Your taxes are likely rising higher than you expected.
The city received “very bad news” late Tuesday when the tenders were opened for the municipality’s waste collection contract.
As two days of operating budget deliberations began at city hall Wednesday morning, treasurer Jim Lang revealed that the bids to administer the city’s waste services are almost $1 million higher than expected - basically double the value of the current contract.
“It’s in the range of $500,000 (more than expected) in 2020 with the same increase again in 2021,” noted Lang.
That extra $500,000 means council started its budget deliberations looking at about a 4.1 per cent increase to the tax levy in 2020. Prior to that bad news, the increase - if all items recommended by staff are approved and new items/services are not added by council - was pegged at about 3.3 per cent.
“It’s not a good way to start the budget process,” said Mayor Steve Clarke. “It’s very unfortunate.”
The announcement set the tone for Wednesday’s nine-hour meeting - the first of two days devoted to discussing the city’s $60-million operating budget.
Andrew Schell, the city’s director of environmental services and operations, said staff were stunned to learn that the price tag for contracted waste collections services was doubling - from just over $1 million to $2.2 million. (The new contract would start July 1, which is why the impact is about $500,000 in 2020 and $500,000 in 2021)
Schell said seven companies stepped up to participate in the tender process, but only two put in bids.
Since the tenders were just opened late Tuesday, staff said they haven’t had an opportunity to evaluate them in depth.
“To be very honest with you, we’re in as much shock as everyone around the table,” said Schell. “I didn’t sleep a wink last night.”
He said “all options are now on the table” in the wake of the stunning news.
Coun. Ralph Cipolla wondered if the city should consider doing garbage and waste collection in-house rather than contracting to a private company.
While Schell said that option can be explored, it comes with massive capital costs - purchasing seven garbage trucks to start.
“Typically, (contracting out the service) is better than running your own business,” said Schell, who noted the city would also need to develop a recycling facility.
Currently, the private contractor has its own recycling facility on Kitchener Street.
Recycling is at the crux of the escalated bid, staff noted. There is virtually no market for recycling items.
“The markets are still readjusting with China’s, essentially, closure of taking North America’s and Europe’s recycling,” said Greg Preston, the city’s manager of water and waste management, noting it’s “had a major impact.”
Preston said there is an “over supply of recycling” and will be until there’s domestic processing capacity. He said that has eliminated much of the revenue associated with recycling.
There may be some light on the horizon. The province is moving to a “full extended producer responsibility” blue box program.
However, that won’t start until 2023. At that point, it will be “a big boost to the budget,” noted Preston.
“But between now and then, this is what municipalities are likely going to be seeing,” said Preston.
After the marathon budget meeting, Schell told OrilliaMatters that he couldn’t talk about specifics because the bids are still being evaluated.
However, he said staff has some options. They could ask the current contractor to extend the contract. They could also cancel the contract.
Coun. Mason Ainsworth who “reluctantly” voted to support the contract hike, said there’s not much time to make a decision as the current contract expires June 30. The option of “not having garbage picked up”’ is not appealing, he noted.
City CAO Gayle Jackson said the proposed contract is an eight-year deal but there is an escape clause after three years.
“That’s a very important clause,” noted Preston, who said that could allow the city to change the terms when the blue box program changes.
For now, however, the city is budgeting for the huge increase.
As it stands at the end of the first day of operating budget deliberations, the tax rate increase sits at 4.1 per cent.
Tomorrow, councillors will deliberate further and will also have to decide on how much to put in reserves.
Coun. Ted Emond noted that reserve contributions provide some “elasticity” that could mitigate the projected tax hike.
In other words, despite the senior management team’s desire to rebuild reserves, councillors could decide to decrease the amount going into those reserves to lower this year’s potential tax hike.
None of the decisions made today are official until the budget is ratified at a special meeting of council Dec. 9.
