Waste Management: Observations on the Congressionally Approved	 
New Hampshire-Vermont Solid Waste Compact (13-DEC-02,		 
GAO-03-276R).							 
                                                                 
This report provides information on (1) the structure and	 
operations of the New Hampshire-Vermont Solid Waste Project; (2) 
how the project's structure and operations compare to those of	 
other interstate waste management projects; and (3) issues that  
need to be addressed in the future, as the expiration of the	 
incineration contract approaches and the districts consider their
options. In addressing the second question, we were unable to	 
identify any other congressionally approved interstate solid	 
waste compacts. However, we identified 10 interstate compacts for
the management of low-level radioactive waste and one solid waste
agreement that was not congressionally approved and used them as 
a basis for comparison. 					 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-276R					        
    ACCNO:   A05726						        
  TITLE:     Waste Management: Observations on the Congressionally    
Approved New Hampshire-Vermont Solid Waste Compact		 
     DATE:   12/13/2002 
  SUBJECT:   Interstate programs				 
	     Solid waste management				 
	     Waste disposal					 
	     Program evaluation 				 
	     Waste management					 
	     Strategic planning 				 
	     New Hampshire					 
	     New Hampshire-Vermont Solid Waste			 
	     Compact						 
                                                                 
	     New Hampshire-Vermont Solid Waste			 
	     Disposal Project					 
                                                                 
	     Vermont						 

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GAO-03-276R

GAO- 03- 276R Interstate Solid Waste Compact United States General
Accounting Office

Washington, DC 20548

December 13, 2002 The Honorable Bob Smith Ranking Minority Member
Committee on Environment

and Public Works United States Senate

Subject: Waste Management: Observations on the Congressionally Approved
New Hampshire- Vermont Solid Waste Compact

Dear Senator Smith: Managing garbage and other solid waste poses a
significant challenge for many communities, particularly small ones. 1
Over the past 4 decades, the amount of waste destined for landfills* the
traditional method of solid waste disposal* increased dramatically, from
88 million tons in 1960 to 232 million tons in 2000, or by about 6.6
percent annually. During the same period, significant numbers of landfills
closed as federal and state regulatory requirements were strengthened.
From 1988 to 2000 alone, about 75 percent of the nation*s landfills ceased
operation, according to data from the Environmental Protection Agency
(EPA). To meet these challenges, some communities have banded together
under regional agreements or interstate agreements* sometimes referred to
as compacts* that help them jointly manage their waste. Such agreements
help participating communities avoid duplication of costs and take
advantage of economies of scale.

In 1982, Congress approved an interstate compact between a solid waste
management district in New Hampshire and a solid waste management district
in Vermont to establish the New Hampshire- Vermont Solid Waste Project.
The purpose of the project was to develop joint solid waste disposal and
resource recovery facilities, including a waste- to- energy incinerator
and a landfill for disposal of the incinerator ash. 2 After the member
districts adopted a cooperative agreement to implement the compact,
project officials contracted with a waste management company to build the
incinerator and to operate and maintain it until 2007. Project officials
issued separate contracts for the design and construction of the ash
landfill. After disputes arose regarding expansion of the landfill*s
capacity, the ash landfill was closed in 2001 and project officials
entered into a contract to have the

1 For the purposes of this report, solid waste means the nonhazardous
garbage or trash typically generated by industries, businesses,
institutions, and households. 2 Under state law in New Hampshire and
Vermont, communities may join together to form waste

management districts to manage the disposal of their solid waste.

GAO- 03- 276R Interstate Solid Waste Compact Page 2 incinerator ash hauled
to a landfill in Massachusetts. Other disputed issues over the

years have included the financing of major capital projects, the cost of
the incineration services, the cost of the electricity generated by the
incinerator, the potential environmental impact of the incinerator and
landfill, and other matters.

The federal government plays a role in the implementation of the New
HampshireVermont Solid Waste Compact. The project*s waste disposal
operations must comply with applicable federal environmental laws.
Moreover, because the compact required initial congressional approval, the
Congress must approve any changes to it. The compact has now been in place
for over 20 years, and questions have arisen about the future of waste
disposal in the affected region. This report provides information on (1)
the structure and operations of the New Hampshire- Vermont Solid Waste
Project; (2) how the project*s structure and operations compare to those
of other interstate waste management projects; and (3) issues that need to
be addressed in the future, as the expiration of the incineration contract
approaches and the districts consider their options. In addressing the
second question, we were unable to identify any other congressionally
approved interstate solid waste compacts. However, we identified 10
interstate compacts for the management of low- level radioactive waste and
one solid waste agreement that was not congressionally approved 3 and used
them as a basis for comparison.

In summary, we found that  To implement the New Hampshire- Vermont Solid
Waste Compact, the two

member districts adopted a cooperative agreement that established a two-
tiered management structure: a Joint Meeting with representatives from
each community in the two districts and a smaller Executive Committee
composed of representatives from the Joint Meeting. The Joint Meeting
authorizes actions needed to carry out the purposes of the cooperative
agreement, such as the acquisition or disposition of property, and adopts
the annual budget under which the project operates. The Executive
Committee implements the policies and actions authorized by the Joint
Meeting, proposes an annual budget, oversees the project*s day- to- day
operations, and approves all project contracts. Executive Committee
members develop a budget sufficient to cover the estimated costs of waste
incineration and ash disposal; real estate taxes; bond repayments; and
running the project office. Once the budget has been approved, the
communities in the member districts are responsible for generating
sufficient revenues to pay for their share of the budget, an allocation
determined by the waste management districts and based on the percentage
of the total waste tonnage that each community generates. The communities
are also responsible for organizing a collection site for their waste and
its transport to the incinerator.

3 In 1971, Fairfax County, Virginia; the District of Columbia; and a
regional waste management agency, which encompassed these and other
jurisdictions (including some in Maryland), entered into a memorandum of
understanding to jointly develop an interim landfill. By 1986, the solid
waste management project had evolved to include a waste- to- energy
incinerator and a landfill; project participants included jurisdictions in
Virginia and the District of Columbia. The project is called the I95
Resource Recovery, Land Reclamation, and Recreation Complex or, more
commonly, the *I- 95 Complex.*

GAO- 03- 276R Interstate Solid Waste Compact Page 3  The structure and
operations of the New Hampshire- Vermont Solid Waste Project

differ from those of other interstate waste management projects in several
ways. For example, the two- tiered structure used in the New Hampshire-
Vermont project differs from that of the other projects, each of which has
a single governing body. From an operational standpoint, major differences
between the New Hampshire- Vermont project and the others include the
degree of authority granted to the projects* governing bodies and how
clearly the implementing agreements define roles and responsibilities. For
example, under the low- level radioactive waste compacts, the projects*
governing bodies are specifically defined as independent legal entities,
separate and distinct from the participating members. However, the
cooperative agreement that implements the New Hampshire- Vermont project
is not as explicit, and the question of whether the *project* exists as a
separate legal entity has been the subject of litigation. Similarly, the
cooperative agreement either does not address important functions that
have been retained by the member districts, such as the authority to issue
bonds to finance major capital investments, or is unclear about how
certain responsibilities are divided between the project and the
districts. The New Hampshire- Vermont compact and the other waste
management agreements are similar in several respects, however, including
the extent to which they address how accounts and records will be
maintained, audit services will be engaged, and the agreements will be
modified.

 By the time the contract for incineration services expires in July 2007,
project officials must address a variety of issues in three broad
categories: alternative waste disposal options, the long- term liability
of communities in the member districts, and the disposition of project-
related land. Much depends on whether the districts decide to dissolve
their cooperative agreement and, as a result, are faced with making new
arrangements for the disposal of their solid waste. If the agreement is
dissolved, project officials must ensure that existing obligations are
met. For example, although the ash landfill was officially closed in 2001,
project officials are responsible both for ensuring that post- closure
maintenance and monitoring requirements will be met over a 30- year period
and for establishing a trust fund to meet related financial obligations.
Consequently, communities in the member districts may retain certain
financial liabilities long after the cooperative agreement is dissolved.
Dissolving the agreement would also raise issues regarding the disposition
of project- related land. For example, although the member districts
jointly own the land on which the incinerator is sited, the company that
currently holds the incineration contract has two 10- year options to
renew its lease of the incinerator property and could do so whether or not
the districts decide to dissolve the cooperative agreement.

Background

The management of the nation*s solid waste is regulated under Subtitle D
of the Resource Conservation and Recovery Act of 1976, as amended. The
statute and EPA*s implementing regulations prohibit the *open dumping* of
solid waste and the establishment of new open dumps, and required that
existing open dumps be

GAO- 03- 276R Interstate Solid Waste Compact Page 4 upgraded or closed
within specific time frames. 4 Communities are allowed to manage

their waste through other means, such as incineration or disposal in
sanitary landfills, as long as the alternatives meet certain criteria
established to protect public health and the environment. Partly in
response to these restrictions, smaller communities throughout the country
began to look for cost- effective alternatives to address their solid
waste management problems.

By the late 1970s and early 1980s, some neighboring communities along the
New Hampshire- Vermont border recognized that they needed to address the
limited capacity and environmental problems at their existing landfills
and began to explore waste disposal alternatives. In 1979, EPA funded a
study that examined the feasibility of developing a joint resource
recovery project for Sullivan County in New Hampshire and the Southern
Windsor Regional Planning Commission in Vermont. As the study progressed,
the member communities in each state formed solid waste management
districts and moved toward entering into an interstate agreement or
*compact,* as authorized under the Resource Conservation and Recovery Act.
5 After the New Hampshire and Vermont legislatures approved the interstate
agreement in 1981, EPA and the Congress formally approved the New
Hampshire- Vermont Solid Waste Compact in April and October 1982,
respectively. Following these approvals, the two solid waste management
districts entered into a cooperative agreement to implement the compact
and establish a framework for the joint management and disposal of their
solid waste.

A Two- Tiered Management Structure Controls Project Operations

In approving the New Hampshire- Vermont compact, the Congress authorized
the adoption of cooperative agreements *for the construction, maintenance,
and operation of a resource recovery facility or sanitary landfill or
both* and established requirements for the contents of such agreements,
including *provision for a joint board and/ or administrator, responsible
for administering the cooperative undertaking and the powers to be
exercised thereby.* Accordingly, the cooperative agreement that implements
the compact provides for a management structure consisting of (1) a
governing body called the Joint Meeting, which has representatives from
each participating community, and (2) a smaller Executive Committee that
oversees the project*s day- to- day operations.

The Joint Meeting consists of representatives from the member solid waste
districts, who are appointed by the boards of selectmen or city councils
in the district communities. In accordance with the rules of their
respective solid waste management districts, representatives from New
Hampshire communities serve 3- year terms and Vermont*s representatives
serve 1- year terms. In total, the Joint Meeting has 34 members
representing 29 communities in accordance with the terms of the district
agreements. Although most of the participating communities have one

4 An open dump is any landfill that poses a reasonable probability of
adverse effects on health or the environment, as provided for under EPA
regulations. 5 The act authorizes two or more states to enter into
agreements or *compacts* for the management of

solid waste, hazardous waste, or both; the enforcement of applicable laws;
and the establishment of agencies to implement the compacts. For such
compacts to be binding, they must be approved by the EPA Administrator and
the Congress.

GAO- 03- 276R Interstate Solid Waste Compact Page 5 representative to the
Joint Meeting, six of them qualify for additional votes based on

the amount of waste they generate. 6 The Joint Meeting is responsible for
authorizing the actions needed to carry out the purposes of the
cooperative agreement, namely, to meet the solid waste disposal needs of
the communities in the member districts. For example, the Joint Meeting
was responsible for authorizing the acquisition of land on which the
incinerator and landfill were sited and, later, voted to close the
landfill. In addition, the Joint Meeting adopts the annual budget under
which the project operates and allocates the budget between the two
districts based on the total tonnage of waste their communities generated
during the prior year.

An 11- member Executive Committee implements the policies and actions
authorized by the Joint Meeting, proposes an annual budget, oversees the
project*s day- to- day operations, and approves all project contracts. In
addition, the committee is responsible for appointing a project manager
and other project staff as needed. The committee includes individuals in
key leadership positions* the chair of the Joint Meeting and the chair and
vice- chair of each district* as well as three additional representatives
from each solid waste district, whom the respective district*s appointed
representatives select annually. Members of the Executive Committee serve
1- year terms and may be re- elected.

Executive Committee members develop a budget sufficient to cover (1) waste
disposal costs, including incineration services and disposal of the ash;
(2) the interest and principal repayment associated with the bonds issued
to construct the landfill; and (3) other operating costs, such as real
estate taxes, salaries for project staff, and amounts needed to run the
project*s office. Project officials compute an estimated cost per ton of
waste, called a *tipping fee,* by dividing the total budgeted costs by the
projected waste tonnage. For 2002, the project*s budget was about $4.4
million, including $2.2 million for the incineration of 49,000 tons of
solid waste.

When the Joint Meeting approves the budget, the members allocate it
between the two districts based on the total waste tonnage generated by
their respective communities during the prior year. The districts, in
turn, determine each community*s share based on the volume or tonnage of
waste generated in the prior year. Historically, New Hampshire is
responsible for about 57 percent of the budget allocation and Vermont*s
share is about 43 percent. Communities in each member district are
responsible for generating sufficient revenue to pay their share of the
district*s budget and, with few exceptions, obtain this revenue through
property tax assessments. The project collects the funds when the project
manager bills the communities* or independent waste haulers, in some
instances* for each ton of waste delivered to the incinerator based on the
tipping fee in the adopted budget.

In addition to contributing a share of the project budget, each community
in the member districts is responsible for providing a collection site for
its waste and transporting it from the collection site to the incinerator.
In some instances, communities make arrangements for joint collection
sites or shared waste transport.

6 One community has three votes (the maximum allowed) and five communities
have two votes.

GAO- 03- 276R Interstate Solid Waste Compact Page 6

Key Aspects of the New Hampshire- Vermont Project Differ from Other Waste
Management Projects

The structure of the New Hampshire- Vermont Solid Waste Project differs
from those of other waste management projects we examined. For example,
the New Hampshire- Vermont project has a two- tiered structure that allows
each of the 29 communities in the member districts to be represented in a
governing body and also provides for a smaller, more manageable Executive
Committee to oversee day- to- day operations. In contrast, the low- level
radioactive waste projects have fewer participants* about four states, on
average* and have a single governing body. In the I- 95 Complex project,
the participating entities signed a memorandum of understanding that gave
Fairfax County full authority to manage all financial and operational
aspects of the project, including the contract for incineration services
and landfill operations. The structural differences in the waste
management agreements may be a reflection of the differences in the number
of entities participating in each project.

We also found differences between the New Hampshire- Vermont Solid Waste
Project and the other waste management projects we examined from an
operational standpoint, based on their implementing agreements. 7 Among
the major differences are the extent of the authority granted to the
projects* governing bodies compared to the projects* members and how
clearly their respective roles and responsibilities are defined in the
implementing agreements. For example, under the low- level radioactive
waste compacts, the projects* governing bodies are explicitly defined as
independent legal entities, separate and distinct from the participating
members. In these projects, the relationship between the governing body
and member states is clearly defined. For example, some agreements
authorize the governing bodies to designate host states for the disposal
facilities and to enter into contracts to accomplish project objectives. 8
However, while the cooperative agreement that implements the New
Hampshire- Vermont project describes the roles and responsibilities of the
Joint Meeting and Executive Committee, it is not explicit about the legal
status of these entities. The question of whether the project exists as a
separate legal entity has been an issue in litigation involving the
project, for example, in a case in which a district representative sought
copies of the project*s legal bills. 9 Clarifying this issue from the
beginning might have allowed the project to avoid some legal problems.

Similarly, problems might have been avoided if the cooperative agreement
for the New Hampshire- Vermont Solid Waste Project had addressed the
projects* responsibility for certain important functions. For example, the
cooperative agreement does not address how major capital projects will be
financed; authority to issue long- term debt is addressed only in the
agreements for the solid waste

7 We compared the cooperative agreement used to implement the New
Hampshire- Vermont Solid Waste Compact with the 10 low- level radioactive
waste compacts and a memorandum of understanding that was used for the I-
95 Complex agreement. 8 As indicated earlier, instead of having a
governing body, the participants in the I- 95 Complex project

agreed that one county would be responsible for managing the project. 9
Franklin v. Callum, 804 A. 2d 444 (N. H. 2002). As part of its ruling, the
court determined that the

project is not a separate entity but rather a creation of the two waste
management districts.

GAO- 03- 276R Interstate Solid Waste Compact Page 7 districts. 10 This
omission may have been a factor in an internal dispute over project

financing. Specifically, the Joint Meeting recommended the issuance of
long- term debt to finance certain costs related to the ash landfill, and
one of the member districts issued the bonds. However, a problem arose
when the other district did not want to pay its portion of the allocated
budget related to bond repayment, arguing that it was not responsible for
repayment of bonds issued by the first district. While the problem was
eventually resolved through arbitration, it might have been avoided
altogether had the cooperative agreement been explicit about who had
authority to issue long- term debt for the benefit of the project* and
under what circumstances* and who was responsible for repaying it. In
contrast to the New Hampshire- Vermont project, the memorandum of
understanding used for the I- 95 Complex agreement clearly gives the
county responsible for managing the project authority to finance the
design and construction of waste disposal facilities and to charge the
participating entities for their share of the capital costs. 11

Other operational differences between the New Hampshire- Vermont Solid
Waste Project and the other projects we examined, based on their
implementing agreements, were in the areas of annual accountability
reporting and public access to meetings and records. Under the low- level
radioactive waste compacts, the governing bodies must publish annual
reports to the governors and legislative bodies of their member states on
the projects* operations and finances, including copies of annual budgets
and independent audits. In addition, 8 of the 10 low- level radioactive
waste compacts included in our comparison require, with certain
exceptions, that project meetings and records be open to the public. While
the memorandum of understanding for the I- 95 Complex does not address
either accountability reporting or public access, Fairfax County, which
manages the I- 95 project, has a process in which the public can gain
access to project records. The cooperative agreement for the New
Hampshire- Vermont project does not address either area. 12

We also found some similarities in the operations of the New Hampshire-
Vermont project and the other waste management projects based on their
implementing agreements. For example, most of the agreements contain
provisions requiring the maintenance of accurate accounts and independent
audits of the projects* finances. The agreements also contain provisions
on amendments by project members and the entry and withdrawal of members
from the project.

10 For example, the agreement for the New Hampshire district states that
the district has authority to incur debt for the purpose of acquiring land
and for planning, constructing, and equipping a refuse disposal facility.
11 The governing bodies established under the low- level radioactive waste
compacts do not issue longterm

debt to finance major capital projects. 12 The lack of a clear, consistent
policy on access to records became an issue in litigation, after the

executive committee denied a district representative*s request to review
certain invoices from the project*s attorney, citing attorney- client
privilege. New Hampshire's Supreme Court ultimately ruled in favor of the
district representative, holding that the representative was a client of
the attorney who provided services to the project, and therefore was
entitled to see the project's legal bills. Franklin v. Callum, 804 A. 2d
444 (N. H. 2002).

GAO- 03- 276R Interstate Solid Waste Compact Page 8

Waste Disposal Options, Long- term Liability of Participating Communities,
and Other Matters Will Need to Be Addressed in the Near Future

Officials with the New Hampshire- Vermont Solid Waste Project will have to
address a number of important issues relating to waste disposal, long-
term liability, and other matters by July 2007, when the project*s
contract for incineration services expires. Recognizing this need, project
officials formed a transition committee to identify more specifically the
kinds of questions that will have to be answered and the decisions that
will have to be made. The committee is not expected to report its findings
until December 2002. However, based on our discussions with project
officials and our review of applicable contracts and other project
documents, we noted some of the key issues that will need to be resolved.

 Extension of incineration contract. Regarding waste disposal, the most
critical decision facing project officials is whether to negotiate an
extension of the incineration contract. Furthermore, according to project
officials, the need to make a decision on the incineration contract is
prompting representatives from the member districts to reconsider their
participation in the cooperative agreement. If the representatives vote to
dissolve the cooperative agreement, then the districts and their
participating communities will have to examine waste disposal
alternatives, the costs associated with each option, and whether certain
communities or districts will make new arrangements to jointly manage
their waste or decide to go it alone.

 Long- term liability of participating communities. Another set of issues
for project officials to consider involves the long- term liability
associated with the project*s landfill, which was closed in 2001.
According to federal and state requirements for the management of solid
waste, the New Hampshire- Vermont Solid Waste project, as the permit
holder for the ash landfill, is responsible both for meeting post- closure
maintenance and monitoring requirements, generally for 30 years, and for
maintaining a trust fund or other mechanism to meet related financial
obligations. As a result, communities in the member districts may retain
certain financial liabilities even after the cooperative agreement is
dissolved. Selling or transferring the landfill property is a possibility,
but the project* and by definition, the communities in the member
districts* would continue to be liable for meeting the technical and
financial obligations associated with the permit unless the new owner
agreed to assume responsibility.

 Disposition of project- related land. If the members of the Joint
Meeting vote to dissolve the cooperative agreement, project officials must
ensure that existing obligations are met and that land and other assets
are disposed of in an orderly manner. Disposition of project- related
land, in particular, raises significant issues. For example, although the
member districts jointly own the land on which the incinerator is sited,
the company that currently holds the incineration contract has two 10-
year options to renew its lease of the property and could do so whether or
not the cooperative agreement is dissolved. In addition, under the terms
of its agreement with the project, the incineration company pays just $100
per year for the lease, a provision that would likely remain in effect in
the event that the property was transferred or sold to a new owner. These
restrictions could affect the ability of project officials to dispose of
the incinerator property by

GAO- 03- 276R Interstate Solid Waste Compact Page 9 limiting the potential
buyers. 13 Similarly, a restriction on the use of the landfill

property could hinder the project*s ability to dispose of it. An April
2000 amendment to the cooperative agreement provided that the property
could not be used as a municipal sanitary landfill without approval by the
town of Newport, New Hampshire, where the property is located.

With only a few years remaining on the contract for incineration services,
project officials have already taken some preliminary steps to prepare for
the future and ensure that various aspects of the project will be
concluded in 2007. For example, when project officials contracted with a
company to haul the incinerator ash to a Massachusetts landfill after the
project*s own landfill was closed, they made sure that the ash hauling
contract expires on the same date as the project*s contract for
incineration services. Project officials also refinanced the bonds that
had been issued to pay for expenses related to the design and construction
of the ash landfill so that the bond repayments end in 2007 rather than in
2009, as originally scheduled. Finally, after borrowing from the trust
fund established for the landfill to pay for its permanent closure,
project officials established a repayment schedule that would ensure that
the trust fund is fully funded by 2007.

Comments from Project Officials

We provided a summary of our findings to the New Hampshire- Vermont Solid
Waste Project to obtain technical comments on the factual accuracy of the
contents. Project officials generally agreed with the facts presented and
suggested some clarifications and technical corrections, which we
incorporated as appropriate.

Scope and Methodology

To gain an understanding of the structure and operations of the New
HampshireVermont Solid Waste Project, we interviewed key officials from
the Executive Committee, Joint Meeting, and solid waste management
districts and reviewed the compact, cooperative agreement, major
contracts, and other pertinent documents. To determine how the structure
and operations of the New Hampshire- Vermont project compare with those of
other interstate waste management projects, we identified other projects
and reviewed their implementing agreements. Specifically, we compared the
structure and operations of the New Hampshire- Vermont project with 10
low- level radioactive waste compacts and a memorandum of understanding
between jurisdictions in Virginia and the District of Columbia. To
identify issues that will need to be addressed in the near future, we
interviewed key project officials to obtain their views and officials from
the New Hampshire Department of Environmental Services to obtain
information on the requirements associated with the ash landfill. We also
reviewed pertinent documents relating to the environmental, financial, and
legal obligations of the project and the member districts. We conducted
our review from February through November 2002 in accordance with
generally accepted government auditing standards.

_ _ _ _ _ 13 According to project officials, the member districts jointly
own more than 50 acres of land, including 6 acres on which the incinerator
is sited, and there is no restriction on the districts* ability to dispose
of the unencumbered portion of the property.

GAO- 03- 276R Interstate Solid Waste Compact Page 10 As agreed with your
office, unless you publicly announce the contents of this report

earlier, we plan no further distribution until 7 days from the report
date. At that time, we will send copies of this report to interested
parties. In addition, the report will be available at no charge on GAO*s
Web site at http:// www. gao. gov. If you or your staff have questions
about this report, please call me at (202) 512- 3841. Key contributors to
this assignment were Ellen Crocker, Les Mahagan, Richard Johnson, and
Cynthia Norris.

Sincerely yours, John B. Stephenson, Director Natural Resources and
Environment

(360175)
*** End of document. ***