report to council on scenarios - feb 26, 2015

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Bio-Digester Scenarios

Report to the Chatsworth Council

February 26, 2015

My email to CAO/Clerk Will Moore on February 23, 2015 provided an excerpt from the minutes of the Georgian Bluffs

Council meeting on June 18, 2014. My understanding of those minutes is that Treasurer Morrison told the Georgian

Bluffs Council that changing to an assessment-based method of sharing the Bio-Digester operating costs, together with

removing all tipping fees would eliminate the concerns of Chatsworth about subsidizing the Sunset Strip.

Here is that excerpt:

Morrison said if we went to an assessment basis we would be paying 67% of the operating costs and Chatsworth would

be paying 33% of the operating costs because we have a higher assessment. Morrison also said the request from

Chatsworth to no longer subsidize tipping fees and transportation costs for septage from the Sunset Strip is now off the

table for discussion (my emphasis by underlining).

My email asked Mr. Moore to advise as to communications with Ms. Morrison on this subject that would have led her to

this conclusion. Changing to an assessment-based apportionment of costs would make some difference, but not very

much; certainly not enough for Chatsworths concerns to go away.

Since I have been paying close attention to issues related to the Bio-Digester, I have not seen information or analyses

prepared by Chatsworth staff; to the best of my knowledge, everything has been done by Georgian Bluffs.

There may be good reasons for this, but Chatsworth Council and staff need to understand that any negotiation, no

matter how friendly or collaborative, always involves the reconciliation of different interests and perspectives; it

is nave to think otherwise. It is not prudent, and can be very risky, to be in the position of always having to respond

or react to scenarios, possibilities or options prepared from the perspective of someone else.

My Supplementary Report to the Chatsworth Council dated February 1, 2015 provided cost figures for the Bio-Digester

with and without the present method of subsidizing the Sunset Strip (through the provisions of the February 2, 2011

Agreement). Audited financial figures for 2012 and 2013 were used as the base.

The February 1 report concluded that financial results for those years would have been $82,580 and $88,795

(respectively) more favourable to Chatsworth if the Sunset Strip businesses were treated in the same way as all others in

the municipalities (pay the normal tipping fee plus transportation) with Georgian Bluffs then reimbursing them to

whatever extent desired (outside of the Agreement).

This present report starts where the February 1, 2015 report left off. This time, however, the calculations show the

bottom line for Chatsworth under both the 50-50 cost sharing method (which has been used for the last four years

because it is in accordance with the Agreement) and the proposed sharing of costs on the basis of assessment, along

with a change to zero tipping fees.

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At this point, the calculations are for the years 2012 and 2013 only. I will provide calculations for 2014 after the actual

costs and volumes are available.

For convenience in calculating, I have assumed that the ratio of assessment is exactly 1/3 2/3; this is good enough for a

comparison such as this.

Table I, below, provides a summary; Tables II and III, attached, show the detailed calculations.

TABLE I Effect of Cost Sharing Comparisons on Chatsworth

Costs shared equally (see report dated Feb 1, 2015)

Costs shared 1/3 2/3

Actual result for

Chatsworth

Sunset Strip subsidized outside of

Agreement

No change to present

method of subsidizing

Sunset Strip subsidized outside of

Agreement

Zero tipping fees

2012 Net Result $122,165 $39,585 $81,440 $26,390 $100,650

2012 Change for Chatsworth

+ $82,580 + $40,725 + $95,775 + $21,515

2013 Net Result $145,135 $56,340 $96,760 $37,560 $129,495

2013 Change for Chatsworth

+ $88,795 + $48,375 + $107,575 + $15,640

Table I shows that the proposed changes to zero tipping fees and shifting to an assessment-based cost formula does

make a difference for Chatsworth, but not much and the least difference of all of these options. This is certainly not

enough of a difference for anyone to conclude that, as a result of the proposed changes, Chatsworths concerns about

the subsidies to the Sunset Strip are off the table.

Finally, I do not know whether Georgian Bluffs has produced figures for the options in these tables, or not. In my

opinion, proposing changes to the cost-sharing formula and tipping fees would make no sense without knowing, roughly

at least, what the result would be (please refer to the paragraph highlighted in bold on the first page).

Respectfully submitted,

Trevor Falk

Attachments: Detailed calculations (Tables II and III)

Report to Council dated February 1, 2015

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TABLE II Effect of Cost Sharing Comparisons on Chatsworth for 2012

2012

Chatsworth pays one third of operating costs

ACTUAL

Actual volumes, present subsidies, recalculated cost

sharing

Sunset Strip pays transportation, pays same tipping fees as

others, and then Georgian Bluffs

provides rebates

No tipping fees charged to anyone but transportation

paid by users

Total volume in cubic metres

10,665 10,665 10,665 10,665

Septage Sunset Strip 7,252 7,252 7,252 7,252

Septage outside sources

2,986 2,986 2,986 2,986

Septage Chatsworth and Georgian Bluffs residents

427 427 427 427

Tipping fees Sunset $58,380

@ $8.05/m3

$58,380 @ $8.05/m

3

$181,300 @ $25.00/m

3

0

Total revenue * $181,640 ** $181,640

$181,640 - $58,380

+ $181,300 = $304,560

$81,785 ***

Chatsworth share of revenue *

$181,640 / 2 = $90,820

$181,640 / 3 = $60,550

$304,560 / 3 = 101,520

$81,785 / 3 = $27,260

Transport fees Sunset $42,240 ** $42,240 0 0

Total expenses not including amortization

$425,970 ** $425,970 $425,970 - $42,240

= $383,730

$425,970 - $42,240

= $383,730

Chatsworth share of expenses

$425,970 / 2 = $212,985

$425,970 / 3 = $141,990

$383,730 / 3 = $127,910

$383,730 / 3 = $127,910

Revenue minus expenses for Chatsworth

$90,820 - $212,985

= - $122,165

$60,550 - $141,990 = - $81,440

$101,520 - $127,910 = - $26,390

$27,260 - $127,910

= - $100,650

Change in financial position of Chatsworth

+ $40,725 + $95,775 + $21,515

* Tipping fees and hydro generation only. The accounts (and even the Audit) include payments from the townships to keep the lights on as revenue. ** Financial figures are from the 2013 Audit *** Hydro generation only Conversion: 1.0 cubic metre = 220.1 Imperial Gallons

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TABLE III Effect of Cost Sharing Comparisons on Chatsworth for 2013

2013

Chatsworth pays one third of operating costs

ACTUAL Actual volumes with present subsidies to

Sunset Strip

Sunset Strip pays transportation, pays same tipping fees as

others, and then Georgian Bluffs

provides rebates

No tipping fees charged to anyone but transportation

paid by users


8,119 8,119 8,119 8,119


Septage outside sources

81 81 81 81


244 244 244 244


@ $8.05/m3

$62,740 @ $8.05/m

3

$194,850 @ $25.00/m

3

0

Total revenue * $212,680 ** $212,680

$212,680 - $62,740

+ $194,850 = $344,780

$68,987 ***

Chatsworth share of revenue *

$212,680 / 2 = $106,340

$212,680 / 3 = $70,890

$344,780 / 3 = $114,930

$68,987 / 3 = $22,995

Transport fees Sunset $45,490 ** $45,490 0 0

Total expenses not including amortization

$502,950 ** $502,950 $502,950 - $45,490

= $457,460

$502,950 - $45,490

= $457,460

Chatsworth share of expenses

$502,950 / 2 = $251,475

$502,950 / 3 = $167,650

$457,460 / 3 = $152,490

$457,460 / 3 = $152,490


$106,340 - $251,475

= - $145,135

$70,890 - $167,650 = - $96,760

$114,930 - $152,490 = - $37,560

$22,995 - $152,490

= - $129,495


+ $48,375 + $107,575 + $15,640

* Tipping fees and hydro generation only. The accounts (and even the Audit) include payments from the townships to keep the lights on as revenue. ** Financial figures are from the 2013 Audit *** Hydro generation only Conversion: 1.0 cubic metre = 220.1 Imperial Gallons

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Finding the Best Way to

Treat and Dispose of Septage in Chatsworth

Supplementary Report to the Chatsworth Council

February 1, 2015

A good question has arisen further to my report to Chatsworth Council dated January 30, 2015:

As a short-term alternative to throwing both user pay and equal risk / reward

into the garbage can, along with about a dozen clauses in the agreements, why

doesnt the Joint Board agree to reinforce both of these principles by disregarding

the two clauses which make Chatsworth equally responsible with Georgian Bluffs

for transportation and disposal/treatment of septage from the businesses on the

Sunset Strip?

In response to this question, I have prepared the attached table showing calculations for 2012 and 2013

(audited year-end financial figures for 2014 are not yet available to me, and 2011 was not a full year and

was not audited).

Taxpayers in Chatsworth wouldnt care if Georgian Bluffs subsidized businesses on the Sunset Strip

directly instead of through the Bio-Digester. In that scenario, the Sunset Strip businesses would pay the

$25.00 per cubic metre tipping fee at the Bio-Digester plus their own transportation costs just like

everybody else. After the end of each month or each year, Georgian Bluffs could send some or all of that

money back to them.

But that isnt how its done. About 20 Sunset Strip businesses pay a tipping fee of only $8.05 per cubic

metre (less than a third of the cost), and the transportation costs are also charged to the Bio-Digester.

Since Bio-Digester costs are shared on a 50-50 basis, Chatsworth ends up picking up half of the tab for

transporting and treating septage for these businesses, exactly the same as Georgian Bluffs.

The question that arose, above, assumes that removing the transportation contract would be contrary

to Agreement dated Feb 2, 2011. This is correct. Article 5.4 states that the cost of transportation from

the Sunset Strip is a cost of operating the Bio-Digester (why Chatsworth would ever have agreed to this

has never been explained, but that isnt the point now).

However, the assumption in the question that changing the tipping fee to $25.00 per cubic metre for the

Sunset Strip businesses would also be contrary to the Agreement is wrong. Article 5.9 of the Agreement

states that the subsidized tipping fee of $8.05 per cubic metre can be changed at any time by Georgian

Bluffs Council.

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All else being equal, the attached table shows that charging the Sunset Strip businesses $25.00 per cubic

metre and having them pay for the transportation themselves would have reduced costs for Chatsworth

by $82,580 in 2012 and by $88,795 in 2013 (an average of about $85,700).

In order to keep the Sunset Strip businesses in the same position as they are today, Georgian Bluffs

would then have to refund the extra tipping fees and the transportation costs to them. Doing it this way

would retain user pay and be entirely consistent with equal risk / reward, the principle upon which

the package of agreements was supposedly established.

The minutes of the Chatsworth Council meeting on December 18, 2013 provide the results of a

recorded vote on the subsidies. Then Deputy Mayor McKay and Councillors Gamble, Mackey and

Vlielander all voted to end the subsidies; Mayor Pringle voted to keep them.

The Bio-Digester has been operating for almost 4 full years. By the time that point is reached, sometime

in February of 2015, subsidies by Chatsworth of the Sunset Strip through the Bio-Digester agreement

will have amounted to more than a third of a million dollars.

Respectfully submitted,

Trevor Falk

Chatsworth

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FINANCIAL RESULTS IF CHATSWORTH WERE NOT PAYING HALF OF THE COSTS OF

TRANSPORTING, TREATING AND DISPOSING OF SEPTAGE FROM THE SUNSET STRIP

2012 actual 2012 with Sunset

Strip clauses removed

2013 actual 2013 with Sunset

Strip clauses removed


10,665 10,665 8,119 8,119


Septage outside sources 2,986 2,986 81 81


427 427 244 244


@ $8.05/m3

$181,300 @ $25.00/m

3

$62,740 @ $8.05/m

3

$194,850 @ $25.00/m

3

Total revenue * with subsidies from townships removed

$181,640 **

$181,640 - $58,380

+ $181,300 = $304,560

$212,680 **

$212,680 - $62,740

+ $194,850 = $344,780

Chatsworth share (50%) of revenue *

$181,640 / 2 = $90,820

$304,560 / 2 = $152,280

$212,680 / 2 = $106,340

$344,780 / 2 = $172,390

Transport fees Sunset $42,240 ** 0 $45,490 ** 0

Total expenses less amortization **

$425,970 ** $425,970 - $42,240

= $383,730 $502,950 **

$502,950 - $45,490

= $457,460

Chatsworth share (50%) of expenses

$425,970 / 2 = $212,985

$383,730 / 2 = $191,865

$502,950 / 2 = $251,475

$457,460 / 2 = $228,730


$90,820 - $212,985

= - $122,165

$152,280 - $191,865 = - $39,585

$106,340 - $251,475

= - $145,135

$172,390 - $228,730 = - $56,340


+ $82,580 + $88,795

Transportation costs plus extra tipping fees refunded to Sunset Strip by Georgian Bluffs

$181,300 - $58,380 + $42,240

= $165,160

$194,850 - $62,740 + $45,490

= $177,600

* Tipping fees and hydro generation. The accounts (and even the Audit) include subsides from the townships as revenue. ** Financial figures are from the 2013 Audit At the Bio-Digester, septage is reported in Imperial Gallons (220.1 Imperial Gallons = 1 cubic metre)

report to council on scenarios - feb 26, 2015

Documents

chatsworth council

chatsworth staff

concerns of chatsworth

operating costs

transportation costs

actual costs

biodigester scenarios

proposed sharing of