Environment and Infrastructure Services

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1 Agenda Item 5 Staff Report for Committee of the Whole Meeting Department: Division: Subject: Environment and Infrastructure Services Environment Services Waste Collection Contract Purpose: To provide Council with an overview of the results of negotiations between the Town and Miller Waste Systems Inc., and to recommend approval of a new waste collection contract to commence on April 1 st, Recommendation(s): a) That the contract for the provision of waste collection services (the Contract ) be awarded to Miller Waste Systems Inc. for a term of 8 years to commence on April 1, 2019 at a total estimated cost of $41.1 million (exclusive of taxes), and including an option to extend for a period of two, (1) year optional terms; b) That yard waste collection be scheduled on the same day as regular waste collection for each neighbourhood; c) That the yard waste collection season commence on the third week of April and continue until the first week in December for the duration of the contract; d) That the Mayor and the Clerk be authorized to execute any necessary documentation to effect the contract and terminate the existing contract effective March 31, 2019; e) That the Commissioner of Environment and Infrastructure Services be authorized to exercise the option(s) to extend the contract for each of the optional years of 2028 and 2029; f) That the Commissioner of Environment and Infrastructure Services be authorized to adjust the length of the yard waste collection season as necessary. g) That the Commissioner of Environment and Infrastructure Services be directed to report back as to changes that may be required or recommended to the Town s Waste By-law in connection with the new waste contract. 27

2 Page 2 Contact Person: Terry Ricketts, Director, Environment Services, Extension 6504 Submitted by: "Signed version on file in the Office of the Clerk" Italo Brutto, P. Eng. Commissioner of Environment and Infrastructure Services Approved by: "Signed version on file in the Office of the Clerk" Neil Garbe Chief Administrative Officer 28

3 Page 3 Background: Waste collection is one of the Town s most visible and tangible programs, providing service to each resident at their home. As such, it is imperative that the Town provide excellent service, consistently, to meet the expectations of our community. Currently, the Town s waste collection services are contracted to Miller Waste Systems Inc. (Miller) and include the collection of garbage, recycling, organics, yard waste and appliances. The existing waste collection contract was awarded to Miller in 1999 and renewed in 2006 for a nine year term. The contract was subsequently extended, with the most recent extension due to expire in May The contract includes waste collection services for single family homes, multi-residential buildings, downtown core residents and small businesses, as well as municipal buildings. The contract value is approximately $5M-$6M annually (exclusive of HST), and is based on a cost per tonne model for waste collection. Over the past few years, in preparation for a new waste collection contract, staff evaluated service levels through a comprehensive information gathering and analysis process, which included pilot projects, municipal benchmarking, public and vendor consultation and cost benefit analysis. In November, 2015 (SREIS ) and June, 2016 (SREIS ) staff provided the results and recommendations from the evaluation process to Council and the following service levels were approved: Maintain manual waste collection, as opposed to automated collection Extend the yard waste collection season into December of each year Provide public waste collection only to new private streets that meet the Town s design standards and continue to provide service to those that have been historically serviced Collect garbage and recycling from public (municipal) containers in the downtown core using contracted services rather than in-house services Provide recycling containers at super mailbox locations, upon request, to be collected using contracted services Provide front-end collection of organics from large multi-residential buildings using contracted services Add recycling collection to destination and community parks using in-house services In June, 2016 (SREIS ) Council directed staff to negotiate a new waste collection contract with the Town s current vendor, Miller. Council also directed staff to proceed with a competitive procurement process if the Town and vendor were unable to reach consensus. The purpose of this staff report is to provide Council with an overview of the results of negotiation between the Town and Miller, and to recommend approval of a new waste collection contract to commence on April 1 st,

4 Page 4 Contract Negotiations and Results: Prior to initiating negotiations with Miller, staff conducted benchmarking of waste collection contracts across southern Ontario and gathered advice from resources such as the Continuous Improvement Fund (CIF) (a partnership between Waste Diversion Ontario, the Association of Municipalities of Ontario, the City of Toronto and Stewardship Ontario). Based on this information, staff drafted a new waste collection contract using the Town s standard contract format and modifying it to reflect currentday program approaches and technologies for waste management. Through a process of contract negotiation meetings held between September 2016 and February 2017, Town staff and Miller discussed and refined the proposed waste collection contract. Negotiations focused on the delivery of existing services, addition of new services, enhanced contract management tools, as well as improved pricing. The Town and Miller reached consensus on a proposed waste collection contract, put forward in SREIS for Council s consideration. If approved, the proposed contract, will result in an overall reduction in the contract cost. New and enhanced services as well as changes included in the proposed contract are summarized as follows: New Services: Recycling collection at super mailbox locations to respond to residents feedback about neighbourhood litter and convenience. Garbage and recycling collection from public (municipal) containers in the downtown core on Mondays, Wednesdays and Fridays, including on holidays 1 responding to the community s request for recycling service in public areas. Front-end collection of organics from large multi-residential buildings to facilitate and promote waste diversion in multi-residential buildings. Collection of illegally dumped material along collection routes on an as needed basis and as directed by the Town to assist with addressing instances of illegal dumping promptly. Enhanced Tools: Waste collection vehicles with reversal cameras and two-person crews to improve efficiency and enhance safety. GPS tracking on every vehicle and real time access to this information by Town staff to improve the Town s contract management capabilities. 1 Note: Town staff will continue to provide waste collection services from these containers on weekends as required. 30

5 Page 5 Data collection tools such as on-board scales and Radio Frequency Identification (RFID) on waste containers - to provide better information about waste generation and diversion rates for multi-residential and municipal buildings. Changed Services: Yard waste collection to occur on the same days as regular waste collection (garbage, recycling and organics) as opposed to Mondays to reduce cost and align collection schedules for all waste. Yard waste collection to begin in mid-april as opposed to the beginning of April to adjust to current trends and reduce cost. Contract Term: The proposed contract term is 8 years plus two, 1-year, optional extensions (2019 to ). This is a typical term for a waste collection contract that secures the desired service and pricing for the Town, and allows the contractor to maximize its capital investment for the collection vehicles which optimizes the overall contract price. The proposed contract start date is April 1 st, The current contract with Miller is due to expire in May The proposed early start date of April 1 st, 2019 will allow the full yard waste season to be collected under the terms of the new contract, giving staff ample time to communicate changes well before the implementation of the new contract to minimize confusion. Financial/Staffing/Other Implications: This section outlines the contract pricing proposed in the draft waste collection contract as developed through the negotiation process. Although the new contract includes a number of new items, the negotiated prices will result in lower overall contract costs. Throughout the course of negotiations, Town staff and Miller discussed a number of service/price combinations to reach the optimum balance for both parties. Currently, curbside collection of recycling and organics occurs weekly with garbage being collected bi-weekly. Garbage, recycling and organics are collected from Tuesday to Friday inclusively. Yard waste is collected bi-weekly from the beginning of April to Thanksgiving and then weekly from Thanksgiving through the first week of December (this is due to increased tonnages during the fall). Yard waste is collected from the entire Town on Mondays only. The most favourable service/price combination involves the addition of new services and enhanced tools mentioned above, as well as two changes to yard waste collection. The first of these two recommended changes is to collect yard waste on the same day as regular waste collection, rather than on Mondays. Pairing yard waste collection with regular waste collection is a consistent practice across most GTA municipalities 31

6 Page 6 including Toronto, Markham, Vaughan and Peel. From a resident s perspective, this approach is convenient as all waste streams are brought to the curb on one day of the week as oppose to the current collection schedule which requires that waste be brought out on two different days of the week. This approach also results in significant cost savings. In order to collect yard waste from the entire Town on Mondays, up to 25 vehicles are required and overtime is incurred. When yard waste is paired with regular waste collection, only 5 to 8 vehicles are required and operating costs (overtime) are reduced as the work is spread throughout the week. Pairing yard waste collection with regular waste collection will result in a cost savings of approximately $117,000 per year (or $1.2 million over the course of a ten-year contract) as compared to the cost of keeping yard waste collection on Mondays. In addition, this approach has the added benefit of resolving scheduling inconsistencies related to statutory holidays that fall on Mondays. The second recommended change is to start the yard waste collection schedule mid- April. This would eliminate the first collection event typically scheduled for early April. Historically, yard waste tonnages collected during the first two weeks of April tend to be low and therefore not sufficient to cover the contractor s cost for collection. Delaying the start of yard waste collection to mid-april will result in an additional cost savings of approximately $20,000 per year (or $200,000 over a ten-year contract). As a measure of protection, should yard waste volumes increase in the future, the Town reserves the right to re-instate yard waste collection in the first two weeks of April at a cost of $20,000 per year. The Commissioner of E.I.S. will have authority to make this decision on the basis of public response and data collected by staff. Based on the information available at this time, starting the yard waste collection season in mid-april is most advantageous to the Town and will result in the best balance of costs and services. The recommended contract approach will result in the following costs: Proposed Contract - Pricing Chart Projected Waste Collection Contract Costs and Savings Current contract cost (projected to 2019) 2 $5,387,000 New contract cost (2019) 3 $4,815,000 Percent reduction in contract cost 10.6% Annual cost savings $572, year cost savings $5,720,000 2 Based on 2016 waste tonnages and number of container lifts and assuming inflation at 1.8% per year. 3 Projected for 2019 based on 2016 waste tonnages and number of container lifts. 32

7 Page 7 Of the $572,000 annual cost savings, $435,000 comes from lower negotiated pricing, $117,000 from pairing yard waste collection with regularly scheduled waste collection (not Mondays), and $20,000 from starting the yard waste collection season in mid-april. Based on benchmarking, the pricing and service levels outlined in the proposed collection contract provide good value to the Town. Costs are lower, despite an overall increase in service levels and an unfavourable US exchange rate (which increases the vendor s capital costs for purchasing vehicles). As a comparison, Vaughan s recent contract, awarded in 2017 through a competitive procurement process resulted in contract savings of 10.1% while Markham s renegotiated contract in 2010 achieved 4% savings when compared to their previous waste collection contract. Contract Risks: The projected contract costs provided in this report are based on current (2016) waste generation numbers. The contract pricing will fluctuate based on the actual waste tonnages collected from our growing community, as well as an annual Consumer Price Index (CPI) cost adjustment. In addition, the contract includes provisions for either party to initiate discussion to revisit the unit rates in the event that the Town implements waste management programs that tangibly reduce the waste tonnages collected by the vendor or if a change in law results in a direct increase or decrease in the vendor s operating and/or capital costs for providing the services. The Waste Free Ontario Act (formerly Bill 151) could potentially impose changes to waste management in Ontario. Previously, waste management was governed by the Waste Diversion Act, The Act obligated Producers to pay 50% of the collection and processing costs for Ontario s blue box program. As a result, the Town receives annual funding of approximately $650,000 to help offset blue box collection costs. The Waste-Free Ontario Act was proclaimed in November Fundamentally, the legislation proposes to transfer full financial responsibility for collecting and processing product/packaging materials from the blue box program to Producers. The new legislation does not include a clear or legislated role for municipalities in waste collection or processing of blue box materials, and is vague on how the transfer will be accomplished. It is unclear whether Producers will choose to pay municipalities to continue to operate the blue box program or if Producers will physically take over collection and processing. The impact of changes brought about by the Act, and specific impacts to Richmond Hill s waste collection contract, will remain unclear until the supporting regulations are written. However, the Province has indicated that future regulations may give consideration to existing municipal contracts. Richmond Hill is actively supporting a Stakeholder Working Group established by the Association of Municipalities of Ontario (AMO) to provide input to the Province and protect the municipal interest as supporting regulations are developed. 33

8 Page 8 Relationship to the Strategic Plan: The Town aims to provide excellent waste collection services while keeping costs low. The careful evaluation of waste management service levels and associated pricing supports Strategic Plan Goal #4, Wise Management of Resources. Conclusion: Over the past several years, staff have undertaken a process of reviewing waste collection service levels in preparation for a new waste collection contract. New and revised service levels were approved by Council and staff were directed to negotiate a new waste collection contract with the current vendor, Miller Waste Systems Inc. (Miller). From September 2016 to February 2017, Town staff and Miller negotiated services and pricing for a new waste collection contract. The negotiation results put forward in this staff report for Council s consideration include the addition of new services and enhanced tools, several service changes and an overall reduction in the contract cost. Staff are recommending pairing yard waste collection with regularly-scheduled waste collection and delaying the start of the yard waste collection season to mid-april. The negotiated contract will result in an annual cost savings of $572,000 or 10.6% reduction in the annual contract cost. Projected over a 10-year contract, this equates to a cost savings of approximately $5.7M as compared to the current contract. Based on benchmarking, the pricing and service levels outlined in the draft collection contract provide good value to the Town. For this reason, staff recommend that Council approve the new waste collection contract as outlined in SREIS between the Town of Richmond Hill and Miller Waste System Inc., to commence on April 1 st, 2019 for an 8 year period ending on April 1, 2027 with an option to extend the contract for an additional two years. Timing and Next Steps: Should Council approve the new waste collection contract, current waste collection services will continue with existing service levels to March 31, 2019 and the new contract will commence on April 1 st, The Town s Waste By-law (By-law ) will be updated accordingly to correspond with any necessary changes resulting from the newly-negotiated contract. 34

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