Slide 49
Looking Forward to 2007Looking Forward to 2007
Cost Pressures: Cost Pressures: further increases in recovery further increases in recovery cost of living & program changescost of living & program changes capital investmentcapital investment increase in municipal administration allowance increase in municipal administration allowance
to 3% & 5% to 3% & 5% commodity prices & revenuecommodity prices & revenue
Negotiated cost band for 2007 Negotiated cost band for 2007 $14M reduction $14M reduction Ongoing cost containment work & Ongoing cost containment work &
implementation of E&E Fundimplementation of E&E Fund
Slide 50
Consultation on Further Amendments to BBPP
Derek Stephenson
Slide 51 Consultation on Further Consultation on Further Amendments to BBPPAmendments to BBPP
Fee setting methodology; options include:Fee setting methodology; options include: revise current allocation factor weightingsrevise current allocation factor weightings modify the allocation factorsmodify the allocation factors alternative fee setting approachesalternative fee setting approaches
Aggregation/dis-aggregation of material Aggregation/dis-aggregation of material typestypes aggregation of paper gradesaggregation of paper grades dis-aggregation of packaging gradesdis-aggregation of packaging grades
Slide 52 Consultation on Further Consultation on Further Amendments to BBPPAmendments to BBPP
Base year data to be used for 2007 fee Base year data to be used for 2007 fee setting purposessetting purposes use previous year steward reports for Blue use previous year steward reports for Blue
Box generation estimatesBox generation estimates harmonization with other provinces harmonization with other provinces
(e.g. reporting years)(e.g. reporting years)
Slide 53 Consultation on Further Consultation on Further Amendments to BBPPAmendments to BBPP
Harmonize de minimis levels for all Harmonize de minimis levels for all stewardsstewards
Slide 54
Process & TimingProcess & Timing
SeptemberSeptember Strike sub-committee of Board (including Strike sub-committee of Board (including representation from Technical & Policy Advisory representation from Technical & Policy Advisory committees under new governance model)committees under new governance model)
OctoberOctober Develop options paper for Board approval for Develop options paper for Board approval for consultationconsultation
NovemberNovember Circulate paper to stewards & other key Circulate paper to stewards & other key stakeholdersstakeholders
Hold public consultation meeting to review optionsHold public consultation meeting to review options
DecemberDecember Preliminary recommendations reviewed by Board Preliminary recommendations reviewed by Board sub-committee sub-committee
Slide 55
2007 Fees – Jan. to Sept.2007 Fees – Jan. to Sept.
JanuaryJanuary Board review of sub-committee recommendations Board review of sub-committee recommendations
FebruaryFebruary Second public meeting on Board draft positionsSecond public meeting on Board draft positions
Stewardship Ontario Board approval of agreed Stewardship Ontario Board approval of agreed amendments to BBPPamendments to BBPP
MarchMarch WDO review & approval of proposed amendmentsWDO review & approval of proposed amendments
JuneJune Target date for Minister approval of amendmentsTarget date for Minister approval of amendments
JulyJuly Target date for consultation on 2007 feesTarget date for consultation on 2007 fees
August/ August/ SeptemberSeptember
WDO approval of 2007 fees & BBPP amendmentsWDO approval of 2007 fees & BBPP amendments
Slide 57
Lunch
Webcast Resumes at 1:30