Public Benefit Assessment of Reform Options for Waste Management Activities Sunshine Coast Regional Council

Transcription

1 Waste Management App A Public Benefit Assessment of Reform Options for Waste Management Activities Sunshine Coast Regional Council

2 Waste Management App A Document Control Job ID: Job Name: Project Director: Project Manager: Company: Job Contact: Document Name: Public Benefit Assessment of Reform Options for Waste Management Activities Gavin O Donovan Michael Shave Sunshine Coast Regional Council Paul Warren PBA Waste and Resource Management.doc Version Date Reviewed PM Approved PD Draft Report 30/04/2010 MS GO 10/06/2010 MS GO Disclaimer: Whilst all care and diligence have been exercised in the preparation of this report, AEC Group Limited does not warrant the accuracy of the information contained within and accepts no liability for any loss or damage that may be suffered as a result of reliance on this information, whether or not there has been any error, omission or negligence on the part of AEC Group Limited or their employees. Any forecasts or projections used in the analysis can be affected by a number of unforeseen variables, and as such no warranty is given that a particular set of results will in fact be achieved. i

3 Waste Management App A Executive Summary Public Benefit Assessment Background Sunshine Coast Regional Council s waste management function (Waste and Resource Management WRM) constitutes a financially significant Type 1 business activity under the relevant National Competition Policy (NCP) provisions of the Local Government Act. As such, a Public Benefit Assessment (PBA) is required to be undertaken to review the appropriateness of adopting one of the following business models: 1. The business remains a Council service, but applies Full Cost Pricing (FCP) reforms; 2. The business becomes a Commercialised Business Unit (CBU); and 3. The business becomes a Local Government Owned Corporation (LGOC) (highest level of reform. Business Model Implications Full Cost Pricing The activities of the business are essentially operated as a service delivery area within Council s organisational structure Prices are set in accordance with commercial cost recovery, including a commercial return on assets employed in the business Some minor compliance costs would be incurred Commercialised Business Unit Local Government Owned Corporation A separate business unit (not a separate legal entity) within Council s corporate structure is created to manage the business, with a dedicated commercially focused business unit manager employed The business unit manager has greater autonomy over the operations of the business The business unit may have a greater ability to source inputs from outside of Council The business unit has more of a commercial orientation than under the FCP option The business unit is subject to separate performance reporting Prices are set in accordance with commercial cost recovery, including a commercial return on assets employed in the business (as per FCP price setting) Compliance costs will exceed those incurred under the FCP model A separate corporate entity is created by Council to manage the business, with Council acting as sole shareholder A Board of Directors is appointed, which is responsible for policy formulation and governance of the business Council retains ownership and ultimate control of business via its shareholder role, and sets strategic direction for the business and performance expectations of the Board through a Statement of Corporate Intent The Corporation features a greater business focus than under the FCP and CBU models Prices are set in accordance with commercial cost recovery, including a commercial return on assets employed in the business (as per CBU and FCP price setting) Significant governance/compliance costs are incurred in the establishment of and ongoing management of the Corporation The objective of the PBA is to determine whether or not there will be a net benefit to the community from adopting the business models under consideration, and which model will lead to the greatest net benefit. There are four key stages in the assessment process: Stage 1 Definition of the existing structure and operation of WRM including management and reporting structures, annual income and expenditure and other financial arrangements; Stage 2 Identification of, and consultation with, stakeholders in the community who might be affected by the outcome of the PBA including customers, employees, contractors and others, as well as consideration of how the business models will affect each group; Stage 3 Assessment of the potential impact of the business models under consideration on the business activity and identified stakeholders; and Stage 4 Based on stages 1-3, the provision of recommendations to the local government about which of the business models is most appropriate for WRM and the associated costs and benefits. ii

4 Waste Management App A Business Profile Summary The business is currently operating as Waste and Resource Management (WRM) under an interim Full Cost Pricing (FCP) business model (with some Commercialised Business Unit (CBU) elements voluntarily applied); WRM currently employs 35 staff; Key waste services provided by WRM include: domestic and commercial general waste and recycling collection waste processing, re-use and recycling operation of landfills, transfer stations and a material recovery facility (MRF) waste management and administration including strategy development and business planning; WRM has a large number of regulatory responsibilities regarding price-setting practices, business planning, reporting, and environmental compliance; The waste collection service charge for a typical residential property is $ in 2009/10 (consisting of a weekly 240L general waste service and a fortnightly 240L recycling service); Waste disposal charges are standardised across the region s waste facilities and general waste is levied a charge of $85/tonne (inclusive of GST); The current written down value of assets utilised by the business is $27.5 million, with a replacement cost of $35.2 million; WRM is currently earning an appropriate commercial return for Council, in accordance with full cost pricing requirements; and Waste and recycling collection services in the region are mandated to be provided by WRM and are therefore not subject to competition. Consultation Process The stakeholder consultation process undertaken as part of the PBA included: Public announcement of the PBA in the Sunshine Coast Daily and on Council s internet site, inviting submissions on the implications of the business models under consideration; The preparation of a information paper which was made available to the general community via Council s internet site and on request, as well as being provided directly to identified key stakeholders; Internal consultation with Council senior management and WRM management regarding the business models under consideration and potential impacts/outcomes from each model; and Announcement of the draft PBA report in the Sunshine Coast Daily and on Council s internet site, with a copy of the draft report made available for the community to provide comment on the outcomes and recommendations contained in the draft report. iii

5 Waste Management App A Consultation Outcomes The following table provides a summary of the responses received from stakeholders. Stakeholder Process Undertaken and Response Received EXTERNAL STAKEHOLDERS Unions No responses were received from the unions contacted by the closing date. In other PBA submissions relating to local government utilities, unions have generally expressed a desire for corporatisation to not be adopted given the potential change in employment conditions that may occur in the move to the Federal industrial relations system. Unions have also highlighted the need for Council s to retain active control of their business activities such as water, sewerage and waste management. Recently, union preference appears to have been for the FCP business model. Regional Business No responses were received by the closing date. Representatives Major Suppliers / No responses were received by the closing date from the suppliers targeted. However, a Contractors meeting was convened with a waste and recycling industry body representing 50 waste contractors and recyclers across Queensland where concerns were raised regarding Council s monopoly in the collection of commercial and industrial waste and recyclables. It was suggested that such a policy contravenes NCP objectives, and that it will also impede Council in achieving its objective under the waste minimisation strategy to maximise diversion from landfill of commercial and industrial waste given that private operators are able to offer a more sophisticated suite of recycling services. Further, it was indicated that such a monopoly does not exist anywhere else in Australia. Customers One submission was received from a major customer who agreed with the concept of full cost recovery and user pays principles (provided collection contractors were engaged at commercially competitive rates). Other comments related to providing subsidised recycling services for businesses to encourage full utilisation of recycling services, and greater transparency surrounding price formulation (and provision of monthly data to commercial customers particularly shopping centres who frequently on charge services to tenants). The submission stated that they had no preference regarding the reform option chosen provided service, costs and environmental focus is not impacted. General Community Environment Regulators Two submissions were received from members of the community / community groups by the closing date. A number of regional community groups provided a combined submission regarding their preferred business model for WRM. The key focus of comments received from a community perspective related to the need for an appropriate business structure to ensure the success of the new waste management strategy, along with additional business transparency in the form of regular public reporting and review of performance. It was stated that the FCP business model was the preferred option as: It would allow Council to continue to control and manage waste in the region (with service delivery and waste minimisation the focus rather than business profit maximisation); It would allow easier integration and communication with other Council departments such as town planning and environment; It would allow more flexibility and ability to respond to changing circumstances; and It would provide greater flexibility for the business to form community alliances and provide effective public education programs. The Sunshine Coast Environment Council contacted AEC and information was subsequently provided regarding the PBA process (although no formal submission was made). The Queensland Competition Authority advised in its letter dated 21 st January 2010 that it may have a conflict of interest in providing a submission, given that it could potentially be asked to critically review the findings of PBAs undertaken for Queensland Councils. No response was received from the Environmental Protection Agency. INTERNAL STAKEHOLDERS Councillors Councillors were informed of the PBA process on 23 rd April 2009, and also again on the 10 th December 2009 (prior to the public announcement of the PBA). From comments received it is evident that Council wishes to continue to be actively involved in decisions regarding waste management in the region including oversight of the delivery of the objectives of the waste minimisation strategy. WRM Employees No responses were received by the closing date, although it was made clear in information provided to staff that whilst Council was required to consider the LGOC business model as part of the assessment process, it was unlikely that such reforms would be recommended in WRM s instance. Senior Council There was a general consensus that the most appropriate business model for WRM moving Management and forward would involve Council continuing to retain direct control of waste activities, particularly WRM Management in relation to the importance of effective waste management in Council s overall vision of being Australia s most sustainable region. iv

6 Waste Management App A Impact Summary Impact Area Financial Position of WRM Sunshine Coast Regional Council Budget Market Staff Waste Collection and Disposal Customers Regional Development and Economic Stability Social Welfare and Equity Environment Net Benefit Assessment Outcome An overall net benefit on the financial position of WRM would be likely if the FCP model was retained, resulting from lower compliance costs given the additional reporting obligations under the CBU model and significant additional governance and compliance costs under the LGOC model. However, to ensure sustainable outcomes are promoted, it is recommended that WRM continue to report formally on its performance, as well as continue to use a long-term financial and pricing model into the future. Assuming that any increased costs incurred by WRM would be passed onto customers, there would be negligible impact on the Sunshine Coast Regional Council budget from adoption of the business models under consideration, although higher charges may be levied on the community under the CBU and LGOC models due to increased compliance requirements. If the FCP model is adopted, it would be appropriate for Council to still require WRM to report regularly on its financial and non-financial performance to ensure its long-term financial sustainability (and the maintenance of dividend and tax equivalent contributions to the general fund). There are negligible impacts on the market from the adoption of the FCP, CBU or LGOC models, although there may be considerable impacts on the market if WRM as a CBU or LGOC did decide to actively pursue increased market share against private operators via no longer contracting out collection services. An overall net benefit for WRM staff would be likely if the FCP model was retained, provided the current organisational structure was retained and there were no adverse changes in the level of delegation to the business manager and roles and responsibilities of staff. Further benefit may be derived under the FCP model via reduced statutory compliance requirements versus the CBU and LGOC models. An overall net benefit for waste collection and disposal customers would be likely if the FCP model was retained, given the current perception in the community that regional waste services are Council operated and are an essential community service rather than a commercially-oriented business function. It would also ensure that the business remains focused on achieving its environmental and community service objectives under the waste minimisation strategy, rather than attempting to actively compete in the market for (non-core) commercial services An overall net benefit for regional development and economic stability would be likely if the FCP model was retained, as it would minimise administration and compliance costs in the provision of waste collection and disposal as an essential community service, and also allow Council to drive the environmental and community-based goals and targets recently adopted in the waste minimisation strategy. An overall net benefit for social welfare and equity would be likely if the FCP model was retained, given that administration and compliance costs are minimised and Council retains control over what is largely a community service, subject to intergenerational equity being promoted by ensuring appropriate reserves are retained to fund future liabilities of the business (e.g. landfill rehabilitation, carbon permits) rather than used for other purposes. An overall net benefit on the environment would be likely if the FCP model was retained, as it will provide Council greater control and flexibility in managing the delivery of the environmental benefits targeted in the waste strategy. v

7 Waste Management App A Recommendation on Preferred Business Model The PBA shows that when comparing the net community benefit of the available reform options, the adoption of the Full Cost Pricing (FCP) business model provides the greatest net community benefit when compared to the Commercialised Business Unit (CBU) and Local Government Owned Corporation (LGOC) business models. It is therefore recommended that Sunshine Coast Regional Council adopt the Full Cost Pricing (FCP) business model for WRM moving forward. For WRM, the FCP business model is the most appropriate reform option as: WRM has been set a clear agenda by Council under the waste minimisation strategy to operate with an environmental and community service focus, rather than maximising commercial profits (although full cost pricing still needs to be applied when considering charging structures and levels); Governance of the implementation of the waste minimisation strategy will require regular input from external experts and members of the Sunshine Coast community; Potential future partnerships between WRM and the private sector to achieve the objectives of the waste strategy will require ongoing Council review and approval; The business currently has, and will continue to have, considerable legislative obligations regarding the services it offers to the community, with waste collection and disposal considered an 'essential service' to ratepayers; Most commercial aspects of the business are tendered out (i.e. waste and recycling collection services, recyclables processing, holding tank services), or are left to the market to provide (i.e. other liquid waste services); There will be increasing control over waste strategies and services resulting from Federal and State waste policies and agendas, with these changes likely to require continued involvement by Council in strategic decision making at a local level; The FCP business model can be easily implemented without significant resourcing commitments, business/employee disruption and timeframe issues; and Council still has the flexibility to continue to voluntarily apply additional elements of the commercialisation framework that it considers will provide benefit to Council, ratepayers and the broader community, with the following recommended for continued application: o o o Relevant delegation of responsibility to waste business management and staff for day-to-day operations Performance reporting to Council and the community using a range of financial and non-financial key performance indicators Ensuring appropriate reserves are held by WRM to fund future liabilities relating to waste activities (e.g. landfill rehabilitation, carbon permits), with future capital funding needs also identified through the ongoing use of the consolidated financial model for the business. Implementation Timetable Sunshine Coast Regional Council should implement the FCP business model effective from 1 July vi

8 Waste Management App A Table of Contents DOCUMENT CONTROL... I EXECUTIVE SUMMARY... II TABLE OF CONTENTS... VII 1. PUBLIC BENEFIT ASSESSMENT BACKGROUND NEED FOR THE PUBLIC BENEFIT ASSESSMENT COMPARISON OF BUSINESS MODELS UNDER ASSESSMENT BUSINESS MODELS ADOPTED BY FORMER COUNCILS THE PUBLIC BENEFIT ASSESSMENT PROCESS EXISTING BUSINESS STRUCTURE AND OPERATIONS VISION AND STRATEGY FUNCTIONS AND ACTIVITIES OF THE BUSINESS SERVICE DELIVERY UNDERTAKINGS AND NEW PROJECTS BUSINESS STRUCTURE AND GOVERNANCE BUSINESS PERSONNEL SUPPORT SERVICES PROVIDED BY COUNCIL BUSINESS ASSETS REGULATORY RESPONSIBILITIES PRICE SETTING PRACTICES METHODOLOGY WASTE COLLECTION CHARGES HOLDING TANK SERVICE CHARGES DISCOUNTS AND PENSIONER REMISSIONS WASTE DISPOSAL AND OTHER CHARGES OPERATING REVENUE OPERATING EXPENDITURE CAPITAL EXPENDITURE FINANCIAL PERFORMANCE NON FINANCIAL PERFORMANCE MARKET IN WHICH THE BUSINESS OPERATES WASTE COLLECTION SERVICES LIQUID WASTE SERVICES WASTE DISPOSAL/RE-USE/RECYCLING SERVICES INDUSTRY TRENDS NATIONAL PRODUCTIVITY COMMISSION WASTE MANAGEMENT INQUIRY QUEENSLAND WASTE STRATEGY NATIONAL WASTE POLICY INCREASING ENVIRONMENTAL FOCUS BUSINESS PROFILE SUMMARY STAKEHOLDER CONSULTATION PROCESS vii

9 Waste Management App A 3.1 CONSULTATION PROCESS RESPONSES FROM STAKEHOLDERS CONSULTATION OUTCOMES SUMMARY BUSINESS MODEL ASSESSMENT COMMUNITY IMPACT ASSESSMENT OF BUSINESS MODELS BUSINESS MODELS ADOPTED BY OTHER COUNCILS RECOMMENDATIONS RECOMMENDATION ON PREFERRED BUSINESS MODEL IMPLEMENTATION TIMETABLE APPENDIX A: IMPLICATIONS OF ADOPTING EACH BUSINESS MODEL APPENDIX B: SCRC WASTE MINIMISATION STRATEGY APPENDIX C: FEES & CHARGES 2009/ APPENDIX D: NATIONAL WASTE POLICY viii

10 Waste Management App A 1. Public Benefit Assessment Background 1.1 Need for the Public Benefit Assessment In accordance with the Local Government Act, all Queensland Councils must identify whether they have any significant business activities 1 (SBAs) for the purposes of applying National Competition Policy (NCP) reforms. If any new SBAs are identified, then Council must undertake a Public Benefit Assessment (PBA) to determine the most appropriate business model to be applied to those activities under NCP reforms. The three available business models for Council significant business activities include: 1. The business remains a Council service, but applies Full Cost Pricing (FCP) reforms; 2. The business becomes a Commercialised Business Unit (CBU); and 3. The business becomes a Local Government Owned Corporation (LGOC) (highest level of reform. Sunshine Coast Regional Council is responsible for providing waste management services to residents and businesses in the region. How these regional services are provided and the size of the activities undertaken were impacted by the recent local government reforms and the amalgamation of the former Maroochy, Caloundra and Noosa Councils. Sunshine Coast Regional Council reviewed its combined waste management activities following amalgamation and determined that the activities constitute a financially significant Type 1 business activity 2. This PBA is therefore being undertaken to determine the appropriate business model to apply to the Sunshine Coast Regional Council s waste management activities in accordance with the requirements under the Local Government Act. 1.2 Comparison of Business Models Under Assessment The primary differences between the three business models under assessment are outlined in the table below. These are further expanded in Appendix A. Table 1.1: Differences Between the Available Business Models Under Assessment Business Model Implications Full Cost Pricing The activities of the business are essentially operated as a service delivery area within Council s organisational structure Prices are set in accordance with commercial cost recovery, including a commercial return on assets employed in the business Some minor compliance costs would be incurred Commercialised Business Unit A separate business unit (not a separate legal entity) within Council s corporate structure is created to manage the business, with a dedicated commercially focused business unit manager employed The business unit manager has greater autonomy over the operations of the business The business unit may have a greater ability to source inputs from outside of Council The business unit has more of a commercial orientation than under the FCP option The business unit is subject to separate performance reporting Prices are set in accordance with commercial cost recovery, including a commercial return on assets employed in the business (as per FCP price setting) Compliance costs will exceed those incurred under the FCP model 1 National Competition Policy reforms place a particular emphasis on significant business activities as measured in terms of annual expenditure given their potential influence on regional economies. 2 In accordance with the provisions contained in the Local Government Act, expenditure for the business (calculated as operating expenses excluding depreciation and competitive neutrality adjustments, but including loan redemption payments) was compared against the threshold amounts advised by the Department of Infrastructure and Planning (Local Government and Planning Group), which for the 2008/09 financial reporting period of 15.5 months was $30.5 million for Type 1 and $10.2 million for Type 2, to determine that the business is in fact a Type 1 significant business activity. 1

11 Waste Management App A Business Model Implications Local Government Owned Corporation Source: AEC Group, Local Government Act A separate corporate entity is created by Council to manage the business, with Council acting as sole shareholder A Board of Directors is appointed, which is responsible for policy formulation and governance of the business Council retains ownership and ultimate control of business via its shareholder role, and sets strategic direction for the business and performance expectations of the Board through a Statement of Corporate Intent The Corporation features a greater business focus than under the FCP and CBU models Prices are set in accordance with commercial cost recovery, including a commercial return on assets employed in the business (as per CBU and FCP price setting) Significant governance/compliance costs are incurred in the establishment of and ongoing management of the Corporation It is important to note that all three reform options involve setting prices to recover the same costs that would be incurred by a private sector entity, incorporating: Direct and indirect costs (e.g. wages, superannuation, materials, contractors, consumables); Administration and management costs; Return of capital/depreciation; Return on capital invested by Council (e.g. resources, infrastructure, land, buildings, plant/equipment); Incorporation of tax equivalents such as Council rates, land tax, payroll tax, FBT and taxes on business profits; and Adjustments for other advantages and disadvantages of public sector ownership. Under all three business models, non-commercial activities undertaken by the business at the direction of Council such as free waste disposal for community groups also need to be funded through Community Service Obligation (CSO) payments, if the business is unable to levy a commercial charge for such services across the community. Adoption of the above business models is intended to make the true costs and performance levels of Council business activities more transparent and accountable, thereby facilitating better decisions by Elected Members, Chief Executive Officers and Managers within Queensland Councils. NCP makes no presumption that public sector business activities are inefficient. Instead, the aim of the reforms is to encourage productivity improvement and best practice in the operations of the Council businesses, as well as providing for a level playing field between the public and private sectors in service provision. It is also important to note that the reform options under consideration do not include privatisation or the selling off of the business. In all instances, Council will retain ownership of the waste management business. The primary differences between the three options pertain to the level of responsibility ascribed to Council (under FCP) versus the business manager (under CBU) or corporate Board (under LGOC) potentially responsible for the operation of the business. 1.3 Business Models Adopted by Former Councils The following table outlines the business models that were applied to the waste activities of the three former Sunshine Coast Councils prior to amalgamation. Table 1.2: Business Models Adopted by Former Councils Council Maroochy Caloundra Noosa Level of Reform Commercialised Business Unit Full Cost Pricing Code of Competitive Conduct Source: Sunshine Coast Regional Council Notes: Noosa s waste management activities were not classified as a SBA as they did not have the necessary level of expenditure to reach the relevant thresholds. Consequently, the activities were instead classified as a Type 3 business activity and the Code of Competition Conduct (a level of reform similar to FCP in a less formal manner) was applied. 2

12 Waste Management App A PBAs were previously undertaken for the waste management activities of the former Maroochy and Caloundra Councils: Maroochy a voluntary PBA was first undertaken in 1998 when it was recommended that the Code of Competitive Conduct be applied to the waste management activity (as the business had not yet reached significant business status as defined under legislation), followed by further voluntary reforms being applied to Maroochy Waste Services in 2001 when the CBU model was implemented. Caloundra following a review of business expenditure thresholds in 2005, it was determined that waste management was a new Type 2 significant business activity and a PBA was undertaken in 2006 which recommended the FCP model (and was subsequently adopted by Council). The waste management activity of the former Noosa Council never met the relevant threshold for recognition as a significant business activity, and was always identified as a Type 3 competitive business activity to which the Code of Competitive Conduct was applied. The Code still involves the application of full cost pricing and competitive neutrality to a business activity, but in a less formal manner than that applied to SBAs. Sunshine Coast Regional Council s combined waste management activities are now managed as a single business named Waste and Resource Management (or WRM). It is the intention of this PBA to determine the most appropriate business structure for WRM moving forward, taking into account the significantly increased size and expanded regional responsibilities resulting from the amalgamation process. 1.4 The Public Benefit Assessment Process The objective of the PBA is to determine whether or not the benefits that may be realised from the business models under consideration outweigh the costs, and which business model will ensure the greatest net benefit for the community. There are four key stages in the assessment process: Stage 1 Definition of the existing structure and operation of WRM, including management and reporting structures, annual income and expenditure and other financial arrangements; Stage 2 Identification of, and consultation with, stakeholders in the community who might be affected by the outcome of the PBA, including customers, employees, contractors and others, as well as consideration of how the business models will affect each group; Stage 3 Assessment of the potential impact of the business models under consideration on the business activity and identified stakeholders; and Stage 4 Based on stages 1-3, the provision of recommendations to Council regarding which of the business models is most appropriate for WRM, including detail on the costs and benefits of each model as well as a timetable for implementation of the recommended business model. Along with satisfying the legislative obligations of undertaking a PBA, the final PBA report may also include consideration of strategic issues identified during the consultation program and assessment process. 3

13 Waste Management App A 2. Existing Business Structure and Operations 2.1 Vision and Strategy WRM provides for the effective collection, removal, transportation, recycling, treatment and disposal of wastes by providing physical services, expertise and promotion of sustainability. WRM s vision and mission statement are as follows: VISION A sustainable tomorrow MISSION To manage waste as a resource. We will seek to minimise impacts and maximise opportunities for customers in an environmentally, economically and socially responsible manner. Council recently adopted a waste minimisation strategy for the Sunshine Coast region, with the objective being to assist Council in its journey of becoming Australia s most sustainable region by minimising waste and maximising the re-use of embodied resources. The strategy has a goal to increase the recovery of wasted resources to over 70% by 2014 to add value to the Sunshine Coast economy and minimise damage to the environment, including fossil carbon use. In adopting its waste strategy in December 2009, Council also adopted the following vision regarding waste minimisation in the region: COUNCIL S WASTE MINIMISATION STRATEGY VISION The Sunshine Coast Regional Council will be diverting over 70% of its waste from landfill. A cost-effective and customer focused service will provide choice and flexibility while facilitating new businesses, causing less environmental harm and generating renewable energy. Farmers and residents will be utilising locally produced composts from recovered organics. The community will be managing our Resource Recovery Centres and specialist waste companies will be in partnership with the Council to collect, sort, recycle and remanufacture. The Council will work with the State and Federal governments to target specific problem wastes and to regulate the system to ensure low levels of disposal and no illegal operations. The strategy also includes the required governance of the waste business to ensure the effective implementation of the strategy, including the following priorities: Council staff have priorities consistent with achieving the objectives of the waste minimisation strategy; A stronger regulatory effort by Council in controlling illegal dumping and requiring recycling activities; Engaging in partnerships with the best of the private sector (with any proposed partnership assessed in terms of its implications on Councils budget and future flexibility); and 4

14 Waste Management App A A regular annual review process of the status of the implementation of the strategy, involving external experts, transparency and community accountability. Additional information on the governance related targets, actions, priorities and KPIs deemed necessary to effectively administer Council s waste minimisation strategy is provided in Appendix B. 2.2 Functions and Activities of the Business WRM currently undertakes the following functions and activities: Table 2.2: Functions and Activities Undertaken by WRM Waste Collection Services Domestic waste collection from kerbside and on property Commercial waste collection from kerbside and business houses Domestic and commercial recyclable materials collection from kerbside and on property Liquid waste removal from private domestic and commercial premises Kerbside cleanup of bulk waste Street and park litter bin collections Deceased animal collection Source: Waste and Resource Management Waste Processing/Recycling Services Operation and maintenance of Council s Material Recovery Facility (MRF) Resource Recovery Centre operation and maintenance (located at Buderim, Beerwah, Nambour, Coolum, Pierce Avenue (Caloundra) and Witta) Transfer Station operation and maintenance (located at Pomona, Cooroy, Beerwah, Witta, Kenilworth, Yandina and Mapleton) Landfill operation and maintenance (located at Nambour, Pierce Avenue, Coolum and Eumundi Road Noosaville) Processing, marketing and sale of diverted and recovered resources from landfills and transfer stations Rehabilitation and environmental investigation of closed landfills Assist the annual Cleanup Australia Campaign Maintenance of clothing charity bins at waste management facilities throughout the Region Waste Management & Administration Services Customer service Corporate reporting Business planning Development of pricing policies Legislative compliance Contract development and management Software and systems management Project management Forward planning/research and development Infrastructure development Waste strategy development and implementation The business receives around 400,000 tonnes of waste at its waste management facilities each year, with the breakdown in 2007/08 provided in the following table. Table 2.1: Waste Received by WRM 2007/08 Waste Type Tonnage % Kerbside Solid Waste and Recycling 120,219 29% Construction and Demolition 96,321 23% Commercial and Industrial and Self Delivered 134,885 33% Garden Waste 61,107 15% Total 412, % Source: Waste and Resource Management WRM provides collection services to a current regional population of approximately 320,000 persons. Collection services are currently undertaken via three separate waste collection contracts (representing the contracts that were in place for the three former Councils prior to amalgamation), and one liquid waste (holding tank) collection contract. The waste collection contracts are due to expire between 2012 and 2014, when it is expected that contracts are likely to be consolidated from a regional servicing perspective for general waste collection, recycling collection and materials recovery operations. The functions and activities of the business are consistent with the key themes and emerging priorities contained in Council s Corporate Plan as follows (documented in the WRM 2009/10 Annual Performance Plan): 5

15 Waste Management App A Table 2.3: Alignment with Corporate Plan Themes and Priorities Theme Priority Role 1 Robust economy 2 Ecological sustainability 7 Managing growth 8 Great governance A broad economic base Actively examine carbon trading opportunities for Council and the region Support for local businesses Ensure Council s procurement policies support local businesses and help generate local employment Infrastructure for economic growth Facilitate the delivery of key infrastructure projects for our preferred economic growth The impact of climate change Research and develop a plan for Council to become a carbon neutral organisation Innovative programs to protect our ecology Environmentally friendly infrastructure and urban design Integrated water cycle management Council s services and assets meet the needs of our growing community Develop a waste management and recycling strategy targeted to the goal of zero waste Determine Council s role in green power generation and its level of involvement and investment Review Council infrastructure plans, design standards and procurement policies to maximise sustainable outcomes Ensure safe treatment and disposal of sewage and trade waste Determine the types and levels of services provided by Council Develop long-term asset management plans which are linked to financial management plans Maintain and renew Council assets to agreed standards Develop and implement five-year and longer-term rolling capital works programs according to strategic priorities Effective business management Implement a business approach that focuses on maximising opportunities, managing risks Highly skilled, engaged and valued workforce Provide for employee safety, security, health and well-being Attend to employee needs and support their personal and professional development Recognise outstanding employee performance, entrepreneurship and innovation Excellence in customer service Develop a better understanding of our customers needs and expectations Enhance existing customer service and explore improved methods of service delivery Source: Waste and Resource Management 2.3 Service Delivery Undertakings and New Projects The following table outlines the 2009/10 service delivery undertakings for the business as outlined in the WRM 2009/10 Annual Performance Plan: Table 2.4: Service Delivery Undertakings 2009/10 Description Service Level Measure Provision of domestic and commercial solid waste collection, disposal and recycling services, and domestic and commercial liquid waste collection services Source: Waste and Resource Management Properties serviced 147,920 Solid waste recycled 32% Solid waste to landfill (tonnes) 267,010 Projects being undertaken in 2009/10 include the following: Extension to the Nambour Landfill; Investigate Eumundi Road Landfill expansion; Pierce Avenue Landfill closure plan; Closure of Coolum Landfill and proposed transfer station; Improved commercial and industrial recycling; Green waste collection service for the central region; Landfill gas program for Pierce Avenue, Nambour and Eumundi Road Landfills; Expanded bulk bin recycling program; Increased waste and recycling education program; Expanded construction and demolition recycling; Expanded regional kerbside recycling program; 6

16 Waste Management App A Commence e-waste recycling program at all waste and recycling facilities; Expand Waste to Energy program at Witta, Beerwah and Pierce Avenue; and Waste and recycling strategy development. 2.4 Business Structure and Governance The following diagram presents the current reporting structure of WRM, and its relationship within the broader Council organisational structure: Figure 2.1: Business Reporting Structure Source: Waste and Resource Management Within Council s overall organisational structure, WRM currently resides within the Infrastructure Services Department. The Manager Waste and Resource Management reports directly to the Executive Director Infrastructure Services, and is responsible for the waste management operations across the region. As an interim measure subject to the outcomes of this PBA and Council s subsequent decision regarding an appropriate business model for its waste management activities, WRM has been run under a FCP business model for the 2009/10 financial year. Certain CBU elements have however been voluntarily applied to the business, such as the preparation of an Annual Performance Plan 3 and also the retention of a dedicated business manager (Manager Waste and Resource Management). The performance of WRM for the financial year is reported quarterly to Council in accordance with agreed performance monitoring provisions contained in the Annual Performance Plan. Quarterly reporting includes both results for the individual quarter as well as results on a year to date basis. Management reporting includes an explanation of cost allocations as well as extraordinary events (if any) affecting performance against budget. Financial delegation is provided to the Manager Waste and Resource Management in accordance with the provisions contained in the business unit s 2009/10 Annual Performance plan, Council s procurement policy and also the Local Government Act Within the business unit, a number of key personnel assist the Manager Waste and Resource Management with day-to-day business operations. 3 Under the CBU model and to ensure compliance with its legislative obligations, WRM would need to prepare an Annual Performance Plan (including business and operating plans). Appendix A details the key differences between the business models under assessment. 7

17 Waste Management App A 2.5 Business Personnel WRM employees by section are outlined in the following table. Given the outsourcing of collection services to external contractors, the majority of employee resources are directed towards management, waste disposal, recovery and diversion activities. Table 2.5: Waste Business Employees Section Employees Proportion (%) Branch Management 2 6% Recovery Diversion and Disposal 18 51% Collection Services 3 9% Business Operations and Systems 7 20% Projects and Contracts 1 3% Waste Strategy & Special Projects 4 11% Total % Source: Waste and Resource Management WRM employees are currently employed subject to Council s recently negotiated Enterprise Bargaining Agreement and the following parent awards: Queensland Local Government Officers Award 1998 (Transitional); and Local Government Employees (excluding Brisbane City Council) Award State Specific provisions are contained in the new Council Enterprise Bargaining Agreement regarding the working conditions for waste facility officers (the Waste Facility Officers Local Area Work Agreement 2009) due primarily to the additional service requirements required to operate and maintain landfills and transfer stations outside of standard Council employee working hours. 2.6 Support Services Provided by Council WRM utilises a number of support services from Council via internal service level arrangements and is charged a fixed annual charge in accordance with estimated usage, based on activity-based costing principles. The 2009/10 budget incorporates $1.8 million of internal support service costs (representing 5% of the business unit s total operating costs excluding depreciation and interest), distributed as follows: Figure 2.2 Distribution of Council Support Service Charges 2009/10 Budget Commercial & Procurement 21% Corporate Governance 6% Finance 3% HR 4% Corporate Communication 7% IT 12% Legal Services 3% Council Services & Business Integration 7% Customer Services 26% Management 11% Source: Sunshine Coast Regional Council The business also incurs costs based on actual consumption for internal service arrangements provided by other internal Council providers. In 2009/10, consumptionbased internal service provider charges total $754,000, with trade waste charges 8

18 Waste Management App A ($230,000), plant hire ($203,000) and building maintenance services ($143,000) being the most significant of these charges. Other consumption-based charges include Council rates and utility charges, electrical maintenance services and office accommodation charges. From 2010/11, trade waste charges will be incurred from Unitywater (the new water and sewerage service provider to the Sunshine Coast and Moreton Bay regions) and will no longer be recorded as an internal charge. 2.7 Business Assets The value of assets currently utilised by the business is approximately $27.5 million, with a replacement cost of $35.2 million. The waste assets were recently revalued in accordance with Council s statutory accounting requirements. Table 2.6: WRM Asset Values by District as at 30 June 2009 Location Replacement Cost ($ 000) Accumulated Depreciation ($ 000) Written Down Value ($ 000) Central District $17,646 $4,680 $12,966 North District $10,493 $1,095 $9,398 South District $7,062 $1,925 $5,137 Total $35,201 $7,700 $27,501 Source: Sunshine Coast Regional Council Notes: The current Pierce Avenue (Caloundra) landfill site is on reserve land and is therefore not valued on Council s asset register, although is also nearly exhausted. As the waste collection component of the business is undertaken via three external contracts, the main assets utilised by the business relate to waste disposal and reuse/recycling. 2.8 Regulatory Responsibilities WRM is required to comply with the following key legislation/policies: Local Government Act 1993; Local Government Finance Standard 2005; Environmental Protection Act 1994; Environmental Protection (Waste Management) Policy 2000; Environmental Protection (Waste Management) Regulation 2000; Freedom of Information Act; Relevant Council local laws and policies; and Local Government Tax Equivalents Regime. The general legislative framework surrounding waste management is the Environmental Protection (Waste Management) Policy 2000, which is based on an objective to protect Queensland s environment while allowing for development that improves the total quality of life, both now and in the future, in a way that maintains the ecological processes on which life depends (ecologically sustainable development). Councils are required, under sections of the Policy to prepare and adopt a Waste Management Strategic Plan. Under the Environmental Protection Act 1994 and the Environmental Protection (Waste Management) Policy 2000, the following principles and duties are required to be addressed when developing a strategic plan: General Environmental Duty the Environmental Protection Act 1994 stipulates that a person or company must not carry out an activity that can harm the environment unless all reasonable and practicable measures to prevent or minimise the harm are taken; and Waste Management Hierarchy a framework for prioritising waste management practices to achieve the best environmental outcomes through promoting the avoidance or minimisation of waste, and where this is not possible, recycling and reuse of waste materials is encouraged ahead of treating and disposing of waste. 9

19 Waste Management App A As National Competition Policy (NCP) reforms have been applied to WRM, the full cost pricing principles in the Local Government Act 1993 need to be met. There are also additional reporting obligations for Council in reporting the financial performance of WRM as a SBA in its budget papers and annual report. 2.9 Price Setting Practices Methodology Waste and Resource Management is responsible for recommending appropriate revenue targets, price structures and price paths to Council to ensure the ongoing viability of the business, with Council having final approval for the setting of annual waste prices (both utility charges and fees and charges). Charges are levied on the basic premise that costs should be equitably distributed to those who utilise or stand to benefit from the provision of the service. Prices are set to deliver sufficient revenue to meet the following objectives: Full cost recovery including required rates of return; Competitive neutrality; Elimination of cross subsidies; Economic, asset and ecological sustainability; and Transparency in pricing regarding Community Service Obligations (CSOs) Waste Collection Charges The waste collection charge for a typical residential property is $ in 2009/10 (before the application of any applicable discount or pensioner remissions), with the service including a weekly 240L service for general refuse and a fortnightly 240L service for recyclables. Properties in the South district (and a number of Central district properties) are charged $ per annum if a 140L general refuse service is taken up instead of the 240L service, and properties in the South district are charged $ if this is further reduced to 80L. Additional charges are levied in the South district for 80L, 140L and 240L bins that need to be collected within a property rather than at the kerbside. Optional kerbside green waste bin collection services apply across the region at an annual cost of $ Casual services are also offered, in addition to a number of other collection services as outlined in Council s schedule of fees and charges (refer Appendix C for further detail on these fees and charges). The table below details the cleansing utility charges applicable for the 2009/10 financial year, as published in Council s 2009/10 Revenue Statement. The services are not yet regionally consistent due to the existence of three different collection contracts. Table 2.7: Cleansing Utility Charges, 2009/10 Service Level District Permanent Service Casual Service Waste Bin 80L South $ $5.27 Waste Bin -140L South, Central $ $5.27 Waste Bin 240L All $ $5.27 On Property - 80L South $ $5.27 On Property - 140L South $ $5.27 On Property - 240L South $ $5.27 Noosa Riverlands Retirement Village North $ $5.27 Optional Green Waste Bin - 240L (f ntly) All $72.00 na Recycling Bin 240L (f ntly)* All No charge No charge Bulk Waste Bin 660L low noise Central $ $14.73 Bulk Waste Bin 1100L low noise North, Central $1, $

20 Waste Management App A Service Level District Permanent Service Casual Service Bulk Waste Bin 1m 3 All $ $17.91 Bulk Waste Bin - 1.5m 3 All $1, $25.27 Bulk Waste Bin - 2m 3 All $1, $33.73 Bulk Waste Bin - 3m 3 All $2, $48.45 Compactor Bulk Waste Bin - 3m 3 North, Central $4, $75.82 Compactor Bulk Waste Bin - 19m 3 All $19, $ Compactor Bulk Waste Bin - 23/30m 3 All $23, $ Additional Bulk Recycling Bin 1100L (f ntly) North, Central $1, $21.09 Additional Bulk Recycling Bin - 1m 3 (f ntly) South, Central $ $12.64 Additional Bulk Recycling Bin - 2m 3 (f ntly) South, Central $1, $25.27 Additional Bulk Recycling Bin - 3m 3 (f ntly) South, Central $2, $44.18 Cardboard Compactor Bin - 19m 3 Central $13, $ Cardboard Compactor Bin - 23/30m 3 Central $17, $ Cardboard Compactor Bin - 35/60m 3 Central $22, $ Source: Sunshine Coast Regional Council Notes: 1. A 240L recycling bin, collected fortnightly, is made available for each 80L, 140L or 240L waste bin at premises. 2. For each bulk waste service a fortnightly bulk recyclable service is made available of the same or similar capacity to the bulk waste service. 3. Additional bulk recycling services requested above the standard entitlement occur an additional charge. 4. Bulk waste services in the Central district greater than 3m 3 are entitled to a single 3m 3 recycling service. 5. A maximum load limit of 2,500 kilograms applies to bulk waste and bulk recycling container services. 6. A minimum charge equivalent to a 140L general refuse service applies to all properties in the Central and North districts (e.g. where a bulk waste service is used in Strata titled units instead of individual waste bins, a minimum charge per unit equivalent for a 140L general refuse bin applies). 7. In the South district, the costs of services provided to common property may be apportioned on a lot entitlement basis. 8. A one off charge of $70 applies to each bin where a change in size to or from a 80L, 140L or 240L occurs. 9. No GST is applicable to Waste Management Charges levied on the rates notice. The following graph compares the residential waste collection service charge (net of any applicable discount) levied by WRM with the charges levied by other large Queensland Councils. The charge levied by WRM of $168 per annum (after discount) is significantly lower (22%) than the median charge levied by large service providers across Queensland of $216 per annum. Figure 2.3: Average Residential Waste Collection Services Bill, 2009/10 $350 $300 $250 $200 $150 $100 $50 $0 Toowoomba Sunshine Coast Gold Coast Mackay Logan Townsville Moreton Bay Bundaberg Gladstone Ipswich Brisbane Redland Fraser Coast Rockhampton Cairns Source: AEC Group The following table provides a breakdown of waste collection service and special charges levied on residential households by large Queensland Councils. 11