[Senate Hearing 105-72]
[From the U.S. Government Publishing Office]
S. Hrg. 105-72
TRANSPORTATION AND FLOW CONTROL OF SOLID WASTE
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HEARING
BEFORE THE
COMMITTEE ON
ENVIRONMENT AND PUBLIC WORKS
UNITED STATES SENATE
ONE HUNDRED FIFTH CONGRESS
FIRST SESSION
on
ON THE OVERSIGHT OF LAWS REGULATING THE INTERSTATE TRANSPORTATION OF
SOLID WASTE AND TO CONSIDER ENACTING LAWS PROVIDING FOR THE FLOW
CONTROL OF MUNICIPAL SOLID WASTE
__________
MARCH 18, 1997
__________
Printed for the use of the Committee on Environment and Public Works
U.S. GOVERNMENT PRINTING OFFICE
40-942 CC WASHINGTON : 1997
___________________________________________________________________________
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS
ONE HUNDRED FIFTH CONGRESS
JOHN H. CHAFEE, Rhode Island, Chairman
JOHN W. WARNER, Virginia MAX BAUCUS, Montana
ROBERT SMITH, New Hampshire DANIEL PATRICK MOYNIHAN, New York
DIRK KEMPTHORNE, Idaho FRANK R. LAUTENBERG, New Jersey
JAMES M. INHOFE, Oklahoma HARRY REID, Nevada
CRAIG THOMAS, Wyoming BOB GRAHAM, Florida
CHRISTOPHER S. BOND, Missouri JOSEPH I. LIEBERMAN, Connecticut
TIM HUTCHINSON, Arkansas BARBARA BOXER, California
WAYNE ALLARD, Colorado RON WYDEN, Oregon
JEFF SESSIONS, Alabama
Steven J. Shimberg, Staff Director
J. Thomas Sliter, Minority Staff Director
(ii)
C O N T E N T S
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MARCH 18, 1997
Page
OPENING STATEMENTS
Allard, Hon. Wayne, U.S. Senator from the State of Colorado...... 26
Baucus, Hon. Max, U.S. Senator from the State of Montana......... 5
Boxer, Hon. Barbara, U.S. Senator from the State of California... 6
Chafee, Hon. John H., U.S. Senator from the State of Rhode Island 1
Lautenberg, Hon. Frank R., U.S. Senator from the State of New
Jersey......................................................... 3
Reid, Hon. Harry, U.S. Senator from the State of Nevada.......... 5
Sessions, Hon. Jeff, U.S. Senator from the State of Alabama...... 14
Smith, Hon. Robert, U.S. Senator from the State of New Hampshire. 27
WITNESSES
Broadway, John, National Federation of Independent Business...... 37
Prepared statement........................................... 91
Cahill, John, commissioner, New York State Department of
Environmental Conservation..................................... 46
Prepared statement........................................... 110
Report, Plan to Phase Out the Fresh Kills Landfill........... 114
Ciofalo, Anthony, chairman, Environmental Industry Associations.. 51
Letter, response to request for additional information....... 268
Prepared statement........................................... 257
Coats, Hon. Dan, U.S. Senator from the State of Indiana.......... 7
Letter, Indiana Department of Environmental Management....... 61
Prepared statement........................................... 59
Franks, Hon. Bob, U.S. Representative from the State of New
Jersey......................................................... 17
Prepared statement........................................... 66
Grams, Hon. Rod, U.S. Senator from the State of Minnesota........ 27
Johnson, Randy, chair, Board of County Commissioners, Hennepin,
County, MN..................................................... 32
Prepared statement........................................... 77
Responses to additional questions from:
Senator Chafee........................................... 85
Senator Lieberman........................................ 87
Senator Boxer............................................ 87
Senator Lautenberg....................................... 88
Leff, David K., assistant commissioner, Connecticut Department of
Environmental Protection....................................... 35
Prepared statement........................................... 93
Responses to additional questions from Senator Chafee........ 95
Levin, Hon. Carl, U.S. Senator from the State of Michigan........ 14
Prepared statement........................................... 64
Mastro, Randy M., deputy mayor for Operations, City of New York.. 47
Prepared statement........................................... 250
Norquist, Grover G., president, Americans for Tax Reform......... 36
Prepared statement........................................... 89
Olson, David L., Dakota Resource Council, on behalf of Western
Organization of Resource Councils.............................. 49
Letter, response to request for additional information....... 256
Prepared statement........................................... 255
Pascrell, Hon. Bill Jr., U.S. Representative from the State of
New Jersey..................................................... 15
Prepared statement........................................... 65
Rooney, John E., mayor, Northvale, NJ............................ 30
Letters in response to testimony, from several New Jersey
officials.................................................. 370
Prepared statement........................................... 67
Report to Congress on Flow Control and Municipal Solid Waste. 70
Response to additional questions from:
Senator Chafee........................................... 76
Senator Lautenberg....................................... 76
Seif, James M., Secretary of Environmental Protection,
Pennsylvania Department of Environmental Protection............ 45
Prepared statement and several exhibits...................... 98
Responses to additional questions from Senator Chafee........ 109
Specter, Hon. Arlen, U.S. Senator from the Commonwealth of
Pennsylvania................................................... 9
Prepared statement........................................... 63
ADDITIONAL MATERIAL
Articles:
Businesses Face Town Trash Fee, Smithtown News, March 6, 1997 401
Flow Control Uncertainty Upsets Investment Ratings, Waste
Age, January 1997.......................................... 399
Standard & Poor's Lowers New Jersey Counties' Solid Waste
Debt....................................................... 306
Waste Flow Drying Up, Smithtown News, February 27, 1997...... 400
Letters:
American Public Works Association............................ 423
Baltimore, Maryland, Department of Public Works.............. 431
Borough of Wildwood Crest, New Jersey........................
373, 375...................................................
Borough of Woodbine, New Jersey.............................. 372
Bristol, Connecticut, Resource Recovery Facility............. 433
Chester County, Pennsylvania, Board of Commissioners......... 435
Dodge County, Minnesota, Board of Commissioners.............. 438
Dutchess County, New York, Executive......................... 439
Emmet County, Michigan, Department of Public Works........... 441
Environmental Industry Association........................... 443
Fairfax County, Virginia, Board of Supervisors............... 426
Federation of New York Solid Waste Associations.............. 446
Fulton County, New York, Department of Solid Waste........... 448
Housatonic Resources Recovery Authority, Brookford, CT....... 450
Huntsville, Alabama, Solid Waste Disposal Authority.......... 452
Islip, New York, Resource Recovery Agency.................... 397
Jefferson Smurfit Group, St. Louis, Missouri................. 403
Kent County, Michigan, Board of Public Works................. 456
King County, Washington, Council............................. 458
Marion County, Oregon, Board of Commissioners................ 460
Mecklenberg County, North Carolina, Board of Commissioners... 463
Middle Township, Cape May, New Jersey........................ 370
Minnesota Office of Environmental Assistance................. 465
Montgomery County, Pennsylvania, Waste System Authority...... 467
Morris County, New Jersey, Municipal Utilities Authority..... 468
National Solid Wastes Management Association................. 268
Newburgh, New York, Comptroller.............................. 469
Olmsted County, Minnesota, Board of Supervisors.............. 477
Oneida-Herkimer Solid Waste Authority, Utica, New York....... 478
Onondaga County, New York, Resource Recovery Agency.......... 480
Sibley County, Minnesota, Board of Supervisors............... 475
Tri-County Solid Waste Office, Nicollete County, Minnesota... 473
Portsmouth, Virginia, Mayor.................................. 481
Prince William County, Virginia, Board of Supervisors........ 483
Sherbourne County, Minnesota, Zoning Administration.......... 484
Sea Isle City, New Jersey.................................... 371
Sussex County, New Jersey, Municipal Utilities Authority..... 487
Union County, New Jersey, Utilities Authority................ 488
Wight County, Virginia, Board of Supervisors................. 454
York County, Pennsylvania, Solid Waste and Refuse Authority.. 490
Reports:
A Plan to Phase Out the Fresh Kills Landfill, City of New
York....................................................... 114
Cost of Flow Control, New Hampshire Department of
Environmental Services..................................... 409
Moody's Municipal Credit Report.............................. 319
Report to Congress on Flow Control and Municipal Solid Waste,
Environmental Protection Agency............................ 70
Statements:
American Forest and Paper Association and the Paper Recycling
Coalition.................................................. 351
Associated Builders and Contractors.......................... 353
American Public Works Association............................
424, 432...................................................
Board of Chosen Freeholders, Warren, New Jersey.............. 355
Cape May County Municipal Utilities Authority, Comprehensive
Solid Waste Management Program Overview.................... 366
Chester County, Pennsylvania, Board of Commissioners......... 436
Conrad, Hon. Kent, U.S. Senator from the State of North
Dakota..................................................... 271
Gorton, Hon. Slade, U.S. Senator from the State of Washington 272
Government Finance Officers Association...................... 376
Integrated Waste Services Association........................ 396
Hayes, Anthony W., director of Public Works, Falmouth, ME.... 445
Jefferson Smurfit Corporation................................ 404
Local Government Coalition for Environmentally Sound
Municipal Solid Waste Management........................... 404
Luther, Hon. Bill, U.S. Representative from the State of
Minnesota.................................................. 282
Marinakis, George, executive director, Cape May County
Municipal Utilities Authority.............................. 362
Minge, Hon. Dave, U.S. Representative from the State of
Minnesota.................................................. 283
Moody's Investor Service..................................... 307
Murray, Hon. Patty, U.S. Senator from the State of Washington 275
National Coalition for Flow Control.......................... 418
PSA, The Bonds Market Trade Association...................... 420
Robb, Hon. Charles, U.S. Senator from the Commonwealth of
Virginia................................................... 276
Solid Waste Association of North America..................... 428
Southeast Public Service Authority of Virginia............... 485
Standard and Poor's Rating Service........................... 285
Wellstone, Hon. Paul, U.S. Senator from Minnesota............ 277
TRANSPORTATION AND FLOW CONTROL OF SOLID WASTE
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TUESDAY, MARCH 18, 1997
U.S. Senate,
Committee on Environment and Public Works,
Washington, DC.
The committee met, pursuant to notice, at 9:30 a.m., in
room 406, Senate Dirksen Building, Hon. John H. Chafee
(chairman of the committee) presiding.
Present: Senators Chafee, Smith, Allard, Sessions, Baucus,
Lautenberg, Reid, and Lieberman.
OPENING STATEMENT OF HON. JOHN H. CHAFEE, U.S. SENATOR FROM THE
STATE OF RHODE ISLAND
Senator Chafee. Good morning. I want to welcome our
distinguished panelists here today.
I just want to say, we've worked on this in past years. I
thought the legislation we came out with last year was good. I
know there's some suggestion that there be what we call a
negative presumption--no imports can take place unless the
local community says so.
That presents some difficulties to me. But we're going to
listen to the witnesses, and we'll get started.
[The prepared statement of Senator Chafee follows:]
Statement of Hon. John Chafee, U.S. Senator from the State of Rhode
Island
We are here this morning to once again focus on two important
public policy issues related to the management of municipal solid
waste. Both issues touch on one of the most important powers that our
Constitution delegates to the Congress--the power to regulate commerce
among the States. I welcome all of our witnesses today, and especially
Senators Coats, Levin and Specter; and two House Members from New
Jersey, Representatives Franks and Pascrell.
The two public policy issues before us today are flow control of
municipal solid waste (``MSW'') and regulation of interstate
transportation of MSW. Flow control legislation would allow a political
entity to require disposal of MSW at a designated MSW management
facility. This creates a revenue stream to pay off the bonds which
financed the facility. The goal of interstate waste legislation is to
regulate the flow of MSW between exporting States and importing States.
Flow control and interstate waste are the two different sides of
the same coin--restrictions on the free flow of MSW. The Supreme Court
has consistently held, in a line of cases stretching back to the famous
Philadelphia v. New Jersey case in 1978, that MSW is an article of
commerce. This means that any State or local law that regulates the
movement of MSW must be evaluated in light of Commerce Clause
jurisprudence.
Before hearing from the other members of the committee and our
witnesses, I would like to make a few points. I will start with
interstate waste. Senator Coats has made the issue of controlling the
interstate movement of MSW one of his highest priorities since he first
entered the Senate 8 years ago. I sympathize with the plight of the
importing States. I know that the concerns of importing States are
heightened due to the planned closure of New York City's Fresh Kills
landfill in 2001. This facility currently accepts 13,000 tons per day
of trash, or about 4 million tons per year.
Once again in this Congress, as in the last Congress, I have made
the passage of interstate waste legislation one of my highest
priorities. I once again will work with Senator Coats and other
Senators from both importing States and exporting States to try to
reach an accommodation between the respective needs of both groups.
Though I have not introduced a bill on this issue, I believe that
last year's bill remains a very viable compromise on interstate waste.
That bill, S. 534, passed out of this committee unanimously in 1995 and
passed the Senate in May 1995, on a vote of 94-6. Language identical to
S. 534 again passed the Senate by unanimous consent in July 1996 as an
amendment to the fiscal year 1997 Energy and Water Appropriations bill.
As we all know, that provision was dropped in the conference on that
bill.
As we start anew on resolving the interstate waste issue, I would
strongly caution anyone who seeks to ``better the deal'' from what we
passed twice in the last Congress on interstate waste. I will oppose
legislation that tilts the scales too heavily in favor of the importing
States at the expense of exporting States, like my own State of Rhode
Island.
One of the most problematic provisions to ``strengthen'' the bill,
from the importing States' perspective, is the so-called ``presumptive
ban.'' This would create a statutory presumption against the lawful
shipment of MSW across State lines. Let me be clear on this issue: a
presumptive ban is unacceptable and goes too far to restrict the free
movement of commerce among the States.
The Commerce Clause of the Constitution came about because of the
need to check local jealousies in matters of protecting home markets. I
believe that when we legislate to restrict free movement of commerce in
a national market, we should tread very lightly. The creation of a
``presumption'' against commerce is probably the most severe restraint
on free movement we could impose short of an outright ban. This means
the ``default'' position is closed borders and no movement.
I believe this is precisely backwards--any ``default'' position
should allow free movement unless the importing State acts. A
presumptive ban is far more than is needed by importing States to
address the problems they now face due to unpredictable waste imports.
More importantly, it is far too great a limitation to place on free
movement of commerce. I agree the States should have the right to say
``no'' to imports but a presumptive ban goes too far.
The resolution of the flow control problem also directly implicates
the commerce power. Federal legislation granting States or local
governments the power to impose flow control would grant State or local
governments the power to create local waste monopolies. Flow control
proponents argue that the Supreme Court decision in the 1994 Carbone
case places at risk their facilities, solid waste management programs,
and credit.
In the Carbone opinion, Justice Kennedy, writing for the majority,
reminds us that ``The central rationale for the rule against
discrimination is to prohibit State or municipal laws whose object is
local economic protectionism, laws that would excite those jealousies
and retaliatory measures the Constitution was designed to prevent.''
Justice O'Connor, in her concurring opinion, reminds us that the
Constitution leaves it within Congress' power to impose legislation
that alters the preference for free movement of articles in commerce.
In the last Congress, our bill, S. 534, contained a title on flow
control. The original philosophy on flow control was twofold. First, we
sought to protect State and local officials who, prior to Carbone,
assumed their flow control laws were constitutional and issued bonds
based on that erroneous assumption. Second, we imposed a sunset
provision that eliminated flow control when the bonds were paid off or
at the end of a facilities useful life, but in any case not longer than
30 years after passage.
We deviated from this fairly clear-cut starting point as members
sought to protect facilities or systems in their States that fell
outside the definitions. From our starting point, we layered on
protection for additional facilities or systems in markup, between
markup and floor consideration, and finally during floor consideration.
There were still Senators with unsatisfied needs at final passage who
would have sought further expansion in conference. At the end of that
process, the original narrow intent of S. 534 was all but lost to well-
intentioned efforts to protect local economic interests.
Two more years have passed since we approved S. 534's flow control
provisions. We are now 3 years removed from the Carbone decision. I
believe it is time to reexamine the issue of flow control in light of
the experience of the last 3 years to determine if the legislation is
still needed and what the proper scope of any legislation should be.
The flow control panel today will reveal that there are two
compelling and competing local interests at stake, in addition to the
national interest on regulating interstate commerce. State and local
flow control laws were widely used until Carbone as a tool to guarantee
that projected amounts of waste and revenues would be received at a
waste management facility. The revenue is used to pay off the bonds
that financed construction of the facility. Revenues are also used for
other related purposes like funding recycling programs or household
hazardous waste collection programs. In some cases, the bonds were
issued on an assumption that flow control was constitutional, even
though that assumption turned out to be wrong.
The competing local interest is that waste disposal is cheaper
under a competitive system than it is under a government-created
monopoly. Reimposition of flow control, in the view of these parties,
amounts to a hidden tax on those that are forced to dispose at a
facility charging above-market rates.
Since the Carbone decision, CRS reports that 18 MSW bond issues
have been downgraded. Fifteen of these downgrades occurred in the first
12 months after the Carbone decision, and relatively few have occurred
in the 2 years since we last took testimony on this subject. Testimony
received from Standard & Poor's, which rates approximately 40 percent
of the MSW bond issues, states that:
The downgrades that have occurred are a result of increased
competitive pressure which has led to an overall decline in
credit quality. These ratings are not solely based on the
absence of Federal flow control. However, in all four cases [of
ratings downgrades], the high fixed costs associated with
waste-to-energy facilities have limited financial flexibility
and resulted in high tipping fees which are above those of
alternative disposal facilities.
If we are going to take the dramatic step of granting Federal
permission for the creation of local trash monopolies that burden
interstate commerce, I want to be sure that we are fixing an acute
current problem. I also want to be sure that the cure is not worse than
the problem we seek to solve.
Justice Kennedy wrote in Carbone: ``The Commerce Clause presumes a
national market free from local legislation that discriminates in favor
of local interests.'' I agree. I said 2 years ago in my opening
statement that ``I will tread cautiously with respect to interfering in
the waste market.'' This is still my view.
Senator Chafee. Senator Lautenberg, do you have a
statement?
OPENING STATEMENT OF HON. FRANK R. LAUTENBERG, U.S. SENATOR
FROM THE STATE OF NEW JERSEY
Senator Lautenberg. Yes, Mr. Chairman.
This is a subject that's had great interest in the State of
New Jersey. Mr. Chairman, I in the last Congress, once the
Supreme Court declared in the Carbone decision that flow
control laws were unconstitutional, this committee passed, and
the Senate approved, an amended bill to grandfather State flow
control systems and to allow Governors to restrict the
transportation of trash into their States.
However, despite efforts by a unified New Jersey
delegation, the House failed to act. In the face of this
gridlock, States and communities across our country have tried
to adjust to the new post-Carbone reality. As more time has
passed, and governments have modified their policies, the
issues facing the Congress have evolved significantly and are
now very different than those that existed in the last
Congress.
In the past, I even led filibuster in the Senate to allow
New Jersey and other States to transport municipal solid waste
across State lines, at least until we could achieve self-
sufficiency. At the same time, after the Carbone decision, I
insisted that should Congress grant States the right to
restrict interstate transport of waste, it should also
grandfather existing flow control systems that New Jersey and
other States established to provide for adequate intra-State
disposal.
Now, given what's happened in the real world in the past 2
years, these debates seem somewhat stale. In the absence of any
definitive Congressional action, communities in many States
that have flow control are now taking advantage of a more
competitive, free market system.
In New Jersey, the situation has been a little more
complicated. A Federal court in the State declared the State's
flow control system unconstitutional pursuant to Carbone, but
stayed its decision for 2 years, in anticipation of
congressional action.
Yet despite the stay keeping flow control in effect, there
has been considerable leakage, as we say, out of the State.
Many incinerators and landfills have lowered their tipping fees
and prices have gone down for consumers. Mr. Chairman,
communities in New Jersey are trying to adjust to the Carbone
decision. The genie, however, is out of the bottle. The
possibility of reinstating flow control in 1997 may have a very
different impact than the question we faced in 1994 and early
1995.
In many places, the reinstatement of flow control would
mean that waste disposal costs would increase for consumers. A
free marketplace is bringing benefits to local communities. At
the same time, the situation is putting many disposal
facilities dependent on flow control into financial difficulty
and we can't ignore that fact, either.
Meanwhile, Governors and Senators continue to argue the
case for interstate restrictions on waste transport. The cross
currents in this debate will be reflected in the testimony of
our witnesses today. I understand our colleagues, Senator Levin
and Senator Coats, remain committed to restrictions on
interstate waste transport, although these restrictions seem in
my view to have no solid economic or environmental rationale.
Two of my colleagues from New Jersey, who are here now,
Congressman Pascrell and Congressman Franks, reflect the
dilemmas in our State. Mr. Pascrell, a Democrat, and former
mayor, supports the free market, because he has seen the
benefits it's brought to his city. Mr. Franks, Republican,
supports a regulated intra-state market, because his district
has facilities built under the flow control regime.
I recognize the validity of both of their concerns, and
we'll listen to the debate with interest while reserving
judgment. The public policy decision we make or fail to make
will have significant long-term ramifications.
I look forward to today's testimony to help clarify the
situation. I thank you, Mr. Chairman.
Senator Chafee. Thank you. As I mentioned before Senator
Baucus and Senator Reid arrived, I am anxious to move along.
We've got quite a few witnesses here. I'd like to, if anybody
has an opening statement, we certainly look forward to have it
put in the record. Senator Reid, do you have any comments?
OPENING STATEMENT OF HON. HARRY REID, U.S. SENATOR FROM THE
STATE OF NEVADA
Senator Reid. I'll follow the admonition of the chair. I am
here for a number of reasons. One, I'm a member of the
committee. And Mr. Chairman, also, I have followed the travails
of Senator Coats over the years. And I wanted to have a first
row seat to watch his performance here today.
[Laughter.]
Senator Chafee. Well, he's had a lot of experience at it.
Senator Baucus.
OPENING STATEMENT OF HON. MAX BAUCUS, U.S. SENATOR FROM THE
STATE OF MONTANA
Senator Baucus. I have a statement, Mr. Chairman. And I do
so, Mr. Chairman, because this is such an important matter, and
one that I've been involved with for many years, in fact, three
or four Congresses. And I just think it's time, frankly, we get
this matter behind us so that we can show Congress actually can
do something.
Senator Chafee. Well, as you know, we passed it here. It's
the House that didn't pass it.
Senator Baucus. That remains another subject, Mr. Chairman,
which I will not, in deference to you, get into at this moment.
But it is time we finally get this passed through both
Houses of Congress and the conference report adopted by both
Houses.
Mr. Chairman, it's a very simple issue. Boiled down to its
essence, the question is, should a State, should a local
community--I'm speaking now of the interstate transport of
garbage, not flow control--have the right to say ``no'' to
garbage being transported from some other State into that
State. That's the central question.
I believe the answer to that question should be yes, that
it is irresponsible for a community, a State, to ship that
State's garbage out of State. It's just a variation of the
``not in my backyard'' syndrome. It's that simple. We want to
encourage communities to recycle, take care of their own
garbage. We also want to allow communities to say ``no'' to the
transportation of garbage into their own State. It's just a
very simple matter.
I know there are some equities back and forth, because some
companies want to transport garbage, and we have different
population densities in different parts of the country.
But the bill that I introduced on this subject yesterday
goes a long way toward resolving that balance. I hope, Mr.
Chairman, we can finally get this issue behind us after all
these years. It will also deal with flow control, which is a
little bit more contentious, and a little bit more difficult to
deal with.
But with respect to the garbage issue, I just very much
hope that finally, both Houses can pass a bill, and the
conference report is adopted by both Houses.
[The prepared statement of Senator Baucus follows:]
Statement of Hon. Max Baucus, U.S. Senator from the State of Montana
Mr. Chairman. Thank you for holding this hearing on the question of
interstate garbage shipments.
I regard this as a very simple question. Should a State, or a town,
have the right to decide whether it wants to host a big garbage dump
for waste from other States? Or should States and towns have nothing to
say about it?
To me the answer is simple. People should have the right to say
``no.'' And we need to give them that right.
Many States are looking to put their garbage somewhere else. In New
York, for instance, the closing of the Fresh Kills landfill means that
some 5 million tons of garbage each year needs a new home. The State
can take only a fraction of that waste. So the rest, about 4 million
tons a year, has to go out-of-state. To Pennsylvania, New Jersey, Ohio
or beyond.
Now I want to single out New York. Many other great cities have
similar troubles. For example, a few years ago Miles City, Montana
faced the prospect of becoming a dumping ground for Minneapolis trash.
The 5,000 citizens of Miles City had no say at all in whether a ``mega-
landfill'' would go up right in their back yards to take care of
garbage from a city nearly eight hundred miles away.
Trash disposal is tough. But simply dumping one city's garbage
problems on unsuspecting, perhaps unwilling towns hundreds of miles
away is wrong. It is unfair. Every town in America should have the
right to say ``No.''
But as my colleagues know, they don't have that right. State laws
restricting out-of-state garbage have consistently been overturned in
court as a violation of the Commerce Clause of the Constitution. So we
need a national law to preserve this basic part of self-determination--
the right to decide whether or not a community wants to accept out-of-
state garbage.
I've introduced a bill which I think achieves that objective. But
it also strikes a balance. It will work for every community, in every
State. It is very similar to the bill the Senate and House nearly
passed about 3 years ago.
I hope that following this hearing, the committee will have a
business meeting to consider my bill. We need to get moving on this
issue.
Mr. Chairman, that is why I thank you for holding this hearing. And
let's get to work.
Senator Chafee. Thank you, Senator Baucus.
Senator Boxer's statement will be placed in the record.
[The prepared statement of Senator Boxer follows:]
Statement of Hon. Barbara Boxer, U.S. Senator from the State of
California
Mr. Chairman, thank you for calling this hearing today to revive
this important discussion concerning disposal of our nations' waste.
As you know, Congress has come very close in the last few years to
passing interstate waste and flow control legislation. I am hopeful
that with your leadership, we will be able to act quickly to finally
resolve these issues which have caused much unnecessary litigation and
economic hardship throughout the nation.
In my State of California, counties are required to meet aggressive
recycling and waste reduction goals--there was a 25% reduction by the
beginning of the 1995 and there must be a 50% reduction by the turn of
the century. To meet these ambitious goals, California counties must
aggressively manage their municipal solid waste.
However, California communities do not use flow control authority
to do this. Instead, they rely on contracts with private waste
companies to ensure that their garbage goes to a designated recycling
plant or other waste facility. They also believe that the Supreme
Court's decision in Carbone v. Clarkstown does not restrict such
contracts.
Many California counties have contacted me to voice their concern
about potential impacts Federal legislation may have on their ability
to meet the State's solid waste goals. They fear that the bill will
unintentionally restrict their ability to employ contractual agreements
to direct waste to particular waste facilities.
As you may recall, I was unable to support final passage of
legislation introduced last session. The legislation did not adequately
address the needs of many California cities and counties which have
incurred debt in order to achieve California's ambitious integrated
waste management requirements.
I intend to follow this issue closely and will work to preserve the
ability of California's counties to meet their waste management
responsibilities.
Thank you again, Mr. Chairman and Senator Baucus, for the hard work
that you have put into resolving these complex waste questions. I
welcome our witnesses today, and look forward to hearing their
testimony.
Senator Chafee. Now we have a distinguished group before
us, and I would ask Senator Coats if he would please proceed.
STATEMENT OF HON. DAN COATS, U.S. SENATOR FROM THE STATE OF
INDIANA
Senator Coats. Mr. Chairman, thank you very much. I very
much appreciate the opportunity to testify this morning.
This is not an issue new to anybody on this panel, and
certainly not new to those of us down here at the witness
panel. Many, many States are affected by this matter. It's an
important issue to my State, as members of the panel know, it's
something I addressed attention to very early in my Senate
career. We've had some interesting battles over the years to
try to finalize this legislation.
The irony is that we have worked through a number of
difficult issues and come to a bipartisan, in fact overwhelming
consensus here in the Senate, in terms of how we ought to
proceed. There's been give and take on both sides. That's part
of the legislative process. Nobody got exactly what they
wanted. But we were able to forge compromises, and I think,
workable legislation in the past, and I see no reason why we
can't do that again.
I agree with Senator Baucus in saying that enough is
enough, let's get this thing done and prove that we can
actually address an issue that's important to an awful lot of
people and an awful lot of State authorities across the
country.
Now, there's fresh impetus, I guess, and I'll use a pun,
fresh impetus for us to move because of the announcement by the
city of New York that they're going to be closing the Fresh
Kills landfill. That has immense implications for all
individuals outside of New York, particularly those States and
areas most close to it. The State of New York has had an 87
percent decline in landfills since 1986. So their capacity to
receive an extraordinary amount of volume, it's going to be
about 13,000 tons of solid waste per day, when they close Fresh
Kills, the capacity of these out of New York City receiving
sites to absorb this kind of volume just doesn't exist. We're
talking figures approaching 5 million tons of garbage on an
annual basis.
My State, like others, continues to be impacted adversely
by out-of-state trash. We've been a net importer of waste for
over 6 years. Last year we received the largest amount of out-
of-state trash, over 1.8 million tons, of any year of those
six. But until the Congress acts and passes legislation, as we
all know, there's nothing that we can do about it in terms of
placing reasonable restraints and restrictions on how that
trash comes into our State.
Last year, as I said, we passed, we enacted legislation in
the Senate. We came close, but close doesn't count. We're now
moving into a new Congress with a new major threat facing us
with the closing of Fresh Kills landfill. Appropriately named,
I guess, Fresh Kills. The problem is, by the time the waste
gets to Indiana, it's not fresh. And it creates a problem for
us.
We had 94 Senators support the legislation that this
committee drafted last year. I want to thank the Chairman and
thank the ranking member and thank the members of the panel for
working expeditiously last year to forge a compromise piece of
legislation that earned the support of 96 Senators. I also want
to thank the Chairman for his expeditious scheduling of this
issue in this Congress, and his willingness to move forward to,
once again, put in place legislation that can address the
problem.
I've reintroduced legislation. I've made some modest
modifications in response to inquiries we've had from Governors
and from importing States in terms of things they think they
need in this legislation. I'm more than happy to work with the
committee in trying to forge a consensus on how we should move
forward.
My colleagues, Senator Specter and Senator Levin, really
represent a great number of Senators from importing States that
want to work with us in this regard.
Finally, with respect to flow control, let me just state
that has not been a major concern of mine. I wanted to address
the solid waste issue just on the matter of solid waste. I
understand that flow control is an issue that is related to
this, and we forged a compromise on that last year. Hopefully,
we can address the concerns that Senator Lautenberg and that
other States raised relative to flow control and the changes,
some of them court ordered changes, that have taken place in
the last 2 years.
Let me finally state that as I conclude my remarks, I am
not arguing for an outright ban on all waste shipments between
States. There are examples of effective and efficient cross
border waste management.
However, we must give States a role in making waste
management decisions. Because without congressional authority,
we will be unable to even sit at the table to state our case
for determining our own environmental destiny relative to our
ability to dispose of trash. There are many States and many
communities that can and want to make arrangements with out-of-
state haulers. I think that's appropriate.
I also think it's appropriate, however, that a State have
the ability to put some reasonable regulations on there so that
it can ensure that its own waste disposal needs are not
overwhelmed by unwanted imports from out of State.
Again, I commend the committee for taking expeditious
action on this, and I look forward to working with you in the
days ahead, hopefully not years ahead, but days ahead, as we
move forward on this legislation.
Thank you, Mr. Chairman.
Senator Chafee. Thank you, Senator Coats. I just want to
briefly say, yes, we want to move forward on this, as I told
you when you and I have had conversations. From what you said,
you support what we did last year, indeed, you voted for it.
But obviously, you could have voted for it, and still had some
reservations. But that S. 534, you still support.
Senator Coats. Well, I do. I would like to work with the
committee, I think it provides the foundation for how we
proceed this year. We work, obviously no one was 100 percent
satisfied with that legislation, because it tried to bring
together two competing needs.
I have in the meantime, as I stated, heard from a number of
Governors and States relative to issues that they would like us
to address. I don't think they are issues that can't be worked
on. I would like to present those to the committee. I could
detail those for you if you want, but I'm happy to work with
your staff and give that information to you.
There are some modest changes that I think are important to
importing States that we can incorporate in this bill without
jeopardizing the support from the importing States. I know they
have some concerns on flow control changes, and I think we can
just put them all in play and work on a new bill that brings
these minor modifications, but essentially preserves what we
did last Congress.
Senator Chafee. Thank you. What I'd like to do, if you can
stay, Senator, for a few minutes, what's your situation?
Senator Coats. Well, we have a closed Intelligence hearing
relative to the Lake situation at 10 o'clock that all of us,
it's sort of a command performance that we've been asked to
attend.
Senator Chafee. That may be moot.
Senator Coats. Well, I thought it was moot, and I was just
given a note that it's----
Senator Chafee. Does anybody have a question of Senator
Coats?
[No response.]
Senator Chafee. All right, thank you, Senator.
Senator Specter.
STATEMENT OF HON. ARLEN SPECTER, U.S. SENATOR FROM THE
COMMONWEALTH OF PENNSYLVANIA
Senator Specter. Thank you very much, Mr. Chairman. I
appreciate an opportunity to appear here this morning to set
forth my views and I know my full statement will be made a part
of the record, I will summarize it.
I think that when Senator Coats says the garbage doesn't
smell very good by the time it gets to Indiana, he vastly
understates the issue. It doesn't smell very good ever. It's a
long way from New Jersey to Indiana, but it goes through
Pennsylvania and New York, and then he stops, as Senator Coats
points out. But I recollect more than a decade ago, the garbage
trucks piled up outside of the highways in Scranton when my
late colleague Senator Heinz and I first started to move on
this issue.
I'm very hopeful that we will get this legislation passed
early in the Senate, try to get our colleagues in the House to
move ahead on it as well. We came within a hair's breadth of
having it done in 1994. I remember the day very well, without
getting into too many of the particulars, we were practically
in agreement in the Senate cloakroom. I went to catch the
train, confident that the arrangement had been worked out, and
got a recall message and came back to the Senate cloakroom. It
did not work out.
It is a matter which requires our attention. Because the
Supreme Court of the United States has said that on
constitutional grounds, the States may not control interstate
commerce. So it's up to the Congress. We have the authority to
do it. And we really should act on that.
The situation in Pennsylvania is a very serious one.
Wherever I travel, I hear objections on it. In 1993, we had
some 3.9 million tons of out-of-state municipal and solid
waste. It rose to 4.3 in 1994 and 5.2 in 1995, and a record 6.3
in 1996.
Senator Reid. Six point three what?
Senator Specter. Six point three million tons.
Senator Reid. Did you get any?
Senator Coats. There's still some left over for Indiana,
even after the 6.3 million tons.
Senator Specter. Pennsylvania is a large State, Senator
Reid.
The issue of flow control is a difficult one. We have
competing interests there. My sense is that we worked it out
about as well as we can, although there may be some issues
which need to be revisited. The bill that we passed in the
104th Congress has a compromise set of ingredients that allowed
a Governor to unilaterally freeze out-of-state waste in 1993
levels at landfills and incinerators that receive waste in
1993. It included an important State ratchet providing that a
Governor could----
Senator Chafee. Senator, you're discussing last year's
bill?
Senator Specter. Right. Just the highlights of it,
including an important State ratchet providing that a Governor
could restrict waste imported for any one State in excess of
1.4 million tons in 1996, down to 550,000 tons in 2002 and
thereafter, providing a concrete incentive for the large
exporting States to get a handle on their solid waste
management immediately.
I thank the chair and the committee for scheduling an early
hearing, and am hopeful we can move ahead. Right now, we do
have floor time in the Senate where we could take it up and
perhaps at some leisure. We don't have the leisure later on,
when we have tight time agreements, but have the kind of debate
if we need it to move ahead and pass the legislation.
I thank the chair and the members for listening.
Senator Lautenberg. Before we--I recognize Senator Coats
has time constraints.
Senator Coats. Well, Senator Baucus just gave me a note
saying it was canceled. I just had a note 5 minutes before
saying it was on.
Senator Baucus. I just checked about 2 minutes ago.
Senator Coats. I think your information is more current
than mine, so I have a little time here.
Senator Chafee. So you can stay, Senator.
Senator Specter. Mr. Chairman, I'm going to have to ask to
be excused.
Senator Chafee. Let me just ask you one question before you
go, Senator Specter. First, Pennsylvania is the largest single
importing State in the country, which you're aware of. You've
got a lot of stake in this, obviously.
Second, from your comments, I gather that you are, yes,
you'd like changes if they could be made, but I take it you
would find S. 534, which we did last year, acceptable?
Senator Specter. I would, Mr. Chairman. I think there can
always be improvements. And like Senator Coats, I am contacted
by very many people who have a lot of changes. But I think the
time has come to act if we're to really address this issue.
Senator Chafee. Yes, we recognize every change you do roils
up somebody on the other side.
Senator Specter. And it passed by big numbers, and it
accommodated most of the interests of most of the States.
Senator Chafee. I thought so, likewise. The Senator has to
go. Does anybody have a question?
Senator Lautenberg. I would just like to note, if I might,
Mr. Chairman, about the dilemma that we face here, as we look
at the possibilities of legislation. Pennsylvania, for
instance, ships out 800,000 tons, and many of our States have
the same exact parameter, where some comes in and some goes
out. Of course, the number of import, of tons imported to
Pennsylvania are substantially larger. But this is a problem
that doesn't get easily solved.
I would ask either one of you, if your Governor had the
right to tell the owner of a licensed landfill that he could no
longer accept out-of-state garbage, might that look like
takings under the view of many here, when property is condemned
to eliminate economic opportunity in association with that
property, if it meets all the tests, zoning, etc.?
Senator Coats. Well, I'll start with that, and then let my
colleagues address it also. If we want to have a situation in
this country where no State has the right to address matters
that degrade its environment, and just simply absolutely leave
it to the free market, then we might as well cancel the Clean
Air Act. We might as well cancel all environmental rules on the
books that give any kind of State authority and power to make
reasonable restraints against the free market system in the
interest of improving their environment.
We see this as a major environmental issue in the State of
Indiana. Our State legislature passed and the Governor signed
legislation that put us on one of the most progressive courses
of dealing with our environmental laws in Indiana of any State
in the Union. We have an aggressive set of legislation and laws
that require recycling, that require waste reduction. We've
taken responsibility for our own environmental future.
Yet all of that effort is overwhelmed if we have no say
whatsoever in the amount of material that in effect overwhelms
our ability to control our own environmental destiny. As I said
in my statement, we're not stating that we are placing an
outright ban on out-of-state waste. That's where I started the
legislation, and I think I've come a long way since then.
We are allowing States and communities to enter into arm's-
length transactions in terms of arrangements to receive waste
for economic benefit. But we're simply saying that, the State
has to have some ability to say, to put reasonable restrictions
on that when it overwhelms the local area, or the State's
effort to control, to even have the capacity for its own waste.
Senator Specter. If I may respond briefly, I note Senator
Lautenberg's comment about Pennsylvania shipping out a little
over 800,000 tons, which is a very small amount compared to the
more than 6 million which came in last year. We have this long,
unguarded border between Pennsylvania and New Jersey. I hope we
can retain it, passage over the Ben Franklin Bridge, for
example.
On the issue of a taking, I do not think we run into a
constitutional problem of taking property without due process
of law under the fifth amendment. There are many regulations
which are much more stringent than this which could confront
taking property. I think this is a reasonable regulation. The
Congress does have the authority to restrict interstate
commerce, in a sense, every time you impose a restriction there
might be considered to be some taking of somebody's rights or
somebody's property.
But I think that the kind of legislation we passed in the
104th Congress would pass Constitutional muster easily.
Senator Lautenberg. Well, I would for just a minute more
like to pursue something that Senator Coats and I have kind of
argued this question in the past. I once threatened to send out
notices to all of our colleges and our high schools where the
players, possible football players, and many of them were
really great, were recruited for Notre Dame and otherwise, and
I said, don't go there, because they're only going to insult
you. But I think we're past that stage now, of the portrayal of
the fat guy from New Jersey with a cigar, saying, we're going
to dump on----
Senator Specter. Oh, don't abandon that threat, Senator
Lautenberg----
[Laughter.]
Senator Lautenberg. I'm going to give you a little----
Senator Coats. That commercial won awards.
Senator Chafee. Let's move on with this.
Senator Specter. If you want to reopen that issue, I'm
happy to do so. Because it makes great----
Senator Chafee. No, I don't think we want to reopen
anything like that.
Senator Specter [continuing]. Theater, but it doesn't make
good legislation.
Senator Lautenberg. Mr. Chairman, if I might make this
point. We are the beneficiary, let me reverse that, the
recipient, of tons of contamination from Indiana and other
States west. When you say, when you raise the question, and
it's a legitimate question to be raised, but the answer is a
little bit, I think, more obscure than a yes or no. Does a
State have a right to block contamination that comes from
another place to its shores, or to its boundaries.
I say, OK, let's start with Indiana and New Jersey, and
erect the kind of facilities that doesn't have that stuff going
up in the air and falling down all over our place, no matter
what we do to protect ourselves.
The point I make, and I think this is a critical one, in
your statement about if no State has the right to protect
itself, we get to the fundamental question about whether or not
we are a federation, we are a Nation of States, each of whom
has some obligation to the other. If we can't work on that
basis, heaven forbid. Because I can see New Jersey saying to
the trucks that pour across our State from Pennsylvania
carrying coal and saying, stay out of here, get rid of your
coal some other way. Or other States sending cargo out through
our ports, or again, Indiana contributing very substantial
amounts of contamination through smoke-stacks that dump
pollution on our State.
So you have a problem, Senator Coats. It's not one that can
be easily resolved by saying, OK, let's just cut it off in one
part and accept the others.
By the way, as a reminder, I'm sure you're aware of this, I
looked at the source of the waste that comes to your State: 79
percent from Illinois, 12 percent from Kentucky, 7 percent from
Ohio, 2 percent from Michigan. There's hardly any that comes
from our area to your State.
So we don't have a direct argument on this, but we do have
a very important disagreement.
Senator Coats. Well, Senator, when this issue started, we
had a very direct argument, because most of our waste was
coming from New Jersey. I'm proud of the fact that by raising
my voice and providing legislation in the Senate, which we were
able to stop, we were able to convince New Jersey that Indiana
shouldn't be the repository of your solid waste. You found
other States to dump it in, and we're pleased that you're not
coming to Indiana with that waste.
As far as the contamination from electric coal-fired
generating plants, you and I both voted for the Clean Air Act,
which placed extraordinary financial burden on the industries
of Indiana and the taxpayers of Indiana. But both Senator Lugar
and I supported that effort, against considerable public
opposition within our State. Because we knew rates were going
to go up.
All in an effort, based on somewhat sketchy scientific
information and since confirmed that perhaps that wasn't the
problem with acid rain. Nevertheless, we thought it was an
appropriate thing to do to help preserve the environment in a
way that you and I both want to preserve it. It was at
considerable cost to our State, and I would put up the amount
of money that our State, our taxpayers have spent to clean up
the environment against what New Jersey has done with its solid
waste, and match you easily on that one.
So I think we've done our share. But frankly, Mr. Chairman,
just in conclusion here, we don't solve this problem by
dredging up old issues. If we're going to get back into a tit-
for-tat, as we were 6 or 8 years ago, when we were promised
that all New Jersey needed was a few years to clean up its act
and then there wouldn't be a problem, I can engage in that kind
of back and forth. I think the constructive thing to do here is
what I've suggested in my opening statement, and that's put
past issues and disputes behind us and move forward with
consensus legislation, like we did in the last Congress.
Senator Chafee. That's what I'd like to do. I'd like to
concentrate on the legislation that's before us, the S. 534
from last year. And what suggestions we have, as that bill
passed last year overwhelmingly.
Now, we've been joined by two colleagues. As I mentioned
before, we've had the two representatives from New Jersey here.
We always say when you're waiting, you know when the pilot says
thank you for your patience, that you've sat on the runway for
2 hours. I haven't had any patience at all. But I get thanked
for it. So I want to thank you both for your patience here.
Senator Smith, do you have any comments?
Senator Smith. Have the witnesses spoken?
Senator Chafee. No, they have not.
Senator Smith. Well, I have a statement that I'd like to
make, but I'll be happy to defer to hearing the witnesses, and
then I'll make it.
Senator Chafee. All right.
Senator Sessions.
Senator Sessions. Mr. Chairman, I have a statement for the
record. I'm interested in listening to the panel.
Senator Chafee. All right, fine.
[The prepared statement of Senator Sessions follows.]
Statement of Hon. Jeff Sessions, U.S. Senator from the State of Alabama
I would like to thank the chairman of this committee, Senator
Chafee for holding this hearing today to consider the issues of
interstate waste and flow control.
I support the free market system and the efficiency, lower costs
and other benefits competition brings to the marketplace. The movement
of trash should not be an exception so long as the methods of disposal
comply with the latest regulations regarding protection of the
environment.
It appears to me that prior arrangements for limited flow control
by communities who have invested their funds to build state-of-the-art
waste to energy plants and environmentally sound landfills could be
legitimate exceptions to this rule. Flow control authority was believed
to be legal prior to the Supreme court case of Carbone v. Town of
Clarkstown made on May 16, 1994, which held certain flow control
authority to be unconstitutional. The real problem is that the decision
threatens the ability of communities to repay bonds issued to fund
their solid waste projects.
If the flow of trash needed to raise revenues to support the bond
debt of a facility drops, then the community becomes responsible for
paying the difference. This is a serious question and it requires
careful thought. I look forward to hearing from the witnesses today as
we discuss what can be done to deal with this situation.
The Huntsville Alabama Waste Authority has over $120 million in
outstanding debt because of the investment made in its state-of-the-art
waste to energy facility. Bonds were issued for the financing of this
facility before the Carbone decision was rendered by the Supreme Court
and the plan relied on flow control authority by Huntsville to provide
revenues to finance the facility.
The city of Huntsville believed flow control authority to be legal
at the time when they agreed to enter into a contract with the Waste
Authority to provide the new facility with a steady stream of trash to
support itself. Without the ability to continue compliance with the
contract to haul trash to this facility, the project will probably fail
and the income necessary to retire the bonds will not exist. In any
event, it will be the people of Huntsville who will pay if we do not
enact limited flow control authority ``grandfathering'' protection to
help those communities who relied on it to finance their solid waste
projects.
I look forward to hearing from the witnesses today as we look for a
reasonable approach to solving this problem, fostering competition
while at the same time protecting those communities who made sound
decisions to control their waste and took on debt based on their most
current interpretation of the law.
Senator Chafee. Now, Senator Levin.
STATEMENT OF HON. CARL LEVIN, U.S. SENATOR FROM THE STATE OF
MICHIGAN
Senator Levin. Thank you, Mr. Chairman.
Just very briefly, I want to come and give my very strong
support to legislation to give State and local governments
authority to regulate flow of solid waste into and out of their
jurisdictions. I remember when I was in local government, for 8
years, how excruciatingly difficult it was to make siting
decisions and to make determinations as to where we would
dispose of waste, how we would dispose of waste, and so forth.
It seems to me, once we have a planning process and a
decisionmaking process like that, made by local government,
with all the difficulty and complexity involved therein, that
we should not ignore it and not override it totally, but
indeed, allow States and local governments to have a say in
determining the flow in and the flow out of waste. Otherwise,
it is almost impossible to issue bonds for facilities relative
to disposal of waste. It is really very difficult if not
impossible to get local governments to make siting decisions
for the disposal of waste.
The other day, we had a site in my home State, which
announced a decision to receive 500,000 tons of trash annually
from Canada. Now, Canada is a pretty big place. And the idea
that we would take a community that has made very difficult
decisions in terms of waste disposal to suddenly have a private
contract entered into with a company in Canada to bring a large
amount, at least relative to that site and to that particular
area, of waste from Canada into my home State, ignores any fair
treatment of local government and State government in the
control of their own environment.
So I would hope that we would promptly take up a bill which
would permit reasonable controls. Simple price competition is
not going to drive good planning in this area of public
activity. I think that it's so long overdue that we allow State
and local governments back into this arena that I would hope
this committee would actively participate in making that
happen.
Finally, in answer to Senator Lautenberg's question about
takings, I think it's quite clear from the Supreme Court
opinions that these activities would not be considered takings,
or else the Supreme Court would not have suggested, either
impliedly or explicitly that Congress could authorize State and
local governments to have this kind of a role. I don't think
they would either by implication or explicitly have reached
that conclusion if there were a taking involved.
So I would think those Supreme Court opinions, which give
Congress the role which we're now exploring, do give us the
green light. Before my red light goes on, I'll simply thank the
committee for allowing us to testify and for hopefully giving
some impetus to legislation that is long overdue, so that our
State and local governments are not treated unfairly and in a
high-handed way when it comes to the very, very important
question of waste disposal.
Thank you.
Senator Chafee. Senator, you voted for final passage of S.
534 in 1995. Should we come up with a bill similar to that,
would you be supportive of it?
Senator Levin. I would. I'd like to see some changes in it,
as I think many of us would, that would be improvements from
our perspective. But the answer is yes, it would be an
improvement over the present situation.
Senator Chafee. All right. Do you have any questions of
Senator Levin, Senator Lautenberg?
Senator Lautenberg. No.
Senator Chafee. All right, thank you very much, Senator.
Senator Levin. Thank you all.
Senator Chafee. Now we have two very distinguished members
from the House here. Mr. Pascrell, why don't you proceed. We're
glad you're here.
STATEMENT OF HON. BILL PASCRELL, JR., U.S. REPRESENTATIVE FROM
THE STATE OF NEW JERSEY
Mr. Pascrell. Thank you, Mr. Chairman. Good morning to you,
and members of the committee, and to our senior Senator from
New Jersey. I'm glad to be here with Congressman Franks. We've
worked on, although we're from different sides of the aisle on
many issues when we were in the State legislature in New
Jersey, we've agreed, we've disagreed, but we've always been
civil.
I want to thank you for giving me this opportunity. I look
at this issue, Mr. Chairman, from two particular perspectives.
No. 1, this is beyond any doubt to me a consumer issue. And No.
2, while we debate in State legislatures and in the Congress of
the United States, State or Federal mandates, I believe that
this is an unfunded mandate which exists in the United States
of America. It is not funded.
I believe that flow control is a consumer issue. In this
instance, the consumer is best served by a system of open
competition which results in lower garbage disposal costs.
Before I discuss why I'm opposed to flow control, I believe
it is important for me to briefly comment on some background on
how I came to adamantly oppose flow control. Prior to being
elected to the Congress, I was an Assemblyman in New Jersey for
9 years. I served as Mayor of the third largest city for 7
years, Paterson, NJ. It was during my tenure as Mayor where I
gained first-hand experience in paying for flow control.
In 1995, the city of Paterson spent $11 million of its $137
million budget on waste disposal. This is roughly 13 percent of
the municipal side of the budget. Then we had to send the waste
to an incinerator in neighboring Essex County.
These precious dollars that funded this overpriced disposal
might have otherwise supported additional fire protection,
police, education. The city of Paterson in a lawsuit asserted
that if it were allowed to pay market costs for disposal it
would have saved approximately between $169,000 and $233,000
per month. Due to waste flow control in our State, passed by
our State, we have the highest disposal costs in the Nation.
This is unacceptable.
Prompted by these experiences and the U.S. Supreme Court's
decision, which held that flow control laws violate that
constitution we live under, I, along with my former colleague,
whom you will hear from later, Assemblyman and Mayor John
Rooney, became the founding members in 1995 of the Mayor's Task
Force Against Flow Control. Two hundred and forty mayors out of
the 530 some in the State of New Jersey joined us.
We all agree that flow control costs our cities tens of
millions of dollars each year, that flow control stifles the
operation of the free market, and that at the end of the day,
there is no reason that New Jerseyans should not enjoy the
benefits of the free market and the operation of their solid
waste system.
I'm interested over the past few years of those who have
pontificated about open markets and free competition, except
when it comes to certain issues. These issues impact upon local
government. I believe that Tip O'Neill was correct: ``all
politics is local.''
The simple goal of the task force was to ensure that
municipalities have the right to send trash to the cheapest
waste facility available. Mr. Chairman, the imposition of solid
waste flow control is a flawed policy that benefits neither the
consumer, the taxpayer, nor the general economy. The only
beneficiaries are local government officials and county utility
authorities. Flow control is not necessary to enable
governments to obtain bonds needed to build waste facilities.
With flow control assurances, underwriters are willing to issue
bonds for facilities that could prove wasteful and incapable of
competing in an open marketplace. I would hope that's what we
all want.
If underwriters do not want to support construction of a
facility, that's a good thing. It protects taxpayers and
consumers from subsidizing what would be a poor investment
decision by the local government in the first place. Groups
like the New Jersey Environmental Federation and the Sierra
Club are also opposed to flow control, adding yet another voice
to the already long list of those in opposition.
The fact of the matter is that flow control legislation is
simply bad policy. I'm strongly opposed to it. Local
governments, small businesses and households are better off
without it. We should let the free market determine the lowest
price to the benefit of all involved. To borrow a quote from a
former colleague, who's Mayor of the city of Jersey City, Brad
Schundler, instead of passing flow control legislation,
Congress should bury it in the trash heap of discarded ideas.
Mr. Chairman, this issue is a critical one, not only for
New Jersey but the entire Nation. No one is suggesting, those
of us who oppose flow control legislation, no one is suggesting
that a helter-skelter, cavalier system dominate. What we're
saying is, the structure that exists now in America is
unacceptable to the consumer and unacceptable to the municipal
tax rolls throughout the United States.
In conclusion, let me add this. In New Jersey, waste flow
laws force us to use disposal facilities designated by the
State and the county agencies even though these facilities
charge tipping fees far in excess of what we pay or would pay
in the free market. We can't justify this. Every year our
taxpayers are forced by the system that exists in the State of
New Jersey to forego other necessary services in order to pay
for the millions of dollars in solid waste disposal costs that
we need to incur.
Mr. Chairman, we want to work together to fashion
legislation that will provide for a free and open market which
will have some structure, so that we do not impugn the
integrity of any State. What I've noticed since coming here,
Mr. Chairman, is instead of the partisan politics, we've often
fallen into the sectional politics in the first 3 months since
I've been here. I don't think it's healthy. I don't think it's
wise. I don't think it proves anything.
I want to work with you to come up with a solution to this
problem. Thank you very much.
Senator Chafee. Thank you very much, Representative
Pascrell. Yes, indeed, we all want to work and see if we can
solve this problem.
Representative Franks, why don't you proceed.
STATEMENT OF HON. BOB FRANKS, U.S. REPRESENTATIVE FROM THE
STATE OF NEW JERSEY
Mr. Franks. Mr. Chairman and members of the committee,
thank you for giving me this opportunity to testify in support
of Federal action required to avert a crisis in my home State
of New Jersey.
At issue today is a court ruling that if left unanswered
could jeopardize the solvency of more than $1.7 billion in
bonds issued by New Jersey counties to construct waste disposal
facilities. Without congressional intervention, the burden of
repaying this debt will fall on innocent taxpayers. Through no
fault of their own, taxpayers could see huge increases in their
local property tax bills.
Mr. Chairman, I am not here to argue the pros and cons of
flow control. Rather, my objective is to ensure that the
taxpayers of New Jersey are not penalized because the Federal
courts have invalidated a longstanding State policy. Let me
briefly describe how New Jersey finds itself in this untenable
position.
Two decades ago, the State faced a solid waste crisis. With
most of the State's landfills having reached capacity or forced
to close due to the tighter environmental regulations imposed
by RCRA, New Jersey was forced to rely heavily on out-of-state
disposal. At one point, New Jersey was shipping nearly 55
percent of its trash to other States, and the costs of disposal
were skyrocketing.
In response, our State legislature passed the 1978 Solid
Waste Management Act, which required each of our 21 counties to
develop a plan to dispose of their trash within the State.
Counties issued over $1.7 billion in bonds to finance the
construction of incinerators, transfer stations and landfills
to comply with the State mandate.
In my district alone, the County of Union issued more than
$300 million in bonds to finance the construction of a waste-
to-energy incinerator. The financial scheme under which this
and dozens of other facilities were constructed was based on
the State's ability to direct all the trash generated in a
specific geographic area to a particular disposal facility. The
authority to direct the disposal of trash was essential to
ensure that county utility authorities would have a guaranteed,
steady flow of trash required to pay for the construction of
disposal facilities.
Therefore, ever since the late 1970's, flow control
authority has been an integral component of New Jersey's solid
waste management system. The 1994 Carbone decision and the
subsequent Atlantic Coast decision have thrown New Jersey's
solid waste disposal program into turmoil. The Carbone decision
declared the practice of flow control to be unconstitutional.
The Atlantic Coast decision upheld the Carbone ruling and gave
our State 2 years after the last appeal to end its practice of
directing waste flow.
I recognize that allowing the free market to dictate solid
waste decisions is ultimately in the best interests of
consumers and taxpayers. However, New Jersey needs time to
responsibly make the transition in a manner that will allow us
to meet our $1.7 billion financial obligation.
In light of the recent court decisions, the ability of New
Jersey's counties to reimburse bondholders for the construction
of waste facilities, as well as the ability to honor contracts
with incinerator operators, are in serious jeopardy.
Mr. Chairman, long before the Carbone decision, the State
of New Jersey had made an enormous investment in its
comprehensive solid waste management system. Taxpayers should
not be stuck with the tab because the rules have been changed
in the middle of the game.
Governor Whitman, the New Jersey Assembly and all 21 of New
Jersey's counties are asking for an extension of flow control
authority until the debt obligations by the counties to
construct disposal facilities have been paid off. I want the
committee to know that there is strong support for
grandfathering flow control authority for those States that had
it in place prior to the Carbone decision. In the 104th
Congress, the entire bipartisan New Jersey congressional
delegation supported H. Res. 349, and other efforts to give a
temporary reprieve from the effects of the Federal court
decision.
In addition, the State of New Jersey, New York,
Pennsylvania, Ohio, Indiana and Michigan have all agreed on
flow control legislation. I urge the committee to pass
legislation to grant flow control authority to States like New
Jersey so they can repay outstanding debts owed to investors,
and then move on to an open competitive system.
I thank you, Mr. Chairman, for this opportunity to testify.
I appreciate greatly your leadership over the years on this
issue.
Senator Chafee. Now, Representative Pascrell, what do you
say to that?
Mr. Pascrell. What I say to it is, there's legislation
pending in New Jersey right now that responds to the debt that
my good friend Congressman Franks talks about. In fact, part of
that debt that he talks about, the $1.7 billion, has allowed
certain counties to bond for facilities that were never built.
The wrong people in this business many times are in jail,
Mr. Chairman. Imagine bonding for a capital facility that was
never built. Now, that debt is important. It's not going to go
away. It's not the debt of the State of New Jersey. It's the
debt of the counties and the authorities that have existed
under the law in the State of New Jersey.
Senator Chafee. Now, wait, you lost me there. I'm not sure
what you mean, they bonded to build a facility, an incinerator,
let's say. And you say they never built it?
Mr. Pascrell. That's correct, sir.
Senator Chafee. But if they never built it, then they don't
have the debt.
Mr. Pascrell. They do have it, sir.
Senator Chafee. Then what they----
Mr. Pascrell. They floated the bonds, sir.
Senator Chafee. What did they do with the money?
[Laughter.]
Mr. Pascrell. We'd have to have another hearing for that,
Mr. Chairman.
[Laughter.]
Mr. Pascrell. We'd be in the wrong committee.
[Laughter.]
Senator Chafee. Well, New Jersey is--well, I'd better watch
my tongue.
[Laughter.]
Senator Chafee. What about that, Representative Franks?
Mr. Franks. Senator, I can only speak to the resource
recovery facility, the waste to energy facility that has been
built, that is operating, is accepting trash, is operating at
full capacity, is operating under the tightest environmental
standards in the world, and it's productively dealing with a
problem that used to be of enormous difficulty for our State.
Senator Chafee. What Representative Franks is saying is
this grandfather proposal, which we have considered in other
years, and you know, your Governor, all 21 of your counties,
are in support of this.
Mr. Pascrell. Well, I'm here to testify how I perceive it,
Mr. Chairman. You'll hear other people testifying from the
State of New Jersey as well. I have for the record stated that
240 cities have signed up in support of what we feel is
necessary.
Senator Chafee. You mean nationally?
Mr. Pascrell. No, just in the State of New Jersey, Mr.
Chairman.
Senator Chafee. Two hundred and forty cities?
Mr. Pascrell. That is correct. That is correct. You're
going to hear that again when Assemblyman Rooney speaks before
you in a little while. The question of the debt is a critical
one, Mr. Chairman. It's not going to go away. It's something
that we understand as a State, even though this is incurred by
the counties, that we have to address.
Over a 10-year period, this would mean perhaps $10 per ton
for the garbage in the State of New Jersey. It is not an
unreasonable fee, considering how much the dollars would come
down the cost of reducing or providing for solid waste
reduction in New Jersey would save every municipality in the
State of New Jersey. That is not unreasonable.
We all understand that, Mr. Chairman. That's not the issue
here. The issue is do we need a free market, and we believe we
do.
Senator Chafee. All right, Senator Baucus.
Senator Baucus. Just briefly following up on that line of
questions.
Mr. Pascrell, are you against any grandfathering?
Mr. Pascrell. No, I'm not.
Senator Baucus. What about the facility that was built and
is operating that Representative Franks referred to?
Mr. Pascrell. I believe part of that debt is questionable.
But I believe that possibly we could use some grandfathering,
if that's the question that you're asking me.
Senator Baucus. It is.
Mr. Pascrell. But I think there is some obligation on the
part of the State of New Jersey, due to the fact that this is a
system that was imposed by the State on the counties in New
Jersey.
Senator Baucus. What I'm looking for is some compromise
here.
Mr. Pascrell. Yes. It's obvious that we want to compromise.
I think it's in everybody's better interest.
Senator Baucus. So that's one area where perhaps you could
compromise?
Mr. Pascrell. Yes, sir.
Senator Baucus. Any other?
Mr. Pascrell. No, sir.
[Laughter.]
Senator Baucus. Mr. Franks, Representative Franks, do you
have any suggestions where you might compromise, where there
might be some more common ground?
Mr. Franks. Senator, I just want to point out, back in
1988, the Third Circuit Court of Appeals of the Federal
Judiciary looked at our system of flow control. They found it
to be constitutional. Only when the Carbone decision arrived
did they turn that third circuit decision on its head.
The rules have been changed. We invested in a system under
one set of rules. We moved from sending 55 percent of our trash
out of State to now sending 14 percent out of our State.
Senator Baucus. Would you agree to some kind of grandfather
provision?
Mr. Franks. Yes, I think that's a prudent way to go. As we
transition to a free and open competitive market, I agree with
my friend Mr. Pascrell, that ought to be this committee's
objective, in my judgment.
But how we pivot and reach that point, I think it has to be
done very carefully.
Senator Baucus. Let me be more clear here. So in the
future, you believe that there should not be, flow control
should not be allowed, States and municipalities cannot enact
flow control provisions?
Mr. Franks. I simply believe that the indebtedness incurred
prior to the Carbone decisions should be allowed to be paid
off. There should be an open, free, competitive market. It
would be to the benefit of all----
Senator Baucus. You're pretty close, then.
Mr. Pascrell. On some issues we are, Senator. And on some
issues, we're not. I think the issue of a competitive market is
important.
We're talking about a town, not only in New Jersey, where
property taxes are running faster than inflation, we need to
address that. The only way we can do that is go into our own
municipal budgets, whether small towns or large towns, and see
how much part of that municipal budget goes through solid waste
recovery. I mean, we put a moratorium on facilities in New
Jersey. That was passed in 1991, I believe.
Senator Baucus. My time has expired. Thank you.
Senator Chafee. Senator Lautenberg.
Senator Lautenberg. Good to see two friends here in
somewhat questionable agreement. I understand where each of you
is coming from, therefore I will walk the line that I think is
wise and judicious.
Senator Baucus. As you always do.
[Laughter.]
Senator Lautenberg. That is, Representative Franks, what
would happen to disposal costs if in fact we did have a flow
control measure put into law?
Mr. Franks. If we grandfathered the current flow control
mechanism under which the State is currently operating, sir?
Senator Lautenberg. Well, you can talk about that. But what
I see are neighboring communities, one paying a rate that's
substantially less than the other one. How does that get
justified? Frankly, I think that the States were treated
unfairly by the presumption that flow control was something
that was going to exist, and go ahead out and do your share in
getting wherever you can in getting rid of the trash that you
have in a sensible, environmentally sound way.
But that's past history. Frankly, I think it's something
maybe the Federal Government has to take some look at. The
building was done, the bonds were floated, under conditions
that were thought to be permanent.
Nevertheless, I think it is realistic to say that rates
would raise substantially for the disposal of garbage if we
have a flow control condition put into the hopper, even if it
grandfathers one community or one county or another. Because
the neighboring county, the neighboring community, would have
one heck of a problem understanding why they're paying so much
to send it to the incinerator, and another community is paying
so little to send it to another disposal site.
Mr. Franks. Senator, what raised questions in my own mind
was, as Senator Specter and Senator Coats were testifying, if
an after, in the post-flow-control era, if other States were
inviting our trash to their landfills, at what point would the
local residents of Indiana and Pennsylvania say, enough is
enough, we're not taking any more of New Jersey's garbage. It
was 20 years ago that that resentment from our out-of-state
shipments caused us to try to identify more in-State disposal
capacity.
We now deal with the vast bulk of garbage generated in our
State within our State borders. That has been one relative
success of flow control authority. Has it been too expensive
and inefficient? Yes, it has, in retrospect. We should move to
an open and competitive market. But I don't want it to be left
as though there has been no progress by the State of New Jersey
in terms of dealing with our in-State disposal needs.
Senator Lautenberg. Just to close, Mr. Chairman, what goes
around comes around. Pennsylvania was dumping millions of tons
of their trash in New Jersey. We went to court, to the Supreme
Court, to try to stop Philadelphia from shipping its garbage to
our State. The Supreme Court said, too bad. It's interstate
commerce. You can't interfere with it. And one day, you're
absolutely right, one day we'll be looking for ways to get rid
of garbage because there will be fewer licenses, there will be
more obstructions to the free shipment of material.
Thank you very much, Mr. Chairman.
Senator Chafee. Thank you, Senator.
Senator Reid. Not here. Senator Smith.
Senator Smith. Thank you, Mr. Chairman.
Gentlemen, let me just focus a little bit on the issue of
the bonds. I remember 2 years ago, we had this same debate that
municipalities were going to have to default on the bonds it
issued. It's my understanding we've had about 18 downgrades out
of some 130, 140 such bonds around the country. The sky didn't
fall.
I guess, how do you justify, then, wanting to promote a
grandfather, and I think you were very clear on that,
Representative Pascrell, but let me ask you, Representative
Franks, what is the justification for it? Bond holders take
risks, don't they? We haven't seen a mass downgrading. We've
seen 18, I don't know if they're all 18 in New Jersey or not.
But so what would be the justification for moving in that
direction?
Mr. Franks. Senator, I'm holding the Wheat First Butcher
Singer fixed-income research report on the facility that's in
my county. Let me just read to you their outlook: Uncertain.
The system is not sustainable in its current form without flow
control. Until an alternative solution is found, a below
investment grade level rating is appropriate.
I'd be happy to leave this for the committee. But as people
are looking at how we've built our system in the last 20 years,
to suddenly remove flow control authority and no longer allow
counties to direct waste generated within their boundaries to a
particular location, it simply will not allow these facilities
to function on an ongoing basis.
Senator Smith. Well, a year and a half or so ago, we had
witnesses, I asked every witness, or almost every witness what
the bondholders were told, did the bondholders know that flow
control may not be a valid authority for the locality when they
bought their bonds? Do you know that, in New Jersey? What were
the bondholders told, the investors?
Mr. Franks. All I know is that until the Carbone decision
in 1994, all preceding Federal and State cases had held the
flow control authority of New Jersey to be constitutional. So
it was against that backdrop that bondholders would have made
their purchases.
Senator Smith. So was there anything in those bonds, was
there anything, was there any language in those bonds that
said, absolutely that this was the way it was going to be, that
it was constitutional?
Mr. Franks. Senator, I'm unaware of how any such guarantee
could be delivered, given the changing composition of the
courts and their changing philosophy.
Senator Smith. But isn't that the point?
Mr. Franks. I don't know how any authority could have
looked forward and predicted with precision how courts would
have dealt with very difficult constitutional issues like this.
Senator Smith. I mean, that's the point isn't it?
Bondholders take risks.
Mr. Franks. Well, Senator, I guess they do take risks, but
what level of risk are they expected to take? The vagaries of
the marketplace certainly are inherent whenever you make this
decision. But----
Senator Smith. I know. But, last point, Mr. Chairman. The,
I mean, when we had this debate a year and a half ago, or when
we had, Senator Chafee and I and others put together this bill,
this compromise bill, and we did grandfather flow control, and
some wanted to go beyond, I think we had 15 or 20 years, some
wanted to go beyond that, and we saw, we didn't, I could not
seem to get an answer on whether or not these communities
thoroughly analyzed the legality of the authority on, in
issuing these bonds. If in fact since that time, we have not
had massive defaults, and the bonds are sustainable, then I
don't see the issue of this great, immediate action being
necessary. A year and a half ago, there seemed to be that
sense. But we didn't pass a bill. Maybe that was a good thing.
Mr. Franks. Senator, there's just one element I want you to
look at. That is, that flow control authority still exists
today on the ground in New Jersey. There's been no default,
because the flow control authority continues to operate. It
will operate until a 2-year period after the last appeal is
heard. The reason why there's been no default is because we've
been able to take the garbage generated in a particular county
and direct it to a particular facility.
Senator Chafee. When's that 2 years up?
Mr. Franks. We've not defaulted because the revenue stream
has been unbroken thus far.
Senator Chafee. When's the 2 years up?
Mr. Franks. Well, when will the last appeal be heard.
Senator Chafee. Oh, I see, you haven't finished the appeal.
Mr. Franks. No, sir. So the integrity of the system
temporarily is intact.
Senator Smith. They've also cut their overhead, institute
competitive tipping fees. It's the free market. It's the free
market that's savings the bonds, I think, not the flow control.
Senator Chafee. Thank you, Senator.
Senator Sessions.
Senator Sessions. I just have a couple of questions. With
regard to, Congressman Pascrell, on Paterson, you're opposing
the grandfathering, correct me if I'm wrong, fundamentally
because you think it's costing your city and the citizens of it
too much to send your waste to an incinerator that could be
better landfilled in some other location at less cost.
Mr. Pascrell. I oppose flow control for the basic reasons
that I stated earlier, Senator. And I believe that it leads to
consumer increase in prices and higher taxes. And I think I've
proven that by the numbers.
Senator Sessions. In effect, as it plays out in your city,
you're required to send your garbage to a facility that costs
you more than you think it ought to cost?
Mr. Pascrell. Well, we go one better than that, Senator.
Because of the flow control in the State of New Jersey, my
city, which has what we call a transfer station within it, as
part of the State system and county system, cannot use the
transfer station. It has to send its garbage by the hauler,
whom we hired through competitive bidding, to an incinerator in
another county. That incinerator charges my city more money
than it costs people from New York State to bring their garbage
into New Jersey to that same incinerator.
You know, when you look at the rhyme or reason to this,
Senator, there are many issues here. And it is complex. I don't
believe it is simple, as was stated before. These are complex
issues, and we need to study them. We don't want to hurt
anybody here. There needs to be parity.
There has never been any suggestion by those of us who
support the elimination of flow control that it's not a phantom
debt. It's a real debt, that these counties owe to the
bondholders. We understand that. The whole State should be held
accountable for that. Whether facilities were built or not,
even, we should be held accountable for it.
Senator Sessions. Well, in Huntsville, AL, they built an
incinerator, and bonds were floated for that. If they lose that
source of garbage, I think, Senator Smith, wisdom
notwithstanding, I think somebody, those bonds are going to be
called. It's a troubling thing to me, the grandfathering seems
to be, those who've really invested, who've developed a system,
and it's a mistake, if it's a mistake, sometimes you enter into
a contract, it's a mistake, you have to see it through to the
end. Maybe that's where we are.
Mr. Chairman, that's really all I have.
Senator Chafee. Thank you, Senator.
Senator Allard.
Senator Allard. Thank you, Mr. Chairman. I have just a few
questions.
On the average, how long are these bonds extended out? How
long is the payoff period, 30 years, 15?
Mr. Franks. The forecast that I've seen, Senator, would
indicate that the last of the bond indebtedness would be paid
off by the year 2010, 13 years from now. On the last of the
facilities. It's important to understand, the range of debt,
the resource recovery facility in my county has some $275
million still outstanding. The County of Hunterton, in the
rural western part of the State, has bonded for $300,000. They
would be able to pay that off in a relatively short period of
time. Under our legislation, the open market would begin to
operate in Hunterton County earlier than it would in the County
of Union, which would need this additional year for them to pay
off the indebtedness.
Senator Allard. When would be the payoff date in your
county, probably?
Mr. Franks. I believe it's 2008, but I'm not certain.
Senator Allard. Then you have 2 years beyond that in the
law to move it into the free market system. Or no, that would
be, that's when the last appeal is heard.
Mr. Franks. That's correct.
Senator Allard. Let me ask you when the last appeal, you
anticipate this appeal process could be strung out for----
Mr. Franks. I suspect one or both parties will ultimately
take this to the Supreme Court. It would depend upon when the
decision was rendered by the Court. I'm not that good a
predictor of these things.
Senator Allard. Can this process be strung out for 10
years?
Mr. Franks. No, I don't believe that there is a likelihood
that the Court could take anywhere near that period of time.
Senator Allard. Two years? Five years?
Mr. Franks. I think the lower end of that scale might be
possible.
Senator Allard. Maybe 2 or 3 years. Then after that's done,
maybe you have 2 years more after that last appeal?
Mr. Franks. Correct.
Senator Allard. So we're already halfway through and most
of these projects are paying off those bonds. Just trying to
deal with averages and how we might impact some.
So it's a relatively short span. There's only about 5 years
where you're going to have those bonds downgraded, or are they
downgraded now? I guess they're downgraded now.
Mr. Franks. They have been downgraded now.
Senator Allard. They have been downgraded now.
Mr. Franks. Yes.
Senator Allard. What I'm getting at, you're going to have
maybe just 5 years on the bond life there where it's going to
be a real problem for you, isn't it? If we had legislation, if
we created just a short window and put some time restraints on
that, maybe that would get you into the free market system. But
I don't want to, wouldn't want to see this abused. Maybe that
is somewhere we can work on a compromise. I think that's a good
observation.
Are there surpluses that develop in some of these
authorities? Are there surpluses that develop there where we
could say, well, if there's a surplus developing, maybe we can
require a paydown of the bond early, even take more of these
projects out of the system if we set a date?
Mr. Pascrell. Senator, there are no surpluses. Some of
these authorities have become cash cows. If you say it the way
it is, you have asked an honest question, I'm trying to give
you an honest answer.
Senator Allard. They overcharge for the fee, and if the
city collects this fee, then the fees can be directed for other
purposes in support of the services?
Mr. Pascrell. That's correct.
Senator Allard. OK. Thank you, Mr. Chairman.
Senator Chafee. Thank you, Senator.
I do want to point out that in the next two panels, we will
have mayors and county commissioners and so forth who will be
able to address these issues also.
Senator Lieberman.
Senator Lieberman. Mr. Chairman, I heard you and therefore
have no questions.
[Laughter.]
Senator Chafee. Thank you very much.
I want to thank the panel and thank you gentlemen very much
for coming.
We now have a new panel coming forward. Mayor Rooney,
Commissioner Johnson, Mr. Leff from Connecticut, Mr. Grover
Norquist, president, Americans for Tax Reform, and Mr. John
Broadway of Virginia.
Now, I do understand that Senator Grams was here and was
going to introduce--come forward, Senator. I know you wanted to
introduce Mr. Johnson to us, and we'd be delighted to hear your
comments.
Senator Allard. Mr. Chairman, I wonder if I might be
recognized, and I ask unanimous consent that my opening
statement be made a part of the record.
Senator Chafee. Definitely.
[The prepared statement of Senator Allard follows:]
Statement of Hon. Wayne Allard, U.S. Senator from the State of Colorado
Thank you Mr. Chairman. First of all Mr. Chairman I want to
congratulate you for chairing the subcommittee that has the opportunity
to deal with Superfund and flow control and interstate waste. You cut a
shrewd deal with the other subcommittee chairs over jurisdictions.
More seriously though, flow control and interstate waste are
important issues to many States and local governments. However, while I
normally agree that we should respect decisions made at the local
level, in this case I believe we should carefully examine the actions
they have taken. By enacting flow control laws and interstate waste
laws State and local government's are interfering with the free market.
If their reasons aren't compelling we shouldn't ratify their actions.
The issue of flow control is the most disturbing. In this instance
localities can completely subvert the free market process, if they are
allowed to pass flow control laws. While I understand that there are
financial considerations to flow control, I have yet to be convinced
they are compelling enough to pass laws restricting free trade.
Thank you Mr. Chairman, I look forward to today's hearing.
Senator Chafee. Senator Grams, why don't you sit right up
there.
We want to welcome you, and you go to it.
STATEMENT OF HON. ROD GRAMS, U.S. SENATOR FROM THE STATE OF
MINNESOTA
Senator Grams. Thank you very much, Mr. Chairman.
I don't have any questions or issues. I don't want to cause
this hearing any problems.
But I just wanted to be here, and it is my privilege to
introduce a very important person at this hearing today. In the
interest of time, I want to make this statement very short.
Mr. Chairman and other members of the committee, I come
before you today not just to commend the committee for focusing
its attention on this very important issue, but also to
introduce a friend and a colleague who has worked tirelessly on
the flow control issue, but nationally and in our State of
Minnesota.
As chairman of the board of commissioners in Hennepin
County, MN, and the future president of the National
Association of Counties, Randy Johnson has devoted many years
of his service to addressing this very important issue. Randy's
additional service as chairman of the Environmental Task Force
for the Urban Consortium helps make him a national authority on
environmental public policy. Hennepin County, which includes
the city of Minneapolis and its suburbs, has the responsibility
to manage a comprehensive recycling and integrated solid waste
management program. I am positive that Randy's service in
Hennepin County will be of considerable benefit as this
committee deliberates the issue of solid waste management.
So once again, Mr. Chairman, I want to thank you very much
for your efforts to address this very important issue. It is my
privilege to introduce to this committee chairman of the board
of county commissioners, Randy Johnson.
Senator Chafee. Well, thank you very much, Senator, for
taking the trouble to come here. We appreciate it.
Senator Smith, did you have a comment you wish to make?
OPENING STATEMENT OF HON. ROBERT SMITH, U.S. SENATOR FROM THE
STATE OF HEW HAMPSHIRE
Senator Smith. Yes, Mr. Chairman. I just wanted to make a
couple of comments as part of an opening statement, to say that
you and I worked very hard 2 years ago I think to accommodate a
lot of interests on both interstate waste and flow control,
trying to balance many different interests. Even though I had
some strong reservations about the use of flow control, S. 534
that we introduced did attempt to narrow, to provide a narrow
grandfather of flow control authority to municipalities that
relied on its power to fund waste energy and landfill disposal
facilities.
During the full markup we even broadened the grandfather
authority to accommodate member concerns. We took the bill to
the floor, accommodated other member concerns, and I think it
passed by a vote of 94 to 6. Then the House of Representatives
did not act on the bill, probably because they felt that the
free market ought to take its course. As I look back on that,
maybe the House was right.
You know, we received information that the sky was falling,
we had witnesses testify that if we didn't act immediately to
protect municipalities we were going to have massive defaults
on bonds, and then 2 years later, we find that the sky is not
falling. I alluded to this in the questions a moment ago.
But the truth of the matter is, as we can see, we have some
written testimony from Standard & Poors, these bonds have
remained stable. There are, although New Jersey does have still
the flow control, there are areas of the country that no longer
have flow control, and these facilities have not defaulted.
So I think the supporters of flow control have a tougher
case this year, at least with me. Last Congress, I did support
grandfathering a limited number of flow control facilities.
Because I was influenced, frankly, by the testimony of a number
of these local governments and the issues regarding the bonds.
But I was never convinced, nor was were my questions ever
answered as to what these bondholders were told and what they
weren't told. I didn't get an answer again this morning.
Despite our good intentions, those who supported flow
control were not satisfied with some of the common sense
provisions, and even tried to further widen the limited
grandfather than we had.
So I think the issue, there are two issues here, Mr.
Chairman, one is flow control and one is interstate waste. And
I think having them together is perhaps taking on more than we
can deal with. For more than 10 years, this committee has heard
dozens of witnesses on interstate waste say that landfills were
filling up faster than we could replace them, if we didn't act
immediately we'd have a national garbage crisis on our hands.
And in response to this, again, we did do some interstate waste
reforms in S. 534.
Now here we are back again 2 years later with additional
data. We know more than we knew then. I've looked at some of
that information from around the country, and it becomes pretty
obvious that there may have been some overstatement, to put it
mildly, regarding not only interstate waste but also flow
control.
Solid waste is still being transported in interstate
commerce. Many States are importing as well as exporting.
Landfill space is not the scarce commodity it was presented to
be, and tipping fees are falling. The free market, to the
consternation of many, is working, Mr. Chairman.
So I look forward to hearing the testimony. I'm trying to
keep an open mind. But it's becoming more and more difficult,
because I think the evidence is not very convincing to me.
Thank you, Mr. Chairman.
[The prepared statement of Senator Smith follows:]
Statement of Hon. Bob Smith, U.S. Senator from the State of New
Hampshire
Once again, we find ourselves here talking about interstate waste
and flow control. Frankly, I am disappointed that we are here today.
Two years ago, Senator Chafee and I worked very hard to put
together an interstate waste and flow control bill that attempted to
balance the many parties interested in these issues. Despite my strong
reservations about the use of flow control, the legislation that
Senator Chafee and I introduced, S. 534, attempted to provide a narrow
grandfather of flow control authority to municipalities that had relied
on this power to fund waste-to-energy and landfill disposal facilities.
During the full committee markup, we broadened this grandfather
authority to accommodate individual member concerns, and similarly did
so on the Senate floor. Our bill contained interstate waste provisions
that not only capped waste exports, but would have ratcheted these
exports down over a series of years. We did not accept all the changes
sought by members, but I believe that Senator Chafee and I bent over
backward to be accommodating. Although the final bill passed the Senate
by a vote of 94-6, the House of Representatives took a more free market
approach to these issues, and S. 534 languished in the other body for
the remainder of the Congress.
To be honest, I believe that the legislation that passed the Senate
had significant flaws, particularly in regards to flow control, and
perhaps the House was right after all. However, at the time, I felt it
was important to quickly address these issues, and it had been my hope
that a Conference with our House counterparts would have resulted in a
streamlined solution to these problems. Nevertheless, this did not
happen. Today, one of my primary concerns is that the rationale for
passing this type of legislation has not gotten any better, and in the
case of flow control, it has gotten worse. I really question whether it
makes any sense to spend any time on these issues here in the Senate,
until we have better assurances that the House will be willing to move
on these matters.
I would like to make a few specific comments about the two issues
we are here today to discuss. The first is the issue of flow control.
This is an issue where some groups took a ``sky-is-falling'' approach.
During the last Congress, we had witnesses who testified that we had to
act ``immediately'' to protect municipalities from having to default on
bonds they had issued to fund their waste-to-energy facilities,
landfill construction and recycling efforts. Now we are here two years
later, and, surprise, surprise, the sky has not fallen. While only
about 18 downgrades have taken place nationwide--almost all in 1995--
widespread municipal defaults did not occur. As we can see from the
written testimony of Standard and Poors, these bonds have remained
stable because municipalities have reacted in a fiscally prudent
manner: they have instituted competitive tipping fees, cut their
overhead costs, and sought alternative streams of revenue. That is the
way the free market should work, and that is the way it has worked.
Yet, despite these facts, we will again have witnesses today who will
claim that we have to act quickly to protect these bonds.
Frankly, the supporters of flow control have a much tougher case to
prove this year. Last Congress, I supported grandfathering a limited
number of flow control facilities because I was influenced by the
testimony of a number of local governments. Despite our good
intentions, lobbyists who supported flow control were not satisfied
with our common sense provisions, and worked hard to organize a number
of harmful amendments to widen the limited grandfather that we had in
S. 534. This effort not only created a number of significant flaws in
our legislation, but I believe it also contributed to the ultimate
demise of that bill. It is because of this experience, that I am wary
of efforts to provide any grandfathering authority whatsoever.
The second issue I want to talk about is the interstate
transportation of solid waste. Not only do I believe this issue can be
discussed separately from flow control, but I think this issue is not
so clear cut. For more than ten years this committee has heard dozens
of witnesses who have testified that this was a significant national
problem, that landfills were filling up faster than we could replace
them, and that if we did not act immediately, we would have a national
garbage crisis on our hands.
In response to these pleas, this committee considered and reported
a number of bills, including S. 534, that would attempt to tackle this
issue. Now we are back here with two year's worth of additional data.
As I reviewed the information from around the country, it became
obvious to me that some folks may have overstated their case a few
years ago when they said we needed to act quickly. While solid waste is
still being transported in interstate commerce, many States are both
importing as well as exporting garbage. Landfill space is not the
scarce commodity it was presented to be and tipping fees are falling.
Nonetheless, on the horizon we see the closing of the Fresh Kills
landfill that could change the equation, perhaps significantly.
Attempts to control the interstate transportation of solid waste also
raises the dilemma over what is the most appropriate level of
government to place control over these issues. Should it be at the
State level, or should local communities be empowered to determine
whether they want to have solid waste facilities within their borders?
I look forward to hearing the testimony of our New York witnesses, and
I hope they will be able to give us some insight into how they are
going to deal with the more than four million tons of solid waste
generated annually in the city. In addition, I hope all of the
witnesses will share their views regarding who should have the ultimate
control over where solid waste materials are placed.
I want to thank the witnesses for coming today and I look forward
to your testimony.
Senator Chafee. Thank you very much. Now we'll have Mayor
John Rooney of Northvale, NJ.
All of your statements will go into the record. Each
witness will have 5 minutes.
Did you have a comment?
Senator Lautenberg. I just want to welcome Mayor Rooney,
Mr. Chairman, and to tell you that he was among the leaders in
the mayor community, mayoralty community in New Jersey looking
for relief for residents. And while we didn't necessarily agree
on the approach, he was a forceful leader in his view, and I'm
pleased to see him here testifying today.
Senator Chafee. Well, thank you, Senator.
Mayor Rooney, you've got 5 minutes. Go to it. Your
statement will be in the record.
STATEMENT OF HON. JOHN E. ROONEY, MAYOR, NORTHVALE, NJ
Mayor Rooney. Thank you, Mr. Chairman.
One of the things I'd like to do is deviate a little bit
from my testimony, and I'll make up for that in time. There
have been some statements made today that I'd like to either
emphasize or correct. One of the things that Senator Baucus had
said was basically shutting down the different States from
interstate commerce. Senator Lautenberg answered that very well
by the fact that New Jersey tried to do this.
The one thing that didn't come out loud and clear is why do
we have a problem in New Jersey today. We have a problem in New
Jersey because Philadelphia filled up our South Jersey
landfills and New York City filled up our North Jersey
landfills. So we're out looking for space. So that's one of the
problems.
Senator Coats said that he's a net importer of garbage for
6 years. Well, New Jersey has been a net importer of garbage
for over 60 years. And that's why we have the problem that we
do today.
Also, my former colleague in the Assembly, former
Assemblyman Pascrell, Congressman now, stated about how much we
actually lose because of flow control in New Jersey. I've
calculated the numbers based on the average and based on the
real costs of garbage. It comes out to over $1 million a day in
New Jersey that we pay in excess fees for disposal.
So that's what this is all about. That's why I'm here.
Also, Congressman Franks said the New Jersey Assembly was
asking for flow control. That's incorrect. The New Jersey
Assembly has not taken a position. As a matter of fact, over 30
of my colleagues in the Assembly have signed on to bills ending
flow control in New Jersey. We have our own solutions in hand.
There are a couple different versions of it. But it's our
solution.
A couple of things. There's one thing that kind of scares
me. It's when somebody says, I'm from Trenton and I'm here to
help. Well, something that scares me even more is when they
say, I'm from Washington and I'm here to help. So please, don't
help us.
Now, what I want to do is give you a little background. I
am the Mayor of Northvale. It's a little, bitty town nestled in
the northern valley of New Jersey. The next town from me is
Tappan, NY. I'm right on the border, I'm 3 miles from the
Hudson River. I have under 5,000 population. We have 1.1 square
miles.
We're paying, right now, $103.38 a ton to dispose of our
garbage because of flow control. I recently went out for bid to
try to see what the free market was like. The price I got was
$63 a ton. But that's not the low. You can see by New York
City's rates, but they have a lot of tonnage, of $43 a ton. If
I look at Bergen County, my own county, they're mandated to go
to the Union County incinerator: Mr. Franks' facility. We pay
$80 a ton to Union. We pay $16 a ton processing fee, because we
must deliver it to North Arlington and pay a host community
fee, too, and we pay another $12 a ton to re-transport it to
Union County. So $116 a ton.
Bergen County is mandated to do 192,000 tons to Union
County. The balance of it we can go in the free market. Do you
know what the bids are in the free market? Forty-two dollars
and 75 cents a ton. That's what the real world of garbage is.
So I'm here to say, and also to give you a little bit of
other background, I'm also in the State legislature, as my
former colleague said. I was also Commissioner on the Bergen
County Utilities Authority. I was there for 5 years, 1983 to
1988.
I'm also the chairman of the Mayor's Task Force Against
Flow Control. We now have over 240 mayors signed on against
flow control. And somebody said, well, we have 567, why not
567? It's because of discrimination. Some of our mayors are
discriminated against. Me, I'm paying $103.38. Somerset County
mayors are paying $125. We're on the Task Force.
But if you take the commissioner of the DEP's own county,
Burlington County, they only pay $49 a ton. Why the hell would
they want to oppose this legislation? They don't. They want to
keep flow control. Their mayors are interested in keeping flow
control.
That's the disparity in New Jersey. If we had rate
averaging and we all paid the average of $96 a ton for our
garbage, we would have everybody against flow control. But we
don't. We have pockets.
But I must tell you that 7 of the 10 large city mayors are
on our side. Over half the population of New Jersey is
represented by the mayors that I've talked about.
To give you a good example of how flow control can really
hit you between the eyes, in 1988, I was doing construction in
my home. February 1988, I had a 10 yard dumpster sitting in my
driveway.
I got a call from the hauler, he said, John, if I take that
Friday, it costs you $350. If you wait until Monday, it costs
you $1,300. That's what flow control has done to New Jersey.
Carbone gave us an opportunity to go out and seek lower
rates. We said, this is great, this is something that we can
use, that money in our budget to provide other services.
Actually not to cut services. Everybody is trying not to cut
services.
I go back to the $63 a ton. If I was able to do that this
year, I would have had a 40 percent reduction in my rates for
garbage disposal. Would any of you up there like to go to your
constituency and say, I'm going to save you 40 percent of this
item in the budget, and I'm not going to reduce your services
one bit? How would you like to take that to your constituency?
I know I can run on it. I'm sure everyone else can. But no,
we have to look at a situation that's going to grow and grow,
just like topsy.
Also on this litigation that we've formed against flow
control, we've got other people supporting this. The
Environmental Federation and the Sierra Club, amazingly,
they're on our side. They're opposing flow control. We also
have Hands Across New Jersey, this is a citizens grass roots
movement, Common Cause, New Jersey Business and Industry
Association, the Chemical Industry Counsel, United Taxpayers of
New Jersey, the New Jersey Chamber of Commerce, and the New
Jersey League of Municipalities.
Senator Chafee. OK, Mayor, if you would wind up now,
please.
Mayor Rooney. That 5 minutes went quickly.
The point of the issue is that just recently we saw New
York City go out for garbage disposal. Forty-three dollar a
ton, the real world of garbage. That garbage is going to come
to New Jersey. It's going to come to the city of Newark to the
incinerator at $43 a ton. The city of Newark pays $72 a ton for
the same facility.
Is that fair? No, it's not.
The other issue is the bonds. I can discuss that ad
nauseam. I can tell you exactly what the issues are on whether
the bonds are going to go belly up. I can tell you about the
issues of why one county spent over $100 million on the bonds
and never put a shovel in the ground.
This is what's happening under flow control. We had a
facility in Bergen County that they, they were 2,400 tons a day
when I was there as a commissioner. That is what we were
projecting for the incinerator. They're now getting 600 tons.
When they had to build a transfer station, do you know what
they did? They built a 5,000 ton facility, 5,000 tons a day.
Why? Because they could. Where does that 800-pound gorilla sit?
Senator Chafee. Now, Mayor, we've cut you.
[Laughter.]
Senator Chafee. Commissioner Johnson.
STATEMENT OF HON. RANDY JOHNSON, CHAIR, BOARD OF COUNTY
COMMISSIONERS, HENNEPIN COUNTY, MN; AND PRESIDENT-ELECT,
NATIONAL ASSOCIATION OF COUNTIES
Mr. Johnson. Thank you, Mr. Chairman and members of the
committee. I'm Randy Johnson, and I'm chair of the Hennepin
County, Minnesota Board of Commissioners. That's Minneapolis
and suburbs. I'm also president-elect of the National
Association of Counties. NACO represents the 3,000 counties in
the United States.
We appreciate being invited to participate in this hearing.
I, too, will depart from my prepared testimony which is being
entered into the record. In view of previous statements, I
think it's important that we look at the issues that are really
not before us right now.
The issue is not whether flow control is a good idea or a
bad idea in the abstract for disposal of garbage. It's not
whether a free market approach to collecting garbage, which is
the expensive part of this whole process. It's not whether a
free market approach to collecting garbage is better than a
municipal government monopoly approach.
It's not whether facilities to which garbage has been sent
pursuant to flow control are environmentally superior to other
facilities. And it's not whether flow control facilities will
cost more or less over an extended time than other facilities.
The issue before us now is whether local governments, who
in good faith built facilities, or in most cases contracted
with the private sector to build and operate facilities under
competitive bid procedures, shall be able to meet their debt
obligations without sharply increasing local taxes.
That's why we are asking for a narrow grandfather for those
local governments to be able to pay off their bonds and live up
to their contractual obligations.
Now, the question has come up nobody's defaulted yet, the
sky isn't falling down, perhaps Congress should continue to do
nothing. NACO had never predicted, and when I testified before,
I never predicted that defaults were inevitable. Local
governments in this country go to great extremes, very
expensive extremes, to avoid the ``third rail'' of defaulting
on bonds. As we all recall, New York City was in dire straits
several decades ago, and yet never defaulted.
But we have had very serious consequences, and default is
not impossible. Here are some of the impacts. National Credit
Rating Agencies have downgraded credit ratings for 17 local and
State solid waste authorities since the Supreme Court threw out
a flow control ordinance in the Carbone case 3 years ago.
Moody's has downgraded 15 issues. Approximately half were
downgraded to ``junk bond'' status. Standard and Poor's
downgraded four issues. Two are now classified as junk bonds.
Fitch downgraded three issues to junk bond status.
In addition to downgrades, Moody's has eight additional
bond issues under credit review. As litigation increases and
the cases work their way through the courts, more downgrades
are likely. The total outstanding debt that has either been
downgraded or put on a credit watch for potential downgrading
by the rating agencies since Carbone is over $2.3 billion.
What does it mean? It means that the next time local
governments try to go to the bond market to borrow funds for
other public projects, like bridges and roads, or schools, they
may be unable to find any market for those bonds. For those
local governments who are able to find buyers of their debt,
the interest rate will be significantly higher, and local
taxpayers will make up the difference.
But it's not only downgrades that we're concerned about.
We're seeing other detrimental and expensive effects from
Congressional lack of action on flow control.
Attached to my testimony is our Think Again sheet, which
outlines and details a number of local governments and what
they have had to do over the last 3 years to try to avoid
defaulting. My county, for example, has been sued by four
businesses and some individuals in a class action regarding our
flow control ordinance.
A year ago, the Federal court certified a class consisting
of virtually every Hennepin County commercial and residential
waste generator. The Court already found the ordinance violated
the Commerce Clause of the Constitution, because as Carbone
held, only Congress has the authority to decide who will
regulate garbage that crosses State lines.
Now in May, we will begin trying the second phase of the
Hennepin County case, the exact amount of the alleged damages.
Plaintiffs are claiming $154 million, nearly one half of
Hennepin County's total annual property tax levy. To add insult
to injury, if the court allows this case to proceed to final
judgment because Congress has not acted, Hennepin County
taxpayers will also have to pay millions of dollars in
plaintiffs attorneys fees. Other lawsuits have been filed, more
are threatened.
One of my concerns is that Hennepin County will become the
poster county for the rest of the country. We will reach the
first decision; this case is farther along than the others. We
would like Congress to act before that case reaches final
judgment.
In other counties, similar difficult impacts are occurring,
in Florida, Maryland, New York, North Carolina, Iowa, and
Virginia, all have already had to increase local taxes and
phaseout recycling programs. We're also seeing that the loss of
flow control allows waste haulers in some communities to
continue to reduce their costs, but they do not pass the
savings on to the waste generators.
The debate over flow control is not really a disagreement
between the public sector and the private sector. Local
governments acted in good faith under the laws that our States
adopted. We attempted, did the best we could to interpret
Federal law. We built and entered into competitively bid
contracts to build facilities that are now being undercut by
what we think are temporarily cheap landfills and some other
facilities.
Similar to the electric utility restructuring debate,
however, what we're seeking is a way to cover our stranded
investments in these facilities. It is only equity that we are
asking for, nothing more. We're asking for a narrow grandfather
for those cities and counties and local governments who acted
in good faith. We tried to solve local problems in the way that
they have traditionally been solved in this country, at the
local level on a local basis.
We urge you not to tie our hands. We urge you to pass a
narrow grandfather bill so that we do not have to explain to
our local taxpayers why Congress has forced us to increase
local taxes.
Thank you very much, Mr. Chairman and members of the
committee.
Senator Chafee. Thank you very much, Mr. Commissioner.
Mr. David Leff, assistant commissioner for Policy and
Planning, Connecticut Department of Environmental Protection.
Senator Lieberman, he's your esteemed constituent.
Senator Lieberman. Yes, he is, and a neighbor to your
esteemed constituents, Mr. Chairman.
I was with David Leff yesterday in New Haven, where we
talked about brownfields legislation. I'm delighted he's here
for the Department and for Governor Roland. We welcome him and
look forward to his testimony.
Thank you.
Senator Chafee. Thank you. Go to it, Mr. Leff. If you would
restrict your comments to the 5 minutes, we'd appreciate it.
STATEMENT OF DAVID K. LEFF, ASSISTANT COMMISSIONER, CONNECTICUT
DEPARTMENT OF ENVIRONMENTAL PROTECTION
Mr. Leff. Yes, sir. Thank you, Senator Lieberman.
Senator Chafee, members of the committee, I bid you good
morning. My name is David Leff, I'm an assistant commissioner
with the Connecticut Department of Environmental Protection.
With me today, behind me is Robert Wright. He's the acting
president of the Connecticut Resources Recovery Authority,
which has financed and built four of Connecticut's six resource
recovery plants.
I want to thank you for having me here this morning to talk
about the effect of a lack of flow control on the State of
Connecticut, and to tell you why the Carbone decision is having
a negative impact on our State.
Over a decade and a half ago, Connecticut realized that it
could no longer use the traditional landfill for disposal of
waste. We were reaching capacity of our landfills. They were
polluting our water, including our drinking water. There were
new sites that were unacceptable to the public. As responsible
officials, we did not want to foist our problem on other
States. We decided that we were going to try to be self-
sufficient in our disposal of solid waste.
Waste-to-energy facilities seemed a very good idea at the
time. Not only would they take care of our garbage, but through
the generation of electricity from solid waste they would avoid
the need for use of imported oil.
But these projects are expensive: in Connecticut, $750
million of bonded debt for six facilities. At the time the
projects were developed, fixed costs were to be paid from a
combination of energy revenues and tipping fees. In order to
allow project financing to go forward, and it was necessary for
project financing to go forward, long-term waste contracts had
to be entered into with the facilities, guaranteeing a minimum
tonnage. These are the so-called put or pay contracts.
In my State, 137 of Connecticut's 169 towns have such
contracts. That represents 86 percent of our population.
Without flow control, haulers are free to dispose of the waste
of committed towns to other facilities. Less waste means that
member town tipping fees go up while the desperate need to
attract spot market waste drives spot market prices ever lower.
It is a very vicious cycle.
This puts an unexpected financial burden on our
municipalities. It could ultimately lead to the destruction of
these facilities which dispose of our solid waste in an
environmentally sensitive and progressive manner. It also
discourages recycling, because as towns seek to increase the
amount of waste they deliver to facilities, they are loathe to
take paper and other recyclables out of the waste stream and
put them back to productive use by re-use, instead sending them
off to be burned.
Why has the system not collapsed 3 years after Carbone?
This is a slow downward spiral. In this case, the world doesn't
end with a bang, it ends with a whimper.
Also, many haulers held off diverting waste until they saw
whether Congress would act. Now that Congress has not acted,
diversion of waste is accelerating. Connecticut State and
municipal officials have dealt with solid waste in a forward
looking and responsible manner. But the Carbone decision has
changed the rules in the middle of the game.
That is fundamentally unfair. These facilities were built
using reasonable economic and legal assumptions. Those
assumptions ought to last for the life of the bonds and the
life of the contracts involved.
Thank you very much.
Senator Chafee. Thank you very much, Mr. Leff. We
appreciate that.
And now Mr. Grover Norquist, president of Americans for Tax
Reform.
STATEMENT OF GROVER G. NORQUIST, PRESIDENT, AMERICANS FOR TAX
REFORM
Mr. Norquist. Mr. Chairman, members of the committee, my
staff has proposed a real bang-up written testimony here that I
commend to your reading at another point. But to stay within
the 5 minutes, I'd just like to address a few of these issues.
First, under truth in testimony, Americans for Tax Reform
receives no Federal funds, State funds, county or taxpayer
funds. And for purposes of this discussion, no support from any
interested industries.
But I am interested in this as a taxpayer organization. We
work with taxpayer groups in New Jersey that have been
mentioned, United Taxpayers of New Jersey, and Hands Across New
Jersey. We've heard from political leaders in New Jersey about
the upward pressure on taxes because of flow control. Flow
control is a tax. It is a tax to support inefficient government
enterprises, and it is a tax that is levied on consumers and on
taxpayers.
If the enterprises--incinerators to burn garbage or
landfills to dispose of garbage--were efficient, they would not
be asking for legal protection in forcing consumers in their
direction. These institutions should either be sold into the
private market or, if they want to remain in the hands of the
Government and not go out and loot taxpayers, they should go
and get market prices for their goods.
The whole world is moving toward free markets, freedom of
contract, freedom of movement, toward freer trade around the
globe. I have gone to Poland, Bulgaria, Eastern Europe,
advising some of those countries on how to move to a free
market. If when I was in Bulgaria, somebody said, hey, we've
got this great plan, it's called flow control, isn't this a
good idea, I would have said, no. Get rid of that. That belongs
to another era. Move to the free market.
It seems to me that if we're advising the rest of the world
to move toward a free market and away from State-ism that we
ought to at least not go in the wrong direction ourselves.
I'm very concerned about this legislation. I was opposed to
flow control or bans or limits on interstate commerce before
these hearings. But having heard the earlier panel in this one,
I'm even more concerned. I thought the Constitution was a good
idea. I think the Takings Clause is a good idea. I think the
Commerce Clause was a good idea.
I understand Patrick Henry's concern that moving from the
Articles of Confederation to the Constitution might raise some
problems, but I really did think that the Commerce and the
Takings Clause were tremendous improvements over the Articles
of Confederation. I think to throw those out is a big mistake,
that we don't all grow our own wheat in our own backyards, our
own counties or our own States. We don't get our own coal from
our own counties or our own backyards or our own State. We
don't bury our dead in our own cities and towns.
I don't understand why you'd want to put those kinds of
restrictions by State, and if not by State, why not by county,
and if not by county, why not by city. Why not get rid of the
free market altogether. It seems to me that moving toward more
State control, government control of this, in order to
subsidize inefficient government-run entities is the exact
wrong direction to go. Having listened to the earlier
discussions in the earlier panel, I thought it was a bad idea
before. I think it's a truly horrible idea and destructive idea
now.
At Americans for Tax Reform, we do rate tax votes and
because this is a tax on consumers, specifically designed to
subsidize failed and failing and costly government enterprises,
the kind that we tell the politicians to get out of the
business of doing that, we're going to be rating this vote as a
bad vote on the tax issue itself in this year.
Bad ideas in the private sector go bankrupt. Bad ideas when
the Government runs them, they want to stick an I.V. in the
taxpayers to fund it. It's a big mistake. I would urge you to
defeat this legislation. And I stayed within the green.
Senator Chafee. You certainly did, and you made your point
clearly.
Mr. John Broadway, Virginia State director, National
Federation of Independent Business. We welcome you here, Mr.
Broadway, and go to it.
STATEMENT OF JOHN BROADWAY, STATE DIRECTOR, VIRGINIA, NATIONAL
FEDERATION OF INDEPENDENT BUSINESS
Mr. Broadway. Thank you, Mr. Chairman.
On behalf of 600,000 members of the NFIB across the United
States, and over 11,000 in the Commonwealth of Virginia, I'm
glad to have an opportunity to present the views of small
business.
By way of introduction, NFIB is the Nation's largest
business association. About 50 percent of our members are in
the service and retail industries. About 25 percent are in
manufacturing and construction, and the rest in businesses
ranging from agriculture to wholesale services. Our typical
member has about five employees and grosses about $350,000
annually.
The vast majority of small businesses are customers of
waste disposal services, NFIB also represents a number of small
haulers and recyclers. Consequently, any efforts to maintain
and expand the use of flow control ordinances negatively
affects the small business community. Flow control ordinances
force waste disposal customers to use Government mandated waste
management facilities and create monopolies, which small
business owners, and in fact all customers, will most likely
pay higher costs.
By their very nature, monopolies give an advantage to one
entity at the expense of all others. Because monopolies don't
have to face free market competition, customers have no power
to bargain for better rates and service.
Flow control ordinances have their most obvious impact on
price. In communities where there are no such ordinances, both
large and small haulers, processors and recyclers compete for
market share. By contrast, where these ordinances do exist,
prices are artificially set, and in some instances, as you've
already heard this morning, prices are artificially set, and
they in fact may be inflated to pay for other Government
services. These monopolies limit choice and place a very real
tax on small business.
Another impact of these ordinances is inefficiency.
Government-backed facilities don't have to seek business to
stay in business. They are guaranteed a return on their
investment, there's no incentive to improve the disposal
facility, to implement new technology or to attempt to cut
costs. And certainly, there's no incentive to pass on savings
to their involuntary customers.
As I mentioned at the outset, we also represent a number of
haulers and recyclers. With flow control ordinances in place,
it's highly unlikely that these small businesses will be able
to compete for long-term contracts. They will, in effect, be
shut out from having any opportunity to provide such services.
We do not agree with the proposition that waste management
requires flow control. Such management by local governments can
be performed through regulating the quality of service, not by
performing it themselves or by establishing long-term exclusive
contracts.
In fact, there is a good example of this process taking
place presently in Virginia. A few years ago, the city of
Richmond and several surrounding localities formed the Central
Virginia Waste Management Authority. One of their goals has
been to maximize existing private waste management company
participation.
The director of that authority, Kevin Burns, has written an
article on this subject, and I would like to just quote three
sentences from his article in which he says:
Unlike most other regional authorities, this authority has
implemented all of its programs through private service
contracts for recycling and other waste management services.
The result has been the development of an integrated regional
waste management program. The public's investment in contract
services has stimulated the creation of private competition
jobs and the private tax base.
Now, regrading the subject of the grandfathering clause.
While small business owners do not support the concept of flow
control ordinances, we're not insensitive to the problems in
many communities that do in fact have these facilities in
place. If the committee does approve flow control legislation,
we would strongly urge that only a strictly limited provision
be established relative to a grandfathering clause. We do not
believe that communities with ongoing programs should be
mandated to live under flow control into eternity.
In conclusion, I would just state that NFIB urges the
committee to consider the negative consequences of establishing
long-term monopolies that force small businesses to purchase
services from a single supplier. We do not believe it's in the
best interest of the Nation or the small business community.
Senator Chafee. Thank you very much, Mr. Broadway.
Just a couple of brief questions. I don't understand why
the rates on these facilities are so high. Is there a
suggestion, Mayor Rooney, that they're inflating their charges,
that because they've got a captive market that they are
charging way more than what the going rate--I'm going to ask
you, Commissioner Johnson, the same question. Because there
seems to be a suggestion here that when these places have flow
control that they are outlandish in their charges.
Mayor.
Mayor Rooney. Actually, when these facilities were mandated
way back in the 1970's, actually it occurred in the 1980's,
when we had to go out and build the incinerators, most of them
were done with no big contracts. And county authorities who
have autonomous, anonymous people on them, they just decided to
go out and pick whoever showed them the best plant in Europe or
somewhere else in the world.
That's how some of these plants were chosen. They were
overbuilt, they were just not competitively done. The bonding
was done without any competitive--in fact, I questioned the
bonding at the time. There was a commission of 1 and \1/2\
percent for the bond issues that went out, when the actual
market value was about \3/4\ percent on issues that size.
So they did nothing that was competitive. They were free
operators, as the 800-pound gorilla was, you know, anything he
wants, he's got. And we couldn't even protest.
Senator Chafee. OK. Commissioner Johnson, what do you say
to all this?
Mr. Johnson. Mr. Chairman and members of the committee,
modern waste-to-energy plants, modern compost facilities, cost
more than burying garbage in the ground in the short run. As
Mayor Rooney himself said, local governments were mandated to
do this. We were mandated to do it by State law. Many of us
thought that that's what the intent of RCRA was.
Most of the plants, and I can't speak for every single
plant and facility in the country, most of these plants were
indeed competitively bid. The bonds were sold in a competitive
sale. Pollution control requirements from State agencies, as
well as the EPA, are very strict on these facilities. Extremely
strict and very expensive.
Senator Chafee. I understand that. But the suggestion from
the testimony is that the prices they're charging are way over
where they could be. In other words, I guess Mayor Rooney said
they are awash with cash.
Mr. Johnson. Mr. Chairman, I hear that. But I can tell you
that's not the case in my county or in any other facility with
which I'm familiar. Now, one of the things that we were told to
do was run these like a business. That involves providing
reserved funds, which a business would do. That's not awash in
cash. That's just prudent management. I'm not aware----
Senator Chafee. My time is up.
Mr. Johnson [continuing]. Of facilities being awash in
cash.
Senator Chafee. Mayor Rooney, very briefly now.
Mayor Rooney. Yes, very briefly. There's a good example,
when flow control ended in New York, the Hempstead Incinerator
at that time was charging approximately $103, $104 a ton,
getting no garbage. Today without flow control, that facility
is between $60 and $65 a ton, getting all the garbage it can
handle. They've been made to be competitive and they can be
competitive, and they're operating fine.
Senator Chafee. Senator Baucus.
Senator Baucus [assuming the chair]. Thank you, Mr.
Chairman.
Mr. Johnson, this is not a question for you on flow
control, rather a subject of the next panel, interstate waste.
As I understand it, you're going to be chairman of the National
Association of Counties. It's further to my understanding that
the organization in the past has favored interstate
legislation, that is, to allow local communities to have more
control of their own destiny, and that is, limit to some degree
out-of-state garbage into those counties, is that accurate?
Mr. Johnson. Yes. Senator Baucus, NACO's position is to
support an interstate waste bill. We think that's important as
part of State decisionmaking. We think that a lot of the
problems that are connected with exporting waste can be
ameliorated if we have flow control so local governments can
take care of their own garbage. I mean, we're willing to do
this.
But we do support an interstate bill.
Senator Baucus. Thank you.
Mr. Norquist, do you favor a grandfather provision in flow
control?
Mr. Norquist. No.
Senator Baucus. No grandfather whatsoever?
Mr. Norquist. If you're charging above market rates for the
taking of garbage, that doesn't solve any problem. What they
ought to do is either sell off the facility, privatize it,
reduce the debt that they entailed, or go to market-based
prices. The other says, we're going to take money from
taxpayers to pay off the bondholders, and we're going to do
that by gouging consumers and taxpayers. That doesn't solve any
problems.
Senator Baucus. What about those communities that relied on
the law and built a facility?
Mr. Norquist. That were forced to do that by the law?
Senator Baucus. They built the facility, relying upon then-
current law, before the Carbone decision.
Mr. Norquist. Before the Carbone----
Senator Baucus. A lot of people around here talk about, let
the local community decide what it wants to do, you know, local
control, and that's what the local folks decided to do.
Mr. Norquist. Right. But local control starts with
individuals running their own lives and making their own
decisions. The county getting together and saying to people,
we've captured you as consumers, and we're going to make you
pay the rates that we want. Of course, government monopolies
charge too much and are wasteful, from Afghanistan to Zaire,
from 2000 years ago----
Senator Baucus. Whoa, wait a minute. We're not talking
about Zaire and Afghanistan right here. We're talking only
about the United States of America. So I'm just curious, so you
do not favor any kind of grandfather provision?
Mr. Norquist. No.
Senator Baucus. You oppose any grandfather whatsoever?
Mr. Norquist. Yes.
Senator Baucus [assuming the chair]. Thank you.
Senator Lautenberg.
Senator Lautenberg. Thank you very much, Mr. Temporary
Chairman.
[Laughter.]
Senator Baucus. Any time.
Senator Lautenberg. We seize the initiative.
Senator Baucus. Right, absolutely. Speaking of Zaire.
[Laughter.]
Senator Lautenberg. Mayor Rooney, good to see you, and you
know that I share your view that the residents, taxpayers ought
to pay as little as they have to. The problem is that we got
into a situation because of the fear and the worry that one day
the borders were going to be shut down on us.
Now, what happens? You've heard Senator Coats and Senator
Levin and Senator Specter talk about restricting interstate
garbage transfer. Lots of members agree with them. What happens
if you're forced to stay in New Jersey and we have no choice?
Then what do we do?
Mayor Rooney. Well, it's, we've wasted millions and
millions of dollars for the last 8 years, 9 years or so that
basically that hasn't happened and that there was lower
alternatives out there. I'm hoping that this doesn't happen,
that the interstate ban doesn't happen and that States will
take their fair share, as New Jersey did. The only reason we
have no landfill space available is because of New York City
and Philadelphia.
Senator Lautenberg. I'm with you, so----
Mayor Rooney. There are States and there is industry out
there that believes that they can have an industry of garbage,
of landfill and garbage. But there's also other things that
could happen. Under flow control, we have this mandated system
that's extremely high. It can be better without flow control.
If we got rid of flow control, they would be forced to be more
competitive. I'll give you an example of New York, the
incinerator, where----
Senator Lautenberg. They would be better off lowering their
rates and having some revenue----
Mayor Rooney. Right.
Senator Lautenberg [continuing]. Than not have any revenue
and just waiting for the free market to bury them in
bankruptcy.
Mayor Rooney. What's happened under flow control is that
we've created an underground economy. We've created a
diversion. We almost have prohibition out there, where it's
more profitable to divert garbage than it is to send it to the
proper facility. So that's what's been happening. The diversion
in all of these States is just tremendous. That's bad for all
of us. It costs our taxpayers those dollars.
Senator Lautenberg. I think the principal thing, because of
the limited time here, is that I want all to recognize that
there is a link that most see between flow control and
interstate transfer of trash. I would caution you that we could
arrive at a situation which would invite terrible retaliation.
If someone's going to say, you can't ship garbage, and you
heard me say before, you can't ship coal, you can't ship other
stuff, it would be awful.
So I think at some point, and one of the things I would
tell you, Mr. Norquist, that distressed me in your testimony,
is that you referred to almost a political or some economic
ideology without once approaching what we do about the problem.
This is a very complex issue. No one enjoys having their trash
carted out-of-state. It's something that we are forced to do.
We used to take it in New Jersey, we went to the Supreme
Court, perhaps you heard me say it before, Supreme Court denied
us any restraint there. As Mayor Rooney said, we're filled up
because of what happened in those States. It's going to come
back to us.
But I like it when a witness says, OK, here's the problem,
here's what we think, and not a lecture on what kind of
economics system ought to prevail.
Thank you.
Senator Chafee [resuming the chair]. Senator Sessions.
Senator Sessions. Well, I like the economic system Mr.
Norquist talked about.
I do, I'm somewhat troubled by the impact I think it will
have in at least one area of Alabama that they've entered into
reliance on the Government that certain things would be
appropriate. In theory, I think you're probably correct, that
we could, other forces would take over and it may just be as
well to do one way or the other, not have grandfathering. But I
think for the disruption and the turmoil it would cause, it may
not be necessary.
Let me ask this. I thought it was interesting, the Senator
from New Jersey talked about it, I find it difficult to justify
under the commerce clause absolute blocking of the transfer of
any substance in America, that you feel like, and I think I
understood you to agree with that.
Mr. Norquist. Yes. I didn't realize that the commerce
clause was a matter of debate here, or wasn't the American
approach to how we handle it. I didn't know it was an economic
theory or something. I thought it was kind of important.
Senator Sessions. Things like nuclear waste, I think it's
perfectly rational, almost irrational for this Nation not to
identify a location in this country to place nuclear waste and
set about to do it. You take the places that would be most
conducive to that, and you use that land or property for it.
We've done that with regard to Nevada, and we can't seem
politically to have the will to follow through. It amazes me
how much it's costing this Nation in terms of tax on citizens
and the utility rates, because this Nation doesn't have the
will to follow through on a perfectly rational plan to dispose
of nuclear waste.
Mr. Leff, you mentioned something, I'm not quite sure I
understood it, but it was that the spot market, the tipping
fees for garbage are dropping?
Mr. Leff. Yes.
Senator Sessions. To me, that is a thing to rejoice. You
seemed, you were suggesting that it was not a good thing. I
think that would be wonderful, as long as we're not disposing
of it in an unsafe way.
Mr. Leff. Well, what happens is that haulers will divert a
member town's waste to another facility and be able to command
a lower price on the spot market. The reason that the spot
market prices have gone down is because the facilities are
competing for some amount of waste at any price because they're
not getting the waste that's guaranteed to them under the
contracts.
If we were to restore flow control in Connecticut, it would
lower the tipping fees for 86 percent of our population.
Senator Sessions. You think it would lower the costs?
Mr. Leff. Yes, it would. It would, because then the waste
that is supposed to go to the particular facilities would go to
those facilities, and they would be getting more waste and it
would spread the fixed costs over a greater number of tons of
waste.
Senator Sessions. Any other comments on that?
Mayor Rooney. I think it's the opposite. Because last year,
the rates were about the lowest. They've come back up. Right
now, as far as Groves Landfill in Pennsylvania, just over the
border from New Jersey, it was down as low as $26 a ton last
year, now I understand it's up to about $36 a ton. So we see it
going up in the Pennsylvania landfills, and I differ with the
opinion.
Senator Sessions. Well, it's a very, very difficult issue,
and it's important for the Nation. Mr. Chairman, that's all I
have.
Senator Chafee. Thank you, Senator.
Senator Lieberman.
Senator Lieberman. Thank you, Mr. Chairman.
This has been an interesting and important discussion. As
Mr. Leff's testimony indicated, this is a very important issue
to Connecticut. Not only Mr. Norquist has invoked the interest
of taxpayers here today. The problem here is, which taxpayers?
In other words, the interest of taxpayers has been both on
behalf of reinserting flow control and the interests of
taxpayers has been invoked as beneficiaries of no flow control.
So it obviously depends on which taxpayers. It happens, if
your taxpayers are part of an area which hooked into a contract
to build a waste to energy facility, which was thought to be
the progressive thing to do--I was thinking about something
Senator Sessions said. I'm not taking it out of context, I
don't mean to, but the old legal concept of action and
reliance, there's a certain sense here in which a lot of
communities around the country acted in reliance on what was
the world at that time, which was changed, and made financial
commitments.
These are big plants, you had to have a clear revenue flow,
not to mention the garbage flow. But that came with the
revenue. When the Carbone decision of the court changed that,
suddenly the revenue wasn't there.
So I want you to go back, let me first say, in response to
Senator Smith's question about, and it's a very important
question Senator Smith raised, in terms of the Congress'
response to this problem. Because here's somebody, Senator
Smith worked very hard with Senator Chafee to fashion a
compromise. And as he said, he was told over and over again,
that in regard to this problem, the sky is falling. Here we
are, 2 years later, and it doesn't look like the sky is
falling.
But I want to ask you, from your testimony, to invoke
Senator Smith's metaphor, it sounded to me as if you were
saying, Commissioner Leff, that the sky was falling, but a
little more slowly than we had thought it might. Correct?
Mr. Leff. Yes. I would liken it to a slowly descending fog,
rather than a ceiling plaster collapsing on you. There was a
hope out there that Congress would act shortly after the
Carbone decision and many haulers maintained that as well. They
were waiting to see, and the diversion recently has increased.
Senator Lieberman. So what are the consequences? In other
words, we've had one project in our State downgraded, another
is on an unstable credit watch. What actually has happened on
the ground? What are the consequences to those changes?
Mr. Leff. Let me if I may defer to Mr. Wright, from the
Resource Recovery Authority.
Mr. Wright. You've had two things occur. First, if you take
the Bridgeport facility, what's happened there is the towns
have done the responsible thing, and rather than ignore their
obligations, they've raised their tip fees. So that the towns
that are committed, at least for the residential waste, which
actually shows up at the plant, the tip fees continue to rise,
and as a consequence, the amount of waste continues to drop,
causing further increases in the tip fee and further drops in
the deliveries.
So it's spiraling up until at one point it may become
intolerable.
The other thing that's happened is you've had a couple of
communities, Madison and Guilford have actually sued to try and
get out of their obligations. Ultimately, that litigation was
settled. But that is a threat that hangs over all the projects,
that the municipal security that's provided for all these
projects may be yanked out by a superior court judge one day. I
don't expect that those are a good case, but you don't know
what will happen once that's thrown into the legal system.
Senator Lieberman. Thanks, my time is up.
And just to draw a conclusion, Mr. Chairman, briefly, from
what you've said, I believe the response explains in your
answer earlier, Mr. Leff, the quandary that Senator Sessions
posed. In fact, and again, it's because 86 percent of our State
is covered by waste to energy facilities, and the contracts
going with them. The absence of flow control has raised tipping
fees. The reassertion of flow control, in our case, because of
the system we bought into in the State, will lower tipping
fees, and therefore, lower taxes at the municipal level.
Mr. Leff. You are absolutely correct, Senator.
Senator Lieberman. Thank you.
Senator Chafee. If I understand, that's because currently,
in the spiral effect, some of it's going out-of-state or going
some place else, and whereas, if it was all, if flow control
continued, then the volume would bring down the tipping fee. Is
that the point you're making?
Mr. Leff. Absolutely, yes.
Senator Chafee. Fine. Thank you. Thank you very much.
Now, we want to thank this panel, it's been a very fine
panel. And we'll go to the next panel, and if you'd come
forward, please. That's Mr. Seif from the Pennsylvania
Department of Environmental Protection; Mr. John Cahill from
New York; Mr. Randy Mastro from New York City; Mr. David Olson,
Dakota Resource Council; and Mr. Tony Ciofalo, on behalf of the
Allied Waste Industries.
Now, gentlemen, regrettably, I am unable to stay. Senator
Baucus is kind enough to indicate that he would handle the
hearing. I have staff here, plus we'll have copies of your
testimony and the record will show. So I'm very interested, I
sincerely apologize, because I'll have to leave into your
testimony.
Mr. Seif.
STATEMENT OF JAMES M. SEIF, SECRETARY OF ENVIRONMENTAL
PROTECTION, PENNSYLVANIA DEPARTMENT OF ENVIRONMENTAL PROTECTION
Mr. Seif. Good morning, Mr. Chairman. Thank you. This is my
second appearance here.
Senator Chafee. Yes, you're getting to be a regular. You
can get a commuter ticket.
Mr. Seif. A tribute not to my eloquence, but to your
patience, I'm sure.
You remember the movie: ``If you build it, they will
come.'' That is Pennsylvania's experience. Pennsylvania in 1987
had basically the status of a backward nation: 1,100 unlined
landfills, no State plan, no county plans, virtually no
recycling, only 18 months of capacity left in our State. The
free market had done its thing, I'm afraid.
In 1988, we invested an enormous amount of capital,
including political capital, which is what it takes to solve
these kinds of problems, in passing and implementing our Act
101. We now have 67 rational county plans, only 51 landfills,
all state-of-the-art, double lined, recycling at 20 percent and
rising toward our statutory goal, and I hope beyond, of 25
percent.
We had capacity for up to 10 years as a result of these
expensive steps. I say had, because at that point, our reward
for a good deed set in. The numbers appear on page 4 of my
written testimony. They are mind-numbing in their volume. They
numb the olfactory sense as well.
What do we want? Well, we don't want more regulation from
Washington. We don't want any money from Washington. We don't
want a ban, or the right to impose a ban. We don't want you to
change the natural economic trash sheds of the Nation to fit
State borders where they don't quite fit. We don't suggest that
New York City become self-sufficient in trash or food
production any more than we think Somerset, PA should have a
stock exchange or an opera.
What we do want is for the Congress to accept the court's
invitation to give us the capacity to protect ourselves,
protect our investment, and to give all States the capacity and
the will to grow a system that is at least somewhat like ours,
and at least as successful. Specifically, on page 7, the
elements are set forth of what we would like to see. The bill
passed last year has those essential elements, though I would
agree with Senator Lautenberg that conditions continue to
change, and it may be that we should be in discussions with the
House and others, other States, on some of the provisions.
Pennsylvania is upstream of the Chesapeake Bay. We are
doing our best to act responsibly toward it. We are downstream
of the air pollution caused elsewhere in the Nation. And we are
downstream of the trash stream. As the real estate agents say,
location, location, location. I guess we measure up in that
regard.
But it's not just location, it's the fact that we achieved
efficient, risk-free, from the environmental sense, efficient
landfilling capacity. We built it, and they came. We don't want
to unbuild it, we would just like to see others build it. We
would like the right to adopt, especially through community and
local community action, some protections on our investment,
some protections on the environment of Pennsylvania.
We will look forward to working with you to realize that
opportunity.
Senator Baucus [assuming the chair]. Thank you, Mr. Seif.
Our next witness is Mr. Cahill, commissioner, New York
State Department of Environmental Conservation.
STATEMENT OF JOHN CAHILL, COMMISSIONER, NEW YORK STATE
DEPARTMENT OF ENVIRONMENTAL CONSERVATION
Mr. Cahill. Thank you, Senator.
Thank you for giving New York State the opportunity to
express our interests and concerns on this very important
issue.
I think it's appropriate to start off to give an overview
of what New York State has been doing on the issue of flow
control and interstate waste. In 1988, New York State passed
laws which established a hierarchy that prioritizes waste
reduction and re-use and recycling as the proper ways to handle
our solid waste.
One of the things that I've noticed that has been missing
this morning in discussion is the importance of waste
reduction, recycling as appropriate tools in solid waste
management. Since 1988, recycling has more than quadrupled in
the State of New York, from 2 million tons per year in 1988 to
over 8.5 million tons in 1995. New York State is leading the
Nation in recycling, in that we have a recycling rate of 35
percent compared to the nationwide average of 24 percent.
Some solid waste still must be incinerated or landfilled.
Approximately 80 percent of New York State's waste is disposed
in New York State's borders. The remaining 20 percent goes to
facilities in Pennsylvania, New Jersey, Connecticut,
Massachusetts, Virginia, West Virginia, Ohio, Indiana, and
Illinois. Most of the waste sent out-of-state goes to private
facilities, many with host community agreements. The remainder
supplements the capacity from municipal landfills, thus
reducing the burden on local taxpayers.
With respect to the issue of flow control, in contrast to
most States, New York has had a history of municipal
development and operation of solid waste disposal facilities.
Our laws have put the burden on local governments to recycle
and reduce solid waste. This has led to a need for flow control
to create economically viable, environmentally sound solid
waste management systems. The issue of flow control is critical
to many communities in New York State.
One of the previous speakers mentioned the Hempstead
facility, which is in Nassau County, as having truly benefited
from the flow control. The reason for that is simply that there
is a continuous large waste stream from lower New York. I would
compare that to our Warrensburg, Washington County facility in
upstate New York, in a rural area along the Canadian border.
They took the initiative about a decade ago to build an up to
the top of the line resource recovery facility, on the
expectations that flow control would be in effect and would
allow them to control their waste.
These two counties, Washington and Warren, as I mentioned,
small, rural communities, who will do anything to make sure
their communities do not go into default. The fact that they
haven't been in default at this time I think is a tribute to
their perseverance and their dedication as local community
leaders.
However, while they may not be in default now, it seems as
though that will be inevitable, unless there is some
grandfathering provision under the flow control.
With respect to New York City's approach to solid waste
management, I will defer most of the comments to Mr. Mastro on
this. But last year, Governor Pataki signed legislation to
close Fresh Kills landfill in Staten Island. Fresh Kills is the
largest unlined landfill in the Nation. It was built in 1942,
with the intent that it would last a couple of years and that
it would be built to simply above grade.
Well, here we are 55 years later, it's still operating and
now encompasses 2,200 acres of marine wetland in Staten Island,
and is the only remaining uncommitted, unlined landfill left in
New York State. Failure to close Fresh Kills would only delay
the implementation of more effective operations for waste
reduction and recycling. New York State is not coming here hat
in hand, looking for Federal help. Indeed, Governor Pataki last
year showed tremendous leadership in pursuing and promoting a
clean water, clean air bond act, which provides over $100
million for New York City solid waste efforts.
In particular, $75 million will be made available to New
York City for Fresh Kills closure, and an additional $25
million the Governor has committed for New York City to improve
its recycling efforts. An additional $19 million in 1972
Environmental Quality Bond Act funds, have been earmarked for
New York City.
Senator Baucus. I have to ask you to wrap up your
testimony.
Mr. Cahill. We believe, Senator, with respect to the free
market should control the issue of interstate waste. We believe
that host community agreements are absolutely essential. We
look forward to working with the States and working with the
Congress with respect to this important issue.
Senator Chafee [resuming the chair]. Thank you very, very
much.
That's a good lead-in to you, Mr. Mastro. You're next.
STATEMENT OF RANDY M. MASTRO, DEPUTY MAYOR FOR OPERATIONS, CITY
OF NEW YORK; ACCOMPANIED BY JOHN DOHERTY, COMMISSIONER,
DEPARTMENT OF SANITATION
Mr. Mastro. Thank you very much, Senator, and members of
the committee.
It's my pleasure to be here on behalf of Mayor Guiliani to
address these very important issues. If I may make the City's
position very clear. We have submitted written statements, but
at the outset, I wanted to say that the City strongly opposes
any presumptive ban on interstate waste shipments, but strongly
favors the use of host community agreements for that waste
which is exported.
I know there have been specific questions raised about
Fresh Kills and our closure of Fresh Kills. So I wanted to
discuss that plan on the City and State's part and give you
some of the particulars on that in my limited time today.
It's in keeping with these principles, which include our
belief that the free market, coupled with host community
agreements, is the best way to ensure a reasonable, fair
pricing structure, as well as a good neighbor policy, that the
city has not predetermined with the closure of Fresh Kills,
where its solid waste will be disposed. This Mayor and this
Governor, supported by a bipartisan consensus of the State
legislature, decided to close Fresh Kills by December 31, 2001.
But this will be a phased-in approach, each year
diminishing the landfilling and use of Fresh Kills over that 5-
year period. We have insisted, consistent with these
principles, that each bidder for export of a city's residential
waste have all requisite environmental permits and a host
community agreement, verifying that the receiving jurisdiction
has approved the operation of the facility and agreed to accept
the solid waste to be imported, often the result of some direct
financial benefit to the receiving jurisdiction.
The city will begin this diminution of landfilling at Fresh
Kills with the export of up to 1,800 tons per day of
residential waste from the Borough of the Bronx by July 1997.
In this regard, it is significant that the city received six
competitive bids for this waste. The bidders proposed seven
different end locations in five different States; two of those
locations being within the State of New York. It's encouraging
that we have bids within the State, and we will continue to
work with and urge the State to develop even more capacity, in
part because transportation is a major element of export costs.
But I should also add that in receiving these bids, we
received three times the capacity in these bids for that which
is needed to export these 1,700 to 1,800 tons per day from the
Bronx.
We did not stop there. We are expanding our recycling
program and our waste reduction initiatives in an effort to
reduce the amount of waste that will eventually need to be
exported. In this regard, I should note that we've added more
than $320 million to our city's financial plan to address the
closure of Fresh Kills in an environmentally sound approach. It
was not an environmentally sound approach for New York City to
have all of its residential waste going to one location,
surrounded by a heavily populated area of Staten Island. I
think everyone recognizes that. We're trying to pursue
environmentally sound approaches for New York City and New York
State's long-term future, as well as the Nation's long-term
future.
So in that regard, we're putting our money where our mouths
are and spending more city funds to increase recycling. We've
increased our recycling budget by more than $76 million to try
to reduce the amount of waste that the city has over the next
5-year period as we diminish the use of Fresh Kills in
anticipation of closure.
I should add that we are the only large city in American
that requires 100 percent of its households to recycle,
including those in multi-family dwellings. We recycle at a
higher percentage of household waste than any other large city
in America. So we not only require it of 100 percent of our
households, but among household waste, we recycle a higher
percentage of our household waste than any other major city in
America.
We're going to continue to spend even more to recycle new
materials, to increase education and outreach, to foster better
compliance, to have new equipment to improve recycling
efficiency, and to also include programs relating to
residential backyard composing and other new initiatives to
potentially expand recycling.
Senator Baucus. I'll have to ask you to wrap up, too,
please.
Mr. Mastro. Certainly. In short, we are taking the steps
not only to address exportation, but at the same time, to
reduce the amount of waste that we produce in anticipation of
Fresh Kills' closure. It is our expectation that by advancing
waste reduction and recycling over the next 5 years, the city
will reduce the amount of export. But we are confident that the
capacity and desire to accommodate this waste exists. I
reiterate that our city's residential waste will only be sent
to communities that have agreed to receive it through host
community agreements.
Thank you very much.
Senator Baucus. Thank you very, very much.
Mr. Olson, you're next.
STATEMENT OF DAVID L. OLSON, DAKOTA RESOURCE COUNCIL, WESTERN
ORGANIZATION OF RESOURCE COUNCILS
Mr. Olson. My name is David L. Olson. My family and I
operate a family grain farm south of Minot, ND. I am here to
testify on behalf of myself and my community, and as a member
and officer of the Souris Valley Chapter of Dakota Resource
Council, one of the six groups that make up the Western
Organization of Resource Councils.
My expertise on the interstate transportation of solid
waste comes from my observation of the effects it has had on my
community. I live just a few miles from the Echo Mountain
Landfill, operated by Municipal Services Corporation. Since the
early 1990's, I have been able to witness daily the
transporting of tons of out-of-state waste being offloaded from
the rail head at Sawyer, ND, and then trucked to and dumped at
the Echo Mountain Facility. The Sawyer dump receives 150,000
tons of waste a year, including municipal solid waste and
industrial waste from many different States around the country.
In spite of the fact that many North Dakotans had strong
reservations about the wisdom of siting the Echo Mountain
facility in old coal spoils south of Sawyer, the lack of
Federal legislation allowing States and local governments to
control the flow of out-of-state waste into their landfills
made it impossible to regulate garbage coming into our
community.
We were successful in securing construction modifications
that offered additional protection for some water supplies. We
were also able to require the presence of a full-time, on-site
inspector at the facility. But we lacked the necessary tools to
be able to make the most fundamentally important siting
decision. Since the facility was sited, those very things
occurred which many of us predicted, including illegal disposal
of hazardous waste and failure to produce economic development.
From the beginning, MSC assured the local community and the
State legislature that its site never was intended nor would
become a hazardous waste site. However, in 1995, we learned
that MSC had in fact allowed approximately 198 barrels of
hazardous waste to be buried. The waste contained levels of
barium several times higher than allowed by law. General Motors
was the generator of the waste, and the waste was contained in
metal barrels. When the health department discovered the
barium, they informed GM the barrels would have to go. Of
course, GM maintained the barrels would be too expensive to dig
up, and to its credit, GM did finally agree to remove some, but
not all of the barrels of barium.
Less than 3 months after this situation was resolved, GM
announced it was ending its contract with MSC. Subsequently,
MSC has lost its major contract for incinerator ash. There are
now only six employees at the facility. Employees may decline
even further as cells close. Needless to say, the vast economic
benefit to the community that MSC promised never came to pass,
and it appears slim it ever will.
Area landowners like myself got together early in the
1990's and speculation was rampant as to how a mega facility
like the Sawyer dump would affect all of us in the area and how
it would affect the whole of North Dakota. North Dakotans are a
fairly pragmatic people. We were interested enough to contact
other States where MSC's parent company conducted business.
A couple of strongly needed things came out of our research
and practical experience. The interstate waste bills that the
Senate has passed over the years are a start. But there are
three additional points that I urge you to consider. Most of
these points are addressed in the interstate waste bills that
Senator Baucus and Senator Conrad have introduced, and I urge
you to refer to them.
First, there's a strong need for North Dakota and other
States to have a presumptive ban, like the one in Senator
Baucus' bill. Second, you realize these huge facilities impact
so much more than just the host community. A State should be
given authority to control mega landfills. One way to do this,
which we endorse, is to let States use a permit cap to moderate
out-of-state waste shipments.
And finally, in the past, some waste companies and States
have wanted to exempt incinerator ash from this legislation. We
think ash, which goes to the same landfills as solid waste,
should be covered by the same laws. Only Congress can give us
the right to decide for ourselves next time whether garbage
disposal is the kind of economic development we want to try. It
is certainly not my intent or the intent of our organization to
block the siting of out-of-state waste facilities in
communities and States where citizens can make that
determination through democratic channels.
Senator Baucus. I'm going to have to ask you to wrap up.
Mr. Olson. In summary, we can be empathetic to New York,
New Jersey, Connecticut. They do have waste problems. But in
waste legislation, we would at least like to come to the table
and have some saying the siting of future waste facilities in
our State, which we do not have now.
Thank you.
Senator Baucus. Thank you very much.
Finally, Mr. Ciofalo.
STATEMENT OF ANTHONY CIOFALO, VICE PRESIDENT, CORPORATE AND
GOVERNMENT AFFAIRS, ALLIED WASTE INDUSTRIES, AND CHAIRMAN,
ENVIRONMENTAL INDUSTRY ASSOCIATIONS
Mr. Ciofalo. Good morning. On behalf of the National Solid
Waste Management Association, I do thank you for the
opportunity to testify.
NSWMA members collect, recycle and dispose of America's
waste in all 50 States. Our members range in size from one or
two truck operations to multi-State companies. We have invested
hundreds of millions of dollars to safely and economically
manage America's garbage and recyclables. We have created
thousands of jobs in the process.
Two years ago, I testified before this committee. I started
my testimony by saying, today, all over America, trash got
picked up, so did recyclables, disposal systems met
environmental regulations, the system works.
Senators that statement is equally true today. The system
continues to work. Americans continue to benefit from the most
environmental protected and cost effective solid waste
management system in the world. We accomplish this through a
combination of State and Federal environmental and public
health protection regulations in a competitive, free market
system.
However, if Congress acts to restrict the interstate
movement of waste, or to re-impose flow control, prices will
rise with no corresponding public health safety or
environmental benefits. Attached to my written testimony are
the results of NSWMA's latest survey of interstate solid waste
shipments. What did we learn?
First, 49 States exported some of their solid waste for
disposal, and 45 States were importers. Second, the amount that
moved across State lines for disposal in 1995 represents less
than 10 percent of the solid waste disposed of in subtitle (d)
facilities.
Third, the great majority of these shipments occurred
between neighboring States. This should not be a surprise.
Markets do not recognize State or county lines. Waste sheds are
markets. Solid waste moves most efficiently to local markets,
many of which happen to be located in a neighboring State.
We also know that solid waste disposal capacity has
increased dramatically over the last 10 years. In 1986, only 25
States had more than 10 years of disposal capacity. In 1996, 38
States had more than 10 years of disposal capacity. As a result
of new Federal and State environmental protection and health
regulations, the days of small open burning dumps are over.
These regulations require careful siting and environmental
controls such as liners and leachate collection systems. Sites
will be monitored well after they close.
Yet meeting these new requirements in a cost-effective
manner results in a large, highly engineered landfill.
Development costs of these landfills can easily be $500,000 per
acre. These costs demand facilities that can achieve economies
of scale, facilities that will serve a larger geographic area.
Moreover, these faculties create jobs for local residents
and the communities receive major financial benefits from host
community agreements. They use per-ton fees to build schools
and roads and other public facilities and to lessen the local
and State tax burden upon their communities.
Just as we oppose restrictions on interstate transportation
of solid waste, we also oppose restrictions of the interstate
transportation of solid waste. Flow control is wrong for all of
the reasons that interstate restrictions are wrong. The facts
are clear: flow control establishes expensive, local
monopolies. EPA's report to Congress made it clear. Flow
control has no relationship to environmental protection or
increased levels of recycling.
So the only issue remaining for flow control proponents is
the fear that solid waste facility bonds will collapse without
Congressional action. Yet the reality is that only a very small
percentage of these facility bonds have been downgraded, and
those facilities continue to meet their bond payments.
Flow control proponents claim that taxes have been levied
to meet bond payments. What really happens is that the hidden
taxes and inflated tipping fees, which are paid unknowingly by
residents and businesses, have been replaced with honest, out
in the open financing. Flow control facilities have lowered
their tipping fees, eliminated all unneeded expenses, slimmed
down and become cost-competitive.
Finally, flow control does not guarantee that enough waste
will be delivered to a disposal facility. The history of these
facilities is clear: increased recycling and economic
recessions cut into the amount of trash available for disposal.
The bond industry knows this. Well before the Carbone decision,
bond prospectuses warned that the garbage may not exist in the
flow control area and that the tip fee would have to be raised
and guarantee enough revenue.
Senator I urge you to say ``no'' to monopolies. At this
historic time when Americans is taking apart electric
monopolies, don't take a step backwards and create garbage
monopolies. I urge you to restrict flow control and the
restrictions on interstate transportation of waste.
Thank you for the opportunity to present our testimony.
Senator Baucus. Thank you, Mr. Ciofalo, very much.
Mr. Olson, you said you favor a presumptive ban. Why is
that?
Mr. Olson. Well, it would help States like North Dakota,
where we've been in the past, I think, fairly well ill-prepared
for the volume of waste moving into western States like ours.
And with a presumptive ban, that would help the State health
department and the State as a whole regulate some of the out-
of-state waste.
Senator Baucus. Do the residents there know about a
potential landfill? Do they receive adequate warning or notice?
Or, on the other hand, did a lot of them wake up one day and
find, oh, my gosh, there was a big landfill here? I'm just kind
of curious what that whole process was.
Mr. Olson. OK, I can be short and to the point. One day I
opened the local newspaper, and on 3 pages on the inside, there
was a 1-inch column. It said that there was a large industrial
waste company bringing waste into a standing facility at
Sawyer, ND. That's the first anybody knew about it.
As more of us asked questions and started calling the State
health department, then more information started coming out
into the newspaper. But the site was already bought. The site
was already in the construction phase. And things were going on
there. It was already in the works. It was a done deal.
Senator Baucus. There was not an agreement, then, with the
local community, the town, or was there?
Mr. Olson. Well, there was an implied consent on the part
of a local community. But as you know, in North Dakota, you can
have towns of 100 people, and 500 people surrounding that small
community. The small community supported the concept, from the
employment aspect of it.
Senator Baucus. So you lacked the decisionmaker, or the
Governor to be able to designate a decisionmaker to be a wider
area, then, not just the local town, is that correct? I see Mr.
Seif nodding his head.
Mr. Seif. The community has to be defined correctly, and it
has to understand that it's out-of-state waste or in-State
waste, it has to be an informed consent to be issued by the
right people.
Senator Baucus. Mr. Mastro and Mr. Cahill, what's wrong
with all that? You say you're in favor of exporting only waste
where there's a host community agreement, if I understood you
correctly.
Mr. Mastro. That's correct.
Senator Baucus. So why not first make sure that there is a
proper agreement? Isn't it more likely to be a proper agreement
if there's a presumptive ban until the local community itself
decides affirmatively that this is what it wants? Because in
that situation, arguably anyway, they can be more fully
informed of what's going on, and time to think about this, be
better able to examine the costs and the benefits of all this.
Why isn't that better? I say that in part because there are
host community agreements, and then, as you know, there are
host community agreements. Some just speak to fees, maybe
others, and just a whole wide variety. So when you say host
community agreements, that doesn't really solve the problem.
The real question is, what should the terms of the host
community agreements include?
Assuming that we have host community agreements, and it's
assumed further that we're talking about fair, legitimate host
community agreements, whatever that means, and I think most
people know what that is, why not, what's the difference
between whether the ban is presumptive or not presumptive?
Because still, we're going to have the local community agree.
What difference does it make?
Mr. Mastro. We are requiring, in connection with the
exportation of the city's residential waste, host community
agreements, and we are verifying, and in fact have been
contacted by governmental entities who have expressed an
interest from the State of Connecticut, from the State of
Pennsylvania, other jurisdictions, about exportation of the
city's residential waste. So we are verifying that there are
real community host agreements. That's what you need to be a
qualified bidder in our process.
However, a presumptive ban is really in our view very bad
policy. It raises the potential for politicizing a process that
shouldn't be politicized. Free market forces are working.
They're working in New York City, which I should add I heard
the representatives from New Jersey who were here, and the
mayor from New Jersey who was here talk about their high costs
of solid waste disposal. They as a State may have the highest
cost in the Nation, but the city of New York has had the
highest cost in the Nation. But our ability now for the first
time to generate competition has caused our prices to go down.
Senator Baucus. My time is about to expire--just did. One
very quick question.
Mr. Seif, what are some of the ranges of terms in host
community agreements, and what do you think a reasonable set of
provisions should be? So when we say host community agreements,
we all know what we're talking about here.
Mr. Seif. The right synonym for agreement is contract. A
contract should have consideration--the community gets
something--and the community needs to be defined, and the State
should do that. In our case, county would be appropriate.
We also need to have an understanding on the part of the
community and its proper authorities, however they are
constituted, of what's coming, how long will it come. Is there
a State, proper State regulation and permit, as there would be
in our case. And all those elements. It's not just one day last
week, a company got the mayor to agree to a deal and then it
happens. It has to be a stakeholder type process that can be
pointed to in the future.
Senator Baucus. My time has expired.
Senator Sessions.
Senator Sessions. Thank you.
I'm thinking of a little slogan I twisted one time, and it
was something like this, oh, what a tangled web we create when
we first start to regulate. Things get more and more
complicated. I heard the explanation of Connecticut. They
entered into, they have a lot of different agreements and laws,
and they want to dispose of waste in any way they want to. If
they want to pay the price for that, fine. But you can't bind
the whole world to make it fit into their scheme of things, I
think.
Let me just say this, or ask a number of questions. With
regard to disposal in a State, the commerce clause is an
important part of our Constitution. It is an essential part of
the growth and health of the economy of this Nation. Resources
need to move rapidly between various parts of the Nation and
back and forth, and I suppose that applies to waste, also.
However, it seems to me that the courts will allow the
States or localities to place reasonable controls on interstate
commerce. Mr. Seif, with regard to that, it wouldn't be wrong
for Alabama or North Dakota to have reasonable restraints on
how they will accept garbage, reasonable fees and costs,
reasonable regulations to monitor, and which you could require
the landowners to pay all of that, would it? I mean, that is
not, as your understanding, being eliminated by the Supreme
Court opinion?
Mr. Seif. No, the Court goes on to invite the Congress to
set up such reasonable possibilities.
Senator Sessions. What about States? Can they do that?
Mr. Seif. The States should, when the Congress gives us
permission, accept that invitation to set up only reasonable
standards, not bans and not silly requirements and not the
Arizona Mud Flap case and all that. But a right to protect our
investment.
Senator Sessions. I guess, you say the Congress, the
Congress could act. I'm sure there will be some action by this
Congress. But the State can still protect itself with
reasonable controls, isn't that right, under the Carbone
decision?
Mr. Seif. In the absence of Congressional permission to do
something more explicit, no State has succeeded, and many have
tried, including Pennsylvania, to establish various ways to
control what comes in. All those ways have been struck down in
other forums, either courts or administrative proceedings. The
fact is, it doesn't work. We have to discriminate, in no way--
--
Senator Sessions. Your local trash has to be subject to
exactly the same conditions of disposal as the out-of-state
trash?
Mr. Seif. That's right, and trash is trash, and that's
appropriate from a technical point of view. The point is, if a
community spends an enormous amount of money, political capital
and so on to produce a landfill for itself and 20 years of
capacity, and then finds out it's only 5 years of capacity
because we built it and everyone came, then we have been----
Senator Sessions. Well, but they wouldn't be required to
take any outside trash, would they?
Mr. Seif. Well, how can I----
Senator Sessions. I mean, if you build a landfill for your
city or county, you wouldn't be required to accept trash from
another State or city?
Mr. Seif. When the Secretary denies a permit to trash
coming from out-of-state, the permit action is overturned in
courts because I have acted contrary to interstate commerce. I
cannot ban out-of-state trash.
Senator Sessions. Well, that's on the assumption that the
creators of that landfill presumably felt they had the
authority themselves to do it. But if you created it
exclusively for your purposes, you wouldn't be required to
accept any more, would you?
Mr. Ciofalo. Well, I think you're probably right in that,
Senator. If we're talking about a municipally-owned landfill,
and they designate that waste comes in from their municipal
jurisdiction, I think you're right in that.
Senator Sessions. What about a private one in which you
contract with a city?
Mr. Ciofalo. I think a private one, a private landfill,
privately owned landfill, I think then indeed the interstate
commerce clause does enter in.
Mr. Olson. It may not. In North Dakota right now, Senator,
there's a case that will be tried that an out-of-state waste
company wants to dump in the city landfill. The city says,
look, it's not properly lined. It's not fit to take industrial
waste from an Air Force Base. We can't accept it. And they're
going to end up getting it shoved down their throat.
Senator Sessions. Well, let me pursue that. Let's say a
private landfill desires to receive, and that's often the case,
I suppose, you get a permit for a landfill, and they desire to
receive trash from out-of-state or some other municipality
within the State. It's hard to stop that under the commerce
clause as being interpreted now, is that correct?
Mr. Olson. Yes.
Senator Sessions. So if you're going to have regulations on
it, it's got to apply to both the local disposal and your
interstate disposal?
Mr. Seif. Absolutely. That's as it should be.
Senator Sessions. All right. Now, if a city could, if it
creates its own landfill, it could presumably limit that to its
own needs. But if it contracts with a private landfill, that
may be more difficult to do.
Mr. Seif. Yes.
Senator Baucus. I have a question for you, Mr. Ciofalo.
Have waste companies generally been entering into host
community agreements with importing States?
Mr. Ciofalo. Yes, Senator. I think that's very typical of
the industry in general. I know for my company, we have 46
landfills in 22 States. I can tell you that we have host
community agreements with all of them. Certainly all of our
subtitle (d) larger facilities.
Senator Baucus. The figure I have is that about 19 million
tons moves across State lines every year. Is that about right?
Mr. Ciofalo. I think the total universe is about 200 of
solid waste generating in the United States in 1995, was 280
million, and of which about 25 million----
Senator Baucus. Say 25 roughly. How much of that 25 million
is being imported to a landfill or incinerator where there's a
host community agreement? What percent, roughly, today?
Mr. Ciofalo. I don't know a percentage, Senator.
Senator Baucus. Rough guess?
Mr. Ciofalo. I think it's very high. I think it would be in
probably the 80 to 90 percent range.
Senator Baucus. Next question is, is there capacity, I
mean, let's say New York, let me get my figures here. As I
recall, about 13 million tons?
Mr. Ciofalo. You're talking about Fresh Kills? Thirteen
thousand tons a day.
Senator Baucus. And New York State capacity, well, New York
is now, what capacity is there in New York today?
Mr. Cahill. Well, Senator, if I could just answer that. Two
years ago, we undertook a revision to the regulations
concerning landfill sitings in the State of New York, which
increased the capacity in New York State by 50 million tons. So
we have recognized the need for New York State to also look at
increasing its capacity to address in-State and out-of-state
waste. Because it should be noted that New York States does
actually import.
Senator Baucus. Most States do.
Mr. Cahill. Yes. Our revisions have, to our regulations,
has made it easier for siting and has created an additional 50
million ton capacity.
Senator Baucus. My real question is the degree to which New
York waste that's going to be exported can easily be exported
subject to host community agreements, when I don't know if 80
percent's correct or not, but let's assume it's correct, it
sounds a little high to me, frankly. The degree to which New
York can easily export its balance and add to very
significantly the amount of waste that is not subject to host
community agreements. Again, the point being, the question
being, how easily can New York export all of its waste, and do
what New York wants to do, that is, subject to host community
agreements?
Mr. Mastro. As I said before, Senator, we are going to
start exporting up to 1,800 tons per day of the residential
waste in the Borough of the Bronx. We've received six bids
siting seven different locations, two of them within the State
of New York. Those bids constituted more than three times the
capacity needed. In other words, just those bids for that Bronx
exportation were three times more than the 1,800 tons per day
that we're seeing to export under that contract.
I have to add one other thing. There are currently 13,000
tons per day of waste going to Fresh Kills that we are
intending to reduce the amount of waste through recycling and
waste reduction programs. We believe we can have some
substantial impact on that number over time, through increased
recycling and waste reduction. But there will still be a need
for some export.
Senator Baucus. What about Pennsylvania? How much of the
volume being exported currently to Pennsylvania is subject to
host community agreement?
Mr. Mastro. I don't know the answer of how much is being
imported to Pennsylvania.
Mr. Cahill. I think it's important to note----
Senator Baucus. Could you provide that to us, please?
Mr. Mastro. Certainly, Senator.
Mr. Cahill. I think it's also important to note, Senator,
that in the report that was released by Governor Pataki and
Mayor Guiliani back in November 1996, with respect to how the
State and city were going to handle Fresh Kills' closure, it
would require, all the shipments out-of-state would require
host community agreements. So I think prospectively the
answer's been addressed in that report, which I certainly would
like to provide you.
Senator Baucus. One question, too, Mr. Cahill, your
predecessor, when I asked him by what year would New York be
self-sufficient or contain all of the, deal with internally
within the State, all of the garbage, the trash that it
generates, the answer I got was by about December 31, 2001.
Mr. Cahill. I hope you won't bind me by my predecessor's
comments.
Senator Baucus. That was Tom Jorling who made that comment,
made that statement, made that assertion, said New York could
handle all of its garbage by the first of 2002.
Mr. Cahill. Well, I think New York State has made a
tremendous effort as far as waste reduction and recycling.
Again, we're leading the Nation in that regard. We have taken
steps over the last several years to improve siting
requirements.
Senator Baucus. Do you have a target date when you will be
self-sufficient?
Mr. Cahill. No, there's not a target date. I think we'd
like to do it as soon as we can. But we realize in the short
term there's going to be a need for importation of New York
State----
Senator Baucus. Was there a change in policy in between you
and Mr. Jorling?
Mr. Cahill. No, I think what we've always been trying to
achieve waste reduction and recycling and how that fits into
the State's need to export waste. So there hasn't been any
change in the priorities of the State. I don't know in what
context Commissioner Jorling made that statement. But frankly,
it would be unrealistic to think that we would not be exporting
some waste by the year 2001.
Senator Baucus. I just generally believe that, first of
all, very much understand and agree with the interstate
transport of trash. I mean, that's here, that's fine and it's
part of the market.
But I also think that a State has an obligation to take
care of its own trash as much as possible, even more recycling,
even more waste reduction. And I understand New York City does
a good job. But let's be honest about it, that's New York City.
I mean, it's much easier to recycle New York City, the
collection process is much easier there than it is in areas
that are spread way out. Washington, DC has a terrible time
setting up a meaningful recycling program.
But I just urge you to take care of your own waste as much
as possible.
Mr. Mastro. Certainly, Senator. We'll continue to make
efforts to increase recycling. But even heavily concentrated
cities like Philadelphia, Chicago, others don't do anywhere
near the job that we do in recycling already. We've made a
substantial financial commitment to increase that recycling.
Senator Baucus. And 12,000 tons a day is a lot of trash.
Senator Sessions.
Senator Sessions. You mentioned six bids. Would you share
with me the range or percentage differences from your low to
highest bids?
Mr. Mastro. Sure. And the six bidders, they ranged anywhere
from the low 40's up to the high 60's. There have been previous
estimates that this could cost as much as $75. So all the bids
came in below that. They ranged geographically, as I said, two
of the bids were for New York facilities. One was in
Connecticut, one in New Jersey, one in Pennsylvania and one in
Virginia. The bidders offered three times the capacity of what
we will need for that particular project.
It's because of that free market and that ability to have
interstate exportation that we were able to substantially
reduce our costs compared to what we estimated they would be.
We have been living in the city that has had the highest
carting costs of any place in the Nation. Our commercial
carting historically plagued by organized crime cartel control
of that industry, which we are now breaking and seeing prices
fall.
But New York City has had the highest carting costs in the
country, historically. We're finally seeing that change, thanks
in part to the ability to have interstate export.
Senator Sessions. Dr. David Verner, Alabama, Montgomery,
helped you, I think, break some of that exorbitant cartage
fees. I respect the work that he did in that regard.
Well, I think that's good to see that. Because every dollar
that you spend is a cost applied to the citizens of New York
and they don't need to pay more than they ought to pay to
dispose of their garbage.
I also think, you know, when you think about disposing of
your own, it would be unrealistic to ask Manhattan to dispose
of all of its garbage, I think, when there are other places in
the country that it could be done cheaper and more practically.
Mr. Chairman, I am delighted to listen to these issues.
It's new for me to be a part of this committee and to hear the
complexity and the importance of handling our waste products in
a way that's at least cost to the taxpayers and most beneficial
to the environment.
Thank you very much.
Senator Baucus. Thank you, Senator Sessions.
I'd like to tell Mr. Cahill the context of Commissioner
Jorling's statement. It was at a hearing before this committee,
it was 1990. And I'm in error. I said that he said that by
December 31, 2001, I was wrong, he said by the turn of the
century.
Mr. Cahill. Are you talking about this century or the next
one?
Senator Baucus. I think this one.
[Laughter.]
Senator Baucus. Because this hearing was still in this
century, so turn of this century.
Well, we thank everybody very much. The record will be kept
open for 7 days. Thank you.
[Whereupon, at 1:32 p.m., the committee was adjourned, to
be reconvened at the call of the chair.]
[Additional statements submitted for the record follow:]
Statement of Hon. Dan Coats, U.S. Senator From the State of Indiana
Mr. Chairman and members of the committee, I appreciate the
opportunity to testify this morning. I am pleased that this committee,
once again, has turned its attention to an issue important to Indiana.
This is a matter that several members of the committee are very
familiar with. Interstate transportation of waste came to my attention
early in my Senate career. Ever since that time, I have fought to give
States and communities the right to impose reasonable restraints on
out-of-state trash.
As the Senate and House have struggled since the 101st Congress to
enact solid waste legislation, shipments across borders have continued.
Large exporters have continued to ship outrageous amounts of waste
across State lines. One such State, New York has not opened new home-
State landfills to meet its waste disposal needs. In fact, New York has
seen an 87 percent decline in landfills since 1986. Now, we read the
announcement that New York City is planning to close the Nation's
largest, and New York City's sole landfill, Fresh Kills. It is almost
certain that no new landfill will be sited within New York City. Over
13,000 tons of trash per day will be searching for a home. Nearly 5
million tons annually.
Large importers, like Indiana, continue to be adversely impacted by
out-of-state trash. Indiana has been a net importer of waste for over 6
years. Last year, we received our largest amount of out-of-state
trash--over 1.8 million tons. But until Congress acts, Indiana's hands
are tied--Indiana cannot control what comes across its borders and into
its landfills.
Congress has come close to enacting laws, but close does not count.
This year, with the impending closure of Fresh Kills, Congress must
complete its work and send legislation to the President.
During the 104th Congress, I supported the Senate bill. Working
with Senators Chafee, Smith and Baucus, legislation was crafted that
earned the support of 96 Senators. Later in the congressional session,
it was approved by unanimous consent. Many came to the table with
divergent positions, but we were able to work out an agreement.
Unfortunately, we were unable to secure passage in the House. So here
we are again--for the fifth straight Congress.
As the Senate, again, addressees the problem of solid waste, I plan
to introduce legislation that includes the framework of the consensus,
Senate bill, but which adds a few provisions that are necessary for
importing States. (A letter that I received from our State
environmental commissioner details the need for strengthening
measures.)
First, importing States need waste controls on future waste
shipments--not just existing levels. According to the report of the
Fresh Kills Task Force (which was charged with exploring New York
City's solid waste disposal options): ``It is necessary to plan for the
possible exportation of all residentially generated waste (13,000 tons
per day) out of the city.'' Besides exportation, New York is also
exploring the options of recycling and waste prevention, but it is
unlikely these two options will greatly reduce the amount of waste that
must be diverted from Fresh Kills. At best, it is unclear how New York
City will replace this lost capacity. But it is safe to assume that the
city will export this waste to traditionally large importing States
such as Indiana, Ohio, Michigan, Pennsylvania and Virginia, and other
States. These States, already struggling under the weight of out-of-
state waste, need tools to address this additional, incoming waste.
These tools, specifically needs language and permit caps, would ensure
that new landfills are not being built primarily for out-of-state
waste. States need the authority to reserve disposal capacity for their
own waste.
Second, the definition of host community agreement must be
narrowed. In the last Congress, the Senate bill allowed a host
community agreement to override all actions by a Governor. Since host
community agreements were broadly defined, a Governor's ability to
reduce out-of-state waste was limited. To eliminate this problem, we
need to make sure that all future host community agreements explicitly
authorize the amount of out-of-state waste to be received at the
facility.
Third, importing States should be given the opportunity to freeze,
and begin to reduce, volumes of out-of-state trash. This allows
exporting States access to facilities, while guaranteeing the importing
States can reasonably understand the volumes they will be expected to
receive. This freeze and reduction will encourage exporters to look for
home-State capacity. It will also protect the importing States'
disposal capacity for local and regional waste management needs.
Finally, others will testify about flow control this morning. I
have not been directly involved with the details of this issue, but I
support the two issues being linked. It is clear that if these two
issues are de-linked, neither will pass. We must address both solid
waste and flow control, if we are able to pass a bill this Congress.
Let me stress, as I conclude my remarks, that I am not arguing for
an outright ban on all waste shipments between States. There are
examples of effective and efficient cross-border waste management.
However, we must give States a role in making waste management
decisions. Without congressional authority, States will remain unable
to reduce unwanted waste transports. States, communities and residents,
whose backyards are out-of-state dumping grounds, must have a say in
the process.
Again, I commend you, Senator Chafee, and my colleagues on the
committee, for moving expeditiously on this issue. I look forward to
working with the committee to ensure that we afford real protection to
importing States while allowing exporters sufficient time to make their
own waste management decisions.
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Statement of Hon. Arlen Specter, U.S. Senator From the Commonwealth of
Pennsylvania
Mr. Chairman and members of the committee, I appreciate the
opportunity to testify before you today on the critical issue of
interstate shipments of solid waste, which is a top environmental
priority for me and for millions of Pennsylvanians. As you are aware,
Congress came very close to enacting legislation to address this issue
in 1994, and the Senate passed interstate waste and flow control
legislation in May, 1995 by an overwhelming 94-6 margin, only to see it
die in the House of Representatives. I am confident that with the
strong leadership of my good friends and colleagues, Dan Coats,
Chairmen Chafee and Smith, and Max Baucus, we can get quick action on a
strong waste bill and put the necessary pressure on the other body to
conclude this effort once and for all.
As you are aware, the Supreme Court has put us in the position of
having to intervene in the issue of trash shipments. In recent years,
the Court has struck down State laws restricting the importation of
solid waste from other jurisdictions under the Interstate Commerce
clause of the U.S. Constitution. The only solution is for Congress to
enact legislation conferring such authority on the States, which would
then be Constitutional.
It is high time that the largest trash exporting States bite the
bullet and take substantial steps toward self-sufficiency for waste
disposal. The legislation passed by the Senate in the 103d and 104th
Congresses would have provided much-needed relief to Pennsylvania,
which is by far the largest importer of out-of-state waste in the
nation. According to the Pennsylvania Department of Environmental
Protection, which is ably headed by one of your other witnesses today,
Secretary Jim Seif, 3.9 million tons of out-of-state municipal solid
waste entered Pennsylvania in 1993, rising to 4.3 million tons in 1994,
5.2 million in 1995, and a record 6.3 million tons from out-of-state in
1996. Most of this trash came from New York and New Jersey, with New
York responsible for 2.8 million tons in 1996 (up from 2.3 million tons
in 1995) and New Jersey exporting 2.4 million tons to Pennsylvania (up
from 1.8 million tons in 1995), representing 83 percent of the
municipal solid waste imported into our State.
This is not a problem limited to one small comer of my State.
Millions of tons of trash generated in other States finds its final
resting place in more than 50 landfills throughout Pennsylvania.
Now, more than ever, we need legislation which will go a long way
toward resolving the landfill problems facing Pennsylvania, Indiana,
and similar waste importing States. I am particularly concerned by the
developments within the past year in New York, where Governor Pataki
and Mayor Giuliani announced the impending closure of the City's one
remaining landfill, Fresh Kills in 2001. I am advised that 13,200 tons
per day of New York City trash are sent there and that Pennsylvania is
a likely destination once Fresh Kills begins its shutdown.
On several occasions, I have met with county officials,
environmental groups, and other Pennsylvanians to discuss the solid
waste issue specifically, and it often comes up in the public open
house town meetings I conduct in all of Pennsylvania's 67 counties. I
came away from those meetings impressed by the deep concerns expressed
by the residents of communities which host a landfill rapidly filling
up with the refuse of millions of New Yorkers and New Jerseyans whose
States have failed to adequately manage the waste they generate.
Recognizing the recurrent problem of landfill capacity in
Pennsylvania, since 1989 I have pushed to resolve the interstate waste
crisis. I have introduced legislation with my late colleague, Senator
John Heinz, and then with Dan Coats and cosponsors from both sides of
the aisle which would have authorized States restrict the disposal of
out-of-state municipal waste in any landfill or incinerator within its
jurisdiction. I was pleased when many of the concepts in our
legislation were incorporated in this committee's reported bills in the
103d and 104th Congresses and supported both measures strongly during
floor consideration.
Some may wonder why there is a need for Federal legislation to
empower States to restrict cross-border flows of garbage. Simply put,
Pennsylvania and other States that were in the forefront of solid waste
management have ended up as the dumping ground for States that have
been unwilling to enact and enforce realistic long-term waste
management plans. Although I am advised that these States are making
some progress, some continue to ship increasing amounts of waste to
Pennsylvania landfills.
I urge the committee to report legislation as soon as possible that
will lead to significant reductions in the amounts of out-of-state
waste imported into Pennsylvania and other States. I believe that the
bill in the 104th Congress had the right ingredients: it allowed a
Governor to unilaterally freeze out-of-state waste at 1993 levels at
landfills and incinerators that received waste in 1993 and included an
import State ratchet providing that a Governor could restrict waste
imported from any one State in excess of 1.4 million tons in 1996, down
to 550,000 tons in 2002 and thereafter. These provisions would provided
a concrete incentive for the largest exporting States to get a handle
on their solid waste management immediately.
Mr. Chairman, I also want to encourage the committee to include
provisions addressing the issue of waste flow control authority. During
the 103d Congress, we encountered a new issue with respect to municipal
solid waste--the issue of waste flow control authority. On May 16,
1994, the Supreme Court held (6-3) in Carbone v. Clarkstown that a flow
control ordinance, which requires all solid waste to be processed at a
designated waste management facility, violates the Commerce Clause of
the United States Constitution. In striking down the Clarkstown
ordinance, the Court stated that the ordinance discriminated against
interstate commerce by allowing only the favored operator to process
waste that is within the town's limits.
As a result of the Court's decision, flow control ordinances in
Pennsylvania and other States are considered unconstitutional.
Therefore, it is necessary for Congress to enact legislation providing
clear authorization for local governments to utilize waste flow
control.
I have met with county commissioners who have made clear that this
issue is vitally important to the local governments in Pennsylvania and
my office has, over the past 3 years received numerous phone calls and
letters from individual Pennsylvania counties and municipal solid waste
authorities that support waste flow control legislation. Since 1988,
flow control has been the primary tool used by Pennsylvania counties to
enforce solid waste plans and meet waste reduction/recycling goals or
mandates and many Pennsylvania jurisdictions have spent a considerable
amount of public funds on disposal facilities, including upgraded
sanitary landfills, state-of-the-art resource recovery facilities, and
co-composting facilities. In the absence of flow control authority, I
am advised that many of these worthwhile projects could be jeopardized
and that there has been a fiscal impact on some communities where there
are debt service obligations related to the issuance of revenue bonds
for the construction of waste management facilities.
The committee has, in the past, devised appropriate legislation
which protected the ability of municipalities to plan effectively for
the management of their municipal solid waste while also guaranteeing
that market forces will still provide opportunities for enterprising
companies in the waste management industry. I urge the committee to
take the same approach in the 105th Congress and to report flow control
legislation to the full Senate as soon as possible.
Thank you again for the opportunity to share my views, and I would
be glad to answer any questions the committee might have.
______
Statement of Hon. Carl Levin, U.S. Senator from the State of Michigan
Mr. Chairman, as you know, I strongly support moving legislation to
give State and local governments the authority to regulate the flow of
solid waste into and out of their jurisdictions.
Before June 1, 1992, the State of Michigan's Solid Waste Management
Act provided that solid waste generated in another county, State, or
country, did not have to be accepted for disposal unless authorized in
the receiving county's management plan. This planning process worked
very well. It provided certainty and assured available disposal
capacity on a county or regional basis for the long term by authorizing
limitations on the amount of waste that could be imported. On June 1,
1992, the Supreme Court, in the Fort Gratiot case, decided that this
part of the Michigan Act was a violation of the Commerce Clause, in the
absence of Congressional authorization. This decision has created chaos
and undermined sound planning.
Recently, the city of Toronto announced a decision to sign a 5-year
contract with Browning-Ferris International (BFI) to dump 500,000 tons
of trash annually at the Arbor Hills, Michigan landfill which BFI
operates in Salem Township, Washtenaw County. That represents
approximately 40 or more truckloads per day. This makes a mockery of
local efforts to plan for local waste disposal needs.
In 1996, according to the Michigan Department of Environmental
Quality, Michigan imported waste from 10 States and Canada. Canada
appears to be the major exporter in terms of volume. It is vital that
any legislation empower States and affected local governments to
regulate incoming out-of-country in the same way as out-of-state waste.
That is why I have coauthored similar provisions in past bills.
In 1994, 35 States had laws on the books containing provisions
authorizing some or all of their political subdivisions to exercise
flow control authority over solid waste within their jurisdictions.
Clearly, this was a recognition that the waste management facilities
and programs that local or regional governments had committed to and
invested in required flow control authority to ensure their continued
economic viability. The Supreme Court decision, in the Carbone case,
threw local government flow control plans into chaos. The Supreme Court
has said Congress can pass legislation to allow local and regional
governments to act. If we truly believe that State and local
governments have a rational role in a Federal process, then act we
must.
I have been contacted by numerous counties in Michigan that are
seeking reinstitution of the authority eliminated by the Supreme Court
decision. Kent County issued approximately $90 million in bonds to pay
for an integrated waste management facility, and depends on exercising
its flow control authority to repay those bonds. Emmet County has spent
millions to develop a transfer station, recycling processing facility
and a household hazardous waste center. Jackson, Oscoda, Montmorency,
and many other Michigan counties and cities have similar stories.
Congress cannot ignore the negative effects that the Carbone decision
has had on the credit ratings or the viability of investments in waste
recovery facilities and programs of numerous local governments around
the country.
Since the Fort Gratiot decision in 1992, I have supported the
return of some measure of the original authority over waste to local
governments and States. I believe these governments have the
responsibility and the ability to most effectively plan for the
management of solid waste. The private sector, in this case, is less
concerned about the long-term environmental and safety risks imposed by
the disposal of waste than the short-term economic gain they receive in
obtaining cheap disposal prices. Simple price competition does not
drive good planning in an area of public activity where feelings run
high, and understandably so, as is the case in landfill or waste
disposal facility siting and operation.
My State should not become a dumping ground dotted with landfills
spilling over with waste from other States or countries that refused to
actively and responsibly manage and control the generation of waste
within their borders. And, that is what appears to be happening. Does
Canada have less land available for landfills than Michigan?
Common sense and a decent respect for our Federal system require
action now on both interstate transportation and flow control of solid
waste.
______
Statement of Hon. Bill Pascrell, Jr., U.S. Representative of New Jersey
Good morning Mr. Chairman, members of the committee, and the senior
Senator from New Jersey. Thank you for giving me the opportunity to
testify on this important issue. I am pleased to be here this morning
to share my views with the committee on why I am opposed to Federal
legislation that would allow States to control the flow of solid waste.
Fundamentally, I believe that flow control is a consumer issue, and in
this case the consumer is best served by a system of open competition
which results in lower garbage disposal costs.
Before I discuss why I am opposed to flow control legislation, I
believe it is important for me to briefly comment on my background and
how I came to adamantly oppose flow control legislation. Prior to being
elected to Congress, I was an Assemblyman in the New Jersey State
Legislature for 10 years (from 1987 to 1997) and served as the Mayor of
Paterson for 7 years (from 1990 to 1997). It was during my tenure as
the Mayor of New Jersey's third largest city where I gained first hand
experience in paying for flow control. In 1995, the city of Paterson
spent $11 million of its $137 million budget on waste disposal--roughly
8 percent of our budget, and we had to send the waste to an incinerator
in neighboring Essex County. These precious dollars that funded this
overpriced disposal might have otherwise supported additional fire
protection, police, education and other important municipal services.
And the city of Paterson in a lawsuit, Carbone v. Shinn, asserted that
if it were allowed to pay market costs for disposal it would have saved
$169,000 to $237,000 per month. Regrettably, due to waste flow control
New Jersey has the highest disposal costs in the nation--$96 per ton.
Prompted by these experiences and the U.S. Supreme Court's decision
in Carbone v. Clarkstown, which held that flow control laws violate the
U.S. Constitution, I along with a former colleague who is with us
today, Assemblyman and Mayor of Northvale, John Rooney, became the
founding members in 1995 of the Mayors' Task Force Against Flow Control
because New Jersey maintained that its system of flow control was
different from Carbone. The Task Force included mayors from 7 of the
States 10 largest cities. We all agreed that flow control costs our
cities tens of millions of dollars each year, that flow control stifles
the operation of the free market, and that at the end of the day there
is no reason that New Jerseyans should not enjoy the benefits of the
free market in the operation of their solid waste system.
The simple goal of our task force was to ensure that municipalities
have the right to send trash to the cheapest waste facility available.
Mr. Chairman the imposition of solid waste flow control is a flawed
policy that benefits neither the consumer, the taxpayer, nor the
general economy. The only beneficiaries are local government officials
and county utility authorities. And flow control is not necessary to
enable governments to obtain bonds needed to build waste facilities.
With flow control assurances, underwriters are willing to issue bonds
for facilities that could prove wasteful and incapable of competing in
an open market place. If underwriters do not want to support
construction of a facility, that's a good thing. It protects taxpayers
and consumers from subsidizing what would be a poor investment decision
by the local government in the first place. Last, groups like the New
Jersey Environmental Federation and the Sierra Club are also opposed to
flow control--adding yet another voice to the already long list of
those in opposition to flow control legislation.
The fact of the matter is that flow control legislation is simply
bad policy. Mr. Chairman, I am strongly opposed to Federal flow control
legislation. Local governments, small businesses, and households are
better off without it. We should let the free market determine the
lowest price, to the benefit of all involved. To borrow a quote from my
former colleague, Brett Schundler, ``Instead of passing flow-control
legislation, Congress should bury it in the trash heap of discarded
ideas.''
Thank you for this opportunity to share my views with you.
______
Statement of Hon. Bob Franks, U.S. Representative of New Jersey
Mr. Chairman, and members of the committee, thank you for giving me
the opportunity to testify in support of Federal action required to
avert a crisis in my home State of New Jersey.
At issue today is a court ruling that, if left unanswered, could
jeopardize the solvency of more than $ 1.7 billion in bonds issued by
New Jersey counties to construct waste disposal facilities.
Without Congressional intervention, the burden of repaying this
debt will fall on innocent taxpayers. Through no fault of their own,
taxpayers could face huge increases in their local property tax bills.
Mr. Chairman, I am not here to argue the pros and cons of flow
control. Rather, my objective is to ensure that taxpayers of New Jersey
are not penalized because the courts have invalidated a long-standing
State policy.
Let me briefly describe how New Jersey finds itself in this
untenable situation.
Two decades ago, the State faced a solid waste crisis. With most of
the State's landfills having reached capacity or forced to close due to
the tougher environmental regulations imposed by the Resource
Conservation and Recovery Act, New Jersey was forced to rely heavily on
out-of-state disposal facilities. At one point, New Jersey was shipping
nearly 55 percent of its trash to other States, and the costs of
disposal were mushrooming.
In response, the State Legislature passed the 1978 Solid Waste
Management Act, which required each of our 21 counties to develop plans
to dispose of their trash within the State. Counties issued over $1.7
billion in bonds to finance the construction of incinerators, transfer
stations, or landfills to comply with the State mandate. In my district
alone, the County of Union' issued more than $300 million in bonds to
finance the construction of a waste-to-energy incinerator.
The financial scheme under which this and dozens of other
facilities were constructed was based on the State's ability to direct
all the trash generated in a specific geographic area to a particular
disposal facility. The authority to direct the disposal of trash was
essential to ensure that county utility authorities would have a
guaranteed, steady flow of trash required to pay for the construction
of the disposal facilities. Therefore, ever since the late 1970's, flow
control authority has been an integral component of New Jersey's solid
waste management system.
The 1994 Carbone vs. Clarkstown decision and the subsequent
Atlantic Coast decision have thrown New Jersey's solid waste disposal
program into turmoil. The Carbone decision declared the practice of
flow control to be unconstitutional. The Atlantic Coast decision upheld
the Carbone ruling and gave our State 2 years after the last appeal to
end its practice of directing waste flow.
I recognize that allowing the free market to dictate solid waste
decisions is ultimately in the best interests of all consumers and
taxpayers. New Jersey, however, needs time to responsibly make the
transition in a manner that will allow us to meet our existing $1.7
billion financial obligation.
In light of the recent Federal court decisions, the ability of New
Jersey's counties to reimburse bondholders for the construction of
waste facilities, as well as the ability to honor contracts with
incinerator operators, are in serious jeopardy.
The court decisions are already having an effect on the financial
stability of utility authorities. Last September, ``Standard and
Poors'' lowered its rating on $416 million of solid waste system
revenue bonds issued by two agencies, the Union County Utilities
Authority and the Pollution Control Financing Authority of Camden
County, from single `A' minus to double `B'.
Mercer County announced last year that it is stopping construction
of its trash incinerator--after investing $100 million in the project.
The county decided it was too risky to proceed with the project because
of the uncertainty over flow control.
And some counties are already considering property tax increases to
pay for the debt incurred from carrying out this State mandate to
manage their own waste.
Mr. Chairman, long before the Carbone decision, the State of New
Jersey had made an enormous investment in its comprehensive solid waste
management system. Taxpayers should not be stuck with the tab because
the rules have been changed in the middle of the game.
Governor Whitman, the New Jersey Assembly and all 21 of New
Jersey's counties are asking for an extension of flow control authority
until all the debt obligations incurred by the counties to construct
disposal facilities have been paid off During the last Congress, we
tried to pass legislation to grant this temporary reprieve. The Senate
passed S. 534. As you know, however, its companion bill, H. Res. 349,
failed to pass the House. It failed because of the ongoing dispute over
provisions affecting the interstate transport of solid waste.
This year, I have sponsored legislation in the House to grandfather
flow control programs existing before the Carbone decision. Two weeks
ago, I introduced legislation that contained the same language as S.
534 and H. Res. 349 on interstate waste and flow control. H.R. 942
contains the Senate's interstate waste language and the flow control
language of last year's House bill. The other measure, H.R. 943,
contains the House's flow control language as a stand-alone bill, with
a modification to include construction and demolition debris. I would
like to submit these proposals for the committee's consideration.
I want the committee to know that there is strong support for
grandfathering flow control authority for those States that had it in
place prior to the Carbone decision. In the 104th Congress, the entire
bipartisan New Jersey Congressional delegation supported H. Res. 349
and other efforts to grant a temporary reprieve from the effects of the
courts' decisions.
In addition, the States of New Jersey, New York, Pennsylvania,
Ohio, Indiana, and Michigan have all agreed on flow control
legislation.
I urge the committee to pass legislation to grant flow control
authority to States like New Jersey, so that they can repay outstanding
debts owed to investors, and move on to a competitive system.
Thank you for this opportunity to testify. I will be happy to
answer any questions that you have.
______
Statement of John E. Rooney, Mayor, Northvale, NJ
Good morning Mr. Chairman, members of the committee. Thank you for
the opportunity to address this committee on the issue of flow control.
I am opposed to any Federal legislation that allows States to control
the flow of solid waste thereby squelching competition and raising the
cost of garbage disposal.
I will explain the reasons that this body does not need to enact
flow control legislation. First, I would like to let you know who I am
and why I so fervently oppose flow control.
I am the Mayor of Northvale, New Jersey. Northvale is a suburban
community nestled in the far northeastern corner of New Jersey. I have
been Mayor there for 15 of the last 20 years. I am also a member of the
New Jersey General Assembly. I have been honored to serve my district
for the past 14 years. From 1983 to 1988 I served as a commissioner of
the Bergen County Utilities Authority, the agency in my county
responsible for the oversight and now participation in the solid waste
industry.
I also come here today with yet another hat, that is, Chairman of
the Mayors' Task Force Against Flow Control. The Mayors' Task Force was
formed shortly after the U.S. Supreme Court's decision in Carbone v.
Clarkstown. As this committee well knows, the Court in Carbone, resting
``upon well-settled principles of our Commerce Clause jurisprudence''
held that flow control laws violate the U.S. Constitution, which
prohibits individual States from hoarding an article of commerce--in
this case, garbage--to the exclusion of other States.
Mayors like myself saw this decision as a rare opportunity for
lower property taxes. Garbage disposal ranks near the top of most
municipalities' budget items. This is true in New Jersey where as a
result of waste flow control we have the highest disposal costs in the
nation--$96.00 per ton. If I may, I would like to share an anecdote
which illustrates just how perverse an effect waste flow control has
had in New Jersey.
In February 1988 at the beginning of the waste flow control era, I
was having some construction done on my house that resulted in a
considerable amount of debris requiring a 10 yard dumpster. The hauler
informed me that if he took the container by Friday my cost would be
$350.00; however if I waited until Monday, after flow control took
effect, my cost would be $1,300.00.
No longer were municipalities or businesses permitted to choose the
disposal facility that made the most economic sense for them. Everyone
had to deliver their waste to the ``favored'' government facility.
Ironically, the facility in my county simply shipped the waste to a
landfill which the rest of us were prohibited from doing business with.
Remember flow control is not about preventing some environment insult,
rather it is about economics (I refer you to portions of the executive
summary of a March 1995 EPA report on Flow Control which is submitted
with my testimony).
After Carbone, communities throughout New Jersey thought rate
relief was in sight. However, the State persisted in its stance that
New Jersey's system of waste flow control was distinguishable from
Carbone. I, along with three other Mayors joined a Federal Lawsuit to
end waste flow in New Jersey. The Judge told us we had no legal
standing to remain in the suit. We had no where to turn. We were
compelled to form a coalition, the Mayors' Task Force, to convey to the
State and Federal Government the position of communities; the view from
the front line; the view from the pocket book.
The Mayors' Task Force started as a few concerned Mayors. Although
we were not given much of a chance to mount an effective grassroots
campaign by many of the so-called experts. We have come a long way. Our
ranks number nearly 250 Mayors from across the State representing 3.5
million of our residents. We are democrats and republican alike. While
we include Mayors from 7 of the largest 10 cities in the State, we also
include Pine Valley Borough, population 19.
We have also been joined by others who are concerned, including The
New Jersey Environmental Federation, an umbrella organization of
several environmental groups. Other groups supporting our cause include
Hands Across New Jersey; Common Cause; New Jersey Business and Industry
Association; the Chemical Industry Council; United Tax Payers of New
Jersey; the New Jersey Chamber of Commerce; and the New Jersey League
of Municipalities.
These groups and the Mayors' Task Force all see waste flow control
for what it really is--a garbage tax that feeds the bureaucratic
monoliths called county utility authorities. These utility authorities
maintain a stranglehold over towns like mine by forcing us to use their
product and only their product. This government intervention where it
does not belong simply adds another layer to an already bloated
bureaucracy.
Today is a time where politicians talk of reducing bureaucracy and
balancing budgets. Federal legislation to permit flow control puts us
on a diametrically opposite path. Flow control allows the government to
grow by allowing county utility authorities to charge artificially high
tipping fees, in Bergen County $103 per ton (the national average is
$34 per ton). This tipping fee plays havoc with my budget forcing me to
divert badly needed funds for infrastructure, police and public safety
to garbage disposal.
Let's analyze Bergen County's rate of $103 per ton. Bergen was
mandated to send 192,000 tons of waste to the Union County Incinerator
at $80.00 per ton. Bergen pays $24.00 per ton to ``process'' its
garbage at the Bergen County transfer station and $12.00 to ship it to
Union--$116.00 per ton. The balance of Bergen's waste which was bid in
the free market obtained a price of 42.75 for transportation and
disposal.
Recently I sought a non flow control alternative for Northvale's
disposal. I was immediately threatened by the State with fines of up to
$50,000 per day for daring to violate this unconstitutional law. I was
thus prevented from implementing a bid of $63.00 per ton, nearly a 40
percent savings with a stroke of the pen. How would this body like to
find a budgetary item that could be cut 40 percent immediately without
cutting services.
Suffice it to say you would all have great job security. Now, think
if you had the 40 percent savings at your fingertips and someone took
it away. If you pass flow control legislation, that's what you will do
to my community and 566 others in New Jersey alone.
It's been nearly 3 years since flow control was declared
unconstitutional and no bonds have defaulted. Rather, the facilities
are learning to compete. New York City recently received bids for
disposal at a cost of $43.00 per ton from a facility located in Newark,
New Jersey, while Newark itself is forced to pay the same facility
$72.00 because of flow control.
There has been no case made that county facilities have to be
bailed out by the taxpayer. And make no mistake, that is what flow
control legislation would be doing. They may not call it a tax; they
may tell you that no money needs be spent by passing this legislation;
they may even tell you that the sky will fall without this legislation.
But you will be bailing out yet another government flop.
Look at the evidence. To whom does the artificially high tipping
fees flow to in the long run, not the hauler, not even the business--
no, its the same people who always pay it--the taxpayer.
The Mayors' Task Force advocates the following. Communities, and
businesses, must be allowed to contract with the most cost effective
yet environmentally sound vendors of their choosing. We must be free of
the government restraints which Federal flow control legislation will
perpetuate.
New Jersey presently has several bills in the legislature dealing
with a post flow control world. While differing in approach the bills
in the New Jersey Assembly recognize that the financial integrity of
existing solid waste facilities need some degree of protection, however
if Federal legislation is enacted and the present system of flow
control is allowed to remain intact it will continue to have the same
deleterious effect on the taxpayers. The approach I advocate is one
where we put in place a mechanism to pay off existing debt but
simultaneously force the county facilities to compete. In other words,
I want to cut our losses.
Mr. Chairman, members of the committee, this issue is about nothing
more than political turf. It pits the county and State governments
against the municipal government. It allows the voracious appetite for
hidden tax dollars to be spent by groups of bureaucrats, who are
typically appointed rather than elected. I like my fellow Mayors must
stand in front of my constituents, and explain why services at the
community level are being cut, while at the county level, the
bureaucracy keeps expanding.
Article I, section 8 of the Constitution, the Commerce Clause, is
there precisely for the reasons we find ourselves here today. The power
to impede the flow of interstate commerce among the States lies with
the Congress. This body must see through the smoke and mirrors, and not
allow the balkanization of this nation because of a battle over turf.
On May 16, 1994 the United States Supreme Court removed the noose
from our necks, I respectfully and sincerely ask that you do not
replace it.
The roots and benefits of interstate commerce are embodied in the
words and teaching of the United States Constitution. At the founding
of this nation we were cautioned about erecting economic barriers
between the States. A healthy respect for the wisdom of our nations'
founders warrants that we are cautioned now.
Thank you for this opportunity to present my views in opposition to
Federal flow control legislation.
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Response by Mayor J.E. Rooney to Additional Question Asked by Senator
Chafee
Question. I understand that New Jersey's Bergen County incurred
$100 million in solid waste debt but built only one transfer station,
but no landfills or incinerators. Was the balance of that $100 million
spent wisely, and if not, who should now bear the costs of dealing with
poor investments? Should all of New Jersey's citizens bear it equally,
or just those in affected jurisdictions?
Response. Bergen County built a facility to process 5,000 tons per
day of solid wastes when they knew their maximum available waste--based
on their planned, but never built incinerator's ``put or pay''
provisions--was 2,000 tons per day. They also have 4 private facilities
approved under the current Solid Waste Management Act, and several
others that are not approved, handling the county's total garbage. The
actual current tonnage at this ``Taj Mahal'' transfer station is less
than 1,000 tons per day.
If ``Flow Control'' ended today, the cost of garbage would drop
from $103.38 to between $40 and $50 per ton in Bergen County. Our 70
municipalities could pay their $121 Million in debt through a 10 year
bond issue at a approximately $20 per ton tax or ``user fee'' on their
garbage and still save their taxpayers 3-4 tax points or $45-60 per
household.
If a statewide solution were approved, it would have the same
monetary effect of $20 per ton for the State's ``true'' bonded
indebtedness of $1.2 Billion. This approach has not been acceptable to
those counties with little or no debt. Conversely, the county-wide
approach is not acceptable to those counties with incinerators because
their costs might exceed $50 per ton. The correct solution is probably
a hybrid of both with a State subsidy for the 4 incinerator counties
and a county by bounty solution for the rest of the State.
There are currently 8 different bills in our legislature dealing
with all aspects of this issue. We are nearing a consensus and the only
thing holding up a final decision is the timing of when the stay will
be lifted.
As I stated at your hearing, we are near a solution, ``Please,
don't help us!''
______
Additional Information Supplied by Mayor J.E. Rooney to Questions from
Senator Lautenberg
In the event the stay is lifted, most certainly, I and my fellow
mayors will send our garbage to the lowest cost facility. However, at
the present time in Bergen County, that facility is the Bergen County
Utility Authority.
The State mandated Bergen to deliver 192,000 tons per year to Union
County at $80 per ton. Bergen also has a contract with Chambers
Environmental for landfill disposal for the balance of their waste, bid
and negotiated in the ``free market'' at $42.75 per ton. When the Union
County contract is eliminated, most Mayors would be happy to work with
Bergen County to pay off this debt by adding another $20 per ton (for
10 years) to the Chambers contract, thereby, saving their taxpayers 3-4
tax points or $45 to 60 per household.
______
Senator Coats and Senator Levin talk about restricting interstate
garbage but, apparently without a coalition of those legislators who
want flow control, there is neither flow control nor an interstate ban.
Over 240 New Jersey Mayors have signed petitions against flow control.
Four our delegation to support the interstate ban would be a sellout of
New Jersey's interests. After all, New Jersey's landfill's are full
because, for years we ware the dumping ground for New York City and
Philadelphia.
Additionally, the only interstate band discussed so far has been a
voluntary one. The only effect this would have would be limiting to the
available supply of landfill space, thereby driving up the national
cost of disposal forcing thousands of mayors across the country to
experience what we in New Jersey have found--that political
interference always results in higher taxes.
On the theoretical chance that we would be forced to stay in New
Jersey, without flow control, we would at least be assured that
competitive alternatives would be available, instead of the State-
mandated fiascoes that we have witnessed over the last 20 years.
As I have stated in almost very debate and forum on this issue,
``Any politician in favor of flow control, is in favor of higher
property taxes''.
______
Statement of Randy Johnson, Chair, Board of County Commissioners,
Hennepin County, Minnesota
I am Randy Johnson, Chair of the Board of Commissioners of Hennepin
County, Minnesota, and President-elect of the National Association of
Counties. NACo represents the over-3000 counties in the United States.
We appreciate being invited to participate in this hearing,
although once again we find that the panel is skewed toward witnesses
that are apparently opposed to local governments making decisions about
local issues and repaying of the real issues surrounding flow control,
rather than some oft-repeated slogans like ``government monopoly versus
free markets'', leads clearly to the conclusion that our position is
sounder public policy and minimizes the Federal government role in
local government.
Counties are involved with solid waste flow control for two primary
reasons. First, trash disposal has been a traditional, fundamental
public health and safety function of local governments in this country
for more than two centuries--even before the Constitution was adopted.
Citizens demand and expect that safe disposal of garbage will be
assured by their local government. When garbage piles up on the streets
because of collection problems or landfills leak into water supplies,
it is the local governments that take most of the heat.
Secondly, most States mandate that we handle garbage and trash.
States mandated recycling quotas, mandated long-range planning
requirements, mandated items that must be excluded from landfills and
incineration, and mandated consumer education programs. In short, we
must deal with trash by State law.
While we are not here today to complain about State mandates, it is
important for you to understand that in nearly every case, we didn't
ask our State legislatures for these mandates. We did ask for the
financial tools to carry out those mandates. Flow control was one of
those tools.
When these mandates were imposed, not every county chose to adopt
flow control as a tool for financing their waste management system. In
fact, less than 20% of the municipal garbage and trash stream in the
United States is--or ever has been--subject to any type of flow
control. Any argument that flow control grossly interferes with the
profits of business or has an impact on the economy, is simply not
supported by the facts.
Those counties and cities that were given flow control authority--
like my county--and those counties that were mandated by State law to
exercise that authority--like counties in New Jersey--undertook a
series of programs to carry out our responsibilities to manage the
garbage generated within our own borders. We tried to solve local
problems at the local level.
There is one other point that I want to make at this time.
Municipalities that object to flow control requirements exercised by
their counties over garbage generated by cities and towns should take
their concerns to their own State legislatures, not to the Congress of
the United States. It is the State government, not the Federal
government, that divides up the responsibilities between cities and
counties in each State. This Congress should not be interfering in
State disputes among local units of government.
A great deal of investment in public infrastructure has taken place
in the local governments that used flow control as a method to finance
facilities. Since 1980, over $20 billion in State and local bond issues
were sold for solid waste facilities. Unless legislation is promptly
enacted by this Congress, many communities face severe financial
consequences. Attached to my testimony is a list of just some of the
problems that we are learning about from around the country. The list
gets longer every day that Congress postpones action.
Here are some of the impacts. The national credit-rating agencies
downgraded debt ratings for 17 local and State solid waste authorities
since the Supreme Court threw out a New York flow control ordinance
three years ago. Moody's downgraded 15 issues, of which approximately
half were downgraded to ``junk bond'' status. Standard and Poor's
downgraded 4 issues, 2 of which were classified as ``junk bonds''.
Fitch downgraded 3 issues to ``junk bond'' status.
In addition to the downgrades, Moody's has 8 additional bond issues
under credit review. As litigation increases and the cases work their
way through the courts, more downgrades are likely.
The total outstanding debt that has either been downgraded or put
on a credit watch for potential downgrading by the rating agencies
since the Carbone case is over $3.3 billion by local public agencies.
What does this mean? It means that the next time these governments
try to go to the bond market to borrow funds for other public
projects--like jails or bridges or schools--they may be unable to find
any market for the bonds. For those that are able to find buyers of
their debt, the interest rate will be significantly higher, by as much
as 10-20 percent for mandated governmental programs. This additional
cost will be borne by local taxpayers--businesses as well as residents.
But it is not only downgrades that we are concerned about. We are
seeing other detrimental and expensive effects from the Congress' lack
of action on flow control legislation. In my county, we have been sued
by four businesses and some individuals in a class action suit
regarding our flow control ordinance. A year ago the Federal court
certified a class consisting of all Hennepin County commercial and
residential waste generators--that is virtually every person in the
County! The court already found that the ordinance violated the
Commerce Clause based on the Carbone decision, and permanently enjoined
its enforcement.
Now we will begin trying the second phase of the case--the exact
amount of the alleged damages. Plaintiffs are claiming $154 million--
nearly one-half of Hennepin County's total annual property tax levy. To
add insult to injury, if the court allows this case to proceed to final
judgment because Congress has not acted, Hennepin County taxpayers will
also have to pay millions of dollars in plaintiffs' attorneys' fees!
Other lawsuits have been filed and more are threatened.
In other counties, similarly difficult impacts are occurring. In
Dade County, Florida, 280 employees were fired, water and sewer rates
were raised by 12%, recycling programs were cut, enforcement of illegal
dumping was reduced, and other environmental programs were cut back.
Other counties in Florida, Maryland, New York, North Carolina,
Iowa, and Virginia have had to increase local taxes and/or fire
employees. Cuts in recycling programs, or new fees to pay for recycling
are occurring all over. The progress that we have made in recycling and
waste reduction over the last decade in these communities is being
lost.
Another important trend that we see happening from the loss of flow
control is that waste haulers are paying less to dump trash and local
taxpayers are picking up the tab. In fact, we have evidence to show
that although the disposal cost to waste haulers is going down, they
are not necessarily passing these savings on to their customers. In
Falmouth, Maine, for example, the city raised its residential rates by
50 percent and reduced its commercial disposal rates for businesses.
Did the businesses see those savings? On the contrary--the private
haulers just pocketed the savings. So the businesses and residents of
some communities are paying twice--once to the waste hauler for the
same service at the same price and again to the county in higher taxes
or fees to pay for the disposal facilities.
The debate over flow control has never been a disagreement between
the public sector and the private sector. Local governments acted in
good faith, under the laws that our States adopted. We built, or in
most cases, entered into to competitively-bid public-private
partnerships to build facilities that are now being undercut by
temporarily cheap landfills and temporarily cheap landfill prices. We
are simply trying to cover the public investment in the facilities that
we were mandated to build.
Similar to the electric utility restructuring debate, we are
seeking a way to cover our ``stranded investments'' in these
facilities. It is only equity that we are asking for, nothing more.
We hope that this committee sees the value in supporting
legislation that will allow us to continue to pay off our bonds and
manage our systems that way the our citizens want us to manage them. We
urge you not to tie our hands and make us have to explain to taxpayers
why Congress is forcing us to increase local taxes.
Thank you.
______
ATTACHMENT
Think the Lack of Flow Control Hasn't Hurt Anybody?
think again
Without Flow Control, Public Officials Around the Country Face
Severe Problems
Dade County, Florida lowered disposal fees by more than
20%, fired 280 employees, renegotiated contracts, restructured debt,
sharply reduced capital expenditures, increased taxpayers' surcharge
12% on water and sewer bills, as well as increasing the cost of carting
services, cut recycling efforts, delayed development of two household
chemical collection facilities, downsized the illegal dumping task
force, and cut the county's mulching program. Despite Dade County's
significant reduction in tip fees, cost savings, and revenue
enhancements, the County's bond rating was lowered by the national
rating companies.
Virginia's Southeastern Public Service Authority (SPSA)
lost more than 50% of its general cash balance, fired 50 employees,
increased the user fee for disposal and instituted a new fee for
recycling. SPSA's bonds were downgraded bonds due to lack of flow
control.
Hennepin County, Minnesota faces more than $150 million in
court-imposed judgments stemming from a class-action lawsuit by waste
haulers challenging the County's flow control authority. Taxes could
more than double to cover the County's liability.
Atlantic County and surrounding counties in New Jersey
lost more than $2 million dollars in revenues. Staff was cut by eight
percent. Development of a recycling center stopped. Bonds used to
finance solid waste facilities and services have been downgraded in
Union County, and Camden County to non-investment (``junk bond'')
status.
The City of Falmouth, Maine has been compelled to raise
its residential rates by more than 50% while reducing commercial
disposal rates in order to entice haulers of commercial waste to use
the town's facility. Almost $3 million per year in disposal fees have
been shifted from commercial haulers to residential taxpayers, yet
businesses have seen no reduction in their waste hauling fees because
private haulers are pocketing the savings.
Iredell County, North Carolina, has lost nearly $300,000
in cash revenues.
Charles County, Maryland lost 40% of its facility
revenues, fired employees and cut recycling efforts. It faces the
potential of having to subsidize its landfill with tax revenues.
Lee County, Iowa relied upon flow control to organize a 4-
county interstate solid waste authority to share the debt of $8.9
million for a disposal site. Three of the counties have now abandoned
the authority, leaving the stranded debt to be paid by a population of
40,000 people. To repay the bonds the county has been forced to impose
a waste management fee, the burden of which falls mainly on small
businesses which pay an average of $240 year.
Skagit County, Washington was forced to close its revenue
producing waste-to-energy plant, leaving the County with a bonded
indebtedness of $12 million for which they have no revenue source other
than local taxes.
Since the Carbone decision in mid-1994, the Waste System
Authority of Eastern Montgomery County, Pennsylvania has been forced to
shift the cost of waste disposal from the commercial ratepayers to
residential taxpayers to cover the costs of the bond payments.
Municipalities will see their rates increased by $1,170,000 in 1997 to
replace $3.8 million in lost disposal fees from waste haulers. If
commercial waste continues to leave the area for cheap landfills,
municipalities will have to cover the revenue shortfall of $5.5
million, or approximately $129/ton.
The loss of flow control in Savannah, Georgia costs city
taxpayers over $1.3 million every year and increases the amount of
garbage taking up valuable landfill space instead of being converted
into energy. The city estimates that every day's delay of passage of
Federal flow control legislation is costing each Savannah taxpayer
$3,561.
New Hanover County, North Carolina stopped development of
a recycling facility and raised taxes while transferring nearly $10.5
million from general funds to cover the more than $18 million in lost
revenues.
Warren and Washington Counties, NY face up to a $2 million
shortfall in revenues from the district's waste-to-energy plant as a
result of reduced tipping fees, adopted to compete with cheap
landfills. To raise enough money to meet debt service payments on the
plant, the counties plan to raise taxes, however such an increase will
violate State tax caps and subject the counties to a legal challenge
from the local taxpayers association.
Lee County, Florida increased property taxes on an
emergency basis to cover $7.8 million in lost revenues, representing
30% of its solid waste department's operating budget. Property owners
face a special assessment over the longer-term.
Eau Claire County, Wisconsin has lost 80 percent of the
tonnage at their solid waste facility that was used to guarantee the
bonds to finance the facility. This loss will cost the county, whose
population is only 85,000, roughly $1 million per year over the next
six years in taxes to pay off the debt used to finance the facility.
The Town of Babylon, New York lost $2 million in 1995
alone--6% of its total town budget. The town was forced to lay off 70
employees. Babylon created a commercial garbage district to offset
losses, and was sued by haulers. The lawsuit cost the town nearly $5
million in lost revenues and legal expenses.
Whatcom County, Washington was ordered by a Federal
arbitrator to pay $75,000 in damages to a local hauler who refused to
meet the county's recycling performance targets under the flow control
ordinance. As a result, the County has ceased providing incentives to
private haulers for recycling.
The bond rating of the solid waste authority of St.
Lawrence County, New York was lowered as the authority faces a $1
million short-fall this year. The County will need to borrow up to $3
million to subsidize the authority.
The Metro Waste Authority of Des Moines, Iowa has lost
nearly $1 million in waste stream revenue to nearby landfills that have
cheaper rates, resulting in a downsizing of the Authority by 35%.
Calvert County, Maryland cut recycling efforts and
employee hours by 30% to avoid layoffs due to lost revenues.
Citrus County, Florida delayed capital expenditures as it
faces loosing up to 60% of its waste stream to out-of-county landfills.
A radical drop in the usage of the county-operated
landfills, and resulting funding shortage, forced Prince George's
County, Maryland to impose new fees for recycling on county taxpayers.
The backlash from the new fees helped pass a taxpayer-let ballot
initiative that requires any new county fees to be approved by
referendum.
St. Lucie County, Florida lost 30% of its landfill
revenues and fired eleven employees.
The bond ratings of the waste-to-energy facility of Mercer
County, New Jersey were downgraded to a B rating (a ``junk'' bond
rating) after Federal courts declared the State's flow control law to
be unconstitutional. The county Board of Freeholders was forced to
cancel the $200 million facility, leaving county taxpayers with the
dilemma of how to pay off the bonds.
Dutchess County, New York taxpayers paid $5 million more
in property taxes in the last year-and-a-half in addition to their
garbage bills due to the loss of waste volume.
Seven metropolitan Minnesota counties have seen an
increased reliance on out-of-state landfills. After a decade of
progress in managing waste within their own region and diverting waste
from landfills by use of recycling and resource recovery facilities,
from a 1993 landfilling rate of 11%, the counties report that
landfilling has reversed direction and is now over 18%.
Oneida and Herkimer Counties in New York face a lawsuit
threatening to scuttle the counties' integrated waste management system
and force property taxpayers to pay off $47 million in bonds.
Nassau County, Florida lost 20% of its facility revenues.
Montgomery, Otsego, and Schoharie Counties in New York
stopped recycling collection services and face dismantling the entire
solid waste management system. The bond insurer for the counties'
facilities stated that future actions ``could totally destroy the
established belief in the municipal bond market.''
Huron County, Ohio has lost one-third of the tonnage
previous delivered to its facility.
Prince William County, Virginia is losing $1.8 million
annually in revenues. To make up for the loss, citizens are now
required to pay higher fees for special services. Programs to reclaim
old landfill space for recreation areas, promote recycling, and expand
recycling programs have been reduced or eliminated.
Wright County, Minnesota has closed an innovative high-
tech composting facility, financed with taxpayer-funded bonds. Twenty-
five employees have lost their jobs and the cost of paying off the
bonds will be born by a special yearly assessment on all property
owners.
Warren County, New Jersey issued debt to build a waste
facility, entering into an agreement with Huntington and Somerset
Counties to supply waste to the facilities. If these counties cannot
exercise flow control, the burden of the debt service will fall
entirely on Warren County residents, increasing their total
indebtedness by 400%. The added costs would force a 30% increase in the
county-purpose tax burden and the debt-per-capita ratio would skyrocket
from one of the lowest in the State of New Jersey to one of the
highest.
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Additional Responses by Randy Johnson to Questions from Senator Chafee
Waste-to-energy (WTE) facilities may have higher fixed costs when
compared to some landfills, leading some critics to argue that they are
``less competitive''. The argument fails to recognized that Federal
policy established by the Environmental Protection Agency during the
prior two administrations supported the generation of energy from waste
over landfilling because of the wiser use of resources and superior
public benefits. In addition, at some WTE facilities, the ``tipping''
fees include an amount to repay coasts of other related debt and
expenditures, such as recycling facilities, composting facilities and
programs, household hazardous chemicals separation programs, and
others--all of which under Federal environmental policy are considered
preferable to landfilling. Accordingly, cost competition should not be
the sole fact in determining the desirability of a particular waste
management facility.
It is also important to understand that merely because no local
government has yet to default on its bonds, does not mean that they
have adjusted ``better'' to the changed economic situation. It is
essential for a county or city to maintain its access to the municipal
bond market to continue to perform its governmental ft?nctions. The
stigma associated with a downgrade or default is so great that there is
extreme pressure on a local government to take remedial actions to
maintain its credit rating. These remedial actions have been documented
in credit reports issued by Standard and Poor's. They include raising
property taxes, reductions in capital expenditures, imposition of new
fees, water and sewer bill surcharges, surcharges on other services,
drawdowns of unrestricted reserves, reductions in other governmental
services and programs, loans from other governmental funds,
cancellation of environmental projects and delay of maintenance on
existing facilities.
If ratings remain stable, it will be because of the many difficult
and unjustifiable changes that will continue to be made by local
governments in response to Congress' inaction. In addition to hardships
already cited, affected local governments are increasingly encountering
litigation and the threat of litigation, along with the payment of
legal and other expenses, the need to renegotiate contracts with
municipalities, higher financing costs, and others (see attached). Such
``adjustments'' may improve the profit margins of private sector waste
companies, but they do not necessarily serve the taxpayers, the public
interest, or environmental protection.
The focus on the ``issue-specific'' credit ratings that Standard
and Poor's and other rating agencies have provided is important, but I
would emphasize that this information is limited with respect to a
specific bond issue for a project and not the governmental entity, per
se. The ratings take into account the ability of a system to set and
increase rates for a project, the flexibility the system has to
establish new fees and revenue sources, and the revenues that are
pledged for repayment. While increased taxes and fees, and other
``adjustments'' necessitated by the lack of flow control authority are
causing financial hardships as described above, the rating for the
specific project would not be expected to change if the local
government is able to make those adjustments, however painful, and
those adjustments were factored into the initial ratings analysis for
the facility.
______
The argument that flow control results in ``above average tipping
fees'' is based on an unfair comparison. Flow control tipping fees
assessed at a specific disposal facility typically include the costs of
other solid waste facilities and programs. Therefore, the tipping fees
are sometimes higher than those charged at another similar/"average''
facility not encumbered with these additional costs. As noted by EPA in
its Report to Congress on Flow Control and Municipal Solid Waste (March
1995, at ES-57), ``[w]hen the [flow control-based] tipping fee is
broken down into its component parts, prices are usually comparable for
facilities [non-flow controlled] sited in similar locations and built
about the same time'' (citing Moody's Public Finance, Perspective on
Solid Waste, August 16, 1993, p. 3) Accordingly, in order to make the
tipping fee at the flow controlled facility ``competitive'', reducing
costs actually means abandoning funding of the other solid waste
facilities and programs, or more typically, shifting those costs to the
taxpayers instead of the waste haulers.
In addition, flow control is not solely a question of local tax
policy. Rather, the use of approaches such as flow control has been
encouraged as a matter of Federal solid waste management policy. For
example, in EPA's Variable Rates in Solid Waste: Handbook for Solid
Waste Officials, Vol. I--Executive Summary 2 (June 1990), EPA
discourages the use of property taxes to fund solid waste management
because doing so would not ``giv[e] residents any incentives to reduce
their waste. In fact, with the property tax method, residents never
even see a bill, and generally have no idea how much it costs * * *
(page 2, emphasis in original).
See also William K. Reilly, Administrator, USEPA, Statement Before
the Subcommittee on Environmental Protection, Senate Committee on
Environment and Public Works (September 17, 1991) in which he
discouraged the use of property taxes to recover the cost of municipal
solid waste (MSW) management because the tme cost of MSW management is
``hidden'' if property taxes are used.
Nor does flow control ``artificially'' increase prices or impose a
higher cost for a given category of services. In this connection, it
should be noted that two of the witnesses who opposed flow control at
the March 18 hearing (Messrs. Broadway and Norquist) referred to a
study prepared for Browning-Ferris Industries (BFI) by National
Economic Research Associates (NERA) to support the claim that tipping
fees are higher for communities that rely on flow control in comparison
to non-flow control jurisdictions. The BFI-NERA document, however, is
inaccurate, invalid and uses distortion to portray flow control as more
expensive. The Department of Environmental Services of the State of New
Hampshire evaluated the BFI-NERA document and found, contrary to the
document's authors, that in two of the three case studies presented,
waste disposal at a flow-controlled facility is actually less expensive
than at similar private facilities. The New Hampshire DES' conclusions
regarding the BFI-NERA study are as follows:
The NERA study is flawed in its assumptions, reporting results,
and conclusions. Misleading use and reporting of statistics
undermines the validity and credibility of the results reported
from NERA's economic analysis. In both its modeling and case
study analysis, NERA confounds tipping prices with the actual
cost of providing MSW disposal, a decision which has the
inevitable effect of creating an apparent price advantage for
privately operated facilities. Erroneous assumptions about the
cost of transporting MSW to alternative disposal facilities
unfairly deflate the reported cost of using these facilities.
Meanwhile, omitting the cost of integrated waste management
services provided by public, flow-controlled facilities
unfairly inflates the reported ``tipping fees'' charged by
these facilities, and results in a false comparison of disposal
costs at the public compared to the private facilities (which
offer no such services).
Moreover, contrary to the implication of this question, local
governments generally cannot ``cut costs'' for MSW management without
cutting services. The fact is that flow control-based tipping fees
often recover, in addition to MSW disposal costs, the costs of
environmentally protective waste management services such as recycling
and household hazardous waste collection--services that ``generally do
not lend themselves to the generation of their own revenues''. EPA
Report to Congress on Flow Control and Municipal Solid Waste (March
1995, at ES-11). While raising local taxes to fund such programs may be
a new de facto Federal policy forced upon local government, it is
disingenuous to ignore the Federal policies encouraging alternatives to
landfills and diversion programs, and the State mandates that require
local governments to provide such services.
______
I do not agree that flow control has no impact on the protection of
human health and the environment merely because Federal landfill
regulations are in place. Prior to the mid-70's, more than 90 percent
of municipal solid waste was landfilled. In 1976, in the Resource
Conservation and Recovery Act, Congress found that ``land is too
valuable a resource to be needlessly polluted by discarded materials.''
Subsequently, the Environmental Protection Agency issued guidelines
that declared that landfills are the least environmentally-preferable
method of handling solid waste, and should be utilized only after all
other alternatives are exhausted.
Local governments throughout the country embarked on a mission to
divert waste from landfills to the maximum extent possible. Through
waste separation facilities, recycling programs, composting facilities,
educational initiatives, and energy recovery facilities, billions of
dollars have been spent to decrease America's reliance on landfills.
These efforts have made a significant impact, reaching a national goal
of 25% source reduction and recycling. For the first time in decades,
the number of operating landfills in the United States has dropped
below 4,000.
Disposing of MSW in landfills--even those landfills regulated under
Subtitle D requirements--is no guarantee of environmental protection
and public health. Subtitle D provides minimum requirements for siting,
operating, monitoring, corrective action, and closure and post-closure.
However, even the best landfill liner and leachate collection system
will ultimately fail due to natural deterioration, according to EPA.
In the Criteria for Municipal Solid Waste Landfills that
accompanied the Subtitle D regulation, EPA stated that ``once the
[landfill] unit is closed, the bottom layer of the landfill will
deteriorate over time, and consequently, will not prevent leachate
transportation out of the unit [into the groundwater.]'' Leakage from
landfills into groundwater carries with it chemicals contained in
household hazardous wastes and small-quantity generator wastes from
commercial operations.
Air emissions from landfills also can negatively affect health and
the environment. Landfill gas is about half methane and half carbon
dioxide with minimal amounts of other gases, including benzene and
vinyl chloride. Non-methane hydrocarbon emissions are also significant
contributors to ozone loading in non-attainment areas. EPA requires
certain large landfills to control such gases, but even those landfills
will capture, at maximum, only about 75%-80% of the generated gas,
according to EPA's analyses.
There is no doubt that some landfills are more environmentally
protective than others. A double-composite liner composed of plastic
sheeting and compacted soil will provide a higher level of
environmental protection than a landfill with a single liner. A methane
emission collection system is likely to minimize air quality problems
compared to a facility that merely flares off the gases. Yet the
Subtitle D regulations mandate compliance with only the minimum
requirements, requirements that many older landfills, and some newer
landfills, have difficulty meeting. Under a ``free market'' system,
waste naturally flows to landfills that provide the least environmental
protection because it is always cheaper to use management methods that
barely meet environmental standards than to create new systems, or
alternatives to landfills, that provide significantly more
environmental protection.
States and local governments which have invested heavily in systems
and programs which minimize the amounts and types of wastes sent to
landfills fear that the progress that they have achieved is in
jeopardy. If the policy of the United States is reversed; if the goal
of finding alternatives to burying waste is no longer viable; if the
emphasis on innovative approaches to diversion--approaches which do not
produce profits--is over, States and local governments have wasted many
years and billions of dollars. More importantly, public health and
environmental protection will be ill-served by such a change in
direction.
______
Additional Responses by Randy Johnson to Question from Senator
Lieberman
Opponents of flow control fail to understand that any perceived
``inefficiencies'' (by which they mean higher tipping fees) associated
with flow control facilities is based on an inaccurate comparison with
the tipping fees at landfills. As noted elsewhere in these answers,
local governments provide far more than mere burial of trash. New
technologies and innovative alternatives to landfill disposal are
admittedly more expensive and experimental than landfills; that is why
such technologies have been encouraged and utilized primarily by the
public sector and financed with tipping fee surcharges.
While some landfills may provide somewhat higher levels of
environmental protection than others, there is little if any incentive
for landfills to attain greater ``efficiencies'' because landfills
sited since the Subtitle D regulations must meet the same minimal
standards. The Federal government does not require that such landfills
be upgraded or improved to exceed the standards. (See answer to
previous question.) Even if a private landfill can cut its costs of
operation, there is no assurance that any significant cost savings are
passed along to the consumer as long as the then-current tipping fee is
set at a level that the market will tolerate. To do otherwise is
contrary to a profit-based system.
______
Additonal Response by Randy Johnson to Question from Senator Boxer
Question. Much of this debate has focused on the economic impact of
flow control. I have heard from private companies from California and
across the country that flow control limits competition, creates
inefficient local monopolies, increases disposal costs, and interferes
with the free market. I have heard from almost every California county,
and many California cities, that the flow control is vital to their
ability to manage solid waste. What do you think? Does flow control
limit competition and increase garbage management costs? What effect
would a failure to authorize flow control have on the economies of
municipal solid waste disposal?
Response. It is important to understand that in many States in this
country, counties and other local governments are mandated by State law
to handle garbage and trash. In addition, State legislatures establish
recycling and/or waste reduction quotas, to be met by legislatively-
mandated deadlines. In California's case, local governments incur
financial penalties for not meeting the State's recycling targets and
deadlines.
California and many other States also impose bans on the disposal
of specific materials in landfills and incinerators, leaving recycling
or reduction as the only option generally available to local
governments. In addition, services such as household hazardous
chemicals collection, and yard waste diversion are frequently mandated
by State law on counties and municipalities.
The necessity of recycling and reduction of solid waste--a mandate
that falls squarely on the shoulders of municipalities and counties,
not private waste haulers--is the major reason why it is inaccurate to
compare the costs of comprehensive solid waste management systems with
the costs of a private operator merely burying trash in the cheapest
location available.
Any discussion of the cost differential between comprehensive waste
management services provided by a public entity utilizing flow control,
and private facilities that charge a low disposal fee (and provide no
other services), must be an ``apples-to apples'' comparison. Local
government fees generally recover, in addition to disposal costs, the
costs of State-mandated waste services--services which do not lend
themselves to generation of their own revenues. Disposal costs are only
a small part of the picture, but if only disposal costs are compared,
prices are usually comparable for public and private facilities sited
in similar locations and built about the same time. (citing Moody's
Public Finance, Perspective on Solid Waste, August 16, 1993, p. 3)
Flow control is not only competitive, in fact, it enables many
small trash hauling companies to survive and flourish. When a county or
city enters into a franchise agreement or long-term contract with a
private hauler, each hauler pays the same disposal fee at the flow-
controlled disposal or recycling facility. Thereby, the small hauler is
able to compete with the large vertically-integrated waste companies
that own their own landfills, transfer stations and tmcks. Flow control
has provided a ``level playing field'' for the small haulers, who know
that they have a disposal site with a set price, rather than at prices
controlled by the industry giants.
There is already strong evidence that the future of small
businesses in the solid waste marketplace are in jeopardy, causing
concern for competitiveness in the waste industry. The January 1995
issue of World Waste reported that since 1990 the two largest waste
companies in the United States had acquired over 1,000 smaller waste
haulers and landfill operators. The trend is continuing at a record
pace. In 1994 alone, one of those two companies reported that it had
acquired 115 additional small waste companies. If local governments are
not allowed to manage solid waste in their communities, the giants of
the industry will continue their march toward a cartel of companies
that can manipulate the marketplace, control prices and eventually
eliminate competition altogether.
______
Congress' failure to authorize flow control is already having an
effect on the economics of municipal solid waste flow control. In order
to retain a portion of the revenues to repay the debt issued for solid
waste facilities such as transfer stations, recycling center,
landfills, and waste-to-energy incinerators counties and cities have
been forced to lower the fees collected at the facilities. In some
cases, the lower fees have mitigated the exodus of trash haulers who
otherwise would be delivering their loads to distant less-expensive
landfills or out-of-state facilities. As a result, the reduced revenues
have forced local governments to find other methods of repaying their
bonds--in several cases those methods have included increasing local
taxes (see attached).
In other cases, local governments have found it necessary to cut
back on recycling services, composting programs, household hazardous
chemical collection programs, environmentally-sound closure of old
landfills, and other innovative waste reduction programs. Such programs
are not income-producing, therefore without ``subsidies'' from waste
disposal fees or local tax-supported revenues, they are activities that
many local governments simply cannot afford. When comprehensive MSW
systems have to ``compete'' with a private company--whose only interest
is burying trash in the ground at the cheapest site available--the
progress made in America since the late 70's toward diverting waste
from landfills is in jeopardy.
______
Additional Responses by Randy Johnson to Questions from Senator
Lautenberg
Waste-to-energy facilities and garbage combusters are economical
under the terms in place at the time of their development. Local
jurisdictions and solid waste authorities entered into contracts and
agreements relying on their legally-upheld flow control authority to
commit their solid waste to a site for 20-30 years in return for long-
term assurance that environmentally-safe disposal was available at a
price certain. As noted in the statement of the Government Finance
Officers Association (GFOA) to the committee, the prices that were
negotiated years ago were ``sound''. Waste-to-energy facilities were
built in a competitive marketplace that required vendors to assume the
risk of providing a 20-year minimum disposal location at an agreed-upon
price that was, in most cases, competitively bid.
Communities relied upon their authority to control the flow of
solid waste--authority that was upheld by the courts on numerous
occasions. Public officials and bond holders had no reason to believe
flow control authority was in jeopardy. ``There is no discussion of any
legal challenges to flow control because during this period of time
[when project bonds were sold], there had been no attacks of the
practice on Commerce Clause grounds,'' notes the GFOA statement. The
lack of certainty for trash disposal and the inability to budget based
on the increasing cost of waste management were much greater risks to
communities at the time. Public officials responded by significantly
minimizing their risks through long-term contracts and agreements,
assuring reliable and responsible waste disposal.
______
With regard to the question about Hennepin County's fees at the
waste-to-energy plant, it is important to understand that the $95/ton
tipping fee charged by the County supported the County's comprehensive
environmental program, of which converting waste to energy was just one
piece. The plant itself did not charge $95/ton; the charge was imposed
by Hennepin County to pay for the entire program which included the
transportation of solid waste to two different plants. The
transportation and processing costs for these plants was, in fact, $65/
ton. The additional amount supported a comprehensive integrated
environmental program which includes the following:
a household hazardous waste (HHW) collection program at
two permanent facilities open five days a week;
neighborhood HHW collection programs in the Spring and
Fall
tree recycling program
commercial materials exchange program to reduce waste
commercial hazardous waste licensing and inspection
program
education and training program for hazardous waste
generators
consumer electronics program to dismantle and recycle
televisions and VCR's
household battery collection and recycling program;
fluorescent light tube collection and recycling program;
and
public education on proper handling of all these wastes.
The total cost for one of the most comprehensive environmental
programs in the nation was borne by the tipping fee and paid by the
waste haulers prior to the Carbone decision. Following that decision,
Hennepin County shifted the costs to their citizens to pay for the same
programs. The tipping fee was lowered and additional revenues were
collected by a service fee, collected by waste haulers from their
customers, as a percentage of collection and disposal costs, and paid
to Hennepin County. In addition, a solid waste service fee was
collected as separate ``line item'' on the property tax statement of
homeowners and businesses.
Despite their objections to paying for the services they receive,
the City of Minneapolis from the beginning of the County program has
received direct benefits from the environmental facilities and
activities. The City has benefited from the household hazardous waste
program, the commercial hazardous waste inspection and training
program, and the collection of household batteries, fluorescent light
tubes, tires, oil, and consumer electronics.
While the costs have been shifted to a different set of tax and
fee-payers, Minneapolis residents are still paying for the County's
comprehensive environmental program. They are paying through a $41/ton
tipping fee, plus a service fee of 6\1/2\ percent on the collection and
disposal of solid waste, plus a solid waste fee of .019 percent of the
taxable market value of property. These three sources of revenue are
supporting the same programs that were previously paid for with the
$95/ton tipping fee. The County continues to provide outstanding
environmental services to the citizens of Hennepin County, including
the residents of Minneapolis. The attached list shows the scope and
results of the County's programs.
______
Statement of Grover G. Norquist, Americans for Tax Reform
i. introduction
Chairman Chafee, members of the committee, and ladies and gentlemen
in the audience, thank you for the opportunity to address you.
My name is Grover Norquist and I am the president of Americans for
Tax Reform (``ATR''). As you may know, ATR is an organization comprised
of individuals, corporations, and associations that favor lower taxes,
less regulation, and a smaller Federal Government. We do not accept any
Federal grant money nor do we benefit from specific Federal programs.
I come before you today to speak briefly about the free market,
taxes and flow control legislation.
ii. americans for tax reform opposes flow control
Americans for Tax Reform believes that flow control promotes
wasteful and inefficient practices at the expense of free market
principals. It is anti-competitive, anti-taxpayer, and anti-growth. How
else would one define the practice of permitting local governments to
set up government-run trash disposal monopolies that virtually
eliminate private-sector competition?
In essence, flow control dictates where municipalities and
businesses send their waste, and then artificially sets prices for
disposal at above-market rates. These additional expenses are passed
directly on to consumers in the form of higher costs for goods and
services. In effect, flow control is a stealth tax. It is critical to
remember that such costs will not be borne solely by corporate
America--individuals, families, senior citizens and persons on fixed
incomes will all shoulder the tax burden of flow control, and the
larger government bureaucracy that it requires.
Moreover, the concept of flow control goes against free market
principles. As you may know, the Supreme Court struck down local flow
control regulations in 1994 in the case of Carbone v. Clarkstown, NY.
The Court found that State-mandated flow control infringed upon
interstate commerce. ATR believes that any interference with
unrestricted movement of goods and services undermines the free market,
and therefore, harms the American taxpayer.
At a time when Congress is empowering communities and individuals,
in such cases as welfare reform and agricultural policy, the last thing
our elected officials should consider is concentrating more power in
the hands of elected officials. One cannot reconcile a theoretical
commitment to a leaner and smarter government with the concept of a
State-run monopoly that precludes private sector competition.
iii. the costs of flow control
ATR is proud to join with other champions of the free market on
this issue. As Jersey City Mayor Brett Schundler so eloquently put it,
flow control legislation ``would institutionalize one of the worst
excesses of the `big government knows best' mentality that has long
dominated Congress . . . . We're forced to spend money on waste
disposal that we would rather use for schools or police.''
We've also seen a broad and diverse business coalition form around
this issue. Representing organizations such as the National Federation
of Independent Business, the National Restaurant Association, the
National Association of Manufacturers, and the Association of Builders
& Contractors, the Coalition Against Oppressive Flow Control has
written: ``Small business owners strongly oppose flow control because
it would allow local governments to dictate where small business must
send their waste and it allows these governments to set monopoly
prices.''
In another statement, the National Association of Manufacturers
says: ``flow control embodies the worst of all government monopolies--a
hidden tax in the form of higher prices, reduced efficiency, a more
intrusive government and a stifled free market.''
And finally, Karen Kerrigan of the Small Business Survival
Committee has explained: ``Flow control is nothing short of centralized
State planning that harms individuals, families, and businesses. It
raises taxes, increases the size of government and hurts American
consumers.'' I couldn't agree with them more.
Perhaps as a way of summary, let me present four arguments against
flow control. In so doing, I also hope to answer the Chair's questions
about what happens to communities in the absence of such regulation.
(1) Flow control is nothing but a trash tax. ATR firmly believes
that a vote to reinstate the practice of flow control is a vote to
raise taxes. Flow control is a stealth tax--a hidden burden imposed on
families and businesses by artificially inflating the price of waste
collection. The American people already pay too much in taxes. We do
not need yet another tax increase. Voters know that taxes on businesses
are ultimately borne by consumers and taxpayers in the form of higher
prices, lower economic growth, and fewer jobs. ATR will work to make
sure that the American people understand the harm done to them if flow
control is enacted.
(2) Flow control costs jobs. We know that flow control means small
business can no longer shop around for the best price for its trash
collection. Consequently, entrepreneurs face higher prices and have
less money to pay their workers or hire new ones. Moreover, with scarce
resources being diverted to pay increased ``garbage taxes,'' there is
less money for businesses to invest in their own communities. That
means fewer private-sector jobs.
(3) The cost of waste disposal is declining thanks to free market
principles already in place. In the 3 years since local flow control
was suspended, the price of waste collection has dropped. Contrary to
the dire predictions of unelected bureaucrats, communities are not just
surviving, but actually growing without flow control in place. The free
market has forced inefficient government agencies that used to rely on
flow control to become more efficient. This has lead to lower costs for
homeowners and small businesses. For example, people under the
regulation of Virginia's Southeastern Public Service Authority have
seen prices cut by over 20 percent. Within Hennepin County, Minnesota,
disposal prices have been slashed by 50 percent, from a high of $95/ton
to $41/ton. In contrast, a study by the National Economic Research
Associates reveals that flow control can actually increase the cost of
waste collection by as much as 40 percent.
(4) Flow control impedes market-oriented environmental and
recycling efforts. The EPA has found that flow control fails to
facilitate recycling or create other environmental benefits. I never
thought that I would be united with Greenpeace, the Sierra Club, and
the Audubon Society, but on this issue we agree. According to one
environmental activist: ``Flow control laws discourage environmental
innovation . . . Congressional authorization of flow control could
inhibit the development of alternative waste management options,
including market-driven recycling efforts. Flow control laws
unnecessarily inhibit the ability of recyclers and other ecological
entrepreneurs to compete in the marketplace.''
iv. conclusion
As many of you know, I have relentlessly fought over the years for
a smaller Federal Government and lower taxes. There could hardly be a
better example of how Washington could threaten these principles than
today's fight over flow control. The lines are cleanly drawn in this
battle. On one side are the flow control proponents advocating a
government-sanctioned monopoly. On the other side are the champions of
the free market, American consumers, and the millions of small
businesses across our nation. The choice could not be clearer.
Americans for Tax Reform strongly urges this committee to protect
American taxpayers and strike a blow for the free market. We urge you
to oppose anti-competitive, anti-small business and anti-taxpayer
programs such as the proposed flow control regime.
______
Statement of John Broadway, National Federation of Independent Business
Good morning. On behalf of 600,000 members of the National
Federation of Independent Business (NFIB), and 11,000 members in
Virginia, I appreciate the opportunity to present the views of small
business owners on the subject of flow control.
By the way of introduction, NFIB is the nation's largest business
association representing a broad cross section of American businesses.
About 50 percent of our membership is in the service and retail
industries, about 25 percent are in manufacturing and construction, and
the rest are in businesses ranging from agriculture to wholesale
services. NFIB's typical member has five employees and grosses about
$350,000 in revenue annually.
overview
The vast majority of small businesses are customers of waste
disposal services. However, NFIB also represents a number of small
waste haulers and recyclers. Consequently, any efforts to maintain and
expand the use of flow control ordinances negatively effect small
business owners. The reasons are quite simple. Flow control ordinances,
which force waste disposal customers to use government-mandated waste
facilities, create monopolies under which small business owners will
most likely pay higher costs and receive inferior service.
Monopolies, by their very nature, give an advantage to one entity
at the expense of all others. It makes little difference whether the
local government or a separate entity with a long-term contract run the
waste disposal facility. Because monopolies don't have to face free
market competition, customers have no power to bargain for better rates
and service.
concerns of small business owners
Flow control ordinances have the most obvious impact on price.
Currently, in communities where no ordinances exist, haulers,
processors, and recyclers compete for market share. As a result,
customers can purchase disposal and recycling services that are
efficient, safe and cost effective. On the other hand, where ordinances
do exist, prices are artificially set to ensure a specific payout, and
in some instances the prices are inflated to pay for other municipal
services as well. These monopolies limit choice and place a very real
tax on small business.
This tax burden, often referred to as a tipping fee, is not
inconsequential. Studies conducted by the NFIB Education Foundation
indicate that typical NFIB members take out of their businesses less
than $40,000 annually to support themselves and their families.
Clearly, the price of any service, and particularly one that is as non-
discretionary as waste disposal, can be a significant expense for a
small business. In fact, a study by the National Economics Research
Associates found that flow control increases disposal costs by an
average of 40 percent. When small business owners are required to use a
government-mandated disposal operation that faces no price or quality
competition, they are virtually guaranteed poorer service and higher
prices.
A second impact of monopolistic flow control ordinances is
inefficiency. Instead of building disposal services to respond to need,
flow control ordinances result in facility-driven systems. Government-
backed facilities do not need to seek business to stay in business:
they are guaranteed a return on their investment. There is no incentive
to improve the disposal facility, to implement new technology, to
attempt to cut costs, or to pass any savings on to the customer.
In addition, because these facilities are built without regard to
market conditions, they are often oversized, built to receive volumes
of waste considerably in excess of volumes projected in a free market
environment.
Flow control ordinances can also negatively affect environmental
quality. Small business owners want the ability to ensure that their
waste is being properly disposed. They and their families live in their
communities--they drink the water and they breathe the air. In
addition, they face enormous liability for the waste they generate if
it is not disposed of responsibly. As the committee is aware, NFIB has
been very active this Congress and in the past in the Superfund debate
because of the serious problems small business owners face in dealing
with past disposal problems.
With respect to flow control ordinances, waste generators may be
forced to send their waste to facilities that are environmentally
unsafe, leaving them with potentially huge liabilities. Waste
generators should be able to control their own liability and their
quality of life by choosing the facility that has the safest standards.
NFIB also represents a number of small haulers and recyclers. With
flow control ordinances in place, it is highly unlikely that these
small businesses would be able to compete for long-term contracts. They
will, in effect, lose any opportunity to provide these services or fill
new niches in the market as new technologies develop.
Arguments are made that counties and municipalities need flow
control ordinances to plan for present and future waste management.
While such planning may be desirable, there are better ways to manage
it than by interfering in free markets. It is a myth that waste
management requires flow control. Such management by local governments
can be performed through regulating the quality of service, not by
performing it themselves or by establishing long-term exclusive
contracts.
I think a good example of that is going on in Virginia right now. A
few years ago, the city of Richmond and 12 surrounding counties and
other independent cities formed the Central Virginia Waste Management
Authority. One of their goals from the beginning has been to maximize
the existing private waste management companies.
In fact, the director of the authority, Kevin Burns, has written
``Unlike most other regional authorities, this authority has
implemented all of its programs through private service contracts for
recycling and other waste management services. The result has been the
development of an integrated regional waste management program. The
public investment in contract services is stimulated with the creation
of private competition, jobs and a private tax base.''
pending legislation
It should be made clear from my testimony that small business
owners do not support flow control ordinances. However, they are not
insensitive to the plight of many communities that have on-going
facilities in place. If the committee must pass some flow control
legislation, NFIB strongly urges that only a strictly limited
grandfather provision be established. Specifically, we do not believe
that communities that currently have on-going programs should be
destined to live under flow control ordinances into eternity. Once the
currently operating facility's useful life is finished, any
grandfathered flow control ordinance should end. And certainly, any
community that had passed an ordinance and was merely in the planning
stages of building a facility should not be protected from the free
market.
Small business owners face many hurdles in maintaining their
businesses, creating jobs, and generating revenue for their
communities. They should not be faced with added costs and poorer
service that results from monopolistic flow control ordinances. NFIB
urges the committee to consider the negative consequences of
establishing long-term monopolies that force small businesses to
purchase services from a single supplier. It is not in the best
interests of small businesses or the nation as a whole.
Thank you for the opportunity to be here today. I would be happy to
answer any questions.
______
Statement of David K. Leff, Assistant Commissioner, Connecticut
Department of Environmental Protection
Good morning. My name is David Leff. I am Assistant Commissioner of
the Connecticut Department of Environmental Protection. I am
accompanied today by Robert Wright, Acting President of the Connecticut
Resources Recovery Authority. The Authority has been responsible for
the financing and development of four of Connecticut's six waste to
energy projects. Thank you for this opportunity to provide testimony on
the significant impact which the U.S. Supreme Court decision in the
matter of C&A Carbone, Inc. v. Town of Clarkstown has had on the solid
waste management system in the State of Connecticut.
By Connecticut statute, each municipality must make provision for
the safe and sanitary disposal of solid waste generated within its
boundaries. More than a decade ago, it became clear that this could no
longer be achieved through the use of traditional municipal landfills.
Stricter environmental regulations, limited geologically appropriate
sites, and public opinion prevented the siting of new municipal solid
waste landfills as old landfills were rapidly reaching their capacity.
In order to fulfill their statutory obligations, the municipalities,
with the help of the State Department of Environmental Protection and
the Connecticut Resources Recovery Authority, created interlocal
agreements to develop sufficient waste-to-energy facilities to serve
the State's needs, approximately 2.2 million tons per year of statewide
capacity. The premise of this integrated waste management system of
transfer stations, waste-to-energy facilities and residue landfills was
that it is a State's responsibility to be as self-sufficient as
possible in its waste disposal practices.
As you know, waste-to-energy projects are not inexpensive. Their
development required the issuance of hundreds of millions of dollars of
revenue bonds secured by the full faith and credit of the
municipalities associated with each project. The bonded indebtedness
for Connecticut's six waste-to-energy facilities is now about $750
million.
At the time that the projects were developed, the municipalities
anticipated that the fixed costs of paying off the bonds could be paid
through a combination of energy revenues, disposal or ``tipping'' fees
from member towns committed to the projects, and from towns and haulers
which used the projects on a periodic or ``spot'' basis. This was a
reasonable expectation since per capita waste generation was
increasing, Connecticut's population was growing, and demand for
disposal capacity was high, driving the cost of ``spot'' tipping fees
well above the level of member tipping fees.
It was in this context that the municipalities signed long-term
``put-or-pay'' contracts to guarantee payment of the bonds issued for
the projects. Through these contracts, they committed to delivering a
minimum annual tonnage of municipal solid waste to their respective
projects and to pay the difference in tipping fees if they failed to
deliver that minimum amount. To ensure that they would never fall below
their minimum tonnage commitments, the municipalities passed flow
control ordinances, requiring that municipal solid waste generated
within their borders be disposed at the waste-to-energy facility to
which they were contractually committed. The ordinances vary from
municipality to municipality, but their basic structure was to assure
that adequate waste was delivered to meet the ``put-or-pay''
commitments.
One hundred and thirty-seven of Connecticut's 169 municipalities,
representing 86% of its population, have long-term ``put-or-pay''
contracts with one of the State's waste-to-energy facilities. Five
municipalities continue to use Connecticut's three remaining municipal
solid waste landfills. The other municipalities either send their
municipal solid waste out-of-state or utilize one of Connecticut's
waste-to-energy facilities on a spot market basis.
For almost a decade, these waste-to-energy projects have enabled
the municipalities to fulfill their statutory solid waste disposal
obligation in an environmentally superior manner. And when the State
passed its Mandatory Recycling Act in 1987, these projects provided a
basis for the development of a new recycling infrastructure, including
several materials recovery facilities. As of fiscal year 1995,
Connecticut recycled about 23% of its municipal solid waste, with a
statutory goal of reaching 40% by the year 2000. The State sent 59% to
waste-to-energy projects in State, landfilled 17% in State, and
disposed of only 1% out-of-state. In short, Connecticut had carefully
established an environmentally responsible and comprehensive municipal
solid waste management system.
By the early 1990s, Connecticut's economy had slowed significantly,
and its population stopped growing, so the anticipated increase in
solid waste generation did not occur. In addition, the recycling rate
rapidly increased from less than 10% to about 23% after 1991. This
meant that there was less Connecticut waste requiring disposal than had
been projected when the waste-to-energy projects were designed and
developed. Despite these changes, most municipalities continued to meet
their contractual commitments to deliver waste to their respective
projects.
The Carbone decision dramatically changed the economics of
Connecticut's waste-to-energy projects and put the State and the
municipalities contracted to the projects at great risk. Without flow
control, haulers have more disposal options, so Connecticut's waste-to-
energy facilities have had to lower their spot market tipping fees to
compete for spot tonnage. Since the 1980s, the spot market rates have
dropped 30-50% in Connecticut. Lower spot market revenues combined with
unchanging energy revenues meant that member tipping fees have had to
increase so that the fixed costs of the waste-to-energy facilities
could be paid. This put an additional and unexpected burden on the
municipalities.
The increasing differential in tipping fees provided a further
incentive for those haulers who paid the tipping fees directly to
divert member town waste from the waste-to-energy facilities to which
the towns were committed. The Carbone decision legitimized this
diversion and created a vicious cycle. The less member waste that was
delivered to the projects, the higher the member tipping fee had to be
to cover the projects' fixed costs. The higher the member tipping fee,
the greater the incentive to divert waste to a less expensive disposal
facility. As of fiscal year 1996, more than half of the Connecticut
municipalities with minimum tonnage commitments did not meet them. In
some cases, the shortfall was quite small and in some projects the
overages of other member towns made up the shortfall so individual
municipalities were not penalized.
The diversion of member waste from Connecticut's waste-to-energy
facilities was at first gradual probably because private haulers
believed that Congress would enact legislation to authorize flow
control, at least in States whose solid waste management systems
depended on it. During the last year, however, haulers have become more
aggressive in redirecting waste to other facilities because Congress
has not taken action. Even those projects which were meeting their
commitments in fiscal year 1996 are experiencing substantial decreases
in tonnages delivered to their facilities. For example, the Bristol
Resource Recovery Facility Operating Committee, an interlocal which
developed a 237,250 tons per year facility serving 14 municipalities,
has recently documented a 20% loss in tonnage. This facility has never
experienced such a shortfall and attributes it to the diversion of
waste by private haulers to other disposal facilities. The Operating
Committee estimates that this reduction will result in an annual loss
of revenue from tipping fees and reduced energy production of
approximately $450,000.
The Housatonic Resource Recovery Authority (HRRA), which is a
quasi-public solid waste management authority in the Danbury area,
reported that tonnage decreased 41% during the month of February alone.
HRRA attributes the reduction to a new hauler taking waste to a
facility other than the one to which the Housatonic municipalities are
committed. If this situation continues, the municipalities will fall
well below their annual put-or-pay commitment. The HRRA has stated that
it is not aware of any reduction in disposal costs being passed on to
consumers by virtue of the hauler using a facility with a lower tipping
fee.
A spokesperson for the Southeastern Regional Resource Recovery
Authority, which helped develop a 251,485 tons per year waste-to-energy
facility Southeastern Connecticut, notes that if municipalities have to
tax their citizens to pay penalties for not delivering their annual
tonnage minimums, residents will actually end up paying twice--once to
their individual haulers and once through their municipal taxes.
A further consequence of this situation is that there is no longer
incentive for municipalities to promote their recycling programs
because increasing recycling tonnages would further exacerbate their
difficulty in meeting put-or-pay waste-to-energy commitments. Although
every one of Connecticut's municipalities has a curbside recycling
program in place, the State's recycling rate has remained flat at 23%
for the last three years. Municipalities which had recycling
coordinators are laying them off, and initiatives to encourage
increased business and institutional recycling are on hold.
An effective and environmentally desirable system which was built
in good faith by responsible public officials is being destroyed by the
lack of flow control legislation. This is clearly not consistent with
the solid waste management hierarchy adopted by Connecticut or the
Federal government. And it has the potential to do great financial
damage to Connecticut's municipalities and to the State as a whole.
Moody's Investors Service has already downgraded $109,340,000 of bonds
issued to support the Southeastern Connecticut Project. The seventeen
municipalities which have guaranteed the revenues for this project are
now confronted with a possible significant reduction in access to
public financing and increased finance costs. Moody's has currently
placed $152,840,000 in bonds issued for CRRA's Bridgeport 821,250 tons
per year facility on its ``unstable-credit watch'' category.
The National Association of Counties, National League of Cities,
Governmental Finance Officers Association, Solid Waste Association of
North America, American Public Works Association, Local Government
Coalition for Environmentally Sound MSW Management, and the National
Coalition for Flow Control sent a letter dated February 26, 1997, to
Congress which documented other cases resulting from the loss of flow
control and requested Federal flow control legislation. Connecticut is
concerned that action must be taken soon to protect municipalities
which acted in good faith to manage their solid waste disposal from the
type of financial crisis faced by Orange County, California.
If the municipalities are unable to meet their contractual
commitments to their waste-to-energy facilities and are forced to
default on the approximately $750 million in bonds which financed them,
municipalities and the State will suffer even greater financial
consequences. But this will happen only after severe hardship for the
municipalities, and it will add a tremendous burden to a State which is
only now seeing signs of economic recovery after a long, long period of
recession.
Connecticut supports the premise that the management of solid waste
should continue to be a function of State, regional, and local
government, and our municipalities are taking appropriate measures to
manage their problems. But the future without flow control is not
bright. Last session the State of Connecticut supported S. 534, known
as the Interstate Transportation of Municipal Solid Waste Act of 1995,
which would have provided Connecticut municipalities with adequate flow
control protection. We urge the Senate to pass similar enabling
legislation this session which supports Federal flow control.
______
Responses by David K. Leff to Additional Questions from Senator Chafee
Question 1. On page 3 of your testimony, you discuss how growth
projections in Connecticut did not turn out to accurately predict the
future because of the recession in the Northeast. How much of
Connecticut's current problem is due to loss of flow control as opposed
to inaccurate predictions of future growth rates?
Response. The problem is primarily due to lack of flow control. All
solid waste facilities in Connecticut are required to submit quarterly
tonnage reports to the Department of Environmental Protection which
include the source, type and amount of waste handled by each facility
and, in the case of transfer stations, the destination of waste shipped
for disposal. Reports from two private transfer stations located in
Southwestern Connecticut, one of which began handling municipal solid
waste in 1996, clearly demonstrate that waste which prior to the
Carbone decision was being disposed in Connecticut is now increasingly
flowing out-of-state. This waste export phenomenon is clearly unrelated
to the fact that Connecticut's population did not increase as quickly
as projected. The chart below illustrates the point. It includes the
amounts and percentages of municipal solid waste generated in
Connecticut and shipped out-of-state by these two facilities.
Two Private Regional Transfer Stations in Southwestern Connecticut (BFI section of Stratford TS and NRS Norwalk
TS*)
----------------------------------------------------------------------------------------------------------------
Disposed Out of
Fiscal Year Total MSW Handled MSW Disposed Out State (In
of State percentage)
----------------------------------------------------------------------------------------------------------------
\1/2\1997.............................................. 71,745 67,755 94.4
1996................................................... 102,973 80,067 77.8
1995................................................... 34,627 22,296 64.4
1994................................................... 42,917 12,085 28.2
1993................................................... 30,940 2,219 7.2
----------------------------------------------------------------------------------------------------------------
*NRS Nonwalk Transfer Station did not begin to accept municipal solid waste until FY 1996.
Connecticut anticipated in its 1991 Statewide Solid Waste
Management Plan that the State's population would increase 9.2% from
1985 to the year 2010 but that there would be no increase in solid
waste generation due to source reduction education and the State's
mandatory recycling requirements. In fact, there has been a slight
decline in the State's population and the annual waste generation rate
has remained flat at about 0.9 tons per capita since fiscal year 1993.
Question 2. You and others imply that any windfall due to below-
market tipping fees does not accrue to taxpayers. Who then benefits--
the general find of the municipality, which uses it for other civic
purposes? The haulers? Others?
Response. The primary benefit is to the haulers. While some of
these savings may be passed on to their customers, anecdotal evidence
suggests that they are not routinely passed on. And if their customers
are taxpayers in a municipality which is not meeting its contracted
minimum tonnage commitment to a waste-to-energy facility, the customers
may actually pay twice: once to the hauler for collection and again
through their taxes to pay any municipal penalty, tax dollars which
might have been available for other civic purposes if the
municipality's tonnage commitment had been met.
Question 3. At the hearing on March 18, the statement was made that
``the sky has not fallen'' as a result of the Carbone decision. You
have testified that Moody's has downgraded $109,340,000 in bonds issued
to the Southeastern CT Project, and has placed an additional
$152,840,000 in bonds issued for Bridgeport in its unstable credit
watch category. Your testimony cites potential ``severe hardship'' for
the municipalities. Could you elaborate on the practical impacts for
municipalities and taxpayers of actions by financial services to
downgrade bond ratings or place bonds in an unstable credit watch
category?
Response. The downgrading of municipal bonds or regional bonds
backed by municipalities may negatively impact a municipality's overall
credit rating and make the costs of bonding for other essential
projects such as schools and fire houses increase. This clearly
increases costs for both the municipalities and their taxpayers.
Question 4. Mr. Broadway of NF1B has testified that, with flow
control ordinances, waste generators may be forced to send their waste
to facilities that are environmentally unsafe--rather than to
facilities with strong environmental standards. What is your response?
Response. The municipalities which have adopted flow control
ordinances in the State of Connecticut are contracted to send the
municipal solid waste generated within their borders to one of the six
waste-to-energy facilities operating in the State. Each facility is
fully permitted and is subject to routine inspections by the Air, Waste
and Water Management Bureaus of the Connecticut Department of
Environmental Protection. All of these facilities are required to meet
applicable State and Federal environmental standards. In addition,
these facilities are entirely consistent with the State and Federal
waste management hierarchies which prefer waste disposal through energy
recovery to landfilling. To suggest that Connecticut's facilities do
not have strong environmental standards or are environmentally unsafe
is simply untrue. Shipment of Connecticut waste to out-of-state
facilities which Connecticut cannot regulate is more likely to result
in environmental degradation than the continued compliant and efficient
operation of the State's waste-to-energy facilities.
Question 5. Can you elaborate on how flow control has supported
environmentally sound alternatives to waste disposal (e.g., recycling,
source reduction) in Connecticut, and the impacts of Carbone in this
regard?
Response. As noted in my testimony on March 18, 1997, until the
Carbone decision, flow control ordinances adopted by Connecticut's
municipalities were the foundation for an integrated regional system of
solid waste management including recycling centers, transfer stations,
waste-to-energy facilities, and landfilling of residuals. Flow control
made it possible to construct and maintain this system by guaranteeing
a sufficient flow of waste to the waste-to-energy facilities to assure
that their fixed costs would be covered and that the system as a whole
could be operated. As of fiscal year 1995, the year after the Carbone
decision was issued, Connecticut recycled about 23% of its municipal
solid waste, with a statutory goal of reaching 40% by the year 2000,
sent 59% to waste-to-energy projects in State, landfilled 17% in State,
and disposed of only 1% (38,808 tons) out-of-state. As noted above,
since the Carbone decision, increasing amounts of Connecticut municipal
solid waste have been being shipped out-of-state for disposal. In
fiscal year 1996, Connecticut recycled about 23% of its municipal solid
waste, sent 56% to waste-to-energy projects in-State, and filled 14%
in-State, and disposed of about 7% (190,581 tons) out-of-state.
The regional authorities which were originally formed to develop
the waste to energy projects provided the structure for developing
regional recycling facilities, administering regional recycling
programs, and educating the public about source reduction. Several of
the regional recycling programs are at least partially subsidized by
the waste-to-energy projects. In the two largest recycling regions,
encompassing most of the State's population, the costs of operating the
recycling facility are incorporated into the tipping fee at the waste-
to-energy facility, thus providing municipalities and haulers with an
incentive to recycle more and dispose less solid waste. In addition,
inspections at the regional transfer stations and waste-to-energy
facilities help enforce Connecticut's mandatory recycling requirements.
When waste is shipped out of State, such enforcement is much more
difficult. Finally, flow control ordinances for recyclables ensure that
the recyclables go to the regional recycling facility on a regular
basis rather than only when the market for recyclables is low. It is
well known that recycling markets vary dramatically over time. It is
not practical or fair for municipalities to bear the costs of providing
and maintaining recycling facilities which are only used by haulers
when they need to get rid of low-value recyclable materials.
Question 6. Mr. Broadway testified that facilities with flow
control are built to receive waste considerably in excess of waste
volumes projected in a ``free market.'' Is this assertion an accurate
reflection of the situation in CT?
Response. This is not an accurate statement for Connecticut where
the waste-to-energy facilities were built to accommodate the waste
predicted to be generated in the State. Each of the State's six
facilities was designed with enough guaranteed capacity to meet peak
demand of the municipalities associated with the project. In order to
avoid excess capacity, Connecticut's legislature passed a statute (CGS
22a-208d) prohibiting the Department of Environmental Protection from
issuing a permit for a new waste-to-energy facility or the expansion of
an existing waste-to-energy facility if that new facility or expansion
would create substantial excess capacity in the State.
Question 7. Mr. Broadway, on behalf of the NFIB, has testified that
flow control ordinances increase inefficiency because no incentive
exists to improve the disposal facility, to implement new technology,
to attempt to cut costs, or to pass any savings along to the consumer.
What is your response?
Response. Five of Connecticut's six waste-to-energy facilities are
managed by public boards of directors on which municipal and State
officials sit, and facility financial information is a matter of public
record. These boards of directors have a great interest in system
efficiency and operational costs because they are answerable to the
taxpayers. Any increase in facility tipping fees in Connecticut is
cause for considerable public debate. In addition, in many cases the
municipalities pay the tipping fees directly. An opportunity to reduce
the tipping fees represents an opportunity to lower municipal taxes or
undertake other needed municipal projects.
Question 8. Some witnesses at the March 18 hearing contended that
flow control is monopolistic and anticompetitive. What is your response
to these contentions?
Response. The question in Connecticut is whether the regional solid
waste management system is anti-competitive; and the answer is that it
is not because five of the State's six waste-to-energy facilities and
all of their associated recycling plants, transfer stations and
landfills were developed by public entities using accepted public
bidding processes. One of the major entities which helped to create
this solid waste management system is the Connecticut Resources
Recovery Authority which is specifically required by statute to
contract with the private sector for all phases of design and
implementation (CGS 22a-268). Furthermore, by Connecticut statute, the
burden of providing for solid waste disposal rests with the
municipalities (CGS 22a-220). Connecticut's regional, integrated solid
waste management systems were created by groups of municipalities which
took seriously their statutory obligation to provide safe and sanitary
management for solid waste generated within their borders. The
municipalities committed their municipal solid waste and their full
faith and credit to these systems during the 1980s when landfills were
reaching capacity and no other disposal options appeared to be
available. Their goal was to ensure long-term and environmentally
appropriate waste disposal through waste-to-energy projects. They were
public entities operating appropriately in the public realm to satisfy
their legal responsibilities. They should not now be compromised for
reasonable decisions they made ten years ago.
Question 9. New Jersey has five incinerators. It appears from the
testimony of both Mr. Leff and Mr. Johnson that incinerators, not
landfills, are in financial jeopardy because of the lack of flexibility
and high debt spawned by flow control. As you know, many environmental
groups are opposed to flow control because they claim that flow control
makes viable uneconomical incinerators. Standard & Poor's seem to agree
that those are the facilities most likely to be thrown in default by
the loss of flow control. Do you think incinerators are just not
economical without flow control?
Response. Connecticut has taken the position that it should be
responsible for managing as much of the waste generated within its
borders as possible and that it should support the solid waste
management hierarchy which prefers waste-to-energy disposal over
landfilling. During the last decade no new MSW landfill has been sited
in Connecticut due to strict State and Federal facility standards, the
State's lack of geologically suitable sites and public opposition to
such facilities. During the same period, six waste-to-energy facilities
have become operational and have formed the foundation for
Connecticut's waste disposal system. Flow control is essential to these
waste-to-energy facilities because they require a consistent daily flow
of waste in order to operate efficiently and generate the power
required by their utility customers. Unlike landfills, these facilities
cannot slow down or shut down for extended periods of time. They
typically operate seven days a week as close to design capacity as
possible to produce electricity for the grid. If the Fresh Kills
landfill closure proceeds as scheduled, flow control ordinances may
become less important for a time because there will be tremendous
competition for any disposal capacity in the vicinity of New York City,
but for the present, flow control is essential to preventing the export
of Connecticut waste from the Connecticut facilities to which it is
committed by contract.
Question 10. Don't high cost waste-to-energy plants lead to less
recycling with or without flow control?
Response. Relatively high tipping fees, regardless of the type of
disposal facility, encourage source reduction and recycling by
providing municipalities with a beneficial way to avoid disposal costs.
Low tipping fees have the opposite effect. Furthermore, as described in
the response to question 5 above, recycling and waste-to-energy
facilities in Connecticut are integrally connected through regional
authorities, operational fee subsidies, and public education and
enforcement efforts. With flow control, Connecticut's recycling rates
steadily increased from 1990 through 1994. Since the Carbone decision,
the recycling rate has remained flat at 23%. With waste flowing out-of-
state and away from their designated facilities, municipalities have
not had an incentive to promote recycling because it would exacerbate
their tonnage commitment shortages and potentially incur penalty
payments. Instead they have been laying off municipal recycling
coordinators and have been unenthusiastic about implementing volume
based collection/disposal fees which would encourage both source
reduction and recycling.
______
Statement of James M. Seif, Secretary, Pennsylvania Department of
Environmental Protection
Good morning, Mr. Chairman and members of the committee. My name is
Jim Seif and I am Secretary of the Pennsylvania Department of
Environmental Protection (DEP). On behalf of Governor Ridge, I want to
thank you for the opportunity to speak with you about the issue of
unwanted municipal solid waste coming into our Commonwealth for
disposal.
Pennsylvania's No. 1 Federal environmental legislative priority
this year is to see Congress pass effective legislation allowing States
to control unwanted imports of municipal solid waste.
While other States choose to ignore their responsibilities to take
care of their own waste, Pennsylvania did not. We made the hard
decisions to set up the nation's most comprehensive curbside recycling
program and built a waste disposal infrastructure that meets the
highest environmental standards.
What was our reward? To see waste from other States fill up the
disposal capacity we created by asking our citizens to recycle. And
waste from other States goes to our landfills because other States
refused to issue permits for landfills in their States.
Unfortunately, the trend for municipal waste exporting is getting
worse not better. Municipal waste imports into Pennsylvania increased
by 1.2 million tons in 1996 to 6.6 million. Pennsylvanians generate
about 9 million tons of waste a year.
How bad is the problem for Pennsylvania? The Congressional Research
Service report entitled ``Interstate Shipment of Municipal Solid Waste:
1996 Update,'' shows Pennsylvania is the largest net importer of
municipal waste. In fact, Pennsylvania imports over three times as much
municipal waste as the State in second place. We receive ``nearly one-
third the national total for interstate waste shipments,'' according to
the CRS Report.
We have worked closely with three other major importing States--
Indiana, Michigan and Ohio--over the last 3 years to deal with the
problem of interstate waste, and we will continue to be part of that
bipartisan four-State coalition. Last year Governor Ridge, along with
23 other Governors urged Congress to enact interstate waste
legislation.
pennsylvania's municipal waste management success story
The Commonwealth's system for managing municipal waste has four key
elements:
tough standards for waste disposal and resource recovery
facilities that are protective of human health and the environment;
county waste planning that ensures a minimum of 10 years
of disposal capacity;
the largest curbside recycling program in the nation,
a mixture of county designated flow control and free
market concepts.
Through the efforts of Pennsylvania's public and private sectors,
we now have a stable solid waste infrastructure that benefits all of
our citizens.
We are self-sufficient and we have balanced our need to ensure
adequate waste disposal capacity for Pennsylvania's citizens with the
desire to preserve the rural heritage and natural beauty of William
Penn's woods.
It wasn't always so. In the mid-1980's Pennsylvania faced a
municipal waste crisis. Disposal rates were increasing rapidly as
disposal capacity was shrinking.
At one point, Pennsylvania had only 12 to 18 months of disposal
capacity left in the entire State. Pennsylvania's old, substandard,
unlined landfills and town dumps--numbering over 1,100--were being shut
down by the State because of their environmental inadequacy. And no new
facilities were being opened because neither the private nor public
sector was willing to invest in new disposal facilities in a State that
had an uncertain permitting process and no comprehensive planning. As a
result, Pennsylvania was exporting significant amounts of waste to New
Jersey and other States.
At the same time, there were few organized State or local
government recycling efforts. Recycling was something left to a few
innovative communities and the Boy Scouts and church groups at make-
shift drop-off centers in shopping malls.
That all changed in 1988, when Pennsylvania took the first step
toward self sufficiency by enacting the Municipal Waste Planning,
Recycling and Waste Reduction Act (Act 101).
The Act assigns counties the responsibility for waste planning,
requires recycling, authorizes programs to encourage waste reduction,
requires government to set the example and purchase products made with
recycled content, provides funding for host municipality inspectors,
and requires landfills and other facilities to pay host community fees.
It also imposed new safeguards at waste management facilities in
Pennsylvania, building on the authority given the Department in the
Solid Waste Management Act of 1980 to set environmental protection
standards for landfills, incinerators and other waste facilities.
Before Act 101, there was no comprehensive waste planning done at
any level of government in Pennsylvania. Now, all 67 counties have
municipal waste management plans in place that review waste generation
levels, consider currently permitted and pending municipal waste
disposal facilities and their relative locations, and adopt strategies
to ensure a minimum of 10 years disposal capacity. Counties have taken
a variety of approaches to assuring future capacity, from directing
waste to particular facilities to having a menu of disposal facilities
available.
As of today, Pennsylvania has 51 permitted double-lined landfills
and 7 resource recovery incinerators. At the present rate of disposal,
these facilities should provide disposal capacity for the next 10-15
years. If the rapid increase of out-of-state waste continues, however,
this hard-won disposal capacity will be taken from us.
Pennsylvania has made tremendous strides to improve statewide
recycling. Ten years ago, Pennsylvania had fewer than 75 curbside
recycling programs and recycled only 2 percent of its municipal waste.
Today Pennsylvania leads the Nation in the number of curbside recycling
programs with 864. Combined with the 253 drop-off programs, recycling
is now available to 8.7 million residents and businesses in 1,355
communities, who together recycled over 2 million tons in 1996--20
percent of Pennsylvania's municipal waste. Pennsylvania's educational
outreach efforts have won regional, national and international acclaim,
including a 1992 United Nations Award for excellence in communicating a
priority issue. Last year, Pennsylvania was the host State for the 15th
annual National Recycling Congress in Pittsburgh.
Recycling programs at the local level are financed in part by the
State's Recycling Fund, which is supported by a $2 per ton fee on
municipal waste received at waste disposal facilities. To date, this
fund has provided over $180 million to local and county governments to
support their recycling and planning efforts. Pennsylvania has also
provided more than $35 million in low interest loans and technology
grants to industry to assist it in developing new recycled products.
More than 85 Pennsylvania companies manufacture recycled products,
and the Commonwealth leads the Northeast in the number and percentage
of manufacturing jobs related to recycling.
State government has also done its part to increase recycling.
Pennsylvania has established recycling programs at all State agencies
and has steadily increased its procurement of recycled products, which
in turn helps to create new markets. In fiscal year 1995/96,
Pennsylvania purchased $40 million in products containing at least 10
percent recycled content, a 20 percent increase over the previous
fiscal year. In 1995, 4,500 tons of materials were recycled in the
Capitol Complex in Harrisburg.
With regard to setting environmental standards, after working to
close over 1,100 municipal waste dumps that were unsafe, out-dated and
unprotective, Pennsylvania adopted new municipal waste landfill and
resource recovery incinerator regulations that are among the toughest
in the nation. Pennsylvania requires all municipal waste landfills to
have double liners, leachate collection and treatment and specifically
approves all streams of non-hazardous residual waste going to
facilities to make sure they can handle it safely.
unwanted municipal waste imports--``if you build it, they will come''
One large unintended consequence of building a world class
municipal waste infrastructure is that the amount of waste being
imported into Pennsylvania has increased steadily and shows no sign of
slowing down. We built it, and with no controls, they came. In 1987,
Pennsylvania's waste imports were less than 3 million tons. Ten years
later, Pennsylvania is importing over 6.6 million tons of waste to
municipal waste facilities from 29 States. Exhibit 1, shows how
dramatically our waste imports have increased--over 130 percent since
1989.
As import levels have risen, so too has the level of concern among
many Pennsylvanians who fear that our State is rapidly becoming a
dumping ground.
Pennsylvanians' fears about increasing levels of unwanted municipal
waste imports were greatly heightened in May of last year, when New
York City announced that it intended to close the Fresh Kills Landfill
in Staten Island by 2001. That will add 4.7 million tons of waste per
year to the waste market. Governor Ridge recently expressed his
concerns to Governor Pataki and Mayor Guiliani about their Task Force
report which recommends continued reliance on out-of-state facilities
to resolve New York City's trash problem.
These concerns also can be seen in editorials and letters to the
editor from all parts of the Commonwealth. For example, a recent
editorial in the Scranton Tribune dated December 5, 1996 stated: ``We
are sick of being a garbage dump for other States. Let New York State
find a place within its borders for New York City's garbage.'' The
Sunbury Daily Item on January 17, 1997 stated: ``It's not right that
officials in New York solve their waste problems by shipping huge
quantities of garbage to Pennsylvania. After all our landfills are
limited too. If we fill them with New York's garbage, where will we
dispose of garbage generated by Pennsylvania's 12 million people?''
In many of our communities, while residents are willing to accept
the burdens associated with disposing of their own trash, such as truck
traffic, noise, odors and other nuisances, they find it simply
unacceptable that other States appear either unwilling or unable to
take some of the same actions we took to handle their own trash.
Moreover, our citizens feel that all of their efforts to increase
recycling are being lost in a sea of rising waste imports.
Waste imports since 1988 were four times the amount of waste
recycled by all Pennsylvanians. The total tonnage of waste recycled
since Act 101 went into effect in 1988 is approximately 8 million tons.
Total imports in that same time period were in excess of 32 million
tons.
pennsylvania's response
States recognize that we presently do not have the power to impose
limits on any municipal waste being imported into the Commonwealth. In
numerous decisions dating back to 1978, the U.S. Supreme Court has
ruled that the transport and disposal of municipal waste is interstate
commerce protected by the Constitution and that States do not have the
authority to limit the flow of waste across State lines, until Congress
grants them that authority.
In the last 2 years in numerous letters, and on visits to
Washington to meet with congressional leaders, Governor Ridge has asked
Congress to give us that authority.
In addition, responding to the concerns of their constituents,
Pennsylvania's House and Senate passed separate resolutions in June
1996 calling on the Congress to approve legislation authorizing states
to restrict the amount of solid waste imported from other States
(Exhibit 2). We expect similar actions this year.
In January 1997, the Citizens Advisory Council to the Pennsylvania
DEP, sent a letter to Pennsylvania's Congressional delegation urging
them ``to work aggressively to pass Federal legislation that would
provide an equitable framework to require each State to be responsible
for providing capacity within its borders for the disposal of its
citizens' waste, and giving States authority over importation of out-
of-state waste.'' (Exhibit 3).
Despite all of our efforts, Federal interstate waste legislation
did not make it through the last Congress.
At this point, Pennsylvania has done all that it can do with regard
to minimizing the impacts that municipal waste, whether generated in-
State or out-of-state, has on our communities.
Last month, my Department released new policies in response to an
Executive Order issued by Governor Ridge on August 29, 1996. That order
required my Department and the Pennsylvania Department of
Transportation to (1) evaluate all existing municipal waste landfills,
resource recovery and transfer facilities to make sure they are not
causing environmental or traffic safety problems; and (2) conduct a
review of our municipal waste program to see how DEP could more
effectively analyze new permit applications in terms of traffic
impacts, volumes of waste accepted and their general environmental
impact.
With the help of DEP's Solid Waste Advisory Committee and other
groups, the Department recently issued new policies in the following
areas:
Traffic Safety. DEP now has developed a more detailed
procedure, developed in cooperation with the Department of
Transportation, to review the potential traffic safety impacts of new
or expanded municipal waste disposal facilities and transfer stations,
that will be based in part on the studies done at existing facilities.
Waste Volumes Accepted. DEP has developed a specific
procedure to set daily volume limits on municipal waste facilities to
reduce environmental and safety hazards.
Environmental Assessments. DEP is now using a more
comprehensive environmental assessment process for identifying
community and environmental impacts such as incompatible land uses and
impacts on other natural and cultural resources like scenic rivers and
historic sites, as recommended by a stakeholders group that I and our
County Commissioners Association convened to recommend improvements to
Act 101.
All pending and future applications for increases in disposal
capacity or waste volumes will now be reviewed by DEP in accordance
with the new policies and procedures developed under the Governor's
Order.
DEP will be working closely with host counties and host
municipalities affected by permit applications to assess the problems
created by proposed facilities.
In addition to these steps, DEP, the Department of Transportation,
State Police and the Public Utility Commission will be continuing
random inspections of waste trucks on our Interstate highways and at
landfills and resource recovery facilities to make sure they meet our
safety and environmental rules. The surprise inspections we conducted
last year resulted in citing 689 waste truck drivers for 905
violations. A total of 2,632 waste trucks were inspected at nine
separate locations around the State. A disproportionately large
percentage of the violations were found to exist on trucks hauling
waste from out-of-state. We proposed as part of our budget this year a
new initiative that would allow communities to hire their own waste
truck inspectors to supplement our own inspection program.
Our inspection program complements the Operation Waste STAR (Safer
Trucks and Roads) driver safety education program announced last year
by the Pennsylvania Waste Industry Association. This new voluntary
program requires participants to do a 57-point safety check of their
truck every day it is used. The association gives trucks that pass the
inspection a star sticker to display.
As part of our truck inspection effort, I have notified my
counterparts in the states that send waste to Pennsylvania of our
inspection program and have asked them to notify waste haulers in their
States of our initiative. In addition, I recently signed a mutual aid
agreement with Robert Shinn, the Commissioner of New Jersey's
Department of Environmental Protection, that commits both of our States
to continue random independent vehicle inspections and to conduct joint
operations with State police and other agencies.
As I noted above, Pennsylvania believes that it has taken all the
actions that it legally can to protect its citizens from out-of-state
waste. But it's clearly not enough. We need congressional action, and
we need it now more than ever.
what we are not asking for
I want to make clear that Pennsylvania is not interested in turning
our backs on the legitimate needs of our neighbors. We recognize that
every State has its own unique set of values and needs that reflect
fiscal and political constraints in dealing with waste issues, but we
don't want to be thought of as the first option for disposing of waste
from other States either.
We are also not asking for Federal money or for more Federal
regulations. We are simply asking for the tools we need to protect our
communities from unreasonable amounts of unwanted municipal waste from
other States.
what we are asking for
Simply put, if the Supreme Court says that States need
Congressional authorization to regulate the flow of trash across State
lines, then Pennsylvanians, including the Governor, the members of our
General Assembly, and our Citizens Advisory Council, say that it's time
for Congress to give us that authority.
Pennsylvania seeks to protect the fiscal, political, social and
community investment that has been made in our solid waste
infrastructure--an investment that has allowed us to move from ground
zero to a world class, environmentally safe waste management system in
less than a decade.
We are asking Congress to give States, like Pennsylvania, the tools
that will allow State and local governments to place reasonable limits
on unwanted municipal waste imports. In particular, we are asking for
authority to allow individual communities to say that they do not have
to accept out-of-state garbage if they don't want to. There are local
governments in Pennsylvania that have already signed host community
agreements that specifically authorize the import of out-of-state
garbage. These agreements should be honored. On the other hand, if the
local government decides that it does not want waste brought in from
other States, Congress should protect those wishes as well.
We are looking forward to working with the committee and its staff
to develop interstate waste legislation that does the following:
allows States to impose a freeze on out-of-state waste at
1993 levels
authorizes States to reduce or ratchet down the levels of
waste imports where there are no host community agreements
prohibits waste imports at facilities that did not receive
waste in 1993 until the affected local government approves its receipt
allows States to deny a permit for disposal facilities
based on need
allows States to impose a percentage cap on the amount of
waste that a new facility or major modification of an existing facility
could receive.
In addition to supporting controls on interstate waste,
Pennsylvania also requests that Congress authorize the use of flow
control ordinances to direct waste to particular waste disposal
facilities, especially when it is needed to protect public investments.
The issues of interstate waste and flow control have historically been
tied together and we see no reason to break them apart. If
Pennsylvania's neighbors, such as New Jersey, had the ability to
enforce flow control, there would be significant benefits to the
Commonwealth because it would help these States to keep their waste
within their borders.
how we will use the tools congress gives us
I can assure you that we have no intention of using any of the new
tools that Congress may give us to act punitively toward any State or
community that has sent waste to Pennsylvania.
Despite our growing alarm over the closure of Fresh Kills, we have
continued to pursue a meaningful and constructive dialog with our
counterparts in New York. Last July, leaders from our General Assembly,
along with my Deputy Secretary for Special Projects met with New York
State environmental officials and legislators in Albany to try to build
a consensus between the importing and exporting States on Federal
legislation. Governor Ridge and Governor Pataki have discussed the
issue. I believe mutually acceptable legislation can be enacted.
While we are grateful that the Senate is moving forward, we
continue to be concerned about the inability of the House to move a
bill. The Senate passed S. 534 not once, but twice, in the last
Congress but the House failed to follow your lead.
The Pennsylvania experience--this 10-year successful effort--need
not be unique; others can do it too. But if the lesson of that success
is simply that any State in the lead gets to be a safety valve for
others lagging behind, if it reduces others' incentives to even make
the effort, and if Congress looks the other way, no other success
stories can be told. Worse yet, Pennsylvania will bear the costs of
others' failures.
We are happy to work with the committee to build consensus and to
help get a bill that can be signed into law at the earliest possible
date.
Thank you.
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Responses by James M. Seif to Additional Questions from Senator Chafee
Question 1. Do you have any estimates of how much Fresh Kills waste
you are likely to receive?
Response. In 1996, New York exported 3,273,000 tons of waste to
municipal waste facilities in Pennsylvania. This was an increase of
521,000 tons over 1995. Since most of this waste comes from New York
City there is a reasonable expectation that the amount of waste will
increase again when Fresh Kills closes. The exact number of tons will
depend on which companies are successful in obtaining hauling contracts
with the City.
Question 2. I believe we should tread lightly when we legislate to
restrict the free flow of commerce. Some importing States claim they
need a presumptive ban--that in the absence of State and local action,
borders should be closed. Why is it not sufficient for the States to
have the right to say ``no'', as we agreed twice last year in our
interstate waste bill?
Response. Pennsylvania has agreed with legislation proposed under
which host municipal agreements would be the basis for any presumptive
ban. Most importing facilities in Pennsylvania have agreements with
their host municipalities, so the effect of a presumptive ban in
Pennsylvania would be to limit waste not to close the borders.
Question 3. If someone, not a governmental body, builds a properly
permitted landfill in your State and then the State limits the
landfills' ``customers'' by limiting out-of-state trash that can go to
that landfill, what arguments would Pennsylvania make to a claim that
restricting the market is a governmental taking under the Fifth
Amendment?
Response. A limitation upon the use of private property in the
manner suggested in the question does not effect a taking if it
substantially advances legitimate State interests, Lucas v. South
Carolina Coastal Commission 505 U.S. 1003, 1023-1024, 112 S.Ct. 2886,
2897 (1992), citing Nolan v. California Coastal Comm'n, 483 U.S. 825,
834, 107 S. Ct. 3141, 3147 (1987), or stated another way, if it is
imposed under the police power to protect the public health, safety and
welfare. Lucas, 505 U.S. at 1023, 112 S.Ct. at 2897; Keystone
Bituminous Coal Assn. v. DeBenedictis, 480 U.S. 470, 488, 107 S.Ct.
1232, 1243 (1987). The exception to this rule is when the limitation
denies the property owner of all of the economically viable use of his
land not otherwise inherently proscribed in the title to the property.
Lucas, 505 U.S. at 1019, at 1247, citing Agins v. Tiburon, 447 U.S.
255, 260, 100 S.Ct. 2138,2141(1980)
In analyzing whether a property owner has been deprived of all of
the economically viable use of his land, the courts do not look at
individual ``strands'' of rights of property ownership, but at the
entire ``bundle'' of rights. Keystone, 480 U.S. at 499, 107 S.Ct. at
1248, citing Andrus v. Allard, 444 U.S. 51, 100 S.Ct. 318 (1979). The
United States Supreme Court held, for instance, that a mine owner who
claimed it could not extract 2 percent of the coal from its mines
because of Pennsylvania's Subsidence Act did not suffer a compensable
taking because significant amounts of coal could still be mined.
Keystone, 480 U.S. at 499, 107 S.Ct. at 1249.
Limiting one source of a landfill's potential customers would not
deny the landowner the economically viable use of its land. Other
customers, waste types, and land uses would still be available. There
are a significant number of potential customers within Pennsylvania:
Pennsylvanians alone generate approximately 9.5 million tons of waste
per year. A landfill operator could compete for these customers.
Additionally, more than just municipal waste may be accepted by a
municipal waste landfill. In particular, residual waste may be
accepted. Pennsylvanians generate approximately 54 million tons of
residual waste per year for which the landfill operator could compete.
In the unlikely event that an operator could not find any other
customers in these ways, it could put the land to other uses. The
property upon which a landfill is located is generally larger than the
area permitted for use as a landfill, and the area permitted for use as
a landfill is generally larger than the area actually used as a
landfill. Hence, economic viability of the entire ``bundle'' of rights
would not realistically be denied the land owner.
Consequently, limiting a landfill's customers by limiting out-of-
state waste that can go to a landfill would not be a governmental
taking under the Fifth Amendment.
Question 4. If we gave the same rights that Pennsylvania wants to
keep out garbage to Nevada, to keep out nuclear waste, what would your
State do with its nuclear wastes?
Response. The comparison of municipal waste to nuclear waste
assumes that the availability of geologic formations suitable for the
disposal of nuclear waste is as universal among the States as the
geologic formations suitable for the disposal of municipal waste.
Virtually every State in the United States has geologic formations
which, with the right design criteria, can support the disposal of
municipal waste. Unfortunately, this is not true for nuclear waste.
Lack of proper, convenient disposal has led to the storage of nuclear
wastes onsite at a number of sites in a number of States. Pennsylvania
is involved in a project with the goal of siting a low-level nuclear
site that will be used by other States, but this has never been part of
our municipal waste analysis.
______
Statement of John P. Cahill, Acting Commissioner, New York State
Department of Environmental Conservation
Chairman Chafee and members of the Senate Environment and Public
Works Committee, thank you for providing me with the opportunity to
testify on behalf of the State of New York. I appreciate greatly the
opportunity that you have afforded me to present the State's viewpoint
on flow control and interstate waste issues.
I also wanted to take the opportunity to introduce myself. Governor
Pataki appointed me as the Acting Commissioner of the Department of
Environmental Conservation on January 1, 1997. The Governor has charged
me with the protection of New York State's environment, balanced with
the need to develop the State's economy. This is a challenge that I am
undertaking enthusiastically.
new york state's commitment
Senator Chafee, flow control and interstate waste issues are of
great importance to New York State. I appreciate the committee's
invitation to provide New York's perspective during your decision-
making process.
New York State has an unparalleled commitment to the reduction,
reuse and recycling of solid waste generated within the State's
borders. New York's Environmental Conservation Law establishes a
hierarchy which prioritizes waste reduction, reuse and recycling
methods of solid waste management, forming the basis for the State's
solid waste management efforts.
In New York State, the Solid Waste Management Act of 1988 helped
turn the tide of solid waste management in the State by including a
comprehensive scope of requirements, programs and policies for State
and local governments to follow in the management of solid waste. It
established a Bureau of Waste Reduction and Recycling and a State Solid
Waste Management Board; defined local planning units; authorized grant
programs for planning, recycling, and local resource reuse and
recovery; and set up a State technical assistance program. Most
important, it set forth the State's waste management hierarchy: waste
reduction, reuse/recycling, resource recovery, and landfilling. This
statute created a fundamental change in the way municipalities viewed,
and now implement, solid waste management.
In New York State, the recycling of solid waste materials has
increased from approximately 2.0 million tons in 1988 to over 8.5
million tons in 1994. This level is continuing to increase. The
Environmental Protection Fund, created by New York State in 1993,
demonstrates our commitment to implementing the State mandated solid
waste hierarchy by providing funds annually for a variety of local
waste reduction and recycling activities.
In fact, New York has a recycling record of which we justifiably
can be proud. As Governor Pataki recently noted in a Natural Resources
Defense Council article, New York has achieved a recycling rate of
35%--well above the national rate of 24%, and above the U.S.
Environmental Protection Agency's expectations. And the Governor is
committed to even greater recycling in coming years through State
support of local recycling efforts.
However, New York faces the same challenge as States throughout the
country, where some solid waste must still be incinerated for energy
recovery or landfilled. And New York State, acting through its local
governments, has made every effort to responsibly handle this residual
solid waste within our own borders.
Approximately 80 percent of the waste that is not recycled is
disposed of within the State. The remaining 20 percent (approximately
4.0 million tons) is exported to facilities in other States. Privately
owned and operated facilities, many with host community agreements,
manage the majority of this waste stream. The remainder is handled by
municipalities, which use the disposal fees collected from New York to
reduce the burden on their own taxpayers.
Since the mid-1980s, New York has been actively closing
environmentally unsound landfills. Their threat to public health and
the environment could no longer be ignored. In their place,
municipalities were developing new, environmentally sound facilities.
Recognizing its responsibility to assist municipalities with the costs
of landfill closures, New York State first created the Environmental
Protection Fund that I mentioned earlier, to help fund closure costs.
Recognizing that this $100 million a year fund--which finances other
environmental activities, including waste reduction and recycling--
could not adequately address the State's share of all local needs for
landfill closure funds, Governor Pataki advanced, and the voters
approved, a Clean Water/Clean Air Bond Act that provides an additional
$50 million in landfill closure grants to local governments. Between
these two funding sources, we believe that the State will provide
sufficient funds to local governments to ensure that all landfills that
must be closed, will be closed.
Loss of flow control, as I will discuss below, is presenting a
major obstacle to our waste management structure. The financial
assistance that the State can provide, cannot absorb or provide relief
for the localities in New York State that already have incurred
substantial debt because they believed that flow control was a legally
and financially sound mechanism. Congressional action, I believe, is
our only avenue to help New York's municipalities once again to be
self-supporting with respect to the financial mechanisms needed to
properly manage their waste streams.
flow control
Local governments in New York, like those in other States, faced
serious financial consequences as a result of the C&A Carbone v. Town
of Clarkstown U.S. Supreme Court decision in 1994. Prior to this
decision, over a billion dollars in local debt had been issued for the
planning, design and construction of environmentally sound landfills
and waste-to-energy facilities in New York State. The State has
supported and assisted our local governments to meet their financial
obligations since the Supreme Court struck down these flow control
ordinances. To do so has been a great challenge.
The State of New York has had a history of municipal development
and operation of solid waste disposal facilities, in contrast to most
other States, where private landfills have served communities. As
attention to the environmental impacts of solid waste disposal grew,
the costs of developing such facilities skyrocketed. Added to that was
the obligation of our municipalities to provide for waste reduction and
recycling efforts--our law puts that burden on local government, not
private entities. This situation led to the need for flow control in
order to create economically viable and environmentally sound solid
waste management systems that, through bond financing, State
assistance, and local funds, provided everything from education to
recycling to final disposal. The costs of such systems, as you are well
aware, are substantial. The loss of flow control represented a major
change in direction for New York's system.
Nearly three years after the Carbone decision, assistance from
Congress is still urgently needed to help New York State's communities
cope with the financial and environmental responsibilities of proper
solid waste disposal. Restitution of flow control in municipalities
which previously had it would provide assurance to bond counsels and
relief to local governments. It would bring a substantial portion of
our current exports back into New York, where full-service municipal
facilities have found themselves at an economic disadvantage against
private enterprise with respect to tipping fees. In addition, it would
help New York avoid future problems with solid waste disposal that may
affect other States, and would assure increased investment by
municipalities in waste reduction and recycling efforts.
The Carbone decision resulted in the exportation of approximately
an additional one million tons annually of municipal solid waste
generated in New York State, and a shift in disposal from local,
municipally owned facilities to more competitive private facilities
that did not bear the municipalities' burden of costs and thus, could
afford lower tipping fees. If flow control is re-instituted for those
communities that initially had it, localities can once again manage
solid waste within their own borders at more competitive tipping fees.
While flow control legislation is important to New York, I wish to
direct the majority of my comments to an even more sensitive issue, the
exportation of solid waste from New York State, particularly New York
City, and how it relates to the recent agreement between the City and
the State to close the Fresh Kills Landfill. Although some private
carters or municipalities elsewhere in New York State are responsible
for a portion of our exports, we recognize that the primary concern of
other States, and their Congressional representatives, has been the
exportation of commercially generated solid waste from New York City.
With the closure of Fresh Kills, residentially generated solid waste
will be added to this mix of exports.
new york city's new approach to solid waste management
Last June, Governor Pataki, along with Mayor Guiliani and the New
York State Legislature, made a commitment to close this country's
largest landfill by January 1, 2002--a decision that was long overdue.
Fresh Kills has a lengthy history. It was built in 1948 upon
environmentally fragile marine wetlands. When opened, it covered 1,500
acres, and was not intended to go higher than the surrounding grade
level, and was expected to be in use for only a few years. Instead,
after 48 years, it has grown to 2,200 acres with heights approaching
200 feet. The Fresh Kills Landfill, due to its longstanding
inadequacies, has contributed to the degradation of air and water
quality; and its construction preceded State requirements to line
landfills. Let me make this clear: the problem with Fresh Kills was not
the waste going into the facility; rather, it was the facility itself.
On top of the commitments made to assist municipalities across New
York State, the Clean Water/Clean Air Bond Act earmarks $75 million to
assist New York City with the environmentally sound closure of the
Fresh Kills Landfill. While it is unquestioned that there will be major
public health and environmental benefits from closing the Fresh Kills
Landfill, some people still ask: why let the City close its only
remaining landfill? The answer is simple. Every day that the City
continues to dispose of waste at Fresh Kills prolongs the pollution of
Staten Island and the surrounding waters of New York Harbor, and delays
the implementation of more effective waste reduction, recycling and
waste disposal strategies.
In less than a year, we've seen a task force of State, City,
Federal and environmental interests convened by Governor Pataki and
Mayor Guiliani unanimously release a report pledging to implement
dozens of proposals for replacing Fresh Kills. Since the Task Force
report was released last November, New York City already has begun to
refocus and expand its recycling and waste reduction programs, adopting
each and every recommendation of the Task Force, with budgetary and
staff commitments to back it up. Junk mail, mixed paper and bulk metals
are being added to the City's existing recycling program, and the City,
with guidance from the State, is preparing over a dozen pilot programs
and other field-oriented studies that will shape another round of waste
reduction and recycling program improvements in early 1998.
Governor Pataki and Mayor Guiliani also have stressed the need to
encourage growth in the recycling industry, to strengthen recycling's
cost effectiveness and the overall economy of the metropolitan area.
Successful corporate recruitment efforts such as the Visy Paper
recycled cardboard plant recently constructed on Staten Island will
enable recycling to play an increasing role in future waste management
plans. When the Visy plant goes on line this June, it will create a
market for paper the City previously could only have dreamed of, and
will provide 400 permanent jobs.
The State also has provided economic development assistance to New
York City's local development corporations and private entities, to
facilitate the development of new waste reduction and recycling
techniques. We firmly believe that, in the future, other large cities
will look to New York for advice and assistance on innovative
recycling, composting and waste reduction efforts.
To allow for an orderly transition away from dependence on Fresh
Kills, the City will decrease the tonnage of solid waste going to the
Landfill steadily, year by year, until it reaches zero at the end of
2001. The remaining amount of trash that has not been captured by waste
reduction and recycling initiatives, the City will send to
environmentally sound disposal facilities operating with the agreement
of the surrounding community.
In fact, the Fresh Kills Task Force Report contains an essential
commitment of the City: to dispose only at permitted landfills that
have entered into ``host community'' agreements signifying the
acceptance of the facility by the community involved. The inclusion of
this commitment by the City was crucial to our neighboring States and
New York's other communities. Governor Pataki views these commitments
as fundamental to preserving the fairness of the Fresh Kills closure
process.
clean water/clean air bond act
The State believes that it must assist the City in these efforts.
For that reason, when Governor Pataki proposed the Clean Water/Clean
Air Bond Act in 1996, he included in it $100 million for City solid
waste management. As I mentioned earlier, $75 million is provided to
help the City finance the closure of the Fresh Kills Landfill, and $25
million is available for capital costs of waste reduction and recycling
projects, the largest single recycling commitment ever made in the
State. The voters of the State approved this commitment, demonstrating
their strong support for responsible solid waste management in New York
City. In addition, $19 million in 1972 Environmental Quality Bond Act
aid has been converted to make it available for further recycling
grants. Finally, the State's Environmental Protection Fund provides an
annual funding stream for solid waste projects across the State,
including such important efforts as public education and outreach.
solid waste exports
Governor Pataki recognizes the importance of State assistance to
ensuring that local governments, including New York City, meet the
State's solid waste hierarchy. Financial support is only one means of
assistance. The Governor is working in partnership with New York City
to develop appropriate solid waste management techniques while we work
towards the post-Fresh Kills era.
My agency, the New York State Department of Environmental
Conservation, works closely with City officials on a daily basis to
determine the most appropriate means to manage the City's waste flow.
Even with these waste reduction and recycling initiatives and the
financial commitments of the State, New York recognizes the unfortunate
necessity to export a portion of the residential solid waste collected
by New York City that would otherwise have been disposed at the Fresh
Kills landfill. The commercially generated waste from New York is
already disposed of separately, often going to facilities in other
States.
New York State understands the burden other States are bearing, and
is willing to work toward limitations on our waste exports, provided
they are accomplished in a predictable, reasoned fashion. We can
support legislation that will provide a reasoned, predictable
framework, without which private developers are unwilling to make long-
term investments to assist in our disposal needs. This includes no
presumptive ban against interstate waste shipments, and upholding
willing host community agreements.
In addition to our support for such a measure, I want to point out
that New York has, and will continue to, take action to develop new
disposal capacity in State--not only to assist New York City, but also
other local governments in this State. Our efforts to develop new
capacity include:
In its 1993 amendments to its solid waste management
regulations, DEC modified its landfill siting requirements to allow
more flexibility in how the landfill siting process will be conducted.
Rather than require applicants to evaluate numerous alternative
locations to find the most appropriate site, specific siting criteria
were added that are adequate for the protection of both human health
and the environment, making it more feasible to locate landfill sites
in the State. DEC believes that this approach to siting will result in
significant reductions in the amount of time and money necessary to
site a landfill.
During 1995 and 1996, DEC issued permits for the
construction of approximately 50 million tons of additional landfill
capacity. In addition, several major new landfill projects and
expansions are being pursued presently by the public and private
sector.
In late 1994, the Onondaga County Resource Recovery
Agency's Waste to Energy Facility commenced operations, thereby
eliminating exports of solid waste from the Syracuse area to other
States.
New York is making every effort to ensure, first and foremost, that
solid waste is reduced, reused or recycled instead of becoming a waste
product. Every effort is being taken to dispose of waste in-State.
Finally, where waste exports remain a necessity, we are willing to
commit to reasonable restrictions that do not include a presumptive ban
on interstate waste transports.
Again, please bear in mind that waste exported from New York State
is sent primarily to willing host communities. This issue is of
paramount importance to the State. We believe that our waste exports
should be sent only to those communities willing to receive it, and are
willing to work with interested municipalities to develop these
agreements. To exemplify this commitment, New York City and the State
have made the commitment to require any facility accepting residential
solid waste exported by the City to have a host community benefit
agreement in place.
Senator Chafee, I want to express to you and the other members of
the committee my personal willingness to work with you on flow control/
interstate waste legislation. I want to thank you, not only for the
time you have allotted me today, but also for your willingness to
listen to New York's needs in the past, and today, on this issue.
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Statement of Randy M. Mastro, Deputy Mayor for Operations for the City
of New York
Mr. Chairman, Senator Baucus, Senator Moynihan, and members of the
committee, my name is Randy Mastro and I am New York City's Deputy
Mayor for Operations. With me today is John Doherty, Commissioner of
the City's Department of Sanitation.
On behalf of Mayor Giuliani, I am pleased to have this opportunity
to address this committee on an issue so important to New York City's
day-to-day operations: the interstate transport of solid waste. I
understand that the decision by Mayor Giuliani and Governor Pataki to
close the City's Fresh Kills Landfill has prompted some to question
whether Congress should revisit limiting the transport of municipal
solid waste across State lines.
The Congressional debate surrounding waste export long preceded the
City's decision to close Fresh Kills. It would, therefore, not be fair
to cite the closure of Fresh Kills as reason for the passage of
interstate waste legislation.
The decision to close Fresh Kills by December 31, 2001 merely
expedites the City's plan to embark on a new, more environmentally
sound course, in the management of its solid waste. We want this
committee to know that we will do so responsibly and appropriately,
with due respect for our neighbors.
Through export of the City's residential waste, we are seeking
nothing more than the ability to exercise the right that has already
been exercised by cities and States across the country--responsible,
efficient and environmentally sound solid waste management through the
private sector. Municipal solid waste is a commodity in interstate
commerce. The proposed business partnerships arising from NYC's waste
export will benefit importer and exporter alike. Clearly, there are
many other jurisdictions which share our approach, since 47 of the 50
States actually export waste, and 45 States are importers.
As a result, many jurisdictions already require the execution of
Host Community Agreements before exported waste can be received. The
Fresh Kills closure plan recognizes the importance of such agreements.
It requires that our municipal solid waste be disposed of only at Host
Community Agreement sites. There seems to be no need for legislation to
require us to do that which we already require of ourselves.
Although the closure of Fresh Kills affects only the City's
residential waste, the private market is as essential to the management
of that waste as it is to commercial waste. Commercial waste has been
exported from New York City by the private sector for several years.
For many communities and States, solid waste is an important revenue
stream. We believe that each local community should have the right to
accept or reject the disposal of solid waste--not by Federal
legislation but by locally-decided Host Community Agreements.
In developing Host Community Agreements, importing communities will
negotiate benefits most suited to their needs. At the same time
exporting communities will rely on private-sector bidding to select the
vendor offering the best overall price. Clearly, senders and receivers
will enter into business arrangements that are in their own best
interest.
In keeping with these principles, New York City has not pre-
determined where its solid waste will be disposed. Instead, the City
has taken steps to assure that each bidder have all requisite
environmental permits and a Host Community Agreement verifying that the
receiving jurisdiction has approved the operation of the facility and
agreed to accept the solid waste to be imported, often resulting in a
direct financial benefit to the receiving jurisdiction. Further, the
existing authority of States in permitting solid waste facilities in
accordance with accepted regulatory mandates and local zoning
ordinances, suggests that there is less reason for intervention in the
form of Federal export restriction legislation.
When the Mayor and the Governor decided to close the Fresh Kills
Landfill by December 31, 2001, a commitment was made to stop shipping
garbage to Fresh Kills by that date. There will be a phased-in
diminution of landfilling at Fresh Kills. The City will begin with the
export of up to 1800 tons per day of residential waste from the borough
of the Bronx by July 1997. The City has received 6 competitive bids for
this waste. The bidders propose seven different end destinations in
five different States. Two of those seven sites are within the State of
New York. The bidders, in combination, offered three times the capacity
needed for this wastestream. It is encouraging that the bids include
disposal sites within the State. We will urge the State to develop even
more capacity, in part because transportation is a major element of the
export cost.
Once again, it is private sector demand that will shape the future
availability of disposal sites. Indeed, according to a recent article
in the New York Times, officials from New Jersey and Connecticut have
said that they would welcome New York's waste because it makes good
economic sense. Robert E. Wright, president of the Connecticut Resource
Recovery Authority, which oversees and partially owns incinerators in
the State, told the New York Times: ``I guess we probably have a more
favorable eye on New York than some more distant States.'' The New York
Times further reported: ``In New Jersey where counties have spent
millions of dollars to build incinerators, local officials generally
are eager for any guaranteed flow of trash. If anything, imported
garbage at a plant like the Newark incinerator's is more desirable than
local trash because the city gets a 10 percent share of the fee
charged.''
The cost of building environmentally-sound disposal sites, and
ensuring their compliance with EPA standards, has fostered the creation
of large, well-run, state-of-the-art regional facilities. These
facilities typically are efficient and offer a favorable disposal cost
structure. Cost and efficiency will continue to drive the private
sector. And the free market will continue to serve those communities
willing to accept a disposal facility in exchange for some host
benefit, such as revenue, lower taxes, and even lower local disposal
fees.
New York City will enter the private disposal market in a
responsible manner, armed with the benefits already derived from an
ambitious recycling program. We are the only large city in America that
requires 100% of its households to recycle, including those residents
in multi-family dwellings, and we recycle a higher percentage of
household waste than any other large city in America. Nevertheless, we
are going to do even more. In the City's recent financial plan, the
Mayor has included over $76 million additional dollars for the
expansion of recycling programs, including new materials, increased
education and outreach, consultant review of initiatives that might
foster better compliance, new equipment to improve recycling
efficiency, increased enforcement as appropriate, and residential
backyard composting aimed at reducing the waste that is generated.
This year alone, with new initiatives tied to Fresh Kills closure,
the City expects to increase recycling by 350-700 tons per day.
Including construction and demolition debris, the City currently
recycles more than 4,000 tons per day or 26% of its wastestream. Thus,
with these new recycling initiatives we aim to increase our recycling
program by nearly 20%.
Moreover, we are aggressively pursuing waste reduction strategies
to reduce the daily tonnages of waste by 50-100 tons per day by the end
of this year. For example, the Mayor recently issued a directive to all
city agencies to reduce the waste generated and to establish
measurement indicators by which the agencies will be held accountable.
New York City residents are huge consumers of goods manufactured
and shipped from other States. And the waste generated by packaging
materials is significant. For that reason, Federal legislation limiting
packaging or requiring manufacturers to use some percentage of recycled
content in their packaging material would have a tremendous--and
measurable--impact on the quantity of exported solid waste. However,
despite our best efforts at waste reduction and recycling, a
substantial portion of our waste will still require disposal outside
the City.
It is our expectation that by advancing waste reduction and
recycling initiatives over the next five years, the City will reduce
the amount of export. We are confident that the capacity and desire to
accommodate this waste exists, and I reiterate that our City's
residential waste will only be sent to communities that have agreed to
receive it through Host Community Agreements.
Again, on behalf of Mayor Giuliani, I would like to express my
appreciation for this opportunity to explain New York City's position
and to underscore our interest in continuing to work with the committee
and its staff on solid waste management legislation. New York City and
New York State have decided to close the Fresh Kills Landfill by
December 31, 2001. We will implement that decision in accordance with
all environmental regulations and in a responsible and appropriate
manner, with due respect to our neighbors. By requiring Host Community
Agreements, we believe that we will accomplish that aim.
I and Commissioner Doherty will be happy to answer any questions
you may have. Thank you.
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Statement of David L. Olson, Western Organization of Resource Councils
My name is David L. Olson. My family and I operate a family grain
farm south of Minot, North Dakota. I'm here to testify on behalf of
myself and my community, and as a member and officer of the Souris
Valley Chapter of Dakota Resource Council, one of six citizen groups
that make up the Western Organization of Resource Councils.
My expertise on the interstate transportation of solid waste comes
from my observation of the effects it has had on my community. I live
just a few miles from the Echo Mountain Landfill, operated by Municipal
Services Corporation (MSC), a subsidiary of Laidlaw. It receives the
largest amount of out-of-state waste of any North Dakota landfill.
Since the early 1990's, I have been able to witness daily the
transporting of tons of out-of-state waste being off loaded from the
rail-head at Sawyer, and then trucked to and dumped at the Echo
Mountain dump. The waste dumped at Sawyer includes municipal solid
waste and industrial waste from many different States around the
country, as well as Mexico and Canada. The Sawyer dump receives an
average of 405 tons of waste in one day, or 150,000 tons a year. That's
30% of the amount of waste that the entire State generates in a year,
and it's 30% more than the amount of waste the entire State of North
Dakota manages to recycle in a year.
In spite of the fact that many North Dakotans had strong
reservations about the wisdom of siting the Echo Mountain facility in
the old coal spoils south of Sawyer, the lack of Federal legislation
allowing States and local governments to control the flow of out-of-
state waste into their landfills made it very difficult to prevent
unwanted garbage from coming into our community. We were successful in
securing construction modifications that offered additional protection
to our water supplies. We were also able to require the presence of a
full-time on-site inspector at the facility. But we lacked the
necessary tools to be able to make the most fundamentally important
decision: Did we want a mega-dump facility in our community or not?
Since the facility was sited, those very things occurred which many
of us predicted, including illegal disposal of hazardous waste and
failure to produce economic development.
From the beginning, MSC assured the local community and the entire
State that its site was never intended as, nor would it become a
hazardous waste site. MSC officials testified here at the Capitol and
promised that they understood and would strictly abide by North Dakota
Health Department regulations, especially those pertaining to hazardous
waste.
Furthermore, they stated that all customers of theirs, the
generators of waste would know of MSC's compliance with all North
Dakota Health Department laws. Unfortunately, this did not hold true.
In late 1995, we learned that MSC had, in fact, allowed
approximately 198 barrels of hazardous waste to be buried. The waste
contained levels of barium several times higher than allowed by law.
General Motors was the generator of the waste identified as hazardous,
which was contained in metal barrels. When the Health Department
discovered the barium, they informed GM the barrels would have to go.
Of course GM maintained the barrels would be too expensive to dig up,
and tried to avoid compliance with the law. GM also claimed the site in
question was ``almost'' a hazardous waste site because of its
construction characteristics. The waste in question remained in the
ground as months and months of negotiation went on between GM, MSC,
private citizens and the Health Department. To its credit GM did
finally agree to a modified removal, removing some, but not all of the
barrels of barium. GM and MSC both paid fines for their illegal
activities, and GM made an additional voluntary contribution to the
State's university system.
Less that three months after this situation was resolved, GM
announced it was ending its contract with MSC. Subsequently, MSC has
also lost its major contract for incinerator ash. There are now only
six employees at the facility. Employees may decline even further as
cells close. Needless to say, the vast economic benefit to the
community that MSC predicted in its promotional materials never came to
pass, and it appears slim it ever will.
Area land owners like myself got together early in the 1990's and
speculation was rampant as to how a mega-facility like the Sawyer dump
would affect all of us in the area and how it would affect the State as
a whole? North Dakotans are a fairly pragmatic people. We were
interested enough to contact other States where MSC's parent company
conducted business. We contacted health and environmental departments
in some of those States. Since North Dakota was new at the mega-dump
business we wanted to try to help ward off for North Dakota, waste
disposal problems that other States already encountered.
A couple of strongly needed things came out of our research and
practical experience. The interstate waste bills that the Senate has
passed in the past are a start, but there are three additional points
that I urge you to consider. Most of these points are addressed in the
Interstate Waste bills that Senator Baucus and Senator Conrad have
introduced, and I urge you to refer to them.
First, there is a strong need for North Dakota and other States to
have a ``presumptive ban,'' like the one in Senator Baucus' bill. This
would ban imports unless the government of the host community okayed
the shipments by signing a ``host community agreement'' with the waste
company. Perhaps the most frustrating aspect of our experience with MSC
was that we did not have the right to decide whether they could come to
the community or not. We will not have that right in the future unless
the bill that you pass includes a ``presumptive ban.'' Without it, we
are forced to rely on the governor to honor our wishes to stop an
unwanted mega-dump.
Second, you realize that these huge facilities impact so much more
than lust the host community. A State should be given authority to
control mega-landfills. One way to do this, which we endorse, is to let
States use a ``permit cap'' to moderate out-of-state waste shipments by
requiring that a portion of every landfill's capacity be reserved for
use by the host State. As more and more landfills close, every State
will be looking for space to dispose of its own waste, both today, and
in the years to come. A ``permit cap'' will help ensure that the host
State's needs are met.
Finally, in the past some waste companies and States have wanted to
exempt incinerator ash from this legislation. Common sense dictates no
one would argue that waste that is shredded or compacted should be
exempted from this bill so why should incinerated waste be exempted?
Most ash goes to the same landfills as solid waste. We think it should
be covered by the same laws.
In closing, perhaps the most frustrating aspect of our experience
with MSC was that we did not have any right what-so-ever to decide if
they should come to the community or not. Since the courts have ruled
that hauling of garbage between States is a form of interstate
commerce, only Congress can give us the right to decide for ourselves
next time whether garbage disposal is the kind of economic development
we want to try. It is certainly not my intent, or the intent of our
organization, to block the siting of out-of-state waste facilities in
communities where citizens can make that determination through
democratic channels. But we do firmly believe that communities need and
deserve the right to control their own destinies and make their own
decisions whether to say yes or no when a multi-national corporation
approaches them to host an out-of-state waste facility. Thank you.
______
Dakota Resource Council,
Dickinson, ND, June 3, 1997.
Hon. John Chafee and Max Baucus,
U.S. Senate, Washington, DC.
Dear Senator Chafee and Senator Baucus: Thank you for the
opportunity to respond to your questions about interstate
transportation of solid waste. I apologize for not getting back to you
sooner, but we are in the middle of planting season, which is a very
busy time on our farm.
I understand that Senator Chafee is beginning the process of
drafting interstate waste legislation. I appreciate that you have both
made this legislation a priority for your committee, and hope that you
will schedule action soon.
I am unable to respond to Senator Boxer's questions because I have
no experience with flow control, and because Dakota Resource Council
and the Western Organization of Resource Councils have no position on
it.
In response to Senator Chafee's question, the reason why last
year's Senate Interstate Waste bill, S. 534, would not protect rural
communities like mine is twofold. First, it would not, as you suggest,
clearly give communities the right to say ``no''. What it would give us
is the ability to request that a Governor say ``no.'' While I hope that
most governors would respect the wishes of the host community, keeping
this authority one step removed from local officials brings a potential
for abuse that is unacceptable to rural citizens. The responsibility of
deciding to import waste must rest as close to the affected citizens as
possible--in the hands of local officials.
My greater concern, however, is not which level of government is
given the right to say ``no,'' but process by which the decision to
import or not is made. My experience is that it is extremely difficult
for concerned citizens to find out what is going on in time to
influence the decisionmaking process. S. 534 would do little to change
this.
As I testified before your committee in March, my neighbors and I
did not find out about the landfill that was proposed in our town until
local officials and property owners had been approached by the waste
company and given their endorsement to the project. The decision was
all but final before we knew the first thing about it. The company
still had to go through the State permitting process, but local
opposition to the landfill was countered by support from our
representatives.
Please don't suggest as an alternative that we exercise our right
as citizens of a democracy to recall and replace officials whose
actions we disagree with. This option is unsatisfying and ineffective.
We have replaced several of these people with individuals who better
represent our concerns, but the damage has been done. The permits have
been granted, the landfill is here, and it will remain there forever.
(This word has special meaning to those of us in family agriculture.)
Perhaps we should have foreseen a situation like this and elected
people who could resist the waste company's promises of jobs and taxes,
but none of us can predict the future, and I've met few officials who
can walk away from promises of economic development being pitched by
professionals.
What we need is a process that levels the playing field as much as
possible. Citizens should be informed and given the opportunity to
speak before officials formally commit their votes, not after. Of all
the Interstate Waste bills I and our group have reviewed, only the
presumptive ban will provide this.
S. 534 would require that citizens be notified in advance and given
an opportunity to comment if their elected representatives want to sign
a host community agreement, or if they want to ban imports, but it
would also allow companies and officials who want to rubber stamp a
proposed facility with little public input to do so--all they have to
do is forego a host community agreement. This may sound irrational to
you, but I have no doubt that it can and will happen if S. 534 is
enacted--despite the waste companies' assurances that host community
agreements are now the norm and will continue to be used.
Of course, no procedure set up by Congress can guarantee that
abuses of the public trust will never happen, but I strongly believe
that the presumptive ban would at least let us make sure that our
officials know how their constituents feel before they commit their
votes.
Senators, we out here in western North Dakota have been trying for
seven years to take what we feel is a common sense approach to waste
importation by working with the waste company once we realized we
couldn't beat it. This is not what we wanted, but we had no choice
under current law. Our reward has been empty promises and illegal
dumping. Giving up land forever to another State's waste is a lot to
ask of anyone. Leveling the playing field through a presumptive band is
the only just approach. I strongly urge you to include a presumptive
band in the bill you bring up in your committee. Thank you again for
the chance to respond, I await your decision.
Sincerely,
David Olson.
______
Statement of Anthony Ciofalo, Vice President, Corporate and Government
Affairs, National Solid Wastes Management Association
a. introduction
Mr. Chairman, I am speaking today on behalf of the National Solid
Wastes Management Association, part of the Environmental Industry
Associations, which represents some 2,000 companies across the United
States that provide products and services for a better environment.
NSWMA members collect and process recyclables; own companies that turn
recyclables into new products; own and operate compost facilities; and
collect and dispose of municipal and other nonhazardous solid wastes.
In these remarks, I will use the term solid waste to refer to this
universe of wastes.
NSWMA members range in size from small, ``mom and pop shops'' with
three or four trucks to large corporations with national operations.
This industry, like others, is in a period of consolidation; many
companies have merged or been acquired. As a result, our association
has seen an increase in the number of members that are large, publicly
traded, integrated companies--that is, they provide a menu of hauling,
recycling, transfer and disposal services. These companies compete
aggressively. But, so do our smaller, independent members, which still
account for the majority of our members. Small companies are surviving
through service flexibility and responsiveness. In some cases, when a
small waste service company is bought or merged into a larger one, the
former owner may depart and start yet another hauling or recycling
company, and start growing again.
Altogether, the industry that we represent is dynamic, competitive,
and customer-oriented. Our members take great pride in their ability to
provide efficient, cost-effective, and environmentally protective
services.
Almost exactly 2 years ago, NSWMA came before this committee to
address the issue of interstate movement of waste and flow control. Mr.
Chairman and members of this panel, today I can repeat to you what we
advocated 2 years ago, because the message has lost none of its force.
In fact, it has gained relevance. The message is this: restricted
borders have no legitimate place in the management of solid waste. It
makes neither economic nor environmental sense to give States the right
to keep out other States' solid waste. It makes neither economic nor
environmental sense to give communities the right to monopolize the
management of solid waste created within their borders. These
restrictions and controls are contrary to the trend toward bigger,
better, more environmentally sound facilities, and they are contrary to
the trend toward more innovative, flexible, waste management
technologies and practices.
One of the most visible, important trends in U.S. policy over the
past 20 years has been the deregulation of monopolistic industries and
the restructuring of these industries into competing, open markets.
Banking, natural gas transportation, airlines, telecommunications--one
by one, the market barriers have been dismantled, the providers of
products and services turned loose to compete for customers, and
consumers given the right to choose their provider. The benefits have
been lower prices and greater innovation. Just think of the changes
that followed the dismantling of AT&T's monopoly on telephones: today,
we have faxes, pagers and cell phones; all manner of identifying,
routing and saving calls; E-mail; and so on. Just as important,
consumers can purchase only those services that they want and need,
knowing for each individual service how much they will pay. Economic
deregulation and competition unquestionably offer enormous benefits.
This year, Congress is set to tackle perhaps the greatest monopoly
of them all: the $200 billion U.S. electric utility industry. While I
am not qualified to comment on the specifics of electricity
restructuring, I expect yet another round of significant consumer
benefits. But, here is the most important analogy between the waste
services industry and the electricity industry: how can it be logical
or fair for Congress to contemplate opening from coast to coast the
borders of the huge electric utility industry, which has been
thoroughly monopolized for decades, and, at the same time, take
seriously the desire of a few States to close their borders to solid
waste imports, or give special rights to a handful of solid waste
service monopolies so that they may continue to use flow control to
exploit their customers with hidden taxes for years on end? How can
interstate restrictions and flow control serve the needs of citizens
and businesses or enhance the viability of the industry that provides
efficient, environmentally protective services? How can this be
anything but a giant waste of time? For Congress to deregulate electric
utilities and reregulate waste movements would be like going into a
restaurant, ordering a heart-healthy meal and a club soda, and topping
it off with double chocolate layer cake and cookie dough toffee crunch
ice cream. It's not what the doctor ordered.
Most of what you are hearing about the alleged need for Federal
intervention in these issues is being driven by a relatively small
group of States and communities. In fact, it is often driven by one
level of government wishing to impose its will on another level of
government. For example, a State government may wish to stop solid
waste imports even when the imports provide economic benefits to local
communities in the State. Or, a county government will require flow
control against the will of a city, town, or village within that
county. There are examples of this in many States, including New York,
New Jersey, Pennsylvania, Maryland, and Minnesota.
Throughout the United States, trash is picked up every day.
Recyclables are sent to market every week. The job is getting done, and
it is getting done without passports, border guards, import taxes, or
other restrictions on commerce. The few communities and States that
believe they need help really do not need help in this matter.
Consumers definitely do not need the kind of ``help'' being proposed.
Now, I would like to comment more specifically on these matters. I
will begin with the interstate movement of solid waste.
b. interstate movement of nonhazardous solid waste
1. Interstate Solid Waste Movements Are Part of the Trend Toward Better
Waste Management
Nonhazardous solid waste does not cross State borders randomly. It
moves through an extensive and intricate web of transactions. This
movement is part of a decades-long trend that has created a nationwide
solid waste management infrastructure offering multiple options for
protection of human health and the environment, conservation of
resources, and economic efficiency. Let me explain.
We learned the hard way how dangerous and damaging uncontrolled
dumping can be. As part of the nation's environmental awakening,
Congress and the States passed laws to improve the management and
disposal of wastes. These laws and the regulations that followed gave
communities new options such as source reduction, composting, and
recycling, and they created a framework of stringent environmental
protection for combustion and land disposal facilities.
No longer is it acceptable to dump wastes in the most convenient
gully or openly burn trash. Comprehensive Federal rules, supplemented
in many States by even tougher State standards, require today's
municipal solid waste landfills to be carefully sited, designed, built,
operated, closed, and cared for decades after closure. Every step in
the development process must be planned. The goal is to keep wastes and
their byproducts isolated in order to protect groundwater and the
surrounding environment.
As a result, we have the best, most highly engineered solid waste
landfills in the nation's history. They protect health and the
environment--today and into the future. However, these landfills are
expensive to build and operate, so they are built big for economies of
scale, that is, to keep costs down. They often serve huge geographic or
metropolitan areas. Some can receive several thousand tons of trash
each day.
As these large, highly engineered landfills have replaced generally
smaller, local and less protective ones, we have seen a drop in the
total number of facilities. Indeed, we don't need as many. The U.S.
Environmental Protection Agency estimated that the Nation had some
20,000 landfills in the late 1970's. In our 1995 survey, we counted
fewer than 2,900 landfills taking municipal solid wastes. Still, these
facilities provide the Nation more than adequate disposal capacity, as
I will explain later in these remarks.
The point is that while we still have plenty of municipal solid
waste landfills to serve the nation, we have fewer local facilities.
Solid wastes must travel farther on average to reach disposal, and that
travel can involve crossing State lines.
There are side benefits of today's bigger, better, less numerous
landfills. One is that fewer NIMBY siting battles take place. A more
important one is that economies of scale, along with competition among
facilities, really do keep costs in line. The tipping fee, or disposal
fee, at the landfills that our members own and operate averaged just
over $30 per ton in 1995, according to our survey data. A ton of trash
is more than the average individual creates in a year, by the way. Of
course, there is more to waste management than disposal, and household
bills will reflect other costs such as hauling and recycling. But, it
should be comforting to citizens and businesses to know that
competition and economies of scale keep solid waste disposal affordable
even as regulations and a commitment to quality by owners and operators
keeps it safe and environmentally protective.
We believe the facts show that solid waste landfills offer the
public a good deal: environmental protection at reasonable prices.
2. What the Data Show About Interstate Solid Waste Movement
The solid wastes that cross borders today for disposal include not
only municipal trash of the sort that we produce at home and in the
offices and cafeterias of our businesses, industries and institutions,
but also such wastes as construction and demolition debris, automobile
salvage residues, combustion ash, and other nonhazardous wastes.
In 1995, the most recent year for which NSWMA collected interstate
movement data, we found the following facts:
About 25 million tons of solid waste crossed State lines
for disposal.
By far the majority of States both exported and imported
such wastes. Forty-nine States and the District of Columbia exported
some portion of their wastes for disposal in other States. Only New
Mexico did not. Forty-five States imported some portion of their solid
wastes.
248 different and regular waste interactions occurred
between States. We define an interaction as the movement of solid waste
between two States or with one of our neighboring countries as an
import or an export.
Of these interactions, 146 (almost 60 percent) involved
movement to neighboring States.
Comparing the total amount of solid wastes disposed in the Nation
with the amount that moves in interstate commerce shows that only a
small fraction actually crosses State lines. According to Chartwell
Information Publishers, an independent publishing company that monitors
solid waste disposal facilities, the Nation annually disposes of about
280 million tons of solid waste in non-captive facilities. By this
estimate, less than 9 percent of the total moved across State lines in
1995.
To summarize the data on interstate movement, we can see that only
a relatively small amount of solid waste crossed State lines in 1995,
and these shipments were headed to facilities that must comply with
extensive Federal, and in many cases, State regulations to protect
health and the environment. Furthermore, most of this interstate
movement is occurring between neighboring States.
The picture we see is not a disposal system out of whack, but
rather an orderly, efficient and geographically reciprocal management
process that works day-in and day-out the same way as other free
markets work. It underscores the Founding Fathers' notion of a national
economic union--the United States--and the constitutional need for a
Commerce Clause to protect this most basic and successful democratic
vision.
I have explained that interstate movement of wastes is related to
the interdependence of States at a time when we have learned to build
bigger and better landfills. Now I would like to discuss some
additional reasons why interstate waste movements occur and make some
related points. But first, permit me to try to defuse this issue a bit.
What is it that really bothers opponents of interstate movement of
trash? Surely, truck and rail movements of garbage are no more cause
for concern than are movements of the raw materials of production--oil,
chemicals, minerals, and the like. For the most part, all types of
material travel safely and securely in interstate commerce every day. I
suggest that few people would even be able to tell the contents of a
long-haul truck transporting solid waste along a highway to its final
destination.
And, what about the traffic on the nation's streets and highways?
What causes more congestion and produces more air emissions: all of the
trash that is moved, or all of the automobiles that we drive? I think
the answer is obvious, yet few people seriously advocate banning cars
from the roads.
3. Interstate Waste Movements are a Function of Geography
Many U.S. cities are situated on or near State borders. Think of
Charlotte, Chicago, Kansas City, New York, Philadelphia, St. Louis, and
Washington, DC., to name a few. These cities have spheres of influence
that extend in all directions. They have interdependent relationships
with their surrounding communities, providing work, entertainment, and
other benefits to people who live outside the city limits, including
those in the neighboring State. We do not prohibit commerce between
cities and their suburbs across State lines. We do not ban commuter
traffic between cities and adjacent States. Why should we ban exports
of solid waste from these cities into the areas that benefit from the
city in so many ways? As I indicated, much of the waste movement across
State borders occurs between neighboring States. From my perspective,
it makes no more sense to bar interstate movement of solid waste than
to bar interstate movement of other kinds of goods. Indeed, my company
does not think of waste collection and disposal in terms of
``States''--we plan and operate on the basis of ``markets''--that is,
geographic regions that are defined by what makes economic sense.
Philadelphia deserves particular mention on this point. In 1978,
the U.S. Supreme Court handed down the landmark decision prohibiting
States from trying to interfere with cross-border shipments of trash.
That decision stopped New Jersey from banning imports from
Philadelphia. Today, the tables are turned, and Pennsylvania is
lobbying to close the door on waste imported from New Jersey and other
States. Obviously, the citizens of New Jersey won when their State
government lost in court 18 years ago. We believe that, like New
Jerseyans, Pennsylvanians will benefit equally from open borders.
4. Host Benefits Come From Interstate Movements
Few people think of benefits from imported solid waste, and yet
another important reason why waste moves across State lines is because
it is invited in. Many communities view waste disposal the same as
other industrial activity--as a source of jobs and income. These
communities agree to host a landfill that will import solid waste
because they have structured arrangements in which they receive ``host
benefits'' from the incoming waste. The benefits are often calculated
as a dollar amount paid on each ton disposed. These benefits have been
used to support an enormous range of services such as school programs,
senior-citizen programs, emergency services, street improvements, and
other important community activities. Let's not forget that every
dollar in public funds a community can raise on its own is one less
dollar for which it must ask the State or Federal Government.
The Reason Foundation, a non-profit public policy research and
education organization, has studied host benefits at landfills and
concluded that, ``Top-down siting of facilities simply is not
acceptable to local residents. Host-community benefits introduce
market-like decisionmaking processes that allow local citizens to make
choices about whether, where, and how a disposal facility is sited.''
The Reason Foundation reports that six States have legislation to
encourage or require compensation and/or citizen participation in
siting. Of course, host benefits don't make much sense if waste is not
coming from outside the immediate community.
5. Capacity Assurance Has Nothing To Do with Interstate Movements
I want to address a concern about safeguarding the authority of
State governments to prescribe how much disposal capacity their
communities need to have. Imports of solid waste do not undermine these
kinds of State requirements. Communities have the option to add
capacity beyond a prescribed amount, if they wish, in order to receive
host benefits from waste imports.
Furthermore, survey data shows that imports of solid waste are not
depriving States of adequate capacity. According to EIA surveys, the
Nation had more solid waste disposal capacity in 1995 than it has had
in the past 10 years. Fully 38 States reported more than 10 years of
disposal capacity in 1995, compared to only 21 States that reported
that much in 1992 and 25 in 1986.
Again, what has happened is that new and better solid waste
landfills were sited and built--even in States that were importing
solid waste. For example, Pennsylvania is sensitive to imports, yet it
increased its statewide landfill capacity from less than 5 years in
1986 to more than 10 years in 1995. Clearly, solid waste imports have
not undermined this State's disposal capacity.
I mentioned earlier that there are different categories of waste
that cross borders. Another category that I did not mention, but which
also crosses borders, is hazardous waste. If States began closing
borders to all sorts of waste, many exporters of hazardous wastes would
have to construct new in-State hazardous waste facilities--not
necessarily a popular public process. And, what about radioactive
waste? Do States really want to be self-sufficient in managing these
kinds of wastes? What about recyclables? Do States want to stop taking
advantage of global markets in recyclables and reuse everything that
they generate?
When we hear calls for restricted borders in the name of self-
sufficiency, we need to pause and reflect on what might happen. A
Federal right unilaterally to stop waste imports could cause adverse
reactions in neighboring States. A State that closes its border to
imports could find its exports unwelcome. States could become embroiled
in a war of attrition, each cutting off any imports of any type of
waste from anywhere else--and each being forced to manage all of its
own.
Waste disposal is no different from any other kind of industrial
activity. It requires freedom of commerce. Not every community needs to
have its own disposal site when it has access to competing facilities
that safely accommodate solid waste regionally.
In summary, only a small amount of solid waste moves between
States. The movement is mostly between neighboring States. Solid wastes
move for a number of very legitimate reasons, including proximity of
disposal sites, lack of immediate local disposal capacity, and
economics. As politically inviting as it may be, Congress should not
allow States to ban the movement of solid waste any more than it should
allow finished goods from one State to be banned from another State.
c. flow control of solid waste
1. Flow Control Is Inefficient and Raises Prices
Flow control is an enormously expensive and inefficient way to
manage garbage. It creates a monopoly where all local wastes must be
sent for recycling or disposal. It insulates the designated facility
from competition--that is, from the need to operate efficiently and
with the needs of consumers in mind. As a result, flow control raises
prices and hinders innovation, yet it does nothing to advance the goals
of integrated waste solutions or protection of public health and the
environment.
Flow control causes rates for various services to be bundled
together so that consumers have no idea how much they are paying for
each individual service. They have no way of knowing if they are paying
too much or too little, or even whether they are getting the services
they want and need. For example, through county-wide flow control,
residents in a municipality can end up paying for suburban curbside
recycling that does not even serve them. Businesses can end up paying
for services they do not use, such as household hazardous waste
collection. Subsidies like these in other industries such as
telecommunications were among the primary reasons for the movement to
deregulate.
Flow control is essentially a hidden tax. Its main purpose is to
provide back-door tax revenue to those lucky enough to direct the flow.
2. Both Public and Private Sectors Have Been Harmed by Flow Control
During the years that flow control was in effect, that is, before
the U.S. Supreme Court's Carbone decision in 1994 that found it
interfered with the constitutional right to interstate commerce,
powerful evidence was building of the harm produced by this
monopolistic practice. Nor did the evidence come solely from private-
sector companies deprived of markets, although that obviously has
always been a great concern to us. It came from the public sector as
well. We were able to collect testimony from a number of mayors and
other public officials who had first-hand experience paying for flow
control. (By the way, one of these mayors is now Congressman William
Pascrell of New Jersey.) We heard how millions of dollars had to be
diverted from municipal budgets to fund overpriced disposal. We heard
how these precious dollars might otherwise have supported additional
fire protection, police, education and other urgent municipal services.
We heard how municipalities were paying for services they did not even
receive. Here are examples of the hardships imposed by flow control:
New Jersey, the most extensively flow-controlled State in
the country, also has the nation's highest tipping fees, averaging more
than $90, $11 per ton higher than the next highest State average. New
Jersey's tipping fees exceed competitive market prices by $110 million
per year, according to U.S. District Court Judge Joseph E. Irenas in a
ruling against the State's flow control regulations. In other words,
New Jersey imposes a $110-million tax on citizens and businesses
through the tipping fee.
The Hudson County Improvement Authority in New Jersey uses
flow control to pay off $130 million in bonds for an incinerator that
will never be built. The county monopoly spent over $55 million in
planning, engineering studies and administrative expenses for a project
that was canceled.
In Hennepin County, Minnesota, where Minneapolis is
located, the waste-to-energy plant was charging $95 per ton of waste
disposed when the actual cost of operating the facility was $45-50 per
ton. Minneapolis officials became so frustrated having to pay what
amounted to $4 million in taxes for virtually no benefit that they used
the threat of hauling the city's trash out of State to win a lower
tipping fee. Of course, without the legal authority of the Carbone
decision, Minneapolis would not have had this leverage.
In Ohio, solid waste districts planned to use flow control
and district fees to collect and spend some $1.2 billion for solid
waste activities over a 9-year period. Most of those funds would have
gone into district-owned or district-operated recycling programs in
competition with pre-existing, private-sector recycling operations.
3. Loss of Flow Control Authority Did Not Harm Integrated Waste
Management Systems
It is clear that the Carbone ruling was a blessing to towns and
cities that felt highjacked by flow control ordinances. It gave them
breathing room and, in many cases, leverage to win lower tipping fees.
However, Carbone led to many dark and foreboding pronouncements on the
part of flow control advocates. Let me cite a few from news reports at
the time:
``the world of municipal solid waste management is turned
upside down.''
``integrated municipal solid waste management will take a
major step back . . .''
``the losers . . . are likely to be many operators of such
environmentally popular options as MRFs, recycling programs, composting
facilities and household hazardous waste activities. . . .''
``there will be chaos and confusion in the management of
municipal solid waste.''
I will not bother to debunk in detail all of the exaggerated
claims. The common message was that the world as we knew it was about
to end--that flow control was integral to modern, integrated waste
management, and without it all of our carefully built programs would
unravel. These assertions have since been demolished by research and
real-life experience. EPA delivered the mortal blow in a report to
Congress 2 years ago, after 18 months of study. The agency found that
public health and environmental regulation, not flow control, protects
health and the environment. It found no data to suggest that flow
control ensured disposal capacity or was necessary to achieve the goals
of source reduction and recycling. In fact, it found that flow control
played an altogether limited role in the solid waste market.
A perverse irony of flow control is that it was used in ways that
did not benefit the environment. In Rhode Island and Illinois,
Superfund sites were designated under flow control mandates. In Ohio,
flow control was imposed in a way that would have directed waste away
from many facilities meeting Ohio Best Available Technology (BAT)
standards and into facilities not meeting those standards. Generators
in most Ohio solid waste districts used BAT landfills before
designation took effect, yet after the initial designations were made,
fewer than half of Ohio's districts had selected BAT-type landfills.
What power does local government have, without flow control, to set
goals and enforce standards? Local government can ensure proper
management of wastes without having to provide the actual waste service
or dictate how the market will work. No one disputes that local
government must set housing codes, but this does not mean that
government must build the houses. No one disputes that government has a
role in protecting public health and safety, but this in no way implies
that government must limit the number of hospitals, or flow patients to
particular doctors, nurses, and clinics. Flow control is the
environmental equivalent of a government-backed monopoly on housing or
health care.
4. Flow Control Is Not Necessary To Protect Bond Holders
Today, the primary claim of flow control advocates is not the
imminent failure of integrated waste management, but rather the
imminent failure of investor-grade ratings on bonds used to finance
flow-designated facilities. Bear in mind that we are now nearly 3 years
past Carbone. ``Imminent'' is not the word that springs to my mind to
describe the predicament that faces these former waste monopolies
today. What, in fact, has been going on the past 34 months?
According to flow control advocates, Moody's Investors Service has
downgraded the bonds of 15 flow control facilities. Yet, all but one
downgrade occurred within the first year after Carbone. In other words,
in the nearly 2 years since May 1995, Moody's downgraded only one more
facility's bonds.
And, what about the ratings on the bonds to begin with? Most of the
downgraded bonds were either A or Baa. They were not triple-A, which is
the rating that is given to the most secure investments. Even under
flow control, waste facilities had risk. This point was made in the
Official Statement from the Mercer County Improvement Authority's 1992
Solid Waste Facility Bond Prospectus. I quote:
There can be no assurance that in any given Fiscal Year the
total tonnage (and/or cubic yardage) of solid waste which is
generated within the Region will be equal to or greater than
the projected tonnage (and/or cubic yardage) upon which the
Authority's Tipping Fees were based . . . As a result of the
following circumstances and other conditions and factors over
which the Authority exercises no control, the aggregate
revenues received by the Authority from its solid waste
operations in a given Fiscal Year may be less than the amounts
necessary for the Authority to meet its obligations to pay debt
service and maintain reserves with respect to the 1992 Bonds
and to pay the Authority's other expenses.
Last September, another bond rating company, Standard & Poor's,
issued an update on flow control financing in its municipal edition of
CreditWeek. The report put it this way: ``Will there be rating upgrades
if flow-control ordinances are reinstated through congressional
legislation? The answer is no.'' Let me emphasize that: ``The answer is
no.'' S&P makes the point that virtually all facilities that previously
benefited from flow control have made the adjustment to a competitive
market. In fact, S&P made this point all along. Again, to quote from
last September's CreditWeek,
Standard & Poor's has previously stated that few ratings
would be affected by the lack of flow control. The relative
stability of solid waste system ratings over the past 2 years
has been due in large part to the fact that many have displayed
characteristics that insulate them from the loss of flow
control.
According to S&P, ``one of the primary indications of success in
the post-Carbone environment is management's awareness of industry
change and its ability to adapt to the business environment.''
Indications of what S&P calls ``strong management'' are efforts to
maximize alternative revenue streams, cost reductions and contract
renegotiations, increased focus on appropriate cost structures,
unbundling of rates and services, and reduction of stranded costs.
S&P even announced that it was changing its approach to evaluating
solid waste credits to reflect the realities of competition, just as it
had done with public power and investor-owned utilities. According to
the report, ``The deregulation and increased competition facing the
public power industry closely parallels the events that have occurred
in the solid waste industry.'' Let's not undo our successes in weaning
ourselves from flow control, not when we have shown how to open the
doors of competition to the far larger electric utility industry.
5. Flow Control Cannot Guarantee Trash Or Ensure A Successful Operation
As a waste company executive, I believe strongly that the ability
to operate in a competitive market is a far greater predictor of
business success than a so-called guaranteed flow of business. The
reason is that no one can guarantee the workings of a market--not even
a highly monopolized market. The evidence shows that even when the iron
jaws of flow control were operating, they could not guarantee that
designated waste facilities would always have an adequate supply of
trash. For example, it is pretty clear that the explosive rise of
curbside recycling and the recession in the early 1990's reduced the
amounts of trash that designated waste facilities were counting on.
Other disposal facilities that competed in the free market also felt
the pinch, but since they were built to compete--for example, by
lowering their prices or improving customer service--they were far
better able to handle the rise and fall of the trash tide.
Evidence also points to some designated facilities' having been
oversized to begin with. Apparently, the guarantee of trash gave the
designers of these facilities delusions of unlimited business. Even
when studies indicated the limits of the local trash supply, they added
disposal capacity, hoping somehow to be able to grow into it. This is
acceptable when you are competing, not when you are being subsidized.
The dilemma of uncertainty that faces central planners was
effectively described in a Feb. 4, 1997 Washington Post article. The
article described how a ``trash shortage'' is playing havoc with
municipal budgets in the Washington metropolitan area. Among the
reasons for the shortage identified in the article were private-sector
landfills that compete on the open market, but also identified were
recycling programs and other efforts to reduce trash. The article
reported that 12 of 18 members of a Fairfax County, Virginia citizens
advisory committee on solid waste quit in January because the county
Board of Supervisors ignored warnings years ago that the county would
have difficulty repaying the $250 million in bonds it sold to build an
incinerator at Lorton. A question asked by one of the remaining
advisors who sympathized with the quitters was why the county had
gotten into the trash business to begin with. It is a question that I
would hope Members of Congress seriously ask. Why not leave the
business of managing trash up to the experts?
Inability to meet facility designs with adequate amounts of garbage
is an international issue. News reports recently have cited garbage
shortages at German incinerators because of recycling and changing
waste generation habits.
6. New Jersey Is A Good Example Of Flow Control's Failures
Let's look more closely at one of the States crying the loudest for
Federal flow control authorization. New Jersey is a State that
instituted not only statewide flow control but statewide utility
regulation of the waste services industry. What did it accomplish? It
managed to force literally hundreds of small waste hauling companies
out of business because of complex and expensive transactional costs,
thus reducing the number from some 2,500 to slightly more than 600. It
managed to make landfills almost impossible to site. It created massive
bureaucracies in the form of waste authorities. It produced a system
that dictates where all garbage must go for disposal, yet which
ironically allows hundreds of thousands of tons to leave the state each
year for disposal elsewhere. It produced a system that periodically
must offer out-of-state sources of trash cheaper rates for disposal
than in-State sources can find. Do not be fooled by claims that New
Jersey has used regulation of waste disposal effectively. New Jersey's
system is itself wasteful. No wonder the State feels nervous about its
reliance on flow control.
Why is it that flow control has been opposed by the New York State
Conference of Mayors and Municipal Officials, by a majority of mayors
in New Jersey's biggest cities, and by mayors and public works
directors in other States? Why has it been opposed by the National
Association of Manufacturers, the National Federation of Independent
Business, the New Jersey State Chamber of Commerce, the Associated
Builders and Contractors, the International Council of Shopping
Centers, and other business and industry groups? Why has it been
opposed by the Competitive Enterprise Institute, the National Taxpayers
Union, and other advocates of better, smaller government? Why has it
been opposed by the Sierra Club, the Natural Resources Defense Council
and other environmental groups? The answer is that flow control, any
way you look at it, simply is not good government. It interferes with
the objectives of an enormous range of interests. Not many issues
manage to annoy so many.
The cry for help on flow control is coming from a very few sources
who happen to cry loudly. It is coming from a few local governments
that made poor business decisions and now need to be bailed out. They
should not be bailed out.
We deregulated telephones, banks, airlines, and other industries.
We are moving ahead in electricity. Let's not force waste services to
swim upstream against today's currents and become a network of flow
monopolies. If we do, the day will come when the inexorable pressures
of the market start tearing the system apart. Let's avoid the pain by
saying today that the free market will be allowed to remain open.
In conclusion, Mr. Chairman, flow control and interstate
restrictions are wasteful, expensive and unnecessary. I urge the
committee to reject any legislation embodying those concepts. I
appreciate the opportunity to have offered this testimony.
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Statement of Hon. Kent Conrad, U.S. Senator from the State of North
Dakota
Mr. Chairman, thank you for this opportunity to testify before the
Senate Environment and Public Works Committee. I greatly appreciate you
holding this hearing to discuss interstate shipments of waste, and I
commend you for holding this hearing so early in the 105th Congress.
This is not a new issue to this committee or to the Senate, and the
problem only grows more and more serious as we delay passing this
important legislation.
According to the Congressional Research Service, an estimated 16
million tons of municipal solid waste travels across State lines each
and every year. And the problem will only grow in the future. Last May,
New York City Mayor Rudolph Giuliani and New York Governor George
Pataki announced an agreement to close the city's last landfill, the
Fresh Kills landfill. Without additional landfill space in New York, an
additional 4 million tons of municipal solid waste will be on the
interstate market every year after Fresh Kills closes on December 31,
2001. That will mean about a 25 percent increase in the amount of
municipal solid waste traveling across State lines every year.
Landfills across the country are filling up, and communities are
searching for new places to send their garbage. They are looking at
places like North Dakota, where the air, water, and soil have not been
spoiled by pollution and where local communities may be willing to take
tremendous amounts of money in exchange for landfill space. Whether
they want this imported waste or not, States and surrounding
communities are almost powerless to stop the flow of garbage across
their borders. Further, residents of local communities that agree to
accept out-of-state waste often do not have all the information they
need to make an informed choice to open their landfill space to
imported garbage.
Mr. Chairman, out-of-state waste has already come to my State of
North Dakota. We have been accepting industrial waste from General
Motors plants from all across the country--34 States I am told--
although GM has recently begun phasing out the North Dakota landfill to
send their waste to another facility in another State. We also import
municipal solid waste incinerator ash from Minnesota. And one waste
company tried for many years to open a superdump in North Dakota that
would take nearly twice as much municipal solid waste as the entire
State of North Dakota produces. My State is not unique in its
situation; this is happening all across the country. In fact, many
States import significantly more waste than North Dakota.
Mr. Chairman, the residents of my State and citizens across the
country are tired of being powerless to regulate interstate waste. In
fact, just last year North Dakota's voters approved an initiated
measure that was designed to deter imports of other States' waste into
North Dakota. That measure was ruled unconstitutional by the U.S.
District Judge. In the Judge's decision, he wrote, ``The reality
appears to be that trash is trash, and any law classifying it into
home-grown vs. foreign will not work.''
We all know, Mr. Chairman, that unless Congress acts to give States
and localities the authority to regulate and reject interstate waste,
this situation will continue.
I have introduced legislation to give States the authority to
regulate and reject municipal solid waste from other States in each of
the past three Congresses. Just 3 weeks ago I introduced S. 384, which
is very similar to the legislation I introduced in the 103rd and 104th
Congresses.
S. 384 is really very simple. First, it gives States the authority
to regulate interstate waste. If a State wants to reject new solid
waste shipments, my bill would allow that.
Second, it requires that affected local governments formally
approve of any waste import. This gives the communities the ability to
veto proposed shipments of out-of-state waste.
Third, it provides an opportunity for the area surrounding the host
community to be involved in a decision to accept out-of-state waste. A
decision on siting a solid waste landfill, especially one that will
take large amounts of imported waste, must be a collective one, and a
small community alone should not be able to make a decision that will
affect a much larger area.
Finally, my bill requires that waste companies publicly release all
the relevant information about their proposed landfill before a
community makes a decision on it. This information should include
estimated environmental impacts and mitigation, economic impacts,
planned expansion, financial disclosure, and records of past violations
by the owner and operator of the proposed disposal site. Waste
companies hold up the promise of jobs and economic incentives, but they
do not want to reveal the potential risks involved in their plans. In
many cases, they may not even reveal their overall plans until it is
too late to stop them. One practice I have seen involves having a local
developer purchase a site and get a permit to dispose of modest amounts
of solid waste. The big interstate waste company then buys out the
local party and aggressively expands the site's permit. The local
community doesn't have a chance. This isn't fair and cannot be allowed
to continue. Communities must be able to make informed choices.
Mr. President, we have been working on the interstate waste problem
in the Senate for many years now. The problem has not gone away and it
will not go away without congressional action. The trash is still
moving, and States and communities are almost powerless to stop it. It
is time to enact strong interstate waste legislation into law.
Thank you again, Mr. Chairman, for the opportunity to present this
testimony at today's hearing.
______
Statement of Hon. Slade Gorton, U.S. Senator from the State of
Washington
Mr. Chairman, I want to commend you for holding this hearing on
solid waste Issues. The number of Senators and House members scheduled
to testify this morning on behalf of their State's interests in this
area is a true indication of the importance of this issue. The mutual
interest of so many of my colleagues also tells me that Washington
State is by no means alone in its desire to have specific needs
addressed in any comprehensive legislation resolving the many problems
associated with the movement of solid waste.
In recent years, our local communities in Washington State have
shouldered the enormous responsibility of managing solid waste to
protect public health and the environment, minimize financial costs and
legal liabilities, and offer prudent services such as recycling. We
have developed integrated systems to accomplish these important goals,
and flow control--the legal authority given to States and local
governments to designate where municipal solid waste must be taken--is
an important part of this process.
While Washington State is by no means alone in its dependence on
local flow control agreements prior to the Supreme Court's 1994 Carbone
decision, our State has authorized flow control in different ways, and
its jurisdictions have implemented flow control in a variety of ways.
In addition to highlighting some of these differences, I also hope to
stress the need to avoid any ``one-size-fits-all'' solutions to this
problem.
Washington State counties with the notable exception of Seattle,
take the lead in providing solid waste planning, management, and
disposal services. Counties acquire the waste collected in the
incorporated cities and towns through interlocal agreements between the
county, each city, and town located within that county. Cities are able
to direct waste to the county system either by contracts with private
haulers or flow control ordinances. Because solid waste management
tends to be the responsibility of counties rather than cities and towns
in Washington State, these larger jurisdictions have a number of
facilities, and therefore do not require waste to be brought to a
particular facility. Instead, counties direct that waste to be brought
to any facility within the county system.
King County, the most populous county in my State, has a solid
waste system which consists of two landfills and seven transfer
stations, all of which are owned and operated by the King County Solid
Waste Division. The County utilizes its flow control authority to
direct municipal solid waste to any disposal facility within its
system. The King County Solid Waste Division does not incur debt on a
facility by facility basis, but instead incurs debt for general system
Improvements that affect multiple facilities.
Another practice used in my State is that of the city of Seattle.
The City uses both Its solid waste contracting authority and flow
ordinances to all non-recycled waste generated in the City to Union
Pacific's Seattle Intermodal Facility. At that point, compacted solid
waste in sealed containers is transferred from truck to train for
delivery to Waste Management's Columbia Ridge Landfill in Arlington,
Oregon. Although the City directs waste to a private railyard, the City
has invested significant resources to modify two different public
transfer stations.
Seattle's long-term disposal contract requires the City to (1)
direct all the City's waste to a privately operated landfill and (2)
invest significant amounts in transfer station facilities. If that
contract were not enforceable, the City estimates that its monthly
rates would be roughly $2 per month higher for every resident in the
City. In addition, the City's ability to equitably finance its
federally required expenditures to close two previously used landfills
at a net capital cost of $76 million would be jeopardized if its flow
control ordinance could not be enforced through a transition period.
In addition to the strong role of local governments in solid waste
management decisions in my State, the State legislature has also taken
an active interest in this issue. In December 1989, the legislature
enacted the ``Waste Not Washington Act.'' This law requires Washington
State communities to implement solid waste reduction plans to achieve a
solid waste reduction goal of 50 percent for 1995. The law made local
governments responsible for planning and implementing solid waste
management programs, including recycling and disposal options.
The result of the legislature's efforts in this area has been one
of the most progressive and successful recycling programs in the
nation. The city of Seattle, for example, had a residential recycling
rate of 49 percent in 1995. Specific commodity recycling rates are even
higher--newspaper is at 75 percent; yard waste is at 85 percent, with a
92 percent residential rate. In short, the Washington State law has led
to some of the lowest cost recycling systems in the country and the
lowest cost disposal systems in the Pacific Northwest.
The final area where our State is particularly unique in its
management of solid waste is the way we pay for our facilities. Many of
our communities have financed their facilities through the use of
general obligation bonds or bonds which were a call or a lien on
taxpayers through the property that they own in particular counties.
Previous attempts to grandfather flow control agreements that predate
the 1994 Supreme Court decision have failed to address the use of
``general obligation bonds''--only focusing on revenue bonds.
Another heavily populated county in my State, Snohomish County, has
financed improvements to its solid waste system through a combination
of revenue bonds and general obligation bonds. The decision in each
case was made based on prevailing rates, market conditions, and the
County's debt capacity. But in all cases even when general obligation
bonds were being backed by the full faith and credit of the County,
solid waste revenues were expected to be used to repay those bonds.
Thus flow control language which only protects revenue bond investments
would only partially protect Snohomish County's commitments. As of
1995, Snohomish County had issued $26.7 million in general obligation
bonds for a variety of solid waste activities to be paid back in the
year 2007.
Clearly, a one size solution that addresses the Carbone decision
will not work in Washington State. Because of the unique way in which
Washington State and other States have implemented flow control
authority--Congress must take a broader approach. Any legislation
addressing the need to grandfather the practice of flow control prior
to the 1994 Supreme Court decision must include the concept of solid
waste systems, and therefore make the bill applicable to political
subdivisions in Washington State.
Comprehensive flow control legislation must also address State
attempts to undertake recycling programs in accordance with its adopted
waste management plan. We must preserve and encourage existing State
laws like the one enacted in my State which has led to substantial
increases in recycling rates.
Any future attempts to grandfather flow control agreements must not
focus exclusively on revenue bonds and must adequately address the use
of general obligation bonds. Washington State communities should not be
penalized simply because they elected one type of financing mechanism
over the other.
Finally, any future legislation relating to flow control must
clarify that nothing within is intended to have any effect on the
current or future authority of cities to franchise, license, or
contract for municipal solid waste collection, processing, or disposal.
The flow control legislation initially considered by the Senate in the
104th Congress contained language that arguably could have invalidated
this authority, which has been upheld by several Federal appeals court
decisions since the Carbone decision. I am aware that many cities and
counties across the Nation share our concern on this matter.
Failure to include these reforms in a comprehensive flow control
package will lead to the failure of local jurisdictions in my State to
meet outstanding bond and contract obligations, increased costs to
local governments and citizens, and the possible reductions of valuable
services such as recycling.
Mr. Chairman, I was very disappointed that our efforts to
incorporate Washington State's concerns in a comprehensive bill
addressing solid waste matters were not accepted by the Senate last
year. All we are asking for is the continuation of a flow control
regime which may very well be the most successful of any State in the
United States.
One size does not fit all when we are legislating in a field which
States and localities have played a dominate role. In Washington
State's case, one size certainly does not fit all when we are dealing
with a State that has been as progressive and successful with its flow
control program. I hope your committee will be willing to work with
Senator Murray and me on these very important matters to our
constituents. Thank you.
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Statement of Hon. Charles S. Robb, U.S. Senator from the Commonwealth
of Virginia
Mr. Chairman, when I first introduced legislation 3 years ago to
give local governments control over interstate waste, I thought it
provided a compromise that would allow us to resolve this issue
quickly. While I still believe this legislation provides an excellent
solution to the problem of unwanted interstate trash, the resolution
has not come about quickly or easily.
Therefore, I have reintroduced the Local Government interstate
Waste Control Act in the 105th Congress, hoping that we can finally
empower localities and prevent them--literally--from being dumped on
without their consent. The heart of the legislation is allowing local
governments to decide for themselves whether to accept trash from
another State. Local governments are charged with the responsibility of
finding a place to put the garbage their communities generate. They are
also responsible for land use planning. It seemed logical, therefore,
to allow local governments the right to say ``no'' to those who want to
build unwanted waste disposal facilities in the community. It seems
logical as well to give them the right to say ``yes'' to out-of-state
trash, if they can condition the disposal in a way that benefits the
locality.
Unfortunately, under existing law a locality cannot ban waste
generated out-of-state. Under the Commerce Clause of the Constitution,
only Congress is allowed to regulate commerce among the States. And the
Supreme Court has ruled quite clearly that even the interstate
transportation and disposal of trash qualifies for protection from
unauthorized State or local interference under the Commerce Clause. If,
however, Congress delegates to localities the authority to regulate
commerce in garbage, then local governments could either choose to ban
trash from out-of-state, or they could choose to accept out-of-state
waste, but impose conditions. Such conditions may include requiring the
landfill developer to accept all of the locality's waste for little or
no charge, to provide a recycling program for the community, or to pay
the local government a percentage of the revenue generated by the
landfill. While not every community may be willing to host a private
landfill, it should remain an option for those that do. And the option
to say ``no'' provides the leverage a locality needs to bargain
effectively when it decides to say ``yes'' to a landfill developer.
The legislation I've introduced accomplishes the goal of empowering
localities by providing that no interstate waste can be disposed of in
a locality unless the local government has given its consent
affirmatively. I believe this is a more effective method of dealing
with the problems associated with out-of-state waste, because it goes
to the heart of the issue. Interstate disposal of trash is a problem
only when the interstate garbage is unwanted. My legislation guarantees
that out-of-state waste does not go where it is not wanted. And where
it is wanted, it provides a place at the bargaining table for the
community that chooses to accept it.
This solution to the issue protects communities without overly
restricting interstate commerce. By not allowing walls to be built up
around entire States, it has the advantage of avoiding the
Balkanization of the States with regard to this article of commerce,
which is a situation the Founding Fathers sought to avoid through the
Commerce Clause of the U.S. Constitution.
I hope we can resolve this issue this year, and I hope we can use
as a basis legislation that delegates to local governments the right to
prohibit unwanted out-of-state garbage from their communities. I would
like to commend the committee for holding this hearing, and I would
especially like to commend Senator Baucus, who introduced similar
legislation last Friday. I look forward to working with him and any
others who believe the solution to this problem rests with those who
have historically been given the authority to decide how to deal with
trash--local governments.
I'd like to say one final word regarding flow control. As I have
stated repeatedly in the past, I believe that Congress needs to provide
protection for communities who relied on flow control prior to the
Supreme Court's ruling in C & A Carbone v. Clarkstown, 511 U.S. 383
(1994).
Whlle I believe that competition in waste disposal is appropriate
over the long term, there are many communities who borrowed funds to
construct waste disposal facilities relying on flow control to assure
repayment. These local governments acted in good faith based on the law
as it existed at the time.
There are local governments in Virginia that have local revenue
bonds issued before the Supreme Court's ruling for existing facilities
which could be irreparably harmed without some protection enacted by
Congress. Time is working against these communities, and I would urge
this committee to support a flow control bill that protects localities
with existing facilities and existing debt.
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Statement of the American Forest and Paper Association and the Paper
Recycling Coalition
The American Forest & Paper Association (AF&PA) and the Paper
Recycling Coalition (PRC) appreciate the opportunity to submit this
statement for the hearing record on the issue of municipal solid waste
flow control. The U.S. paper industry is interested in this matter
because of its potential to negatively impact paper recycling and
materials recovery.
The American Forest & Paper Association is a national trade
association representing the U.S. forest products industry. The United
States is the world's leading producer and consumer of forest products
and a vital component of the nation's economy, representing more than 7
percent of all U.S. manufacturing capacity. Our members produce more
than 80 percent of the pulp, paper and paperboard in this country. The
forest products industry ranks among the top ten employers in 40
States, directly employing some 12.6 million people with an annual
payroll of approximately $43.5 billion.
The Paper Recycling Coalition (PRC), was formed in 1990 by
manufacturers of 100 percent recycled paper and paperboard to further
the development of sound public policy which supports private
industry's role in recycling and improving the public's understanding
of the paper recycling process. The nine member companies of the PRC
utilize approximately five million tons of recovered paper annually in
manufacturing 100 percent recycled paper and paperboard products.
We recognize that the Senate Environment and Public Works Committee
is evaluating the appropriate role, if any, for new flow control
authority. Should the committee advance legislation to grant authority
to impose flow control, it should be clearly targeted to address only
those concerns associated with municipal solid waste. In order to
ensure that recycling activities are not adversely affected, any flow
control legislation should recognize that:
any materials that have been separated from waste
otherwise destined for disposal (either at the source of the waste or
at processing facilities) or that have been managed separately from
waste destined for disposal should not be subject to local government
municipal solid waste flow control either for past or prospective
programs;
flow control over recovered materials would undermine
significant private commercial activity in an area which has not
historically fallen under government control or regulation;
local governments can presently direct the flow of
recyclable materials once the owner or generator of those recyclable
materials freely and voluntarily transfers ownership of those materials
to the local government by placement in a municipal collection program;
flow control or interstate waste authority should cover
only municipal solid waste. Non-hazardous industrial wastes are not
part of municipal solid waste and therefore should not be subject to
local government flow control, nor should recovered materials from non-
hazardous industrial waste be subject to flow control.
background
The U.S. paper industry has been recycling paper for over 300
years. Over the last decade, as interest in recycling spread, our use
of recovered fiber has increased 74 percent. Recycled paper is a vital
raw material source for the industry. Today, 37 percent of the entire
U.S. paper industry's raw material is comprised of recovered paper (43
million tons), up from 25 percent in 1988. In the year 2000, recycled
paper is expected to supply 40 percent of the all fiber used to make
new paper and paperboard products.
While the growth in industry utilization of recovered fiber has
occurred at the same time that local governments instituted municipal
recycling programs, the vast majority of paper recovery still takes
place in private or commercial programs. Residential curbside
collection programs account for less than 20 percent of all paper
recovery. In order to sustain the growth in recycling, it is imperative
that our industry continue to have open market access to recovered
paper that has made current growth possible.
Long ago, the paper industry developed the infrastructure to
utilize recycled paper, in the absence of mandates or other artificial
constraints. The paper industry relies on supppliers which include a
private network of small independent businesses that act as collectors,
packers, and brokers. Paper is collected from commercial
establishments, warehouses, offices, institutions and through private
or charitable organizations including schools and churches. Municipal
collection programs are just one part of the collection infrastructure.
The paper is then, to the extent necessary, cleaned, processed and
graded prior to delivery to a paper mill. Between 1993 and the year
2000, we estimate $10 billion of capital investment will have been made
to process recycled paper and paperboard into new products.
To publicly demonstrate our commitment to maximizing recycling and
minimizing the amount of paper destined for landfill disposal, the
paper industry set a voluntary goal to recover 50 percent of all paper
in the year 2000 for reuse and recycling. The 50 percent goal was set
after the industry had achieved an earlier goal to recover 40 percent
of all paper--two years ahead of schedule. In 1996, 44.8 percent of all
paper was recovered.
The challenge ahead is to continue to supply recovered paper and
specifically to expand recovery of those grades of paper most in demand
by U.S. papermakers. Maintaining reliance on market forces to determine
access to, and use of recovered paper supplies will be absolutely
essential to continuing the progress already underway in U.S. paper
recovery and recycling.
paper industry's principles regarding flow control
The paper industry supports policies that ensure manufacturers
unfettered access to their recovered paper as a raw material.
Recovered Paper--received from residential and commercial
collection programs--is the source of 37 percent of the paper
industry's raw material. These materials are commodities, bought and
sold on the open market like thousands of other commodities. They are
neither solid waste nor municipal solid waste and should not be
regulated as such. If paper does not enter, or is diverted or removed
from, the solid waste stream, it becomes a commodity raw material and
should not be regulated as a solid waste or subject to local government
flow control.
Second, the ownership of recovered materials conveys the same
rights of ownership of other personal property. The owner of a bale of
corrugated cartons, or bundle of newspapers must have the same rights
as the owner of a bushel of wheat when deciding on the destination of
the material. In other words, the owner of a recovered material has the
right to sell, donate, transport, or contribute that material to
whomever, or in whatever way he or she chooses. And, to the extent that
government should not limit the rights of ownership, it should not
restrict commerce in such materials by restricting rights to purchase
or transport recovered materials. In no case should local government
mandate that recovered materials be transferred to the government or
its recycling agent. This is not to imply that the industry opposes
voluntary curbside recycling programs which the industry supports and
relies on as a source of raw material. The industry believes that once
the owner/generator voluntarily transfers ownership by placing the
materials for public collection either directly or under contract
through an agent, the government can assume ownership of recyclables.
At that point local government has the authority to control the flow of
its recovered materials in whatever manner it chooses, and thus negates
the need for Federal flow control authority over recovered materials.
free market results in greatly increased recycling rates of all types
of paper
In 1996, 63 percent of all newspapers published in the
United States were recovered for recycling.
Use of recovered paper by printing-writing paper
manufacturers is now growing about twice as fast as recovered paper use
by the industry at-large (5.9 percent vs. 2.9 percent).
Nearly three-quarters (73 percent) of all corrugated boxes
were recovered for recycling in 1996. And, with growing demand for this
material by domestic manufacturers, the challenge is to recover even
more.
Recovery of paper and paperboard packaging is at an all-
time high. According to the U.S. Environmental Protection Agency's most
recent data, 45.2 percent of paper and paperboard packaging used in
this country was recovered in 1994.
increasing supplies of recovered paper results in increased
manufacturing capacity
Since 1988, consumption of recovered paper at U.S. mills
has jumped more than 74 percent.
Recovered paper consumption at U.S. mills continues to
grow at twice the rate of growth of total production capacity--by any
measure a significant change in raw material sourcing.
Today, well over 400 domestic paper mills recycle some
recovered paper, and about 200 depend entirely on it for their raw
material requirements. Almost without exception, U.S. paper companies
are using at least some percentage of recovered paper for their fiber.
These statistics present powerful evidence of the paper industry's
commitment to recycling, and its ability to perform based upon a free
market in recovered paper. In order to meet the industry's voluntary
goal to recover 50 percent of all paper in the year 2000, we must
continue to have open access to the volume, quality and diversity of
this material.
Paper, like other commodities, is subject to the laws of supply and
demand. Government flow control policies which prohibit or restrict the
industry's ability to obtain the right amount and type of raw material
jeopardize existing and future investment in paper recycling.
summary
The paper industry believes local economic conditions, not laws or
regulation, should be allowed to dictate the flow, price and quality of
recovered materials as they do of other commodities. The tremendous
growth in the recovery of paper for recycling has proven the validity
of this approach. With unrestricted access to their raw material, paper
mills will continue to increase their reliance on recovered fiber. In
the year 2000, the paper recovery rate is expected to grow to 50
percent, from 28.2 percent in 1986. Government interference in this
dynamic commodity market will severely jeopardize the future growth of
paper recycling. Flow control over recovered materials would be harmful
as it replaces an efficient and effective market with non-market forces
which do not reflect or understand the recovered materials markets or
the needs of the paper recycling industry. The American Forest & Paper
Association and Paper Recycling Coalition appreciate the opportunity to
present our views on flow control and stand ready to assist the
committee as you attempt to craft legislation to address this issue.
______
Statement of Associated Builders and Contractors
Associated Builders and Contractors (ABC) thanks the Senate
Environment and Public Works Committee for the opportunity to submit a
statement on proposals that would authorize State and local governments
to enact solid waste flow-control laws.
ABC is a national trade association representing over 19,000
contractors, subcontractors, material suppliers, and related firms from
across the country and from all specialties in the construction
industry. ABC's diverse membership is bound by a shared commitment to
the merit shop philosophy of awarding construction contracts to the
lowest responsible bidder through open and competitive bidding. This
practice assures taxpayers and consumers the most value for their
construction dollar. With 80 percent of the construction performed
today by open shop contractors, ABC is proud to be their voice.
In May 1994, the U.S. Supreme Court ruled in C.A. Carbone Inc. v.
Town of Clarkstown, New York, that flow control law are
unconstitutional--as an article of interstate commerce, solid waste
cannot be restricted by the States without explicit congressional
authority. As a result of the Supreme Court's decision, some local
governments are seeking legislation to authorize flow control. While it
may have been justified in some circumstances, flow control
nevertheless is a process which allows local governments to monopolize
the waste system and precludes competition from lower-cost facilities.
Flow control is anti-business and free market. It denies businesses
the opportunity to shop among competing waste haulers, by allowing
local governments to monopolize waste disposal services. As an industry
which inherently generates large volumes of solid waste, builders and
contractors are significantly affected by the price of waste disposal.
The construction industry is concerned that expanded flow control
authority will unnecessarily impede free markets in the waste
management industry and result in substantial cost increases.
In fact, a study by the National Economic Research Associates
estimated that flow control increases disposal costs by an average of
$14 per ton, or 40 percent. By artificially inflating the cost of waste
collection, flow control impose a substantial hidden tax increase on
small businesses.
ABC sees no need for any action. Since the Supreme Court struck
down flow-control laws, local officials have alleged that
municipalities that had issued bonds to build landfills and
incinerators on the assumption that they could guarantee a steady flow
of waste to those facilities could find their debt repayments at risk
and their bond ratings downgraded. These dire predications, however,
have not come to fruition. According to the Moody's Investor Service,
fewer than 15 percent of bonds related to flow control have been
downgraded since Carbone. Those bonds that have been downgraded were
far less than top-graded bonds to begin with, and a number of the
bonds' downgraded were tied to forces in the solid waste industry that
were unrelated to lack of flow control.
Associated Builders and Contractors strongly urges you to oppose
expansion of flow control authority. Again, ABC appreciates this
opportunity to submit a statement for the record.
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Statement of George Marinakis, Executive Director, Cape May County
Municipal Utilities Authority
Cape May County represents the southern most extension of the State
of New Jersey and, as the name implies, the County is a peninsula with
water bodies on three sides: the Atlantic Ocean to the east and south
and the Delaware Bay to the west. The County's extensive beaches,
wetlands and waterways attract many tourists and provide an excellent
base for commercial and recreational fishing, water sports,
campgrounds, bird watching and other wildlife related activities.
Tourism and commercial fishing represent the largest industries in the
County, which experiences a dramatic change in population from a base
of approximately 100,000 year-round residents to a summer population
estimated to be in excess of 600,000.
The New Jersey Solid Waste Management Act (N.J.S.A. 13:1 E-1 et
seq.), as amended in 1975, directed each county in the State of New
Jersey to develop a Solid Waste Management Plan in order to ensure the
availability of reliable long-term disposal capacity for all solid
waste generated within the county. This Act further stressed the
importance of incorporating within each County Plan a commitment to
maximizing the recycling of recoverable materials within the waste
stream and also stressed the importance of minimizing any adverse
impact on the natural and human environment of the most densely
populated State in the Nation.
In response to the requirements, goals and objectives of the Solid
Waste Management Act, the Cape May County Board of Chosen Freeholders
authorized the preparation of the County's original Solid Waste
Management Plan and in 1980 designated the Cape May County Municipal
Utilities Authority (CMCMUA/Authority) as the agency to proceed with
the financing and implementation of the County's adopted and State-
approved Plan. Since that time, the CMCMUA has aggressively pursued and
implemented a comprehensive and balanced solid waste management system
to serve the residents of and visitors to Cape May County. This
integrated approach, which includes waste reduction, source separation
and recycling, waste reclamation, and sanitary landfilling, has enabled
the Authority to establish a system which meets the needs of the local
environment as well as the people it serves. In 1991, Cape May County's
efforts were recognized when the CMCMUA received a variety of honors
for the development and implementation of this comprehensive solid
waste management system, including four prestigious recycling awards.
These awards include the National Recycling Coalition's first-place
award as the best regional recycling program in the Nation, regardless
of population. A first-place award from the Solid Waste Association of
North America as being the best regional recycling program in the
United States or Canada, serving populations up to 100,000. An
Environmental Quality Award from the United States Environmental
Protection Agency for a comprehensive solid waste management system and
the New Jersey Department of Environmental Protection's designation as
the best regional recycling program in the State.
The CMCMUA's Solid Waste Complex is located on a 454 acre site and
is comprised of a wide variety of recycling and solid waste facilities
that are all owned by the Authority. All of these facilities, with the
exception of the Intermediate Processing Facility which receives and
processes source separated recyclables, are operated by the CMCMUA. The
facilities and services provided by the CMCMUA include:
A secure sanitary landfill with adequate capacity to
satisfy the waste disposal needs of Cape May County for the next 30-40
years.
A solid waste transfer station.
A county-wide source separation program in which all 16
Cape May County municipalities participate.
An Intermediate Processing Facility which receives, sorts,
processes and upgrades source separated recyclables collected by the
municipalities to improve their marketability.
A bulky waste sorting and recycling operation in which
corrugated cardboard, wood and scrap metals are removed from mixed
bulky waste, including construction and demolition debris, for
recycling.
A cooperative program for receiving street sweepings and
catch basin clean-out materials.
A ``white goods'' and CFC recovery operation wherein
source separated white goods are accepted for recycling and CFC
refrigerants are also recovered and recycled.
Wood pallets are processed into a marketable woodchip
product.
Source separated tree trunks and stumps are chipped and
converted into root mulch and topsoil.
Christmas trees are chipped to produce a mulch.
Source separated leaves and grass clippings are composted.
Source separated automobile and truck tires are accepted
and delivered to a recycling facility where they are processed for
reuse.
Automotive and marine batteries are accepted for
recycling.
Used motor oil is accepted for recycling.
Source separated household hazardous waste is accepted for
subsequent disposal at a hazardous waste facility.
After satisfying the needs of local charities, used
clothing is stored and delivered to a textile recycling business.
Technical and promotional assistance is provided to
municipalities, businesses, institutions, residents and visitors to
expand source reduction, reuse and recycling activities.
A Litter Abatement Partnership Program which encourages
roadside and community clean-up activities is conducted jointly with
the County and participating municipalities.
Enforcement of mandatory recycling requirements for
``designated recyclables'' which are not allowed to be disposed of at
the County's solid waste facilities.
It should be noted that the CMCMUA's primary source of revenue for
the above-noted solid waste and recycling activities is derived from
the tipping fee charged for the disposal of solid waste at the
Authority's Sanitary Landfill. Recognizing the relatively minor amount
of revenue derived from the sale of the materials and/or products that
are recycled it, therefore, should also be recognized that, with the
exception of the CMCMUA's Sanitary Landfill itself, all of the above
noted facilities, programs and services are in whole, or in part,
subsidized from the revenues derived from the CMCMUA's solid waste
disposal fees.
Cape May County has mandated the recycling of 20 different
materials which have been defined as ``designated recyclables'' and
further recommends the recycling of 13 additional materials. The
landfill prohibition on the disposal of designated recyclables, as well
as an extensive promotional and educational program, substantially
contributes to the overall success achieved in recycling Cape May
County's solid waste.
In 1995, the CMCMUA landfilled a total of 118,778 tons of solid
waste while, at the same time, the Authority's facilities recycled
50,209 tons of materials. Reported 1995 figures indicate that a total
of 215,402 tons of material, or approximately 64 percent of all solid
waste generated within Cape May County was recycled through a
combination of CMCMUA and private sector facilities (Reference attached
chart which summarizes the total quantity of Cape May County solid
waste recycled 1987-1995). Unfortunately, recycling tonnage figures are
not yet available from private sector facilities for 1996. However, it
can be reported that the CMCMUA's facilities recycled 51,533 tons of
material during 1996, while landfilling a total of 124,637 tons during
the same period; thus indicating a sustained high level of
participation and recycling success during the past year.
A strong commitment and a great deal of work was required in order
to achieve the results noted above. The planning, siting studies, land
acquisition, design, permitting, financing and construction of the
various solid waste and recycling facilities provided for in the Cape
May County Solid Waste Management Plan also required a significant
financial commitment. Revenue Bonds totaling approximately $48 Million
were issued by the CMCMUA in order to finance this effort on behalf of
County residents and businesses. This significant investment was made
in response to the requirements of the New Jersey Solid Waste
Management Act, the waste management planning objectives of the Federal
Government as set forth in the Resource Conservation and Recovery Act
(RCRA) and also in light of relevant waste flow control decisions
rendered by the United States District Court prior to the United States
Supreme Court's May 14, 1994 Ruling in the case of Carbone vs. Town of
Clarkstown, New York. In other words, Cape May County's Solid Waste
Management Plan and the financial investment required to implement this
very effective waste management strategy was made in good faith
reliance and with a clear expectation that the debt incurred by the
CMCMUA when it issued its Revenue Bonds could be repaid through the
exercise of flow control authority.
The loss of waste flow control authority resulting from the United
States Supreme Court decision in the Carbone Case will not only
undermine the financial integrity of Cape May County's solid waste
management system but will also undermine the County's ability to
sustain the comprehensive solid waste management system which has been
assembled in response to the County's unique needs. The appeal of low
cost disposal options at out-of-state facilities, which are essentially
offering a lower cost disposal option by straight landfilling, will
undoubtedly reduce the quantity of solid waste and, therefore, revenue
received at the CMCMUA's solid waste facilities. As a result, the
various programs and/or services which are outlined above and which are
subsidized in whole or in part from the revenues derived from the
CMCMUA's solid waste disposal fees, may have to be eliminated.
Although each county in the State of New Jersey has proceeded with
the development and implementation of solid waste strategies consistent
with their own needs, the various solid waste management districts
throughout New Jersey have, reportedly, incurred a debt totaling
approximately $1.8 Billion in planning and implementing these
facilities and services. In the case of the CMCMUA, this Authority
currently has a total outstanding solid waste debt of approximately $40
Million.
The CMCMUA urges the members of the Senate Environment and Public
Works Committee to recognize the inequity created by the loss of waste
flow control authority resulting from the United States Supreme Court's
Ruling. Public bodies that have responded in good faith to legislative
priorities and/or mandates and who have relied upon prior judicial
decisions regarding waste flow control should not continue to be left
stranded by the absence of Federal legislation which would
``grandfather'' waste flow control authority to the extent required for
such public bodies to address their financial obligations.
The CMCMUA urges prompt congressional approval of the Federal
legislation which is needed to address this problem.
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Cape May County Municipal Utilities Authority, Comprehensive Solid
Waste Management Program Overview
The Cape May County Municipal Utilities Authority (CMCMUA) provides
solid waste disposal services to approximately 100,000 year-round
residents and over 500,000 additional summer visitors to Cape May
County each year. The CMCMUA's Solid Waste Complex is located on a 454
acre site and is comprised of a wide variety of recycling and solid
waste facilities that are all owned by the Authority. All of these
facilities, with the exception of the Intermediate Processing Facility
which receives and processes source separated recyclables, are operated
by the CMCMUA.
A brief description of the major facilities and programs that
comprise the County's solid waste management system is presented below.
secure sanitary landfill
The CMCMUA's Sanitary Landfill (SLF) is a state-of-the-art, double-
lined landfill located in the northern section of the County. This
facility, which began operations in May 1984, currently has 52 acres
dedicated to landfilling (Phase I, Cells 1A, 1B and 1C) and provides
leachate collection and storage with subsequent treatment at one of the
Authority's four (4) regional wastewater treatment facilities. The
CMCMUA's Sanitary Landfill is expected to be expanded to serve both the
short-and long-term disposal needs of Cape May County. Specifically,
the Authority plans to fully utilize the capacity of the existing
landfill cells, including the currently active Cell 1C. Thereafter, the
Authority plan to develop new cells on 42 adjacent acres within the
existing site, and will maximize recycling efforts to enable Cape May
County to maintain solid waste self-sufficiency for the next 30-40
years.
transfer station
The CMCMUA also owns and operates a solid waste transfer station.
This facility which began operations in July 1984 provides convenient
hauling services and minimizes truck traffic from the southern half of
the County to the CMCMUA's Sanitary Landfill.
county-wide source separation program
All sixteen (16) Cape May County municipalities and the Authority
participate in a joint source separation and recycling program. For
convenience and to encourage greater participation, municipalities
provide curbside collection of two (2) categories of source separated
materials; mixed paper, which includes newspaper, corrugated, kraft
grocery bags, magazines, office paper, and junk mail; and commingled
cans and bottles, including clear, green and brown glass, aluminum, tin
and aerosol cans, and PET and HDPE plastic containers. These source
separated materials are collected from residents, businesses and
institutions that are now all required to recycle. These materials can
either be dropped off at the Authority's Transfer Station, or they can
be delivered directly to the CMCMUA's Intermediate Processing Facility.
intermediate processing facility
The CMCMUA also owns and, under Contract with a private Operator,
operates an Intermediate Processing Facility (IPF) which receives and
processes source-separated recyclables. The IPF, which began commercial
operations in April 1990, is a highly sophisticated and mechanized
recycling facility which was modified in 1993 to increase peak
processing capacity to 375 tons per day of recyclables. Source
separated recyclables are received, at no charge, 6 days per week from
municipalities, private haulers, businesses and residents. The IPF
sorts, processes and upgrades accepted materials to improve
marketability. All recyclable materials processed through the IPF are
currently marketed.
bulky waste sorting/recycling facility
Mixed bulky waste received for disposal at the Authority's Solid
Waste Complex, including construction and demolition debris, is
inspected and sorted to reclaim corrugated cardboard, wood and scrap
metals for recycling. Wood recovered from Bulky Waste, along with
source separated wood that is accepted at a reduced rate at the Solid
Waste Complex, is processed into a landfill cover material.
street sweeping and catch basin cleanout
The Authority accepts street sweepings and catch basin cleanout
materials which are subsequently reused for landfill cover, at no cost,
as a way of encouraging and promoting this activity in support of local
and county initiatives directed toward improving water quality.
``white goods'' and cfc recovery
Bulky household metals are accepted at no cost for recycling at the
Bulky Waste Sorting/ Recycling Facility. In accordance with Federal and
State air quality regulations, CFC refrigerants are also recovered from
refrigerators and air conditioners prior to their being recycled.
wood pallet recycling
Source separated wood pallets are accepted at no cost and are
processed through a tub grinder. The resulting woodchips are either
used as a bulking agent in the CMCMUA Wastewater Program's Sludge
Composting Facility or they are colored to produce a marketable and
popular landscaping material sold under the trade name ``Second
Harvest''.
tree trunks and stumps
Source separated tree trunks and stumps received by the Authority
are chipped and converted into root mulch and top soil and sold to
private landscapers or the public.
christmas tree recycling project
Decoration-free natural trees are received at no cost and chipped,
with the resulting mulch distributed to the general public at no
charge.
grass clippings and leaf composting project
Source separated uncontaminated leaves and grass clippings are
accepted without charge and composted at the Authority's Solid Waste
Complex. The composted product is screened and sold locally.
tire recycling
To provide an outlet for the proper disposal of used tires, source-
separated loads of car and truck tires are accepted by the CMCMUA and
delivered to an out-of-county facility for processing and reuse, rather
than landfilling these materials.
automotive and marine batteries
Automotive and marine batteries are accepted at no cost by the
Authority for recycling.
used motor oil recycling
In an effort to discourage improper disposal, the Authority accepts
without charge used motor oil at its solid waste facilities for
recycling. Most municipalities have also established collection points
to receive used motor oil.
household hazardous waste
The Authority conducts programs in the spring and fall of each year
to divert potentially dangerous materials from the regular solid waste
disposal system. Under this program, household hazardous wastes are
received from residents, schools, public agencies and businesses. With
the exception of large quantity generators, these materials are
accepted without charge.
used clothing recycling
The used clothing recycling and reuse drop-off program is a
cooperative effort of the County Sheriffs Department, local public
works departments and the CMCMUA. Source separated used clothing is
accepted free at municipal drop-offsites. The Cape May County Sheriff's
Department collects bags of used clothing from the municipal drop-off
sites and, after the needs of local charities have been met, delivers
the excess to the Authority. Used clothing is marketed by the Authority
to a Philadelphia area textile recycling business.
recycling promotion/education
Extensive technical and promotional assistance is provided to
municipalities, businesses, institutions, residents and visitors to
expand source reduction, reuse and recycling activities. Promotional
and technical assistance is provided to private businesses that face
unique recycling challenges due to the large influx of summer
vacationers. A comprehensive recycling education program has also been
implemented in local schools. These services are provided by the CMCMUA
without charge.
litter abatement partnership program
Under a partnership agreement with participating municipalities,
the Authority accepts, without charge, during any four (4) days within
a calendar year, any bulky wastes which are collected as part of a
scheduled residential bulky waste collection service. Also accepted by
the CMCMUA, without charge, are roadside litter and other debris
collected by the County Road Department along County roads and by
participating municipal public works or road departments along local
roadways.
enforcement
Unique and effective recycling enforcement strategies have been
implemented by municipalities and the Authority that include
substantial fines, refusal to pick up solid waste, monetary surcharges,
and a ban on landfilling of 20 designated recyclables. The landfill ban
includes all of the materials designated for recycling at the Cape May
County IPF, as well as leaves, used motor oil, white goods, scrap
metals and lead acid batteries. In addition, the Authority actively
enforces NJDEP waste flow regulations so as to assure the Authority's
revenue stream used to support the various recycling activities noted
above is not compromised.
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Statement of the Government Finance Officers Association
introduction
This written statement is submitted on behalf of the Government
Finance Officers Association (GFOA), a professional association of
13,500 State and local government officials who manage the financial
resources of our nation's States, cities, counties, towns, districts,
and authorities. GFOA strongly supports a grandfather provision that
would, at a minimum, restore flow control for those jurisdictions that
acted in good faith and relied on existing flow control statutes to
finance solid waste facilities. GFOA urges Congress to pass a flow
control bill this year and end the uncertainty surrounding this issue.
As a matter of policy, GFOA believes flow control is an important
financing tool. Flow control has permitted governments to raise
sufficient revenues to manage comprehensive waste management programs
through charges on those who use a facility rather than the general
taxpayers of a community. This method of financing permits revenues to
be collected by beneficiaries of the system within the service area,
which may encompass a county and several other separate taxing
jurisdictions. Therefore, GFOA has supported Federal legislation
authorizing the use of flow control so that governmental entities could
continue to carry out their responsibility to manage solid waste within
their boundaries.
GFOA is deeply troubled that Members of Congress are now
questioning the need for flow control legislation that would
grandfather certain existing facilities because of the lack of severe
financial emergencies, such as defaults, during congressional
consideration of flow control legislation. GFOA assures Members of
Congress that the need for legislative action has not diminished.
Communities, individual and business taxpayers, and bondholders are all
affected by the lack of flow control.
In this statement, GFOA responds to several issues that have been
raised by Members of Congress and others concerning the need for flow
control authority. These are:
the reason for the lack of bond defaults and other severe
financial emergencies,
the meaning of issue-specific credit ratings,
characteristics of projects secured by flow control, and
disclosure to bondholders about flow control.
Finally, GFOA is joined in this statement by 32 finance officers
from 23 States who represent jurisdictions that have experienced
financial hardships as a result of the loss of flow control or who
believe it is incumbent on Congress to restore flow control authority
for those jurisdictions that made long-term financial commitments in
reliance on flow control authority.
the reason for the lack of bond defaults and other severe financial
emergencies
There is a mistaken impression that flow control legislation is not
needed because governments are not failing to make debt service
payments on their solid waste facility bonds or filing for bankruptcy.
This does not mean, however, that jurisdictions are not experiencing
severe financial hardships. Default and bankruptcy are options of last
resort and are not actions entered into unless all other financial
alternatives have been exhausted. Governments provide services that are
essential to the general welfare of communities and they need continued
access to the municipal bond market to perform their essential
functions. If they default on their bonds or file for bankruptcy, they
will be denied future access to the bond market.
In the lengthy history of State and local debt financing, defaults
have occurred rarely. The confidence of the municipal bond market is
essential and municipal issuers make every effort to honor their debt
obligations. As a result, debt repudiation is very uncommon. Since
1839, there have been less than 10,000 defaults by State and local
government issuers. Almost half of those defaults occurred during the
Great Depression. In 1937, Federal legislation was passed to permit
governments to file for bankruptcy protection. Since then, only 437
units of government have sought such protection. Furthermore, for some
governments, bankruptcy is not even an option because Federal law now
requires that State statutes specifically authorize a bankruptcy
filing. At this time, governments in approximately 60 percent of the
States are not even authorized to file for bankruptcy under Chapter 9
of the Federal bankruptcy laws.
The stigma of a default or bankruptcy and the difficult question of
access to the bond market thereafter place extreme pressure on issuers
of municipal debt to do everything in their power to repay their debt.
Therefore, governments that relied on flow control have taken various
remedial actions to maintain their fiscal stability and prevent a
financial emergency. Remedies necessarily cause financial hardships for
affected jurisdictions because already-scarce resources must be
diverted to the repayment of outstanding debt. The following is a list
of actions that have been taken by governments to maintain their credit
ratings, prevent further downgrades in their credit ratings and avoid
default or bankruptcy:
the restructuring of existing debt to reduce the amount of
annual debt service payments that need to be paid to bondholders,
reductions in other capital expenditures,
modifications in the use of a facility to extend its
expected life,
the imposition of new fees on all real property owners,
water and sewer bill surcharges,
the imposition of surcharges on other services,
staff reductions,
reductions in other governmental services and programs,
drawdowns of unrestricted reserves,
loans from other governmental funds to offset revenue
losses,
cancellation of future projects, and
delay of maintenance on existing facilities.
In addition to the financial hardship caused by these actions,
affected governments have been adversely affected by
the threat of litigation and legal expenses for
litigation,
the need to renegotiate contracts with municipalities and
private haulers,
the payment of legal, underwriting and other expenses
associated with restructuring troubled debt,
higher financing costs caused by downgrades,
taking over the debt of troubled issuers,
bumping up against tax and expenditure limitations, and
bumping up against debt limits.
The flow control problem has not gone away. Many governments still
rely on flow control while litigation is pending to determine whether
their particular State law or local ordinance is unconstitutional.
Therefore, these jurisdictions have not yet had to deal with the full
impact of the C&A Carbone, Inc., et al v. Town of Clarkstown, NY,
decision. For some governments that are already trying to adjust to
reduced tipping fees and the diversion of waste to other facilities,
the situation is becoming even more urgent as they are running out of
stop-gap measures and the further delays or even abandonment by the
Congress is an ever-increasing possibility.
the meaning of issue-specific credit ratings
GFOA is concerned that there has been some confusion about the
meaning of solid waste credit ratings. In its written statement to the
committee on Environment and Public Works, Standard and Poor's provides
important information about solid waste credit ratings, explaining they
are issue-specific as contrasted with issuer ratings. Issue-specific
ratings provide a current opinion of creditworthiness with respect to a
specific bond issue for a project and not a governmental entity. Such
factors as the security provisions of the specific financing, the
service area economy, system operations, and project finances and costs
are the basis for assessing the credit of these bonds. An issue-
specific credit rating does not reflect the creditworthiness of a
government. To determine the credit-worthiness of a government, an
analysis is performed that focuses on a review of the government's debt
and financial performance, it's management, and the local economy.
Issue-specific ratings only evaluate a specific project, such as a
solid waste facility, and include a review of that project's financial
operations. The rating takes into account the ability of the system to
set and increase rates for the project, the flexibility it has to
establish new fees and revenue sources, and the revenues that are
pledged to the repayment of the bonds. While revenue increases and
other financial adjustments necessitated by the lack of flow control
are causing financial pain in affected governments, that would not
necessarily mean that ratings for the project would be expected to
change, because the ability to make these financial adjustments was
factored into the ratings analysis.
Furthermore, governments that are not the issuers of bonds also
have been affected by the loss of flow control because of the
agreements they entered into with the issuers of solid waste bonds.
Even though these participating governments are having to make higher
payments to cover the debt service on bonds or are experiencing other
financial hardships, these financial consequences do not affect the
rating on the bonds issued to finance the facility. Bond ratings tell
only part of the story. Even in the absence of ratings changes, there
can be severe financial hardships.
characteristics of projects secured by flow control
During the recent Senate hearing on flow control, several comments
were made concerning the selection, financing and operation of
projects. This statement provides additional information about these
various topics.
It was suggested that flow control is not necessary because it
permits underwriters to support facilities that are poor investments.
Governments, not underwriters, issue bonds and assume the serious
financial obligation to repay the debt over the life of the bonds. The
preparation and approval of a bond issue is a complex process involving
both appointed and elected public officials and many outside
professionals, including financial advisors, bond lawyers and other
counsel, engineers, trustees, rating analysts, bond guarantors and
underwriters. The sale of debt requires the preparation of detailed
disclosure documents, detailed feasibility studies, complex agreements
between other jurisdictions and the private sector, various
certifications, and governmental approvals. To suggest that
underwriters ramrod inappropriate projects through this process
oversimplifies the complexity and expense involved in bringing a bond
issue to market.
Additionally, GFOA believes that it is important to provide some
historical perspective about flow control. In the 1980's, there were
shortfalls in disposal capacity and flow control was viewed as an
innovative solution to a public-policy problem--the disposal of waste.
The shortfalls caused fees at existing facilities to rise to the levels
that were commonplace before the Carbone decision. The fees that were
set to sustain new facilities were viewed as sound financial options,
even though today they may seem unjustified. As the supply curve
shifted and more options for waste disposal became available, users of
the facilities sought to employ the least cost option, thus providing
the impetus for challenging flow control.
It has been suggested that the sale of solid waste bonds on a
negotiated basis rather than a competitive basis was a questionable
practice. As a matter of practice, a large number of bonds have been
sold on a negotiated basis in recent years. While GFOA recommends the
competitive method of sale rather than a negotiated sale in many
instances, it recognizes that conditions may warrant a negotiated sale.
Solid waste transactions, in fact, did exhibit some of these conditions
as they were complex transactions and the debt was not backed by an
issuer's full faith and credit or a strong, known or historically
performing revenue stream. Moreover, the use of the negotiated sale
process was expected to reduce borrowing costs because the underwriter
would be familiar with the details of the transaction, having been an
active participant in the planning process.
During the recent Senate hearing, the committee was informed of an
unidentified project for which bonds had been issued, but construction
had not occurred. This development is a rather unusual occurrence in
the municipal market, which could have serious financial repercussions
for an issuer. Presumably, the issuer would ``call'' the bonds at the
first opportunity and pay off the bondholders before the bonds matured,
because of the borrowing costs that are being incurred. There are
several Federal tax and securities law provisions that need to be
considered in this context. Current Federal tax law provisions permit
an issuer to invest bond proceeds that are not spent for construction
purposes, but the law also requires the issuer to rebate to the Federal
Government any investment earnings above the bond yield. (These
earnings are called arbitrage earnings.) As a result, there is no
financial incentive to issue bonds for a project that is not likely to
go forward. Additionally, issuers incur significant borrowing costs
that cannot be recovered by investment of the bond proceeds, so the
issuer is actually ``out of pocket'' for the expenses.
Another consideration is the fact that Federal securities laws
provide that State and local governments have a duty to produce
disclosure documents that do not contain misstatements or omissions of
``material'' facts. Failure to meet these requirements could result in
a Securities and Exchange Commission enforcement action or private
litigation. Proceeding with a project that is not viable and using bond
proceeds in a manner inconsistent with the way in which the disclosure
documents describe their use could invite an SEC investigation.
At the hearing, it was suggested that solid waste issuers are
``awash with cash'' because of the high fees that were charged. As we
have explained above, the economics of the industry at the time many of
these facilities were financed justified the rate levels that were
established. Additionally, from a financing perspective, it is
important to remember that some regional solid waste authorities that
sold solid waste bonds were independent entities that did not have
taxing authority, so they were completely dependent on the revenues
earned by the system. As a result, it is necessary for them to
establish reserves for debt service coverage or replacement of property
and to have resources on hand to respond to such contingencies as
technology failures, economic downturns, business closures and other
events affecting the operations of the facility.
disclosure to bondholders about flow control
Since the 1970's, the GFOA has prepared and updated disclosure
guidelines for issuers of State and local government securities that
set forth the items that should be included in the official statements
of municipal bond issuers. Among the items that are highlighted for so-
called enterprise facilities such as solid waste, are the sources of
revenue to pay the debt service and any legal matters such as any
pending judicial, administrative or regulatory proceedings that may
significantly affect the enterprise's ability to perform its
obligations to the holders of the securities being offered.
During the Senate's recent flow control hearing, the question of
bondholder disclosure was raised. Attached to this statement are
several examples of official statement disclosures concerning issuers'
ability to control the flow of solid waste and State law enabling
legislation. It will be noted that these documents are for transactions
before 1988. After this time period, the pace of solid waste financings
that relied on flow control declined dramatically because the supply of
disposal options had increased and such projects were not financially
feasible. There is no discussion of any legal challenges to flow
control because during this time period there had been no attacks on
the practice on Commerce Clause grounds. There is some discussion of
whether flow control laws were anticompetitive and violated antitrust
laws. However, by the mid-1980's, the courts had clarified that if
there was State enabling legislation authorizing flow control, there
would be no antitrust violation. Therefore, the bondholders who
purchased flow control bonds did not receive any warning about the risk
that their bonds might decline in value because of the possibility of
the invalidation of flow control authority. This disclosure was not
warranted at the time because flow control was a legally permitted
financing tool of unquestioned status.
concluding comments
The U.S. Supreme Court's Carbone decision changed the rules in the
middle of the game for many communities that relied on flow control.
The relief that governments are now seeking to prevent greater
financial instability is a reasonable request that will prevent the
imposition of further burdens on governmental units whose financial
condition has been imperiled; taxpayers who are paying higher taxes,
fees, and surcharges; and bondholders who have seen a diminution in the
value of their securities. It would be unfair to deny this request.
To suggest that a vote for a limited grandfather exception is a
vote for a tax increase demonstrates a complete lack of understanding
of our system of public finance. Without flow control, many governments
are having to impose new taxes, fees or surcharges on general taxpayers
to avoid the untenable--a default or bankruptcy. In effect, assets are
being diverted to waste haulers from local taxpayers. Ironically,
because of the small number of large firms that control landfills,
transfer stations and other facilities in many areas, customers may not
benefit from lower fees. The ability of firms to control market prices
means the market is not purely competitive and the demise of flow
control will not guarantee more price competition and greater consumer
protection.
The Federal Government and State and local governments are partners
in our Federal system. The Federal Government should be helping local
governments to live up to the financial commitments that were made when
flow control was the law of the land. Unlike other Federal actions that
are needed to help governments, the passage of flow control legislation
does not even cost a dime. Flow control does not affect every
government, but that should not be the measure of its importance. Just
because it is not front page news does not mean it is not of great
significance.
Mr. Chairman and members of the committee, GFOA reiterates its
support for a grandfather provision and appreciates this opportunity to
submit a written statement. The Association would be happy to provide
additional information, as needed.
additional support for flow control legislation
The Government Finance Officers Association is joined in its
written statement by finance officers from throughout the United
States. They represent jurisdictions that are experiencing financial
hardships brought about by the lack of flow control authority or who
believe it is incumbent upon the Congress of the United States to
restore flow control for those governmental units that made long-term
financial commitments based on that authority. They are:
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Statement of Integrated Waste Services Association
The Integrated Waste Services Association (``IWSA'') is pleased to
submit testimony before the Senate Environment and Public Works
Committee. IWSA is a national trade association representing the waste-
to-energy industry. Our Association encourages the use of waste-to-
energy technology as a key component of community programs to handle
solid waste. IWSA members include American Ref-Fuel Company, Foster
Wheeler Power Systems Company, Katy-Seghers, Montenay Power
Corporation, Ogden Martin Systems, Inc., Westinghouse Electric
Corporation, and Wheelabrator Environmental Systems Inc., as well as 50
other associate members including local governments and firms involved
in sold waste management. Together, our members represent 66 of the 114
waste-to energy facilities nationwide. IWSA member facilities process
approximately 83,000 tons of waste each day and generate enough energy
to meet the electricity needs of more than one million households.
IWSA supports the need for legislation that transitions local
governments that relied on the ability to control waste within their
boundaries as a basis for incurring legally binding financial
obligations. We believe a narrowly crafted bill is required to
establish a transition period spanning the time when local governments
relied on flow control to the current market-based system. Such
transitional legislation that provides for bonds to be paid off and for
legally binding contracts to be performed would mitigate the hardships
that will otherwise be experienced by communities. The legislation
should cover only those bonds and contracts issued upon reliance of
flow control and only for such time as necessary to pay off those
original instruments and such environmental retrofits as are required
by the Clean Air Act Amendments of 1990 and financed by a date certain.
We believe that the compromise legislation of January, 1996, supported
by a wide array of stakeholders, accomplishes these purposes and we
commend it to you for your consideration.
Flow control statutes and ordinances were developed at the turn of
the century to assist local governments with their task of managing
transport and disposal of household trash. The term ``flow control''
has been used to define the statutes and ordinances that local
governments enacted allowing them to deliver to a designated facility
all municipal solid waste generated within the jurisdiction. Flow
control laws were used most often to manage the handling, transport,
recycling, treatment and disposal of trash. In 1994, the U.S. Supreme
Court handed down a decision in C&A Carbone v. Clarkstown that struck
down the use of flow control authority as counter to the Commerce
Clause and therefore unconstitutional. Unless and until the Congress
acts, flow control is now unavailable to those local governments that
relied on it in good faith.
Until the Supreme Court decision, local governments used flow
control to ensure that sufficient trash was available over a period of
years as needed for the issuance of long-term bonds used to finance
solid waste management programs such as recycling, landfills,
composting, household hazardous waste collection, and waste-to-energy
plants. Approximately $4 billion in debt currently is outstanding that
was issued to finance waste-to-energy facilities based upon reliance of
local government's flow control authority.
More than $2 billion worth of debt has been downgraded due to the
lack of flow control authority. You will hear a lot about the fact that
local governments have not defaulted on their bonds. This is true. The
ability to borrow money to pay for essential services surely is too
important to local officials to allow defaults. To avail themselves of
the bond market, local governments have cut jobs, levied taxes, and
slashed programs and still face a higher cost of borrowing money. In
fact, the downgrading of solid waste bonds has impacted the borrowing
power of all municipal debt.
Government default has never been and should not now be the
starting pistol that triggers congressional action. We ask that the
Congress consider instead the issue of equity and a community's good
faith reliance on flow control by providing a basis for local
governments to discharge their obligations.
Flow control should not be an issue that pits local government
against the marketplace. Instead, it is an issue that requires an
equitable solution for those who relied in good faith on flow control.
Flow control is not a philosophical question. It is a question of
equity. Fairness would dictate that when the rules are changed in mid-
stream, there is offered some protection to those who are caught off
shore.
Thank you for your consideration of our views.
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[From Waste Age, January 1997]
Flow Control Uncertainty Upsets Investment Ratings of Two County Waste
Authorities
[By Sarah Halsted]
Due, in large part, to market uncertainty created by a decline in
systems that guarantee waste flow, Moody's Investor Service (New York
City) has been watching and rating the progress of investments made by
several county solid waste authorities.
Two authorities in particular--New Jersey's Mercer County
Improvement Authority (MCIA) and Florida's Dade County Solid Waste
Sysem--have felt the impact of Moody's observations and of a recent
Federal district court decision, Atlantic Coast Demolition & Recycling,
Inc. v. Board of Chosen Freeholders of Atlantic County, et al., which
effectively dismantled the flow control system in New Jersey (see Waste
Age, August 1996, p. 8).
Ratings are extremely important to any business because crediting
is one factor determining yield on a bond, says Charles Emrich,
assistant vice president of Moody's. Downgrading creates a higher
interest rate, makes bonds riskier, and increases the cost of
borrowing.
Although it has not yet been downgraded, MCIA has been placed on
``surveillance watch,'' according to Chee Mee Hu, manager of a revenue
specialties group for Moody's.
MCIA is on shaky ground, particularly after the Mercer County Board
of Freeholders recently rejected amendments proposed by the authority
necessary to complete the construction of its 10-year-old waste-to-
energy project. The amendments were necessitated by the demise of flow
control ordinances, and, in order for the amendments to be accepted,
both the freeholders and the Department of Environmental Protection had
to offer their approval.
Initially, MCIA wanted to build the incinerator to meet State
mandates and had relied on flow control to maintain and operate the
project.
Without a guaranteed waste stream, however, and because of the
freeholders decision, MCIA is now left with approximately $190 million
in outstanding solid waste revenue bonds. Almost $40 million of the
bonds are uninsured and are currently rated ``Ba,'' meaning the bonds
are considered ``speculative'' by Moody's. The remaining $150-million
bonds are insured by FGIC and have an ``Aaa'' rating, Moody's highest-
quality investment grade.
One of MCIA's key proposed amendments was to have a private
company, Ogden Martin, assume ownership of the project after its
construction. It is for this reason, among others, that Anthony
Carabelli, president of the Board of Freeholders, voted the amendments
down.
Estimating the cost of financing the project for 20 years to be
half a billion dollars, Carabelli says the cost was far too great,
particularly since Ogden Martin would own it in the end. ``The
conditions of the contract, when the project is built, say it would
turn to Ogden Martin's [ownership],'' making the proposal unreasonable,
Carabelli says. Ogden Martin would end up paying only 20 percent to the
freeholders' 80 percent, yet ``it would be [Ogden's] incinerator--why
should we pay for someone else's ownership?''
Carabelli also says he took the financial difficulties five other
New Jersey incinerators are facing into consideration when he made his
decision. The other incinerators ``are wanting for garbage and would be
only too happy to have our garbage,'' he says.
Only 20 percent of the garbage to be collected in the proposed
incinerator would have been collected from other areas--yet another
reason Carabelli voted against the plan.
Mercer County still has a 2-year contract with the Groves Landfill
in Pennsylvania.
According to Emrich, analysts are currently in discussion with MCIA
to determine its future course. MCIA is facing very real and immediate
problems, though, with a debt service payment due in the spring and no
interest to pay it, says Mee Hu. ``It's a very tight situation, we're
basically seeing a very tight outlook, very negative,'' she says.
On the other hand, Moody's analysts are far more optimistic about
the future of Dade County's Solid Waste System. The county, which
already has an incinerator up and running, has ``gotten its act
together,'' says Emrich.
Dade County, which faced diversion rates of 700,000 tons per year
in 1994, and even greater diversion rates of 940,000 tons in fiscal
1995, incurred a loss in gross disposal revenue of approximately $41.3
million in fiscal 1994, and a loss of approximately $53 million in
1995, according to Emrich.
The system, which consists of a resource recovery facility,
landfills, and transfer stations, initially relied on a guaranteed
waste flow. The termination of flow control ordinances abruptly put an
end to the flow, leaving the Dade County system with uncompetitive tip
fees. As a result, Moody's downgraded it slightly from an ``A'' (upper
medium grade) rating to a ``Baal'' (strong medium grade) rating in May
of last year.
In response to the downgrading, but mostly because of an increase
in waste diversion, Dade County implemented a business strategy, a main
part of which was the lowering of tip fees from $59 per ton to $45 per
ton. This new competitive edge allows Dade County to attract local
municipalities and haulers to sign long-term contracts, once again
ensuring a guaranteed waste flow.
The fees are fixed for 3 years and will be adjusted by the rate of
inflation thereafter, capped at 5 percent. According to Moody's,
contracts have increased the amount of committed waste to 90 percent
for 1997, up from about 40 percent in 1991.
As another part of its strategy, Dade County is diversifying its
revenue stream by receiving revenue from a portion of the utility
service fee, and introducing a disposal fee on haulers in the
unincorporated areas of the county. Expenses are fixed and advance at
2.6 percent per year, according to Moody's.
As a result of these strategic changes, Dade County's credit
quality is expected to improve, Emrich says.
______
[From The Smithtown News, February 27, 1997]
Waste Flow Drying Up!
commercial garbage revenue off $125,000
[By David Ambro]
Despite optimistic projections included in the 1997 budget by
Supervisor Patrick Vecchio, the flow of commercial solid waste to the
Town of Smithtown has dropped dramatically.
The Town controls the flow of residential solid waste through a
municipal refuse district and contracts with garbage carters. There is,
however, no commercial garbage district but in the past the Town
implemented flow control legislation, which mandated that the garbage
be delivered to the incinerator. The United States Supreme Court,
however, recently struck down garbage flow control legislation. The
court ruling left Smithtown with no way to control municipal refuse.
Despite the lack of flow control legislation, Supervisor Vecchio
included the same level of commercial solid waste revenue in the 1997
budget as in 1996, about $2.7 million. He based the projection on a
meeting he had with garbage carters, who reportedly agreed to deliver
Smithtown's solid waste to the incinerator.
So far, however, the flow of commercial garbage to Smithtown is
well below anticipated revenue. During the Town Board work session
Tuesday, February 25, Councilman Michael Hollander asked Town
Comptroller Anthony Minerva for an update of the commercial waste flow
situation.
``It was a disastrous month,'' said Mr. Minerva about January. He
told Mr. Hollander that the Town brought in about $125,000 below the
projected amount on the commercial waste revenue line.
After the work session, Mr. Minerva told The News that he feels the
loss of revenue was a direct result of the flow control legislation
being struck down. He said that within the next few months, the Town
Board will likely begin to consider implementation of a municipal
commercial garbage district.
During an interview after the meeting, Supervisor Patrick Vecchio
said that he plans to discuss the situation with the Town Board next
week, and that he is still researching certain aspects of the
situation. The Supervisor said that he will ask the town Board to
explore certain creative alternatives to restore the revenue from the
commercial garbage.
______
[From The Smithtown News, March 6, 1997]
Businesses Face Town Trash Fee
$1.9 million budget gap projected from commercial waste shortage
[By David Ambro]
In an effort to head off a projected multi-million dollar loss of
revenue from commercial garbage disposal, the Smithtown Town Board may
begin to charge businesses a solid waste disposal fee modeled on a
system in Tulsa, Oklahoma.
Under the provisions of the plan, each commercial property in the
Town will be individually evaluated to determine its annual volume of
solid waste and the fee charged to the business will be based on that
volume. The fee will cover the disposal of the commercial garbage at
the bi-town incinerator and the business owners will then have to
renegotiate with the individual garbage carter to pay only for the
collection costs but not for the disposal costs.
Smithtown Supervisor Patrick Vecchio, who is pushing the Tulsa
plan, said that it is more equitable than other alternatives, such as a
commercial refuse district or simply passing along the revenue
shortfall to the taxpayers.
``I believe that it is a forthright, uninvolved method to pay the
fair cost of commercial garbage generation, which is currently being
diverted away from the [incinerator] plant and costing taxpayers--
commercial and residential--taxes they ought not pay,'' Supervisor
Vecchio said. ``This plan should result in a fairer shake for the
taxpayers.''
The supervisor said that a Town Board majority supports
implementation of the Tulsa system in Smithtown. Before the plan can be
implemented, a public hearing will have to be held but one has not yet
been scheduled.
According to Supervisor Vecchio, the Town is losing over $100,000 a
month in revenue from commercial solid waste disposal. He said that the
question now becomes how to make up that lost revenue without burdening
the taxpayers. He said that the Tulsa plan has been tested and proven
to work in a city of over 500,000 people.
In Babylon, the Town created a commercial garbage district to
ensure flow control of garbage to its incinerator. Under that system,
the Town taxes business owners and enters into contracts with carters
for service, much like the Smithtown residential district.
Supervisor Vecchio said that a commercial refuse district similar
to the one imposed in Babylon takes much longer to implement (than
would the Tulsa system) and creates numerous inequities among the
commercial property owners. For example, he said that a shoe repair
store with a very low volume of garbage, and a deli with a very high
volume of garbage, both operating from similar sized stores, are
charged the same amount. Under the Tulsa plan, according to the
Supervisor, the fee charged to a business will be more closely
associated to the waste flow.
At its meeting Tuesday, March 4, the Smithtown Town Board voted 4-1
to send three Town officials to Tulsa, Oklahoma, to review the system.
Going on the trip will be Town Solid Waste Coordinator John Trent, Town
Comptroller Anthony Minerva and Town Systems Analyst Nicholas DiMattei.
Councilman Michael Fitzpatrick was also approved for the trip but will
only go if Mr. DiMattei, whose wife is about to give birth, is unable
to attend.
Councilwoman Jane Conway cast the lone vote in opposition to the
Tulsa trip. ``It's just a waste of money in my opinion. International
business is conducted through teleconferences so I don't see the need
to travel to Tulsa to find out about their system,'' Councilwoman
Conway said during an interview after the meeting.
Councilwoman Conway said that the Tulsa plan is contained in an
ordinance, a copy of which was provided to Town officials this week.
She said that rather than sending employees to Tulsa, the Town Board
should make its decision based on a review of the legislation and that
little else can be derived from a trip to the city.
In addition to her concerns about the trip, Councilwoman Conway
said that she has some concerns about the Tulsa plan itself. She said
that many local businesses have contracts with their carting company
that may be difficult to change. The commercial solid waste fee, she
said, may then become an additional cost to many local businesses.
According to information provided to the Town Board last week by
Mr. Trent, it is projected that at the present rate the Town will
receive about half the amount of commercial solid waste in 1997 as it
did in 1996. If that trend holds, which Town officials fear it will,
the Town will be left with a $1.8 million revenue shortfall by the end
of the year.
Commercial garbage carters are presently charged $65 per ton to
dump the solid waste at the bi-town incinerator. Smithtown uses the
commercial solid waste as a revenue to offset expenses. The decline in
commercial solid waste has been steady for the past 6 years but in the
past 3 years there has been a radical drop in the amount of commercial
waste coming to Smithtown. The drop off is believed to have resulted in
a State Supreme Court ruling, which deregulates the industry and
strikes down municipal flow control legislation.
From 1992 to 1995, the commercial garbage delivered to the Town
during the month of January ranged from 3,400 to 3,900 tons. In 1996
the volume dropped drastically to 2,600 tons and in 1997 only 1,126
tons of commercial garbage came to the Town.
Mr. Trent projects that at the present rate by year's end the Town
will receive only 14,339 tons of commercial waste, down from 27,862 in
1996 and from 38,881 in 1995, 47,777 in 1994, 51,015 in 1993 and 53,845
in 1992.
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Statement of Jefferson Smurfit Corporation
Jefferson Smurfit Corporation (JSC) is a leading manufacturer of
paper and paperboard products whose predominant raw material is
recovered paper (wastepaper). Additionally, one of their divisions,
Smurfit Recycling Company, is the largest collector and marketer of
recovered paper in the Nation (if not the world as a private
enterprise). Annually, JSC collects in excess of 4.5 million tons, 2
million of which is consumed internally while the balance is sold to
other paper mills as a raw material or exported. Examples of JSC's
paper packaging are cereal boxes, toy boxes, corrugated cardboard
containers, and industrial paper tubes. Also, JSC is the largest U.S.
producer of recycled content newsprint.
Jefferson Smurfit supported S. 534 from last session and, if new
legislation is drafted, it should be the starting point. While it
generally provided the exemption for recyclable materials, some of the
language should be clarified.
We support, in full, the written comments provided the committee by
the American Forest and Paper Association (AF&PA).
JSC would support legislation that builds on, and refines the
principles set forth in, S. 534 which would recognize:
any materials that have been separated from waste
otherwise destined for disposal (either at the source of the waste or
at processing facilities) or that have been managed separately from
waste destined for disposal should not be subject to local government
municipal solid waste flow control either for past or prospective
programs;
flow control over recovered materials would undermine
significant and long term private commercial recovery activity in an
area which has not historically fallen under government control or
regulation;
presently, local governments can direct the flow of
recyclable materials once the owner or generator of those recyclable
materials freely and voluntarily transfers ownership of those materials
to the local government by placement in a municipal collection program;
flow control or interstate waste authority should cover
only municipal solid waste. Non-hazardous industrial wastes are not
part of municipal solid waste and therefore should not be subject to
local government flow control.
JSC and other paper manufacturers can increase their recycled paper
capacity only in an environment that ensures unfettered access to their
recovered paper as a raw material. That access is driven by two broad
principles.
Recovered Paper--received from residential and commercial
collection programs--is the source of 37 percent of the paper
industry's raw material. These materials are commodities, bought and
sold on the open market like thousands of other commodities. They are
neither solid waste nor municipal solid waste and should not be
regulated as such. If paper does not enter, or is diverted or removed
from, the solid waste stream, it becomes a commodity raw material and
should not be regulated as a solid waste or subject to local government
flow control.
Second, the ownership of recovered materials conveys the same
rights of ownership of other personal property. The owner of a bale of
cardboard boxes or bundle of newspapers must have the same rights as
the owner of a bushel of wheat when deciding on the destination of the
material. In other words, the owner of a recovered material has the
right to sell, donate, transport, or contribute that material to
whomever, or in whatever way he or she chooses. And, to the extent that
government should not limit the rights of ownership, it should not
restrict commerce in such materials by restricting rights to purchase
or transport recovered materials. In no case should local government
mandate that recovered materials be transferred to the government or
its recycling agent. This is not to imply that JSC opposes voluntary
curbside recycling programs which we support and rely on as a source of
raw material. We believe that once the owner/generator voluntarily
transfers ownership by placing the materials for public collection
either directly or under contract through an agent, the government can
assume ownership of recyclables. At that point local government has the
authority to control the flow of its recovered materials in whatever
manner it chooses, and thus negates the need for Federal flow control
authority over recovered materials.
______
Statement of the Local Government Coalition for Environmentally Sound
Municipal Solid Waste Management
Dear Mr. Chairman: This statement is submitted by the Local
Government Coalition for Environmentally Sound Municipal Solid Waste
Management (Coalition) for inclusion in the record of the Environment
and Public Works Committee's March 18, 1997 hearings that addressed,
among other things, municipal solid waste (MSW) flow control
legislation (this statement is also being supplied in computer disk
format). As a preliminary matter, we should note that the Coalition is
an ad hoc consortium of cities, counties, solid waste management
authorities and related associations concerned with MSW flow control
legislation and other critical MSW management issues. The Coalition's
members are dedicated to integrated municipal solid waste management
that provides full protection for public health and the environment,
and reliable, long-term municipal waste management solutions at
reasonable and stable costs for their respective communities.
This statement addresses two separate matters that are before the
committee in connection with flow control legislation. The first is the
pressing need for--and very strong equitable arguments justifying----
Federal legislation to ``grandfather'' uses of flow control authority
in effect prior to the Supreme Court's decision in the Carbone case
(C&A Carbone, Inc. v. Town of Clarkstown, New York, 114 S.Ct. 1677
1994)). Such legislation is needed to relieve the adverse financial
impacts already sustained by a number of communities and to avoid
further consequences for those communities and others. Second, we
respond to criticisms offered at the committee's March 18 hearing
regarding decisions made long ago by a number of communities to rely on
flow control authority in addressing their diverse MSW2 management
needs.
i. the need for federal legislation to grandfather existing uses of
flow control authority
Various witnesses testified at the March 18 hearing regarding the
need for Federal legislation that would grandfather uses of flow
control in effect at the time of the Carbone decision (e.g., witnesses
Johnson, Leff and Cahill). Indeed, even the witnesses who opposed flow
control as a general matter recognized (with one exception) that
grandfathering legislation is appropriate because of the changes
brought about as a consequence of Carbone. In fact, the need for
legislation to grandfather such past uses of flow control is
indistinguishable from the ``stranded investment'' issue that has been
widely recognized as requiring legislative relief in connection with
restructuring of the electric utility industry. As explained by the
witnesses who testified in support of flow control, the consequences
that communities throughout the country are now facing due to the
absence of Federal legislation include precipitous declines in waste
deliveries and resulting bond downgrades, increased taxes to offset
declines in tipping fee revenue, termination of recycling and other
environmentally essential programs, employee layoffs and terminations
and ever-increasing upward pressure on tipping fees as the unavoidable
fixed cost burden of waste management infrastructure (e.g., recycling,
composting, waste-to-energy, etc.) is shared by fewer users (further
elaboration regarding these adverse consequences is provided in the
testimony of witnesses Johnson, Leff and Cahill and need not be
belabored here).\1\
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\1\ In addition, because flow control authority is a tool that
facilitates a community's ability to develop long-term MSW management
solutions at stable prices, flow control assists in addressing the
concerns of waste importing States, as witnesses Seif and Cahill each
testified. See Cahill testimony at 3 (``The Carbone decision resulted
in the exportation of approximately an additional one million tons
annually of municipal solid waste generated in New York State. . . . If
flow control is re-instituted for those communities that initially had
it, localities can once again manage solid waste within their own
borders at more competitive tipping fees'').
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Despite these adverse impacts, it was nevertheless suggested in the
March 18 hearing record that Federal flow control legislation may not
be necessary because the financial impact to date (that is, the extent
of bond downgrades to date and the absence of bond defaults) has not
been sufficiently severe to require legislative action. The number of
bond downgrades (17 in total) is significant, however. Moreover, 19
additional solid waste bond issues have been rated ``unstable--credit
watch'' by Moody's Investors Service due specifically to the absence of
flow control legislation. Furthermore, the absence of flow control
legislation is also affecting credit-supported solid waste bonds that
are secured by general obligations guarantees or bond repayment
insurance (in addition to previous reliance on flow control authority).
On an overall basis, approximately one-half of all solid waste bond
issues are in one of the three risk categories outlined above and would
benefit from legislation that grandfathers pre-Carbone uses of flow
control authority. Indeed, Moody's testimony to this committee notes
that the probable benefit of the stabilized waste stream that would
result from legislation to grandfather pre-Carbone uses of flow control
will be to strengthen credit ratings.\2\
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\2\ It should also be noted that focusing on the number of bond
downgrades or the absence of bond defaults is to disregard the fact
that local governments will do everything within their ability to avoid
a downgrade or the truly debilitating impact of a bond default. The
preferred policy outcome here is surely not one in which due to the
absence of flow control authority local governments are forced, as
examples, to terminate recycling programs or lay off employees, or
increase taxes in order to subsidize recycling (in the latter
situation, the absence of flow control authority is a hidden tax).
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Finally, and of particular significance, flow control is a stranded
investment issue (local governments are seeking grandfather legislation
only--we are not seeking authority for new uses of flow control). The
need for such grandfather legislation is a matter of basic equity: the
Carbone decision changed the rules ``in the middle of the game'' and
grandfathering legislation that provides a reasonable transition is
essential. It must be emphasized that the situation confronting local
governments as a result of Carbone is indistinguishable from the
circumstances electric utilities face as a result of industry
restructuring. The bipartisan electric utility restructuring
legislation that has already been introduced in Congress (as well as
additional legislative proposals that are anticipated) provide (or are
expected to provide) reasonable assurance that utilities will be able
to recover stranded investment that is a consequence of industry
restructuring. In addition, at least eight States have already adopted
legislation that accomplishes the same result. No electric utility will
be required to sustain a bond downgrade, or worst yet a bond default,
as a condition precedent to legislative protection that allows electric
utilities to recover their stranded investment. Local government is
equally deserving of protection on the same basis--that is, without
being forced to sustain even more bond downgrades and bond defaults.\3\
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\3\ Needless to say, local government investment in waste
management infrastructure was taken in direct response to State (and
Federal) mandates rather than as a type of entrepreneurial activity.
There can be no justification for protecting investors against market
risk in the context of electric utility restructuring, while declining
to protect taxpayers and the public in the flow control context where
the actions in question were taken in response to governmental mandates
and for protection of public health and the environment.
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ii. various witnesses' criticisms of flow control are unfounded
As explained above, local government is asking for legislation
merely to grandfather past uses of flow control authority, and thereby
allow a reasonable transition to respond to the consequences of the
Carbone decision. Such legislation is amply justified as a matter of
equity and independent of the different policy viewpoints--favorable
and unfavorable--regarding the past use of flow control presented
during the committee's March 18 hearing. Nevertheless, the criticism of
flow control offered by witnesses at the hearing is not supported by
the facts, and we respond to that criticism below.
A. Flow Control Is Not Anti-Competitive
Several witnesses claimed that flow control is anti-competitive.
E.g., witnesses Rooney, Broadway and Norquist. These claims are without
basis. Contrary to the witnesses' assertions, the tipping fees--user
fees--charged for municipal solid waste management services in
communities that rely on flow control are based on cost and are often
the result of competitive bidding in the private marketplace for the
necessary waste management services. Those fees recover the costs of
various solid waste management services--recycling, household hazardous
waste collection, composting, public education, resource recovery
(waste-to-energy), etc. Moreover, flow control proponents agree that
such tipping fee-derived revenues should not be used to cross-subsidize
non-solid waste management services (the flow control legislation
overwhelmingly approved by the Senate during the last Congress, S. 534,
expressly so provided with the full agreement of flow control
proponents).
Nor is flow control anti-private enterprise. To the contrary,
communities that rely on flow control also rely to the maximum extent
possible on private enterprise for their waste management
infrastructure. The difference is that flow control allows the affected
communities to achieve long-term cost stability for waste management
services and significantly less exposure to the vagaries of the
marketplace. See n.6, below. The members of the Coalition submitting
this statement are a case in point. The clear majority of the
recycling/waste management facilities with respect to which our members
exercise flow control authority are privately owned and/or operated.
For example, the integrated waste management system that serves the
city of Indianapolis consists of a waste-to-energy plant, an ash
monofill, a composting facility, a materials recovery (recycling)
facility, three transfer stations and a landfill. All of these
facilities are privately owned and operated with the exception of the
ash monofill, which is publicly owned and privately operated. National
trends are fully consistent. In fact, as the U.S. Environmental
Protection Agency has recently emphasized, ``it is noteworthy that the
private sector has an ownership or operational role for 84 percent of
WTE [waste-to-energy] throughput, including most of the larger WTEs.''
See U.S. Environmental Protection Agency, Report to Congress on Flow
Control and Municipal Solid Waste, EPA 530-R-95-009 (March 1995, at
III-58) (cited below as ``Report to Congress on Flow Control''). State
and regional statistics show the same pattern. For example, the
Pennsylvania Waste Industries Association, which represents private
companies engaged in the operation of landfills, transportation of
solid waste, recycling and related services, estimated in 1995 that its
members provide 75 percent of all of the municipal waste processing and
disposal services within Pennsylvania. A key factor here has been
complementary public-private relationships for which flow control is a
principal component.\4\
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\4\ See, Report to Congress on Flow Control at III-58: Some of the
largest WTE facilities represent public-private partnerships. Without
the involvement and support of the public sector, this market segment
would be much smaller.
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It also bears emphasis that the local governments that rely on flow
control adhere to competitive bidding requirements that make cost a
prime consideration in selecting among alternative waste management
facilities or vendors. The fact that some communities that rely on flow
control authority may have higher tipping fees than certain non-flow
control communities is the former's own choice (as well as a cost that
the flow control-reliant community alone will bear), and was made for
reasons that the affected community and its elected officials
considered fully justified (e.g. maximize recycling, minimize
unproductive use of land resources and minimize potential Superfund
liability). Specifically, their higher fees resulted because the
community had decided to invest in more costly and capital intensive
waste management infrastructure, such as advanced materials recovery
facilities (MRFs) or resource recovery/waste-to-energy facilities.\5\
Such facilities cost more--over the short-run--than other alternatives.
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\5\ See Report to Congress on Flow Control at ES-7 (``For the
recycling segment, flow control has been an important factor for MRFs,
particularly MRFs that require substantial capital investments''). See
also id. at III-46 and 47 (emphasis supplied):
``The use of flow controls to guarantee waste flows to WTE
facilities is significant; approximately 58 percent of WTE throughput
(from 61 facilities) is guaranteed by flow control. One reason for this
high percentage is the substantial debt service entailed by the large
initial capital investment required to construct WTE facilities
[footnote omitted]. WTE facility operators and owners need to ensure
adequate, long-term supplies of waste and operate at high capacity
utilization rates (e.g., 85 percent) in order to generate sufficient
tipping fee revenues to meet debt service payments. Data show a strong
association between magnitude of capital costs and use of flow controls
by WTEs.''
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B. Flow Control Does Not Cost More
Nor does flow control ``artificially'' increase prices or impose a
higher cost for a given category of service. In this connection, it
should be noted that two of the witnesses who opposed flow control at
the March 18 hearing (Messrs. Broadway and Norquist) referred to a
study prepared for Browning-Ferris Industries (BFI) by National
Economic Research Associates (NERA) to support the claim that tipping
fees are higher for communities that rely on flow control in comparison
to non-flow control jurisdictions. The BFI-NERA document, however, is
invalid and laden with distortion that portrays flow control as more
expensive. It bears emphasis that the State of New Hampshire,
Department of Environmental Services, evaluated the BFI-NERA document
and found, contrary to the document's authors, that in two of the three
case studies presented by BFI-NERA waste disposal at a flow-controlled
facility is actually less expensive than at competing private
facilities. The New Hampshire DES' conclusions regarding the BFI-NERA
document are particularly noteworthy:
The NERA study is flawed in its assumptions, reported
results, and conclusions. Misleading use and reporting of
statistics undermines the validity and credibility of the
results reported from NERA's economic analysis. In both its
modeling and case study analysis, NERA confounds tipping prices
with the actual cost of providing MSW disposal, a decision
which has the inevitable effect of creating an apparent price
advantage for privately operated facilities. Erroneous
assumptions about the cost of transporting MSW to alternative
disposal facilities unfairly deflate the reported cost of using
these facilities. Meanwhile, omitting the cost of integrated
waste management service provided by public, flow-controlled
facilities unfairly inflates the reported ``tipping fees''
charged by these facilities, and results in a false comparison
of disposal costs at the public compared to the private
facilities (which offer no such services). . . .
The NERA study ignores or misinterprets these critical
aspects of solid waste management. In doing so, it vacates any
standing it might otherwise claim as a meaningful contribution
to the ongoing debate about flow control and broader waste
management issues in this country.
Attachment 1, p. 4 (emphasis in original).\6\
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\6\ As an example of the erroneous nature of the BFI-NERA document,
no attempt is made to compare tipping fees on a consistent basis;
instead, spot market tipping fees are apparently averaged together with
tipping fees under long-term contracts without distinguishing the two.
The difference between long-term and spot market tipping fees, however,
is extremely important when analyzing the impact of flow control. In
fact, a principal reason why local governments rely on flow control is
to facilitate long-term agreements for the development and financing of
waste management facilities, as well as to avoid the short-term
fluctuations--which are at times considerable--in spot market prices.
The error underlying the BFI-NERA document is perhaps most poignantly
demonstrated by the claim (at 18) that in Medina, Ohio flow control
``prevents waste generators from saving approximately $20 per ton.'' To
make that claim the BFI-NERA document compares the cost of a modern
recycling facility with the cost of waste disposal at landfills in the
region. Without belaboring the obvious, it costs more to recycle rather
than landfill waste, and that has nothing to do with flow control.
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Finally, it is true that flow control-based tipping fees often
recover, in addition to MSW disposal costs, the costs of
environmentally essential waste management services such as recycling
and household hazardous waste collection that ``generally do not lend
themselves to generation of their own revenues''. Report to Congress on
Flow Control at ES-11. It is particularly important to note in this
connection, however, that ``[w]hen the tipping fee is broken down into
its component parts, prices are usually comparable for facilities sited
in similar locations and built about the same time.'' Id. at 57 (citing
Moody's Public Finance, Perspective on Solid Waste, August 16, 1993, p.
3.) \7\ Moreover, the approach of combining the costs of other solid
waste management programs in a composite fee charged for disposal of
MSW is fully consistent with well established Federal policy. See U.S.
EPA, Variable Rates In Solid Waste: Handbook For Solid Waste Officials,
Volume I--Executive Summary 2, EPA 910/9-90-012a (June 1990)
(discourages use of general taxes to fund solid waste management
because no incentive to reduce waste volume is provided and encourages
volume-based user fees).
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\7\ In a typical non-flow jurisdiction, on the other hand, the only
cost that tipping fees would recover is the cost of disposal, which is
only a small part of the picture.
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iii. conclusion
The Coalition appreciates the opportunity to present the foregoing
views to the Committee on Environment and Public Works. We respectfully
urge the committee to proceed expeditiously with legislation that will
grandfather uses of MSW flow control authority in effect prior to the
Supreme Court's Carbone decision. We pledge our full efforts to work
with the committee to achieve that objective.
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Statement of the National Coalition for Flow Control
This statement is submitted by the National Coalition for Flow
Control \1\ in support of legislation reinstating flow control
authority for certain State and local governments. Specifically, we
urge that flow control authority should be authorized for those
municipal governments that relied on the ability to control the
disposal of waste within their jurisdiction when committing taxpayer
dollars to fund waste-to-energy, landfill and related transfer and
disposal facilities. This limited legislation is necessary to restore a
measure of control to local authorities who must balance the demands of
protecting human health and the environment while maintaining their
ability to borrow money and repay their debts. The Coalition believes
strongly that such governments should not suffer because the rules of
the game were changed in midstream.
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\1\ The members of the Coalition include Lancaster, Montgomery and
York counties, Pennsylvania; Atlantic County, New Jersey; the Great
River Regional Waste Authority, Fort Madison, Iowa; and the City and
County of Honolulu, Hawaii.
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Waste collection has traditionally been a responsibility of local
governments. Twenty years ago, through the authority of Resource
Conservation Recovery Act, Congress charged the States with the task of
developing comprehensive solid waste management plans. Most States
adopted waste disposal, recycling and minimization requirements. Local
governments, responding to these mandates, sought long-term solutions
to the impending waste management problem. Over thirty States adopted
the use of flow control as a tool to help finance advanced,
environmentally sound, solid waste management systems. Flow control
statutes and local ordinances allowed communities to direct where waste
created within their jurisdiction would be disposed. Prior to the
Supreme Court's 1994 Carbone decision, the courts had repeatedly upheld
local government authority to utilize flow control.
Relying on the enforceability of local flow control laws,
communities have issued over $20 billion in bonds since 1980 to finance
the building of modern, efficient, waste management facilities.
Building these facilities is the best long-range means to serve the
waste management needs of thousands of communities while adhering to
environmental standards. Often the revenues from flow controlled waste
management facilities also support recycling and public education on
the need for waste management.
Underpinning the decision to enter the public finance markets and
borrow significant amounts of money was the certainty that flow control
authority guaranteed a dedicated stream of waste that made the
construction of large centralized systems (which benefited from
economics of scale) economical. Thus communities could adopt a ``user
fee'' system by which tipping fees at a landfill or waste-to-energy
plant are borne by the users of the facility. User fees, rather than
taxes, are regarded as the most equitable way of paying for a facility.
The Environmental Protection Agency has encouraged this practice as a
means fairly distributing the cost of reducing total waste and
encouraging recycling. In further reliance on flow control power, many
municipalities have signed long-term ``put or pay'' contracts that
obligate them to supply a certain amount of solid waste to their local
landfill or incinerator. If they fail to deliver the agreed minimum
amount, they must pay the difference in tipping fees. With flow
control, such an outcome was precluded. Without it, municipalities may
have to pay for trash disposal twice; once where it is actually
handled, and again pursuant to ``put of pay contracts''.
Waste authorities throughout the country were dealt a stunning blow
in May 1994 when the Supreme Court ruled in the Carbone case that flow
control ordinances were invalid on the ground that, absent
congressional authorization, they violated the Interstate Commerce
Clause of the Constitution. The decision destroyed the ability of local
communities to manage their waste in the manner they deemed most
effective and threatened their ability to repay their public debt. The
inequity of this course of action was pointed out by House Speaker
Gingrich in a recent statement to the National Association of Counties:
No city or county which has already signed the bonds and has
already built and made the investment should be left in the
lurch. We should grandfather them and take care of them. We
have to learn to make changes in this country in an orderly way
where we don't bankrupt people who did everything right under
the old rules, and they then have no transition to the new
rules.
Since Carbone, communities throughout the country have suffered
grave harm. Over $3.3 billion in municipal bonds have been downgraded
or put on a credit watch since the Carbone decision. The result is that
these jurisdictions may not be able to access the bond market in the
future for essential public facilities. If they can obtain debt
financing, the costs to local taxpayers will be much higher (by as much
as 10-20 percent, according to the National Association of Counties).
Some opponents of flow control point out that, contrary to the dire
predictions, few communities or projects which relied on flow control
have gone into default. This is misleading. Communities, obviously, do
not want defaults and have taken drastic measures to avoid them. Some
are dipping into reserve funds to make up for lost tipping fees. Others
have instituted employee lay-offs, reductions in services, or have
raised taxes. While most communities and waste management facilities
have been able to survive using a combination of these stop-gap
measures, this should not be construed to mean that they do not need
flow control. These measures are not long-term solutions to the
problem. If Congress does not reauthorize flow control more severe
economic consequences, particularly in the form of increased taxes to
residential and commercial users, are likely to follow. Here are some
specific examples of the direct impact of the lack of flow control from
our membership:
In Montgomery County, Pennsylvania, in 1989, the solid
waste authority entered into agreements to build, own and operate a
state-of-the-art 1,200 ton per day mass burn solid waste facility. In
order to finance the facility, the Montgomery County Industrial
Development Authority issued bonds and each of the 24 member
municipalities agreed to send their waste to the facility. Each passed
municipal waste flow ordinances which required each municipality to pay
its share of the total projected waste commitment, regardless of
whether the waste is actually delivered to the facility.
The Waste Management System Authority of Eastern Montgomery County,
Pennsylvania (WSA) issued $107 million in bonds to finance two transfer
stations and a 1200 ton-per-day resource recovery facility for the
benefit of its 24 member municipalities. Since the loss of flow
control, WSA's revenues have fallen $3.8 million, and it expects them
to fall a further $2.6-2.9 million in 1997. These lost revenues (from
fewer tipping fees) are being made up out of reserves which may be
exhausted by the end of this year. Furthermore, WSA stands to lose an
additional 150,000 tons of commercially generated municipal solid waste
in 1998, representing an additional loss of over $4 million in revenues
that must be made up by the municipalities and their residents.
Since the Carbone decision, Atlantic County, New Jersey,
has had to eliminate 61 staff positions, and the Authority may have to
eliminate its recycling, household hazardous waste collection,
composting, paint recycling, and public education programs. Moody's
investment service has downgraded Atlantic County's bonds because it
found the County was ``vulnerable to the loss of legal flow control.''
In Lancaster County, Pennsylvania, the Solid Waste
Management Authority serves a population of 450,000 people. After
incurring over $193 million in debt, the Authority has lost $7.85
million in fees and has drawn down on their reserves in order to make
up the lost tipping fees. Both Moody's and Standard & Poor's have
downgraded their municipal bond ratings, which may not allow them to
refinance their debt because of a lack of investment quality grade
bonds.
Henry, Louisa and Lee Counties in Iowa joined with Hancock
County, Illinois in May 1992, to form the Great River Regional Waste
Authority to manage waste from all four counties in an efficient and
environmentally sound manner. Since the Carbone decision, the Authority
has been forced to find alternative means to repay the $8.9 million in
outstanding debt. Now two of the four counties comprising the Authority
have dropped out, leaving the burden of the debt on the remaining two
counties. The risk of higher taxes is very real for the remaining
counties.
The City and County of Honolulu serves 900,000 customers
at its waste-to-energy and landfill facilities which began operation in
1990 and were constructed at a total cost of $280 million. The loss of
flow control authority makes waste-to-energy facilities less
sustainable in a small, isolated State which will be more dependent in
the future on this less land intensive technology.
There is a simple solution to these problems. The Supreme Court
ruling emphasized that ``absent congressional authorization'' municipal
flow control ordinances were invalid. Congress can and should act to
remedy the situation. Both the 103d and 104th Congresses came close to
reauthorizing flow control authority. These bills failed in part
because opponents of flow control cast the debate as anti-free market.
In fact, less than 20 percent of the municipal solid waste in the
United States has ever been subject to flow control. The bills also
suffered due to controversy over the attached Interstate Waste title
which, although a separate issue, has long been linked to flow control.
A separate bill which restores flow control authority only to those
facilities which relied on flow control to finance their waste
management facilities would be largely free of these concerns.
The National Coalition for Flow Control urges this committee to
take action now to protect communities which have built waste
management facilities and issued bonds in reliance on the law and now
find themselves facing economic disaster through no fault of their own.
By adopting legislation similar to S. 534 (104th Congress) the Senate
will protect taxpayers, residents, permit local governments to meet
their financial obligations and promote environmentally sound waste
management practices.
______
Statement of PSA, The Bond Market Trade Association
PSA, The Bond Market Trade Association is pleased to offer its
views on recent developments related to flow control and the need for
congressional attention to the issue. PSA represents securities?firms
and banks that underwrite, trade and sell debt securities, both
domestically and internationally. PSA's membership includes nearly all
major underwriters of and dealers in State and local government bonds.
Our members have underwritten and currently make markets in all
outstanding debt which is supported by flow control. We have been
active in advocating congressional action on the issue for several
years. We are disappointed that despite numerous attempts, the issue is
not yet resolved. However, we remain hopeful that problems raised by
recent developments can be addressed this year. We thank Chairman
Chafee for convening this hearing and we appreciate the opportunity to
present our views.
PSA does not attempt to defend flow control as a policy. Flow
control has been criticized as anti-competitive and monopolistic, and
these arguments have some merit. We do not suggest that flow control be
perpetuated any longer than is absolutely necessary. However, for many
years flow control was an accepted and widely used practice. Many local
governments around the country entered into very long-term financing
arrangements and contracts under the assumption that they would be able
to practice flow control for at least as long as their exposure under
these arrangements. Now, of course, these local governments are at
serious risk. There is a possibility that some, or even many, could
suffer economically as a result of the loss of flow control authority.
We believe that Congress has an obligation to provide affected
localities with very limited flow control authority for a period long--
enough so that those who are facing serious problems as a result of the
Supreme Court's actions can end the practice of flow control in a
managed and orderly way. After that, we recognize fully that all flow
control authority would end forever.
flow control and municipal bonds
As you know, flow control refers to the ability of local
governments to require that municipal solid waste generated within a
jurisdiction be processed at a designated disposal site, transfer
station, recycling facility or other waste processing facility. Flow
control authority was important to local government solid waste
programs in part because it made financing for capital facilities
possible at affordable rates. Flow control authority ensured investors
and others that a particular facility would generate a sufficient level
of waste disposal--and would earn sufficient fee revenue from that
disposal activity--to pay debt service on bonds. With flow control
authority, a local government was usually able to obtain ``investment
grade'' ratings from bond rating agencies, ensuring a reasonable cost
of capital financing. Flow control was also utilized in numerous
jurisdictions to help ensure the sufficiency of revenue for facilities
owned or operated by private companies.
When the U.S. Supreme Court ruled in 1994 on the case of C&A
Carbone, Inc. v. Town of Clarkstown, N.Y., striking down the policy of
flow control as unconstitutional, many market analysts predicted
extremely negative outcomes. A number of outstanding bond issues were
downgraded by one or more credit rating agencies, indicating that the
credit quality of outstanding debt supported by flow control had
deteriorated significantly. Local governments began scrambling to
explore alternatives to flow control in anticipation of their eventual
loss of flow control authority.
Today, nearly 3 years after the Carbone decision, many of the
pressures that market participants feared have intensified. Many bond
issues are in technical default.\1\ Credit downgrades continue.
Investors in flow control bonds have experienced severe deterioration
in the prices of their portfolios. Communities have begun to tap other
sources of funds to meet their debt service obligations. All this has
happened during a time when many local governments are still able to
enforce flow control ordinances, either because their cases are still
pending in the judicial system or because courts have granted
transition periods during which flow control is still permitted.
Perhaps the most illustrative example is the State of New Jersey.
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\1\ ``Technical'' default occurs when a bond issuer fails to comply
with one or more requirements under a bond indenture, even though the
issuer remains current on debt service payments. Often, technical
defaults occur when issuers fail to maintain debt service coverage
ratios. This is the reason for technica1 defaults on flow control
bonds. Debt service coverage ratios stipulate that a bond issuer's
revenue available for debt service must exceed some multiple of the
actual debt service obligation. For example, a debt service coverage
ratio of 1.25 means that an issuer's revenue available to pay debt
service must total at least 125 percent of the debt service actually
owed. If revenues fall short, the issuer is in technical default.
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Some time ago, the State of New Jersey established a goal of self-
sufficiency in its solid waste disposal. This goal was established in
part because the State had become dependent on out-of-state disposal
facilities to receive solid waste generated within New Jersey, and
there was concern that eventually Congress would significantly restrict
the interstate transportation of municipal solid waste. As a result, at
the State's direction, many local governments in New Jersey established
solid waste authorities and issued bonds to build environmentally sound
local waste disposal facilities, in most cases incinerators. In order
to cover operation and maintenance expenses and to service the debt
necessary to design and build these facilities, the per-ton disposal,
or ``tip,'' fees had to be set at levels considerably higher than at
alternative disposal sites, which consisted largely of nearby out-of-
state, privately owned and managed landfills. The only way the New
Jersey facilities could support their above-market fees was through the
exercise of flow control.
A Federal court decision last year in Atlantic Coast Demolition &
Recycling, Inc., et al. v. Board of Chosen Freeholders of Atlantic
County et al. reaffirmed the Supreme Court's Carbone decision and ruled
that New Jersey's system of solid waste management is unconstitutional
because it relies on flow control. The decision gave the State until
July 1998 to restructure its solid waste disposal system and stop
practicing flow control. For the time being, New Jersey localities are
still able to enforce flow control ordinances. However, the court's
deadline is approaching quickly. The State must establish an
alternative source of funding to retire the billions of dollars of debt
that was incurred in order that New Jersey could become self-sufficient
in its solid waste disposal. One of the approaches under consideration
would empower local governments to impose ``environmental investment
charges,'' or garbage taxes, on local businesses. The new taxes could
be imposed on all residences and businesses that generate solid waste
to raise sufficient revenue to pay off outstanding debt.
It is unfortunate and ironic that New Jersey, the State which
spearheaded the growing trend of cutting burdensome State taxes as a
way to spur economic development, may have to impose a new tax in order
to maintain its local governments' payment obligations. It is also
ironic that the cost of providing solid waste disposal services will
ultimately be borne by the same citizens and businesses which had been
paying above-market disposal fees as a result of flow control--under
the proposal being considered, they will pay the cost as a tax rather
than as inordinately high tip fees. Ultimately, all the costs of New
Jersey's investment must be paid. In the absence of flow control and
under current competitive pressures, New Jersey's disposal facilities
cannot survive by charging the above-market fees which they have to
date. Market level fees would not generate sufficient revenue to cover
operation, maintenance and debt service expenses. The only alternative
would be for New Jersey's local governments to default on outstanding
debt. In the mean time, bond investors continue to lose money because
the considerable uncertainty regarding the outcome of the debate has
driven down the prices of flow control bonds.
congressional action needed
PSA still believes that the simplest way to address the problems
associated with the loss of flow control authority is for Congress to
permit local governments with contracts or debt outstanding to practice
flow control only long enough to retire their obligations. This
approach was embodied in compromise flow control legislation which was
brought before the House of Representatives in the last Congress and,
unfortunately, did not pass under suspension of the rules. The
compromise proposal considered in the House in 1995 was the product of
many hours of discussion among representatives of solid waste disposal
companies, our industry, representatives of local governments and, of
course, Members of Congress and their staffs. The compromise
legislation represented a balanced, measured approach designed to give
local governments an opportunity to phase out their practice of flow
control in a reasonable and managed way.
The compromise acted upon in the House in the last Congress would
permit local governments with bonds outstanding or ``put-or-pay''
contracts in place at the time of the Carbone decision to practice flow
control only until their obligations were satisfied. It would provide
no ``prospective'' flow control authority. It would limit the uses of
revenues generated through the practice of flow control. It would
prohibit local governments from imposing flow control on classes of
waste which were not subject to flow control at the time of the Carbone
decision. In general, it would provide safeguards to ensure that no
local government abused its limited authority to enforce flow control
ordinances. This approach has the support of key members of the solid
waste industry as well as local government representatives and other
market participants, including PSA. The legislative language acted on
by the House in 1995 was recently reintroduced by Congressman Bob
Franks as H.R. 943, the Municipal Solid Waste Flow Control Act of 1997.
summary
PSA is grateful for the effort and attention which Chairman Chafee
and other members of this committee have paid to the issue of flow
control over the past several years. We particularly appreciate, for
example, Chairman Chafee's and Chairman Smith's work in the last
Congress on S. 534, the Municipal Solid Waste Flow Control Act of 1995,
which was passed by the Senate 2 years ago. We supported that effort,
and we were disappointed when the House failed to act on it. However,
we believe that in the current climate, an approach such as that
embodied in S. 534 would likely not emerge successfully from the
legislative process. A more measured approach to the flow control
problem such as H.R. 943 would provide local governments with the tools
necessary to address problems raised by the Carbone decision and, we
believe, would represent more palatable policy.
Today, local governments find themselves in very difficult
financial situations over which they have little control. We do not
seek to perpetuate flow control any longer than is absolutely
necessary. However, congressional action is needed to ensure an orderly
transition away from a system based on practice once considered
perfectly acceptable. We urge the committee to act quickly on flow
control legislation. We would support a bill which granted local
governments limited flow control authority tied to outstanding
obligations such as that provided in H.R. 943. We are grateful for the
opportunity to present our views, and we would be happy to work with
members and staff of this committee as the debate over flow control
legislation progresses.
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Statement of Teree Caldwell-Johnson, Chair, Solid Waste Management
Committee, American Public Works Association
Chairman Chafee, Mr. Baucus and Distinguished Members of the Senate
Environment & Public Works Committee: My name is Teree Caldwell-
Johnson, and I am the County Manager for Polk County, Iowa and the
former Executive Director of the Des Moines Metro Waste Authority.
Today I make this statement on behalf of the American Public Works
Association (APWA). APWA is the largest membership organization of the
Nation's local public works agencies and professionals who help to
maintain the nation's infrastructure. Our members have the
responsibility for applying limited public resources to ensure that the
roads and bridges we use every day are maintained and safe. We ensure
that the water you drink is clean and safe, the trash and recyclables
collected, the landfills maintained the often invisible, but essential,
services that contribute to quality of life in our cities, counties and
towns.
First, I want to thank you, Mr. Chairman, for holding this hearing
on a subject of critical importance to many communities across the
Nation. As you know, local government waste flow control has been in
legal jeopardy since May 1994 when the U.S. Supreme Court, in Carbone
v. Town of Clarkstown (N.Y.), ruled that a local ordinance that
required trash haulers to use the town's designated disposal facility
violated the Commerce Clause of the U.S. Constitution. This decision
had the effect of changing the rules in the middle of the game. Local
governments had entered into legally binding flow control arrangements
prior to the Court's decision, in part to spur recycling, composting
and other waste reduction activities. They made significant financial
commitments based on these arrangements, including issuing bonds to
construct new, technologically advanced, environmentally safe
facilities. To repay these obligations without flow control authority,
communities have had to impose tax and fee increases, make staff
reductions, and impose cutbacks in other programs--all as a result of
Congress' failure to pass flow control legislation in the nearly 3
years since Carbone.
As the body of professionals charged with implementing State and
Federal laws which require planning for integrated, safe,
environmentally sound and fiscally viable solid waste management
systems, the American Public Works Association urges you to take action
on waste flow control legislation this session. Let me tell you why.
Members of APWA report to me that, in addition to decreased
revenues, they are faced with expensive lawsuits or the threat of
lawsuits by, for example, haulers seeking a refund of the portion of
tip fees deemed by them to be above the level necessary for the
operation of the facility--even going back to pre-Carbone days. In at
least one case, the threat of such a lawsuit was used as a negotiating
tool in contract negotiations.
Local governments who responded to the perceived landfill capacity
shortage a decade back by building state-of-the-art waste-to-energy
facilities are now faced not only with an inability to repay bonds
through flow-controlled tip fees, but also with imminent clean air
retrofits.
What is the inevitable result to these very real circumstances? I
foresee a ``Price is Right'' approach to solid waste decisionmaking,
which discourages long-term environmental and holistic considerations
in favor of short-term economic expediency. This approach transforms
the federally recommended solid waste hierarchy (which prefers source
reduction, minimization and diversion and lists landfilling as a last
resort) from a cornerstone of integrated solid waste planning to merely
a ``Figure 3-1 `` in some out of print EPA publication. Members of APWA
don't want to see that happen.
If you are wondering why we care, I'll remind you that, unlike the
private sector, in most areas of the United States, local general
purpose governments have been charged with ultimate responsibility to
manage the municipal solid waste generated within their boundaries.
Some States have codified that responsibility. Other States have vested
that responsibility with regional or statewide agencies and assigned
those public entities the responsibility for managing the municipal
waste generated within boundaries established in the legislation.
Without flow control, local governments retain the responsibility
without the authority.
In order to fulfill their obligation, the planning efforts
undertaken by the responsible public agencies must consider the
utilization of all elements of integrated solid waste management. The
planning program must take into account the environmental, economic and
political elements of waste management program alternatives including
the use of various types of public/private cooperative activities and
the availability of existing facilities and infrastructure.
Municipal waste management programs, whether they be implemented at
the local, regional or State levels, start at the storage container
located in the home, school, office or plant and continue through the
collection, transportation, processing and final disposal phases. Most
local municipal programs focus primarily on the residential waste
stream, with the private sector supplying the services to other
generators. In some instances, however, the public sector agency
exercises control over the entire municipal waste stream by providing
service to all generators through the use of public employees and
publically owned equipment and/or facilities, through contracting of
services for all generators or through the licensing of haulers,
processors and disposers.
Since the details of each particular program are heavily dependent
on the demographics, physiographics, financial capabilities and staff
expertise available in a given area, current programs vary
significantly in those details. Examples of variation of municipal
waste management programs being implemented include:
Public ownership and operation of all required equipment
and facilities.
Public ownership and operation of collection equipment and
contract for private operation of publicly owned transfer, processing
(materials recovery, composting, waste-to-energy) facilities and/or
disposal (landfill) facilities.
Public ownership and operation of collection equipment and
contract for use of privately owned and operated transfer, processing
facilities and/or disposal facilities.
Private ownership and operation of all required equipment
and facilities through service contract with the public sector.
Private ownership and operation of all required equipment
and facilities through direct contracts between the individual
generator and the private sector supplier.
A review of these approaches clearly indicates that the
capabilities of the private sector both environmentally and
financially--have been and will continue to be integral elements of
solid waste management programs undertaken by the public sector. Under
any of the options, however, appropriate Federal and State laws should
ensure that the environment and public health are protected.
Regardless of the system employed, the amount of waste handled in
any single program has a great impact on the economics of that system.
Larger volumes can provide economy of scale benefits through the
implementation of area wide programs involving both large and small
municipalities. Such benefits could have a positive impact on the
financing of capital costs, on the cost of day to day operations and on
the more efficient utilization of personnel and equipment. This is
particularly true today as the environmental sophistication and
resultant capital and operating costs associated with modern waste
management equipment and facilities have soared. Therefore, any Federal
proposal regarding flow control must assess both the retrospective and
prospective impact of those proposed actions.
From a retrospective standpoint, many capital-intensive solid waste
management projects require that local governments deliver a minimum
amount of waste to a specific facility through binding contractual
commitments or reliance on existing flow control authority. The owners/
operators of such facilities, whether they are public or private sector
entities, rely on income to cover development, financing and operating
costs. The resulting investment losses due to a lack of flow control
puts the burden on small businesses and taxpayers.
Because of the need for a bill that will allow affected communities
to repay their significant outstanding liabilities incurred prior to
Carbone, we support legislation limited to the objectives of
``grandfathering'' such pre-existing obligations.
Thank you.
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Statement of the Solid Waste Association of North America
The Solid Waste Association of North America (SWANA) is a non-
profit professional association comprised of approximately 6,400 local
government and private sector professionals dedicated to advancing the
practice of environmentally and economically sound municipal solid
waste management. SWANA's guiding principle is that local governments
must ultimately be responsible for the management of municipal solid
waste within their jurisdiction. However, local government need not own
or operate the system to meet that responsibility. This principle has
long been recognized by the courts, embodied in the Resource
Conservation and Recovery Act (RCRA) and incorporated in State solid
waste laws. In response, local governments invested in solid waste
management facilities for use by their communities. Most did so at a
time when private sector alternatives were non-existent. Many local
governments financed these facilities in good faith reliance on waste
flow control authority to recover the costs of such investments.
With the U.S. Supreme Court's decision in C&A Carbone v. Town of
Clarkstown, New York, 114 S. CT. 1677 (1994), invalidating local
governments' flow control authority, the rules for local government
changed leaving stranded the investments they made. These local
governments are now facing significant hardships as they struggle to
repay the bonds without flow control authority, ranging from having to
increase property taxes to a weakened ability to obtain credit in the
market for funding of other infrastructure projects.
SWANA believes fairness and the need to restore economic stability
dictates that Congress should grant those local governments, who were
left with stranded debt in the wake of the Carbone decision, authority
to exercise flow control for the limited purpose of repaying their
outstanding bonded indebtedness. Such legislation would facilitate a
smooth transition to the post-Carbone era of greater free markets and
less regulation in the management of municipal solid waste.
the regulatory framework prior to carbone
Historically, it has been local government's responsibility to
protect human health and the environment under State granted police
powers. The U.S. Supreme Court has long recognized that local
government management of municipal solid waste, or local government
supervision of private service contractors providing this service, is a
valid exercise of these police powers. See, e.g., California Reduction
Co. v. Sanitary Reduction Works of San Francisco, 199 U.S. 306 (1905).
The public has relied on local governments to manage for the collection
and disposal of municipal solid waste and it will undoubtedly continue
to rely on local governments to ensure that its wastes will be disposed
of in a manner which protects the general welfare.
Congress recognized this traditional role of local governments when
it passed RCRA in 1976. Under the Act, States and their local
governments were directed to close open dumps and develop and implement
long term plans for the management of solid waste generated within
their respective boundaries. RCRA encouraged resource recycling
including converting waste to energy. The US Environmental Protection
Agency (EPA) adopted a national policy, reflecting what many States and
local governments were already doing in the wake of RCRA, which
established a hierarchy for municipal solid waste management. The
hierarchy encouraged integrated solid waste management by which
programs for waste reduction should be implemented first, followed by
composting and recycling, energy production from waste, and landfilling
the remaining wastes only as the last resort. In response to these
Federal mandates and policies, consequent State mandates (including
mandatory recycling/diversion levels), and, at the time, an absence of
mature private sector alternatives, many local governments financed the
construction and operation of integrated systems of waste management
facilities and programs--such as waste reduction, composting, and
household hazardous waste collection among others--to ensure that there
would be long term capacity for managing municipal solid waste.
In order to generate the capital necessary to finance the solid
waste management facilities, most local governments issued municipal
bonds in an amount that has been estimated at $20 Billion nationwide.
These bonds were issued on the premise that local governments could
regulate the flow of solid waste to the facilities so that tipping fees
could be assessed to generate sufficient revenues to repay the bonds.
In part, local governments relied on certain provisions in RCRA which
indicated that Congress expected local governments to implement some
form of flow control. (See, e.g., 42 USC Sec. 6943(a)(5) (not
prohibiting local governments from negotiating and entering into long-
term contracts for the supply of solid waste to resource recovery
facilities), and 42 USC Sec. 6948(d)(3)(C) (endorsing creation of local
government authorities having the power to secure the supply of waste
to a project)).
(Typically, the local governments set tipping fees to recover costs
of the integrated system and assessed those fees at one designated
facility within the system. If the designated facility was a waste-to-
energy (WTE) plant or a landfill, this approach to assessing ``system''
tipping fees allowed other WTE plant or landfill owners, who needed to
recover only the cost of their specific facility, to argue that their
tipping fees were considerably lower. This difference in tipping fees
at comparable facilities has been used to argue that flow control
results in greater disposal costs. However, this argument, although
accepted by many as true, unfairly ignores that it is clearly based on
an ``apples to oranges'' comparison.)
In exercising flow control, local governments also relied on 90
years of Federal court decisions, beginning with the California
Reduction case, that rejected private waste companies' challenges to
local government control over solid waste based on antitrust, property
``takings'' and interstate commerce discrimination arguments.
Specifically, in the decade following adoption of RCRA, Federal courts
in New Jersey, Ohio and Delaware each found flow control regimes to not
violate the Constitution's Commerce Clause. During this same period,
the private solid waste management industry reached maturity, large
private regional landfills were constructed, and commerce in solid
waste became a billion dollar business. By the early 1990's, the tide
in the courts turned against local governments' exercise of flow
control culminating with the Supreme Court's decision in Carbone.
Today, it appears that the Federal policy favoring integrated systems
of solid waste facilities is being replaced by an emphasis on the
cheapest disposal option: large regional landfills benefiting from
economies of scale. To this extent, compliance with the Federal solid
waste hierarchy is jeopardized.
stranded investments in the wake of carbone
What is currently occurring to many local governments in the
aftermath of the Carbone decision is in many ways similar to the
current struggle to deregulate the electric utility industry. In both
cases there is a shift from a regulatory regime based on monopolistic
practices to a highly competitive and deregulated arena. Additionally,
in both cases, there is significant stranded investment that is created
by the shift to a free market.
In the case of electric utility deregulation, the electric
utilities which were relied upon to make investments to ensure an ample
power supply to their customers, are now not assured that these
customers will remain to help repay the investments since they are free
to shop for other electricity providers. Accordingly, to avoid severe
and disruptive economic consequences, Federal and State regulators and
policymakers have authorized the utilities to require these customers
to assist in repaying the utilities' existing debts over a reasonable
amount of time.
The concept of protecting stranded investments makes sense for
several reasons. First of all it appeals to a sense of fair play. Those
investments were made in good faith under the State and Federal
regulatory regime that was in effect at the time. Second, allowing
recovery of stranded investments, provides a smooth transition for
these existing facilities to operate in a market place with changed
ground rules. Third, spreading these stranded investments over the
entire customer base results in an equitable and least painful
allocation of costs, so no single party bears an undue share. Finally,
the recovery period is temporary and is restricted to a reasonable
period of time. Eventually these investments will be paid off and the
need for protection will end.
SWANA believes that the same rationale which has been applied to
the electric utility sector to allow recovery of stranded costs, should
be applied to local governments that relied on flow control ordinances
to finance investments in solid waste management facilities. Those
local governments that, prior to the Carbone decision, issued bonds for
such investments should be allowed to repay those bonds over the
remaining bond financing period by using waste flow control. SWANA
supports Federal legislation which would authorize these local
governments to exercise flow control for this limited purpose and
limited duration.
why congress needs to act
In the Carbone decision, Congress was invited to enact legislation
to clearly indicate that States and local governments could exercise
flow control. However, Congress' failure to do so in the 3 years since
Carbone has resulted in three major credit rating agencies reevaluating
the credit of the billions of dollars in outstanding municipal waste
bonds which were issued to finance construction of solid waste
management facilities. Eighteen of these bonds have been downgraded,
including several to non-investment grade. For the local governments
with below investment grade rating, their access to the public market
to fund capital projects has either been eliminated or greatly
diminished. For the 21 bond issues that received an unstable credit
watch, the cost of future borrowing, by the respective local
governments, will certainly increase.
Those who believe that these local governments do not need Federal
legislation authorizing flow control have cited the fact that no local
government has yet to default on its bonds. However, they fail to
acknowledge that the local governments have taken drastic and painful
steps to avoid bond defaults at all costs. These steps have included
raising property taxes, dipping into other infrastructure accounts,
cutting of recycling programs and other environmentally sound solid
waste management services, transferring general fund revenues, and
laying off scores of employees. Without restoration of flow control
authority to repay the bonds, additional financial hardships and
adverse environmental consequences are expected with the potential for
bond defaults looming larger and larger. We have attached a summary of
adverse impacts in some of the communities which have been affected by
the Carbone decision.
Some have also argued that Federal flow control legislation is not
needed because some local governments have been able to use alternative
constitutional means to ensure that solid waste is delivered to the
facilities financed by the bonds. However, the ability of a specific
local government to undertake alternatives depends on the scope of
authority it was granted under State laws. The hodge podge of State
laws, and the time consuming nature of efforts in the States to provide
relief to local governments saddled with investments stranded by
Carbone, underscores the need for timely Federal legislation which
uniformly restores to those local governments flow control authority to
repay their debts.
Congress has cited the need to end litigation as a primary reason
for its drive to reform the Federal Superfund law. Likewise, Congress
should end the costly litigation to which local governments that
previously exercised flow control are now subject, by validating that
flow control authority through enactment of Federal legislation. Local
governments and private parties have spent millions of dollars on legal
fees since the Carbone decision. In addition, in a growing number of
these lawsuits, punitive damages are being sought from the local
governments. For Example, Hennipen County, Minnesota has already paid
$17 million in such damages and faces a potential damage award in
excess of $154 million.
conclusion
The regulatory regime that local governments operated under prior
to Carbone was based on Federal and State laws, policies, and court
decisions which encouraged the use of waste flow control. It is only
fair that local governments which incurred debt pursuant to the prior
regulatory regime be given a reasonable period of time to transition to
the new ``deregulated'' arena and recover that debt. Otherwise, these
local governments will be subject to significant financial hardships
and economic dislocations. Accordingly, SWANA urges Congress to act
responsibly by granting those local governments, who were left with
stranded debt in the wake of the Carbone decision, authority to
exercise flow control for the limited purpose of repaying that debt.
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Statement of George G. Balog, Chair, Urban Affairs Committee, American
Public Works Association
Chairman Chafee and Distinguished Members of the Committee on
Environment and Public Works: My name is George G. Balog and I am
Director of the Baltimore City Department of Public Works, one of the
largest Public Works Departments in the Country. I am writing in my
capacity as Chair of the American Public Works Association's (APWA)
Urban Forum in support of local government authority to control the
flow of waste.
The APWA is the largest membership organization of municipal public
works agencies and private consultants who help maintain the nation's
infrastructure. Our members are entrusted with use of limited public
resources to ensure that the roads and bridges we use every day are
maintained and safe. We ensure that the water you drink is clean and
safe, that trash and recyclables are collected, the landfills
maintained--the often invisible services that keep our cities, counties
and towns running safely and smoothly.
These invisible services require a huge investment of time, effort
and funds in order to support the kind of services our citizens have
come to expect and demand. Nowhere is this more evident than in the
management of our Solid Waste Stream.
No longer are we simply ``picking up the trash.'' We have
incorporated special bulk services, curbside recycling to reduce our
trash stream, used regional approaches for disposal plants and
composting facilities, sponsored community cleanups, added an arsenal
of new equipment and fostered public information campaigns to educate
and motivate our citizens. With shrinking General Fund budgets,
innovation is no longer just a dream, its a necessity.
Our communities are faced with stringent Federal and State
Environmental Rules and Regulations. In addition, finding appropriate
markets for recyclables or waste disposal facilities has not been easy
nor always affordable. Many communities have had to make long-term
financial commitments in or to facilities which ensure the facilities'
financial and operational stability. Flow control has been the logical
outgrowth of such conditions.
Since the May, 1994 U.S. Supreme Court decision in Carbone v. Town
of Clarkstown (N.Y.), legally binding flow control and related
financial arrangements have been thrown into disarray. These
arrangements were negotiated and entered into in good faith. For many
local governments, these were the only means available to meet
environmental standards, goals and their fiscal responsibilities. We
believe these efforts should be recognized and ``grandfathered'' in
Federal Flow Control Legislation.
In the city of Baltimore, we have a carefully managed Solid Waste
Program that includes: municipal collection of solid waste; a privately
owned waste-to-energy plant that burns our municipal waste according to
contract-minimum amounts; a City owned and operated landfill which
accepts the incinerated waste ash from the waste-to-energy plant as
well as other public and private wastes; and private companies which
accept recyclables collected by City forces under competitively bid
contracts. This balance of public and private cooperation is necessary
in order to effectively and responsibly manage the 2,600 tons of solid
waste generated every day in Baltimore City.
Local governments carry the burden of safe collection and disposal
of Solid Waste for their communities. It is a task which Public Works
Departments accept and have been doing quite well for many years. It is
a sensible arrangement. But over the years, environmental protection
measures mandated by State and Federal Government--much of which has
been unfunded--and goal driven programs to reduce waste streams through
recycling, makes the job of Solid Waste Management more difficult, more
expensive and more complex.
While we recognize the unquestionable authority Congress has in
regulating Interstate Commerce, we in APWA' s Urban Forum would like
Congress to recognize local governments' unique needs in managing Solid
Waste. Federal Flow Control Legislation that authorizes local
governments to designate facilities where locally generated municipal
solid waste is managed will allow for dependable supplies of waste and
predictable sources of revenue to make possible reasonable and
responsible Solid Waste Management Programs.
We, as Public Works professionals, urge Congress to move quickly
and positively to pass Federal Flow Control Legislation. Please help
make local governments' difficult job of Solid Waste Management a more
reasonable and effective one.
To that end, I offer the resources of my Agency and my colleagues
in the APWA Urban Forum to assist in any way we can in this effort.
Thank you.
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Statement of Anthony W. Hayes, Director of Public Works, Falmouth, ME
Chairman Chafee and other distinguished members of the Environment
and Public Works Committee: I write to you today as a representative of
a small community which has been adversely and significantly impacted
by the court ruling in the Carbonne v. Clarkstown case. Communities are
seen as having a legal responsibility to provide some services to its
citizens. By law, waste disposal is one of these services. In Carbonne
the court saw fit to redefine the rules by which municipalities
interpreted their responsibilities but also saw that there would be
need for Congress to act to mitigate substantial economic harm to some
communities.
Before Carbonne, area wastes were disposed of at a regionally owned
and operated municipal waste to energy plant with commercial waste fees
at $65 per ton. Without flow control we were forced to reduce
commercial fees.
After Carbonne the same waste is going to the same plant, except at
a reduced commercial rate of $40 per ton. Residential disposal fees
have had to increase to $98 per ton to provide sufficient revenue to
the plant to pay long term debt, operating costs, and for pollution
upgrades. The losers are the residential customers whose tip fee has
increased by more than 50 percent. Businesses have seen no reduction in
waste disposal fees from haulers but have seen higher property taxes in
the area to help fund residential tip fees which are usually paid for
with property tax dollars.
The winners are the waste haulers who have pocketed the tip fee
savings.
Almost $3 million per year in disposal fees have been shifted from
commercial haulers to residential taxpayers. This represents a huge
windfall for the haulers! No wonder they support the status-quo!
Municipalities and taxpayers must have relief from the financial
mess created by a shift in law after the multi-million dollars
investment.
While some may feel that the issue of Flow Control has been
resolved. I am sure you recognize that is not the case. Just because a
story is not front page news does not mean it is not of great
significance. Though flow control affects only a portion of the country
and only some communities, that impact is severe for many. Falmouth's
waste disposal budget increased by nearly 75 percent. If this were an
issue impacting all the country, the impact would be more than $2
billion dollars. Because it does not impact everyone should not be the
measure of its importance.
Please return to the near unanimous agreement of several years ago
and draft limited grandfathering legislation that addresses the needs
of the significant number of citizens impacted by the law court ruling
on flow control.
Thank you for the opportunity to comment on this issue.
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