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Decision reached in Blue Box funding dispute

An arbitrator has upheld the Authority’s decision-making on the Steward Cost Containment Fee and Non-Obligated Materials in a dispute about the methodology for setting the annual steward funding obligation for Ontario’s Blue Box Program. On a third issue regarding the Blue Box In-Kind program, the arbitrator directed an adjustment of approximately $1.1 million to the $126.4 million steward obligation set by the Authority in 2019.

The dispute was initiated in 2018 by Stewardship Ontario, the industry funding organization that administers the program through which brand owners and other stewards of packaging and printed paper fund municipal Blue Box recycling programs.

The dispute was arbitrated under the Blue Box Program Agreement between the Authority and Stewardship Ontario.

The steward obligation is calculated by the Authority and sets the total amount that stewards must pay to municipalities to offset municipal costs in operating the residential Blue Box recycling system.

Stewardship Ontario disputed three elements of the Authority’s methodology for the 2019 steward obligation and future years:

  1. The Authority’s inclusion of a “steward cost containment” fee, which relates to stewards’ responsibility for cost increases on the system due to their packaging choices
  2. The Authority’s inclusion of costs related to materials that are not defined as “Printed Paper and Packaging” in the rules for stewards (referred to as the “non-obligated” issue).
  3. The Authority’s inclusion of the cash value of in-kind advertising contributions from newspaper stewards used by municipalities for Blue Box advertisements

The arbitrator Ronald G. Slaght confirmed in his ruling that the Authority can include a steward cost containment fee and that the Authority’s formula for calculating the fee was not unreasonable. For the 2019 steward obligation, the steward cost containment fee was $7.1 million.

On the non-obligated issue, Mr. Slaght’s ruling confirmed that the Authority can include costs related to materials that are commonly found in the Blue Box recycling system, including contamination that ends up in the system and other materials (such as office and fine paper) that are not included in the definition of “Printed Paper and Packaging” in Stewardship Ontario’s rules for stewards.

On the in-kind issue, the arbitrator ruled that the Authority is not allowed to include the monetary value of in-kind contributions from newspaper stewards—which are used by municipalities to promote the Blue Box Program—as costs of the program to be funded by the steward obligation. As a result, the arbitrator directed an adjustment of approximately $1.1 million out of the $126.4 million steward obligation and the elimination of this charge in future steward obligations.

Read the complete arbitrator’s decision.

The municipalities that receive the steward obligation funding did not participate in the dispute. In a procedural ruling issued by Mr. Slaght, the Authority’s proposal to include the Association of Municipalities of Ontario (AMO) and the City of Toronto as parties to the arbitration was rejected. The City of Toronto and AMO brought injunction proceedings in the Divisional Court seeking to stop the arbitration from proceeding without their involvement, but this was also rejected by the Court.

The Authority plans to determine any adjustments to the 2019 steward obligation, as well as the final 2020 funding obligation, by September 2020. The 2020 funding obligation will be posted on the Blue Box page once finalized.