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Public Benefit Assessment of

Reform Options for Waste and

Recycling Activities

Bundaberg Regional Council

Draft Report

May, 2010

Public Benefit Assessment of Reform Options for Waste and Recycling Activities - Bundaberg Draft Report

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Job ID: 44111

Job Name: Public Benefit Assessment of Reform Options for Bundaberg Waste and Recycling

Project Director: Gavin O’Donovan

Project Manager: Michael Shave

Company: Bundaberg Regional Council

Job Contact: John Kelly

Document Name: Draft Report - Public Benefit Assessment Bundaberg Waste and Recycling.docx

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Disclaimer:

Whilst all care and diligence have been exercised in the preparation of this report, the 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 the 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.


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Executive Summary

Background to the Public Benefit Assessment

Bundaberg Regional Council’s waste management activities constitute a financially

significant Type 2 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 (minimum level of reform); and

2. The business becomes a Commercialised Business Unit (CBU).

Model Implications

FCP • The activities of the business are essentially operated as a service delivery area within Council’s organisational structure (with reduced autonomy than under the CBU model)

• 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

CBU • A separate business unit (not a separate legal entity) within Council’s corporate structure is created, with a dedicated, commercially-focussed 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 model • 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

The objective of the PBA is to determine whether or not the benefits that may be realised

from the two 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 the Waste and Recycling

business, 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 the Waste and Recycling business,

including detail on the costs and benefits of each model as well as a timetable for

implementation of the recommended business model.

Business Profile Summary

• The business is currently operating under an interim Full Cost Pricing (FCP) business model, and provides waste and recycling activities in the Bundaberg region;

• The business currently employs approximately 45 staff;

• Key activities undertaken by the business include:


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Activity Description

Waste and Recycling Collection

• Waste collection provides 55,000 weekly services to 37,000 properties across the Bundaberg region (including general refuse and recycling collection)

• The business utilises its own labour workforce and assets to provide collection services on behalf of Council in the Bundaberg and Burnett districts, while external collection contracts are in place in the Kolan and Isis districts

Landfill and Transfer Station Facility Management

• The business operates 12 waste management facilities as part of its waste disposal services to the Bundaberg region, including 1 combined transfer station and landfill (Bundaberg), 6 landfill only facilities and 5 transfer station only facilities

• The facilities are operated by a combination of Refuse Operations staff and outsourced contract services

• All facilities are licensed under the Environmental Protection Act 1994, with strict conditions placed on operations to avoid adverse environmental impacts

Waste Reduction and Recycling Activities

• In addition to kerbside collection of recyclables, Council provides facilities to recycle green waste, construction/demolition waste and commercial/industrial waste

• Batteries and oil are also accepted for recycling, as well as electrical goods, tyres and clean fill

Waste Management / Waste Minimisation Promotional Activities

• Active participation in campaigns such as Clean Up Australia Day, World Environment Day, National Recycling Week, Mobile Muster (Mobile Phone Recycling), Drum Muster (Pesticide Drum Recycling), and Close the Loop Printer Cartridge Recycling.

• The business has a large number of regulatory responsibilities regarding price-setting practices, business planning, reporting, and environmental compliance;

• The waste collection service charge after discount for a typical residential property is $216.00 in 2009/10 (consisting of a weekly 240L general waste service and a fortnightly 240L recycling service);

• Waste disposal charges are standardised across all regional waste facilities, with

charges generally levied as a fixed charge (as currently no weighbridge facilities are in place). Waste disposal charges include charges for general waste, commercial waste (loose and compacted), green waste, tyres etc;

• The current written down value of assets utilised by the business is $5.3 million, with a replacement cost of $5.6 million;

• The business is forecasting to conservatively spend $15 million on capital works over the next ten years;

• The business achieved an operating deficit in 2008/09 (with a deficit budgeted for 2009/10), which indicates that an appropriate commercial return for Council, in accordance with full cost pricing legislative requirements is not being achieved;

• Collection services in the region are generally non competitive in nature with the business providing a monopoly service for all standard general refuse and recycling bin collections to residential properties. The business does not, however, undertake industrial bin collections, which are undertaken by the private sector.

Consultation Process

The stakeholder consultation process undertaken as part of the PBA included:

• Public announcement of the PBA in the in the ‘News Mail’ on Saturday 19th December 2009 and also the ‘Isis Town and Country’ on Thursday 17th December 2009 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; and

• Internal consultation with Council senior management and the Waste and Recycling Business Manager regarding the business models under consideration and potential

impacts/outcomes from each model.


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Consultation Outcomes

The following table provides a summary of the responses received from stakeholders.

Stakeholder Process Undertaken and Response Received

EXTERNAL STAKEHOLDERS

Unions The following unions were provided Stakeholder Information Papers for comment: • Transport Workers Union • Australian Workers Union • Australian Manufacturing Workers Union • Australian Municipal, Administrative, Clerical and Services Union • Association of Professional Engineers, Scientists and Managers Australia • Construction, Forestry, Mining and Energy Union

One submission was received from the Australian Municipal, Administrative, Clerical and Services Union. The response indicated that the Full Cost Pricing business model be applied to the business to ensure Council continues to have direct control of the waste functions, employees of the business remain Council employees and continue to be employed under current awards, and employment security continues for employees.

Regional Business Representatives

The following key local and regional business organisations were provided Stakeholder Information Papers for comment: • Bundaberg Chamber of Commerce • Coral Coast Chamber of Commerce

No responses were received by the closing date. General Community / Customers

The public advertisement of the PBA process requested submissions from interested parties.

Two phone calls were received by waste disposal operators querying the PBA process. The first (Dump Rat Removals) had issues with the current disposal price levels, and also the inequities with the current disposal price structure (being based on a load rather than volume basis). Comments from the second operator (Quick Tip Skips) also surrounded the current level of disposal fees (in particular the recent steep price increases), as well as the efficiency of Council’s waste management operation (where it was suggested landfills and transfer stations were overstaffed).

Environment The following identified local and regional environmental organisations were provided Stakeholder Information Papers for comment: • Burnett Catchment Care • Burnett Mary Regional Group • Sustainabundy

The Burnett Mary Regional Group advised that they were thankful for being considered a key stakeholder regarding the PBA process. They advised that they currently held a neutral position with regard to the business models being considered by Council.

Regulators The following regulators were provided Stakeholder Information Papers for comment: • Environmental Protection Agency (EPA) • Queensland Competition Authority (QCA) • Department of Infrastructure and Planning (DIP) • Sunwater • Department of Environment and Resource Management

The QCA advised in its letter dated 21st 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 any of the other regulators contacted.

INTERNAL STAKEHOLDERS

Councillors Councillors were informed of the PBA process in November 2009, and also again in December 2009 (prior to the public announcement of the PBA). Councillors were also contacted prior to the submission deadline and were requested to provide back any comments / feedback / submissions.

No significant issues were raised as part of the consultation process. Waste and Recycling Employees

Information papers were provided to employees of the business outlining the PBA process and addressing potential concerns that may exist.

No significant issues were raised as part of the consultation process. Council Senior Management and Waste and Recycling Management

The implications of each business model under assessment were discussed with Council senior management and also the Waste and Recycling Business Manager.

Council management indicated no particular desire to move the Waste and Recycling business to a CBU business model with any potential benefits of moving to such a model unlikely to be greater than the ongoing compliance costs associated with running a CBU.


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Impact Summary

Impact Area Net Benefit Assessment Outcome

Financial Position of the Business

Net Benefit Under FCP – An overall net benefit on the financial position of the business would be likely if the FCP model was retained given reduced compliance requirements (versus the CBU model). However, to ensure sustainable outcomes are promoted, it is recommended that a full cost pricing model be used as part of the price-setting process and formal performance reporting to Council be implemented.

Bundaberg Regional Council Budget

Net Benefit Under FCP – There would be negligible difference in the impacts on the Bundaberg Regional Council budget from the FCP and CBU models, assuming that any increased costs incurred by the business would be passed onto customers or offset by a corresponding reduction in general rates. However, higher charges may be levied on the community under the CBU model due to increased compliance requirements which is likely to impact community satisfaction with Council. If the FCP model is adopted, it would be appropriate for Council to implement regular financial and non-financial performance reporting (but probably not to the level mandated under the CBU model) to ensure that business performance is continually monitored (and dividend and tax equivalent contributions to the general fund are maintained).

Market Negligible Difference Between FCP and CBU – There are negligible impacts on the market from the adoption of either the FCP or CBU models, as both reform options require full cost pricing principles to be applied to the business.

Staff Net Benefit Under FCP – An overall net benefit for Waste and Recycling staff would be likely if the FCP model was adopted, provided the current business structure was retained, resourcing levels for the business were appropriate, and there were no adverse changes in the level of delegation to the Business Manager and roles and responsibilities of staff. Further benefit would be derived under the FCP model via reduced statutory NCP-related compliance requirements that are required under the CBU model.

Ratepayers and Commercial Customers

Net Benefit Under FCP – There is likely to be a net benefit for consumers from the adoption of the FCP model. Despite price increases being required under both models to ensure that full cost pricing requirements are being met in accordance with legislative requirements, slightly higher prices may be required under the CBU model to recoup additional compliance costs.

Regional Development and Economic Stability

Net Benefit Under FCP – 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 and recycling services, provided funds generated by the adoption of full cost pricing practices are appropriately invested into waste infrastructure (and landfill rehabilitation) to ensure sustainable service provision.

Social Welfare and Equity

Net Benefit Under FCP – 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 targeted at social and environmental outcomes, subject to intergenerational equity being promoted by ensuring appropriate ongoing levels of investment in waste service provision is maintained.

Environment Net Benefit Under FCP – 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 Council’s operational plan.

Recommendation on Preferred Business Structure

It is believed that a FCP business model is the most appropriate reform option as:

• While the Waste and Recycling business undertakes its own collection services in the Bundaberg and Burnett areas (rather than contracting to the private sector), it does not actively compete in the market for non-mandated services and commercial business (including collections outside of the Bundaberg region);

• The FCP business model can be easily implemented without significant resourcing

commitments, business/employee disruption and timeframe issues;

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) business model.

It is therefore recommended that Bundaberg Regional Council adopt the Full Cost Pricing (FCP) business model for the Waste and Recycling business activity moving forward.


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• The business currently has, and will continue to have, considerable legislative obligations regarding the services it offers to the community, with the provision of waste and recycling activities considered an essential community service with social and environmental objectives rather than profit maximisation being the primary

focus;

• There will be increasing control and intervention in waste service provision resulting from Federal and State policies and agendas, with these changes likely to require continued involvement by Council in strategic decision making at a local level; and

• Council still has the flexibility 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 Relevant delegation of responsibility to the manager Waste and Recycling and staff for day-to-day operations

o Performance reporting to Council and the community using a range of financial and non-financial key performance indicators

o Ensuring appropriate reserves are held by the business to fund future capital

works and landfill rehabilitation requirements identified through the ongoing use of a long-term financial sustainability model for the business.

Reform Implementation Timetable

Bundaberg Regional Council should implement the FCP business model effective from 1

July 2010, and investigate/implement other issues during the 2010/11 financial year.

Other Issues from the Business Review

• Council will need to apply sufficient resources to comply with the reporting requirements contained in the Local Government Act in relation to Waste

and Recycling as a SBA.

• A standard suite of key financial and non-financial performance indicators should be developed to allow robust, periodic Council monitoring of business

performance.

• The Waste and Recycling business may wish to consider reviewing its disposal service pricing structure to give greater consideration to weight

and/or volume-based charging rather than a flat fee per load.

• A review of all non-commercial activities undertaken by the Waste and Recycling business at the request of Council may be required to ensure they

are appropriately identified and funded via Community Service Obligation

payments from the general rate.

• Adoption of the FCP business model will require all plant hire charges to be developed on the same basis as the private sector.

• There is a need to ensure that waste collection and waste disposal services provided internally to Council are appropriately charged by the business.

• All assets associated with the waste management function should be clearly assigned to the business, unless hired/leased from Council at commercial

equivalent rates.

• Council should prioritise the development of a regional waste management strategy to provide the foundation for future strategy and planning

surrounding waste collection and disposal (including sustainable waste

recycling and minimisation).

• An appropriate long-term financial sustainability model should be developed for the business to help identify ongoing investment and landfill

rehabilitation requirements, help inform capital funding decisions regarding

appropriate reserve levels and borrowing programs, as well as help develop

longer-term price paths and revenue strategies that are compliant with full


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cost pricing principles and are more reflective of waste lifecycle costing

principles.

• Council should consider the implications associated with current under-

resourcing in meeting regulatory compliance requirements, as well as the

implications for resourcing future strategies and the application of broader

state and national waste policies (including effective carbon management).


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Table of Contents

DOCUMENT CONTROL .......................................................................................... I

EXECUTIVE SUMMARY ........................................................................................ II

TABLE OF CONTENTS...................................................................................... VIII

1. PUBLIC BENEFIT ASSESSMENT BACKGROUND ............................................ 1

1.1 NEED FOR THE PUBLIC BENEFIT ASSESSMENT .............................................................. 1

1.2 BUSINESS MODELS UNDER ASSESSMENT ................................................................... 1

1.3 BUSINESS MODELS ADOPTED BY FORMER COUNCILS ...................................................... 2

1.4 THE PUBLIC BENEFIT ASSESSMENT PROCESS .............................................................. 3

2. BUSINESS STRUCTURE AND OPERATIONS .................................................. 4

2.1 OBJECTIVES OF THE BUSINESS ............................................................................... 4

2.1.1 OPERATIONAL PLAN STRATEGIES .................................................................. 4

2.2 BUSINESS STRUCTURE AND GOVERNANCE .................................................................. 6

2.3 BUSINESS PERSONNEL ........................................................................................ 6

2.4 SUPPORT SERVICES ........................................................................................... 7

2.5 BUSINESS ASSETS ............................................................................................ 7

2.6 REGULATORY RESPONSIBILITIES ............................................................................. 7

2.7 PRICE SETTING PRACTICES ................................................................................... 8

2.7.1 METHODOLOGY ...................................................................................... 8

2.7.2 WASTE COLLECTION CHARGE ...................................................................... 8

2.7.3 WASTE DISPOSAL AND OTHER CHARGES ....................................................... 11

2.8 OPERATING REVENUE ....................................................................................... 11

2.9 OPERATING EXPENDITURE .................................................................................. 11

2.10 CAPITAL EXPENDITURE ...................................................................................... 12

2.11 FINANCIAL PERFORMANCE .................................................................................. 12

2.12 NON-FINANCIAL PERFORMANCE ............................................................................ 13

2.12.1 PERFORMANCE INDICATORS ...................................................................... 13

2.12.2 CUSTOMER SATISFACTION SURVEY .............................................................. 14

2.13 MARKET IN WHICH THE BUSINESS OPERATES ............................................................ 15

2.13.1 WASTE COLLECTION SERVICES .................................................................. 15

2.13.2 WASTE DISPOSAL SERVICES ..................................................................... 15

2.14 INDUSTRY TRENDS .......................................................................................... 15

2.14.1 NATIONAL PRODUCTIVITY COMMISSION WASTE MANAGEMENT INQUIRY .................... 15

2.14.2 QUEENSLAND WASTE STRATEGY ................................................................. 15

2.14.3 NATIONAL WASTE POLICY ........................................................................ 16

2.14.4 INCREASING ENVIRONMENTAL FOCUS ........................................................... 17

2.15 BUSINESS PROFILE SUMMARY .............................................................................. 18

3. STAKEHOLDER CONSULTATION PROCESS ................................................. 19

3.1 CONSULTATION PROCESS ................................................................................... 19

3.2 RESPONSES FROM STAKEHOLDERS ........................................................................ 19


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3.3 CONSULTATION OUTCOMES SUMMARY .................................................................... 20

4. BUSINESS MODEL ASSESSMENT ................................................................ 21

4.1 COMMUNITY IMPACT ASSESSMENT OF BUSINESS MODELS .............................................. 21

5. RECOMMENDATIONS ................................................................................. 29

5.1 PBA RECOMMENDATION ON PREFERRED BUSINESS STRUCTURE ....................................... 29

5.2 OTHER ISSUES FROM THE BUSINESS REVIEW ............................................................ 29

5.2.1 STATUTORY REPORTING .......................................................................... 29

5.2.2 BUSINESS PERFORMANCE REPORTING .......................................................... 30

5.2.3 DISPOSAL SERVICE PRICING ..................................................................... 30

5.2.4 COMMUNITY SERVICE OBLIGATIONS ............................................................ 30

5.2.5 PLANT HIRE CHARGES ............................................................................ 30

5.2.6 INTERNAL CHARGING PROCESSES ............................................................... 30

5.2.7 ASSETS ............................................................................................. 30

5.2.8 REGIONAL WASTE MANAGEMENT STRATEGY ................................................... 30

5.2.9 LONG-TERM FINANCIAL SUSTAINABILITY MODELLING ......................................... 30

5.2.10 RESOURCING ....................................................................................... 31

5.3 TIMETABLE FOR IMPLEMENTATION OF REFORMS .......................................................... 31

APPENDIX A: IMPLICATIONS OF ADOPTING EACH BUSINESS MODEL ............... 32

APPENDIX B: WASTE FEES & CHARGES 2009/10 .............................................. 34

APPENDIX C: NATIONAL WASTE POLICY .......................................................... 35


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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 SBAs 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).

Bundaberg Regional Council is responsible for providing waste management services to residents and businesses in the Bundaberg region. How these regional services are provided and the size of the activities undertaken has been impacted by the recent local government reforms which saw the amalgamation of the former Bundaberg City, Burnett Shire, Isis Shire and Kolan Shire Councils.

Bundaberg Regional Council has reviewed its combined waste management

activities following amalgamation and has determined that the activities

constitute a financially significant Type 2 business activity2.

This PBA is therefore being undertaken to determine the appropriate business model to be applied to Bundaberg Regional Council’s waste management activities in accordance with the requirements under the Local Government Act3.

1.2 Business Models Under Assessment

It is important to note that both 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 both business models, non-commercial activities undertaken by the business at the direction of Council – such as subsidised residential dumping at landfills and transfer stations – also need to be funded through Community Service Obligation (CSO) payments if a commercial charge is unable to be levied to cover the cost of the activities.

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 were $30.5 million for Type 1 and $10.2 million for Type 2, to determine that the business is

a Type 2 SBA.

3 Bundaberg Regional Council did not resolve to include the consideration of the LGOC reform option as part of the

PBA for its waste and recycling activities (which may be voluntarily included in the assessment for Type 2 SBAs).


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The primary differences between the business models under assessment are outlined in the table on the following page. These are further expanded in Appendix A.

Table 1.1: Differences Between the Available Business Models Under Assessment

Model Implications

FCP • The activities of the business are essentially operated as a service delivery area within Council’s organisational structure (with reduced autonomy than under the CBU model)

• 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

CBU • A separate business unit (not a separate legal entity) within Council’s corporate structure is created, with a dedicated, commercially-focussed 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 model • 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

Source: AEC Group, Local Government Act

Adoption of either 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 two reform options under consideration do not include privatisation or the ‘selling off’ of the business. In both instances, Council will

retain ownership of the waste management business. The primary differences between the two options pertain to the level of responsibility ascribed to Council (under FCP) versus the business manager (under CBU) 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 management activities of the four former Councils in the Bundaberg region prior to amalgamation.

Table 1.2: Previous NCP Reforms Applied to Former Waste Activities

Council Business Type Level of Reform

Bundaberg City Type 3 Code of Competitive Conduct

Burnett Shire Type 3 Code of Competitive Conduct

Isis Shire Type 3 Code of Competitive Conduct

Kolan Shire(a) n/a n/a

Note: (a) Following a review of its operations, Kolan Shire Council found no SBAs and elected to not apply any business reforms to

other activities. Source: Bundaberg Regional Council

The waste management activities of the former Bundaberg, Burnett and Isis Councils did

not meet the relevant thresholds for recognition as SBAs, but were subsequently identified as voluntary Type 3 (competitive) business activities to which the Code of Competitive Conduct was applied (which still involves the application of FCP and competitive neutrality to a business activity, but in a less formal manner than that applied to SBAs). Kolan Council did not consider its waste management activity as a business activity and as such no business reforms were applied.

Bundaberg Regional Council’s combined waste management activities are now managed

as a single business, Waste and Recycling. It is the intention of this PBA to determine the most appropriate business structure moving forward, taking into account the significantly


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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 two 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 the Waste and Recycling

business, 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 the Waste and Recycling business,

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.


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2. Business Structure and Operations

2.1 Objectives of the Business

The activities undertaken by Waste and Recycling are outlined in the following table.

Table 2.1: Waste Management Core Activities

Activity Description


• Waste collection provides 55,000 weekly services to 37,000 properties across the Bundaberg region (including general refuse and recycling collection)

• The business utilises its own labour workforce and assets to provide collection services on behalf of Council in the Bundaberg and Burnett districts, while external collection contracts are in place in the Kolan and Isis districts

Landfill and Transfer Station Facility Management

• The business operates 12 waste management facilities as part of its waste disposal services to the Bundaberg region, including 1 combined transfer station and landfill (Bundaberg), 6 landfill only facilities and 5 transfer station only facilities

• The facilities are operated by a combination of Refuse Operations staff and outsourced contract services

• All facilities are licensed under the Environmental Protection Act 1994, with strict conditions placed on operations to avoid adverse environmental impacts

Waste Reduction and Recycling Activities

• In addition to kerbside collection of recyclables, Council provides facilities to recycle green waste, construction/demolition waste and commercial/industrial waste

• Batteries and oil are also accepted for recycling, as well as electrical goods, tyres and clean fill

Waste Management / Waste Minimisation Promotional Activities

• Active participation in campaigns such as Clean Up Australia Day, World Environment Day, National Recycling Week, Mobile Muster (Mobile Phone Recycling), Drum Muster (Pesticide Drum Recycling), and Close the Loop Printer Cartridge Recycling.

Source: Bundaberg Regional Council

The core objectives of Council’s Waste and Recycling function are to:

• Provide a quality waste and recycling collection service, ensuring every service-entitled resident has the entire contents of their wheelie bin collected on the allotted

collection day when presented for collection;

• Ensure collection is dependable, unobtrusive and inoffensive; and

• Ensure complaints regarding collection services are resolved quickly and effectively.

In 2008/09, 21,753 tonnes of kerbside waste was placed into landfill (a 13% increase on the previous year) and 4,682 tonnes of collected recyclables were recycled (a 12% increase on the previous year).

The business also operates 12 waste management facilities to provide waste disposal services to residents of the Bundaberg region.

Table 2.2: Waste Facilities in the Bundaberg Region

Landfills Transfer Stations

Bundaberg (University Dr) Bundaberg (Cedars Rd) Qunaba Meadowvale Avondale Tirroan Childers

Bundaberg (University Dr) South Kolan Booyal Cordalba Buxton Woodgate


2.1.1 Operational Plan Strategies

Included in Council’s 2009/10 Operational Plan are a range of waste and recycling strategies with identified key performance indicators that support Council’s current and long-term environmental goals and desired outcomes. The following table outlines the 2009/10 Council Operational Plan strategies, key performance indicators and status of each waste and recycling strategy.


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Table 2.3: 2009/10 Operational Plan Waste and Recycling Strategies

Corporate Plan Goal

Corporate Plan Outcome

Corporate Plan Strategy Waste and Recycling Strategy KPI Status

A Sustainable, Managed And Healthy Environment

A Natural Environment That Is Valued And Sustainable

• Provide a range of community awareness and education activities and programs that support the preservation of the regions natural environment

• Support cooperative programs through the Environmental Protection Agency/Queensland Parks and Wildlife Service

• Conduct waste management

educational programs • Engage Landcare and similar

community based land protection groups

• Number of programs supported

• Number of

community education programs conducted

• Number of joint

projects

• No known programs available to support in the reporting period

• 15 education programs conducted with a variety of school

and community groups. Participation limited due to shortage of resources and other work commitments. Education is one area temporarily de-prioritised until available resources improve

• Preliminary discussions with Bundaberg and Burnett

Region Community Development Aboriginal Corporation (BBRCDAC) for the establishment of a Community Garden Project based at University Drive Waste Management Facility. Mulch made available at no cost to community groups including Landcare

• Encourage community involvement in such activities and programs

• Invite community participation in such programs

• Council participation in events such as Clean Up Australia Day, National Tree Day, etc.

• Waste collection and disposal services offered to Clean Up Australia participants throughout the region, and skip bins provided for more remote locations

• Participated in World Environment Day with the launch of "Name the Characters" competition

• Supported MobileMuster activities in provision of collection points for disposal of mobile phones

• Develop and implement a regional land use plan underpinned by the principles of sustainable development

• Develop a Regional Waste Management Strategy

• Review of existing plans conducted

• Preliminary discussions with consultants held with the view to call for tenders on the preparation of a Regional Waste Strategy

• No funding available in the current financial year to carry out actual plan drafting

• Create partnerships to assist in minimising the impact of climate change, reduce pollution and encourage the sustainable use of natural resources

• Identify relevant community support groups and relevant business operators for waste and recycling

• Relevant community support groups engaged for waste and recycling.

• Preliminary discussions with EPA Sustainable Industries section, SustainaBundy and BMRG in relation to establishment of sustainability support for domestic and commercial entities

• No progress to date on securing business partnerships



6

2.2 Business Structure and Governance

The following diagram presents the current structure of Council’s Waste and Recycling function, and its relationship within the broader Council organisational structure (where it resides within the Health & Environmental Services directorate). The Manager Waste and Recycling is responsible for the waste management operations across the Bundaberg region and directly reports to the Director Health & Environmental Services. In 2009/10, the Waste and Recycling business is operating under an interim Full Cost Pricing (FCP) business model (pending the outcome of this PBA).

Figure 2.1: Waste and Recycling Organisational Structure


2.3 Business Personnel

The following table outlines the resources currently employed by the Waste and Recycling business to deliver services to the community.

Table 2.4: Bundaberg Regional Waste Services Employees

Section Employees Proportion

Waste Manager & Administration 2 employees 4.4%

Waste Collection 21 employees 46.7%

Waste Disposal & Recycling 22 employees 48.9%

Total 45 employees 100.0%


Employees of the business are currently employed subject to Council’s current Enterprise Bargaining Agreement and the following parent awards:

• Local Government Employees (excluding Brisbane City Council) Award State 2003;

• Queensland Local Government Officers Award 1998;

• Building Trades Public Sector Award State 2002;

• Engineering Award – State; and

• Apprentices and Trainees Wages and Conditions.

An Enterprise Bargaining Agreement (EBA) for both internal and external employees of Council was finalised in 2008 to replace the individual agreements of the former Councils prior to amalgamation. The EBA is operational until the 30th November 2011. There are special provisions contained in the EBA applicable to Waste and Recycling staff available under the relevant awards, such as Rubbish Allowance and Wet Pay – Rubbish. Drivers of collection vehicles primarily engaged in the collection of refuse are paid a rubbish

allowance whilst directly engaged in refuse collection work in addition to their ordinary wages. Employees primarily engaged in sanitary or refuse collection services are paid wet pay in addition to their ordinary wages.

CEO / COUNCIL

DIRECTOR HEALTH & ENVIRONMENTAL

SERVICES

MANAGER WASTE & RECYCLING

FOREMAN COLLECTION SERVICES

COORDINATOR WASTE & RECYCLING

ADMINISTRATION


7

2.4 Support Services

The Waste and Recycling business utilises a number of support services from Council via internal support service arrangements and is charged a calculated percentage (based on activity-based costing principles) of corporate overhead costs to represent payment for these services. The charge levied on the business in 2009/10 is $1.4 million to cover Executive Services, Human Resources, Information Systems, Financial and Commercial Services (Accounting, Payroll, Procurement, Accounts Payable / Receivable, etc.), Call Centre Operations, Information Management, and Health and Environmental

Administration costs.

Figure 2.2 Distribution of Council Corporate Overhead Charges 2009/10 Budget


2.5 Business Assets

The current value of assets utilised by the business is $5.3 million (with a replacement cost of $5.6 million), as outlined in the following table. These primarily relate to the 12

waste facilities across the region. Although the business undertakes collection services in the Bundaberg and Burnett districts on behalf of Council, collection vehicles are leased from Council’s fleet services section and are therefore not included in the table below.

Table 2.5: Value of Bundaberg Regional Council Waste Assets

Asset Type Replacement Value

($’000)

Accumulated Depreciation

($’000)

Written Down Value ($’000)

Buildings $3,741 $209 $3,532

Other Structures $604 $67 $537

Land $1,208 - $1,208

Total Business $5,553 $276 $5,277


2.6 Regulatory Responsibilities

Council’s Waste and Recycling business is required to comply with the following key legislation/policies:

• Local Government Act 1993;

• Local Government Finance Standard 2005;

• Environmental Protection Act 1994;

Executive Services2% Financial Accounting

and Reporting12%

Strategic Financial Planning

3%

Revenue Services13%

Commercial Services

14%

Call Centre Operation

14%

Information Management

1%

Information Systems10%

Corporate Policy (incl WH&S)

13%

Human Resource Management

3%

Health and Environmental -

Directorate Admin15%


8

• 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 26-34 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 re-use of waste materials is encouraged ahead of treating and disposing of waste.

As National Competition Policy (NCP) reforms have been applied to Council’s Waste and Recycling business, the full cost pricing principles contained in the Local Government Act

need to be adhered to. There are also additional reporting obligations for Council in reporting the financial performance of the business as a SBA in its budget papers and annual report.

2.7 Price Setting Practices

2.7.1 Methodology

The Waste and Recycling business 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).

2.7.2 Waste Collection Charge

The waste collection charge for a typical residential collection service is $240.00 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 (with Burnett district services recently moving from a 140L bin to a 240L bin for general refuse). An additional recycling bin is available to residents at an annual cost of $120.00. The waste collection service charge is applied to each house, flat

or apartment. A 10% discount is currently offered on waste collection service charges. Pensioner remissions are also provided in line with Council’s remission policy.


9

The following graph compares the residential waste collection service charge (net of any applicable discount) levied by the Waste and Recycling business with the charges levied by other large Queensland Councils. The annual charge levied by the business of $216 per annum (after discount) is on par with the median charge levied by large service

providers across Queensland.

Figure 2.3: Average Residential Waste Collection Charge, 2009/10

Source: AEC Group

The following table provides a breakdown of waste collection service and special charges

levied on residential households by large Queensland Councils.

Table 2.6: Residential Price Benchmarking for Large Service Providers in Queensland, 2009/10

Council Collection Service

Discount Separate Charge/Levy

Discount Notes

Brisbane $239.00 0% 0.0164 cents in the dollar

UCV (min. $21.68)(a)

0% * Collection service includes a weekly general refuse service and a fortnightly recycling service

* Moreton Island properties are levied a charge of $303.08 * Brisbane levies an Environmental Management and Compliance Levy on all rateable land to cover costs

associated with the protection and enhancement of the natural environment (including landfill issues) and in meeting

its requirements under the EPA Act 1994 * The charge is levied on a differential basis by rate category

and is calculated by applying a rate in the dollar UCV (subject to a minimum annual charge)

Bundaberg $240.00 10% Nil n.a. * Collection service includes a weekly general refuse service and a fortnightly recycling service

Cairns $287.52 0% Nil n.a. * Collection service includes a weekly general refuse service and a fortnightly recycling service

* A refuse disposal special charge of $126.64 is levied on all rateable properties with an improvement within the area of the former Douglas Shire Council area that are currently not

serviced by Council to reflect the cost of waste disposal from these properties to the region’s waste facilities

Fraser Coast $268.00 10% $65.00 0% * Collection service includes a weekly general refuse service and a fortnightly recycling service

* A Fraser Island Garbage Levy of $268.00 is applied to properties on Fraser Island

* The Waste Management Levy of $65.00 is included in the collection service charges and is only applicable to properties who do not receive a bin service (e.g. rural residential

properties and vacant urban properties) to help fund landfill sites and transfer stations

Gladstone $240.00 10% Nil n.a. * Collection service includes a weekly general refuse service and a fortnightly recycling service

Gold Coast $189.00 10% Nil n.a. * Collection service includes a weekly general refuse service

(140L or 240L) and a fortnightly recycling service (excluding South Stradbroke Island which has no recycling service) *Where a twice weekly residential 240L refuse collection is

requested, the charge increases to $248.50 * The service charge for a 360L bin is $247.40

Ipswich $224.00 0% Nil n.a. * Collection service includes a weekly general refuse service and a fortnightly recycling service

$0

$50

$100

$150

$200

$250

$300

$350To

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10

Council Collection

Service

Discount Separate

Charge/Levy

Discount Notes

Logan Logan, Beaudesert

Area

Gold Coast Area

$193.00

$205.00

5%

5%

Nil

Nil

n.a.

n.a.

* Collection service includes a weekly general refuse service and a fortnightly recycling service * A number of other service options are available depending

on bin configurations (particularly for additional services requested) and whether the property is a multi-residential

property

Mackay $189.40 10% $118.90 0% * Collection service includes a weekly general refuse service

and a fortnightly recycling service * The Refuse Management Separate Charge of $118.90 per

rateable assessment is levied to help offset the fixed cost involved in providing waste management facilities

Moreton Bay $217.00 0% Nil n.a. * Collection service includes a weekly general refuse service and a fortnightly recycling service

* Properties requiring only a 120L general refuse service benefit from a reduced charge of $201.00 in the former Caboolture and Pine Rivers Council areas

* A Rural Recycling and Waste Management Special Charge of $98.00 is levied in the former Caboolture and Pine Rivers

Council areas on occupied residential properties not receiving a collection service to help fund the cost associated with the availability and management of recycling and waste disposal

facilities

Redland Mainland

Island

$239.00

$267.00

0%

0%

$37.50

$37.50

0%

0%

* Collection service includes a weekly general refuse service and a fortnightly recycling service * Properties requiring only a 120L general refuse service

benefit from a reduced charge of $197.00 for mainland and $223.00 for island

* A Landfill Remediation Charge of $37.50 per lot is charged to fund the monitoring and remediation of landfills closed prior to July 1998 and the landfill at Myora North Stradbroke

Island

Rockhampton Rockhampton

Gracemere

Livingstone

Fitzroy

Mount Morgan

$275.00

$275.00

$220.00

$220.00

$220.00

10%

10%

10%

10%

10%

Nil

Nil

Nil

Nil

Nil

n.a.

n.a.

n.a.

n.a.

n.a.

* Collection service for the former Rockhampton Council area and Gracemere township within the former Fitzroy Council area includes a weekly general refuse service and a

fortnightly recycling service * Collection service for the former Livingstone and Mount

Morgan Council areas, as well as the remainder of the former Fitzroy Council area, only reflect the cost of a weekly general refuse collection service

Sunshine Coast $187.00 10% Nil n.a. * Collection service includes a weekly general refuse service

and a fortnightly recycling service * In the South area, the charge reduces to $123.00 where

an 80L general refuse bin is adopted * In the South and Central areas, the charge reduces to

$141.50 where a 140L general refuse bin is adopted * Additional charges are levied in the South area for bins that need to be collected on a property rather than at the

kerbside * Optional kerbside green waste bin collection services apply

across the region at a cost of $72.00

Toowoomba

Combined Service: Toowoomba, Pittsworth, Jondaryan, Crows

Nest, Clifton, Cambooya

General Refuse Service Only: Rosalie, Millmerran, Crows Nest

$150.00

$140.00

10%

10%

$10.00

$10.00

10%

10%

* Some areas of the region receive only a general refuse

service, some receive a split bin general refuse/recycling service and others receive a two-bin general refuse and

recycling service * An optional green waste service exists in the Toowoomba area at a cost of $35.00

* An Environmental Levy of $10.00 per rateable assessment is levied for the purposes of operating, maintaining and

rehabilitating all landfills within the region

Townsville $187.00 0% Nil n.a. * Collection service includes a weekly general refuse service and a fortnightly recycling service

Source: AEC Group, assorted service providers

Notes: (a) Only a portion of the revenue collected from these separate charges/levies is applied to fund waste management activities, with the remainder being applied to fund environmental initiatives.


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2.7.3 Waste Disposal and Other Charges

Appendix B lists the disposal charges published in Council’s commercial charges register. There are standardised commercial disposal charges across all regional waste facilities, with charges generally levied as a fixed charge (as currently no weighbridge facilities are

in place). Waste disposal charges include charges for general waste, commercial waste (loose and compacted), green waste, tyres, etc.

In 2009/10, domestic waste disposal is charged at $4.00/load (inclusive of GST) for standard passenger sized vehicles, utes and small trailers and $18.00/load for vehicles with dual axle trailers, large utes and small trucks. Commercial waste (including builder’s waste and green waste) is also charged according to vehicle size, with charges ranging from a $5.00 minimum charge applicable to utes/small trailers through to a $250.00/load

charge for semi trailers.

2.8 Operating Revenue

Of the total consolidated operating revenue of $10.3 million, utility charges account for $8.3 million (or 80.1%). Fees and charges account for a further $1.7 million, with

Community Service Obligations ($0.3 million) and interest revenue ($0.04 million) accounting for the remainder of operating revenues.

Figure 2.4: Operating Revenue Sources 2009/10 Budget


The Waste and Recycling business currently provides subsidised fees at its waste facilities for domestic waste disposed by Bundaberg residents, which is funded by a Community

Service Obligation (CSO) payment from the general fund/general rate. It has been indicated that the business also provides a number of other non-commercial activities at the request of Council that have not been formally recognised as CSOs. A review of all potential CSOs across the Waste and Recycling business should be undertaken to ensure that all non-commercial activities requested of the business by Council are appropriately identified and funded through CSO payments from the general fund or via other means.

2.9 Operating Expenditure

Total operating expenses for the business in 2009/10 are $12 million. Significant expenditure items include materials and services of $7.2 million, employee costs of $2.9 million and corporate overhead costs of $1.4 million. Other expenses are incurred for interest costs ($0.3 million) and depreciation expense ($0.08 million).

Community Service

Obligations2.9%

Rates & Utility Charges80.1%

Interest0.4%

Fees and Charges16.6%


12

Figure 2.5: Operating Expenditure Sources 2009/10 Budget


2.10 Capital Expenditure

The Waste and Recycling business expects to complete $0.2 million of capital works in 2009/10 on waste disposal and materials recycling facilities. The business also expects to invest $15 million in capital assets over the next ten years in the following areas:

• $7 million (47%) on transfer and processing facilities;

• $3.4 million (22%) on processing and disposal assets;

• $2.9 million (19%) on collection assets (organic bins);

• $1.4 million (9%) on landfill-related closure costs; and

• $0.4 million (2%) on administration assets.

Figure 2.6: Capital Expenditure Forecasts 2011-2019


2.11 Financial Performance

Given the differences in reporting performance for waste management activities by the former Councils and lack of available historical financial information, an assessment of financial performance for the consolidated business has been limited to the 2008/09

financial year and the 2009/10 budget.

Employee Costs

24.3%

Materials and

Services

59.8%

Interest

Expenses

2.8%

Depreciation

0.7%

Corporate

Overheads

11.8%

Competitive

Neutrality Costs

0.7%

0.00

500,000.00

1,000,000.00

1,500,000.00

2,000,000.00

2,500,000.00

3,000,000.00

3,500,000.00

2011 2012 2013 2014 2015 2016 2017 2018 2019

Processing and DisposalWaste CollectionTransfer and Processing FacilitiesLandfill ClosureAdministration


13

Table 2.7: Operating Financial Performance, 2008/09-2009/10

2008/09 Actual ($'000)

2009/10 Budget ($'000)

Operating Income Net Rates and Utility Charges Fees and Charges / Other Community Service Obligations

$7,384 $1,357 $299

$8,290 $1,714 $300

Total Operating Income $9,040 $10,304 Operating Expenditure Employees, Materials & Services Depreciation Corporate Overheads Competitive Neutrality

$9,216 $177 $277 ($5)

$10,118

$81 $1,416

$81

Total Operating Expenditure $9,665 $11,696 Operating Surplus / (Deficit) ($625) ($1,392)

Note: Interest revenues are excluded from operating revenues, and interest costs are excluded from operating expenditure. 2008/09 actuals are based on 12 months for this assessment (with Council published 2008/09 financial statements based on 15

months due to amalgamation). Source: Bundaberg Regional Council

The results show that the business operated with a deficit of $0.6 million in 2008/09,

with the extent of the deficit increasing in 2009/10 to $1.4 million. Full cost pricing analysis confirms that current revenue levels are insufficient to recover all costs, including an appropriate commercial rate of return on capital employed.

Indeed, to ensure full cost recovery for the business is achieved in the short term, minimum price increases in the vicinity of 10% per annum will be required for the next four financial years (excluding any potential cost impacts from the implementation of

State / National waste strategies).

2.12 Non-Financial Performance

2.12.1 Performance Indicators

The Waste and Recycling business is in the process of finalising its consolidated business

strategy in relation to its waste collection and education programs. Included in the strategy are a number of key performance indicators expected to be utilised by the business and Council to assess ongoing waste collection and education performance.

Table 2.8: Draft Business Strategy KPIs

Program KPI


• Collection rate (bins/hour/run) data will be collected and analysed • Number of complaints and compliments regarding individual issues (i.e. missed

services, incomplete service, driver behaviour, truck noise, overweight bins, contaminated recyclables, etc.) will be recorded

Bin Maintenance • Non-conformances in relation to time limits on complaint resolution will be recorded • Number of complaints and compliments regarding individual issues (i.e. axles,

wheels, pins, lid) will be recorded

Street Tidy Collection • Audits will be conducted on street tidy usage rates, litter issues in parks and bin appropriateness

• Response times for individual complaints will be recorded on the approved form • Numbers of complaints and compliments regarding individual bins will be recorded

Dead Animal Collection

• A daily record will be kept on the standard of bagging and storage for each veterinary Practice and other collection points

• Response times for road kill complaints will be recorded on the approved form • Numbers of complaints and compliments about either Council service and collection

point non compliance will be recorded

Recycling / Waste Education

• Regular audits of community awareness levels will be carried out


In time, the business expects to expand its business planning to include waste disposal

services (including landfill and transfer station management), with key performance indicators developed particularly in relation to transfer station and landfill performance


14

(e.g. environmental compliance, disposal costs per tonne, disposal tonnages to landfills, recycling recovery rates and tonnages).

2.12.2 Customer Satisfaction Survey

A customer satisfaction survey was undertaken by Council in July 2009 to determine the

level of ratepayer satisfaction with Council facilities and services. The focus of the survey of 500 residents was a community evaluation of the relative importance of Council services and activities.

As part of the survey, respondents were asked to rate the three most important services provided by Council (from a selection of 8 services). Waste removal and recycling was the third highest rated first response (behind roads and water supply), the third highest second response (behind sewerage and water supply), and the highest third response.

Table 2.9: Response Rankings Regarding the Importance of Council Services

Service First Response

Second Response

Third Response

Roads 59.6% 0.4% 0.2%

Water Supply 32.4% 28.6% 0.2%

Waste Removal & Recycling 3.8% 15.6% 46.4%

Sewerage 2.2% 44.0% 15.6%

Parks 1.6% 4.0% 6.4%

Libraries 0.4% 5.4% 10.0%

Arts 0.0% 4.0% 2.0%

Don’t Know / No Other 0.0% 0.6% 1.4%

Community Services 0.0% 0.4% 17.8%

Total 100% 100% 100%


Figure 2.7: Response Rankings Regarding the Importance of Council Services


Although the customer satisfaction survey undertaken did not specifically provide an

evaluation of Council’s performance regarding providing waste and recycling services, generally the importance ranking results indicated that the provision of waste removal and recycling services is considered quite important by the community compared to other services provided by Council.

0%

10%

20%

30%

40%

50%

60%

First Response

Second Response

Third Response


15

2.13 Market in Which the Business Operates

2.13.1 Waste Collection Services

Collection services in the region are generally non competitive in nature, with the business providing a monopoly service for all standard general refuse and recycling bin collections to residential properties in accordance with the provisions contained in the Local Government Act. The business does not, however, undertake industrial bulk bin collections, which are undertaken by the private sector.

2.13.2 Waste Disposal Services

The waste disposal services of the business do involve commercial components, with the business indirectly competing against other regional landfills in receiving commercial waste for disposal. Currently, commercial operators in both the Rockhampton and Gympie regions are transporting commercial waste to Bundaberg for disposal, indicating that disposal prices may be lower than those in nearby regions.

2.14 Industry Trends

2.14.1 National Productivity Commission Waste Management Inquiry

The Waste Management Productivity Commission Inquiry Report was published in October 2006, which reviewed historic waste management policy decisions across the states and territories of Australia and provided a series of recommendations on the most appropriate means by which policy decisions should be made into the future. Overall, the

Commission advised on waste generation, resource efficiency, and strategies to address market failures and externalities associated with the generation and disposal of waste within Australia.

The report found that most states and territories were placing too great a focus on reducing the amount of waste generated and sent to landfill at all costs, instead of balancing such significant policy decisions against economic, environmental and social

implications. The end result was that the report indicated that there are likely to be net costs to the community from current waste policies adopted across Australia, which have primarily been based on the adoption of the waste hierarchy as the primary objective of policymaking. Landfill levies, in particular, were found to be “unsound interventions” that were ineffective in achieving community benefits.

The most significant recommendation of the Productivity Commission report was to provide direction to state and territory governments that waste management policy

decisions should be subject to comprehensive cost-benefit analysis covering financial/economic, environmental and social outcomes, with net benefit to the community adopted as the guiding principle when deciding between waste management policy options.

2.14.2 Queensland Waste Strategy

The primary objective of the current Waste Management Strategy for Queensland (released in 1996) is to:

…provide a framework for effectively managing waste to minimise or avoid adverse impacts on the environment, while at the same time allowing economic development and improving Queenslanders’ quality of life. (EPA 2007, p.28)

In October 2007, the Queensland Government Environmental Protection Agency (EPA) published a discussion paper Let’s Not Waste Our Future which identified a need to develop a new waste management strategy for Queensland. The discussion paper stated that the waste management focus in Queensland will now be on avoiding the generation of waste in the first place, recovering for reuse and recycling for energy for those wastes that cannot be avoided, and managing any residuals to landfill. The following objectives

for the new strategy were outlined:

• Provide a clear public expression of the Government’s priorities in relation to waste policy. • Ensure that all sectors follow a coherent and united direction on waste in their many spheres of

waste-related activity.


16

• Enable government, business and community to operate confidently in a changing environment. • Establish an outcomes-based approach to waste management without rejecting any proven

waste management technology. • Provide a strategic context for Queensland’s waste-related activities, which embrace not only

waste planning, disposal and minimisation but also economic development, community safety and promotion of community-based environmental projects.

• Contribute to a safer, cleaner and healthier environment, and help to reduce greenhouse gas emissions in the light of rising concerns over climate change.

• Meet expectations from government that local governments have clear strategic statements concerning their approach to waste and ensure that waste is considered at all levels of planning. (EPA 2007; p.25)

As part of the new waste management strategy for Queensland, a series of economic instruments were proposed for potential implementation to achieve the above objectives

and outcomes, including:

• Performance-based landfill levies;

• Container deposit legislation (CDL);

• Targets and bans;

• ‘Pay as You Throw’ (PAYT) schemes; and

• Extended producer responsibility (EPR) and product stewardship schemes (PSS).

Public consultation on the discussion paper ran from 22 October 2007 to 21 December

2007, with the EPA receiving eighty-nine written submissions by post and email. The EPA also ran targeted forums with key stakeholders including local government, the waste and recycling sector, environment and community groups and key industry sectors.

The Local Government Association of Queensland’s submission to the EPA’s discussion paper included an independent assessment report by the AEC Group which included the following recommendations regarding the most appropriate economic instruments and policies that should be adopted in the state waste strategy:

• Effective Regulation – including landfill licensing and enforcement, mandated recycling for commercial and industrial properties in areas where recycling is found to be feasible and collection already occurs as part of the municipal system, the requirement for commercial and industrial properties and construction activities to have waste management plans in place to minimise waste generation and disposal, and the removal of any unnecessary regulatory barriers to recycling activity.

• Incentives – including compost bin and mulcher subsidies and optional green waste bin servicing as part of the municipal waste servicing program.

• Education – education and awareness campaigns focussing on ‘selling’ waste minimisation to the community and enhancing awareness over recyclable waste products, the possible phasing in of smaller general waste bins to each household to overcome the attitude of not getting value for money if the bin isn’t full each week, as well as assistance with waste avoidance planning for commercial and industrial

properties and construction activities (particularly for small to medium enterprises).

• EPR and PSS – schemes considered beneficial to ensure that externality costs are included as much as possible at the product purchase stage for targeted products rather than borne by the broader community at the product disposal stage, with Queensland working towards a nationally coordinated approach.

• Pricing Guidelines – development of pricing guidelines for waste services by the Queensland Government for local governments, including appropriate landfill costing

procedures and the removal of pricing subsidies for waste services.

To date, no decision has been made as to the final waste management strategy to be adopted. However, an overarching state waste strategy with broad-ranging implications for the Queensland waste sector is still likely to be released in the near future.

2.14.3 National Waste Policy

In November 2008, the federal government announced that a new National Waste Policy

for Australia was to be developed. The purpose of the National Waste Policy is to set the direction for the next 10 years toward producing less waste for disposal, and managing


17

waste as a resource to deliver economic, environmental and social benefits. Six key directions are identified in the policy, as outlined in the following table.

Table 2.10: National Waste Policy Key Directions

Area Description

Taking responsibility Shared responsibility for reducing the environmental, health and safety footprint of products and materials across the manufacture-supply-consumption chain and at end of life

Improving the market Efficient and effective Australian markets for waste and recovered resources, with local technology and innovation being sought after internationally

Pursuing sustainability Less waste and improved use of waste to achieve broader environmental, social and economic benefits

Reducing hazard and risk Reduction of potentially hazardous content of wastes with consistent, safe and accountable waste recovery, handling and disposal

Tailoring solutions Increased capacity in regional, remote and Indigenous communities to manage waste and recover and re-use resources

Providing the evidence Access by decision makers to meaningful, accurate and current national waste and resource recovery data and information, in order to measure progress and educate and inform the behaviour and the choices of the community

Source: Environment Protection and Heritage Council

Appendix C provides further detail regarding the strategies to achieve the policy outcomes and expected results, as well as key responsibilities.

2.14.4 Increasing Environmental Focus

The following environmental issues will play an increasing role in waste management practices across Queensland and Australia:

• Increasing regulation of historic, current and future landfills;

• Increasing difficulty in obtaining landfill approvals, making efficient utilisation of existing landfills essential;

• Consideration of broad scale gas capture (reduced emissions) and electricity generation, at least at larger landfill sites;

• Trend towards the regional provision of landfill facilities, with intermediate transfer stations being established to act as consolidation nodes for waste before transfer to the regional landfill for disposal – thus allowing local governments to access economies of scale and phase out older, smaller landfill sites;

• Implications of the Carbon Pollution Reduction Scheme (CPRS) on operations – if and when it is introduced – noting that emissions from legacy waste (waste deposited in landfills before the commencement of the CPRS) will not be included but Councils

may still opt to offset such emissions to achieve true carbon neutrality in operations; and

• Increased collection service offering by Councils wishing to minimise waste sent to landfill (and extend the life of existing landfills), as well as reduce landfill greenhouse gas emissions, e.g. the provision of green waste bins.


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2.15 Business Profile Summary

Table 2.11: Business Profile Summary

Issue Business Profile Outcome

Business Structure and Governance

• The Waste & Recycling business currently resides within the Health & Environmental Services Directorate of Council

• The Manager Waste and Recycling reports directly to the Director Infrastructure Services, and is responsible for the waste management operations across the Bundaberg region

• The business is currently operating under an interim Full Cost Pricing (FCP) business model

• Prior to amalgamation, the waste management activities in the region consisted of three business activities operating under the Code of Competitive Conduct (Bundaber, Burnett and Isis waste management activities), with Kolan’s waste management activities operating without any application of competition reform

Personnel • The business currently employs 44 staff • The business also utilises Council’s internal support services in areas such as executive

services, human resources, information systems, and financial and commercial services (accounting, payroll, procurement, accounts payable / receivable, etc.),

Functions • The business provides waste management services to a regional population of approximately 92,000

• Core business functions include waste and recycling collection, landfill and transfer station facility management, waste reduction and recycling activities, and waste management / waste minimisation promotional activities

Responsibilities • In addition to its customer service provision responsibilities, the business has a large number of regulatory responsibilities regarding price-setting practices, business planning, reporting, and environmental compliance

• It is envisaged that these responsibilities will only increase into the future as financial, social and environmental sustainability become increasingly important in the waste industry, and the Carbon Pollution Reduction Scheme is introduced

Pricing • The business 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 on pricing levels

• The waste collection service charge for a residential property is $240 in 2009/10 (consisting of a weekly 240L waste service and a fortnightly 240L recycling service)

• A 10% discount is currently applicable for permanent collection services • The residential collection service charge of $216 (after discount) is on par with the

median charge levied by large service providers across Queensland • Waste disposal charges are standardised across the region’s waste facilities, and are

based on per load charges rather than estimated volume or weight • Waste disposal charges include charges for general waste, commercial waste (loose and

compacted), green waste, tyres, etc.

Financial Performance

• Budgeted operating revenue for the business in 2009/10 is $10million, with utility charges ($8 million) and fees and charges ($1.7 million) accounting for the majority of revenue received

• Community Service Obligation payments for non-commercial activities undertaken by the business total $0.3 million in 2009/10

• Total operating expenditure for the business is $12 million (including depreciation but excluding interest)

• Significant cost items include materials and services ($7 million), employee costs ($3 million), and corporate overhead charges from Council ($1.4 million)

• A comparison of actual revenues with the revenue requirement under full cost pricing principles confirms that for the 2009/10 financial year revenue levels are insufficient to recover all costs including an appropriate commercial rate of return on capital employed

Assets • The current value of assets utilised by the business is $5.3 million, with a replacement cost of $5.6 million

• Capital expenditure of $0.2 million is anticipated in 2009/10 • Over the next ten years, the business expects to invest $15 million on processing and

disposal assets, transfer and processing facilities, collection assets and landfill related closure costs

Operating Environment and Industry Trends

• Residential waste and recycling collection services in the region are mandated to be provided by the business and are therefore not subject to competition

• Commercial and industrial services are generally left to the market, with the business not collecting bulk bins

• There is some degree of competition for the waste disposal, re-use and recycling functions of the business’s waste facilities

• A new waste strategy for Queensland is due for release in the near future, which may have significant implications for the business

• A National Waste Policy has recently been prepared which will result in additional initiatives to maximise reuse and recycling and minimise waste generation and disposal

Source: AEC Group


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3. Stakeholder Consultation Process

3.1 Consultation Process

Consultation is a key tool in identifying the costs and benefits that may accrue to

different stakeholders within and outside of the Bundaberg region as a result of implementing the two business models under consideration. The consultation program also provides a forum for stakeholders to express concerns regarding any aspect of the reform process and/or the future strategy of the Waste and Recycling business.

A targeted consultation approach was adopted as part of this PBA to ensure that key stakeholders had appropriate opportunity to provide input into the process.

Table 3.1: PBA Consultation Process

Stage Action

Information Preparation

• A Stakeholder Information Paper was prepared for distribution to key stakeholders, setting out the key features of competition policy and competitive neutrality, as well as the potential implications of each business model

Public Announcement

• The PBA process was announced in the ‘The News Mail’ on Saturday 19th December 2009 and also the ‘Isis Town and Country’ on Thursday 17th December 2009, with Council’s internet site also featuring a public notice announcing the PBA

• A copy of the Stakeholder Information Paper was also made available for download on Council’s internet site

• Interested parties were invited to submit comments on the implications of each business model by 26th February 2010

Identification of Interested External Parties

• Specific stakeholders that could be affected by any changes to Council’s waste and recycling activities were identified, sent a copy of the Stakeholder Information Paper directly and asked to provide comments on the implications of each business model under consideration

• The stakeholder groups targeted included: o Local and regional business representatives; o Environmental Bodies; o Regulators (i.e. State Government); and o Unions

Internal Consultation

• Stakeholders within Council and the business were consulted and comments sought regarding the PBA process and potential outcomes

• The following consultation methods were adopted: o Targeted discussions with Council management o Targeted discussions with the Waste and Recycling Manager o Information handouts/information sessions for Waste and Recycling staff

Source: AEC Group

3.2 Responses from Stakeholders

The following table provides a summary of the responses received from stakeholders.

Table 3.2: Responses from Stakeholders


EXTERNAL STAKEHOLDERS

Unions The following unions were provided Stakeholder Information Papers for comment: • Transport Workers Union • Australian Workers Union • Australian Manufacturing Workers Union • Australian Municipal, Administrative, Clerical and Services Union • Association of Professional Engineers, Scientists and Managers Australia • Construction, Forestry, Mining and Energy Union

One submission was received from the Australian Municipal, Administrative, Clerical and Services Union. The response indicated that the Full Cost Pricing business model be applied to the business to ensure Council continues to have direct control of the waste functions, employees of the business remain Council employees and continue to be employed under current awards, and employment security continues for employees.

Regional Business Representatives

The following key local and regional business organisations were provided Stakeholder Information Papers for comment: • Bundaberg Chamber of Commerce • Coral Coast Chamber of Commerce

No responses were received by the closing date.


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General Community / Customers

The public advertisement of the PBA process requested submissions from interested parties.

Two phone calls were received by waste disposal operators querying the PBA process. The first (Dump Rat Removals) had issues with the current disposal price levels, and also the inequities with the current disposal price structure (being based on a load rather than volume basis). Comments from the second operator (Quick Tip Skips) also surrounded the current level of disposal fees (in particular the recent steep price increases), as well as the efficiency of Council’s waste management operation (where it was suggested landfills and transfer stations were overstaffed).

Environment The following identified local and regional environmental organisations were provided Stakeholder Information Papers for comment: • Burnett Catchment Care • Burnett Mary Regional Group • Sustainabundy

The Burnett Mary Regional Group advised that they were thankful for being considered a key stakeholder regarding the PBA process. They advised that they currently held a neutral position with regard to the business models being considered by Council.

Regulators The following regulators were provided Stakeholder Information Papers for comment: • Environmental Protection Agency (EPA) • Queensland Competition Authority (QCA) • Department of Infrastructure and Planning (DIP) • Sunwater • Department of Environment and Resource Management

The QCA advised in its letter dated 21st 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 any of the other regulators contacted.

INTERNAL STAKEHOLDERS

Councillors Councillors were informed of the PBA process in November 2009, and also again in December 2009 (prior to the public announcement of the PBA). Councillors were also contacted prior to the submission deadline and were requested to provide back any comments / feedback / submissions.

No significant issues were raised as part of the consultation process. Waste and Recycling Employees

Information papers were provided to employees of the business outlining the PBA process and addressing potential concerns that may exist.

No significant issues were raised as part of the consultation process. Council Senior Management and Waste and Recycling Management

The implications of each business model under assessment were discussed with Council senior management and also the Waste and Recycling Business Manager.

Council management indicated no particular desire to move the Waste and Recycling business to a CBU business model with any potential benefits of moving to such a model unlikely to be greater than the ongoing compliance costs associated with running a CBU.

Source: AEC Group

3.3 Consultation Outcomes Summary

As outlined in the stakeholder consultation summary above, minimal responses were received from external stakeholders in response to the distribution of the Stakeholder Information Paper, community announcements and direct stakeholder contact.

The lack of detailed comments received from external stakeholders as part of the PBA

consultation process can possibly be attributed to a number of factors, namely:

• The Waste and Recycling function already operates as a business activity in accordance with full cost pricing principles, and is already responsible for the waste management activities of the entire region following amalgamation;

• Consumers, both residential and non-residential, have become accustomed to user pays based waste utility charges that reflect levels of use;

• The reform options under discussion are not expected to result in any substantial

changes to the current pricing structure; and

• The response rates received in this PBA are on par with those achieved by similar PBA exercises for business activities of other Councils.


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4. Business Model Assessment

4.1 Community Impact Assessment of Business Models

The information collected from the review of business structure and operations, market

profiling and consultation process, along with established information in respect of likely and potential community impacts from each of the business models under consideration, are utilised in the assessment.

The following impact areas are considered:

• Financial position of the Waste and Recycling business;

• Bundaberg Regional Council budget;

• Market;

• Staff;

• Consumers;

• Regional development and stability;

• Social welfare and equity; and

• Environment.

Traditionally, PBAs have assessed the impacts of moving from the current business model

adopted by Council to the adoption of the FCP or CBU models (for Type 2 SBAs). However, when PBAs were originally undertaken following the introduction of NCP reform in the late 1990s, the current business model adopted by Council generally featured no application of competition reforms.

Given that Council’s Waste and Recycling business is reasonably advanced in the application of competition reforms, the traditional assessment method is not necessarily the most appropriate approach in determining net community impacts. As such, this

community impact assessment considers the most appropriate business model moving forward, after taking into account specific regional factors and implications for Council at the local level.

It is evident from the analysis contained in the next few pages that most of the differences between the two business models under consideration relate to the extent of managerial autonomy from Council, reporting processes and the level of commercial

orientation in business operations. As such, most of the impacts cannot be quantified and are instead qualitatively assessed.


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Table 5.1: Impact Assessment of Status Quo versus FCP and CBU Reform Options

AREA OF IMPACT

ADOPTION OF FULL COST PRICING REFORMS ADOPTION OF COMMERCIALISED BUSINESS UNIT REFORMS NET OUTCOME CBU vs FCP

IMPLICATIONS FOR WASTE AND RECYCLING FINANCIAL POSITION

Pricing

Non-Commercial Activities

Administration

Operational Efficiency

Business Definition

• The application of full cost price-setting practices and user pays principles will

ensure the price of goods and services provided by the business reflects the full economic cost of service provision including a commercial return on assets employed, thus ensuring ongoing financial sustainability.

• Any non-commercial activities undertaken by the business would be identified

and funded via Community Service Obligation (CSO) payments funded by the general rate.

• Requires the ongoing use and updating of a full cost pricing model for the

business, to ensure legislative requirements regarding full cost recovery are met.

• The business is not required to undertake the statutory reporting functions associated with a CBU structure (including annual performance plans, annual

reporting and submission of tax equivalent returns).

• There would be a reduced commercial focus for the business, with reporting

processes and performance monitoring limited to minimum statutory requirements (which may reduce any incentive to operate efficiently and minimise costs).

• It is possible that the adoption of the FCP model may result in ambiguity in

business structure, functions, assets and responsibilities, although the risk of this occurring would be low provided that waste and recycling activities remain separated in Council’s organisational structure (and continues to feature a

dedicated business manager) and a formal business strategy is adopted to comply with the broader regional waste management strategy (included in the

current Council operational plan). • It is expected that future national and state waste management policies will

result in even more intense focus towards core regulatory (and compliance) functions rather than commercial functions.

• The adoption of full cost price-setting practices and user pays principles will

ensure the price of goods and services provided by the business reflects the full economic cost of service provision including a commercial return on assets employed, thus ensuring ongoing financial sustainability.

• Any non-commercial activities undertaken by the business would be identified

and funded via Community Service Obligation (CSO) payments funded by the general rate.

• Requires the ongoing use and updating of a full cost pricing model for the

business, to ensure legislative requirements regarding full cost recovery are met.

• The business would be required to undertake additional statutory reporting functions associated with a CBU structure (including annual performance plans,

separate reporting of performance in Council’s annual report, annual reporting and submission of tax equivalent returns).

• Greater degree of management autonomy (via delegated authority from

Council’s Chief Executive Officer) may allow for more efficient decision making and timely responses to business and customer issues.

• Greater scope for the business to implement formal service level agreements

for internal services provided by Council to ensure value for money and more

accurate cost inputs for pricing determination. • Benefits may be impeded given the social/environmental focus of operations

rather than profit maximisation being the primary objective of the business.

• Although some clarity of objectives / targets may be realised with the adoption of a CBU model, the business should have a clear understanding of its functions

and responsibilities under its current interim FCP structure – consequently, business definition is unlikely to be enhanced significantly under the CBU model.

No Difference (same price-setting

practices)

No Difference (same recognition of non-

commercial activities)

Moderate Cost (cost in meeting reporting requirements attached to

CBU structure)

Low Benefit (increased efficiency from

commercial focus and performance reporting

requirements)

Low Benefit (some potential for

increased definition of the

activity, including assignment of assets and

responsibilities)

SUMMARY COMMENT Net Benefit Under FCP – An overall net benefit on the financial position of the business would be likely if the FCP model was retained given reduced compliance requirements (versus the CBU model). However, to ensure sustainable outcomes are promoted, it is recommended that a full cost pricing model be used as part of the price-setting process and formal performance reporting to Council be implemented.


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AREA OF IMPACT


IMPLICATIONS FOR BUNDABERG REGIONAL COUNCIL BUDGET

Community

Service Provision

Financial

Sustainability

Ratepayer Impact

Compliance

• Waste and recycling services would be provided from within Council with all

customer service issues dealt with by the relevant Council program with less formal service levels for customers.

• Any non-commercial activities undertaken by the business may be identified

and funded via Community Service Obligation (CSO) payments funded by the general rate to ensure they are continued without community impact.

• The FCP model requires the business to set prices on a commercial basis in a transparent manner to ensure long-term business viability and contribute to

Council’s financial sustainability through the payment of dividends and taxation equivalents.

• The level of mandatory performance reporting from the business to Council is reduced, with a reduced commercial focus potentially impacting on Council’s

ability to ensure financial outcomes are maximised from the business.

• Council may be able to offset changes in waste charges on an aggregated level

against changes in the general rate to minimise ratepayer impacts given that increased profitability in the business should result in higher taxation equivalent

payments and dividend payments to the general fund.

• Reduced administrative and reporting compliance may be achieved, as the

business would not be required to undertake compliance functions associated

with the CBU model (e.g. service level agreement negotiation and documentation, corporate plan reporting requirements, consolidating the business within the annual budget and consolidating the required annual report

within Council’s annual report).

• The business would be able to deal directly with customer service issues in

accordance with established service level performance targets required under an Annual Performance Plan (CBU).

• Any non-commercial activities undertaken by the business may be identified

and funded via Community Service Obligation (CSO) payments funded by the general rate to ensure they are continued without community impact.

• The CBU business model requires the business to set prices on a commercial basis in a transparent manner to ensure long-term business viability and

contribute to Council’s financial sustainability through the payment of dividends and taxation equivalents.

• Clearly defined service levels and performance standards documented in service level agreements between Council and the business may assist Council in

driving productivity improvements for internal services, but may also result in reduced payments for internal support services provided to the business which

would then need to be funded through other areas of Council’s operation • Council may lose control over operational decisions in the day-to-day running of

the business under the CBU model. • Profit maximisation may come at the expense of other social and environmental

objectives of Council in undertaking waste and recycling activities.

• There may be negative ratepayer impacts of more commercial decisions in the provision of waste services to the community under the CBU model (e.g.

reduced network of transfer stations, reduced recycling), although Council still retains the ultimate decision-making power regarding the setting of rates and

charges under both business models. • Council may be able to offset changes in waste charges on an aggregated level

against changes in the general rate to minimise ratepayer impacts given that increased profitability in the business should result in higher taxation equivalent payments and dividend payments to the general fund.

• Costs would be incurred to support the CBU, including service level agreement

negotiation and documentation, corporate plan reporting requirements, reporting the business within the annual budget and consolidating the waste

and recycling annual report within Council’s annual report, etc.

Low Benefit

(increased customer service focus)

Negligible Difference (efficiency gains from CBU reforms may assist financial sustainability but

the profit motive may be inconsistent with Council’s

social/environmental objectives)

No Difference (similar ratepayer

impacts)

Moderate Cost (cost in meeting

additional compliance requirements attached to

CBU structure)

SUMMARY COMMENT Net Benefit Under FCP – There would be negligible difference in the impacts on the Bundaberg Regional Council budget from the FCP and CBU models, assuming that any increased costs incurred by the business would be passed onto customers or offset by a corresponding reduction in general rates. However, higher charges may be levied on the community under the CBU model due to increased compliance requirements which is likely to impact community satisfaction with Council. If the FCP model is adopted, it would be appropriate for Council to implement regular financial and non-financial performance reporting (but probably not to the level mandated under the CBU model) to ensure that business performance is continually monitored (and dividend and tax equivalent contributions to the general fund are maintained).


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AREA OF IMPACT


IMPLICATIONS FOR THE MARKET

Market Pricing

Competitive Neutrality

• There will be less distortion and more consistency in the market for waste and

recycling services (particularly in relation to pricing) if full cost price-setting principles were adopted in the Bundaberg region.

• Adopting FCP reforms may impact the level of competitive neutrality compliance

due to ambiguity in the business’ functions, assets and responsibilities, (although the risk of this occurring could be considered low given the clear

identification/separation of business assets in Council’s financial asset register, and the ongoing use of a full cost pricing model).

• There will be less distortion and more consistency in the market for waste and

recycling services (particularly in relation to pricing) if full cost price-setting principles were adopted in the Bundaberg region.

• Additional costs associated with the CBU model (compliance costs) would need

to be recovered through prices charged to customers. • The adoption of CBU reforms would ensure appropriate competitive neutrality

compliance due to the legislative requirement for clear delineation of the business’ functions, assets and responsibilities

No Difference

(same price-setting practices)

Negligible Difference (potential for slightly

improved competitive neutrality compliance)

SUMMARY COMMENT Negligible Difference Between FCP and CBU – There are negligible impacts on the market from the adoption of either the FCP or CBU models, as both reform options require full cost pricing principles to be applied to the business.

IMPLICATIONS FOR STAFF

Resourcing

Employee Morale

• The business would have appropriate resources in place should the FCP model

be adopted (and the status quo continued), although it was indicated that there is pressure on existing staff and the ability to perform current regulatory

compliance functions to an appropriate level (which may be exacerbated in the future by the expected requirement to implement State and Federal waste

strategies).

• The adoption of the FCP model should not impact on staff morale within the business (provided the current business structure is maintained and appropriate

levels of resourcing are provided for the business).

• Under the CBU model, additional management and administrative resources

would be required to ensure compliance with additional statutory reporting requirements. It was indicated that existing staffing levels are insufficient to

perform current regulatory compliance functions to an appropriate level (which may be exacerbated in the future by the expected requirement to implement

State and Federal waste strategies).

• The adoption of the CBU model would result in additional compliance related responsibilities for the business manager and administrative staff, and may

impact adversely on staff morale if resources were insufficient to cope with any increased workload (and additional resources were not provided).

• The management autonomy created by CBU reforms would potentially assign a certain degree of responsibility and a stronger performance focus to the

business and therefore its employees (who may then feel more attached to the organisation). However, such a model may crease some degree of confusion

regarding business objectives, specifically whether there should be a focus on profit maximisation or social and environmental outcomes.

Moderate Cost (cost of additional

resources in meeting compliance requirements

attached to CBU structure)

Negligible Difference (possible improved

employee morale and

assignment of responsibility, offset by

potential for conflicting objectives)

SUMMARY COMMENT Net Benefit Under FCP – An overall net benefit for Waste and Recycling staff would be likely if the FCP model was adopted, provided the current business structure was retained, resourcing levels for the business were appropriate, and there were no adverse changes in the level of delegation to the Business Manager and roles and responsibilities of staff. Further benefit would be derived under the FCP model via reduced statutory NCP-related compliance requirements that are required under the CBU model.


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AREA OF IMPACT


IMPLICATIONS FOR CONSUMERS (INCORPORATING RATEPAYERS AND COMMERCIAL CUSTOMERS)

Pricing

Customer Service Aspects

• Improved price signal to consumers regarding the true cost of waste collection

and disposal, thus allowing them to make informed decisions regarding consumption behaviour (including disposal practices) and business expansion.

• Little, if any, confusion or impact on customer service provision would be likely,

given the current interim FCP structure in place and general perception of the business as a Council function.

• Waste and recycling services would be continued to be provided from within Council with all customer service issues dealt with by the relevant Council

program/section.

• Improved price signal to consumers regarding the true cost of waste collection

and disposal, thus allowing them to make informed decisions regarding consumption behaviour (including disposal practices) and business expansion.

• Clear signal to customers that the waste management function is a commercial

business responsible for waste and recycling service provision in the region, with a separate identity and customer service focus and interaction.

• Waste and recycling services would be provided by the CBU which would be branded as such to deal with customer service issues directly in accordance

with its established service level performance targets. • May be some confusion in the community regarding whether the business is

focussed on maximising profits or meeting social and environmental objectives.

Moderate Cost

(same price-setting practices, but likely higher

prices to cover additional costs)

Low Benefit (slightly increased

customer service focus)

SUMMARY COMMENT Net Benefit Under FCP – There is likely to be a net benefit for consumers from the adoption of the FCP model. Despite price increases being required under both models to ensure that full cost pricing requirements are being met in accordance with legislative requirements, slightly higher prices may be required under the CBU model to recoup additional compliance costs.

IMPLICATIONS FOR REGIONAL DEVELOPMENT AND ECONOMIC STABILITY

Essential Service

Provision

Sustainable Investment

• Adopting full cost pricing practices would provide the funds necessary to ensure

appropriate investment in waste infrastructure and sustainable service

provision, providing business and industry with the confidence to stay in or move to the region.

• Under the FCP model, administration and compliance costs would be minimised

in the provision of waste and recycling activities as an essential community service.

• Responsible and sustainable business planning and capital investment in

regional waste infrastructure may be compromised given the business could potentially have less control over its capital works planning and would

essentially be competing with other Council programs for scarce capital funding.

• Price increases will be required which could impact on industry competitiveness, although any additional revenues generated may be used to reduce the

pressure on the general rate.


appropriate investment in waste infrastructure and sustainable service

provision, providing business and industry with the confidence to stay in or move to the region.

• Additional administration and compliance costs would be incurred under a CBU

model due to additional compliance related responsibilities for the business manager and administrative staff.

• Whilst still theoretically competing with other Council programs for scarce

funding, sustainable business planning and capital investment in regional waste infrastructure may be improved due to greater control over planning and

performance for the CBU. • Price increases will be required which could impact on industry competitiveness,

although any additional revenues generated may be used to reduce the pressure on the general rate.

• Additional compliance costs would need to be recouped via waste collection and disposal charges, thus potentially impacting development in the region.

Moderate Cost (cost in meeting

additional compliance

requirements attached to CBU structure)

Negligible Difference (greater control over

capital works planning and delivery)

SUMMARY COMMENT Net Benefit Under FCP – 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 and recycling services, provided funds generated by the adoption of full cost pricing practices are appropriately invested into waste infrastructure (and landfill rehabilitation) to ensure sustainable service provision.


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AREA OF IMPACT


IMPLICATIONS FOR SOCIAL WELFARE AND EQUITY

Equity Between

Customers

Ratepayer Equity

Inter-

generational Equity

Community Affordability

• The adoption of user pays pricing principles and the identification and removal

of cross subsidies in service provision will enhance equity between customer groups.

• Transparent decision making regarding the provision of non-commercial and

community-focused activities should occur, with Council directives funded via CSO payments to the business funded by the general rate (with the incidence

of the Council decisions being borne by all ratepayers rather than just waste customers).


sustainable service provision through the longer term, ensuring that the incidence of costs is attributed to the period in which they are incurred rather

than left for future generations – however, there is a risk under the FCP model that reserves to fund future new and replacement capital works may be used for other purposes.

• Adopting the FCP model as opposed to a CBU structure may place some risk on sustainable capital investment given conflicting objectives and priorities of the

Council of the day, although Council will still be required to comply with its current and future regulatory requirements regarding waste service provision –

however, there is no guarantee that aligning investment under the CBU model to corporate targets, commercial outcomes and regulatory responsibilities will produce better outcomes than under the FCP model.

• Council retains greatest control over the setting of waste collection and disposal

charges (and therefore the impact on social welfare from such decisions) under the FCP model, although it still has ultimate decision making powers in the

setting of charges under the CBU model. • Administration and compliance costs would be minimised and the rates and

charges levied on the community for mandated services are likely to be lowest under the FCP model.

• The adoption of user pays pricing principles and the identification and removal

of cross subsidies in service provision will enhance equity between customer groups.

• Transparent decision making regarding the provision of non-commercial and

community-focused activities should occur, with Council directives funded via CSO payments to the business funded by the general rate (with the incidence

of the Council decisions being borne by all ratepayers rather than just waste customers).


sustainable service provision through the longer term, ensuring that the incidence of costs is attributed to the period in which they are incurred rather

than left for future generations • Adopting a CBU structure may reduce the risk of unsustainable practices

resulting from the conflicting objectives of the Council of the day

• Additional costs associated with the CBU model (compliance costs) would need to be recovered through prices charged to customers.

No Difference

(same price-setting practices)

No Difference

(same funding principles

for non-commercial activities undertaken)

Low Benefit (CBU may have greater control over adopting

sustainable practices)

Moderate Cost (higher charges to

recover the additional

costs attached to CBU structure)

SUMMARY COMMENT Net Benefit Under FCP – 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 targeted at social and environmental outcomes, subject to intergenerational equity being promoted by ensuring appropriate ongoing levels of investment in waste service provision is maintained.


27

AREA OF IMPACT


IMPLICATIONS FOR ENVIRONMENTAL OUTCOMES

Waste

Generation / Minimisation

Recycling

Disposal Practices

• Under the FCP business model, the application of full cost price-setting

practices may lead to more efficient waste practices by customers, reducing the amount of waste sent to landfill and potentially reducing carbon emissions.

• Council would have greater oversight and control over the business under the

FCP model, where it would be able to continually review and manage operational plan strategies in relation to waste and recycling activities.

• The FCP model may provide Council with greater flexibility to adopt recycling

and reuse strategies that may not be considered by a CBU on cost grounds.

• The FCP model may provide Council with greater control and flexibility to drive the achievement of potential future waste disposal targets, which may be more

difficult under the CBU model (with a CBU model more likely to focus on the cheapest solution to maximise profitability).

• Under the CBU business model, the application of full cost price-setting

practices may lead to more efficient waste practices by customers, reducing the amount of waste sent to landfill and potentially reducing carbon emissions.

• Council would have reduced oversight and control over the day-to-day

operations of the business under the CBU model, with the business responsible for the development, review and management of business plans and operational plan strategies in relation to waste and recycling activities.

• The CBU model may provide Council with reduced flexibility to adopt recycling

and reuse strategies (on cost grounds).

• The CBU model may provide Council with reduced control and flexibility to drive the achievement of potential future waste disposal targets, which may be more

achievable under the FCP model (with a CBU model more likely to focus on the cheapest solution to maximise profitability).

Low Cost

(strategies for increased efficiencies and cost

minimisation may not be consistent with Council’s

objectives for the

business)

Low Cost (reduced Council control regarding recycling and

reuse strategies)

Low Cost (reduced Council control regarding future waste

disposal targets)

SUMMARY COMMENT Net Benefit Under FCP – 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 Council’s operational plan.

Source: AEC Group


28

The following table provides a summary of the current level of NCP reforms that have been applied to local government waste businesses in Queensland for the 2009/10 financial year.

Table 5.2: Reforms Applied to Large Service Providers in Queensland, 2009/10

Council Type Model

Adopted 2009/10

Comment

BRISBANE City Waste Services

Type 1 SBA

FCP

No significant impacts from local government reforms/amalgamations

CAIRNS

Water and Waste

Type 1 SBA

CBU

Waste activities combined with water and sewerage functions

FRASER COAST

Fraser Coast Waste

Type 2 SBA

CCC

To be confirmed whether local government reforms/amalgamations now require a PBA to be undertaken

GOLD COAST Gold Coast Waste Management

Type 1 SBA

CBU


IPSWICH Ipswich Waste Services

Type 2 SBA

CBU


LOGAN

Logan Waste Services

Type 2 SBA

CBU


MACKAY

Mackay Waste Services

Type 2 SBA

CBU

A new SBA was identified following local government reforms/ amalgamations, with a PBA scheduled to be undertaken in 2009/10 to

determine the most appropriate reform option

MORETON BAY

Moreton Bay Waste

Type 1 SBA

FCP

A PBA was recently undertaken following local government reforms/ amalgamations, with the FCP model recommended

REDLAND Redland Waste

Type 2 SBA

CBU


ROCKHAMPTON Refuse Management

Type 2 SBA

CCC

A new SBA was identified following local government reforms/

amalgamations, with a PBA scheduled to be undertaken in 2009/10 to determine the most appropriate reform option

SUNSHINE COAST Waste Management

Type 1 SBA

FCP

A PBA was recently undertaken following local government reforms/

amalgamations, with the FCP model recommended

TOOWOOMBA Refuse Collection

Type 2 SBA

CCC

To be confirmed whether local government reforms/amalgamations now require a PBA to be undertaken

TOWNSVILLE Townsville Waste Services

Type 2 SBA

CBU

A PBA was recently undertaken following local government reforms/

amalgamations, with the CBU model recommended

Source: AEC Group

Of the 13 waste businesses reviewed, seven have applied CBU reforms, three have applied FCP reforms with the remaining three applying CCC reforms. Rockhampton and Mackay PBAs should be completed soon and may result in changes to the business model adopted moving forward.


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5. Recommendations

5.1 PBA Recommendation on Preferred Business Structure

It is believed that a FCP business model is the most appropriate reform option as:

• While the Waste and Recycling business undertakes its own collection services in the

Bundaberg and Burnett areas (rather than contracting to the private sector), it does not actively compete in the market for non-mandated services and commercial business (including collections outside of the Bundaberg region);

• The FCP business model can be easily implemented without significant resourcing commitments, business/employee disruption and timeframe issues;

• The business currently has, and will continue to have, considerable legislative obligations regarding the services it offers to the community, with the provision of

waste and recycling activities considered an essential community service with social and environmental objectives rather than profit maximisation being the primary focus;

• There will be increasing control and intervention in waste service provision resulting from Federal and State policies and agendas, with these changes likely to require continued involvement by Council in strategic decision making at a local level; and

• Council still has the flexibility 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 Relevant delegation of responsibility to the manager Waste and Recycling and staff for day-to-day operations

o Performance reporting to Council and the community using a range of financial

and non-financial key performance indicators 4

o Ensuring appropriate reserves are held by the business to fund future capital works and landfill rehabilitation requirements identified through the ongoing use of a long-term financial sustainability model for the business.

5.2 Other Issues from the Business Review

5.2.1 Statutory Reporting

Council will need to apply sufficient resources to comply with the reporting requirements contained in the Local Government Act in relation to Waste and Recycling as a SBA, in particular financial reporting in the annual budget and annual report.

4 Adopting the FCP model will remove the legislative requirement for the business to comply with a number of

reporting obligations applicable under a CBU structure (e.g. preparing tax equivalent returns and annual

performance plans, reporting on performance). However, to ensure that the transparent reporting processes

currently in place are maintained, a certain level of reporting should continue to allow Council to monitor

performance against financial and non-financial targets. Graphical reporting on financial performance could be

automated as part of a long-term model for the business.

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) business model.

It is therefore recommended that Bundaberg Regional Council adopt the Full Cost Pricing (FCP) business model for the Waste and Recycling business activity moving forward.


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5.2.2 Business Performance Reporting

A standard suite of key financial and non-financial performance indicators should be developed to allow robust, periodic Council monitoring of business performance against financial targets and agreed levels of service to customers and the broader community.

5.2.3 Disposal Service Pricing

The Waste and Recycling business may wish to consider reviewing its disposal service pricing structure to give greater consideration to weight and/or volume-based charging rather than a flat fee per load (irrespective of how full the load is) to enhance the user pays pricing signal and to be more consistent with charges levied in other regions.

5.2.4 Community Service Obligations

A review of all non-commercial activities undertaken by the Waste and Recycling business

at the request of Council may be required to ensure they are appropriately identified and funded via Community Service Obligation payments from the general rate.

5.2.5 Plant Hire Charges

Adoption of the FCP business model will require all plant hire charges to be developed on the same basis as the private sector. As such, hire/lease rates for the waste collection fleet and other plant and equipment hired from Council’s centralised fleet services area

will need to recover direct operating costs, corporate/administration overhead costs, depreciation charges and a return on capital invested.

5.2.6 Internal Charging Processes

There is a need to ensure that waste collection and waste disposal services provided internally to Council are appropriately charged by the business. Not only will this drive decision-making on waste disposal behaviours within Council departments, it will also ensure that appropriate information is available to ensure that price-setting for external

services occurs on a holistic basis in terms of total waste streams collected and disposed or recycled.

5.2.7 Assets

All assets associated with the waste management function should be clearly assigned to the business, unless hired/leased from Council at commercial equivalent rates. Where land values do not exist for land occupied for landfills, transfer stations and depots, approximate values should be assigned to ensure that competitive neutrality principles

can be adhered to (at least for full cost pricing calculations).

5.2.8 Regional Waste Management Strategy

Council should prioritise the development of a regional waste management strategy to provide the foundation for future strategy and planning surrounding waste collection and disposal (including sustainable waste recycling and minimisation). This is particularly important given the volume of waste indicated as being transported to Bundaberg for

disposal from other regions.

5.2.9 Long-Term Financial Sustainability Modelling

Whilst a full cost pricing model is utilised for the annual determination of cost recovery levels, an appropriate long-term financial sustainability model should be developed for the business to help identify ongoing investment and landfill rehabilitation requirements, help inform capital funding decisions regarding appropriate reserve levels and borrowing programs, as well as help develop longer-term price paths and revenue strategies that

are compliant with full cost pricing principles and are more reflective of waste lifecycle costing principles.


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5.2.10 Resourcing

As indicated in Section 5.2.1, Council should consider the implications associated with current under-resourcing in meeting regulatory compliance requirements, as well as the implications for resourcing future strategies and the application of broader state and

national waste policies (including effective carbon management).

5.3 Timetable for Implementation of Reforms

Bundaberg Regional Council should implement the FCP business model effective from 1 July 2010, and investigate/implement other issues during the 2010/11 financial year.


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Appendix A: Implications of Adopting Each Business Model

FCP Model

The FCP model involves setting prices on a commercial basis, but does not necessitate the creation of a new business unit or corporate entity – i.e. waste management activities remain an integrated Council program or department. FCP is founded on the principle that, as in the private sector, the price charged for a good or service should recover sufficient revenue to cover the costs of production, funds to replace assets as they are

consumed and the achievement of a reasonable return on capital invested.

The following table sets out the key requirements of FCP and notes the progress of the Waste and Recycling business in their implementation. It is evident that the business is reasonably advanced in relation to the application of FCP requirements given the previous application of competition reforms by the former Bundaberg, Burnett and Isis Councils and the implications of adopting this model are therefore considered negligible.

Implications of Adopting the FCP Model

Requirement Features and Issues

Identify all direct costs • All direct costs associated with the consolidated business appear to have been identified and no change from the status quo is anticipated

Identify all relevant indirect costs (including a share of Council

overheads/support services) and adopt a rational procedure for allocating those

costs to particular activities

• Corporate overheads are allocated to the business by Council using an

existing allocation methodology, although a review of the cost drivers within the model is currently being undertaken to ensure that overhead costs are

allocated in an equitable manner

Identify all relevant capital costs including

depreciation, interest payments, debt guarantee fees, and an appropriate commercial return on capital employed

• Continual review of the full cost pricing position of the business is required to

ensure that depreciation charges are current and reflect the annual consumption of the consolidated asset base, and that a commercial return on

capital is targeted • All land occupied by the business must be assigned a proxy value to ensure

that return on capital calculations are reflective of a private sector operating environment

Identify and adjust for tax equivalent effects where relevant

• Tax equivalents are appropriately accounted for (subject to land values – and

therefore land tax and general rate equivalents – being appropriate, as discussed above)

• Tax equivalent calculations need to occur annually during budget preparation

given ongoing changes to the tax environment (in particular State taxes such as land tax and payroll tax)

Adjust for other factors to ensure costs are comparable with what would be

incurred by a private entity

• Competitive neutrality adjustments are included in the full cost pricing model,

with the adjustments also provided for in the Waste and Recycling budget

Prepare a cost budget and statement of

assets

• The budget for the Waste and Recycling business was endorsed by Council

as part of the 2009/10 annual budget adoption

• Council’s financial system and asset register recognises the assets of the business separately for reporting and pricing purposes

• Land values may need to be reviewed (particularly for parcels not owned by Council)

Develop an appropriate pricing strategy and remove cross subsidies between

customers (where possible)

• Waste and Recycling prices are set to reflect the true costs of providing each

service whilst ensuring earnings are sufficient to ensure long-term sustainability

• Development of a price path to achieve a commercial return on capital is

currently being undertaken by Council

Identify and explicitly recognise any Community Service Obligations (CSOs) – i.e. non-commercial activities undertaken

at the direction of Council

• Identified CSOs are costed separately, included as a revenue line item for the business (once approved by Council), and funded via the general rate

• CSOs may need to be further reviewed given the findings that there may be other non-commercial activities being undertaken by the business without

appropriate compensation from the general fund or customers • CSO key performance indicators may need to be established to assess their

ongoing relevance and appropriateness

Prepare revenue forecasts to demonstrate revenue levels are meeting full cost pricing obligations over a reasonable time

frame

• Five-year financial forecasts are prepared for the business in accordance with Council’s legislative obligations (contained within the FCP model)

Prepare the relevant governance reports • The NCP reporting obligations relating to the business are only being partially

complied with by Council, with current deficiencies relating to the relevant reporting in the annual budget and annual report

Source: AEC Group


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CBU Model

The intention of adopting the CBU model would be to create a more commercial operating environment in the delivery of waste and recycling activities in the region. Essentially, the day-to-day operations of the business would be controlled by the commercial business manager and the strategic direction of the business would be in accordance with established performance plans approved by Council. Instead of being directly controlled by Council on a day-to-day basis, the business unit would report its financial and non-financial performance against established targets to Council on a regular basis.

The following table summarises the additional compliance/governance activities that a CBU model would require. Under the CBU model, the business would need to prepare an Annual Performance Plan (including business and operating plans), and Council would need to comply with additional reporting requirements in its Corporate Plan and Operational Plan, as well as prepare an Annual Statement of Operations for inclusion in its Annual Report.

Implications of Adopting the CBU Model

Requirement Features and Issues

Business Management • Managerial control of the business unit would need to be devolved to the managers within the unit

• Clearly defined objectives/targets for the business unit would need to be

established by Council and agreed by the business unit • Regulatory and policy functions would need to be separated from the

business to avoid conflict between commercial and regulatory demands

Financial • The business unit would be required to more formally pay notional tax and

dividend equivalents to Council • An appropriate commercial capital structure may wish to be established with

a commercial debt to equity ratio

Corporate Plan • Council’s Corporate Plan would need to include the CBU’s objectives and the nature and scope of its activities

Operational Plan • Council’s Operational Plan would need to include the outcomes and strategies

outlined in the Corporate Plan, the proposed outputs of the CBU, the activities which will be carried out to deliver these outputs, and performance measures concerning the delivery of these outputs

Annual Performance Plan • An Annual Performance Plan would need to be prepared annually to set out:

o Performance targets (financial and non-financial) o Full details of all CSOs o The objectives and functions of the CBU

o Details of the CBU’s main activities o The notional capital structure and the treatment of surpluses

o Proposed investments o A service level statement

o Details of any outstanding and/or proposed borrowings o Extent of managerial autonomy

Annual Statement of Operations • An Annual Statement on Operations would need to be included in Council’s Annual Report that features:

o Relevant data that permits a comparison of planned and actual performance;

o Details of any changes made to the Performance Plan;

o Assessment of the impact of changes to the Performance Plan on the CBU’s financial position, operating surpluses/deficits and prospects;

o Particulars of any Council directions received; and, o Details of Commonwealth and State tax equivalents and adjustments for

any guarantees by the State Government

Source: AEC Group


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Appendix B: Waste Fees & Charges 2009/10

Disposal Charges

Description Charge Unit

Commercial Loose (includes builders waste and green waste)

Vehicles < 3 tonnes $40.00 Per Load

Vehicles > 3 tonnes $90.00 Per Load

Vehicles > 3 tonnes (double axle) $150.00 Per Load

Dual-axle truck with dog trailer $250.00 Per Load

Semi-trailer $250.00 Per Load

Large trailer (dual axle) $32.00 Per Load

Sedan/Station wagon $10.00 Per Load

Ute/small trailer (single axle) $15.00 Per Load

Ute/small trailer (minimum charge) $5.00 Per Load

Commercial Compacted

Vehicles < 3 tonne $80.00 Per Load

Vehicles > 3 tonne $300.00 Per Load

Tyres

Passenger car $4.00 Per Tyre

4 x 4 $5.00 Per Tyre

Truck $12.00 Per Tyre

Tractor $25.00 Per Tyre

Domestic Waste and Green Waste

Sedan/ station wagon/ ute/ small trailer $4.00 Per Load

Dual axle trailer/ large ute/ small truck (1-3 tonne) $18.00 Per Load

Vehicles > 3 tonnes (charged at commercial rate) $90.00 Per Load

Skip Bins (Based on Bin Capacity)

1.5 cubic metres $6.50 Bin

2 cubic metres $9.00 Bin

2.5 cubic metres $11.00 Bin








Other - per cubic metre $4.50 Bin

Other Waste Charges

Description Charge Unit

Mulch Sales $6.50 Per Cubic Metre


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Appendix C: National Waste Policy

Key Policy Directions and Associated Strategies

THEME STRATEGY RESULTS RESPONSIBILITY TAKING RESPONSIBILITY

Shared responsibility for reducing the environmental, health and safety footprint of manufactured goods and materials across the manufacture-supply-consumption chain and at end-of-life OBJECTIVE Support business and consumers to appropriately manage end-of-life products, materials and packaging

STRATEGY 1

• Establish a national framework underpinned by legislation to support voluntary, co-regulatory

and regulatory product stewardship and extended producer responsibility schemes to

provide for the impacts of a product being responsibly managed during and at end-of-life

STRATEGY 2

• All governments as significant procurers of

goods, services and infrastructure, will embody and promote sustainable procurement principles and practices within their own

operations and delivery of programs and services to facilitate certainty in the market

STRATEGY 3 • The Australian Government, in collaboration

with state and territory governments, industry and the community better manage packaging

to improve the use of resources, reduce the environmental impact of packaging design, enhance away from home recycling and reduce

litter

STRATEGY 1

• The first product stewardship scheme(s) are in place under the national framework within three years, and

Commonwealth legislation for the national product stewardship framework is enacted

• A number of voluntary product stewardship schemes are accredited and reporting under the national product

stewardship framework within four years • Business is increasingly aware of, and implementing,

waste avoidance opportunities STRATEGY 2

• Sustainable procurement principles are taken into account as part of value for money in procurement

decisions • Waste management, use of reprocessed materials,

resource recovery and responsibility for goods and materials at end of life, are taken into account as far as

practicable in decision making • Guidance on sustainable procurement such as standard

specifications and model contract clauses are available to procurement officials within four years

STRATEGY 3 • Governments will report periodically on the uptake of

sustainable procurement • Approaches to improving the use of resources, reducing

the environmental impact of packaging design, enhancing away from home recycling and reducing litter

will be agreed • Improved away from home recycling

• Packaging design will increasingly provide for easy re-processing and will be labelled accordingly

STRATEGY 1

• Australian Government to resource and be responsible for the establishment and administration of the Commonwealth

legislative framework • Australian Government will consult state and territory

governments through EPHC, on the design of the National Product Stewardship Framework

• Consultation on additional products that might be regulated in future will be through EPHC

• Operation of the co-regulatory and any regulatory schemes to be

funded by the sector subject to regulation and the approach agreed as part of the development of the scheme by the sector

• Accreditation of voluntary schemes to occur on cost recovered

basis through a fee for service • State and territory governments to provide for assessments,

inspections, intelligence gathering as part of existing policy,

program and regulatory operations • State and territory governments can continue to support local

product stewardship action STRATEGY 2 • All governments to undertake as part of existing arrangements

• EPHC, through the secretariat, facilitates sharing of guidance

materials between jurisdictions and in consultation with relevant bodies such as the Australian Procurement and Construction

Council STRATEGY 3

• All governments will progress through EPHC activities, including the National Packaging Covenant.

• This strategy will also be progressed through existing and prospective government initiatives and programs


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THEME STRATEGY RESULTS RESPONSIBILITY IMPROVING THE MARKET

Efficient and effective Australian markets for waste and recovered resources, and local technology and innovation are sought after internationally OBJECTIVE Support waste avoidance, reduction, recovery and re-use by addressing market impediments and removing red tape


with state and territory governments, will introduce a national definition and classification

system for wastes (including hazardous and clinical wastes) that aligns with definitions in

international conventions, provides for when a product or material ceases to become a waste, and reflects these classifications in relevant

policies and instruments STRATEGY 5

• The Australian Government, in collaboration with state and territory governments through

the EPHC, will facilitate the development of a suite of agreed national principles,

specifications, best practice guidelines and standards, to remove impediments to the development and operation of effective markets

for potential wastes STRATEGY 6

• The Australian Government, in collaboration with state and territory governments, local

governments, industry, business and the community, will provide access to knowledge

and expertise in sustainable procurement and business practices

STRATEGY 4 • Existing arrangements are mapped in a simple national

classification data base for wastes which shows equivalent classes and to the extent possible, how these

relate to international approaches • Principles are agreed that can be applied to classes or

types of waste that enable definitions to be applied as to when a material ceases to be a waste

• Existing classification arrangements are assessed and options developed for a national system, together with

their costs and benefits, with a decision on an approach within four years

• National classifications and definitions of when a material ceases to be a waste are referenced as key

instruments are progressively reviewed or new instruments established

• Key government policies and legislation use consistent classifications and are supported by nationally consistent

data collection and tracking systems STRATEGY 5 • National principles to encourage safe re-use of waste are

agreed; and national specifications for use of recycled

construction and demolition waste in pavements, fit-for-purpose use of recycled organics; and biosolids derived from organic waste are commenced within a three year

period • Further priorities agreed and work program to develop

national guidance and standards for these priorities endorsed

• National guidance is publicly available, referenced in government guidelines and state and territory licensing

arrangements as appropriate STRATEGY 6

• Capability is provided under the auspices of the EPHC that provides access to current information and analyses

on waste management and reprocessing technologies; regulatory and institutional settings; research; business

case information; and consumer values

STRATEGY 4 This strategy will be progressed in two phases.

• The first phase will address impediments to defining when a product or material ceases to become a waste, map existing

classifications of waste, and scope development of a nationally consistent classification system that aligns with current and future

needs. Existing arrangements such as the Controlled Waste NEPM and NPI will be considered. This phase will be progressed through EPHC

• For the national classification system, the first phase will build on EPHC work to scope requirements, and assess the benefits of

change, implementation options and costs • For the second phase of the national classification system, EPHC

will agree an approach. This will be completed within four years STRATEGY 5

• To be undertaken through EPHC, with the first step being to

scope the project, identify priorities and timeframes. This would include looking at existing materials that could be shared or used nationally

STRATEGY 6 • To be undertaken through EPHC, with the first phase being to

scope the project, identify priorities and timeframes


37

THEME STRATEGY RESULTS RESPONSIBILITY PURSUING SUSTAINABILITY

Less waste and improved use of waste to achieve broader environmental, social and economic benefits OBJECTIVE To enhance biodegradable (organic) resource recovery and reduce greenhouse gas emissions from landfills

STRATEGY 7 • State and territory governments building on

existing commitments, continue their focus to phase down the amount of biodegradable

material sent to landfill STRATEGY 8

• State and territory governments ensure the safety and health risks arising from landfill gas

emissions are managed across all landfills through appropriate regulation and licence requirements


with state and territory governments, will develop a strategy for measures to address

emissions from disposal of waste to landfills and other waste activities, and these support

the operation of a future CPRS STRATEGY 10 • State and territory and local governments, in

collaboration with the Australian Government,

industry and business, to achieve major improvements in waste avoidance and re-use of materials in key areas of the commercial and

industrial waste stream STRATEGY 11

• All governments continue to encourage best practice waste management and resource

recovery for construction and demolition projects

STRATEGY 7 • Biodegradable waste disposed to landfill is significantly

reduced. This will be achieved through beneficial re-use such as compost, soil conditioners, biochar, and through

the use of alternative waste treatment technologies waste-to-energy plants and bio-digesters

• Increased markets are available for beneficial use STRATEGY 8

• State and territory governments effectively manage health and safety risks arising from landfill gas emissions

through key policies, planning, legislation and licence conditions.

STRATEGY 9 • Strategies for addressing and/or offsetting emissions

from landfill that complement the approach to resource recovery from organic waste is released by EPHC by

2011 • State and territory governments have initiatives for

diverting organic waste from landfill and energy production

STRATEGY 10

• Significant waste avoidance and resource recovery

actions are identified for the commercial and industrial waste stream and initiatives commenced progressively over the period. This will include supply chain, food

waste, packaging recycling and central business district initiatives

STRATEGY 11 • Construction and demolition projects apply best practice

waste avoidance, waste management and resource recovery procedures

STRATEGY 7 • State and territory governments to undertake as part of their

existing waste management and program responsibilities STRATEGY 8

• State and territory governments to undertake as part of their existing waste management responsibilities

STRATEGY 9 • Strategies developed through EPHC

• Australian Government is responsible for the implementation of

the proposed CPRS which covers landfill emissions, and continues to support appropriate research, innovation and related activities through relevant programs

STRATEGY 10 • All jurisdictions to identify opportunities within the other national

waste policy strategies to promote waste avoidance and enhanced resource recovery from the commercial and industrial

waste stream. • State and territory governments to determine areas that could

deliver the most significant waste reductions and/or recovery outcomes, and develop partnerships to implement/resource

complementary cross-cutting activities as part of existing and prospective initiatives and program responsibilities.

• All jurisdictions to identify areas and processes for national action in the commercial and industrial waste stream and progress these

through EPHC. STRATEGY 11 • All governments to progress as part of their existing procurement,

infrastructure and waste management responsibilities


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THEME STRATEGY RESULTS RESPONSIBILITY REDUCING HAZARD AND RISK

Potentially hazardous content of wastes is reduced and waste recovery, handling and disposal is consistent, safe and accountable OBJECTIVE A comprehensive nationally integrated system for the identification, classification, collection, treatment, disposal and monitoring of hazardous substances and waste that aligns with international obligations


with state and territory governments, will ensure that: our international obligations are

met; hazardous materials entering the waste stream are reduced; transboundary movement

of hazardous waste is effectively, efficiently and legally undertaken within Australia and complies with international requirements;

product stewardship is adopted to provide for the impacts of a product with potentially

hazardous materials being responsibly managed during and at end-of-life; and facilities are available to handle and dispose of

hazardous substances that become waste in an environmentally sound manner

STRATEGY 13 • The Australian Government, with the support of

state and territory governments, will adopt a system that aligns with international

approaches, to reduce hazardous substances in products and articles sold in Australia that present a potential risk during and at end-of-

life to human health, safety or the environment

STRATEGY 12 • The existing hazardous waste arrangements are mapped

to a national classification system for wastes, and these classifications referenced in key instruments as they are

reviewed or new instruments established • Product stewardship schemes address specific products

that contain potentially hazardous materials • An assessment of options to introduce a labelling system

for products and articles containing potentially hazardous content to allow safe disassembly and/or

treatment and disposal is completed and a decision made

• Government systems, policies and regulatory frameworks are aligned to ensure that appropriate

transboundary movement of hazardous waste for treatment and disposal can occur in an expeditious,

streamlined and legal manner, and the monitoring and reporting system is integrated with a contemporary National Pollutant Inventory

• Key government policies and legislation use consistent classifications for hazardous wastes, including clinical

wastes, and are supported by nationally consistent data collection and tracking systems

• A monitoring program for chemicals listed under the Stockholm Convention has commenced and priorities for

the management of hazardous substances in products and materials completed

• An analysis of Australia’s current and future hazardous waste treatment and disposal capabilities has been

completed • Local stockpiling of hazardous substances and waste is

reduced • Improved collection of chemical waste and containers

STRATEGY 13 • An assessment of the approach best suited to Australia

is complete and a decision made within three years

STRATEGY 12 • Australian Government is responsible for the first phase of

establishing the basic monitoring program for chemicals listed under Stockholm Convention. Scaling up of monitoring and

sampling to occur in the second phase • See comments for Strategy 1 re product stewardship scheme

• See comments for Strategy 4 re hazardous component of national

classification to underpin monitoring and reporting • Labelling system to continue to be progressed by EPHC

• Streamlining transboundary movement to be undertaken by jurisdictions as part of their waste management responsibilities

• Analysis of Australia’s current and future hazardous waste treatment and disposal capabilities will be undertaken under the

auspices of EPHC • Jurisdictions to reduce local stockpiling of waste as part of

existing waste management responsibilities • Assessment of improved collection of chemical waste and

containers to be progressed by EPHC STRATEGY 13

• The first phase will be for the Australian Government to

undertake in consultation with the states and territories, an assessment of approaches to reduce hazardous substances in products and articles sold in Australia.

• The second phase will be to determine the most suitable approach informed by the analysis of costs and benefits and

alignment with approaches overseas. Consultation with state and territory governments on the approach to be adopted will occur

through EPHC

TAILORING SOLUTIONS Increased capacity in regional and remote communities to manage waste and recover and re-use resources OBJECTIVE Support improved waste management and re-use of waste in regional, remote and Indigenous communities

STRATEGY 14 • State and territory and local governments to

work together to identify regional and remote waste and resource recovery actions to build

capacity and ensure an appropriate suite of services is available to communities

STRATEGY 15

• The Australian Government will undertake an audit of existing waste infrastructure and local

capability in selected remote Indigenous communities as part of a larger essential

services audit under the COAG National Indigenous Housing Partnership Agreement

STRATEGY 14 • Actions are assessed including a regional and remote

stakeholder waste network to build capacity STRATEGY 15

• The audit is completed within two years and recommendations provided

STRATEGY 14 • State and territory and local governments continue to resource

and take relevant action as part of existing policies and programs, including waste management

STRATEGY 15 • Australian Government is responsible for the audit


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THEME STRATEGY RESULTS RESPONSIBILITY PROVIDING THE EVIDENCE Decision makers have access to meaningful, accurate and current national waste and resource recovery data and information OBJECTIVE Develop capacity to effectively collect consistent, accurate and meaningful national waste and resource recovery data to inform policy and decisions


with state and territory governments, will develop and publish a three-yearly current and

future trends waste and resource recovery report. This will be underpinned by a system

that provides access to integrated national core data on waste and resource recovery that is accurate, meaningful and up-to-date and

available online

STRATEGY 16 • First periodic national current and future trends in waste

and resource recovery report (National Waste Report) will be published in three years

• The basic national dataset, and how best to improve data collection and streamline business reporting

requirements and administration, to align with national directions, will be scoped and developed over a five year

period

STRATEGY 16 • Future National Waste Reports will be developed by the Australian

Government in consultation with the states and territories and made available through EPHC

• The first phase will be to assess information needs for policy, regulatory and operational purposes and business needs. Any

improvements and streamlining that can be easily made in the short term will be identified and improvements undertaken where

feasible. Options for accessing comprehensive, robust, accurate and timely core national waste data and information will be assessed—these could include a virtual, dispersed or an

aggregated system • The second phase on the integrated national waste data system is

for EPHC to agree an approach


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T +61 7 3831 0577 F +61 7 3831 3899 T +61 3 9653 9312 F +61 3 9653 9307 T +61 2 9283 8400 F +61 2 9264 9254 T +61 7 4771 5550 F +61 7 4771 5152 T +61 8 9288 4456 F +61 7 9288 4457

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