Magazine article Government Finance Review

Flow Control and Congress: The Sequel

Magazine article Government Finance Review

Flow Control and Congress: The Sequel

Article excerpt

Flow control - the ability of local governments to direct the flow of solid waste generated within a jurisdiction to a designated disposal site, transfer station, recycling facility or other waste processing facility - is an issue that is often thought of as strictly environmental. However, flow control has a considerable impact on the finances of many cities, counties, and states. Without specific federal legislation, governments that constructed flow control facilities with revenue financing may experience adverse financial consequences. This encroachment on local authority and planning can result in lost revenues, strained budgets, fee increases, bond rating reductions, and staff reductions. After failing to enact remedial flow control legislation in previous congresses, the 106th Congress now seems poised to act.

History of Flow Control Legislation

Flow control legislation first came about in the late 1970s. When Congress passed the Resource and Recovery Act (RCRA) in 1976, the RCRA mandated that state governments develop and implement environmentally sound waste management plans. Although the RCRA did not require reliance on flow control authority, flow control has been used as a tool since the early 1980s. At selected facilities, haulers were charged relatively high "tipping fees" to haul and deposit the waste at a facility. The fees were used to pay off debt sold to finance the facilities.

Although flow control authority has been used successfully in at least 327 waste facility projects in 42 states across the country, it is not without its problems. Representatives of the waste industry criticized flow control as anti-competitive because haulers were required to deposit the waste at selected facilities. They also charged that flow control was not economical because the cost of processing some of the waste was more expensive than services provided by private industry. These arguments did not take into consideration the fact that the revenue generated from flow control is used by governments to carry out other necessary public responsibilities, including closing unsafe landfills and disposing of waste that cannot generate a profit, (e.g., household hazardous waste, recycling waste, and composting waste).

The Supreme Court's Carbone Decision

Despite the positive aspects of flow control, this authority has been called into question in several United States Supreme Court decisions. The decision having the most profound affect on flow control occurred in a case decided by the Supreme Court in 1994, C & A Carbone, Inc. v. Town of Clarkstown, NY (511 US 383). In that case, the Court said the Clarkstown flow control ordinance was unconstitutional because it violated the Commerce Clause. The Court maintained that the ordinance discriminated against interstate commerce by allowing only a favored operator to process waste that was within the town limits. The Carbone decision removed local control over waste flows, thereby reducing revenue used to support debt service on bonds that had been previously issued to finance the facilities. In addition, bond rating agencies examined the reductions in the revenue-backed structure of the debt and downgraded ratings on bonds impacted by the flow control decision.

The Government Finance Officers Association (GFOA) supports federal legislation that would restore flow control authority to state and local governments. Following the Carbone decision in 1994, GFOA adopted a policy statement supporting federal legislation on waste flow control that would allow governmental entities to continue carrying out their responsibility in managing municipal solid wastes within their boundaries. Such legislation should provide:

* recognition of existing state and local government flow control laws, ordinances and other legal provisions granting waste flow control authority, and any existing debt secured under such laws or ordinances;

* extension of flow control authority to municipal solid waste generated from all sources; and

* all interested parties should have an opportunity to have facilities considered for designation in future authorizations of flow control. …

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