2016 Annual Report

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Table of Contents

Corporate Profile 3

Highlights 4

Regulatory Update 22

Property, Plant and Equipment 34

Employees 34

Operations 35

Service Area 37

Management’s Responsibility for Financial Reporting 38

Auditor’s Report 39

Statement of Financial Position 40

Statement of Fund Operations and Changes in Fund Balances 41

Statement of Cash Flow 42

Notes to the Financial Statements (December 31, 2016) 43

Membership 49

Corporate Directory 50

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Corporate Profile The Bluewater Recycling Association, located in Huron Industrial Park in the Municipality of South Huron, near Exeter, provides a wide variety of reliable, dependable, and affordable resource management based products and services. The Association is one of the largest multi-municipal resource management organizations in Canada, which provides integrated waste reduction and environmental services ranging from collection and processing to marketing superior quality products and services. The 74 people employed by the Association handle over 42,000 tonnes of material yearly, which represents a substantial portion of the overall waste stream. Although the Association's fleet of 46 vehicles collect most of the material, the Association also processes contractor-collected material. "Our mission is to provide ethical, innovative, effective, quality resource management services. We will carry out our mission efficiently, safely, and in an environmentally responsible manner, ultimately enabling our members to meet their environmental commitments."

The logo depicts the Association’s acronym at the roots of a white oak tree strategically placed above our recognizable Bluewater wave. The white oak, native to the area, standing tall above the waters of Lake Huron is notorious for its stability and long life, which the Association mirrors. The root system of the oak is as dispersed as the branches above, reflecting the Association's unique relationship between its owners and customers. The roots of the oak tree flow into BRA, the acronym for the Bluewater Recycling Association, signifying that the Association is at the root of providing solutions to environmental issues. The letters are intertwined, representing the cooperative nature of the organization that involves more than 20 individual municipalities. The bold, stylish letters symbolize the strength, creativity, and proactiveness of the organization. The wave is representative of the blue water found on Lake Huron which most of our members have an opportunity to view regularly. Each colour used in the logo also carries special significance for the Association. Green is synonymous with the environment in general. Blue is representative of the blue water of Lake Huron and is a colour that is widely associated with recycling. White is representative of the cleanliness and purity of the environment which we strive to achieve. The Bluewater Recycling Association is much more than a recycling company, it’s

"Your Environmental Alternative"

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Highlights The Circular Economy Isn’t the Waste Business As Usual In November, the Ontario Government proclaimed the Resource Recovery and Circular Economy Act, 2016 and the Waste Diversion Transition Act, 2016, enacted by the Waste-Free Ontario Act, 2016. This framework is intended to help us move towards a circular economy, which will increase resource recovery and reduce waste in Ontario. Upon proclamation, the legislation came into effect and the Waste Diversion Act, 2002 was repealed. In addition, new regulations for existing diversion programs under the Waste Diversion Transition Act, 2016 came into effect. Waste Diversion Ontario has now been overhauled to become the Resource Productivity and Recovery Authority (the Authority). The Minister has appointed the initial board for the Authority. The ministry has released the Strategy for a Waste-Free Ontario: Building a Circular Economy. The strategy serves as a roadmap to shift Ontario toward a circular economy. Much has been written about the “circular economy” in the last couple of years, and I am often asked about the difference between the circular economy and zero waste. The focus of both is on eliminating waste and maximizing the use of our natural resources. I went looking recently to see if there are any important developments or differences between circular economy and zero waste, and what I found is an exciting synergy between the two with the potential for really shaking up the waste industry. First, let’s establish what is meant by the circular economy. According to the Ellen MacArthur Foundation, a leading circular economy advocacy organization: A circular economy is restorative and regenerative by design, and aims to keep products, components, and materials at their highest utility and value at all times… it is a continuous positive development cycle that preserves and enhances natural capital, optimizes resource yields, and minimizes system risks by managing finite stocks and renewable flows. This sounds a lot like what we called the zero waste economy nearly 20 years ago when the Zero Waste International Alliance said: “Zero Waste means designing and managing products and processes to systematically avoid and eliminate the volume and toxicity of waste and materials, conserve and recover all resources, and not burn or bury them. Implementing Zero Waste will eliminate all discharges to land, water or air that are a threat to planetary, human, animal or plant health.” In fact, the circular economy and zero waste are both part of the same vision for a more sustainable, prosperous planet. The business sector is the primary driver behind the circular economy because there is a clear financial opportunity and communities are the primary driver behind zero waste because there are clear social and environmental benefits. Both co-exist and need each other.

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Large manufacturers are the early implementers of circular economy activities, just as they were the first big movers toward zero waste practices. That is logical since manufacturers clearly see waste as a sign of inefficiency and reducing waste directly saves money. More importantly, it is necessary that big business gets involved with the circular economy because they have the power to influence many “upstream” waste problems in how materials are sourced, which materials are chosen and how products are designed for reuse and recovery. By cleaning up the supply chain and design practices we can reduce the polluting natural resource extraction practices that often disrupt and cause great harm to indigenous people around the world, toxic processing and manufacturing practices and the industrial design problems that make products and packaging difficult to reuse in any way. My main interest, however, is not corporations but the rest of society—the community, the local government, the schools and the small- and medium-sized businesses. We don’t have the concentrated power or funds to make large-scale change happen quickly, so what is the path forward for the circular economy for the rest of us?

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The answer to that question comes to us from circular economy and zero waste practitioners over in the United Kingdom. Stated clearly by the Waste & Recycling Action Programme (WRAP) when they say they are “working at all points of the circular economy by making resource use more efficient, reducing the production of waste, maximizing the recycling of waste and identifying alternative business models.” What do they mean by alternative business models? That is the key to understanding how the implementation of the circular economy and zero waste is moving forward. The discussion of new business models is generally not a common topic in America, the land of uber-capitalism and competition, because anything other than the pursuit of profit in business is viewed skeptically. But the problem is that traditional capitalistic marketplace drivers have not, generally speaking, brought us either zero waste or circular economies. So the way forward to create community benefit from the circular economy is to expand the zero waste story and have serious community discussions around creating new business models! Here is a great list of circular economy business models that might be waiting ahead for the next generation of clever entrepreneurs: Hire & Leasing: Hire or leasing of products as an alternative to purchasing. Performance/Service System: Providing a service based on delivering the performance outputs of a product where the manufacturer retains ownership, has greater control over the production of a product, and therefore has more interest in producing a product that lasts. Incentivized Return: Offering a financial or other incentive for the return of ‘used’ products. Products can be refurbished and re-sold. Asset Management: Maximizing product lifetime and minimizing new purchase through tracking an organization’s assets, planning what can be re-used, repaired or redeployed at a different site. Collaborative Consumption: Rental or sharing of products between members of the public or businesses, often through peer-to-peer networks. Long Life: Products designed for long life, supported by guarantees and trusted repair services. Someday we can hope that these new business models are profitable activities, but at this point in time we need to help these ideas get off the ground by creating public-private partnerships and “social enterprises” where making money and fulfilling a social mission are equally important. The idea of marrying social enterprise with the new circular economy and zero waste business models is exciting and starting to happen in Scotland, England, Australia, Brazil and other places, and needs to get a higher profile in America in the future. Indeed, bringing together the circular economy with zero waste and social enterprise is making this a very exciting time to start actualizing some new ideas in the waste/resource management industry.

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90% Serviced with Automated Collection In 2016, the Association was busy planning the launch of the automated collection system in the Township of Perth South and the Hensall Ward of the Municipality of Bluewater. Wheelie bins were delivered during the month of October to all the residents to begin collection at the end of the month. In a last minute decision, the Council of the Township of Warwick accepted a proposal from the Association to convert its blue box recycling program in Watford to the automated wheelie bin collection system. They took advantage of the system to change the collection frequency to biweekly from the old weekly service while improving the service with both sides of the street collection. The new system resulted in savings. They launched on December 2, 2016. This conversion meant that over 85% of the Association’s households were serviced this way by the end of the year. The Township of Perth East committed early in the New Year to switching to automated collection on a biweekly frequency. This will mean that 90% of our households will now be serviced using the automated collection system and 100% of Perth County. Once the program launches in June, the Association will only have two remaining vehicles collecting manually from its fleet of 46 trucks.

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New Controller On behalf of the Bluewater Recycling Association, it is my pleasure to announce that after serving the Association for the last 26 years Matt has retired. Matt was hired by the Association, in 1994, after an incredibly successful career in corporate management where he led the development of a local construction company into a multi-million dollar multi-national corporation. We were fortunate to have him on our team. His hunger for success and more responsibilities were immediately harnessed when he was promoted to Vice-President. His financial responsibilities were quickly expanded into leading our Mars Environmental division, human resources, and sales of commodities. Matt is joining his wife Anne who retired last year. They plan on splitting their time between their condo in Florida and their home near Sarnia. Both are avid golfers and will take full advantage of their new schedule. Their family was also recently expanded with the arrival of their first grandchild, which is bound to take up some of that new found free time. We wish Matt and his family a long, and healthy retirement. We thank him for his dedication and commitment. It is my pleasure to announce that effective Tuesday December 6th, Michelle Courtney joined the Association as our new Controller. Michelle comes to us from the Exeter area with nearly 10 years of experience in financial management, holding progressive positions. While she worked for the local firm of PTMG

LLP on track to become partner, her aspirations were always with the private sector where she could make real operational contributions. Having served as our auditor in the past, she was familiar with our operations making her extra keen to make the change when opportunity came. Michelle has Bachelor of Business Administration from Wilfrid Laurier University. She is a Chartered Professional Accountant with a Chartered Accountant designation. Michelle and her husband Kyle have two beautiful sons and they are both adept hockey players. She may be reached at 519.228.6678 extension 224 or michelle@bra.org

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Global Commodity Resin Prices Are Expected To Remain Relatively Low In The Short-Term, With Higher Prices Possible In 2017 As Oil Prices Begin To Recover. Low-priced crude oil and natural gas feedstocks have lowered commodity resin prices since mid-2014. The world is growing again, but at a slow pace, China is transitioning from manufacturing to a service economy. The US economy will continue to expand at a moderate pace, led by consumer spending and homebuilding. Global oil demand growth has slowed as supplies have increased, largely from new US production related to fracking and horizontal drilling. These new supplies have driven prices down from $100 per barrel in mid-2014 to less than $38 in 2016. Some oil firms have cut back production as a result. Lower supply and improving world economies should drive oil prices back to $60 per barrel during 2017. In plastics, global overcapacities exist for many commodity resins, due in large part to overbuilding in China. But plastics feedstocks ethylene and propylene are expected to average above GDP growth through 2020. Polyethylene with a global market share of 38% of the major thermoplastics market in 2015 should grow at or slightly above global GDP. And even with higher oil prices, major North American PE expansions set for the next two to three years is expected to outpace demand and could drive prices down. Polypropylene (26% of plastics market share) should grow at above GDP levels through 2020. Supplies of the material are long globally but are short in North America, since numerous assets were closed when the market was oversupplied in 2010-14. As a result, PP is being imported into North America, which could serve to keep prices relatively low. PET bottle resin (8% of plastics market share) also could see similar GDP-level growth. Recycling has come into play here, as increased availability of recycled PET has lessened demand for prime grades of the material. Prime PET remains in oversupply in all regions of the world. Polystyrene (4% of plastics market share) growth should be at levels below that of GDP. PS is “under siege” from lower-priced materials, with limited demand growth and no new investment in capacity.

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Ferrous Scrap To Gain 'Maximum Traction' In US$ 406 Billion Metals Market The metal recycling market size is projected to grow from US$ 277.12 billion in 2015 to US$ 406.16 billion by 2020, according to a new report by Market and Markets. This represents a compound annual growth rate of 7.95%, which is attributed to ‘rapidly increasing’ need for metal products in light of accelerated urbanization, growth in infrastructural activities, and increasing industrialization.

Ferrous metal recycling is said to gain 'maximum traction' during the forecast period. The use of scrap in steel production has formed an 'integral part' of the steel making industry, with an estimated 40% of steel production made from scrap, the report points out. One ton of recycled steel saves 642 Kwh of energy, 1.8 barrels of oil, 10.9 million Btus of energy, and 4 cubic yards of landfill space. The Asia-Pacific region will play a 'key role' in the metal recycling market in the coming years. Factors such as the increasing urbanized population in China and India along with the growth in disposable income, and the spreading awareness regarding the importance of waste management and resource efficiency in these countries are driving the growth of the Asia-Pacific metal recycling market. Additionally, the strict laws pertaining to waste management & recycling, increasing awareness of the efficient use of natural resources, and demand for recycled metal have led both public sector bodies and private sector parties 'to take active part' in the recovery of metal from scrap.

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US Paper Recovery Nears 52 Million Tonnes According to data from the American Forest & Paper Association (AF&PA), around 52 million tonnes of paper was recovered in the U.S. last year. The association estimates the overall paper recovery rate at an all-time high of 66.8%, which compares to 65.4% in 2014. AF&PA credits the higher numbers to growth in the country’s recycling infrastructure and to paper mill demand for recovered material. Overall paper generation in the USA fell slightly to just under 78 million tonnes in 2015 and has dropped around 25% since 1999. OCC generation reached 33.7 million tonnes last year - of which 31.3 million tonnes, or 92.9%, was recovered.

Glass Markets While glass packaging is declining overall in favour of cheaper plastic options, it remains part of the regulated materials that must be collected in Ontario’s municipal recycling programs. However, local markets have all disappeared except for one and they are struggling. Its low value and lack of demand make it a material that is not desirable in the program.

Commodities Update After a four year drought in the commodity prices led by a general oversupply in the market place of most commodities and a low crude oil price, 2016 finally saw some movement. In the middle of 2016 prices started to climb out of nowhere and they stuck for the remainder of the year. The end result was a significant increase in revenue and a welcome relief after so many years of hardship.

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Fuel Update One of the benefit of low crude oil is generally lower diesel prices as well. While diesel prices did not go down as rapidly as the crude price, it did eventually fall to a reasonable price below $1.00 per litre. In the meantime, our conversion to natural gas continues with now 12 of our vehicles operating with this fuel. Despite the lower the diesel prices, natural gas remains significantly lower. Furthermore, it remains the best overall performer with lower emissions and low noise.

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Tonnes Managed The Association continues to grow by managing more materials in the area. Despite a significant campaign to reduce contamination in 2016, we managed to maintain our recycling volumes while increasing our waste volumes. The Association manages approximately 44,000 tonnes annually.

Facts About Food Waste About $31 billion worth of food is thrown away annually in Canada. Meanwhile, more than 850,000 Canadians rely on food banks for their next meal, including many children. The true cost of food waste when you factor in the energy that is wasted (to produce the food), is actually close to $107 billion annually. The United Nations’ Food and Agricultural Organization estimates that the full cost of food waste is approximately two and a half times greater than the “face value” of the wasted food, because of the wasted water, energy, labour, capital investment, and more. Most food that gets thrown away in Canada – a full 47 per cent – occurs in the home. Consumers like you or I throw away about $1,500 worth of wasted groceries annually. So that’s a lot of money. But at the same time, there’s also retailing waste, farm waste and processing waste. So it’s all across the food supply chain.

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Mars Environmental Our commercial division continues to perform well despite the drop in lifts performed in 2016. The drop in services is directly related to our change of policy with regards to recycling services. As soon as we implemented a nominal fee for the service, our customers responded with an adjustment in service frequency away from weekly service to biweekly or even monthly. This has resulted in a much more efficient operation lowering our costs while improving our revenue stream preparing us for continued growth ahead.

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EPA, The Recycling Partnership release curbside recycling report Key findings from the report show that multiple factors support successful programs. The U.S. Environmental Protection Agency (EPA) and national nonprofit The Recycling Partnership, Falls Church, Virginia, have completed a study on the state of curbside recycling in the U.S. in 2016. The report provides analysis of key curbside recycling attributes that influence performance, notably:

• offering recycling wherever trash pickup is available;

• using wheelie bins to collect recyclables; and

• having robust engagement from municipal recycling program managers. Characteristics of curbside recycling programs that were evaluated include container type, collection frequency, municipal solid waste (MSW) tip fee level and material mix. A number of other variables also were evaluated. Key findings from the report show that not just one program characteristic supports successful programs. Instead, many attributes combine to support strong recovery of bottles, cans, containers and paper. Annual pounds per household collected was the key performance indicator used to measure program performance. Of the 465 geographically dispersed cities researched, the average was 357 pounds per household per year with an average MSW tip fee of $47 per ton. According to the report, the cities represented in the study include at least three incorporated areas in each state, other than Alaska and Hawaii; 250 of the largest cities in the country by population; and each state capital. At least 20 percent of the homes eligible for curbside service are represented in each of the 10 EPA Regions. The study represents 28 percent of U.S. homes that could potentially receive curbside recycling service, and represents a selection of communities reflecting the diversity of curbside program attributes. Recent research by the state of North Carolina’s Department of Environmental Quality shows that there is roughly 800 to 1,000 pounds of recyclables available in the household each year. There are great opportunities to recover more of that material across the country. This curbside report points to strategies that lead to higher recovery and clearly more resources need to be made available to local governments to unlock their full potential. When evaluating programs with higher-than-average recovery (more than 400 pounds per household per year), common themes quickly took shape, The Recycling Partnership says:

• 100 percent of these programs had some type of public action that influenced curbside recycling;

• 96 percent were single-stream programs;

• 93 percent collected automatically, and

• 83 percent of those high-performing communities were using wheelie bins.

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Understanding How Program Costs and Recovery Have Changed Over Time In Ontario, the recovery of total recyclable material (per annum) of Blue Box materials has increased from 779,884 tonnes to 884,504 tonnes between the periods of 2002 and 2014. The costs of managing this system have increased by 91% during this same period. Both packaging producers and municipalities have expressed extreme concern over the inordinate rise in system costs relative to the increase in waste diversion. At this juncture, there remains considerable debate surrounding why material management costs have increased (where material management costs are defined as the costs incurred for collecting, processing and providing administrative support for recycling waste). Increases in costs have been attributed to decreased revenue from the sale of recyclable material, an increasing trend for producers to switch to “light weight” and more complex packaging, and inefficiencies in municipal waste collection and processing systems. However, is it possible that rising system costs are a result of the province’s decision to emphasize diversion and recycling of the broadest range of materials? While the 90s and much of the 2000s were characterized by numerous successes, our provincial Blue Box recycling rate has stalled in recent years and actually decreased in the past two. Recycling system costs have increased by more than $100 million dollars since the Waste Diversion Act’s formal inception. This study attempts to explore some of the potential drivers for increases in recycling system costs over the past decade. York University has already been exploring the economic drivers of recycling behavior for quite a while, but this was our first attempt to quantify the relationship between changes in the packaging mix and increases in recycling system costs (using the historical data set from the Stewardship Ontario Pay in Model). From 2003 (used for 2004 and 2005 fees as well) to 2016, the average net cost per tonne has increased from $150 to $287 a tonne. However, this data is expressed in nominal terms. Using our inflation adjusted data, we observe that net costs per tonne has increased from $135 to $221 a tonne (a ~63% increase). While bad, this is a slightly better story than the 91% increase observed using the nominal data. However, given that one of the common assumptions surrounding increases in recycling cost are attributed to changes in the packaging mix, the next step was to model a scenario that constructed a “hypothetical Blue Box”. In our hypothetical scenario, we consider a program that does not collect non-core materials Instead, the Blue Box is confined to the “core” materials, i.e. Printed Paper, Boxboard/Cardboard, PET/HDPE Bottles, Steel, Aluminum and Glass. In our modeled scenario, the inflation adjusted net cost per tonne has increased from $124 to $171 a tonne – a 39% increase over time. In the modeled scenario, the projected rate of increase (with respect to system costs) is much lower. Things are suddenly starting to look interesting. Now let’s take it one step further and compare the recycling rates of our current and hypothetical system. Suddenly our “lagging Blue Box” doesn’t look so bad – we are actually recycling more than 80% of the material that public readily recognizes as being part of the Blue Box.

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This figure is perhaps the most telling, as it illustrates the challenges of attempting to manage non-core materials. Their presence within the recycling system results in significant cost increases, while contributed negligibly to overall diversion rates. When viewed relative to the modeled scenario, the inclusion of non-core materials is adversely impacting both costs and recycling rate performance for the system as a whole. While we will concede that there are probably exogenous drivers of system cost that are being omitted from this regression, the explanatory power of our model is sufficiently high to make informed statements. Changes in the cost of Printed Paper, Composite Packaging and Other Plastics are the most significant drivers of changes in system cost over time. Printed paper is an interesting result, in that it is actually considered one of the “core” materials, and has a low net cost for recycling relative to other Blue Box materials. This, in part, is explained by printed paper making up a significant portion of all Blue Box materials recovered. Even small changes in the cost of managing printed paper are likely to affect the overall cost of managing the program. Other Plastics is also responsible for a significant portion of the overall increase in system costs, lending credence to the municipal position that these materials are difficult to manage within the existing Blue Box system. While we are reluctant to offer any definitive guidance regarding what materials actually belong in the Blue Box program, it is time to start asking difficult questions regarding what we want the future of Ontario’s recycling system to look like. Particularly in light of the Waste-Free Ontario legislation, there is now an opportunity to revisit what materials are included in the Blue Box program, and perhaps add clarity to what should constitute an obligated vs a non obligated material. This study is not meant to provide any answers, but merely elucidate the economic challenges facing recycling stakeholders. The hope is to start a conversation about what changes need to be made moving forward. Ontario has achieved some amazing things with the Blue Box program and continues to be a global leader in residential recycling. However, the province needs to be able to glean from previous experiences, and be adaptable, flexible and willing to ask tough questions in order to come to rational and evidenced based decisions.

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How Demographics and Technology Explain the Evolving Tonne Blue Box materials are changing, and have been since 2008 or earlier—on that we all agree. We even have a name for what is going on: The Evolving Tonne. This term refers to the fact that the Blue Box mix has less paper and more plastic than it used to and this changing mix is causing havoc for collection and processing systems, and well as for markets where it is increasingly hard to meet market specifications. The reasons for The Evolving Tonne? A combination of:

• Demographics

• The Internet/smart/handheld devices

• Our changing lifestyles and demand for convenience

Millennials, which combine all three. First, let’s recap on what is happening to Canadian demographics, and how these influence what is in the Blue Box: Canadians are getting older, living longer, and more are living alone. Over 65s currently account for 11 per cent of the Canadian population and this is expected to double over the next 20 years as Baby Boomers (those born 1945 to 1963) get older. An older person living alone wants convenient packaging, re-sealable packaging, and products in small portion packaging. This leads to higher volumes of smaller packaging in MRFs. Re-sealable packaging is typically in stand-up pouches (SUPs), which are not recyclable. And smaller packages are a nuisance in MRFs. One MRF operator told me he used to get 20,000 rejects an hour. Now he gets 120,000. This means a lot more material he receives ends up in residue rather than as valuable recyclables sent into the market. Canadian households are smaller for a host of reasons—fewer children, first marriage later, divorce, voluntarily single, more Canadians are living alone or with one other person, 61 per cent of Canadian households are one or two-person households. This means people don’t spend time cooking big family meals (no one there to eat with), so Canadians eat a lot more take-out food and prepared meals than they used to. Two-worker families. Two-worker families mean no one has time to shop and cook, again leading to an increased demand for take-out food and pre-prepared meals, all of which come in extensive packaging. Millennials are the demographic born between 1980 and 2000, so are 16 to 36 now. We all know lots of them. In fact, we have 9.5 million millennials in Canada alone. Collectively, Millennials are the largest global demographic, and they get a lot of attention from marketers. Millennials love convenience, love their smart devices, and are digital natives. They feel a personal connection to their preferred brands—“what does my brand say about me?”

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Millennials live with (sleep with) their smart devices and get their news online, but not from newsprint newspapers. They are snackers (average four snacks per day) and like individualized, individually packaged snacks. They don’t cook. They like mostly good quality take-out food. Predictions are that over time 10 to 30 per cent of meals will be hand-delivered rather than cooked at home. They purchase a lot online (which leads to more packaging). They live with their parents but seek high quality reliable products that speak to their goals for social economic status. The Internet (has changed everything). We are in the midst of the most fundamental technology change of our time—the Internet, which has effectively changed everything. We can order goods online. They are delivered to our home in cardboard boxes. We can read news online and not buy a paper newspaper. We can order food online and it will be delivered to our home… yes, again, in lots of packaging. The growth in pouches. The stand-up pouch has been a very successful package that has really taken off in the last few years. It has great barrier properties, is re-sealable, and can display beautiful graphics. It is lighter for transportation and takes up less space than traditional packaging for some products. The growth rate for this package is anticipated to be 4 to 5 per cent per year. The problem is, it is not yet recyclable as it is a multi-layer package that combines different materials. How the Blue Box mix is changing When you put all this together – technology change, demographics, lifestyle trends and a demand for convenience – it leads to a world where newsprint newspapers are in decline, although online versions of newspapers survive, convenient single serve or re-sealable packaging use is increasing rapidly, and there is a significant increase in packaging from Internet shopping deliveries. This combination presents significant challenges for MRF operators. How MRF Operators Adapt to Evolving Tonne MRF operators have been watching as printed paper declines and multi-layer packaging increases over the last seven or eight years. As each new trend emerges, MRF processing equipment evolves to address the challenge—more optical sorters, screens, and other technologies to separate one material from another and clean up material mixes for market, but there is a lag of a few years between the time material mix changes are noticed and equipment design catches up. All we know for sure is that the Blue Box mix is changing constantly, and will continue to change, and we need to learn to adapt rapidly to these on-going changes.

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Can You Hear Me Now? This line may have been made famous by a cell phone company bragging about their coverage but the reality is that in the information age, it is more difficult than ever to reach everyone. Less than 20% of households subscribe to a local paper. It is not that long ago that local newspaper production exceeded the number of households in a community because everyone subscribed and they were sold to businesses and on every corner. Newspapers were the source for news. Gone are the days where the front-page of the newspaper had all the power. Today, the front page is often clouded in a complicated media muddle made up of mobile apps, web content and social media. So to help you adapt to this media metamorphosis, there’s a number of reasons why using different outreach channels is key to building an engaged recycling network in your municipality. Up to 35% of residential property do not receive “junk mail”. Canada Post customers are able to subscribe to a service called Consumer Choice which allows Canada Post to skip their mailbox when it comes to unaddressed ad mail. This means it is becoming extremely difficult to reach everyone to send notices or even collection calendars. Only about 16% of residents go their municipality’s website Analytics across a number of municipality webpages in North America show that only an average of 16% of residents visited their municipalities website for recycling information. This figure illustrates the pressing demand to reach the remaining 84% through different channels of communication. Exploiting a number of different outlets (both tradition and technological) is key to widening the reach of your public program, allowing residents to engage with local recycling information in a format that flows with their lifestyle. Different residents tune into different channels In the past, residents across North America were often tuned into the same channels at the same time. The entire country would be watching the world series for example, or the whole “town” would tune into their local radio station for news at 6 o’clock. The local and national newspapers too, were read by almost everyone, and published every morning, like clockwork. In the pre-internet days, communication channels were much simpler and somewhat one-dimensional. Today, residents from municipalities both big and small are tuned into a multitude of channels. The rise of the internet has created a more complex maze of communication and has fragmented residents in new ways. Print material like newspaper articles, flyers, calendars and newsletters are still tapped into by older demographics. And local radio is still relevant in communities where driving is the main form of transportation. But digital channels like websites and mobile apps, however, have become increasingly preferred by specific demographics. The 22-55 population, for example, is a group of multitaskers with busy schedules, who use their smartphones to ingest information every single day. And because they are so pressed for time, they want to be able to access recycling information, on demand, and at a time that is convenient for them. Residents above the age of 55 are

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also buying into the digital movement too-- plugging into tablets, laptops and even desktop computers. So being strategic with your communications plan and leveraging both traditional and digital channels are effective ways to reach more residents, within a range of demographics. It increases the accessibility of your program Providing a number of ways for residents to find recycling information makes your public program more accessible and approachable. And to make your outreach even more seamless (and to bridge the divide between print and digital communication), you can also hone into perfecting the art of “in person” community events. Recycling events like city-wide garage sales, can help provide residents with a “face” or physical entry point to your program, complementing and adding value to your overall outreach. By using a variety of outreach channels, your program will leave “no stone unturned” in its pursuit to reach residents young and old.

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Regulatory Update Ontario Passes New Waste-Free Ontario Act Ontario has passed legislation ushering in full producer-paid recycling of packaging materials throughout the province of more than 13 million people. The Legislative Assembly of Ontario approved the Waste-Free Ontario Act, or Bill 151, on June 1. The law replaces the Waste Diversion Act of 2002, under which producers split the costs of recycling printed paper and packaging with municipalities. From the launch of the Waste Diversion Act’s review in the fall of 2008, to the introduction of the failed Bill 91 in 2013, to the recent passing of Bill 151, the Waste-Free Ontario Act, legislative reform on waste diversion in Ontario has been a long time coming. The bill, which was generally supported by representatives of the recycling industry, government and product producers, sets the stage for a transition to complete extended producer responsibility (EPR) for paper and packaging. In EPR systems, brand owners are charged with funding and managing end-of-life concerns for the products they put on the market. Bill 151 makes product makers solely responsible for the costs of curbside recycling and other recycling programs. It overhauls the current regulatory body, Waste Diversion Ontario, into a new oversight and enforcement body called the Resource Productivity and Recovery Authority. Passage of the bill makes Ontario the largest jurisdiction in North America to implement fully producer-paid EPR. According to Ontario's Ministry of the Environment and Climate Change, the province is working to finalize a plan for implementing the law. According to a draft plan, it's expected to take two to four years to transition to producer control of existing programs for the recycling of municipal hazardous or special waste, electronics and appliances and used tires. But handing over funding responsibility and control of the Blue Box program, the province's curbside recycling program for printed paper and packaging, may take longer. Currently, industry group Stewardship Ontario collects fees from printed paper and packaging producers and uses the money to partially compensate municipalities for their costs of collecting and recycling the materials. Transitioning that 12-year-old program could be a lengthy process because government, municipalities and producers need time to iron out important details. Stakeholders will need to address existing municipal contracts for collection and management of recyclables and the role municipalities' waste management systems will play in the new system. Also up for discussion is the harmonization of the list of accepted materials, which currently differs by municipality. Strategy for a Waste-Free Ontario: Building the Circular Economy within three months of the legislation coming into effect. The strategy outlines Ontario's vision for a zero waste future and proposed plan to implement the legislation.

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Ontario's Strategy for a Waste-Free Ontario: Building the Circular Economy Ontario is working to create a zero-waste future with the launch of a strategy that will divert more waste from landfills, create jobs and help fight climate change. On March 1st, 2017 Minister of the Environment and Climate Change Glen Murray announced Ontario's Strategy for a Waste-Free Ontario: Building the Circular Economy. This new strategy outlines the province's plan to fight climate change by reducing landfilled materials that could otherwise be reused, recycled, composted and reintegrated into the economy. The strategy includes 15 concrete actions to build up the province's circular economy and help reduce greenhouse gas emissions from landfills, such as:

• Requiring producers to take full responsibility for the environmental and financial management of their products and packaging, including small appliances, electrical tools, batteries, fluorescent bulbs, mattresses, carpets, clothing and furniture

• Implementing a framework to reduce the volume of food and organic waste going to landfill

• Requiring industrial, commercial and institutional sectors to divert more of the waste they produce from landfills

• Banning certain materials, such as food waste, beverage containers, corrugated cardboard and fluorescent bulbs and tubes, from disposal and driving creative strategies to reuse and recycle these items

• Improving oversight and accountability in the waste management sector, including by requiring producers to register and report on their waste management activities

• Reducing waste and building a circular economy is part of our plan to create jobs, grow our economy and help people in their everyday lives.

Key issues for municipalities that are outlined in the Strategy are:

• New legislation makes Producers fully responsible for end-of-life management of designated products and packaging. Municipal governments have traditionally played a key role in waste diversion programs.

• Wind-up and transition of existing diversion programs for Blue Box, Municipal Hazardous and Special Waste, Waste Electrical and Electronic Equipment, and Tires to the Resource Recovery and Circular Economy Act. Regulations will be developed for each of these programs.

• The Organics Action Plan intends to ban food waste from disposal in 2022 and may also create new revenue opportunities with increased demand for renewable natural gas.

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The Waste Diversion Transition Act, 2016 The Waste Diversion Transition Act, 2016 (WDTA) provides the Ministry of the Environment and Climate Change with an approach to wind-up the four existing waste diversion programs that were established, and are currently operating under, the Waste Diversion Act, 2002 (WDA). The WDTA enables the wind-up of the industry funding organizations that operate these programs. In order to wind-up the programs and the industry funding organizations under the WDTA, the programs and their governing regulations must first be transferred from the WDA to the WDTA. The Ministry of the Environment and Climate Change passed regulations under the WDTA for the purposes of transferring the four waste diversion programs to the WDTA. Until the programs are wound-up and the wastes managed under the programs are transitioned to the new producer responsibility framework under the Resource Recovery and Circular Economy Act, 2016, the programs will operate under the WDTA. The four waste diversion programs are for:

• blue box waste; • municipal hazardous or special waste; • used tires; and • waste electrical and electronic equipment.

The regulations continue to address the designation of wastes, governance of the three industry funding organizations;

• Ontario Tire Stewardship, • Ontario Electronic Stewardship • Stewardship Ontario, and • as well as prescribe a cost recovery fee methodology for the used tire and municipal

hazardous or special waste programs. The regulations came into force with the coming into force of the WDTA and the repeal of the Waste Diversion Act, 2002. The regulations enable the smooth transfer of the existing waste diversion programs from the WDA to the WDTA, as well as the wind-up of the programs under the WDTA once the wastes managed under the programs are transitioned to the new producer responsibility framework under the Resource Recovery and Circular Economy Act, 2016.

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Food and Organic Waste Action Plan Development Under Way This initiative is part of the "next steps" arising from The Resource Recovery and Circular Economy Act, 2016 and the Waste Diversion Transition Act 2016 which came into force on November 30, 2016. The Resource Recovery and Circular Economy Act, 2016 identifies the provincial interest in the establishment of resource recovery and waste reduction system and establishes a new producer responsibility regime and requires the province to develop the "Strategy for a Waste-Free Ontario: Building the Circular Economy" (the Strategy). A key action in the strategy (Action #10) is developing and implementing a Food and Organic Waste Action Plan. The ministry proposes that the Food and Organic Waste Action Plan will:

• Reduce the amount of food that becomes waste

• Remove food and appropriate organic materials from the disposal stream

• Reduce GHG emissions from food and organic waste

• Support and stimulate end markets to recover the value from food and organic wastes

• Increase accountability of responsible parties

• Improve data on food and organic materials The ministry has established a Stakeholder Working Group (SWG) that enables: open discussion of the issues; solutions associated with tools; and, actions to increase diversion of food and organic waste. Chaired by the ministry, the SWG will discuss current and emerging barriers/challenges and opportunities associated with reducing food waste and increasing diversion of organic materials in the residential and IC&I sectors, as well as discuss tools and actions that may be considered to increase organics diversion. The members will provide advice on the:

• Issues facing food and organic waste reduction and resource recovery

• Outcomes setting and tools/actions identification to increase organic materials diversion

• Complementary measures to support increased organics diversion (eg. streamlining approvals to support increased organics processing capacity

The Ontario Ministry of Environment and Climate Change's (MOECC) first meeting of the Food and Organic Waste Framework Stakeholder Working Group was held January 19th, 2017. It is the MOECC’s intent to develop a plan for consideration by the end of 2017.

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Province To Shut Down Ontario Tire Stewardship By 2018 Ontario’s environment minister is closing the province’s troubled tire recycling agency after stories exposed suspicious money transfers, allegations of fraud and wasteful executive spending. Glen Murray, minister of the environment and climate change, said the Ontario Tire Stewardship, the smallest and least complex of Ontario’s three government-created recycling programs, will be the first eliminated under new legislation designed to improve the recycling process in Ontario. In a letter sent to the stewardship on Feb. 17, Murray gave executive director Andrew Horsman a deadline of Oct. 31 to submit a wind-up plan for the province’s waste oversight authority. That plan, “requires the cessation of operations by Dec. 31, 2018.” Murray’s statement said the stewardship must be “transparent and clear” with the public. It must “avoid disruption” of its tire recycling program until the end date and “not adversely affect Ontario’s tire marketplace.” Another key point, according to the Ontario Waste Management Association, is the disbursement of the stewardship’s surplus. Last year, the surplus hit $49.5 million — ultimately from consumer eco-fees — and the association questioned where that money would go when the program eventually ended. Murray’s letter said assets must be managed in a “fair, open and transparent process.” Horsman, of the tire stewardship, said his office is “evaluating the direction provided” and referred additional questions to the minister or the oversight authority. The Waste-Free Ontario Act, which came into force in November, will eventually dissolve all three government-created recycling programs for tires, old electronics and hazardous household waste. The tire stewardship is currently the only program that has been given a timeline to end its operations. It is headquartered in Etobicoke, where stewardship staff control the collection and movement of used tires. The goal of the new law is to force producers and retailers to take individual responsibility for their products by creating innovative recycling programs. Murray said the issues raised “certainly put a red flag in the middle of this. I think the industry wants to put this behind it and get a clean start.”

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Information requirements from Ontario Tire Stewardship For many years the collection of tires by municipalities has been an important part of the province’s waste diversion effort. Since the introduction of legislation creating diversion program for tires many municipalities have worked with the Ontario Tire Stewardship (OTS) as partners in the recovery and recycling of tires. In recent months, however, municipalities have had difficulty receiving payments due to a lack of tracking of personal information on users. In particular, the new requirement for municipalities to gather and store personal information from public users of these programs. These new information gathering requirements from these steward organizations may be in breach of current privacy legislation, as well as posing operational barriers which may lead to reconsideration of partnership arrangements and agreements for some programs.

WDO Board Approves Automotive Materials Stewardship (AMS) ISP On August 10, the WDO Board approved Automotive Materials Stewardship’s (AMS’s) ISP to manage automotive materials (antifreeze/antifreeze containers, oil filters, and oil containers). The Board discussed the issue of the AMS governance structure and by laws to be developed, and determined that these should be reviewed by WDO and approved by WDO prior to any implementation date. AMS committed to collect and divert the same amount of automotive materials than the current MHSW program. The Board has required that AMS will be subject to corrective action by WDO should they fail to maintain Stewardship Ontario’s reported performance for 2015. In addition, AMS will maintain current collection sites for consumers. The Board also required that WDO and AMS, following transition of the ISP, review the available for collection factors and following the completion of this review modify them if necessary. The Resource Productivity and Recovery Authority (the Authority) has determined that April 1, 2017 will be the effective date of Automotive Materials Stewardship’s (AMS) Industry Stewardship Plan (ISP) for the following automotive materials: Oil Containers, Oil Filters, and Antifreeze. On April 1, 2017, the management of AMS materials will transition from the current MHSW Program ("Orange Drop") operated by Stewardship Ontario to the new program operated by AMS. Product Care Association is the Industry Stewardship Organization that operates the WDO Board-approved Industry Stewardship Plans for paint, and pesticides, solvents and fertilizers ("ReGeneration" Programs). SodaStream Canada is the Industry Stewardship Organization that operates the WDO Board-approved Industry Stewardship Plan for their proprietary carbon dioxide (CO2) cylinders.

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Environmental Review Tribunal Decision On Director's Order Against Peel Regarding Ownership And Responsibility Of Waste The Director’s Order attempted to assign responsibility to the Region of Peel for waste that had been transferred in ownership and responsibility to a third-party facility with a valid C of A (ECA). The inclusion of a previous owner of waste in the Order was a serious departure from the Environmental Protection Act (EPA) and past decisions. These actions, if successful, would have set precedence that would move the EPA towards the U.S. ‘superfund’ framework whereby the original generator of waste and all parties that handle the waste to final disposition can be held financially responsible for removal or remediation if problems occur. The City of Toronto and Ontario Waste Management Association supported the Region of Peel’s motion to appeal the Director’s Order. The ERT found in favour of the arguments made by the Region of Peel, the OWMA and the City of Toronto and revoked the 2015 Director’s Order. The decision included the following arguments:

• It is clear that Part V [of the EPA] is intended to provide an incentive for “good behaviour” (i.e. depositing waste only at locations approved to receive it).

• S. 42(5) of the EPA in this case should provide certainty to actors in society generally, and the waste industry in particular … The Tribunal accepts that “reading in” the powers proposed by the Director would remove that certainty and leave parties exposed to unanticipated legal liability. If the Legislature finds that the Director should have such power, it can be clearly included in legislation. It is not there currently.

• The Tribunal agrees …that the MOECC is the regulator … and as such, it was the MOECC’s responsibility to enforce the ECA, not Peel’s.

The MOECC appealed the decision and lost again.

Minister of Transportation Rejects Slow Down Move Over Law In a letter to the mayor of Hamilton the Minister wrote “The Ministry of Transportation encourages all drivers to slow down and move over when passing a potential hazard along a roadway, especially vehicles with activated flashing lights or hazard lights. This message is a part of our ongoing public education activities. In 2015, Ontario extended the "Slow Down, Move Over" law to include tow trucks stopped at roadside with their flashing amber lights activated. These requirements reflect the need of emergency first responders and tow truck operators to provide assistance in high-risk, high-speed and often uncontrolled roadside situations. Waste/recycling collection vehicles are not included in this law and there is currently no provision under the HTA to require traffic to yield the right of way to these vehicles. Although waste/recycling collection personnel generally operate at roadside, their duties are generally conducted on safer, more predictable low-speed residential roadways. Further, waste collection workers, unlike tow truck operators and emergency personnel, are typically insulated from passing traffic by their vehicle. For these reasons, we are not looking into additional amendments to the HTA with regards to waste/recycling collection vehicles. However, we will continue to monitor this issue and respond accordingly.”

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Landfill Assessment Methodology Review On June 30, 2016, the Minister of Finance accepted the recommendations of the PricewaterhouseCooper (PwC) report on landfill assessment methodology. There are concerns by inaccuracies in the report and the direction provided. The main concerns revolve around two aspects of the recommendations: • The creation of a new property tax class and tax ratios specific to landfills, and, • Mandatory data collection, which negates the right of appeal. The recommendation to establish a new property tax class for landfills with corresponding tax-ratio ranges has the overall impact of making the valuation methodology meaningless. It is not in keeping with the approach taken by the province in dealing with similar property types, and removes the commonly applied principle of equity in taxation between similar properties. We are not aware of any other jurisdiction that has taken a similar approach. Further, no explanation in the report is provided as to why a completely separate property tax class is necessary or what makes this property type so different that it should be treated differently. There is also no indication as to how a landfill will be defined for property tax purposes and how co-located facilities like transfer stations, recycling facilities or compost facilities will be dealt with to ensure they are treated in an equitable tax manner. The recommendation also provides a significant amount of uncertainty about the potential magnitude of impact. We have no guidance as to what the targeted tax ratios will be and the potential impact versus current taxes. Depending on the magnitude of the impact, these ratios have the potential to create significant distortions in the waste management marketplace and change the cost structure within the province. It could also exacerbate the exportation of waste from the province and increase tensions with Michigan. The data required by the Ministry to assess landfills through the historic cost methodology is all publicly available as part of the Environmental Approvals process through the Ministry of the Environment and Climate Change. It remains unclear why the Ministry of Finance would need to make this data collection mandatory over the short-term. With the move to an income-based approach, mandatory data collection may need to be necessary, but it comes with a whole host of problematic questions that must be addressed. The Ontario government has filed a regulation to establish tax ratios for the Landfill Property Class. Ontario Reg. 95/17: Tax Matters – Transition Ratios and Average Transition Ratios. Ministry officials stated that they do not plan to move forward with any changes around mandatory data submissions and restricting the right to appeal in the near term (eg this would be necessary for next cycle when the income approach is applied). No plan has been made yet on how consultations will occur or when they might happen but the Ministry was clear that would include the sector in this consultation before a draft regulation was posted. Ministry staff said that they were not expecting any significant tax changes and the goal was to provide a stable outcome.

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Ontario’s Climate Change Action Plan Ontario’s provincial government has released the details of it’s sweeping plan to address climate change, and it includes plenty of financial incentives to get more efficient cars and trucks on the roads and to convince homeowners and businesses to lower their carbon footprints. But it’s going to be expensive. The plan earmark’s between $5.9 billion and $8.3 billion to spend on climate change initiatives over the next five years. The money would come from the $1.9 billion the Liberal government expects to raise each year by auctioning off pollution emission credits when Ontario joins a cap-and-trade market with Quebec and California next January. Most greenhouse gas (GHG) emissions data is presented in a form that greatly undervalues the role the waste management sector can and does play in contributing to GHG emission reductions. As a result, policy-makers often overlook the role the sector can play in the development of carbon policies. The Ontario Government was no exception. The value of waste management sector should be viewed from the perspective of the cascading benefits it can provide to the energy, forestry, agriculture, mining, transport, and manufacturing sectors in reducing GHG emissions through reuse, recycling, composting, anaerobic digestion, and other forms of energy recovery. While the waste management sector has already reduced emissions over the years, there is additional potential for reductions in this sector. However, this potential will not be achieved, if policy-makers do not holistically seek to leverage them. As a result policy-makers should: • Improve data capture and presentation to more accurately reflect the contribution of these activities and aid in the development of future protocols and other reduction mechanisms. • Ensure reduction related activities are properly acknowledged through the creation of offset protocols and conversely ensure they are not adversely impacted if they are caught under the cap. • Aid in the development of offset protocols for the sector to ensure the appropriate nature and content with a focus on reducing potential administrative burdens. • Assist the government with potential opportunities where Allowance Funds collected can further drive emission reductions. Ontario’s goal is to reduce its greenhouse gas emissions by 15 per cent from 1990 levels by 2020, by 37 per cent in 2030 and by 80 per cent in 2050.

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U.S. Adopts Stricter Fuel Standards For Heavy Trucks, Canada Plans To Follow Suit Liberals Planning To Propose New Heavy Truck Emissions Rules By End Of 2016 The Obama administration adopted previously-announced standards to make large trucks, buses and other heavy-duty vehicles more fuel efficient, and the Canadian government says it plans to follow suit. About 70 per cent of all freight transported in the U.S. is moved by trucks, and the heavy vehicles are blamed for more than one-fifth of all transportation-related fuel consumption and associated GHG emissions. The new regulations will bring in stricter carbon and fuel consumption regulations, requiring improvements of up to 25 per cent for certain tractors. The Environmental Protection Agency (EPA) and the U.S. Transportation Department say the standards will cut carbon pollution while saving vehicle owners billions of dollars in fuel costs and conserving tens of billions of gallons of oil. While an earlier round of U.S. fuel-efficiency standards applied to vehicles in model years 2014-2018, the standards adopted Aug. 16 apply through 2027. The new rules also mandate heavy-duty pickups and vans will have to become 2.5 per cent more efficient annually between 2021 and 2027. Canada’s Liberal government congratulated the EPA and Transportation Department on the news.

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Plans For Diesel Bans Are Spreading The cities of Paris, Mexico City, Madrid, and Athens will have stopped the use of diesel cars and trucks by 2025, the mayors of those cities announced at a conference in Mexico. And you can expect others to follow suit soon. Germany has decided to ban the sales of all internal combustion engines by 2030. After that time, only zero-emission vehicles will be allowed on the market according to RoadandTrack.com. The ban was first introduced in October. The resolution was passed in Germany's Bundesrat, the nation's legislative body representing the 16 German states, with across-the-aisle support. Early reports say the ban will follow a series of tax incentives designed to hasten the replacement of internal combustion engines with alternative fuels and modes of transport. The European Union had earlier come out with a recommendation to ban the sale of new internal-combustion-powered vehicles but the EU has no legislative power. Germany, however, is the largest and most influential member of the EU, so there’s a good likelihood other countries will follow its lead. According to the German periodical Der Spiegel, Germany wants to reduce carbon dioxide emissions by as much as 95% by 2050. The mayors of Mexico City, Paris, Madrid and Athens say they will offer incentives for alternative modes of transport, including walking and cycling. In their statements, the mayors cited World Health Organization statistics that suggests approximately 3 million deaths every year can be linked to outdoor air pollution.

ISRI Changes Material Specifications The Institute of Scrap Recycling Industries (ISRI), Washington, announced that changes to the plastic specifications have been published in the “Scrap Specifications Circular.” These changes were approved to better reflect what commodities are being traded in the marketplace to assist members in buying and selling materials and products, the association says. They were developed in consultation with plastic scrap recycling industry members and other plastics industry associations. The MRF glass specifications were approved by the divisions at the Fall Board & Committee Meetings in Salt Lake City Nov. 4, 2016. The inbound MRF specifications were approved by the divisions during the Winter ISRI Board & Committee Meetings Jan. 9, 2017. Both were developed in consultation with ISRI’s MRF Council and paper and plastic scrap recycling industry members with extensive experience working with scrap streams sourced from municipal collection facilities and programs. The circular also was updated to reflect the June 30, 2017, deadline extension of the deletion of certain old paper specifications. ISRI’s scrap specifications are internationally recognized guidelines used by buyers and sellers of recycled materials and products, including nonferrous and ferrous scrap, glass, paper stock, plastic, electronics and tire scrap. The specifications are intended to assist in the trading of scrap commodities and are regularly reviewed and updated to reflect the expanding range of commercially recyclable materials.

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Revised ANSI Standard on Mobile Equipment and Processing Facilities The National Waste & Recycling Association (NWRA) announced that the American National Standards Institute (ANSI) approved the revision of the mobile equipment standard Z245.1-2017. This revision replaces the Provisional Amendment from 2014 and the standard from 2012. Standard Z245.1-2017 applies to the construction, reconstruction, modification, care, maintenance, operation and use of mobile waste or recyclable materials collecting, transportation and compacting equipment. This standard identifies requirements for refuse collecting and compacting equipment mounted on refuse truck chassis: rear-loading, front-loading, and side-loading compacting equipment; roll-off and hoist-type equipment; grapple vehicles; satellite vehicles; waste transfer trailers; recycling collection vehicles; and mobile equipment with container and cart lifting equipment. The revision of standard Z245.1-2017 includes:

• Removal of specific fall protection sections – while acknowledging for each company to conduct a hazard assessment for their specific equipment;

• Clarification of collection operation, transit, and using the restraining device

• Implementation of new signage In November 2015, the association published the revised industry standard pertaining to the design, manufacturing, operation and maintaining of material recovery facilities (MRFs).The standard for “Equipment Technology and Operations for Wastes and Recyclable Materials – Facilities for the Processing of Commingled Recyclable Materials – Safety Requirements”, otherwise known as ANSI Z245.41-2015 was last updated in 2008. The standard specifically addresses single stream processing, including sorting done mechanically using equipment such as separator screens, optical sorters, and glass breakers. In this method, material is quality control checked by employees performing manual sorting of the final product. The previous standard that was released in 2008 focused on dual stream processing systems more relevant to older recycling practices. In December, the Bureau of Labor Statistics revealed the final 2015 figures for industry and occupational fatalities. Total fatalities for refuse and recyclable material collectors rose from 27 to 33—matching 2013 for the greater number of fatalities since 2006. The fatal injury rate hit 38.8 per 100,000 workers—the highest level since 2006. As the designated Secretariat for ANSI Standards for the waste and recycling industry for more than 50 years, NWRA also coordinates the ongoing development of new and revised standards for both equipment and protective gear.

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Property, Plant and Equipment As of December 31, 2016, the Association owned two facilities totalling approximately 90,000 ft2 and its associated parcels of real estate property used in its operations. The Association owns its corporate headquarters, which also serves as the Material Recovery Facility in Huron Park, Ontario. The second facility is the Association's main repair shop for the fleet, which is located next door to our Material Recovery Facility. As of December 31, 2016, the Association utilized approximately 46 waste collection vehicles and other support vehicles, all of which are owned. The majority of our vehicles are highly specialized automated co-collection vehicles to collect waste and recyclables at the same time. The Association upgraded its Material Recovery Facility in 2009. It was the most advanced facility in the marketplace at the time and it remains so in our service area. It is a unique facility maximizing the use of technology to minimize manual sorting effectively reducing repetitive strain injuries. The Material Recovery Facility is able to process single stream materials, which enables us to facilitate changes in our collection procedure and technology used to collect materials. The collection conversion began in 2008 with one vehicle. Most of the fleet has been replaced with the most recent type of automated vehicles.

Employees As of December 31, 2016, the Association employed approximately 74 full-time employees, including 6 persons classified as professionals or managers, 37 employees involved in collection, 28 in the material recovery operations, and 3 clerical, data processing or other administrative employees. The Teamsters union with which the

Association has a collective bargaining agreement expiring December 1, 2017 represents approximately 68 employees at the Association’s operating facilities. The Association typically negotiates a three to four year collective bargaining agreement in the last year of any current agreement. The Association is not aware of any other organizational efforts among its employees and believes that relations with its employees are very good.

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Operations As of December 31, 2016, the Association served approximately 92,000 customers, comprised of 87,000 residential clients and 5,000 commercial clients. The following table sets forth certain information regarding the Association’s revenues by category of activity for the last three years.

Bluewater Recycling Association Revenue Summary

2016 2015 2014

Residential Collection $8,410,314 $8,038,024 $8,198,618

Material Sales 1,812,206 1,267,971 1,689,551

Processing & Disposal 380,719 325,204 298,638

Commercial Collection 1,042,058 804,224 727,682

Other 58,379 66,484 90,640

TOTAL $11,703,676 $10,501,907 $11,005,129

Residential Collection Services The Association’s long-term solid waste collection contracts with municipalities typically contain a formula, generally based on a pre-determined published price index, for automatic adjustment to fees to cover increases in some, but not all, operating costs plus a pass-through of any disposal cost increases. Under the terms of each of these agreements, the Association has exclusive rights to provide certain services to the community. Most of these agreements were bid on a competitive basis, and rates for all services are set forth in the agreement. Fees for recycling collection services are based primarily on a joint cooperative agreement reviewed annually while fees for residential solid waste collection services are based primarily on route density, the frequency and level of service, the distance to the disposal or processing facility, the cost of disposal or processing and prices charged in the Association’s markets for similar services.

Processing and Disposal The Association offers municipal, commercial and industrial customers services for a variety of recyclable materials, including newspaper, mixed paper, cardboard, office paper, plastic containers, glass bottles, and ferrous and aluminum metals. The Association owns and operates a Material Recovery Facility (MRF) in Huron Park, Ontario. The Association believes that recycling will continue to be an important component of local solid waste management plans due to the public’s increasing environmental awareness and regulations that mandate or encourage recycling.

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The Association disposes of the waste it collects in one of two ways: • at municipally owned landfills; or • at privately owned third party landfills. The Association seeks to secure favourable long-term disposal arrangements with municipalities or private owners of landfills. The Association’s ability to maintain competitive prices for its commercial waste collection services is generally dependent upon its ability to secure favourable disposal pricing.

Commercial Collection The Association’s commercial collection services are performed principally under service agreements. Fees are determined by a variety of factors, including collection frequency, level of service, route density, the type, volume and weight of the waste collected, type of equipment and containers furnished, the distance to the disposal or processing facility, the cost of disposal or processing and prices charged by competitors for similar services. Commercial collection vehicles normally require one operator. The Association provides 2 to 40 cubic yard containers to commercial customers. This area, while secondary to the Association's mandate, remains the fastest growing segment of our business because of the lack of serious competition in the immediate area.

Commodity Sales The Association sells all materials recovered through its operation of the Material Recovery Facility in Huron Park. The sale of those materials is subject to fluctuations in market prices affected by current global events and by the volume of materials that flows through the facility from our own collection operations and that of other collectors. The market prices during 2016 averaged $125 per tonne, which was higher than the previous year at $105 per tonne as a result of a rise in demand globally.

Sales and Marketing The Association has a diverse customer base, with no single contract or customer accounting for more than 10% of revenues during the year ended December 31, 2016.

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Service Area

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Management’s Responsibility for Financial Reporting Management and the Board of Directors are responsible for the financial statements and all other information presented in this annual report in accordance with the Financial Administration Act and Regulations. The financial statements have been prepared by management in accordance with generally accepted accounting principles and, where appropriate, include amounts based on management's estimates and judgment. Management has developed and maintains books of account, records, financial and management control, and information systems and management practices. These are designed to provide reasonable assurance as to the reliability of financial information, with the Financial Administration Act and Regulations as well as the by-laws of the Corporation. The Board of Directors ensures that management fulfills its responsibilities for financial reporting and internal control. The Board of Directors meets monthly to oversee the financial activities of the Corporation, and to review the financial statements and the auditors' annual report. The Corporation's external auditors, Pinder, Taylor, McNeilly, Godkin Licensed Public Accountants examine the financial statements and report to the membership.

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Auditor’s Report To the Members of the Bluewater Recycling Association We have audited the accompanying financial statements of Bluewater Recycling Association which comprise the statement of financial position as at December 31, 2016 and the statements of fund operations and changes in fund balances and cash flow for the year then ended, and a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian generally accepted accounting principles, and for such internal controls as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, these financial statements present fairly, in all material respects, the financial position of Bluewater Recycling Association as at December 31, 2016 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. March 16, 2017 PTMG LLP Exeter, Ontario Licensed Public Accountants

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Statement of Financial Position

On Behalf of the Board: Chairman President See accompanying notes to the financial statements.

Year ended December 31Operating

FundCapital Asset

FundCapital Reserve

Fund Total 2016 Total 2015

ASSETSCurrent Assets

Cash 618,252$ 122,487$ -$ 740,739$ 452,536$ Accounts Receivable 1,539,748 - - 1,539,748 827,479 Grants receivable - - - - - Inventory (Note 2) 132,336 - - 132,336 112,476 Prepaid expenses & deposits 121,516 - - 121,516 138,650

2,411,852 122,487 - 2,534,339 1,531,141

Capital Assets (Note 3) - 10,951,476 - 10,951,476 11,103,954 2,411,852$ 11,073,963$ -$ 13,485,815$ 12,635,095$

LIABILITIESCurrent Liabilities

Accounts Payable and accrued charges (Note 4) 710,821$ -$ -$ 710,821$ 590,502$ Interfund loans (advances) 1,701,031 - (1,701,031) - - Current portion of long term debt (Note 5) - 4,603,351 - 4,603,351 3,948,677

2,411,852 4,603,351 (1,701,031) 5,314,172 4,539,179 Long Term Debt (Note 5) - 836,178 - 836,178 1,375,221

2,411,852 5,439,529 (1,701,031) 6,150,350 5,914,400 Commitments (Note 7)

FUND BALANCESInvested in capital assets -$ 5,634,434$ -$ 5,634,434$ 5,801,971$ Internally restricted - - 1,701,031 1,701,031 918,724

- 5,634,434 1,701,031 7,335,465 6,720,695 2,411,852$ 11,073,963$ -$ 13,485,815$ 12,635,095$

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Statement of Fund Operations and Changes in Fund Balances

See accompanying notes to the financial statements

Capital CapitalAsset Reserve Total Total

Year ended December 31 2016 2015 2016 2016 2016 2015Revenue

Municipal levies 6,600,290$ 6,260,529$ -$ -$ -$ -$ Recyclable products 1,812,206 1,267,971 - - - -

Operating FundRestricted Funds

Operating grants 1,810,024 1,777,495 - - - - Front End 1,042,058 804,224 - - - - Other Income 424,491 378,664 - - - - Composters and collection supplies 14,607 13,024 - - - -

11,703,676 10,501,907 - - - -

ExpensesCost of Sales - Recyclables & Freight 137,866 155,127 - - - - Composters and Collection Supplies 17,230 11,273 - - - - Disposal Fees 1,133,451 1,018,207 - - - - Administrative Expenses (Schedule) 843,123 821,883 - - - - Collection Expenses (Schedule) 4,772,949 4,883,448 - - - - Processing Expenses (Schedule) 1,792,850 1,697,311 - - - - Interest on long term debt - - 191,230 - 191,230 219,497 Amortization of capital assets - - 2,206,617 - 2,206,617 2,122,746 Gain on disposal of capital assets - - (6,410) - (6,410) -

8,697,469 8,587,249 2,391,437 - 2,391,437 2,342,243 Excess (Deficiency) of Revenue Over Expenses 3,006,207 1,914,658 (2,391,437) - (2,391,437) (2,342,243) Fund Balance, Beginning of Year - - 5,801,971 918,724 6,720,695 7,148,280 Interfund transfers (3,006,207) (1,914,658) 2,223,900 782,307 3,006,207 1,914,658 Fund Balance, End of Year -$ -$ 5,634,434$ 1,701,031$ 7,335,465$ 6,720,695$

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Statement of Cash Flow

See accompanying notes to the financial statements

Year ended December 31 2016 2015

Cash Provided by (Used in)OperationsExcess (Deficiency) of revenue over expenses

Operating Fund 3,006,207$ 1,914,658$ Capital Asset Fund (2,391,437) (2,342,243)

614,770 (427,585)

Items not involving a cash paymentAmortization 2,206,617 2,122,746 Gain on disposal of capital assets (6,410) -

2,814,977 1,695,161

Changes in non-cash working capital items:Decrease (Increase) in accounts receivable (712,269) 332,919 Decrease (Increase) in inventory and prepaid expenses (2,726) (32,072) Increase (Decrease) in accounts payable and accrued charges 120,323 3,046

2,220,305 1,999,054

FinancingAdditional long term debt 2,362,781 2,131,511 Repayment of long term debt (2,247,152) (1,976,352) Repayment of obligations under capital leases - (77,571)

115,629 77,588

InvestingPurchase of capital assets (Note 3) (2,054,141) (2,395,012) Proceeds on disposal of capital assets 6,410 -

(2,047,731) (2,395,012)

Net Increase (Decrease) in cash 288,203 (318,370) Cash, Beginning of Year 452,536 770,906 Cash, End of Year 740,739$ 452,536$

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Notes to the Financial Statements (December 31, 2016)

Purpose Of The Organization The Bluewater Recycling Association is a multi-municipal resource management organization providing integrated waste reduction and environmental services including the collection, processing and marketing of resource based products and services. The corporation is a non-profit organization incorporated without share capital under the Laws of Ontario and is exempt from income taxes.

Accounting Estimates Financial statements are based on representations that often require estimates to be made in anticipation of future transactions and events and include measurements that may, by their nature, be approximations.

Fund Accounting The organization follows the restricted fund method of accounting for contributions. The Operating Fund accounts for the organization's program delivery and administrative costs. This fund reports unrestricted resources and restricted operating grants. The Capital Asset Fund reports the assets, liabilities, revenues and expenses related to the organization's capital assets. The Capital Reserve Fund reports the assets, liabilities, revenues and expenses related to the organization's capital asset replacements. The annual Operating Fund surplus or deficit is transferred to this fund. Amounts are transferred from this fund to the Capital Asset Fund as funds are required to purchase capital assets.

Revenue Recognition Restricted contributions related to general operations are recognized as revenue of the Operating Fund in the year in which the related expenses are incurred. All other restricted contributions are recognized as revenue during the course of the year as the budgeted amounts are invoiced. Revenue from recyclable products is recognized when the commodities are shipped. Revenue from services is recognized as the related services are performed.

Inventory Inventory is comprised of recyclable materials and collection supplies. Recyclable materials are stated at their net realizable value. Collection supplies are stated at the lower of cost and replacement value. Cost is determined on a first in, first out basis.

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1. Summary Of Significant Accounting Policies Capital Assets and Amortization: Capital assets are capitalized for financial statement purposes in the year of acquisition. The cost of repairs and maintenance of a routine nature are charged to operations while those expenditures that improve or extend the useful life of the assets are capitalized. The corporation provides for amortization on its capital assets using the straight-line method at rates set out below, based upon management's estimates of the useful life of the respective assets. Buildings 5% Collection Supplies 10% - 20% Office furniture and equipment 10% - 30% Processing machinery and equipment 10% and 20% Automotive equipment 10% and 30%

Capital Leases Capital leases which transfer substantially all of the benefits and inherent risks related to ownership of the property leased to the organization are capitalized by recording as assets and liabilities the present value of the payments under leases. The property leased and recorded in this way is amortized over its useful life. Rental payments are recorded partly against the amount of the obligation and partly as interest.

Pension Agreement The Association participates in the Ontario Municipal Employees Retirement System (OMERS), which is a multi-employer plan, on behalf of its employees. The plan is a contributory defined benefit plan, which specifies the amount of the retirement benefit to be received by employees based on length of service and rates of pay. The amount contributed to OMERS for 2016 was $286,306 (2015 - $288,223) for current service. These payments are included as expenditure in the financial statements. OMERS sets the pension contribution rate annually to ensure that the plan remains fully funded. The pension contribution rate for 2016 was 9.0% of regular wages.

Foreign Currency Transactions Transactions which are completed in United States dollars are translated into Canadian dollars by the use of the exchange rate in effect the day of the transaction. At the balance sheet date, monetary items denominated in foreign currency are adjusted to reflect the exchange rate in effect at that date.

2. Inventory

2016 2015Recyclable Inventory 49,335$ 27,106$ Collection Supplies 83,001 85,370

132,336$ 112,476$

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3. Capital Assets

4. Accounts Payable

2015

Capital assets are classified as follows: CostAccumulated Depreciation Net Book Value Net Book Value

Land 124,830$ -$ 124,830$ 124,830$ Buildings 2,129,254 1,019,622 1,109,632 1,101,438 Collection Supplies 5,300,541 2,580,328 2,720,213 2,594,965 Office Furniture and Equipment 501,381 466,583 34,798 57,961 Processing machinery and Equipment 5,273,294 3,729,476 1,543,818 2,005,459 Automotive Equipment 14,771,820 9,353,635 5,418,185 5,219,301

28,101,120$ 17,149,644$ 10,951,476$ 11,103,954$

2016

Purchase of capital assets: 2016 2015Land and Buildings 104,306$ 147,523$ Collection supplies 607,744 534,742 Office furniture and equipment 3,822 29,152 Processing machinery and equipment 38,841 81,489 Automotive equipment 1,299,428 1,602,106

2,054,141$ 2,395,012$

2016 2015Accounts Payable 667,038$ 542,349$ Government remittances payable 43,783 48,153

710,821$ 590,502$

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5. Long Term Debt The following table outlines outstanding bank term and equipment loan repayable in monthly installments consisting of the outlined principal plus monthly interest, and are secured by vehicles and a general security agreement or the equipment only.

Long term debt repayments due over the next five years are as follows:

The bank terms loans are also secured by a general security agreement covering all of the association's assets, chattel mortgages over equipment financed and a first charge collateral mortgage of $1,000,000 on real estate. The Association has an authorized operating loan line bearing interest at the bank's prime rate with a credit limit of $200,000

Rate Instalments Due Date 2016 2015Prime 4,167$ August 2026 483,334$ -$ 5.05% 10,250 July 2020 430,500 553,500 5.05% 11,606 April 2020 426,543 541,107 Prime 7,250 May 2021 384,250 - Prime 10,364 September 2019 362,745 476,750 Prime 6,833 February 2021 341,667 - 5.09% 11,253 March 2020 308,321 393,308 Prime 5,833 February 2021 291,667 - Prime 9,750 June 2019 282,750 399,750 Prime 8,667 July 2019 268,667 372,667 4.25% 11,657 October 2018 246,289 372,771 Prime 4,166 November 2021 245,834 - Prime 3,916 November 2021 231,084 - Prime 5,833 February 2020 221,667 291,667 4.25% 8,261 October 2018 174,595 264,225 3.98% 2,835 August 2021 144,651 Prime 4,833 January 2019 120,833 178,833 Prime 9,167 December 2017 100,833 210,833 5.50% 11,253 June 2017 66,448 193,998 5.50% 11,253 June 2017 66,448 193,998 5.50% 10,514 June 2017 62,087 181,266 Prime 7,500 August 2017 52,500 142,500 Prime 883 September 2020 38,867 49,467 Prime 750 October 2020 34,500 43,500 Prime 1,000 May 2019 28,000 40,000 6.02% 12,971 February 2017 24,449 173,739 Prime 8,000 November 2016 - 88,000 4.70% 8,334 August 2016 - 66,592 5.93% 4,337 December 2016 - 50,427 Prime 7,500 June 2016 - 45,000

5,439,529 5,323,898Less amounts due within one year 4,603,351 3,948,677

836,178$ 1,375,221$

2017 4,603,351$ 2018 446,207 2019 263,470 2020 104,159 2021 22,342

5,439,529$

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and an approved capital expenditure credit facility for equipment purchases of up to $4,500,000 of which $943,049 has not been used at December 31, 2016. Although there are loans included in the long term debt that are due on demand or come due within the next fiscal year, management does not believe that the demand features of the loans will be exercised; the scheduled principal repayments on the long term debt for the next five years and thereafter are as follows:

6. Government Assistance The Association received $155,475 (2015 - $147,784) of government assistance from Waste Diversion Ontario under the Continuous Improvement Fund Project for the purchase of recycling wheelie bins. The assistance has been deducted from the cost of the capital asset purchase. In 2009 the Association received $2,000,000 in government assistance from Waste Diversion Ontario, which was deducted from the cost of the related capital asset purchase. The agreement stipulates that a portion of the assistance will be repayable if the related equipment is removed from operation prior to the end of its useful life and replaced with equipment of lesser value.

7. Commitments Prior to December 31, 2016, the Association entered into an agreement to purchase two fleet trucks with the balance of $490,000 payable upon delivery in 2017, The Association has arranged financing with its existing lenders for this purchase. The Association has also issued a $40,000 Letter of Credit through the Bank of Montreal in favour of a customer.

8. Financial Instruments The company has interest rate risk due to having bank loans subject to floating interest rates and is exposed to fluctuations based on the bank’s prime rate of interest. It is management's opinion that the Association is not exposed to significant credit risks.

2017 1,850,952$ 2018 1,460,171 2019 1,094,320 2020 577,888 2021 222,859

2022 and future years 233,339 5,439,529$

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2016 Management

Board of Directors Chairman Todd Case, Warwick Vice-Chairman Brad Richards, Strathroy Caradoc

Huron Marnie Hill, Bluewater Tom Tomes, South Huron

Lambton Jason Meyer, Dawn-Euphemia Todd Case, Warwick

Middlesex Andy Van Geel, Lucan Biddulph Brad Richards, Strathroy Caradoc

Perth Ken Buchanan, North Perth

Jim Craigmile, St. Marys

Management President Francis Veilleux, since inception Vice President Mathew Keeley, since July 1994

Controller Michelle Courtney, since December 2016 Fleet Manager Doug Tilford, since September 2001

Operations Manager Terry Erb, since February 2001

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Membership Huron County Municipality of Bluewater Municipality of Central Huron Municipality of Huron East Municipality of South Huron Town of Goderich Township of Morris-Turnberry (Associate)

Lambton County Municipality of Lambton Shores Township of Brooke Alvinston Township of Dawn/Euphemia Township of Warwick Village of Oil Springs

Middlesex County Municipality of Middlesex Centre Municipality of North Middlesex Township of Adelaide Metcalfe Township of Lucan-Biddulph Township of Strathroy-Caradoc

Perth County City of Stratford (Associate) Municipality of North Perth Municipality of West Perth Town of St. Marys Township of Perth East (Associate) Township of Perth South The Association also services other communities under contracts and/or through subcontractors. Associate Members have no voting rights.

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Corporate Directory

Head Office Bluewater Recycling Association P.O. Box 547 415 Canada Avenue Huron Park ON N0M 1Y0

Solicitors McKenzie Lake Barristers & Solicitors 140 Fullarton Street, Suite 1800 London ON N6A 5P2

Auditors PTMG LLP Chartered Accountants 71 Main Street, North Exeter ON N0M 1S3

Financial Institution Bank of Montreal 400 Main Street Exeter ON N0M 1S3