Testimony of Congressman Bob Franks
March 18, 1997
Senate Environment and Public Works Committee

Mr. Chairman, and members of the Committee, thank you for giving me the opportunity to testi~fy 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 1970s, 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 two 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 legislati~on 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.