In-house garbage collection racking up operating deficits
The two garbage collection zones that use city staff together racked up a $1.2-million operational deficit in 2016, an external audit shows.
The downtown zone had a deficit of $589,899 and the east Ottawa zone had a deficit of $665,060 in the fourth year of the collection contracts.
The previous three years of the collection contracts resulted in a cumulative operational deficit of $340,609.
Over the first four years of the contracts, the city collection zones have run a total $1.6-million operational deficit.
The city chalks it up to increased labour, fleet and fuel costs.
The 2016 financial results for the two in-house collection zones are outlined in a report to council’s environment and climate protection committee, which meets Tuesday.
It was supposed to cost about $5.6 million at most to collect garbage downtown and $6.3 million to pick up garbage in east Ottawa in 2016. In both cases, there were more expenses than those city budgets could cover.
Overtime costs shot up in 2016. According to the city, an arbitration ruling compels the city to use full-time operators for overtime to cover short-term vacancies, rather than casual labour or subcontractors.
It also doesn’t help that warranties have expired on almost the entire garbage fleet, which means the costs for repairs now come out of taxpayers’ pockets. The rigs are also getting older.
The city, of course, is keen on emphasizing the big picture when it comes to the cost of collecting curbside trash.
The city says it still saves money with having at least one in-house collection zone, based on how much cheaper the city’s bid was compared to the next bid price when contracts were awarded in 2012.
Taking together the operational deficit and contract savings, the city has so far come out ahead by about $430,000, the public works department says.
The audit by Ernst & Young used a financial year-end date of Oct. 31, since that was roughly when the contracts started in 2012.
The city has five geographic garbage collection zones.
In 2011, when it was preparing the contract competitions, council decided to keep the downtown zone as an in-house operation. An in-house bid team also submitted proposals for the other four zones and was awarded the east Ottawa collection contract.
Waste Management secured the west Ottawa contract and Miller Waste Systems obtained the two south Ottawa contracts.
All garbage collection contracts run until May 31, 2019.
When the city awarded the garbage contracts, council directed staff to report each year on the financial results of the in-house operations.
Operation deficits in any city department are usually covered by surpluses in other departments before the city considers using reserves.