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Stewards’ Consultation

Stewards’ Consultation. September 1, 2005. Welcome. Morning Agenda. Today’s Instructions. New participants in all stakeholder groups Webcast available in archives – 180 days 2 nd audience listening on-line we’ll note the number as we change slides

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Stewards’ Consultation

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  1. Stewards’ Consultation September 1, 2005

  2. Welcome

  3. Morning Agenda

  4. Today’s Instructions • New participants in all stakeholder groups • Webcast available in archives – 180 days • 2nd audience listening on-line • we’ll note the number as we change slides • email questions/comments  from your regular email program  to the address below info@stewardshipontario.ca

  5. Consultation Process & Timing

  6. Blue Box Program PlanUpdate & Amendments Derek Stephenson

  7. BBPP Update: 2005 Program Year • First full calendar year for program • Met all legal requirements under WDA • On track for: • $51.3M direct payments to municipalities • approved $5.1M in competitive grants to improve effectiveness & efficiency of municipal programs • direct administration costs less than 5% of program cost

  8. BBPP Update: 2005 Program Year • Successfully negotiated cost containment plan with AMO • $2.5M investment in new glass market development approved • Received & processed 2,000 reports from stewards • 500+ potential additionalstewards identified but not yet reported

  9. BBPP Update: 2005 Program Year • First charges have been laid under Act: • failure to report • failure to pay fees • both company & officers charged • Completed first on-site audits of steward reports

  10. BBPP Update: 2005 Program Year • Original BBPP projected 815,000 tonnes recycled & municipal payments of $54M by 2004 • End 2004 results: 824,000 tonnes recycled & municipal payments of $55.5M

  11. Amendments to BBPP for 2006 • Minister’s decision on in-kind payments for CNA/OCNA members with regards to their obligations to municipalities • Cost containment strategy including agreements with AMO on reasonable cost bands & municipal administration costs

  12. Amendments to BBPP for 2006 • Minister’s requirement that Stewardship Ontario & WDO administration costs be capped • no more than5% of total program costs • Minister’s direction on voluntary stewards

  13. Amendments to BBPP for 2006 • Revised Stewardship Ontario governance model (when approved by Minister) • Changes to program rules • 2006 fee rates

  14. Proposed 2006 Program Rules Gordon Day

  15. Background • Rules changed annually: • update fee rates & dates • improve clarity • address shortcomings • Board is considering three changes to Rules for which they would like stewards to provide comment

  16. Today’s Rules Presentation • Copy of proposed 2006 Rules provided • Changes to Rules denoted in 1 of 3 ways: • Underline: annual change • Bold Italics: new additions; for your information only • Boxed: 3 boxed sections; changes for comment

  17. #1 Brand Owner Definition – What has been our experience? • Many business models in place • some not clearly covered by Rules • Licensing arrangements wide-spread • resulting in 2 possible “brand owners” in Ontario • Need to assign obligation • must be logical, clear, fair & meet intent of program • Companies who have organized corporate structure for other purposes - exempt from fees related to Designated Blue Box Waste (DBBW)

  18. #1 Proposed Changes – Brand Owner • Recognize that trademark owner & licensee may both reside in Ontario • Clarifies “Private Label” manufacturers not classified as licensee

  19. #1 Proposed Changes – Brand Owner • In event of 2 brand owners in Ontario, obligation assigned to party “more directly connected to production of DBBW, except Franchisor who shall be the steward.” • Reinforce that Franchisor is Brand Owner of DBBW • Add “any person whose corporate name or business name registration includes trademark.”

  20. #1 Impact of Proposed Change • Close gaps in current Rules • currently exploited by small number of companies • Clarifies obligation in case of trademark owner & licensee • Captures companies registered in Ontario who benefit from sale of products, but do not meet current test of residency

  21. #2 Designation of Steward – What has been our experience? • Confusion around who is obligated for “service packaging,” specifically unbranded packaging • Previous “franchisee supply” rule confusing to understand & difficult to monitor • created un-level playing field within certain sectors • Most franchisees under sales or 15 tonne threshold • Franchisor owns trademark & benefits from sale of products with trademark

  22. #2 Proposed Changes – Designation of Stewards • Add “Service Packaging” to defined terms • Include “Service Packaging” to Brand Owner, First Importer & Franchisor designation • Add new section (iv) to capture “Any person who delivers Service Packaging to consumers in Ontario” • to cover mail order/internet shopping

  23. #2 Proposed Changes – Designation of Stewards • In a franchise system, Franchisor owns brand & trademark • consistent with Minister’s direction & rules for other stewards • Franchisor will be responsible for all DBBW within their franchise system

  24. #2 Impact of Proposed Change • Improves clarity around Service Packaging • including mail order/internet shopping companies • Levels playing field for franchise operations • obligations consistent across similar competitors • Increases number of franchisors obligated to report & pay fees • Reduces quantity of exempted DBBW

  25. #3 Steward Exemptions – What has been our experience? • Two tonnage thresholds confusing & raises questions about fairness of program • Some stewards attempt to report business operations separately to avoid obligations

  26. #3 Proposed Changes – Steward Exemptions • Remove 75,000 kilogram (kg) threshold exemption for newspapers • Resulting in only one 15,000 kg weight exemption for all DBBW • Clarify weight exemption test in (ii) to include “the steward and its Affiliates” as currently applies in (i) sales exemption

  27. #3 Impact of Proposed Change • One consistent & clear weight exemption • Clearly defined 15,000 kg applies to steward & Affiliates • net impact will reduce number of exempted stewards • Handful of exempt OCNA stewards will be obligated • however financial impact would be <$150/yr

  28. Other Important Change • Reporting & payment schedule added as Schedule C • Stewardship Ontario moving to quarterly payment schedule as originally planned • Reporting deadline remains March 31st • First payment of 25% in 2006 obligation due March 31st • penalty & interest if payment received after March 31st • last quarter payment due December 1, 2006

  29. Questions & Answersinfo@stewardshipontario.ca

  30. 2006 Stewards’ Fees Guy Perry

  31. Topics to Cover • Basis for calculating 2006 fees • Proposed 2006 Stewards Fees • Next steps

  32. Blue Box Stewards Fees • Total industry cost down ~$61.2M for 2006 vs. $64.3M for 2005 (~5%) ~$74.3/tonne for 2006 vs. $82.5/tonne for 2005 (~10%)

  33. Cost Containment • Negotiated cost containment strategy with municipalities: • apply “reasonable cost bands” based on better performing programs • instituted performance measure as basis for payments • reduction in Blue Box System cost of $24M over next two years • cap municipal administration cost • payment to best practice costs in 2008

  34. Agreed Net Blue Box Cost $140 $120 $100 $80 Net Cost (actual gross cost less 3-year average revenue) Net cost (million $) $60 Agreed Net Cost $40 $20 $0 2001 2002 2003 2004 Municipal Reporting Year

  35. Key Elements of Fees Program Delivery, MOE Enforcement & WDO Charges 5% Payments to Municipalities 91% Administration & Start-up 3% Anticipated Shortfall * 1% * Due to difference in reported sales quantities & generation estimates used to calculate previous years’ fees

  36. Key Elements of Fees: Generation Rates • Generation estimates largely based on waste composition audits & some industry data • Used last year generation rates • accounting for population growth (1.26%) • extensive waste audit program underway, but incomplete • As for 2005, used most recent stewards’ data for newsprint, telephone directories, paint cans & LCBO glass packaging • these represent more reliable generation figures than waste audit results

  37. Recovery Rates Overall recovery up ~6% from 779,843 tonnes to 823,627 tonnes 75% 60% 45% Recovery Rate (%) 30% 15% 2002 2003 2004 2002 2003 2004 2002 2003 2004 2002 2003 2004 2002 2003 2004 2002 2003 2004 0% Printed Paper Paper-based Plastics Aluminum Steel Glass Packaging Taken from 2004 annual municipal datacall reported by WDO

  38. Gross Costs • Reported by WDO from 2004 municipal datacall • up ~ 6.5% from $182.4M to $194.4M • includes interest on municipal capital ($4.2M) • deferred to 2006 negotiated as part of cost containment strategy • Use material specific costs from last year’s allocation study • conditions not changed substantially across province • preliminary work underway to address implementation of single-stream recycling & combined recycling & organics collection in Toronto

  39. Revenue • Reported by municipalities to WDO • $83.7M in 2004 from $65.6M in 2003 • 3-year average (used for obligation) • $73.6M for 2006 fees from $64.9M • Relative prices will affect relative net costs & allocation among materials

  40. Industry Share of Blue Box Cost $140 Total $120.92 M Total $117.55 M $120 $100 Industry Industry $55.46M $58.78M Program Cost (millions of $) $80 Cost Band $10M $60 $40 Municipal Municipal $58.78M $55.46M $20 $0 2003 2004

  41. On Track with Program Plan • Compared to original Blue Box Program Plan . . . for 2004: • plan forecast 814,700 tonnes to be recovered with an industry obligation of $54M • actual recovery was higher at 823,600 tonnes with an industry obligation of $55.5M

  42. Allocation Factors • No change to the funding formula for 2006 • same allocation factors & weighting • recovery rate – 40% • net cost – 40% • equalization – 20%

  43. Program Delivery Costs for Market Development • 2003/2004 fees  $2.5M for glass • 2005 fees  $100K for plastics • preliminary market development underway • For 2006: • no additional market development fees • glass & plastics work ongoing & progress continues toward 60% diversion goal • this will be reviewed on an annual basis

  44. Program Delivery, Admin & Start-up Total: $5.2M WDO Charges & MOE Enforcement $1.20M Direct Program Delivery $1.93M Administration $1.17M Start-up $0.89M

  45. Stewards Reports vs. Fee Estimates Packaging & Printed Paper Generation For 2004 Fees Difference between tonnes reported by stewards & estimates used for previous years fees 100% Estimated Generation for 2004 Fees 1,578,500 tonnes 80% Stewards Reports 60% 1,285,000 tonnes 40% 20%

  46. Revenue Against Target For 2003/2004 • Previously estimated $1.1M • Board decision to spread over 3 years  pay $369K each year • Actual $1.6M (as of Dec. 31 2004) • higher re-filing, lower new stewards For 2005 • Additional 2003/2004 fees & interest of $635K in 2005 • Projected net shortfall at Dec. 31 2005 of $1.15M Recovery in 2006 Fees • 50% ($575K) in 2006 fees

  47. Proposed Fee Rates Printed Paper Proposed 2005 Fees Material 2006 Fees Change (¢/kg) (¢/kg) 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

  48. Proposed Fee Rates Packaging Proposed 2005 Fees Material 2006 Fees Change (¢/kg) (¢/kg) Paper Packaging 7.904 7.673 Plastics 13.907 13.556 Steel 4.745 4.601 Aluminum Food & -1.093 -0.476 Beverage Cans Foil & Other Aluminum 5.502 3.577 Glass 4.003 3.41

  49. Looking Forward to 2007 • Cost Pressures: • further increases in recovery • cost of living & program changes • capital investment • increase in municipal administration allowance to 3% & 5% • commodity prices & revenue • Negotiated cost band for 2007  $14M reduction • Ongoing cost containment work & implementation of E&E Fund

  50. Consultation on Further Amendments to BBPP Derek Stephenson

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