TESTIMONY OF THE HONORABLE DEWEY R. STOKES
PRESIDENT, BOARD OF COUNTY COMMISSIONERS
FRANKLIN COUNTY, OHIO
BEHALF OF THE NATIONAL ASSOCIATION OF COUNTIES
JUNE 17, 1999

I am Dewey R. Stokes, President of the Board of Commissioners of Franklin County, Ohio. I am testifying today on behalf of the National Association of Counties (NACo), which represents the over-3000 counties in the United States. We are also speaking on behalf of several individual local governments who are part of a coalition created specifically to support flow control legislation.

We appreciate being invited to participate in this hearing. As you know, counties have been before this committee on several occasions on this subject. We are delighted to have a chance to again press our case for federal legislation to allow local governments to protect our huge investments in our municipal solid waste facilities.

We commend you, Chairman Chafee, for holding this hearing, and for allowing the longstanding issues of interstate waste and flow control to again be brought before the Committee. I also want to compliment Senator Voinovich for his dedication in solving these persistent problems by sponsoring S. 872, legislation that is vitally important to my county and many other communities. A similar bill, S. 663 by Senator Specter, is similarly worthy of our praise.

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 to dispose of solid waste. Since 1980, over $20 billion in state and local bond issues were sold for solid waste facilities.

The need for legislation to grandfather these existing facilities continues just as strongly today as it did when the U.S. Supreme Court in 1994 decided the Carbone case (C. & A. Carbone, Inc. v. Town of Clarkstown, N.Y., 114 S.Ct.)

No, we have not defaulted on our bonds - most communities have made large financial sacrifices in order to meet those bond payments. Surely no one would seriously suggest that flow control-reliant communities must sustain an Orange County, California-type experience to justify congressional action. To avoid default and bond downgrades, communities have raised taxes, imposed new trash fees, cut back on waste management and recycling services, and drawn down reserve funds.

Nationally, credit-rating agencies downgraded debt ratings for 17 local and state solid waste authorities. Moody's downgraded 15 issues, of which approximately half were downgraded to "junk bond" status. Junk bond status, as I'm sure you know, means that the bonds are speculative and carry a significant risk that they will not be re-paid.

In addition to the downgrades, Moody's has 19 additional bond issues in the "unstable credit watch" category, due specifically to the absence of federal legislation. As litigation by trash companies continues to be brought against counties and cities, the downgrades will also continue. 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 $2.3 billion by local public agencies.

What does this mean? It means that when a county goes to the bond market to borrow funds for other public projects - like jails or bridges or schools - the interest rate is significantly higher. This additional cost is borne by local taxpayers - small businesses as well as residents.

In Franklin County we have over $160 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 had to impose a $7 per ton fee - a waste tax - on all municipal solid waste generated in Franklin County and disposed at in-state landfills. We had to take that action to generate sufficient revenue to meet our debt obligations due to the Carbone decision and the Congress' failure to help us.

My community will do everything possible to prevent a bond default and keep our bond rating, and I would expect communities everywhere to do the same thing. Surely bond defaults will not somehow be the litmus test for flow control legislation.

In this regard, I must emphasize that the flow control provisions of S. 872 and S. 663 are exactly the same as - I repeat, exactly the same - as the stranded costs protection provisions of the electric utility restructuring legislation that is supported by many of the Senate's most staunch advocates of a free market economy. Under that legislation, no electric utility will have to sustain a bond downgrade, or worse yet, a bond default, to be eligible for financial protection. Local governments are equally deserving of protection on the same basis -- without being forced to sustain more downgrades, more local tax increases, and more litigation. We ask only for equitable treatment.

Simply put, the Carbone decision in 1994 changed the rules in the middle of the game. S. 872 and S. 663 provide narrow "grandfather" authority for pre-Carbone uses of flow control to assist affected communities in making the transition. If enacted, flow control authority can be re-instituted only for those communities that initially used flow control before May, 1994.

Let me emphasize that the flow control provisions of S. 872 and S. 663 are self-limiting. Once pre-Carbone debt is paid off, a community's authority under these bills terminates.

Opponents claim that flow control is a "hidden tax". Nothing could be further from the truth. The reality is that the absence of flow control authority has forced increased taxes and fees in many counties and cities. That is hardly a surprise - our debt obligations did not go away with the Supreme Court's Carbone decision. If that debt expense is not recovered through flow control-supported user fees, it will have to be recovered by increasing taxes or imposing new fees. There is no free lunch.

We hope that this Committee will join with the Senators who have sponsored the flow control bills and temporarily give us back what the Supreme Court took away. We urge you to support S. 872 and similar bills.

We also want to commend Sen. Voinovich for addressing the issue of interstate waste in his bill. Like my counterparts in many other states, we want to make sure that our communities have some control over waste imported from other states - whether to welcome it or reject it. The closing of New York's Fresh Kills landfill in just 2 years only makes the situation more critical.

But I urge you to remember that controlling interstate waste is only one half of the coin. Without the ability to keep waste at our own facilities, our local waste will be exported to cheaper landfills further west and south, and then more states will have to deal with the problem. I hope we can finally resolve this difficult issue, and we stand ready to help.