<DOC> [105 Senate Hearings] [From the U.S. Government Printing Office via GPO Access] [DOCID: f:45564.wais] S. Hrg. 105-72 TRANSPORTATION AND FLOW CONTROL OF SOLID WASTE ======================================================================= 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 ---------- 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 ---------- 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. [GRAPHIC] [TIFF OMITTED] TH072.061 [GRAPHIC] [TIFF OMITTED] TH072.062 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. [GRAPHIC] [TIFF OMITTED] TH072.070 [GRAPHIC] [TIFF OMITTED] TH072.071 [GRAPHIC] [TIFF OMITTED] TH072.072 [GRAPHIC] [TIFF OMITTED] TH072.073 [GRAPHIC] [TIFF OMITTED] TH072.074 [GRAPHIC] [TIFF OMITTED] TH072.075 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 <bullet> 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. <bullet> 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. <bullet> 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. <bullet> 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. <bullet> 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. <bullet> Iredell County, North Carolina, has lost nearly $300,000 in cash revenues. <bullet> 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. <bullet> 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. <bullet> 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. <bullet> 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. <bullet> 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. <bullet> 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. <bullet> 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. <bullet> 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. <bullet> 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. <bullet> 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. <bullet> 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. <bullet> 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. <bullet> 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%. <bullet> Calvert County, Maryland cut recycling efforts and employee hours by 30% to avoid layoffs due to lost revenues. <bullet> Citrus County, Florida delayed capital expenditures as it faces loosing up to 60% of its waste stream to out-of-county landfills. <bullet> 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. <bullet> St. Lucie County, Florida lost 30% of its landfill revenues and fired eleven employees. <bullet> 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. <bullet> 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. <bullet> 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%. <bullet> 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. <bullet> Nassau County, Florida lost 20% of its facility revenues. <bullet> 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.'' <bullet> Huron County, Ohio has lost one-third of the tonnage previous delivered to its facility. <bullet> 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. <bullet> 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. <bullet> 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. [GRAPHIC] [TIFF OMITTED] TH072.081 [GRAPHIC] [TIFF OMITTED] TH072.082 [GRAPHIC] [TIFF OMITTED] TH072.083 [GRAPHIC] [TIFF OMITTED] TH072.084 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: <bullet> a household hazardous waste (HHW) collection program at two permanent facilities open five days a week; <bullet> neighborhood HHW collection programs in the Spring and Fall <bullet> tree recycling program <bullet> commercial materials exchange program to reduce waste <bullet> commercial hazardous waste licensing and inspection program <bullet> education and training program for hazardous waste generators <bullet> consumer electronics program to dismantle and recycle televisions and VCR's <bullet> household battery collection and recycling program; <bullet> fluorescent light tube collection and recycling program; and <bullet> 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: <bullet> tough standards for waste disposal and resource recovery facilities that are protective of human health and the environment; <bullet> county waste planning that ensures a minimum of 10 years of disposal capacity; <bullet> the largest curbside recycling program in the nation, <bullet> 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: <bullet> 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. <bullet> Waste Volumes Accepted. DEP has developed a specific procedure to set daily volume limits on municipal waste facilities to reduce environmental and safety hazards. <bullet> 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: <bullet> allows States to impose a freeze on out-of-state waste at 1993 levels <bullet> authorizes States to reduce or ratchet down the levels of waste imports where there are no host community agreements <bullet> prohibits waste imports at facilities that did not receive waste in 1993 until the affected local government approves its receipt <bullet> allows States to deny a permit for disposal facilities based on need <bullet> 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. [GRAPHIC] [TIFF OMITTED] TH072.104 [GRAPHIC] [TIFF OMITTED] TH072.105 [GRAPHIC] [TIFF OMITTED] TH072.106 [GRAPHIC] [TIFF OMITTED] TH072.107 [GRAPHIC] [TIFF OMITTED] TH072.108 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: <bullet> 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. <bullet> 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. <bullet> 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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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. [GRAPHIC] [TIFF OMITTED] TH072.252 [GRAPHIC] [TIFF OMITTED] TH072.253 [GRAPHIC] [TIFF OMITTED] TH072.254 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: <bullet> About 25 million tons of solid waste crossed State lines for disposal. <bullet> 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. <bullet> 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. <bullet> 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: <bullet> 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. <bullet> 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. <bullet> 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. <bullet> 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: <bullet> ``the world of municipal solid waste management is turned upside down.'' <bullet> ``integrated municipal solid waste management will take a major step back . . .'' <bullet> ``the losers . . . are likely to be many operators of such environmentally popular options as MRFs, recycling programs, composting facilities and household hazardous waste activities. . . .'' <bullet> ``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. [GRAPHIC] [TIFF OMITTED] TH072.266 [GRAPHIC] [TIFF OMITTED] TH072.267 [GRAPHIC] [TIFF OMITTED] TH072.268 [GRAPHIC] [TIFF OMITTED] TH072.269 [GRAPHIC] [TIFF OMITTED] TH072.270 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. [GRAPHIC] [TIFF OMITTED] TH072.275 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. [GRAPHIC] [TIFF OMITTED] TH072.277 [GRAPHIC] [TIFF OMITTED] TH072.278 [GRAPHIC] [TIFF OMITTED] TH072.279 [GRAPHIC] [TIFF OMITTED] TH072.280 [GRAPHIC] [TIFF OMITTED] TH072.281 [GRAPHIC] [TIFF OMITTED] TH072.282 [GRAPHIC] [TIFF OMITTED] TH072.283 [GRAPHIC] [TIFF OMITTED] TH072.284 [GRAPHIC] [TIFF OMITTED] TH072.285 [GRAPHIC] [TIFF OMITTED] TH072.286 [GRAPHIC] [TIFF OMITTED] TH072.287 [GRAPHIC] [TIFF OMITTED] TH072.288 [GRAPHIC] [TIFF OMITTED] TH072.289 [GRAPHIC] [TIFF OMITTED] TH072.290 [GRAPHIC] [TIFF OMITTED] TH072.291 [GRAPHIC] [TIFF OMITTED] TH072.292 [GRAPHIC] [TIFF OMITTED] TH072.293 [GRAPHIC] [TIFF OMITTED] TH072.294 [GRAPHIC] [TIFF OMITTED] TH072.295 [GRAPHIC] [TIFF OMITTED] TH072.296 [GRAPHIC] [TIFF OMITTED] TH072.297 [GRAPHIC] [TIFF OMITTED] TH072.298 [GRAPHIC] [TIFF OMITTED] TH072.299 [GRAPHIC] [TIFF OMITTED] TH072.300 [GRAPHIC] [TIFF OMITTED] TH072.301 [GRAPHIC] [TIFF OMITTED] TH072.302 [GRAPHIC] [TIFF OMITTED] TH072.303 [GRAPHIC] [TIFF OMITTED] TH072.304 [GRAPHIC] [TIFF OMITTED] TH072.305 [GRAPHIC] [TIFF OMITTED] TH072.306 [GRAPHIC] [TIFF OMITTED] TH072.307 [GRAPHIC] [TIFF OMITTED] TH072.308 [GRAPHIC] [TIFF OMITTED] TH072.309 [GRAPHIC] [TIFF OMITTED] TH072.310 [GRAPHIC] [TIFF OMITTED] TH072.311 [GRAPHIC] [TIFF OMITTED] TH072.312 [GRAPHIC] [TIFF OMITTED] TH072.313 [GRAPHIC] [TIFF OMITTED] TH072.314 [GRAPHIC] [TIFF OMITTED] TH072.315 [GRAPHIC] [TIFF OMITTED] TH072.316 [GRAPHIC] [TIFF OMITTED] TH072.317 [GRAPHIC] [TIFF OMITTED] TH072.318 [GRAPHIC] [TIFF OMITTED] TH072.319 [GRAPHIC] [TIFF OMITTED] TH072.320 [GRAPHIC] [TIFF OMITTED] TH072.321 [GRAPHIC] [TIFF OMITTED] TH072.322 [GRAPHIC] [TIFF OMITTED] TH072.323 [GRAPHIC] [TIFF OMITTED] TH072.324 [GRAPHIC] [TIFF OMITTED] TH072.325 [GRAPHIC] [TIFF OMITTED] TH072.326 [GRAPHIC] [TIFF OMITTED] TH072.327 [GRAPHIC] [TIFF OMITTED] TH072.328 [GRAPHIC] [TIFF OMITTED] TH072.329 [GRAPHIC] [TIFF OMITTED] TH072.330 [GRAPHIC] [TIFF OMITTED] TH072.331 [GRAPHIC] [TIFF OMITTED] TH072.332 [GRAPHIC] [TIFF OMITTED] TH072.333 [GRAPHIC] [TIFF OMITTED] TH072.334 [GRAPHIC] [TIFF OMITTED] TH072.335 [GRAPHIC] [TIFF OMITTED] TH072.336 [GRAPHIC] [TIFF OMITTED] TH072.337 [GRAPHIC] [TIFF OMITTED] TH072.338 [GRAPHIC] [TIFF OMITTED] TH072.339 [GRAPHIC] [TIFF OMITTED] TH072.340 [GRAPHIC] [TIFF OMITTED] TH072.341 [GRAPHIC] [TIFF OMITTED] TH072.342 [GRAPHIC] [TIFF OMITTED] TH072.343 [GRAPHIC] [TIFF OMITTED] TH072.344 [GRAPHIC] [TIFF OMITTED] TH072.345 [GRAPHIC] [TIFF OMITTED] TH072.346 [GRAPHIC] [TIFF OMITTED] TH072.347 [GRAPHIC] [TIFF OMITTED] TH072.348 [GRAPHIC] [TIFF OMITTED] TH072.349 [GRAPHIC] [TIFF OMITTED] TH072.350 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: <bullet> 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; <bullet> flow control over recovered materials would undermine significant private commercial activity in an area which has not historically fallen under government control or regulation; <bullet> 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; <bullet> 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 <bullet> In 1996, 63 percent of all newspapers published in the United States were recovered for recycling. <bullet> 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). <bullet> 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. <bullet> 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 <bullet> Since 1988, consumption of recovered paper at U.S. mills has jumped more than 74 percent. <bullet> 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. <bullet> 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. [GRAPHIC] [TIFF OMITTED] TH072.355 [GRAPHIC] [TIFF OMITTED] TH072.356 [GRAPHIC] [TIFF OMITTED] TH072.357 [GRAPHIC] [TIFF OMITTED] TH072.358 [GRAPHIC] [TIFF OMITTED] TH072.359 [GRAPHIC] [TIFF OMITTED] TH072.360 [GRAPHIC] [TIFF OMITTED] TH072.361 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: <bullet> A secure sanitary landfill with adequate capacity to satisfy the waste disposal needs of Cape May County for the next 30-40 years. <bullet> A solid waste transfer station. <bullet> A county-wide source separation program in which all 16 Cape May County municipalities participate. <bullet> An Intermediate Processing Facility which receives, sorts, processes and upgrades source separated recyclables collected by the municipalities to improve their marketability. <bullet> 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. <bullet> A cooperative program for receiving street sweepings and catch basin clean-out materials. <bullet> A ``white goods'' and CFC recovery operation wherein source separated white goods are accepted for recycling and CFC refrigerants are also recovered and recycled. <bullet> Wood pallets are processed into a marketable woodchip product. <bullet> Source separated tree trunks and stumps are chipped and converted into root mulch and topsoil. <bullet> Christmas trees are chipped to produce a mulch. <bullet> Source separated leaves and grass clippings are composted. <bullet> Source separated automobile and truck tires are accepted and delivered to a recycling facility where they are processed for reuse. <bullet> Automotive and marine batteries are accepted for recycling. <bullet> Used motor oil is accepted for recycling. <bullet> Source separated household hazardous waste is accepted for subsequent disposal at a hazardous waste facility. <bullet> After satisfying the needs of local charities, used clothing is stored and delivered to a textile recycling business. <bullet> Technical and promotional assistance is provided to municipalities, businesses, institutions, residents and visitors to expand source reduction, reuse and recycling activities. <bullet> A Litter Abatement Partnership Program which encourages roadside and community clean-up activities is conducted jointly with the County and participating municipalities. <bullet> 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. [GRAPHIC] [TIFF OMITTED] TH072.365 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. [GRAPHIC] [TIFF OMITTED] TH072.369 [GRAPHIC] [TIFF OMITTED] TH072.370 [GRAPHIC] [TIFF OMITTED] TH072.371 [GRAPHIC] [TIFF OMITTED] TH072.372 [GRAPHIC] [TIFF OMITTED] TH072.373 [GRAPHIC] [TIFF OMITTED] TH072.374 [GRAPHIC] [TIFF OMITTED] TH072.375 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: <bullet> the reason for the lack of bond defaults and other severe financial emergencies, <bullet> the meaning of issue-specific credit ratings, <bullet> characteristics of projects secured by flow control, and <bullet> 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: <bullet> the restructuring of existing debt to reduce the amount of annual debt service payments that need to be paid to bondholders, <bullet> reductions in other capital expenditures, <bullet> modifications in the use of a facility to extend its expected life, <bullet> the imposition of new fees on all real property owners, <bullet> water and sewer bill surcharges, <bullet> the imposition of surcharges on other services, <bullet> staff reductions, <bullet> reductions in other governmental services and programs, <bullet> drawdowns of unrestricted reserves, <bullet> loans from other governmental funds to offset revenue losses, <bullet> cancellation of future projects, and <bullet> delay of maintenance on existing facilities. In addition to the financial hardship caused by these actions, affected governments have been adversely affected by <bullet> the threat of litigation and legal expenses for litigation, <bullet> the need to renegotiate contracts with municipalities and private haulers, <bullet> the payment of legal, underwriting and other expenses associated with restructuring troubled debt, <bullet> higher financing costs caused by downgrades, <bullet> taking over the debt of troubled issuers, <bullet> bumping up against tax and expenditure limitations, and <bullet> 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: [GRAPHIC] [TIFF OMITTED] TH072.380 [GRAPHIC] [TIFF OMITTED] TH072.381 [GRAPHIC] [TIFF OMITTED] TH072.382 [GRAPHIC] [TIFF OMITTED] TH072.383 [GRAPHIC] [TIFF OMITTED] TH072.384 [GRAPHIC] [TIFF OMITTED] TH072.385 [GRAPHIC] [TIFF OMITTED] TH072.386 [GRAPHIC] [TIFF OMITTED] TH072.387 [GRAPHIC] [TIFF OMITTED] TH072.388 [GRAPHIC] [TIFF OMITTED] TH072.389 [GRAPHIC] [TIFF OMITTED] TH072.390 [GRAPHIC] [TIFF OMITTED] TH072.391 [GRAPHIC] [TIFF OMITTED] TH072.392 [GRAPHIC] [TIFF OMITTED] TH072.393 [GRAPHIC] [TIFF OMITTED] TH072.394 [GRAPHIC] [TIFF OMITTED] TH072.395 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. [GRAPHIC] [TIFF OMITTED] TH072.397 [GRAPHIC] [TIFF OMITTED] TH072.398 [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. [GRAPHIC] [TIFF OMITTED] TH072.403 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: <bullet> 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; <bullet> 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; <bullet> 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; <bullet> 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\ --------------------------------------------------------------------------- \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''). --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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). --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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. --------------------------------------------------------------------------- \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.'' --------------------------------------------------------------------------- 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\ --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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). --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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. [GRAPHIC] [TIFF OMITTED] TH072.409 [GRAPHIC] [TIFF OMITTED] TH072.410 [GRAPHIC] [TIFF OMITTED] TH072.411 [GRAPHIC] [TIFF OMITTED] TH072.412 [GRAPHIC] [TIFF OMITTED] TH072.413 [GRAPHIC] [TIFF OMITTED] TH072.414 [GRAPHIC] [TIFF OMITTED] TH072.415 [GRAPHIC] [TIFF OMITTED] TH072.416 [GRAPHIC] [TIFF OMITTED] TH072.417 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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: <bullet> 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. <bullet> 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.'' <bullet> 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. <bullet> 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. <bullet> 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. --------------------------------------------------------------------------- \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. --------------------------------------------------------------------------- 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. [GRAPHIC] [TIFF OMITTED] TH072.423 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: <bullet> Public ownership and operation of all required equipment and facilities. <bullet> 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. <bullet> Public ownership and operation of collection equipment and contract for use of privately owned and operated transfer, processing facilities and/or disposal facilities. <bullet> Private ownership and operation of all required equipment and facilities through service contract with the public sector. <bullet> 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. [GRAPHIC] [TIFF OMITTED] TH072.426 [GRAPHIC] [TIFF OMITTED] TH072.427 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. [GRAPHIC] [TIFF OMITTED] TH072.431 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. [GRAPHIC] [TIFF OMITTED] TH072.433 [GRAPHIC] [TIFF OMITTED] TH072.434 [GRAPHIC] [TIFF OMITTED] TH072.435 [GRAPHIC] [TIFF OMITTED] TH072.436 [GRAPHIC] [TIFF OMITTED] TH072.437 [GRAPHIC] [TIFF OMITTED] TH072.438 [GRAPHIC] [TIFF OMITTED] TH072.439 [GRAPHIC] [TIFF OMITTED] TH072.440 [GRAPHIC] [TIFF OMITTED] TH072.441 [GRAPHIC] [TIFF OMITTED] TH072.442 [GRAPHIC] [TIFF OMITTED] TH072.443 [GRAPHIC] [TIFF OMITTED] TH072.444 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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