Testimony of Harold J. Anderson III
Chief Counsel, Solid Waste Authority of Central Ohio
Hearings on S. 1194
“The Solid Waste Interstate
Transportation and Local Authority Act”
March 20, 2002
Committee on Environment and Public Works
Senate of the United States
on behalf of the
Local Government Coalition for Environmentally Sound
Municipal Solid Waste Management
Chairman Jeffords and members of the
Committee:
My name is Harold Anderson and I am
Chief Counsel of the Solid Waste Authority of Central Ohio (“SWACO”). I am testifying on behalf of SWACO and the
Local Government Coalition for Environmentally Sound Municipal Solid Waste
Management (“Coalition”), a joint effort by a number of cities, counties, solid
waste management authorities and related associations concerned with municipal
solid waste flow control, interstate waste transportation and other municipal
solid waste issues.
We commend you, Chairman Jeffords,
for holding this hearing, and for allowing the long-standing issues of
interstate waste and flow control to again be brought before the
Committee. We also thank Senator
Voinovich for a very similar bill that we understand is expected to be
introduced in the near future. And
last, but certainly not least, we also want to extend sincere appreciation to
Senator Specter for sponsoring S. 1194, as well Senators Wyden, Warner,
Stabenow and Santorum for their co-sponsorship of the bill.
Background
My testimony will briefly address
flow control and interstate waste transportation. Before turning to those points, first let me tell you about
SWACO. We are among the ten largest
public waste management authorities in America. SWACO strongly embraces recycling and other environmentally
friendly programs. In fact, SWACO
recently took over the recycling program for the 700,000 residents of the City
of Columbus. SWACO strongly embraces
partnerships with the private sector.
Our public landfill is operated by Waste Management, Inc.
Our Coalition supports S. 1194. The bill would protect stranded investment
by providing limited grandfather authority for the use of “flow control.” These are investments that many communities
and other public bodies made in direct response to federal mandates arising
under the Resource Conservation and Recovery Act and parallel state laws that
give local governments primary responsibility to assure adequate long-term
capacity to manage in an environmentally sound manner all of the municipal
solid waste generated within their respective jurisdictions.
“Flow control” is a mechanism that
allows local governments to meet that obligation in a fiscally responsible
manner. As the term implies, a local
government will “control the flow” of municipal solid waste by selecting -- and
designating by ordinance -- a specific facility (or set of facilities) for
municipal solid waste processing, disposal, etc.
Providing that capacity or
infrastructure will often require significant financial commitments which are,
in turn, secured through revenue bonds and similar flow control-dependent
financial arrangements. In fact, since
1980 over $20 billion in state and local bonds have been issued in reliance on
flow control authority for the construction of solid waste facilities.
Unfortunately, in the Carbone
case the Supreme Court ruled that the flow control ordinance at issue in the
case violated the Commerce Clause. I
should hasten to note that prior to Carbone flow control had repeatedly
been validated by federal court decisions spanning more than two decades from
the 1970’s into the 1990’s, and statutes in more than 20 states authorized
local governments to employ flow control.
In fact, in previous hearings before this Committee, Moody’s Investors
Service, Inc., testified, and I quote, that “[p]rior to the Carbone
decision, Moody’s viewed the state and local flow control laws and ordinances
as valid, binding and enforceable.”
The Impact of the Carbone Decision
The consequences
confronting communities throughout the nation due to the loss of flow control
authority and the absence of federal legislation such as S. 1194 include steep
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,
depletion of cash reserves, and ever-increasing upward pressure on tipping fees
as the unavoidable fixed cost burden of waste management infrastructure is
shared by fewer and fewer users.
My agency, SWACO, is a case in
point. We have over $150 million of
stranded investment in a waste-to-energy facility that was closed on the heels
of the Carbone decision. After
the Carbone ruling we laid off 250 employees and had to impose a $7 per
ton fee -- a waste tax -- on all municipal solid waste generated in Franklin
County. We had to take that action to
generate sufficient revenue to meet our debt obligations in the absence of flow
control authority.
In terms of the bond
downgrades that I mentioned a moment ago, the principal rating agencies,
Moody’s and Standard and Poor’s, have downgraded a considerable number of bonds
(at least 22), and the total outstanding solid waste debt for public agencies
that has been downgraded or placed on credit watch for potential downgrading
since Carbone is estimated at over $3.5 billion.
Compounding these difficulties is
the spillover effect for other public investment needs. Specifically, when a flow control-reliant
community goes to the bond market to finance essential needs such as schools,
roads, public safety facilities, wastewater treatment plants, etc., the
interest rate that it must pay is likely to be higher due to the instability
that results from the absence of federal flow control legislation. Those additional costs are ultimately borne
by the local taxpayers.
I must also emphasize that we have
not defaulted on our bonds and, like many other local governments, we have made
significant financial sacrifices to meet our obligations. Along with other communities and public
bodies, we will continue to do everything within our ability to avoid the truly
debilitating impact of a bond default.
Unfortunately, the absence of such a
default has led some to suggest that we “do not need” flow control
legislation. That suggestion would be
correct if -- and only if -- one also concludes (which we do not)
that the better approach is to increase local taxes to meet financial
obligations undertaken a number of years ago in good faith reliance on flow
control authority. Aside from its
unfairness, that position would contradict federal policy announced more than a
decade ago to discourage use of general taxes to fund solid waste
management. And surely no one would
seriously suggest that flow control-reliant communities must endure an Orange
County-type default to justify congressional action.
S. 1194 Provides
Narrow Protection For Stranded Investment
S. 1194 is narrow legislation that
protects reliance interests. The bill
provides "grandfather" authority for use of flow control by
communities with stranded investment (or contractual obligations) undertaken in
reliance on the previous availability of flow control. In that regard, just as stranded cost
protection for a utility recognizes that industry restructuring “changed the rules
of the game” in terms of a utility’s ability to recover various prudently
incurred investments from the past, the Carbone decision “changed the
rules” for local governments that had previously relied on flow control to
secure their investments in the waste management infrastructure needed to serve
their communities.
The authority provided by S. 1194 is
also self-limiting. By that I mean it
is confined to recovery of a narrow list of expenses for waste disposal and
recycling facilities (e.g., principal and interest on bonds and "put or
pay" contract obligations). As a
result, the flow control authority provided by S. 1194 will only be used where
necessary and only for as long as necessary.
In addition, the bill protects the
interests of non-flow controlled facilities by making the exercise of flow
control subordinate to post-1994 contractual relationships that would be
impaired by the exercise of flow control.
Finally, the bill contains a firm
"sunset" provision that limits its protection (i) to investments and
contractual obligations undertaken in 1994 or earlier and (ii) only for the
duration of such investments or obligations as they stood in 1994. Put another way, under this legislation,
flow control authority can be re-instituted only for communities that had
relied on flow control before May 1994, and once pre-Carbone obligations
are satisfied a community’s authority under the bill terminates.
Flow Control Is
Not Anti-Competitive Or Anti-Private Enterprise
It should also be emphasized that
flow control is not anti-competitive or anti-private enterprise. In considering this point it is important to
bear in mind that the tipping fees -- user fees -- charged for municipal solid
waste management services in communities that rely on flow control are limited
to recovering the costs of those services (recycling, household
hazardous waste collection, composting, public education, etc.). Moreover, communities that rely on flow
control also rely to the maximum extent possible on private enterprise for
their waste management infrastructure.
SWACO and the other 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
would exercise flow control authority are privately owned and/or operated.
Flow Control Does
Not Increase The Overall Cost For Waste Management Services
Nor does flow control increase
prices or result in the imposition of higher costs for a given category of
service. The local governments that
have relied on flow control adhere to competitive bidding requirements that
make cost a prime consideration in selecting among alternative waste management
facilities or vendors. Tipping fees in
communities that rely on flow control will almost always recover, in addition
to the cost to dispose of non-recyclable waste, the costs of other essential
services such as recycling, household hazardous waste collection, etc. Nevertheless, U.S.EPA concluded in its post-Carbone
report to Congress on flow control that when the tipping fees paid in those
communities are broken down into their component parts, the resulting prices
are comparable to those for non-flow controlled facilities.
Interstate Waste
Transportation
Finally, I also want to commend your
bills, Senators Specter and Voinovich, for addressing the issue of interstate
waste transportation. SWACO strongly
supports legislation that will provide communities with appropriate means to
husband the finite natural resources and waste management capacity in their
states and facilitate more effective local planning for waste management
needs. We believe that host community
agreements play a fundamental role in this matter and want to make sure that our
communities have appropriate control over waste imports from other states. In the long run, this will benefit both
importing and exporting states by increasing the importance of waste reduction
and minimization programs and encouraging comprehensive planning by state and
local governments.
The interstate waste transportation
legislation before this Committee addresses a serious national problem. Ohio is a case in point. Communities across our state have serious
concerns with trash from outside Ohio being disposed in our state. This local concern has resulted in a large
number of bills being introduced in Ohio’s Statehouse ranging from moratoriums
on landfill construction to commissions to study the issue. Each of these bills, while well intentioned,
are bad public policy that will increase the cost for taxpayers while doing
nothing to help the environment.
SWACO is part of a coalition of
public and private waste companies and business customers that advocate against
these bills in the Ohio Statehouse. Our
message to members of the Ohio General Assembly is simple: the concerns of
local communities regarding out of state waste needs to be resolved in the
Congress and not the Statehouse.
In conclusion, I certainly appreciate the opportunity to appear before
the Committee this morning, and I sincerely hope we can finally resolve these
issues. We stand ready to help.
Thank you.