Regionalization: a solid waste solution

Historically, states have delegated the responsibility of solid waste management (SWM) to local governments. These responsibilities vary considerably from municipality to municipality as a result of population density, governmental philosophy, access to private sector services and existing resources. In some instances, waste-related services can be provided both more efficiently and more economically on a regional basis.

SWM regionalization is the collective management of waste services by more than one municipality. In various regions of the United States, regionalization has evolved to represent a variety of approaches, including partnerships between a county and the cities within its jurisdiction, a collective venture of several cities or a group composed of county governments.

FORMATION INCENTIVES

Cooperative SWM provides both direct and indirect benefits to local governments. The primary benefits include economies of scale, shared liability, minimization of siting and permitting constraints and shared resources. Also, the combination of these benefits can better enable local governments to meet state waste minimization mandates.

In many instances, increasing demands on local governments to address SWM issues have resulted in a need to either increase staff or contract for assistance. In either case, the ability to implement new waste reduction and recycling activities requires additional resources.

Most waste minimization programs require comprehensive educational and informational efforts. Duplicate efforts may exist from one neighboring jurisdiction to another. Regional entities can provide a more efficient approach to effective programs by sharing information and staff.

With increasing recovery activities, a key to cost-effective SWM programs is the effective marketing of the recovered materials. Local governments can benefit from regional cooperation and marketing. Generally, a regional approach provides a better bargaining position for the participating entities and, ultimately, a more favorable contract for sales.

In addition, many states now require some form of SWM planning, which includes characterizing the existing management system and identifying an alternative approach to promote long-term viability. Regional cooperation can minimize duplicative efforts and promote sharing of limited resources.

MULTI-JURISDICTIONAL OPTIONS

Regional SWM includes a broad range of options, ranging from loose, informal relationships to specific contractual relationships defining how responsibilities and authority will be shared. A few are:

Legislatively created districts or agencies. A formal solid waste entity is created through either special legislation defining its duties or through enabling legislation setting the framework for the establishment of SWM districts. Missouri, Indiana and Ohio all used enabling legislation for this purpose in the last decade.

Special service districts. These are independent, limited-purpose governmental units that are separate entities from existing local governments, usually created to generate revenue and provide access to bond markets. The California Sanitary Districts, for example, are responsible for the exclusive disposal of solid waste within their jurisdictions.

Joint powers agreements. Multijurisdictional consortiums that provide a range of services, but maintain some local autonomy, are becoming a more common approach.

Jurisdictional sponsorships. This approach does not involve agency formation, but includes formal agreements with various municipalities, with a single jurisdiction taking the lead in sponsoring, owning or managing a SWM facility. It is often used in conjunction with the development and operation of recovery facilities.

Functional consolidations. Two or more local governments merge their resources to provide specific services over a long term. Many SWM authorities were created using this approach.

Councils of governments. Local governments use the resources of an existing regional entity to provide planning and technical assistance. Many states with strong county governments have regional councils that provide SWM technical assistance.

The key issue in the regionalization process is the trade-off between cooperation and autonomy. The level of cooperation depends upon the perceptions of each participating entity concerning the extent of the benefits received. The most appropriate structural composition of a cooperative effort will differ. Therefore, the formation process must be tailored specifically to the interests of the potential participants.

NORTHEAST SOLID WASTE COOPERATIVE

In 1984, 23 northeast Massachusetts cities and towns within a 25-mile radius of each other formed the Northeast Solid Waste Cooperative (NESWC). To address the long-term disposal of municipal solid waste (MSW) for the participating communities, NESWC undertook the planning, siting and development of a waste-to-energy (WTE) facility and entered into a partnership with a contractor to develop the facility.

The WTE facility was built with an approximately 50-percent greater capacity than needed to serve NESWC’s 23 communities. The service fees paid by the NESWC communities covers debt service and O&M costs for the WTE on an annual basis over a 20-year time frame.

While the WTE has operated effectively over the past 10 years, revenues from the project have not been at the level originally projected. This financial situation can be attributed to two factors. First, the revenues from the power generated and sold to the local utility have declined sharply. Second, the spot market price for solid waste in the NESWC region has declined substantially. Approximately 50 percent of the WTE’s capacity needs must be met through the spot market (supply contracts from non-NESWC members).

The spot market has changed dramatically with added landfill capacity in the Northeast and the legal affirmation of the status of interstate transportation of solid waste. As a result, under the existing agreement between NESWC and the WTE, NESWC communities must pay a substantially higher service fee to cover the declining revenues.

NESWC is presently evaluating potential options to meet the increasing financial requirements, including renegotiations of its service agreements and power sales arrangements. The cooperative has developed a plan to reduce costs over the next 10 years.

EAST CENTRAL SOLID WASTE COMMISSION

In 1986, five counties in East Central Minnesota entered into a joint powers agreement, forming the East Central Solid Waste Commission (ECSWC). Under the agreement, the ECSWC assumed responsibility of planning, adopting and implementing an SWM system that includes waste processing, a transfer station and a mixed municipal solid waste landfill. To manage and integrate a system, the commission designated the flow of waste from all five counties to the ECSWC facilities.

In 1990, the commission began developing a MSW composting facility. In 1991, the commission signed a composting vender to operate the 250-tpd facility, which was financed through the issuance of $11.3 million in general obligation bonds.

Once operation started, the facility received an average of only 160 tons of solid waste per day for processing — substantially less than the quantity for which it was designed. Also, the composition of the solid waste received at the ECSWC varied significantly from what was anticipated.

The low tipping fee income, due to less waste being received, resulted in a substantial revenue shortfall. Moreover, there was a high quantity of non-processible and residuals resulting from the composting process.

Prior to the formal expiration date, the operating agreement between the composting vendor and the ECSWC was mutually terminated because of an inability to resolve institutional and technical issues, including compost classification and odor management.

Subsequent to the termination of the operating agreement, the ECSWC has initiated the process of selecting another composting vendor. “Moving forward has been very difficult with a fixed revenue stream, declining commission subsidies and existing operational limitations,” says Doug Sell, ECSWC executive director. “However, we are presently completing negotiations with a new composting vendor to operate the facility at a substantially lower tipping fee.”

BLUESTEM SOLID WASTE AGENCY

Cedar Rapids and Linn County, Iowa, formed the Bluestem Solid Waste Agency in July 1994, with the objective of stabilizing long-term disposal costs and ensuring environmentally prudent SWM. The agency is responsible for the disposal of solid waste generated by Cedar Rapids, the largest municipality within Linn County, by unincorporated portions of Linn County and by cities that become associate members of the agency.

Bluestem’s authority extends to operation of landfills and other disposal sites, transfer stations, waste processing centers, recycling and related programs. Moreover, the agency can impose fees for waste disposal in areas where it is the collector. Bluestem can collect fees to meet current operating expenses, debt retirement and financial assurance needs.

The agency also is authorized to issue revenue bonds. In return for becoming a member or an associate member of the agency, local governments agree to deliver all waste to designated locations. As part of the agreement, Cedar Rapids and Linn County transferred all interest in their mixed-waste landfills to Bluestem. The agency then became responsible for closure, post-closure, financial assurance, leachate collection and final disposal. Additionally, it must meet reduction obligations.

The formation agreement establishes two levels of memberships — full members and associate members. Cedar Rapids and Linn County are full members and other communities are associate members. By January 1995, all communities within Linn County had joined the agency. Each member made a 50-year commitment for the delivery of solid waste to the designated disposal facilities.

“The strength of the agency is in its rate base,” says Bluestem Executive Director David Hogan. “The long-term commitments will provide a stable revenue stream to support solid waste management services, including waste reduction programs.”

SOUTHEAST MISSOURI SOLID WASTE DISTRICT

In 1990, Missouri Senate Bill 530 established 20 regions in the state to address SWM issues. The bill requires all counties and cities with populations greater than 500 to submit integrated SWM plans to the Missouri Department of Naturla Resources (MDNR). The plans should specify how each entity would achieve a 40-percent reduction in landfilled solid waste by 1998.

In June of 1992, seven southeast Missouri counties and 17 incorporated cities within these counties created the Southeast Missouri Solid Waste Management District, a predominantly rural district with 40 incorporated municipalities, 17 of which have a population of 500 or more. It contains more than 3,600 square miles and has a total population of approximately 175,000. Since formation, members successfully worked together to develop a draft SWM plan, which was submitted to the MDNR in October 1993.

The district’s authority to raise revenues in which to finance the implementation of their plan is limited to that which has been delegated directly to Missouri cities and counties. Consequently, before the district can levy any additional taxes or fees, it must secure formal approval through a public referendum in each city or county in which the fees will be levied. This approach is not politically palatable.

But the district has moved ahead with implementation of its plan. In addition to receiving some grants from the MDNR for recycling programs, members have contributed annual dues from their general funds to move forward. The district is assessing the viability of a regional facility that would include a source-separated recovery facility and a mixed-waste landfill.

“The key to moving forward with the development of a regional solid waste facility is the link between development of an economically competitive system and participation of all members,” says Tom Tucker, district executive director.

FORMATION ASSESSMENT

The limited ability to compete with the private sector, lack of control over the flow of waste and inadequate financing mechanisms to implement SWM systems remain areas of concern for effective long-term regionalization.

Even before the implementation of Subtitle D requirements for mixed MSW landfills, industry experts predicted a shortage of disposal capacity into the 21st century. In the early ’80s, projected and perceived disposal capacity shortages provided an incentive for both the regional development of SWM systems and mandates for waste minimization programs.

In response to federal requirements and increasing costs, many small landfills have closed. However, several national and regional private landfill firms have secured additional disposal capacity at existing landfills and, as a result, while the number of landfills throughout the U.S. has decreased, the overall disposal capacity has not dropped at a comparable rate.

Many regional waste processing and disposal facilities have established a system-wide tipping fee based on a set of integrated SWM services. In most instances, the private sector establishes tipping fees based on the marginal cost of disposal. Consequently, the private sector has a competitive advantage in economically providing disposal on a segmented service basis.

Additionally, many public entities have used state-delegated authority to implement statutory flow control to assure the flow of waste to a designated facility and secure a stable revenue stream. In most instances, the primary means of covering the debt service and O&M costs for a facility has been through tipping fees.

The May 16, 1994, U.S. Supreme Court decision in Carbone v. the City of Clarkstown addressed flow control directly. Specifically, the Supreme Court ruled that the ordinance deprived private competitors from access to the local solid waste market, which violated the commerce clause of the U.S. Constitution. In effect, the court said unless there is convincing evidence that no other option is available, statutory flow control could be unconstitutional.

In so ruling, the court has made it difficult to operate existing regional facilities and to finance regional facilities. Consequently, alternative approaches to waste assurance must be balanced with the need to ensure competitive tipping fees. (Congress is being urged to enact flow control laws that would protect such facilities.)

Most states that mandate SWM planning requirements have delegated some authority to local governments to finance needed processing and disposal facilities. However, most districts or authorities must undertake facility development within the constraints of existing statutory debt limit for the participating local governments.

The Northeast is atypical concerning regionalization. Regional facility development in the Northeast resulted from perceived and actual need for alternative disposal options. Consequently, local governments were willing to use a variety of financing mechanisms that placed increased demands upon their own existing debt limits. In contrast, regionalization efforts in much of the rest of the country have focused on planning efforts for compliance with RCRA Subtitle D standards and other requirements.

Many of the regional organizations outside the Northeast have not successfully implemented their plans because of inadequate financing mechanisms. Local governments may be unwilling to use their own statutory debt capacity, since many are having to fund essential services with decreasing budgets. Some have removed their SWM programs from the general fund and established enterprise funds. Others have attempted to supplement funding resources through a mix of service fees, impact fees and user-based fees.

More than 40 states have actively promoted regional SWM through legislation requiring waste reduction and recycling plans. Generally, this legislation has been developed where counties have historically been active in providing local governmental services. Future implementation of programs to meet recovery and reduction goals will require linking rate structures with waste assurance to leverage regional economies of scale.