OTS Wind Up Plan: Key Issues September 2017 1
OTS Wind Up Plan Issues and Proposals • Context • Key Operational Issues and Proposals: • Termination of OTS Incentive Payments; • TreadMarks Transition; • Data Release Proposal; • Wind up of OTS Communication & R& D Activities; • Stakeholder Communications Plan; • Coordination of Transition with Post OTS Stakeholders • Key Financial Issues: • OTS Financial Overview; • Issues Affecting Financial Forecast: • OTS Contingency Fund Estimate • 2017 Used Tire Volume Processing Issue • Potential HST Obligation • OTR Account Balance Reconciliation OTS Contingency Fund; • Other Financial Issues Raised During Consultation; • Disposition of Potential OTS residual fund DRAFT - PROPRIETARY TO OTS 2 2
OTS Wind Up Plan Context • Minister’s Wind-up Directions: February 17, 2017; • June 29, 2017. • • Stakeholder feedback Resource Productivity Recovery Authority (RPRA) Industry Funding • Organization (IFO) Wind-up Guide; Key Timelines: • OTS to submit wind up plan to RPRA by October 31, 2017; – RPRA, following consultation, to approve a plan by March 31, 2018; – Used Tire program to cease operations December 31, 2018 (as per – Minister's direction Feb 17, 2017); DRAFT - PROPRIETARY TO OTS 3 3
Ministerial Directions February Letter: Plan should be consistent with following principles: No disruption in the operation of the waste diversion program during wind up; • Current program targets must be maintained until program ceases operations; • Affected stakeholders must have opportunities for meaningful engagement; • Plan shall not result in unfair or preferential treatment of the public or affected • stakeholders. June Letter: • Interests of current and future tire consumers should be considered in options dealing with program surpluses and deficits; • Where possible, rules should eliminate fees for PLT tires to minimize surplus funds - by May 1, 2018 or as soon as feasible. DRAFT - PROPRIETARY TO OTS 4
RPRA Guiding Principles Plan must be Fair and Equitable; • Minimal impact to stakeholders - Minimal disruption to stakeholders- Any • excess funds must be allocated to stewards; Defined and Measurable Scope - Must address Section 14 of WDTA and • Ministerial Directions • Transparency - Public and affected stakeholders must receive clear communications and have opportunity for meaningful engagement; • Commercial Reasonability - Assets, liabilities, rights and obligations of IFO to be dealt with in a reasonable manner; Integrity and Protection of Data - Data shall be safeguarded; • Independence and professionalism - Must be maintained by Board members • and management; Fiscal Responsibility and Operating Performance - Performance targets must • be maintained - spending limited to necessary program expenditures. DRAFT - PROPRIETARY TO OTS 5
OTS Termination of Incentive Payments OTS reviewed 3 options related to Termination of Incentive • Payments with stakeholders during consultation: 1. Minimal inventory recognition – only operational stakeholder activities completed prior to December 31 – would be eligible for OTS incentive payments; 2. On hand inventory recognition – stakeholder inventories held as of December 31, 2018 would be eligible for OTS incentive payments; 3. Full Inventory recognition – All used tires collected prior to Dec 31, 2018 would be eligible for full range of OTS incentive payments. Estimate Termination of Incentive Option 2019 Cost Scenario 1 $1.5 Million (Assumes bump in claims in 2018) Scenario 2 $8.8 Million Scenario 3 $15.4 Million DRAFT - PROPRIETARY TO OTS 6 6
Termination of OTS Incentive Payments: Stakeholder Feedback Most important wind up issue for virtually all OTS recycling partners (i.e. • collectors, haulers, processors and recycled product manufacturers (RPMs); Program participants universally support recognition of existing material • inventories as of December 31, 2018: – Indicated lack of inventory recognition would lead to supply chain disruptions in 2018 as termination date nears; • Some stewards also support clear legal distinction between OTS tires (collected 2018) and RRCEA tires (collected January 2019): Do not want to assume legal liability for waste collected in 2018. – Conversely, little stakeholder support for limiting OTS incentive payments to • activities completed before Dec. 31, 2018 (Option 1). DRAFT - PROPRIETARY TO OTS 7 7
OTS Termination of Incentive Payments: Preferred Stakeholder Position Option 3: Full Inventory Recognition: OTS pays full range of incentives on used tires collected in 2018; • OTS establishes claims schedule/audit procedures for 2019 to ensure no • overlap with 2019 used tire materials; Reduces estimated 2019 program reserve funds to approximately $1 million • (see Financial Discussion). Implications Associated with Option: • Minimize risks of disruption to used tire recycling during wind up; • Inventory recognition will support smoother transition process; • Addresses a number of criteria included in both Ministerial Directions and RPRA Guiding Principles; Treats all stakeholders fairly - processors; manufacturers will not be adversely • affected in relation to competitors due to differences in seasonal inventory levels; Clean legal option - no confusion about liabilities/obligations in relation to • used tires collected in 2018 under RRCEA framework; • Some administrative complexity for OTS in 2019. DRAFT - PROPRIETARY TO OTS 8 8
Transition of OTS TreadMarks During earlier consultation, stakeholder's expressed broad support for OTS's • proposal to transitioning TreadMarks: Make TreadMarks available for use by any post-OTS PRO/brand holder responsible for – used tire diversion in Ontario at nominal cost. Proposal: OTS Wind Up plan include detailed transition proposal for TreadMarks • Implications: Helps minimize disruption during transition as all stakeholders have access to • TreadMarks technology; Does not create preferential treatment or impact competition between Resource • Recovery and Circular Economy Act (RRCEA) brand holders. DRAFT - PROPRIETARY TO OTS 9 9
Tire Sales and Recycling Data • Stakeholders expressed broad support for OTS's proposed Approach: Aggregate OTS tire sale and recycling data for release to post-OTS brand holders and – recycling participants in electronic form at nominal cost; Protect commercially confidential information. – • Some stakeholders reserved judgment pending review of proposed OTS aggregated data outline. Proposal: OTS Data release to include: • – Aggregated Provincial Sales by Tire Category PLT, MT and OTR; Collection data aggregated by Geographic zones by tire category (PLT, MT and OTR); – Processors: Inbound tonnage and aggregate output TDP by processor; – RPMs: Inbound tonnage and aggregate output TDP by RPM; – Data plan will also include timing of release and periods (e.g. OTS will release data – March 31, 2018 for the calendar years 2017 and 2016) • OTS will also consider release of company specific data to third parties with upon request and authorization of company (i.e. Steward sales, more detailed processor outputs; etc.) DRAFT - PROPRIETARY TO OTS 10 10 10 10 10 10 10
Tire Sales and Recycling Data Geographic Zones for Collection reporting • DRAFT DRAFT DRAFT DRAFT 11 11 11 11 11 11 11 DRAFT - PROPRIETARY TO OTS
OTS Proposal for Wind Down of Communications and Research and Development Activities Continue in 2018 • Community Renewal Fund Grants & Demonstration Builds (projects will completed by December 2018) • RPM & Processor Market Support Consumer Rebate Programs • • Consumer & Trade Shows PR & Communications Outreach • Special tire collection events (e.g. OARA) • Wind-Up in 2017 Design Challenge • R & D Grants • Third-party Spokespeople • RethinkTires RoadTrip • 2018 P&E reductions result in budget being approximately 40% less than 7+5 2017 Forecast 12 12 DRAFT - PROPRIETARY TO OTS
Transition of Communications Assets Where possible, OTS will provide marketing communications • assets for free download/availability via a secure sharefile site. – Materials will be available as of July 1, 2018 to anyone who registers for access (e.g.: PROS/Obligated Parties); – This site will be live until Jan 31, 2019. These assets will include things like: • – Design files for POS/Ads/infographics; – Photography (where rights are allowed); Availability will assist brand holders in developing their own • marketing communications materials. DRAFT - PROPRIETARY TO OTS 13 13
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