Ontario Tire Stewardship: from the stewards to the PROs

For the nine years Ontario Tire Stewardship ran the province's used tire program, the program was funded by a Tire Stewardship Fee that tire brand owners and first importers remitted "for every tire supplied into the Ontario market," and the amount of the fee, OTS's vice-president of finance, James Coulter, swore in the affidavit that opened this winding-up, "was typically charged by Stewards as a separate fee to the cost of each tire purchased by end-users in Ontario." The fees funded collection, transportation, recycling and processing; OTS, he swore, diverted over 135 million of them from Ontario landfills. The Used Tires Program closed on December 31, 2018, as planned, per the Affidavit of James Coulter, Mar. 4, 2020, paras. 1, 4–5, 15. It closed with money left over, and three ministers have since directed three different destinations for it.

The latest direction is dated October 1, 2026, a letter from the Minister of the Environment, Conservation and Parks, Todd McCarthy, to Jonathan Krieger as liquidator. "In response to recent disruptions in tire collection and recycling activities across Ontario," and acting under section 14 of the Waste Diversion Transition Act, 2016, the minister directed OTS to amend its wind-up plan. "Generally, remaining surplus funds will be issued to producer responsibility organizations (PROs) that are registered with the Resource Productivity and Recovery Authority (RPRA) to provide services to tire producers under the Tires Regulation," the letter says, and it "revises the previous directions issued to OTS, including the most recent direction issued on April 21, 2020," per the Letter of the Minister of the Environment, Conservation and Parks, Oct. 1, 2026, pp. 1, 3.

Where the surplus was meant to go

The wind-up plan OTS submitted in November 2017 would have returned any surplus to the stewards. "If excess funds exist at the end of the used tire program wind up, OTS will allocate those excess funds back to stewards in accordance with their contributions to OTS over the last three years," per the OTS Wind Up Plan, Nov. 2017, p. 19.

The surplus then grew, and the affidavit points to tax: in March 2019 the Canada Revenue Agency confirmed that no GST/HST was owed on transportation incentives paid to processors from October 2014 to October 2018, a ruling it says added about $12,600,000, and CRA also allowed OTS's claims for input tax credits of $30,800,000, per the Affidavit of James Coulter, Mar. 4, 2020, paras. 16–18. On April 2, 2019, Minister Rod Phillips wrote that RPRA had informed him OTS "is now expected to have surplus funds of approximately $38 million, in part due to the resolution of a tax dispute with the Canada Revenue Agency," and directed OTS to establish "a program for the return of surplus funds to tire consumers." The direction was guided, he wrote, by the principle that consumers' interests should be considered "since consumers were charged fees when they purchased new tires," and the amount returned "should align with the amounts that OTS previously charged for the collection and management of used tires while the program was operating, for example, approximately $4.00 per passenger tire," per the Letter of Minister Rod Phillips, Apr. 2, 2019, Ex. "G" to the Coulter Affidavit.

OTS, down by then to three staff with a severance date of March 31, 2020, described the likely shape of its draft amendment: a "hybrid" rebate program of instant and mail-in rebates at the point of sale. It projected an aggregate surplus of $39,170,000 at the end of 2020, before any return to consumers and assuming favourable outcomes on the outstanding tax issues. For whatever the rebates left, it envisioned three options: return it to stewards under the original plan, "transfer remaining funds to RPRA to offset registry and compliance expenses related to tires under the RRCEA," or split it 50/50 between the two. The revised mandate, Mr. Coulter swore, had to fall to a liquidator, because it had become clear to OTS that its remaining staff would not be capable of seeing it through, per the Affidavit of James Coulter, Mar. 4, 2020, paras. 22, 24–30, 32. On March 16, 2020, Justice Gilmore appointed Grant Thornton Limited and ordered that the winding-up "be completed in accordance with the Corporation's plan to wind up the Corporation, as prepared or amended pursuant to directions received from the Minister of the Environment, Conservation and Parks, and as approved by the Resource Productivity and Recovery Authority … or as otherwise ordered by the Court," per the Order Appointing Liquidator, Mar. 16, 2020, para. 3.

On April 21, 2020, Minister Jeff Yurek changed course, "In response to feedback I have received from stakeholders." Any remaining surplus was now to be "returned to stewards in proportion to the stewards' contribution of the surplus in regard to tire classes that are in a surplus position," and he expected stewards to use it to offset the fees they were paying under the Tires Regulation: "Offsetting these costs is expected to benefit consumers when they purchase new tires." The amended plan was due within 10 weeks of a final CRA ruling on OTS's tax rebate, per the Letter of the Minister of the Environment, Conservation and Parks, Apr. 21, 2020, p. 1.

Twelve million dollars to the passenger-tire stewards

The liquidator read "tire classes that are in a surplus position" against OTS's books. Its table for 2009 through 2020 put passenger and light truck tires, Class 1, at a cumulative surplus of $78,566,535, medium truck tires at a deficit of $26,033,639 and off-the-road tires at a deficit of $7,796,579, for a net of $44,736,317. It concluded that only Class 1 was in surplus and proposed that only Class 1 stewards share, per the Surplus Funds Addendum, amended Mar. 3, 2021, pp. 5–6. The addendum proposed a $12 million interim distribution, allocated year by year in proportion to each steward's passenger tire equivalents supplied, with no payment on any share under $250 and with each cheque carrying a letter acknowledging the minister's expectation that it "will be used for the benefit of Ontario consumers." The liquidator considered $12 million appropriate given that resolving the HST dispute "will take some time," and taking into account claims and future liquidation expenses. The stakeholders it consulted, among them the Tire and Rubber Association of Canada, Canadian Tire Corporation, Michelin North America (Canada), FCA Canada, Ford Motor Company of Canada and General Motors of Canada, raised no objection to confining payments to Class 1, though some questioned subsidizing the deficits of classes they had never supplied, per the Surplus Funds Addendum, amended Mar. 3, 2021, pp. 7, 9, 11–12.

RPRA's board approved the addendum without conditions on March 26, 2021, per the RPRA approval letter, Apr. 1, 2021, pp. 1–2. On April 21, 2021, Justice Cavanagh authorized and directed the liquidator to pay $12,000,000 "to the Stewards on the basis of the Distribution Methodology," and sealed, among other things, the schedule of each steward's share, per the Order of Justice Cavanagh, Apr. 21, 2021, paras. 5, 9 and the First Report of the Liquidator, Apr. 14, 2021, para. 19(g). The distribution went out on June 1, 2021, and the liquidator was still following up uncashed cheques in the first months of 2022, per the Second Report of the Liquidator, Jan. 18, 2022, para. 52 and the Third Report of the Liquidator, Apr. 14, 2022, para. 24. The addendum left the rest open: "A further interim distribution may occur, or the Liquidator may elect to issue a final distribution, depending on the status of resolving the HST Liability, subject to a future consultation process, and receiving requisite approvals from RPRA and the Court," per the Surplus Funds Addendum, amended Mar. 3, 2021, p. 9.