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Report calls cost efficiencies of contracting out Toronto's garbage collection 'fictional'

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The financial analysis and decision making process to contract out Toronto's garbage collection is "seriously flawed and grossly inadequate," according to a new report prepared by a group of forensic accountants.

"Available facts do not support the Staff's claims and claims of cost savings could easily become additional costs for contracting out," said the report authours.

"Material, relevant cost information is either not available, or has not been assembled, from the City's accounting systems. In the absence of basic cost data, it is troublesome to us as to how Staff can make assertions regarding anticipated savings, much less expect City Council to make major contractual commitments based upon faulty analysis and unsupported estimates."

At the end of April, the Public Works Committee and the City recommended that curbside collection west of Yonge Street known as District 2, city wide Litter Vac Operations, Parks Litter Bin Collections and ad hoc supplementary collection services be contracted out to private companies.

Toronto Civic Employees' Union, Local 416, asked for an opinion from Rosen and Associates Limited, a firm of litigation and investigative accountants, on the financial aspects of the proposed contracting out.

"Staff's financial analysis, can be characterized as cursory or perfunctory, at best," said the report. "We further understand that no intention exists for Staff to prepare a competitive in-house bid should Council agree to put the various contracts to tender."

The report noted that the method by Staff to arrive at cost savings is based upon "a very narrow assumption and is conceptually flawed."

Staff assumed that the lower wages paid by a private contractor would means savings for the City. However, said the report authors, once normal profit margins for the industry are considered, anticipated savings are almost eliminated.

Staff compared collection costs in District 2 to District 1 (the former City of Etobicoke) to highlight the anticipated cost savings between private and public sector collection. The report, however, said that District 1 and 2 are very different. Only a comparison between two similar districts could yield reliable comparisons.

Furthermore, Staff has failed to consider labour redeployment costs if garbage collection is contracted out, thus underestimating contracting out costs.

Rosen and Associates Limited said that in spite of numerous requests to the City for "relevant, additional information," important data has not been provided or "supposedly is not available."

The report concluded that "the Staff's analysis should not be relied upon by City Council for its decision-making on contracting out" because "the Staff's analysis is superficial, incomplete or unrealistic."

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