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F O R B U I L D I N G O W N E R S , A S S E T A N D P R O P E R T Y M A N AG E R S

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TABLE OF CONTENTS

CONTENTS 04

08

COVER STORY

04

SHAKING OFF COVID Office and retail stake out relevance

IN THIS ISSUE

08

FLASHBACK TO THE ‘90S Ontario’s delayed reassessment ties property tax apportionment to outdated values

14

SNOWBALLING LIABILITY Winter maintenance contractors pass through insurance pressures

17

DIMINISHING CAPACITY Auditor General reports ICI and multi-res waste is gobbling up landfill space

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SHAKING OFF COVID Office and Retail Stake Out Relevance

BY BARBARA CARSS

O

ffice and retail were diagnosed as stricken asset classes early in the COVID-19 pandemic. With some properties already suffering from pre-existing conditions, fears of looming work-from-home and e-commerce conquests abounded.

However, after 20 months on the disabled list,

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conventional venues for labour and shopping are rallying to fight for market share.

Speaking at an online event earlier this fall, in conjunction with the release of the 2022 Emerging Trends in Real Estate report from PwC and the Urban Land Institute (ULI), commercial real estate insiders advised that

investors are engaged and most tenants aren’t going anywhere. In the Greater Toronto Area and farther afield, there’s general optimism that health-related uncertainties are abating, along with recognition that today’s challenges are instead tied to the economic and cultural

MARKET OUTLOOK

upheaval the pandemic either unleashed or accelerated.

“It’s more apparent in the U.S. where you see 150,000 people going to a college football game, but they won’t go back to the office,” reflected Ashley Lawrence, Managing Director and Head of Canadian real estate with Brookfield Property Group.

It’s become the de facto premise that, given the option, many people will choose to continue working outside formal office settings, and that employers bent on attracting and retaining talented staff will accommodate those wishes. Yet, it’s also assumed that many people who adapted to working from home over the course of the pandemic could be open to readapting to an office workplace, at least some of the time.

What’s been termed “the great resignation” to describe a recent escalation in career moves in some sectors could bolster the latter likelihood, as new hires are introduced into and seek to forge relationships within organizations. Lawrence predicts it will also place a priority on enticing valued employees to stay, ultimately reorienting the purpose of the office.

“If they work for Company A in their offices at home, they have the exact same environment as if they work for Company B in their offices at home. Those two or three days when they’re in the [formal] office, that’s where you’re going to set the culture,” he maintained. “If you have employees who are only in the office two days a week, those 8-hour or 9-hour days become much more vitally important to engagement with the company.”

AWAITING WORKFORCE RETURN It’s expected that many office buildings, particularly in downtown locations, will be sparsely occupied for the remainder of 2021, but increasing numbers of corporate tenants will bring their workforces back in-house in the new year. Lawrence hypothesizes employers have been using the third and fourth quarters of this year to suss out staff needs and demands, and plan for new arrangements.

“Some of the delays we’re seeing in returnto-office are about figuring out how and when and who is going to be back in the office, and for what purpose,” he said. “It’s not easy to switch up an office configuration if you’re a bank. It’s a lot of money and a lot of time.”

Players in the suburban space, such as Jaime McKenna, Managing Director and

“WITH A LOT OF INSTITUTIONAL OWNERSHIP OF OFFICE BUILDINGS IN ALL THE MAJOR MARKETS, THESE OWNERS CAN RIDE OUT THE STORM PRETTY WELL.” Group Head of real estate with Fengate Asset Management, suggest the low-density, carfriendly characteristics of office parks gained stature with employers and employees over the course of the pandemic. Companies with satellite hubs outside the downtown could provide a less congested office environment and — noteworthy for those who shunned public transportation in pre-vaccine days — minimized driving frustrations.

“We’ve already seen activity pick up substantially in 2021 and that’s because of satellite office,” she reported.

The next challenge is holding that interest when downtown locations regain their attractiveness — one that Fengate has tackled with the introduction of a food delivery service and by working to identify other opportunities to bring urban conveniences within easier reach.

“If we’re going to get people out of their homes and into the office again, it’s got to be a little bit less disruptive than what we were used to pre-pandemic,” McKenna said. “I’m very bullish on the suburban office market if you can combine that convenience with the availability of satellite office space to reduce commute times.”

INVESTMENT SENTIMENT Canadian executives surveyed for the Emerging Trends in Real Estate study have a similar outlook on downtown and suburban office assets. Both property types rank as “fair” investment and development prospects — at below 3.5, above 2, on a scale of 1 to 5 — with suburban office nudging slightly ahead.

As well, the niche sub-class of medical office, which is not differentiated by location, garners a “good” assessment — above 3.8; below 4 — from prospective investors and developers.

Opinion is somewhat more split on acquisition and disposition with just 15% of respondents agreeing that it’s a good time to sell centrally located office, versus 24% expressing that opinion about suburban stock.

Additionally, 55% favour buying medical office and just 9% endorse selling it.

Colin Johnston, President, research, valuation and advisory, for Altus Group in Canada, pointed to the number of office building deals in Toronto, Montreal and Vancouver this year with no sign of discounted values. In Toronto, 10 million square feet of new office space currently under construction is about 65% pre-leased, and the city was one of North America’s tightest office markets prior to the pandemic. He pegs today’s higher vacancies — with a downtown Class A rate of 9.9% as of the third quarter — as within an acceptable range.

“Lease availability did rise, but we saw rental rates not really eroding much. We saw TIAs (tenant improvement allowances) and landlord packages. With a lot of institutional ownership of office buildings in all the major markets, these owners can ride out the storm pretty well. As long as you’ve got term and you’ve got covenant, values will continue to hold,” Johnston maintained. “A lot of people are continuing to bet on office. People still believe there is a need for office in the future and that’s why people are stepping up with investment dollars.”

Investors have shown robust renewed interest in almost all asset classes. Johnston cited the 56% uptick in activity for first six months of 2021 compared to 2020 and, perhaps more tellingly, the 30% increase over the first six months of 2019. That’s a trend that Canadian respondents to the Emerging Trends survey project will continue, with 62% of them foreseeing an oversupply of equity capital for investing in 2022.

Retail assets aren’t expected to capture the bulk of that, as outlet centres, power centres and regional malls were the three lowest ranked investment prospects among 24 asset sub-classes. However, only regional malls were actually rated “poor”, with a score of 2 on the scale of 1 to 5, and neighbourhood/ community malls cracked the “good” rankings, with a score of 3.77.

“I’m a big fan of our opportunities in grocery-anchored retail going forward. It’s an asset class that’s really weathered the storm www.REMInetwork.com

5

MARKET OUTLOOK

through the pandemic,” concurred Andrew Duncan, Chief Investment Officer with RioCan Real Estate Investment Trust.

RETAIL REGROUPS RioCan REIT’s move into the multifamily rental sector in the years prior to the pandemic now looks particularly well-timed. Within its retail base, pandemic-related business curtailments had varying repercussions. As of Q3 2021, Duncan confirmed those assets were 60% occupied with tenants proffering 95% of owed rents, which is on par with pre-pandemic trends.

“What the pandemic’s done is created further bifurcation of retail in terms of sub asset classes, like grocery-anchored strips versus enclosed versus unenclosed,” he said.

“They’re all very different assets and are underwritten in value very differently. We’ve got all of that, and we’re responding to each of those asset classes differently.”

“The owners of retail need to reimagine their retail assets to stay relevant and, more importantly, to really just preserve value,” asserted Frank Magliocco, Partner and National Real Estate Leader with PwC

Canada. “In PwC’s recent study of Canadian consumer shopping trends, it found many consumer behaviours that became entrenched during the lockdowns are really persisting. As retail landlords look to adapt in response to these changes, the focus is shifting toward repurposing spaces to stay relevant for consumers, and finding new ways that they can bring value to retailers and their customers, such as sharing data and offering more diverse experiences, shared community services and a better retail mix.”

Johnston offered the 16% increase in yearover-year bricks-and-mortar retail sales for the first seven months of 2021 as evidence that it’s no longer ceding market share to e-commerce at the same spiking rate as in 2020. Nevertheless, e-commerce now accounts for an estimated 12 to 15% of total Canadian retail sales compared to 7 to 8% two years ago.

“What’s nice to see is that clothing has bounced back in a significant way,” he observed. “Clothing and fashion was one of the categories most hit, and most associated with enclosed shopping centres, so to see that rebound has been encouraging.”

For now, restaurants and food halls still have

a lot of ground to recover, but, for the survivors, their post-pandemic allure is something of a given.

“Food is one of the things we like. We like going out,” Johnston reiterated.

Abandoned sites are more of a rarity in Canada than the U.S., where he tallies 24 socalled ghost malls encompassing about 8 million square feet of space that have been wholly transformed into distribution centres.

Canada’s lower ratio of retail space per capita is comparatively favourable to U.S. scenarios, but it remains a tough market for malls in need of renewal. Meanwhile, many sit in prime locations that could be highly in demand for other purposes.

“The strong have gotten stronger and the weak have gotten weaker. I think we’ll just see that acceleration toward redevelopment for some of those assets,” Johnston concluded. ■ ___________________________________________ THE 2022 EMERGING TRENDS IN REAL ESTATE REPORT CAN BE FOUND AT WWW.PWC. COM/CA /EN/INDUSTRIES/REAL-ESTATE/ EMERGING-TRENDS-IN-REAL-ESTATE.HTML.

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FLASHBACK TO THE ‘90S Ontario’s delayed reassessment ties property tax apportionment to outdated values

BY BARBARA CARSS

O

ntario’s overdue property reassessment is on hold until at least 2024, leaving many commercial ratepayers with a further wait to realize tax reductions from pandemic-related value erosion. As announced earlier this fall in the provincial economic statement, market values from January 2016 will remain the benchmark for apportioning the municipal property tax burden for the 2022 and 2023 tax years — a decision that is projected to produce significant tax shifts when new assessments are finally in place and to prompt more appeals to Ontario’s Assessment Review Board in the interim.

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“It’s not a market based system anymore because we’re too far removed,” asserts David Gibson, a property tax consultant and Director with Yeoman & Company Paralegal Professional Corporation. “The four-year assessment cycle is already too long. At best, it should be one; at worst, it should be two years.

Now, the 2016 base year is going to be seven years old before it’s replaced.”

The Ontario government maintains this third postponement of a new assessment cycle, which was initially set to begin in 2021, arises from input received through its ongoing review of property assessment and taxation, involving

consultations with municipalities, residential and commercial taxpayers, and industry associations. The start-date was first pushed to 2022 and then to an unspecified date — which was nevertheless widely believed to be 2023 because the provincial Assessment Act has been amended to establish January 2021 as the base date for the market valuations — in response to the COVID-19 pandemic. That’s also the given rationale for the further delay.

“During these consultations, the government heard a wide range of views expressed by municipal and taxpayer representatives. The government has considered the advice that

PROPERTY TAX

was received and has concluded that the priority is maintaining stability for taxpayers and municipalities at this time,” the economic statement confirms.

Alternatively, Gibson speculates that neither the provincial government nor municipal councils are keen to have updated property assessment notices arrive in voters’ mailboxes in the election year of 2022.

He recalls the upheaval in the late 1990s when market value assessment was first introduced province-wide to adjust valuations that often had not been scrutinized in dozens of years. At the time, many homeowners feared that significant increases in assessed values would translate into directly corresponding increases in taxes.

“Elected officials don’t want a scenario where residential ratepayers get new assessment notices saying that in 2016 the market value was $1 million and now the market value is $2 million. They don’t want the ‘Does that mean my taxes are doubling?’ narrative during an election,” Gibson hypothesizes.

PANDEMIC NOT FACTORED On the non-residential side of the ledger

where assessment is tied to income-producing capacity, locking in 2016 market values for at least one extra year is a financial blow for many hotels, office buildings and retail centres. With the switch to a 2021 base year, 2020 income statements will be factored into the Municipal Property Assessment Corporation’s (MPAC) modelling, better reflecting the pandemic’s affect on value.

“Long delays in updating assessments are known to create inequities in taxation. It’s bad news particularly for those businesses most impacted by declining revenues and property values as a result of the economic fallout of the pandemic,” says Terry Bishop, President, Property Tax, for Altus Group in Canada. “While the Province’s stated priority is to maintain stability for taxpayers and municipalities, the last thing businesses need is stability of their tax levies when revenues have fallen dramatically.”

“With much industry devastation and depressed revenues since March of 2020, it is not acceptable to see the 2023 tax year assessments being based on pre-COVID values, and values that will be seven years old by that timeframe,” concurs Tony Elenis, President

and Chief Executive Officer of the Ontario Restaurant, Hotel and Motel Association (ORHMA). “ORHMA is disappointed in the Ontario government further postponing property tax reassessment until 2024.”

On the flipside, the delayed reassessment will provide more lead time before expected property tax increases for warehouse/ distribution and logistics facilities and multifamily rental buildings. In other Canadian jurisdictions where annual reassessment exercises occurred this year — including Alberta, British Columbia, Nova Scotia and New Brunswick — the booming light industrial sector has been on the receiving end of tax shifts within the commercial property class. Meanwhile, the multifamily sector has experienced an influx of investment capital in recent years, driving up values.

“From that perspective, looking back in the rear view mirror six or seven years doesn’t hurt them,” Gibson notes. “But, as values go up, tax rates come down. It’s not an all sum game.”

SHIFTS AHEAD Christopher Jobe, Toronto Manager for the commercial real estate advisory firm, Turner

www.REMInetwork.com

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PROPERTY TAX

Drake & Partners, projects a major change in the status quo when the reassessment finally occurs.

“Compression in capitalization rates over the seven-year span separating the valuation dates would see values increase by as much as 30 to 60% in some property classes — industrial, multi-residential and some retail, in particular — even before consideration of improvements in operating performance,” he says. “Increases on a number of sectors — hospitality, power centres, and some enclosed and neighborhood retail — are expected to be much more temperate and, in some instances, assessed values could potentially decrease.”

However, the shifts won’t necessarily fully favour the latter group of properties immediately. When recalibration of outdated assessments created extreme tax shifts within property tax classes in the late 1990s, it also spawned an elaborate cap and clawback apparatus that some municipalities, such as Toronto, still employ today.

This places a ceiling on annual assessmentrelated tax increases for designated hardhit properties but, to balance out revenue collection, reduces decreases that should be assigned to other properties.

“The complicated systems of capping, clawbacks and phase-ins were necessary in order to protect both properties from large increases and municipalities from lost revenues. These measures, while welcome by many, have the concomitant impact of decreasing the simplicity and transparency of the taxation system,” observes Giselle Kakamousias, Vice President, Property Tax, with Turner Drake & Partners. “In my opinion, the gold standard is annual reassessment with a current base date, as is revenue neutrality — i.e. any increase in the assessment base sees a corresponding decrease in tax rates.”

Similarly, the recently released Altus 2021 property tax rate benchmark report for 11 major Canadian cities links many of the peculiarities of Ottawa’s and Toronto’s property tax culture to this era, and to the long-delayed reassessment at the source of the manoeuvrings.

“The hangover from this unprecedented delay in updating assessments remains in Toronto and Ottawa to this date, having the greatest inequities in taxation and the least transparent tax system of all the cities covered in this survey,” it states.

APPEALS ON EQUITY Beyond waiting for a new assessment, property owners can appeal to Ontario’s Assessment Review Board (ARB) for an adjustment to the assessed value, and both Bishop and Gibson foresee more commercial landlords will make those efforts in 2022 and 2023. That avenue of appeal is based on equity — a stipulation in the Assessment Act that directs the ARB to reduce the assessed value, even if it is proved to be accurate, if it can be shown that similar properties in the area have lower assessed values.

Notably, the Act does not allow assessed values to be adjusted upward on properties found to have inequitable below-market assessments so appellants face only the costs of the process itself.

That could prove increasingly worthwhile if the resulting discount is in place for an extended period .

“It’s going back to being like the ‘80s and ‘90s where it’s just chasing to save tax dollars, not looking at market value,” Gibson submits.

“If we continue on this path, we’re going to end up in an environment where it’s 1998 all over again.” ■

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SNOWBALLING LIABILITY

Winter maintenance contractors pass through insurance pressures

BY REBECCA MELNYK

A

hard global insurance market has been affecting all types of service providers across Canada, but one in particular is feeling the chill — leaving property owners on treacherous footing.

Two years ago, Tony DiGiovanni, Executive Director of Landscape Ontario, began receiving weekly phone calls from snow and ice contractors. Their insurance premiums were escalating, and some, who spent years building their business, couldn’t obtain any insurance at all.

“It started off at 25%, then you’d hear stories about 40%, then 600%,” he recounts. “It’s a crisis not just for members, but eventually, if this doesn’t get solved, who is going to keep Ontario safe? It will affect everybody.”

Growing numbers of slip-and-fall claims are at the heart of the situation. Because snow and ice contractors assume control over a property during a contract, under the Occupiers’ Liability Act (OLA), they are deemed at fault if someone is injured from a slip-and-fall.

Terry Nicholson, Vice President of Clintar Landscape Management and Chair of Landscape Ontario’s Snow and Ice Sector Group, explains the costs to fight these

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DECEMBER 2021

claims are so expensive that insurance companies are most often settling them before they reach the court.

“Because there have been so many claims coming in, year after year, the rates are getting out of control; they’re not sustainable,” he says.

“In some cases, contractors are paying 15% of their revenue for just liability insurance.”

David Amadori, Senior Vice President of commercial practice with the insurance broker and risk services provider, Marsh Canada, notes that snow and ice contractors have always faced insurance challenges even in the best of times. Now, with commercial insurance premiums going up in general, this class is “firmly on the outside looking in when finding favour with insurers.”

CONDO CONSEQUENCES Meanwhile, condos are among the riskiest types of snow removal to engage with when it comes to frequency of claims. “In over 10 years, I’ve seen more slip-and-falls at condo corporations than I do at some large retail locations,” Amadori affirms.

Given condo corporations’ ownership structure, owners who make claims after

slipping and falling on the property are consequently suing themselves.

“The condo corporation policy will pay for that, but ultimately, when that happens, condo insurance grows more expensive, and the maintenance fees rise,” Amadori observes.

“It’s a self-defeating cycle.”

He identifies contingency lawyers, who offer free representation to claimants, with no recourse if a claim goes away, as a contributing factor. Contractors and their insurers are then carrying the legal costs on other side.

“Even a victory for a contractor in the current environment costs them money, and a loss for the claimant costs them zero,” Amadori says.

DiGiovanni reports companies typically settle — with payouts in the $20,000 to $30,000 range — to avoid lengthy and costly legal battles. “The bigger companies are growing bigger and the little companies are being squeezed out because they can’t afford it,” he suggests.

In turn, property managers have a smaller pool of competitive snow contractors, leading to service level erosion and higher costs. Val Khomenko, Principal Condominium Manager for Regional Group in Ottawa, agrees there is

RISK MANAGEMENT

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a financial impact for condominiums and other properties already facing their own insurance pressures.

“Smaller contractors are folding and closing shop, left and right. Fees are certainly being raised,” he says. “One of the main complaints we are also getting is the lack of labour force, which naturally affects the deliverables and the service level. Colleagues are reporting similar instances.”

Roof Assessment & Replacement Window Upgrades Site Improvements Interior Upgrades New Amenities

NEW LIMITATION ON CLAIMS Landscape Ontario’s Snow and Ice Management Sector Group has been working on a number of fronts to help keep contractors in business.

In January 2021, Bill 118 —The Occupiers' Liability Amendment Act, 2020 — came into effect in Ontario. The private member’s bill, introduced by Parry Sound-Muskoka MPP Norm Miller, reduced the statute of limitations for claims arising from snow or ice-related injuries from two years to 60 days. It’s seen as mechanism to curb frivolous claims.

“Our members were seeing the pattern that just before the two years were up, that’s when they’d get the claim,” says DiGiovanni.

“Someone was banking on the fact the data would be lost.”

With a much shorter timeline, it’s expected there will be fresher recollection of key details such as the weather conditions, amount of anti-icer application, and the type of footwear claimants were wearing. Of further support, technology now delivers time-stamped data that could help defend against frivolous claims.

Contractors should have a sense of new legislation’s impact by mid-June 2022, which would be about 60 days after this winter’s snow and ice season.

“My expectation is that the data set that exists after this winter could be quite compelling,” Amadori predicts. “It could materially reduce the amount of slip-and-falls that have been brought forth towards snow removal contractors, ultimately reduce the frequency of claims and, in turn, reduce the total costs associated with insuring this sector.”

“The erosion of risk associated with the industry from an insurer perspective could attract more insurance capital to the sector creating downward pressure on rates with more options for contractors,” he adds.

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RISK MANAGEMENT

work. It also continues to educate its members about the value of documentation.

A self-insurance retention model, inspired by the elevator industry’s experience with frequent claims, is another option. About 12 large snow contractors that couldn’t obtain insurance are pooling their insurance premium to cover their initial number of claims, and are more able to get catastrophe insurance. What isn’t spent from the investment over a period of five years is paid back.

“With that model, they're actually working to be better companies, as well,” says DiGiovanni. “Now, the claims come under their premium, so naturally, they have to be more inclined to look at all the details — doing the best job they can from a risk management perspective.”

More recently, the group of contractors has approached the Canadian Standards Association (CSA) to develop a nationally recognized standard of care for snow and ice operations.

“Often, what members have told me over the years is that judges don’t know what is a good standard to compare things to. They don’t have data so they don’t understand,” says

DiGiovanni. “How do you solve a claim when there is no standard to judge that claim on?”

SALT CONUNDRUM Looking to models in other jurisdictions, Landscape Ontario is exploring the Green Snow Pro accreditation program developed in New Hampshire. It is contingent on reducing salt use, a known groundwater contaminant, to establish criteria for proving the proper completion of work.

That complements Landscape Ontario’s membership in the Freshwater Roundtable.

The alliance — including conservation authorities, environmental protection groups, property owners and managers, multiple levels of government, legal representatives, insurers and contractors — is promoting legislation to mandate that snow operators become Smart about Salt (SAS) accredited and, thus, protected from liability unless negligent.

“We will know in the next six months if that will go anywhere,” says DiGiovanni.

Nicholson acknowledges that salt is applied far too liberally. It harms freshwater systems outside and causes damage and higher maintenance costs indoors when it is tracked into condo buildings. It’s not even a very

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effective de-icer in the short term and typically does more to aid traction than remove slippage sources.

“But it’s our only defence,” he asserts.

“Most of us are landscapers and we take care of green things first. We know that salt is damaging and we want to reduce the impact we’re having on the environment, but, because of the fear of ending up in litigation, we tend to over apply.”

Without amendments to the Occupiers’ Liability Act, those practices are unlikely to change. Nicholson frames it as an environmental and health and safety imperative.

“We’re at hospitals, schools, government buildings, recreational centres, nursing homes, condos, retail centres and other workplaces — private contractors do most of the snow removal in the province,” he tallies. “If they are leaving the industry, and insurance companies aren’t insuring new companies, then ultimately, it affects the safety of everyone in the province.” ■ ___________________________________________ REBECCA MELNYK CONDOBUSINESS

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Auditor General reports ICI and multi-res waste is gobbling up landfill space

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ubpar waste diversion results in Ontario’s ICI and multi-residential sectors are hobbling ambitious targets to conserve existing landfill capacity. Newly released recommendations from provincial Auditor General Bonnie Lysyk call for more outreach, enhanced data and firmer oversight to improve compliance with recycling regulations.

It’s currently estimated that about 50% of waste generated from Ontario’s singlefamily households and other sources eligible for municipal collection services is diverted from landfill through recycling programs for various inorganic and organic materials.

In contrast, about 85% of waste from an array of businesses, public institutions, residential buildings with six or more units and construction/demolition sites ends up in landfill, including a vast amount of recyclable material.

The value-for-money audit of waste reduction and diversion — one of five released this fall as part of the Auditor General’s annual environmental review — concludes that Ontario came close to meeting its 2020 objective to divert 30% of generated waste from landfill on the strength of the residential contribution. However, it is well off-pace to achieve stated targets of 50% diversion by 2030 and 80% diversion by 2050.

“If Ontario continues on its current trajectory of waste generation and disposal,

existing landfill capacity in the province will be filled within the next 11 to 14 years,” the audit report projects. “Our audit found that improving waste management in the IC&I sector — which generates and disposes of the majority of Ontario’s waste — holds the key to meeting the province’s waste goals, as well as to avoiding Ontario’s looming landfill shortage.”

As recommended, that would involve a three-pronged approach of: 1) expanding the base of regulated entities required to recycle, conduct waste audits and implement waste reduction plans; 2) providing more resources for compliance and beefing up enforcement of regulations; and 3) mandating a broader range of materials to be recycled.

EXEMPTIONS ABOUND The current triggers for imposing mandatory recycling and waste reduction obligations are meant to target the largest waste producers, but the audit report calculates that up to 98% of organizations in the ICI sector are not captured. Exempt entities are believed to be collectively responsible for generating more than half of the sector’s waste volume.

For example, while the six-unit threshold arguably brings the major share of multiresidential properties into the scheme, office buildings and retail malls, plazas or stores are exempt until they surpass 107,000 square feet (10,000 square metres) in size. The same goes

for construction and demolition sites smaller than 21,500 square feet (2,000 square metres), hotels and motels with fewer than 75 rooms, and schools with fewer than 350 students.

“More than 98% of businesses and institutions are not required to recycle, so they often don’t,” Lysyk submits. “Sending waste to landfills is relatively cheap, so even easily recyclable products from places like offices, restaurants, movie theatres, retail stores and warehouses end up as landfill garbage.”

The remaining 2% encompasses about 7,000 office buildings, 3,000 educational facilities, 1,500 manufacturing facilities, 1,500 to 4,000 retail venues, 800 hotels/motels and 100 hospitals. The report estimates that 100 to 600 designated construction or demolition sites in 2019 represented less than 1% of such worksites in the province that year.

The audit reveals varying commitment to compliance among those players. Data for approximately 1,260 inspections the Ministry of Environment conducted in the five-year period ending in 2019 shows an overall 88% compliance rate with buildinglevel requirements to separate out recyclable materials from the waste stream. Office and multi-residential buildings both surpassed that average.

Waste audit figures for the same period provide more insight. Multi-residential buildings are not subject to requirements for self-reported audits and waste reduction www.REMInetwork.com

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plans, but office buildings demonstrate a wide range of performance — from a low of 36% to a high of 90% waste diversion. That’s a pattern seen elsewhere, with universities exhibiting one of the widest swings from a low of 11% to a high of 81% diversion.

NARROW INSPECTION PARAMETERS The report notes that inspectors look for designated bins for recyclable materials and waste as evidence of source separation, but typically do not check to ensure recyclable material is uncontaminated with waste or organics. Nor do they require record-keeping to show that recyclables are shipped to legitimate recycling facilities.

“Broad compliance with the Source Separation Regulation does not necessarily result in higher waste diversion. The regulation does not require establishments to achieve a specific performance outcome, such as a diversion target, only to make ‘reasonable efforts’ to divert collected materials,” the audit report states.

It suggests the government’s pullback on requirements for audits and reduction plans could be part of that disconnect. Since April

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2019, Ministry inspectors have focused only on the rules for separating recyclable and waste materials, downplaying the documentation and planning exercises that are meant to steer participants’ attention to opportunities to curb waste and increase diversion.

The audit also raises serious concerns about where much of the recyclable material goes after it is sorted out at buildings — deducing that it often ends up in landfill because it is taken to transfer stations that aren’t equipped to handle it. In response, the report calls for more data and transparency.

“Establishments do not have access to information about waste industry activities to verify where recyclables are taken or to make informed decisions when contracting waste services,” it states. “The Ministry does not compile or publish information about waste management companies’ operations, such as their diversion rates, the types of materials they divert, or what they do with the materials they handle.”

ACTION URGED The Ministry is urged to update its 25-year-old list of mandated materials for recycling to add

the coffee cups, compostable packaging and an expanded range of plastics that it is now feasible to recycle. It’s also urged to more actively promote looming targets for diverting organic waste in the ICI and multi-residential sectors., which were invoked through the 2018 organic waste policy.

“The policy requires multi-residential buildings and large establishments to reduce and divert organic waste by either 50% or 70%, depending on their size and subsector, by 2025,” the audit advises. “This could result in added costs for the affected multiresidential buildings and establishments that require budgeting, but the Ministry has not yet provided essential guidance on how to calculate the baseline for the target, nor undertaken outreach activities to promote compliance with the policy.” ■ ___________________________________________ THE VALUE-FOR-MONEY AUDIT REPORT, NON-HAZARDOUS WASTE REDUCTION AND DIVERSION IN THE INDUSTRIAL, COMMERCIAL AND INSTITUTIONAL (IC&I) SECTOR, CAN BE FOUND AT WWW.AUDITOR. ON.CA /EN/CONTENT/ANNUALREPORTS/ ANNUALREPORTS.HTML.

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