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The lengthy Blue Box funding arbitration decision under the Waste Diversion Act has been confusing for some readers. One incorrectly wrote:

Aspects of computer modelling used for the Blue Box negotiations were viewed as flawed by the arbitrator, potentially paving the way for smaller payments to municipalities in the future.”

In fact, the flaws in the rejected model are precisely why municipalities have received smaller payments since 2009. Now that this model has been discredited, municipalities will receive larger payments, just as they did in 2014. This is why the Arbitrator awarded municipalities nearly twenty million dollars more than Stewardship Ontario proposed to pay for 2014.

  1. What do the flaws in the computer model mean for future Steward Obligations?

The flawed computer model that the arbitrator rejected was the so-called “Baseline Cost Model” that Stewardship Ontario relied on. Stewardship Ontario has used this model in past years to drive down payments to municipalities, and used it in the arbitration to propose a payment of approximately $95 million instead of the ~$115 million that was awarded. The arbitrator found that municipal witnesses raised legitimate concerns about the model[1] and that the model did not produce a reliable figure about Blue Box program costs.[2]

The Arbitrator did not use the model in his decision, and did not recommend that it be used in future years. He left it open to WDO and the parties “to revisit in the future if there is the goodwill and the basis to do so.”[3]

  1. Reasonableness

The reader wrote: “In the future, total net costs may have to meet a reasonableness threshold that takes cost containment principles into account.”

This will not reduce payments in future years. The Arbitrator concluded that the Datacall, as verified by WDO, is “sensible, thorough and reliable,” already does meet the reasonableness threshold and is informed by the principles of cost containment.[4] This is precisely why he awarded municipalities ~$115 million, the total amount that municipalities requested. Mr. Armstrong recommended that the same Datacall method should be how costs are determined in future years.[5]

In most past years, stewards have not paid a full 50% of Datacall results.

[1] Decision at para. 216.

[2] Decision at para. 224.

[3] Decision at para. 292.

[4] Decision at 229 to 241, para. 291.

[5] Decision at para. 290.

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