Contested Flow

Never before have so many cities actually wanted the material accumulated by their citizens and hauled by local services. And some municipalities are enacting flow control ordinances to ensure this material remains within their jurisdictions.

Flow control is a practice by which governments require solid waste and recyclables generated within their jurisdictions to be collected only by designated entities and disposed of at designated facilities—usually those owned or controlled by the municipalities in question.

Haulers and landfill owners feel the pinch of such regulations. Lawsuits result. Sometimes haulers win. Sometimes local government wins.

“If you force someone to turn their material over to a public agency, that violates the Constitution,” says Scott Horne, general counsel and vice president of government relations for the Institute of Scrap Recycling Industries Inc. (ISRI), Washington, D.C. “That is not appropriate.”

Horne says ISRI gets involved in flow control issues only when they deal with recycling and not with general waste.

Regardless of whether the county or the haulers come out on top, the National Solid Wastes Management Association (NSWMA), Washington, D.C., opposes flow control measures. Noting that both the economics and technology in today’s waste market are dynamic, David Biderman, general counsel for the NSWMA says, “Flow control is an impediment to technological innovation and free markets.”

Flow control clauses are viable under certain circumstances, maintains Barry Shanoff, general counsel for SWANA (Solid Waste Association of North America), Silver Spring, Md. He points to a 2007 case—United Haulers Association Inc. et al vs. Oneida-Herkimer (New York) Solid Waste Management Authority et al, which was heard by the U.S. Supreme Court—as the one case with sweeping implications for flow control. “Others have been pretty much state specific or locality specific,” Shanoff says.

One such locality-specific case was in South Carolina, where the Horry (“oar-ee”) County Solid Waste Authority (SWA) started the year off on a positive note when the U.S. District Court for the District of South Carolina upheld the authority’s flow control ordinance. This was the second time the Horry County SWA had gone into the fray over flow control. The state Supreme Court had earlier sided with the county back in 2011.

At the Root
The battle, like most, was about money. For years, Horry County funded a variety of recycling programs—from household hazardous waste to school education programs—using tipping fees generated at its landfill. About 12 years ago, the waste stream started to leave the county. When the economy was good, the revenue was sufficient to support the programs. When the economy soured, the Horry County SWA faced a crunch.

“We had built our programs from those tipping fees,” explains Mike Bessant, government affairs coordinator with the Horry County SWA. The Horry County commissioners loved the programs but also were adamant that they be no burden on taxpayers. In March 2009, the county passed its flow control ordinance. Dumping or disposal of waste generated in the county at any site other than one approved by Horry County SWA was prohibited.

“The flow control ordinance brought waste back into the county and gave us the money to fund our programs,” Bessant says.

Sandlands C&D LLC, Gresham, S.C., and Express Disposal Service LLC (EDS), Conway, S.C., took issue with the order. Sandlands operates a licensed landfill in nearby Marion County. Loss of the Horry County waste, especially C&D material, would cripple the landfill, the plaintiffs said. EDS is a sister company to Sandlands with an agreement to tip waste at $20 per ton versus $26.50 in Horry County.

Horry County won twice. The initial suit was filed in Federal District Court. The federal court, recognizing that a key proviso of flow control ordinances is that they not conflict with state law, referred the issue to the South Carolina Supreme Court, which said there was no conflict with state law. At that point (2011), the federal case was able to move forward.

Both sides asked for summary judgment. The South Carolina Supreme Court ruled in the county’s favor, though it said it was “not unsympathetic to the plight of the plaintiffs.”

Horry County was the beneficiary of the 2007 U.S. Supreme Court decision. If a facility is publicly owned and operated, then any flow control ordinance is subject to a much easier legal test. “That means the local government is more likely to win,” Biderman says.

In these cases, there is a subtle difference between waste and recyclables. “We have always taken the position that if someone puts out recyclables at their curbside for a municipally sponsored program, then it is reasonable for the municipality to exercise control over those materials,” Horne says. However, he says, “It is not proper for a municipality to interfere with contractual agreements covering materials that are not waste.” Since recyclables are not landfilled, ISRI strongly maintains that recyclables are not waste.

“Recyclables have considerable value. If you force someone to turn that material over to a public entity, that violates the Constitution,” Horne says.

Contractual Matters
Biderman notes that, while some local governments feel that owning the landfill “immunizes” them against constitutional attack, that is not necessarily true.

In fact, not all municipalities win when flow control ordinances are challenged.

Late last fall, the U.S. District Court for the Northern District of Texas permanently enjoined the city of Dallas from enforcing a flow control ordinance the city enacted a year earlier. Haulers won, not exactly on the issue of flow control, but on a higher-level constitutional issue known as the “Contracts Clause,” which deals with the actual terms of written contracts.

“The only significant flow control case involving the Contracts Clause is the Dallas case, which is far from concluded,” says Shanoff.

Horne would disagree. He says the court got the Dallas case right. “That was a rational decision,” Horne says. “The solid waste industry made cogent points.”

The story started about six years ago when Dallas signed solid waste collection franchise agreements with a number of haulers. While the franchise agreements allowed the haulers to take solid waste and recyclables anywhere they wanted for disposal or processing, the new flow control ordinance required franchise haulers to take all solid waste to one of two city-owned landfills. Recyclables, the valuable fraction of the waste stream, had to go to city-owned MRFs.

Judge Reed O’Connor had issued a preliminary injunction Jan. 31, 2012, based upon his findings that the plaintiffs were likely to succeed on the merits of their Contracts Clause claim and would suffer irreparable harm if the flow control ordinance was allowed to take effect.

O’Connor confirmed his original finding in a decision this past fall to grant a permanent injunction because he found that Dallas violated the Contract Clause.

The Contracts Clause argument is a somewhat novel approach to the fight against flow control ordinances. O’Connor determined that Dallas enacted the ordinance primarily for economic gain, as opposed to an effort to protect the public health, safety and welfare. That violates the Contracts Clause of the U.S. Constitution, which states that “[n]o state shall...pass any…law impairing the obligation of contracts.”

In addition to the constitutional issue, the Dallas case also was found to be in violation of the Dallas City Charter.

Legal Precedents
The Commerce Clause of the U.S. Constitution, though phrased as a grant of regulatory power to Congress, has long been interpreted to have a negative aspect that denies the states the power to discriminate against or burden the interstate flow of articles of commerce unjustifiably. Note that this is a separate section from the Contracts Clause.

Way back in 1994, C&A Carbone sued the town of Clarkston, N.Y. A new landfill was built in Clarkston in 1989 with a waste guarantee of 120,000 tons per year and a tipping fee of $81, which was well above then-current fees. Clarkston then required all nonhazardous waste from the town be deposited at its site. In the Clarkston case, the U.S. Supreme Court said Clarkston’s flow control ordinance violated the Commerce Clause because it deprived competitors, including out-of-state firms, access to the local market.

In 2007, the U.S. Supreme Court heard the case of United Haulers Association Inc. et al vs. Oneida-Herkimer (New York) Solid Waste Management Authority (OHSWA) et al. The flow control ordinance enacted by Oneida and Herkimer counties allowed private haulers to pick up trash but required them to allow OHSWA to process and dispose of the material. Again, the tipping fees were higher than the open market rate.

The plaintiff, United Haulers, was a group of six haulers that operated in the area. The Supreme Court said the flow control ordinance benefitted “a clearly public facility while treating all private companies exactly the same.” Therefore, the court determined, “such flow control ordinances do not discriminate against interstate commerce for purposes of the dormant Commerce Clause.”

Economic Argument
Enthusiasm for flow control requirements varies because some recyclables, in some markets, are valuable. Other commodities are dismissed as “unrecyclable” and are simply landfilled.

Horne says most municipalities saw recyclables as trash until recently, when markets began to pay well. “Then they saw a chance to make money,” he says.

Horne says, whether it is for a Boy Scouts’ paper drive or selling spent appliances for cash, a property owner has a right to decide how and where to sell his goods.

“People should have the opportunity to give, sell, donate or transfer that material to anyone,” Horne says. “It is not waste. It is not intended for the landfill.”

In the economic argument for flow control, both sides have powerful weapons. In the Horry County case, there is no doubt that the plaintiffs had a cheaper alternative for disposal. There also is no doubt that the county’s residents benefitted from valuable recycling education and services paid for by captive disposal requirements.

Biderman points to the most recent flow control ordinance, which was enacted in Ulster County, N.Y., in December 2012 and goes into effect in February, as a good example of bad legislation. NSWMA strongly urged the Ulster County Counsel not to pass the measure. Biderman maintains that the result will be higher tipping fees covering the entire waste stream. Higher costs to waste haulers will mean higher costs to businesses. In turn, that will make the county less attractive to businesses that may be considering Ulster County for their homes.

“Ulster County’s flow control law helps eliminate the government’s subsidy of the Ulster County Resource Recovery Agency (RRA),” County Executive Mike Hein said at the time of the signing Dec. 18, 2012.

The county’s RRA has a MRF (material recovery facility) that can process, bale and ship 1,800 tons per month (21,000 tons each year) of recyclables.

Ken Wishnick, an Ulster County legislator, says most residents do not know that local property taxpayers have been subsidizing RRA operations by $200,000 per month. “Most of that subsidy was due to the deep discounts given only to the large corporate garbage companies,” he says.

While conceding that the flow control ordinance is far from ideal, Wishnick says it will result in all private garbage collectors paying the same rates. He says the ordinance will shift the full cost of garbage disposal from taxpayers to those who dispose of garbage.

In late 1991, Ulster County adopted a mandatory source-separation and recycling law requiring all waste generators to separate newspaper, corrugated cardboard, glass bottles and jars, metal cans and plastic bottles and jugs for recycling. The law also required haulers to collect these materials curbside. Businesses and institutions have been required to recycle these same materials, along with office and computer paper, since 1992.

According to RRA, private haulers now will pay a tipping fee of $100 per ton. That is as much as double the fee some pay today. Kingston, the Ulster County seat, will continue to pay $80 per ton, while other towns pay $90.

“I believe this makes for good public policy,” Wishnick says.

Biderman is not sold, however. He is quick to point out that creating a monopoly rarely results in either urgency for technological development or in more competitive prices for local citizens and businesses.

“Flow control is often enacted to achieve certain revenue goals,” Biderman says. “Usually, the result is higher tipping fees covering the entire waste stream.”

Ulster County’s Hein begs to differ. While conceding that the county needed to address the RRA’s $23 million debt, he says the flow control law, “Spurs competition and small business development…and helps to protect our environment.”

While saying the law is not a panacea for past challenges at the RRA, Hein adds that he hopes the flow control measure will spur action for a more comprehensive solution to the solid waste issues facing New York’s Ulster County.

“Ulster County’s Flow Control Law will ensure the reliable delivery of waste services to the community, allowing the system to operate on a strictly fee-for-service basis,” Hein says.

Biderman, like Horne, maintains that recyclables are commodities and different from the regular solid waste stream. “Efforts to flow control recyclables by local government are just another money grab by local governments,” he says.

At press time in Ulster County, haulers were still considering whether to take legal action against the county. Some initial fact-finding was underway. Given the long-standing opposition to flow control measures by NSWMA and other hauler groups, it is likely that the Ulster County flow control measure will be challenged.

“Governing agencies that contract for the collection, processing or marketing of materials diverted or removed from the solid waste stream that have properly come under their control should do so in a competitive bidding process that is not tied to the mandatory provision of other functions, such as the ability to provide solid waste collection or disposal services,”

ISRI’s long-standing policy states. It is likely that ISRI, too, will be taking a hard look at the Ulster County issue.

The author, based in Cleveland, is a contributing editor to Recycling Today and can be contacted at curt@curtharler.com.