MEETING NOTICE RAMSEY/WASHINGTON COUNTY …

MEETING NOTICE RAMSEY/WASHINGTON COUNTY

RESOURCE RECOVERY PROJECT BOARD

DATE: February 20, 2014

TIME: 9:00 am to Noon PLACE: NOTE MEETING LOCATION Keller Golf Course Clubhouse | 2166 Maplewood Drive | Maplewood AGENDA:

I. BUSINESS MEETING A. Call to Order

B. Approval of Agenda

C. Approval of Minutes – January 30, 2014

D. Business - Project Management

i. Report of Budget Activity Information

E. Adjourn to Workshop

II. FUTURE OF PROCESSING WORKSHOP – POLICY ISSUES Information A. Workshop Introduction

B. Follow-up to Technology Workshop

C. Presentations

i. Waste Assurance Report – Kevin Johnson, Stoel-Rives ii. Governance Alternatives Report - Staff

iii. Ownership & Financial Report – Barry Fick, Springsted, Inc.

D. Break E. Discussion of Policy Issues

RAMSEY/WASHINGTON COUNTY RESOURCE RECOVERY PROJECT BOARD/WORKSHOP

JANUARY 30, 2014 MINUTES

A meeting of the Ramsey/Washington County Resource Recovery Project was held at 9:00 a.m., January 30, 2014 at the Oakdale Discovery Center, Oakdale, Minnesota. MEMBERS PRESENT Commissioners Blake Huffman, Mary Jo McGuire (alternate), Rafael Ortega, Victoria Reinhardt – Ramsey County Commissioners Ted Bearth, Autumn Lehrke, Fran Miron, Lisa Weik – Washington County MEMBERS ABSENT Commissioners Toni Carter, Janice Rettman – Ramsey County ALSO ATTENDING Mary Elizabeth Berglund, Gary Bruns, Tim Cesarek, Barry Fick, Bob Gilmore, Chris Gondeck, Zack Hansen, Curt Hartog, Kevin Johnson, Julie Ketchum, Randy Kiser, Sue Kuss, Harry McPeak, Dan Ostrenga, Greg Parent, Steve Pincuspy, Norm Schiferl, Katie Shaw, Warren Shuros, Darren Tobolt, Ryan Tritz, Dale Walker, Joe Wozniak, Kate Bartelt, Judy Hunter APPROVAL OF AGENDA Commissioner Miron moved, seconded by Commissioner Huffman, to approve agenda. Roll Call: Ayes – 5 Nays – 0 Motion Carried. APPROVAL OF THE OCTOBER 31, 2013 MINUTES Commissioner Bearth moved, seconded by Commissioner Miron, to approve the minutes. Roll Call: Ayes – 5 Nays – 0 Motion Carried. PROJECT MANAGEMENT 2014 Meeting Schedule Commissioner Bearth moved, seconded by Commissioner Miron, to approve the proposed 2014 Meeting Schedule. Roll Call: Ayes – 5 Nays – 0 Motion Carried. Introductions were made. Executive Committee Member Chair Reinhardt said the Executive Committee is composed of the Chair, Vice Chair, and a member of the Vice Chair’s County. Commissioner Reinhardt appointed Commissioner Miron to serve on the Executive Committee. The 2014 Executive Committee is comprised of Commissioners Reinhardt, Lehrke, and Miron. Policy Evaluation – Future of Waste Processing Kevin Johnson, Stoel Rives reported on the arbitration outcome. The Project recently participated in a binding arbitration process with Resource Recovery Technologies (RRT) in December 2014. The arbitration panel rendered a decision of $26,400,000. The arbitration panel consisted of former Ramsey County Judge Flynn, former Hennepin County Judge Forbe, and Peter Terrus, practicing attorney from Boston who is knowledgeable in waste-to-energy issues. Witnesses for the County were Zack Hansen, Judy Hunter, Warren

RAMSEY/WASHINGTON COUNTY RESOURCE RECOVERY PROJECT BOARD MINUTES JANUARY 30, 2014

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Shuros and the Appraiser from American Appraisal. RRT’s witnesses were Mark Wickoren, Chris Gondeck and their appraiser. ADJOURNMENT TO THE WORKSHOP Chair Reinhardt adjourned the meeting. RAMSEY/WASHINGTON COUNTY RESOURCE RECOVERY PROJECT WORKSHOP POLICY EVALUATION WORKSHOP – TECHNOLOGY ISSUES Introduction Zack provided the introduction. What Counties do in solid waste management is driven by the policy plans adopted in the Solid Waste Master Plan. Both County plans have policies that relate to waste processing. There is a statement that states “in the event of market failure to support a merchant approach, the counties will consider specific options in lieu of the merchant approach.” In the event of a failure of the solid waste market to support a merchant approach or other County environmental goals, the County will consider the following actions:

• Seek to acquire the Newport Resource Recovery Facility to maintain its operation as a resource recovery facility. This includes consideration of public operation and the use of flow control.

• Pursuant to action taken following the Public Collection Study in 2001-2002, move forward with design of a public collection system for residential and commercial solid waste to achieve environmental goals and protect public health and safety.

• Intervene in the market and use public funds to encourage processing. The key policy questions to be answered in 2015:

1. How should the processing of MSW be integrated into the solid waste system in the East Metro area? 2. What should be the role of the Countieswith regard to integrating processing into the solid waste system?

The Phase 1 decision point in April 2014 is:

1. What specific processing alternatives should the counties further research and develop in 2014? 2. What waste assurance, ownership and governance alternative(s) should be further evaluated in 2014?

The reason for the technology workshop is to present the results of data gathering and analysis related to technology options available for processing waste in the east metro area. This information is intended to inform the Board to provide direction in April 2014 on the technology options to further evaluate. The Workshop will:

1. Review some of key takeaways from the recent Renewable Energy from Waste Conference 2. Review Technical Reports from Foth 3. Provide Presentations by Technology Representatives

a. Gasification b. Anaerobic Digestion c. Mixed Waste Processing

The technology analyses are designed to be neutral as to ownership. The technology scenarios analyzed were selected to provide a range for comparison purposes. There is some flexibility as the Board continues its evaluation to look at other technology combinations.


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The range of potential county waste processing options reviewed at the workshop includes: • Using Newport and Xcel combustion units as they currently exist • Using the Newport Facility with Mixed Waste Processing and Gasification • Mixed Waste Processing and Anaerobic Digestion • Mass Burn

Commissioner Ortega arrived. Key Takeaways from Renewable Energy from Waste Conference Report Some of the key themes:

• Waste assurance is the number one issue • Risk • Local government is responsible for managing waste. If technology fails, the waste keeps coming. The

public sector is not risk averse, it is deliberate • Design for flexibility • 70% of system costs are in collection • Siting a new facility is extremely difficult • RDF technology has changed. The focus is on engineered fuel • Mixed waste processing is emerging • Emerging technologies are more sophisticated in marketing. Buyer beware, proceed with caution • Hope is not an appropriate way to build an industry • Wise leaders plant trees they seldom will sit under

Presentation of Foth’s Alternatives Comparison Report Warren Shuros, Foth, presented a summary of the Feasibility Report and Alternative Comparison Report, both of which can be found on the Project’s website. The Feasibility Report and comparative analysis report was to compare these options:

• Current RDF system • Mass burn • Combination of RDF, mixed waste processing & gasification • Combination of mixed waste processing, anaerobic digestion & plastics to fuel • Sanitary landfill

The factors used in the Technical Comparative Analysis:

• Technical – able to handle MSW – size, age, experience • Financial – capital, operating, revenues, cost per diverted tons • Environmental – diversion, energy, emissions, odors, groundwater • Permitting – regulatory process, ease, likelihood, time required • Siting – community response, potential organized opposition • Reliability – perform on a daily & future basis – capacity, age, redundancy • Flexibility – handle changes in MSW volume or composition


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The key observations from the feasibility results: • Mass Burn

o Not site specific o Similar to HERC in size & operation

• Newport with Mixed Waste Processing & Gasification o Gasification is still an emerging technology o Ethanol revenues potentially higher than electricity o Mixed waste processing targets only commercial wastes o RDF goes to gasification, not to Xcel o Newport site too small for gasification refinery; you will need 20 acres for a gasification site

• Mixed Waste Processing with Anaerobic Digestion o Standalone facility o Targets only recyclables & organics o Remaining wastes are landfilled o Mixed waste processing processes entire waste stream o Plastics to fuel technology not ready and has not been analyzed

Mr. Shuros showed the overall comparison ratings using the criteria developed in the report. The scoring was as follows:

• Current RDF System 44 • Newport w/MWP& Gasification 45 • MWP w/AD 32 • Mass Burn 35 • Sanitary Landfill 31

In Summary:

• The current RDF system came up high on permitting, siting & reliability • Newport with the mixed waste processing & gasification came up high on financial & flexibility • Gasification would rate higher on energy if all green energy considered • Analysis served as a starting point for further discussion • Other combinations may be considered • Some interesting possibilities exist

Presentations from Technology Representatives Enerkem/Vecoplan Presentation on Gasification Technologies and Mixed Waste Processing Tim Cesarek, Enerkem, provided an overview of the partnership with the City of Edmonton, Alberta Canada and Vecoplan. He said gasification has been around since WWII. What they do is process trash. They looked at different processes to separate and fractionate waste into refuse derived fuel. They create valuable transportation fuel that is used for end products to effectively close the loop for municipal solid waste. They do that with a process of thermo-chemical technology which they create syngas. They do not burn it. They starve the process of oxygen enough when in effect it vaporizes. The CO2 that is produced is not emitted into the air. In fact, industrial gas companies purchase that from them to make dry ice or put it into carbonated beverages. The CO and the hydrogen they rebuild into initial methanol which is a chemical and ethanol which is a transportation fuel. The transportation fuel is the same ethanol that you use in your car today.


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Enerkem at a glance • A private company based in Canada; founded in 2000 which employees 170 • Produces biofuels and renewable chemicals from garbage • Operates 2 facilities in Quebec (pilot and demonstration facilities) • Entering commercial phase with first biorefinery under commissioning in Edmonton, Alberta Canada

Tim Cesarek introduced Bob Gilmore from Vecoplan. Mr. Gilmore said Vecoplan was founded in 1969. Today, Vecoplan employs over 500 employees in multiple Countries with manufacturing in Europe and the US. They were challenged with a process to take 55 tons per hour of MRF residual and turn that into an usable engineered fuel that ultimately goes to gasification. Primary Steps associated to turn the trash-to-trash into a usable product:

• Infeed conveyor - 55 tons per hour • Pre-shredder- 2 shaft unit that open & liberate all the material which will make the downstream

separation far more efficient; low speed; low maintenance, energy efficient • Ferrous removal – pulled out of stream for recycling • Fines removal – will separate the organics, aggregates & fines; screens are easily clean & virtually

maintenance free • Heavies removal – non-ferrous, large organics, etc. • Non-ferrous removal – separates non-ferrous which goes to recycling, material which goes to fuel and

ferrous which goes to recycling • Re-shredder • Vecobelt – after the fuel is produced, it needs to get from one building to the other which is a distance of a

football field. The tubular line conveyor called a vecobelt that actually rides on air. This is connected from the process building to the storage building

• Load/Unload Storage Sanimax Presentation on Anaerobic Digestion Dan Ostrenga, Sanimax, provided an overview of their SaniGreen BioEnergy project that has both unique opportunity and benefits for the community. Sanimax has been operating facilities in South Saint Paul for a long time. Sanimas now has plans to build a BioEnergy facility, which would produce renewable energy using anaerobic digestion. Result: anaerobic digestion is emerging as a cost-competitive renewable energy technology. SaniGreen’s project would use organic waste from various sources to produce synthetic gas, or syngas, which could be used to produce natural gas of pipeline quality, or electricity. The project will also produce a marketable organic fertilizer. Mr. Ostrenga explained why there is value in SaniGreen and made these points:

• Elimination of County capital investment • Removal of permitting and siting concerns • Operational complexity & support • Production expertise & product development • Timeline – parallel development opportunity • Ability to commercialize, spreading costs = lower fees • Quick solution on organic recycling


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• All has been approved • Design & flexibility in pretreatment • Renewable energy solution • Proven technology • Location • No capital costs • Lack long-term relationship • Low transportation costs

At the conclusion of the presentations staff reminded commissioners about the February 20, 2014 workshop on policy issues related to the future of waste processing. Adjourn: Chair Reinhardt adjourned the workshop. Approved: ____________________________________________ Commissioner Victoria Reinhardt, Chair

RAMSEY/WASHINGTON COUNTY RESOURCE RECOVERY PROJECT REQUEST FOR BOARD ACTION

Project Board Meeting Date: 2/20/14

AGENDA ITEM: I-D-i

SUBJECT: Report of Budget Activity TYPE OF ITEM: X Information __ Policy Discussion __ Action Submitted By: Joint Staff Committee

PROJECT BOARD ACTION REQUESTED: For information only. EXECUTIVE SUMMARY: The Joint Staff Committee reports on a regular basis to the Resource Recovery Project Board on budget status for the Project. Attached is a report on 2013 Project revenue and expenditures. ATTACHMENTS: 1. 2013 Resource Recovery Project Budget and Actual Expenditures

Coversheet Page 2 of 2

SUBJECT: Report of Budget Activity FINANCIAL IMPLICATIONS: None AUTHORIZED SIGNATURES

Joint Staff Committee Date

February 11, 2014

Ramsey County Attorney Date

Washington County Attorney Date

Ramsey County Department of Finance Date

February 11, 2014

Other Date

2013 2013Amended Budget Actuals to Date

421102 State Auditor 5,200 5,350

421208 County Attorney Services 20,000 24,059

421501 Consulting Services (Superion Consulting) 1,500 -

421502 Engineering Services 50,000 49,980

421511 County Project Management Services 250,471 284,226

423309 Records Storage/Retrieval Fee 500 179

424107 Liability & Property Damage 14,205 14,205

424302 Membership & Dues 750 750

424303 Conference & Seminar - 576

424304 Other Travel 10,000 1,634

424306 Meeting Expenses Account 300 272

424601 Other Services 10,000 - 362,926 381,232


421501 Consulting Services 330,000 295,527

421201 Legal Services (BizRecycling Trademark) - 4,665

421502 Engineering Services 19,253

421602 Advertising & Promotion 54,000 45,482

424601 Other Services - -

425102 Organic Waste Management (Second Harvest Heartland) 495,000 40,000

879,000 404,927


421602 Advertising & Promotion 362,500 303,066 362,500 303,066

RESOURCE RECOVERY PROJECT

TOTAL PROJECT MANAGEMENT EXPENSES

PROGRAM: ORGANIC WASTE MANAGEMENTThis program includes funding for the variety of activities that the Project initiated in 2011, following a year-long policy evaluation of organic waste management. The work includes education, consultation and technical assistance; evaluation and recommendations to address collection efficiencies; evaluation of a starter-grants program; and funding for food rescue.

2013 BUDGET & YTD ACTUALS

Program: Project ManagementThis Program includes expenses associated with managing the Resource Recovery Project and the Processing Agreement with RRT.

This program includes outreach and education activities targeted at waste generators in the two Counties.

TOTAL ORGANIC WASTE MANAGEMENT EXPENSES

PROGRAM: GENERAL OUTREACH

TOTAL GENERAL OUTREACH EXPENSES

RESOURCE RECOVERY PROJECT2013 BUDGET & YTD ACTUALS


421201 Legal Services 274,000 203,308

421501 Consulting Services (Springsted) 85,000 13,258

421502 Engineering Services 275,000 216,660

424601 Other Services 40,000 - 674,000 433,227


424601 Other Services - Prior year Hauler Rebates - 40,868 424623 Rebates - Resource Recovery Tipping Fees1 8,400,000 9,158,229

8,400,000 9,199,097


PROJECT MANAGEMENT 362,926 381,232

ORGANIC WASTE MANAGEMENT 879,000 404,927

GENERAL OUTREACH 362,500 303,066

POLICY EVALUATION 674,000 433,227

RESOURCE RECOVERY 8,400,000 9,199,097 TOTAL PROJECT BOARD BUDGET: 10,678,426 10,721,548


314103 Other Participation (Washington County) 2,720,095 1,763,704

319110 Ramsey County Participation 7,354,331 7,040,811

318102 Interest on Investments 15,000 2,013

319105 Insurance Dividends - 14,080

Resource Recovery Project Board Fund Balance 589,000 433,227 TOTAL REVENUE: 10,678,426 9,253,835

Note:

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TITLE OF PROGRAM

TOTAL POLICY EVALUATION EXPENSES

PROGRAM: RESOURCE RECOVERY This program provides funding for hauler rebates. Prior year rebates paid in the current year are reflected in 424601

TOTAL PROCESSING EXPENSES

EXPENSE SUMMARY

Amount of 2013 hauler rebates above $8.4 million will be reimbursed by RRT and not charged to Counties. As of this report, $758,229 in 2013 hauler rebates will be charged to RRT.

REVENUE SUMMARY

INTERGOVERNMENTAL REVENUE

PROGRAM: POLICY EVALUATIONThis program is a one-time program that is a result of the policies discussions and development of the 2013-2015 Processing Agreement. There are three main categories of work: Evaluation of processing alternatives, establishing a purchase price for the Facility, and evaluation of the future of processing, including purchase of the Facility.

RAMSEY/WASHINGTON COUNTY RESOURCE RECOVERY PROJECT REQUEST FOR BOARD ACTION

PROJECT BOARD MEETING DATE: 2/13/2014

AGENDA ITEM: II

SUBJECT: Policy Evaluation Workshop TYPE OF ITEM: ___ Information X Policy Discussion __ Action SUBMITTED BY: Joint Staff Committee

PROJECT BOARD ACTION REQUESTED: For information only.

EXECUTIVE SUMMARY: The Resource Recovery Project is conducting a policy evaluation on the future of waste processing in 2013 – 2014, consisting including a policy analysis leading to a decision point in 2015 about the future of waste processing, and in particular, whether the Counties would exercise their option to purchase the facility. Two Project Board workshops are being held in January and February 2014 to present the results of work from the first phase of the analysis. The purpose of the February 20th workshop is to present reports related to key public policy issues. These include waste assurance, governance alternatives, and ownership/financial issues. This information is intended to inform the Board as decides in April 2014 on the technology which policy issues to further evaluate. The Workshop will be comprised of presentations of these reports, with Project Board discussion.

ATTACHMENTS: • Staff memo dated February 13, 2014 with an overview of the Workshop • Staff memo dated February 13, 2014 with an update on technology issues • Reports and presentations

o Waste Assurance, by Stoel Rives o Governance Alternatives, by staff o Ownership Considerations, By Springsted

Coversheet Page 2 of 2

SUBJECT: Policy Evaluation Workshop

FINANCIAL IMPLICATIONS: None AUTHORIZED SIGNATURES

Joint Staff Committee Date

2.13.14

Ramsey County Attorney Date

Washington County Attorney Date

Ramsey County Department of Finance Date

Other Date

Policy Workshop Introduction February 2014 Page 1 of 5

February 13, 2014 To: Resource Recovery Project Board From: Joint Staff Committee Re: Future of Processing: Policy Evaluation Workshop The Resource Recovery Project is conducting a policy evaluation on the future of waste processing in 2013 – 2014 leading to a decision point in 2015 about the future of waste processing, and in particular, whether the Counties would exercise their option to purchase the facility. Background: At its October 2013 meeting the Project Board reviewed the policy evaluation process, which has two key questions to be answered in 2015: Looking ahead to the future (20-30 years):

1. How should processing of MSW be integrated into the solid waste system in the East Metro area? To answer this requires projections of waste volume and composition over the next few decades, along with an evaluation of technologies and other system components.

2. What should be the role of the Counties with regard to integrating processing into the solid waste system? This question speaks to the level of intervention by the Counties in the solid waste market to accomplish the public policy goals

The current phase of the policy analysis includes information gathering and a preliminary analysis, leading to a decision point in April 2014 to address two questions, and to narrow the scope of the analysis. Those questions are:

1. What specific processing alternative(s) should the counties further research and develop in 2014?

2. What waste assurance, ownership and governance alternative(s) should be further evaluated in 2014?


Second Workshop: Policy Evaluation – February 20, 2014 The purpose of this workshop is to present information related to the role of the Counties as they implement State, regional and County policies related to waste processing. This information is intended to inform the Board to provide direction in April 2014 on the policy options to further evaluate. Context for the Policy Analysis As staff and consultants worked on the policy analysis, several key issues emerged for consideration.

• Systems Approach: Since 1980 Minnesota has taken a systems approach to waste management, and to prevent pollution, conserve resources, protect health and the environment, and to not pass costs onto future generations.

• State Direction: The Minnesota Waste Management Act identifies its purpose and the waste management hierarchy in Section 115A.02 (see below). Based on these goals, waste management plans are written, reviewed and approved by the Minnesota Pollution Control Agency (MPCA). Counties comply, measure and update their solid waste master plans to reflect changes in the system and progress made.

PURPOSE AND GOALS OF THE WASTE MANAGEMENT ACT, Minn. Stat. Section 115A.02 a) It is the goal of this chapter to protect the state's land, air, water, and other natural resources and the public health by improving waste management in the state to serve the following purposes:

(1) reduction in the amount and toxicity of waste generated; (2) separation and recovery of materials and energy from waste; (3) reduction in indiscriminate dependence on disposal of waste; (4) coordination of solid waste management among political subdivisions; and (5) orderly and deliberate development and financial security of waste facilities including disposal

facilities.

(b) The waste management goal of the state is to foster an integrated waste management system in a manner appropriate to the characteristics of the waste stream and thereby protect the state's land, air, water, and other natural resources and the public health. The following waste management practices are in order of preference:

(1) waste reduction and reuse; (2) waste recycling; (3) composting of yard waste and food waste; (4) resource recovery through mixed municipal solid waste composting or incineration; (5) land disposal which produces no measurable methane gas or which involves the retrieval of

methane gas as a fuel for the production of energy to be used on-site or for sale; and (6) land disposal which produces measurable methane and which does not involve the retrieval of

methane gas as a fuel for the production of energy to be used on-site or for sale.


• Hierarchy: The State has a hierarchy of preferred methods to handle waste,

emphasizing prevention of environmental problems. Preventing the creation of waste is the ultimate goal in the waste management hierarchy. Adhering to the waste management hierarchy reduces air, water and soil pollution.

• Focus on Risk: The Waste Management Act identifies protection of health and the environment as a principal goal. Ramsey and Washington Counties’ both use a public health model of prevention in their work on solid and hazardous waste. In that regard, reducing risks (environmental, health, safety, economic) is a fundamental consideration.

• Policy Tools: Since the 1980’s the system has been planned and deliberately developed in the East Metro area to meet State goals. A variety of public policy tools have been used to implement the current system, including

o Policy Direction – Establishing a vision for a waste management system, and holding public and private entities accountable to move toward the vision. For example, without County Master Plans, curbside recycling would not have emerged during the 1990’s.

o Regulation –such as licensing and inspection of various activities; o Ownership of facilities – such as Ramsey County’s yard waste sites, and

Washington County’s Environmental Center; o Direct services – such as household hazardous waste collection; o Contracting for services – such as household hazardous waste, or waste

processing at Newport; o Grants – such as recycling grants to municipalities; o Financial Tools - such as the County Environmental Charge; o Education, communication – Such as each County’s Going Green guide; o Consultation and technical assistance – Such as the East Metro Organics and

Recycling program. • Origin of the “market” - Solid waste management is a necessary government function,

for reasons of public health and safety, and protection of the environment. State and local government in Minnesota has created the marketplace in which private industry competes to provide this necessary service.

• Public Responsibility/Private Control: In the East Metro area, the private sector controls most of the waste stream, and makes most of the decisions related to the fate of waste. For over two decades there has been tension between public sector interest in creating the system envisioned by the Waste Management Act, and the private sector’s interests.

Workshop Content The analysis for the Project Board focuses on two key areas of involvement: Waste assurance, and facility ownership. The matrix on page 5 of this memo illustrates policy tools within these


areas, showing a continuum of public involvement for the policy tools available to meet state goals. In this case, more involvement means more control over the outcomes associated with the activity, so this could also be considered a continuum of control over the solid waste system. Also included in the analysis are options available to the counties for governing waste processing. A range of alternatives are presented, with staff recommending that the structure of a governing entity follow decisions related to county actions. That is, form should follow function. Three key public policy issues addressed are:

• Waste Assurance: Waste Assurance is the key economic issue related to any processing alternative and ownership option selected. Controlling and assuring a supply of waste over a period of time is essential for financing the capital and operating costs, and meeting policy goals associated with waste processing. This will be presented by Kevin Johnson of Stoel-Rives.

• Governance Alternatives: This policy issue investigates the governance options available to the Counties, describes the processes to implement and consequences associated with each. This will be presented by staff.

• Ownership and Financial Issues: This policy issue describes the options for ownership of processing capacity, and outlines the benefits and risks of each option. This will be presented by Barry Fick of Springsted, Inc.

Key Questions to Keep in Mind The policy question to be answered in 2014 - 2015 regarding county involvement in the waste system is “What should be the role of the Counties with regard to integrating processing into the solid waste system?” The following are questions suggested for consideration by Commissioners as the February 20th workshop proceeds:

• With regard to selection of processing technology, what policy tool is the best fit for the counties

in deciding which technology (-ies) will process waste over the next 20-30 years?

• With regard to assuring a supply of waste for processing over the next 20-30 years, what policy tool (s) will be most appropriate for the counties to implement?

• What are the risks associated with the various policy tools?

• Which governance and ownership structure will best position the East Metro area to implement various policy tools for the next 30 years?

• Are there any further policy analyses needed prior to decision making in April?


Continuum of County Involvement in Waste Processing

Category More

Waste

Assurance

Waste Designation

County Contracts with

haulers for delivery of waste

Private facility contracts with

haulers for waste; County

subsidy to facility

County pays haulers a rebate for processing at

any facility

Market-driven merchant approach

Ownership

Public Ownership Public/Private Joint

Ownership

Private Ownership with a Service

Agreement

Private Ownership with no service

agreement


February 13, 2014 To: Resource Recovery Project Board From: Joint Staff Committee Re: Follow-up on Technology Workshop The Resource Recovery Project Board held a workshop on processing technology issues on January 30, 2014, focused on the question “what specific processing alternative(s) should the counties further research and develop 2014?” A number of requests for further analysis resulted from the workshop. This memo summarizes the follow-up work being conducted. The results will be available for the April 24, 2014 Project Board meeting. Specific information/questions about technologies • Water: what is the need for water for the various technologies, and how do they compare

for water use and wastewater created. • How does the Vecoplan RDF production technology compare to the current Newport RDF

technology? What are the key differences in equipment and processing steps • Is the amount of ethanol produced by gasification sufficient to assure that it can be sold in

the market? • What has been the experience of finding sites for gasification, mixed waste processing, and

anaerobic digestion technologies? • What is the size and capacity of the planned Sanimax facility? How many tons of source

separated organics is needed and how will that material be delivered • Obtain utility perspectives (Xcel Energy and Great River Energy) on waste processing in the

future. • Further information about the Sanimax anaerobic digester, including the size of the facility

and how it relates to waste volumes in the two counties

Further Analyses • Two additional technology options suggested

o Using the existing Newport system combined with anaerobic digestion and gasification;

o Using the existing Newport system combined with anaerobic digestion


• Financial analysis – o Preparing a more detailed financial analysis to reduce the confusion created by

the “breakeven” concept. o Providing more clarity on the financial rankings provided in the report. o Prepare an informational memo explaining the methods used.

• Comparing the energy value/production of the technologies on a more complete basis, by looking at energy production, net and gross, and developing an energy process flow diagram for each process.

• Review selected technologies and quantify how the technology, if implemented, would help the Counties meet state objectives and compare all technologies on this component.

SOLID WASTE DELIVERY ASSURANCE ANALYSIS AND OPTIONS

February 2014

Prepared by: Kevin D. Johnson, Attorney Stoel Rives LLP Minneapolis, Minnesota 612-373-8803 [email protected] Sara E. Bergan, Attorney Stoel Rives, LLP Minneapolis, Minnesota 612-373-8819 [email protected] Prepared for: Ramsey - Washington Resource Recovery Project Board

TABLE OF CONTENTS

Page

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A. Introduction ........................................................................................................................ 1

B. Overview of Regulatory Approaches ................................................................................. 1

1. Waste Designation ................................................................................................. 1

a. Minnesota Statutory Process ...................................................................... 1

b. Initial Minnesota Legal Challenges ........................................................... 2

c. Carbone Decision ...................................................................................... 3

d. United Haulers Decision ............................................................................ 4

e. Public vs. Private Operation ...................................................................... 6

f. Contract Clause .......................................................................................... 9

2. Market Participant Methods: Public Entities and Public Collection ................... 11

a. Government as Market Participant .......................................................... 11

b. Minnesota Public Entities Statutes........................................................... 14

c. Public Collection ...................................................................................... 14

C. Economic Incentive Approaches ..................................................................................... 15

1. Hauler Delivery Agreements ............................................................................... 15

2. Hauler Rebates ..................................................................................................... 16

3. Zero Tip Fee ......................................................................................................... 16

4. Role of Hauler-Collected Service Charge ............................................................ 17

D. Ramsey - Washington Analysis and Options ................................................................... 17

1. Waste Delivery Assurance Historical Summary .................................................. 17

2. Current RRT Delivery Agreements with County Rebates ................................... 18

3. Re-establishment of Waste Designation Under Public Ownership Scenario ...... 19

a. Waste Designation Plan & Ordinances .................................................... 19

b. Combination of Designation Ordinances and Waste Delivery Agreements .............................................................................................. 19

4. Continued Reliance on Private Ownership .......................................................... 20

a. No Subsidy Scenario ................................................................................ 20

b. Continued Rebate Scenario ...................................................................... 20

c. Role of Public Entities Statutes ................................................................ 20

d. MPCA Enforcement of Minn. Stat. § 473.848 ........................................ 21

Solid Waste Delivery Assurance Stoel Rives, LLP Analysis and Options February 2014

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A. Introduction

This document provides an overview of options for assuring delivery of mixed municipal solid waste, and potentially other solid wastes, to the Newport Refuse-Derived Fuel (RDF) Facility, or another resource recovery facility involving Ramsey and Washington Counties.

B. Overview of Regulatory Approaches

1. Waste Designation

a. Minnesota Statutory Process

Minn. Stat. §§ 115A.80-.893 (Waste Designation Statute) provides that a qualifying solid waste management district or county may require all, or a portion, of the solid waste generated within its boundaries be delivered to a processing or disposal facility identified by the district or county. Designation applies to “mixed municipal solid waste” and other solid waste that is not managed as a separate waste stream and is managed lower on the solid waste management hierarchy in Minn. Stat. § 115A.02. Designation may not apply to materials that are recovered for reuse, already processed at a resource recovery facility, separated at a qualifying transfer facility, or recycled.

Before a solid waste management district or county may begin the designation process, it must adopt a comprehensive solid waste management plan. Upon adoption of such plan, it may then prepare and submit for approval by the Minnesota Pollution Control Agency (MPCA) a designation plan that evaluates:

1. the benefits of designation, including the public purposes achieved;

2. the estimated costs of designation, both direct and indirect;

3. whether the designation will result in the recovery of resources or energy from materials that would otherwise be wasted;

4. whether the designation will lessen the demand for land disposal;

5. whether the designation is necessary for the financial support of the facility;

6. whether less restrictive methods for ensuring an adequate waste supply are available;

7. other feasible and prudent waste management alternatives for accomplishing the purposes of the proposed designation, the direct and indirect costs of the alternatives, and the effects of the alternatives on the cost to generators;

8. whether the designation takes into account and promotes local, regional, and state waste management goals;


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9. whether the designation will better serve to protect public health and safety;

10. the impacts on other disposal facilities inside and outside the area;

11. whether the designation is necessary to promote regional waste management programs and cooperation; and

12. the extent to which the design and operation of the facility protects the environment.

The MPCA, upon receipt of the proposed designation plan for approval, must then make a decision within 120 days, and is required to approve the designation plan if it satisfies the requirements identified above. The MPCA may, under certain circumstances, modify the plan to exclude certain wastes.

To effect a designation to a facility, the district or county must hold a public hearing after providing notice to political subdivisions, processing and disposal facility operators, and licensed solid waste collectors who may be expected to use the facility describing the area in which the designation will apply. This notice will specify the points of delivery of the solid waste, estimate the types and quantities of solid waste subject to the designation, and estimate the fee to be charged for the use of the facility.

For 90 days following the hearing, the district or county must negotiate with those persons to whom notice was submitted for the purpose of developing contractual agreements that will require use of the facilities proposed to be designated. At the end of this 90-day period, the district or county may proceed with securing approval of a designation ordinance. The ordinance must be submitted to the MPCA for review and approval, which must be granted or denied within 90 days. Once this approval has been granted, the district or county must wait an additional 60 days before implementing the designation.

b. Initial Minnesota Legal Challenges

Beginning in the mid-1980s, local governments in Minnesota -- including Ramsey and Washington Counties -- began developing alternatives to disposal of solid waste in landfills through establishment of solid waste resource recovery facilities. This was done in response to directives and incentives provided by the State of Minnesota, including policies outlined in the Minnesota Waste Management Act (Minn. Stat. Chaps. 115A and 473). Many Minnesota counties -- including Ramsey and Washington Counties -- completed the designation process and enacted designation ordinances.

For example, Martin and Faribault Counties in south-central Minnesota built the Prairieland Solid Waste Composting Facility in Truman, Minnesota. To finance the $8 million it cost to build the facility, the Counties needed to receive enough waste and the tipping fee revenue from the waste to pay off capital debt and pay for operation and maintenance costs. In 1991, the Counties enacted waste designation ordinances pursuant to the Waste Designation Statute designating all solid waste within their jurisdictions to be delivered to the Prairieland facility at a $70 per ton tipping fee.


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The preferred option for Waste Systems Corporation, a local solid waste hauler, was to instead truck the waste it collected in Martin and Faribault Counties across the Minnesota border to its landfill in Lake Mills, Iowa, where the tipping fee was less than $30 per ton. Waste Systems sought an injunction before the ordinances took effect. In Waste Systems Corp. v. Martin County and Faribault County, 784 F.Supp. 641 (D. Minn. 1992), the court ruled the local governments’ ordinances were economic protectionism and therefore were per se invalid under the dormant Commerce Clause of the U.S. Constitution.

The Eighth Circuit affirmed the ruling 1993 and stated:

“Although the purpose behind constructing the Plant may have included legitimate environmental concerns, the purpose behind the Ordinances is solely economic. Enjoining the Ordinances will not negatively affect the environment. The Plant director has stated that the Plant will continue to operate whether or not the Ordinances are enjoined, and waste will continue to be processed. Enjoining the Ordinances will affect only financing of the Plant and payment of the local government-guaranteed bonds...”

c. Carbone Decision

A year later, the U.S. Supreme Court took up the validity of waste designation or “flow control” ordinances in C & A Carbone v. Town of Clarkstown, 511 U.S. 383, 114 S.Ct. 1677 (1994). Clarkstown, New York, had contracted with a private company to build a new solid waste transfer station and guaranteed the financing would be paid off through an $81 tipping fee. The regional market price for tipping fees was substantially lower, so Clarkstown enacted a flow control ordinance that required all non-hazardous solid waste generated in, or transported into, Clarkstown to be processed at the designated transfer station before leaving the City. The Supreme Court struck down the waste flow control ordinance as violating the dormant Commerce Clause of the U.S. Constitution.

The Court wrote: “While the immediate effect of the ordinance was to direct local transport of solid waste to a designated site within the local jurisdiction, its economic effects were interstate in reach.” The Court found that the ordinance discriminated against interstate commerce on its face and was therefore per se invalid, and that Clarkstown had not advanced a legitimate local interest to justify the discrimination. The Court held “state and local governments may not use their regulatory power to favor local enterprise by prohibiting patronage of out-of-state competitors or their facilities.”

After the Supreme Court struck down the Clarkstown flow control ordinance in Carbone, many local and state flow control laws or ordinances were stricken by various courts as per se invalid discrimination against interstate commerce under the dormant Commerce Clause. In Minnesota, Ramsey County’s waste designation ordinance was invalidated in Poor Richard’s v. Ramsey County, 922 F.Supp. 1387 (D. Minn. 1996), and Hennepin County’s ordinance was struck down in Ben Oehrleins v. Hennepin County, 115 F.3d 1372 (8th Cir. 1997). New Jersey’s statewide flow control statute was invalidated in Atlantic Coast Demolition & Recycling v. Board of Chosen Freeholders of Atlantic County, 48 F.3d 701 (3rd Cir. 1995) and Nashville, Tennessee’s city-wide flow control ordinance was struck down in Waste Management v. Metropolitan Government, 130 F.3d 731 (6th Cir. 1997).


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Some federal circuit courts carved out significant exceptions to the per se unconstitutionality of flow control ordinances. In Harvey & Harvey, Inc. v. County of Chester, 68 F.3d 788 (3rd Cir. 1995), the Third Circuit held that a flow control ordinance that requires all waste to be processed or deposited in-state for some fixed period of time does not necessarily violate the dormant Commerce Clause if out-of-state businesses are invited to compete on an even playing field for the disposal facility designation. The Court stated that the governmental defendants can rebut a putative showing of discrimination by presenting evidence demonstrating that the designation process was open, fair and competitive, i.e., determined by objective criteria that did not have the effect of favoring in-state interests. Such evidence might include bid solicitation, selection criteria, and evaluation of bidders, along with statistical evidence or expert testimony.

Some Minnesota local governments responded to Carbone by revising their waste designation ordinances to apply only to waste leaving the jurisdiction for management within the state, thereby avoiding implication of interstate commerce concerns. Hennepin County’s intrastate waste designation ordinance was upheld by the Eighth Circuit in Ben Oehrleins. However, subsequent federal court rulings make clear that intrastate designation of waste to a facility appears to depend on how the facts of the case will fare under the balancing test established in Pike v. Bruce Church, Inc., 397 U.S. 137 (1970). An example is the holding in Randy’s Sanitation v. Wright County, 65 F.Supp.2d 1017 (D. Minn. 1999). In 1990, Wright County constructed a solid waste composting facility to address inadequate landfill capacity and recover resources from waste. To ensure adequate supply of waste that would pay for the financing, the County enacted a flow control ordinance. After the Eighth Circuit held interstate flow control ordinances were unconstitutional in Waste Systems Corp., the County suspended enforcement of the Ordinance as it applied to the flow of solid waste across interstate lines, but continued to enforce the Ordinance’s impact on waste management within Minnesota.

The court drew upon Carbone and Ben Oehrleins in holding the interstate designation ordinance in Wright County invalid under the Commerce Clause. The lesson of Oehrleins and Carbone is clear, the court said: “when a locality enacts a law that explicitly favors a local enterprise over outsiders, that law consciously violates the dormant Commerce Clause.” In holding the intrastate designation also violated the Commerce Clause, the court found it a “much closer question.” Because the intrastate designation version of the ordinance did not facially discriminate against interstate commerce, the court applied the Pike balancing test aimed at assessing whether the burden imposed is excessive in comparison to the putative local benefits.

In so doing the court determined that the County’s interests in the ordinance and the benefits it actually enjoys must be analyzed separately, giving way to an investigation as to the ordinance’s track-record in meeting the purported benefits. While the court concluded that Wright County had a legitimate interest in the ordinance as largely outlined in its waste designation plan, review of the record led the court to conclude the purported benefits were not being realized. Recycling and composting goals were not being met and illegal methods of disposal were on the increase.

d. United Haulers Decision

On April 30, 2007, the United States Supreme Court issued a major decision in United Haulers Ass'n v. Oneida-Herkimer Solid Waste Management Authority, 550 U.S. 330 (2007), that reinstated the ability of local governments to enact solid waste flow control (waste designation)


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ordinances when they “require haulers to bring waste to facilities owned and operated by a state-created public benefit corporation.”

The case arose from two New York counties (Oneida and Herkimer) that formed a solid waste management authority (Authority) to sort, process and manage solid waste and recyclables from the two counties. The tipping fees at the Authority’s facilities significantly exceeded those charged at open market landfills and the counties enacted flow control ordinances requiring that all solid waste and recyclables generated within their jurisdiction be delivered to the Authority’s processing facility.

The United Haulers Association challenged the validity of the flow control ordinances arguing that the Carbone decision governed and therefore the ordinances were per se in violation of the dormant Commerce Clause. The federal district court in 2001 struck down the ordinances based upon the Carbone decision.

The Authority appealed to the Second Circuit Court of Appeals, which reversed the district court and upheld the ordinances reasoning that a distinction exists between flow control ordinances that benefit public, as opposed to private, facilities. The haulers appealed to the United States Supreme Court, which took the case because differences existed on this issue among the various Circuit Courts.

In a 6 to 3 decision written by Chief Justice John Roberts, the Court upheld the Second Circuit’s view, finding a “constitutionally significant” difference between flow control laws that benefit facilities owned and operated by state-created public entities versus ordinances that favor facilities owned by private entities.

The majority opinion stated that the flow control ordinances in this case, as opposed to the ordinance in Carbone case, benefit a clearly public facility while treating all private companies exactly the same. The Court found that, unlike private enterprise, government is vested with responsibility of protecting the health, safety and welfare of its citizens and that these important responsibilities set state and local government apart from typical private businesses. Therefore, it does not make sense to equally regard under the dormant Commerce Clause laws favoring local government and laws favoring private industry.

Justice Roberts wrote:

“The dormant Commerce Clause is not a roving license for federal courts to decide what activities are appropriate for state and local government to undertake, and what activities must be the province of private market competition. In this case, the citizens of Oneida and Herkimer Counties have chosen the government to provide waste management services, with a limited role for the private sector in arranging for transport of waste from the curb to the public facilities . . . It is not the office of the Commerce Clause to control a decision of the voters on whether government or the private sector should provide waste management services.”

The majority also stated that solid waste management is typically and traditionally a local government function and that the citizens and businesses of the counties, through their elected officials, had decided to bear the higher costs of waste disposal as a result of the flow control


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ordinances. Therefore, “there is no reason to step in and hand local businesses a victory they could not obtain through the political process,” wrote Chief Justice Roberts.

After finding that the ordinances were not per se invalid under the dormant Commerce Clause, the Court proceeded to apply the Pike balancing test, which looks to whether the burden imposed on interstate commerce by the ordinances are “clearly excessive” in relation to the local benefits of the ordinances. The Court found that “any arguable burden does not exceed the public benefits of the ordinances.”

Benefits the Court cited favorably included:

• the ordinances give the counties a convenient and effective way to finance their integrated package of waste disposal services;

• the ordinances are more than financing tools and they work to increase recycling and provide enhanced incentives for proper disposal of household hazardous waste; and

• the ordinances give the counties increased ability to enforce laws designed to promote greater recycling.

In concurring opinions, Justices Scalia and Thomas indicated that the Carbone case had been wrongly decided and that the dormant Commerce Clause should be discarded altogether.

Justice Alito’s dissenting opinion argued that the dormant Commerce Clause is good precedent and to properly implement the dormant Commerce Clause there should not be a distinction between public and private facilities.

It should be noted that if the United Haulers case had been decided prior to the Martin and Faribault Counties case, the Martin-Faribault outcome would likely have been different as the Prairieland facility was, and still is, publicly owned and operated.

e. Public vs. Private Operation

The Supreme Court did not provide guidance as to what qualifies as publicly owned and operated. Given the fairly wide variety of potential public-private relationships in essential waste management services, this public/private distinction is beginning to be reviewed by the courts. Pending final determinations in these cases, however, the relevant dormant Commerce Clause boundaries for waste designation are likely best understood by a careful review of the circumstances in the two primary cases most recently before the Supreme Court on this issue: Carbone and United Haulers. Complicating the ability to draw neat distinguishing lines between the treatment of the “public” facility in United Haulers and the “private” facility in Carbone, however, is the fact that both involved at least some public-private partnership.

(1) Public-Private Treatment in Carbone

The decision in Carbone hinged on the fact that the local ordinance benefitted a private entity above all other private entities (particularly out-of-state private entities). The arrangement that favored the private entity, however, was largely a means of financing a facility that Clarkstown


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would eventually own. The Town arranged for the transfer station to be built and owned by a private entity for the first five years of operation. In exchange, the Town directed all waste to the transfer station and allowed higher tipping fees so the private firm could recoup its investment. The Town also guaranteed 120,000 tons annually and agreed to cover any shortfall. At the end of the five year period, the Town would purchase the facility from the private company at the nominal price of $1. The ordinance referred to it as the Town’s facility and Justice Kennedy, writing for the majority, recognized that the arrangement was developed to help finance the municipality’s transfer station. The arrangement clearly had a substantial public component and it was not lost on the Court.

The majority in Carbone, however, focused attention on the benefit the regulation provided to the single local private entity. Justice Kennedy posited the Carbone facts alongside a long string of cases involving invalid local regulations favoring in-state private firms above out-of-state private firms. He explained that “state and local governments may not use their regulatory power to favor local enterprise by prohibiting patronage of out-of-state competitors or their facilities.”

In his dissenting opinion, Justice Souter argued the Clarkstown ordinance should be treated differently because it favored what was essentially a municipal facility and treated all private entities equally. He explained:

"While our previous local processing cases have barred discrimination in markets served by private companies, Clarkstown’s transfer station is essentially a municipal facility, built and operated under a contract with the municipality and soon to revert entirely to municipal ownership. This, of course, is no mere coincidence, since the facility performs a municipal function that tradition as well as state and federal law recognize as the domain of local government. Throughout the history of this country, municipalities have taken responsibility for disposing of local garbage to prevent noisome smells, obstruction of the streets, and threats to public health, and today 78 percent of landfills receiving municipal solid waste are owned by local governments."

(2) Public-Private Treatment in United Haulers

Just as the facility in Carbone was not completely private, the facilities in United Haulers were not completely public. Although all of the designated facilities were publicly owned in the Oneida and Herkimer Counties, the Utica Transfer Station was privately-operated. Specifically the counties periodically selected an operator for the transfer station through a competitive bidding process that attracted bids from in-state and out-of-state firms (and different operators won in different years). The counties had plans, which they have since implemented, to construct a publicly-owned and operated landfill to take over or diminish the need for the private processing operations.

(3) Forthcoming Public-Private Treatment in Carbone II

In the wake of the Oneida-Herkimer decision, a new ordinance was passed by Clarkstown that allegedly disadvantaged C & A Carbone once again and thus gave rise to litigation known as Carbone II, C & A Carbone, Inc. v. County of Rockland, 2010 U.S. Dist. LEXIS 103464 (S.D.N.Y., Sep. 30, 2010). In this case, the County of Rockland, New York enacted an


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ordinance requiring all waste generated within the County be delivered solely to designated, publicly owned facilities for processing. The Rockland County Solid Waste Management Authority (Authority) designated eight publicly owned Designated Facilities. Notably the Clarkstown facility at issue in Carbone was designated and the Carbone facility was not.

Within four weeks of the June 19, 2008 enactment, C & A Carbone filed suit in the Southern District Court for New York. Carbone alleged that the facility was designated as a result of a deal in 2008 whereby the Authority agreed to purchase the facility from Clarkstown and in return would contract with CRC, the contract operator of the Clarkstown facility, to operate the facility for a five-year term, renewable for up to twenty-five years.

Clarkstown argued that the facilities are owned by and operated for the benefit of the Authority. They argued that the involvement of private contractors does not render the facilities not “public” or undeserving of treatment under Oneida-Herkimer. They also cited to the fact that the Utica Transfer Station in the Oneida-Herkimer situation was also privately operated. Further, they argued that there is no requirement “whatsoever that a facility be operated solely with public employees in order to fall within the ambit of United Haulers.”

By contrast, Carbone argued that the Oneida-Herkimer decision was something of an anomaly and that the Carbone decision was more consistent with precedent. Moreover, they contended that the Rockland situation was missing the key and determinative element: public ownership and operation. In the Rockland situation, they argued, not one of the eight designated facilities is publicly “owned and operated” but instead all eight are privately operated by local profit seeking firms. The ostensibly considerable role and responsibility of the private firm(s) involved in the operation of the transfer facilities is laid out in the contracts between the Authority and each company.

Carbone further alleged that CRC worked out a deal with the Authority to transfer ownership of the facility in exchange for a 25-year no-bid contract to operate it. In its decision allowing the Commerce Clause claims to continue, the District Court explained that, if true, the arrangement between the Town, CRC and the Authority as alleged “would create an unconstitutional end run around Carbone I.”

Since the original complaint was filed in 2008, Carbone has amended its claim twice and cross motions for summary judgment have been filed by both sides. A judgment on this matter may be forthcoming. Depending on the approach of the court, it could shed considerable light on what arrangements are sufficient to be seen as “public operation” and not in violation of the dormant Commerce Clause.

(4) Contribution of Sandlands to Public-Private Understanding

Meanwhile, other cases continue to flesh out the application of United Haulers to various local flow-control arrangements. Recently the Fourth Circuit affirmed the South Carolina Federal District Court’s summary judgment determination for Horry County in Sandlands C & D, LLC v. County of Horry, 737 F.3d 45 (4th Cir., December 3, 2013). Horry County’s flow control ordinance directed household and commercial solid waste generated within the County to be deposited in disposal facilities operated by the Horry County Solid Waste Authority or publicly


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owned and operated facilities designated by the Authority. The Authority owned and operated two landfills and a recycling facility in Horry County and together these facilities received 99% of the waste generated within the county during the years in question. Four landfills outside of the county received the rest of the waste, much of which the Authority explains was “unacceptable waste” under the ordinance.

As a result of the flow control ordinance, Sandlands, which operates a private landfill in the neighboring county, saw a significant decrease in business and filed suit including a dormant Commerce Clause challenge. Ultimately the Fourth Circuit explained that Oneida-Herkimer is not only instructive, “it is largely dispositive of [Sandland’s] dormant Commerce Clause claims.” The Court found the Horry County ordinance to be very similar to that in Oneida-Herkimer and, importantly, to benefit a “clearly public facility.”

Sandlands argued it had been treated differently from a neighboring landfill owned by Georgetown County that received some of the remaining one percent of the waste. The court simply responded to the assertion by explaining that the question for purposes of the dormant Commerce Clause is “whether Sandlands has been treated differently from other private businesses - not other public entities.” Sandlands also argued that the County had discriminated against them by not allowing them to process and sort mixtures of acceptable waste and recyclables at their facility in the neighboring county. The court, again, reasoned that Sandlands had not been treated any differently from any other private firm. It could choose to process waste in the county according to the ordinance, as other private firms had done, and then bring only the recovered materials to their facility outside Horry County.

After determining the ordinance was not discriminatory, the Fourth Circuit decided it did not need to do “actually balance the interests laid out in Pike” because the Supreme Court had already done so in United Haulers. Despite this assertion, it did go on to evaluate the benefits of the Horry County law as substantially similar to that in United Haulers.

f. Contract Clause

In October 2012, a U.S. District Court in Texas issued a decision regarding an effort by the City of Dallas to enact flow control to a landfill owned and operated by the City within the city limits. See Nat’l Solid Waste Mgmt. Ass’n v. City of Dallas, No. 11-3200 (N.D. Tex. 2012). The City had adopted its flow control ordinance in September 2011; it being a simple amendment to its existing solid waste ordinance providing for a fine of $2,000 for any person disposing of waste, except for recyclables, at non-City facilities. Waste Management owns two landfills just outside the city limits, and Republic Waste owns one landfill just outside the city. Waste Management and Republic, along with the National Solid Waste Management Association (NSWMA), were concerned that the City would be charging higher tip fees and redirect waste volume from their landfills to the City's landfill.

The plaintiffs' claims did not emphasize potential Commerce Clause violations, but rather potential violations of the Contract Clauses of the United States and Texas Constitutions. The Plaintiffs filed their complaint in November 2011 and in January 2012 the District Court issued a preliminary injunction enjoining enforcement of the ordinance amendment finding that the


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amendment was likely a violation of the Contract Clause. A permanent injunction was issued in October 2012.

In 2007, the City had entered into franchise agreements with all haulers operating within its jurisdiction. Under these agreements, the haulers paid money to the City for the right to collect solid waste within the City. Under the agreements, the haulers were allowed to take collected waste to a facility of their choice so long as it was a validly permitted facility.

The NWSMA plaintiffs succeeded in arguing that the City's flow control ordinance violated the Contract Clause by interfering with their rights under the franchise agreements. Under the Contract Clause of the U.S. Constitution, "[n]o State shall . . . pass any . . . Law impairing the Obligation of the Contract." While the language of the clause is absolute, its prohibition is tempered against states' inherent police power to protect the vital interests of their citizens. In making a Contract Clause argument, plaintiffs must first establish that a state or local law operates as a substantial impairment of a contractual relationship. Plaintiffs must then show that the adjustment of the rights and responsibilities of the contracting parties is not reasonably related to a legitimate public purpose. When a state or local government has substantially impaired its own contracts, courts apply a stricter standard to assess the reasonableness of the impairment, and will strike down legislation when less drastic or alternative means are available for achieving the government's goals.

In NSWMA, the court found the flow control law substantially impaired existing franchise agreements between the City and the franchisee plaintiffs because those agreements did not limit where the franchisees were allowed to dispose of solid waste, other than restricting disposal to "authorized" facilities. The court agreed with the plaintiffs that "authorized" facilities meant permitted facilities, and rejected the City's argument that the agreements enabled the City to use flow control to define "authorized" facilities. The impairment was substantial due to the financial impacts the ordinance would have on the disposal businesses of certain franchisees, such as those that would otherwise transport waste to their own facilities, and those that would be forced to transport waste greater distances. Finally, the City was unable to sufficiently justify the impairment to the court, with the court finding instead that the flow control was intended simply to raise City revenue rather than address a specific fiscal problem.

The court in this case followed a three step analysis:

(1) whether the state law has operated as a substantial impairment of a contractual relationship;

(2) whether the state has a significant and legitimate public purpose behind the regulation; and

(3) whether the law was reasonably necessary to achieve its purpose.

It is in the third prong where courts draw a distinction between public and private contacts. In private contracts, the courts defer to the legislative judgment as to the necessity and reasonableness of a particular measure, including the impairment of contracts. When public contracts are present, the analysis differs in two ways. First, a court must determine whether the state had the power to create irrevocable contract rights in the first place, rather than inquire into


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the purpose or reasonableness of the subsequent impairment. Here, the question was whether the contacts "surrender an essential attribute of the state's sovereignty," such as the right of a state to exercise its police power. If so, the contracts are void and cannot form the basis of a Contract Clause claim. Second, a court must assess the reasonableness and necessity of the state's impairment of its contractual obligations, using a "stricter standard" than applied to private contracts. In this context, "complete deference to a legislative assessment of the reasonableness and necessity is not appropriate because the State's self-interest is at stake."

Because the contracts at issue in NSWMA were public contracts, the court first examined whether the Franchise Agreements surrendered an essential attribute of the City's sovereignty. The court found that the franchise agreements did not surrender the City's power; rather, the franchise agreements were an exercise of that power.

The court then analyzed whether the ordinance was a necessary and reasonable means of achieving the purported purpose of increasing recycling and developing green technologies. In applying the stricter standard for public contracts, the court held that the ordinance was not tailored to achieve its purpose because the City could not identify any portion of the ordinance that would result in the generation of data about commercial waste, the ordinance was not necessary to address illegal dumping issues, and the ordinance was not necessary to increase the rate of recycling. Thus, the ordinance was not necessary to achieve its stated purposes and the court granted plaintiff's request for relief.

Had the contracts in NSWMA been private contacts, perhaps between a hauler and a private disposal facility, the court's analysis would have differed. Instead of asking whether Dallas surrendered an essential attribute of sovereignty and using a stricter standard to assess the reasonableness and necessity of the city's impairment of contractual obligations when it reached the third prong of its analysis, the court would use a lower level of scrutiny and "defer to legislative judgment." This level of scrutiny is tantamount to the rational basis level in economic and social regulation. Under this standard, regulations are rarely deemed unconstitutional, as the governmental action must clear a much lower hurdle. Thus, it is more likely that the Dallas ordinance would have survived if the case only dealt with private contracts.

2. Market Participant Methods: Public Entities and Public Collection

a. Government as Market Participant

Under the market participant approach, local governments can enact ordinances that establish themselves as the provider of solid waste collection services. Public collection could then be carried out either through government employees and equipment, with the waste brought to a designated resource recovery facility, or by contracting with one or multiple haulers to carry out these functions, with the contract directing the collected waste to the facility.

In SSC Corp. v. Town of Smithtown, 66 F.3d 502 (2nd Cir. 1995), cert. denied, 116 S.Ct. 911 (1996), solid waste hauler SSC Corp. challenged a flow control ordinance enacted by Smithtown, NY and a provision in SSC's contract with the Town that it haul garbage to a facility the Town had designated. The Second Circuit found the flow control ordinance to be violative of the Commerce Clause under Carbone. However, the Court found the contract to be constitutional


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under the "market participant" exception to the Commerce Clause. Smithtown had established a comprehensive solid waste collection program in which it divided its residential areas into 10 districts and solicited competitive bids for waste collection and disposal services for each district. SSC was awarded hauling and disposal contracts in seven of the 10 districts. The Smithtown contracts required SSC to take the garbage it collected to an waste-to-energy facility owned by Smithtown. The tipping fee at the facility was $65 per ton. Smithtown, in turn, assessed a user fee on each residential homeowner's annual property tax bill. Those funds were then used to pay SSC under the contract.

However, SSC chose to haul some of the garbage to lower priced facilities out-of-state and was allegedly pocketing the difference. The federal district court granted summary judgment for SSC. On appeal, the Second Circuit stated that the U.S. Supreme Court has drawn an important distinction between regulation of, and participation in, a market: "When a government entity acts as a regulator, it is subject to the Commerce Clause, but when a government entity is acting as a market participant, it may pick and choose its business partners, in terms of doing business, and its business goals as if it were a private party."

The Court found that Smithtown became a market participant, rather than a regulator, when it decided to provide waste collection and disposal services. The Court noted that if the Town so desired, it could collect waste and provide disposal services through its own employees or it could choose to contract out such services separately. The Court held that because Smithtown was substantially the buyer of these services, as well as a customer, it could dictate by contract where the hauler could take the waste for disposal. The fact that the disposal facility was partially funded by the Town was not considered a debilitating factor.

In USA Recycling, Inc. v. Town of Babylon, 66 F.3d 1272 (2nd Cir. 1995), cert denied, 116 S.Ct. 1419 (1996), the Second Circuit also upheld a town's ability to designate a waste processing facility by contract under a municipal collection arrangement which included collection from commercial establishments. In this case, as well as in Smithtown, the Court held that the Town's decision to replace the private market for commercial garbage collection with uniform municipal collection was subject to the limitations of the dormant Commerce Clause because it constituted regulation of the market, not participation in it. However, the Town's decision to take over commercial garbage collection did not discriminate in any way against out-of-state competitors in awarding contracts. The Town participated in the garbage collection market by buying garbage hauling and disposal services and raising funds to pay for these services.

The Court concluded that the case boiled down to two simple propositions: 1) that towns can assume exclusive responsibility for the collection and disposal of local garbage; and 2) that towns could hire private contractors to provide municipal services to residents. In neither case did the town discriminate against, nor impose any burden on, interstate commerce. The Court stated that if it were to rule in the plaintiff's favor, municipal garbage systems throughout the country would be unconstitutional and municipalities could no longer undertake the traditional local governmental function of collecting town garbage. The Court also said that when a local government decides to provide a municipal service, such as garbage collection, to its residents, it need not buy garbage trucks or put drivers on the town payroll to pass constitutional muster. Instead, it can hire outside contractors to provide those services to the town. Furthermore, the


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Court said, nothing in the Constitution precludes a local government from hiring a local company just because it is local.

A significant development of the Smithtown and Babylon decisions occurred in 2000 when the Sixth Circuit issued its decision in Huish Detergents, Inc. v. Warren County, Kentucky, 214 F.3d 707 (6th Cir. 2000). In this case, Warren County, Kentucky issued an RFP and considered competitive bids from waste haulers interested in collecting and processing all MSW generated in Bowling Green, Kentucky. The County awarded a contract to Monarch Environmental, Inc. and formalized the relationship in a written franchise agreement that provided Monarch the exclusive right to collect and process all MSW generated in the jurisdiction for five years. Monarch was obligated by the agreement to operate the City’s transfer station to process the waste it collected, and was obligated to dispose of all the waste at a landfill located and approved by the State of Kentucky. This effectively prohibited the use of out-of-state disposal sites. The County passed an ordinance executing the franchise agreement that incorporated its provisions by reference.

Huish Detergents operated a laundry detergent manufacturing facility within the City of Bowling Green and objected to the County’s requirement that it use Monarch to remove its solid waste. Huish sued the County and Monarch for violating the dormant Commerce Clause, seeking damages pursuant to 42 U.S.C. §1983. The federal district court took the view that the County had engaged in two separate actions: (1) taking over the local waste collection processing and disposal market; and (2) granting Monarch the exclusive right to collect, process and dispose of waste generated in Bowling Green. The District Court found that the regulatory act of taking over collection, processing and disposal did not violate the dormant Commerce Clause, and that the County had acted as a market participant in awarding the exclusive franchise to Monarch, which exempted the County and Monarch from Commerce Clause scrutiny.

The Sixth Circuit, however, looked closely at the County’s actions in taking over the collection, processing and disposal marketplace. The Court concluded that because the County did not purchase services from Monarch or from the third party disposal facility using taxpayer funds, but rather relied on its takeover ordinance to force residents and businesses in Bowling Green to do business with Monarch, the County was not acting as a market participant when it designated its transfer station for use by Monarch as well as in its prohibition of out-of-state disposal. By effectively forcing via ordinance all city residents to purchase waste processing services directly from Monarch, the County’s action far exceeded that which a private entity could accomplish in the free market. Because it was not paying Monarch for its services, the County was not purchasing the collection, processing and disposal services with public funds. Nor was it selling its own processing services. In sum, the Court found that the County had used its regulatory power, not its proprietary purchasing power, to retain Monarch services.

The Sixth Circuit agreed with the district court in that, had the County used public funds to pay Monarch for its services, it would have become a market participant in the waste collection and processing marketplace. By implication, if the County had paid the disposal facility for disposal services, it would have also become a market participant in the disposal marketplace.


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b. Minnesota Public Entities Statutes

In National Solid Waste Management Ass'n v. Williams, 146 F.3d 595 (8th Cir. 1998) the Eighth Circuit favorably cited Smithtown and Babylon in holding the State of Minnesota was acting as a market participant in directing public entities within the state to follow county solid waste management plans. Minnesota law mandates that public entities manage their waste in accordance with county waste management plans, unless the county provides its consent to do otherwise. Minn. Stat. §115.46, subd. 5(b). Public entities that receive such consent from the county may then choose to not follow the county plan, but must then adhere to the provisions of Minn. Stat. §115A.471. Under this statute, the public entity must:

(a) determine the potential liability to the public entity and its taxpayers for managing the waste in this manner;

(b) develop and implement a plan for managing the potential liability; and

(c) submit the information from clauses (a) and (b) to the Minnesota Pollution Control Agency.

Together these statutes are known as the “public entities statutes.”

The challenge was brought by the NSWMA, a non-profit trade association whose members include Minnesota businesses which have waste collection and disposal contracts with various Minnesota public entities. The Eighth Circuit held the Association did not meet the standing requirement to challenge Minn. Stat. §115A.471 because within that statute public entities are defined narrowly. However, the Association met the standing requirement for Minn. Stat. §115A.46, subd. 5(b) because in addition to various public entities, subdivision 5 applies to “any contractor acting pursuant to a contract with a public entity.” Minn. Stat. §16B.122, subd. 1(f).

In assessing the Commerce Clause challenge to Minn. Stat. §115A.46, subd. 5(b), the Court first analyzed whether the state was regulating the market or merely participating in it. If deemed a market participant, the state’s actions would be exempt from Commerce Clause review. The Court ruled the state was acting as a market participant by enacting a statute that directs the purchasing behavior of entities the state created and controls. The Court held: “. . . when a state contracts for garbage service, it does not run afoul of the Commerce Clause by dictating by contract where the contractor delivers the waste.”

As a result, for more than a decade many Minnesota counties -- including Ramsey and Washington Counties -- have relied upon the public entities statutes to ensure that public entities within their jurisdictions -- including cities, school boards and special purpose districts -- manage their waste at facilities preferred under the county solid waste plan. Given the language in the statutes, haulers acting under contract to municipal collection or organized collection programs, are also subject to the requirements of the statutes.

c. Public Collection

There is a long history in Minnesota of local governments, primarily cities and towns, assuming responsibility for the collection and disposal of solid waste within their jurisdiction. There are


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several sources of statutory authority for cities to enter the solid waste collection and disposal business. In many cases, municipal solid waste is collected from residential generators only and private haulers compete to collect from commercial generators within the same jurisdiction. There are many cities within the seven-county Twin Cities Metropolitan Area that currently operate public collection programs either through use of public employees and publicly-owned trucks or through service contracts entered into with private haulers.

The most obvious example of this arrangement is that which is used by the City of Minneapolis, in which the City provides collection of all residential solid waste and has divided the collection service between its own employees and a contract with a consortium of private haulers. The haulers and the City employees each collect approximately half of the City’s residential solid waste. The City of Maplewood recently organized collection and contracted with one hauler, rather than allowing several haulers to compete for customers under an open licensing system.

At the county level, Stearns County in 1998 enacted an ordinance that established public control of solid waste collection, delivery and disposal as authorized by Minn. Stat. Sec. 145A.05, subd. 4, and Minn. Stat. § 400.08, which allow counties to provide for or regulate the disposal of solid waste, garbage and other refuse. Stearns County Ordinance 193. Under a second ordinance, Stearns County could solicit proposals from waste haulers to provide collection and conveyance services for covered solid waste and could either accept a proposal or negotiate with one or more haulers to obtain new or different terms from those originally proposed by the haulers. Stearns County Ordinance 194.

The ordinances establish that certain areas may be exempted because a municipality or other political subdivision already provides solid waste collection. The County may establish a blanket exemption or limit it to certain classifications such as only residential solid waste collection. The ordinances also provide an exemption for haulers who contract with the Tri-County Solid Waste Commission for delivery of waste to the Elk River Resource Recovery Facility to meet the Commission's waste delivery requirement.

Wabasha County enacted a public collection ordinance in 1999, but has not implemented it. The ordinance is similar to the Stearns County ordinance, but also provides exact service district boundaries and designated resource recovery facilities for each service district. In response to the ordinance enactment, private haulers within Wabasha County chose to be exempt from the ordinance by entering into waste delivery contracts with the County.

Olmsted, Martin and Faribault, and Ramsey and Washington Counties have explored the market participant public collection approach. However, these counties decided to withhold implementation when long term waste delivery contracts were reached with local haulers. These Counties also chose to implement a hauler-collected service charge.

C. Economic Incentive Approaches

1. Hauler Delivery Agreements

In response to competition from haulers disposing of waste in landfills with lower tipping fees many local governments that own resource recovery facilities or have contacts to deliver required amounts of waste to privately or publicly-owned resource recovery facilities have


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chosen to slightly or significantly reduce the higher tipping fees at the resource recovery facilities and enter into contracts with haulers that provide waste delivery assurances in return for a lower tipping fee.

Tipping fees have been subsidized through revenues from the general property tax, a property-based service charge, or a service charge collected by haulers. Property-based charges are collected via the property tax statement. Separate charges are often established for households and commercial, industrial and institutional parcels to equate to estimated amounts of waste generated. Service charges collected by haulers are assessed on container size with different amounts per container, or as a percentage of the hauler’s bill to the generator. Service charges collected by haulers can include a small percentage to the hauler for the administrative costs of fee collection.

Advantages of hauler contracts with subsidized tipping fees are that such contracts are an accepted form of waste assurance for private facilities pursuant to the Carbone decision, which stated that general taxes can be used to subsidize resource recovery facilities to provide tipping fees that are competitive with lower out-of-state tipping fees. Properly structured contracts provide the waste delivery assurances desired by local governments, and provide the hauler the certainty of a waste management facility at a certain tipping fee.

Disadvantages of these types of contracts are that they tend to be relatively short term when compared to the estimated useful life of the resource recovery facilities, and the amount of the tipping fee subsidy could increase each time the contract is up for renewal. Thus, the certainty of waste assurance for local governments is relatively short-term under this approach.

2. Hauler Rebates

For several years certain counties, primarily Twin Cities Metro Area counties, have incentivized haulers to utilize solid waste resource recovery facilities, not by directly paying the resource recovery facility, and not through the use of a delivery agreement, but simply by providing a rebate payment to haulers that use the facility. Ramsey and Washington Counties began this approach in 2007 when RRT acquired the Newport Facility from NRG, and RRT stepped into the position of directly contracting with haulers for waste deliveries rather than the Counties. For the initial agreement between RRT and the Counties, the rebate was $12 per ton of waste delivered. This amount increased to $14 per ton by the end of the agreement. Currently, the Counties' only financial involvement with the Facility is through hauler rebates in the amount of $28 per ton, which the Counties are obligated to provide through the term of the Processing Agreement ending December 31, 2015.

3. Zero Tip Fee

A few counties in greater Minnesota have utilized a "zero tip fee," meaning a heavily subsidized tip fee of approximately $0 per ton that incentivizes haulers to utilize a designated waste facility. An example of this is in Beltrami County in which the County collects a solid waste service charge via the property tax statement and utilizes the funds to assure transfer station services, as well as rural drop off sites, with a nominal tip fee as an incentive for haulers to deliver waste to the County's preferred facilities. This tool also provides an incentive to residents of very rural


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areas to utilize county facilities rather than managing waste on-site or through illegal disposal. However, this approach likely only can be successful in a rural area, in a jurisdiction with a very large land mass and no nearby competing facilities. Otherwise, the haulers could collect waste from other jurisdictions and bring them to the zero tip fee facilities thereby costing the sponsoring county its own funds to manage waste collected from other jurisdictions without receiving revenue from the those jurisdictions or the haulers operating within those other jurisdictions.

4. Role of Hauler-Collected Service Charge

In Zenith/Kremer v. Western Lake Superior Sanitary District, 575 N.W.2d 300 (Minn. 1997), the Minnesota Supreme Court upheld the imposition of a hauler-collected service fee. In response to a federal district court finding that their interstate waste designation system was unconstitutional, WLSSD considered various alternatives to finance its solid waste services. WLSSD chose to reduce its tipping fee to $39.75 per ton and impose a $28.25 per ton service charge to make up the lost revenue. A portion of the service charge was used to subsidize WLSSD's debt service and expenses of the waste processing facility resulting from improvements to the facility.

The Court cited the Carbone decision, which suggested that instead of a flow control ordinance the town could subsidize a privately-owned trash facility "through general taxes or municipal bonds." The Court evaluated whether the incidental burden imposed on interstate commerce was "clearly excessive in relation to the putative local benefits," pursuant to the Pike test. Relying on legislative determinations regarding waste reclamation facilities and overall benefits to the community, the Court found this outweighed the possibility "out-of-state businesses may be more heavily affected by the tax and subsidy scheme than in-state businesses." In addition, the Court concluded under the Pike test, "there is no other financing option which would serve WLSSD's purposes with a lesser impact on interstate activities." The Court noted "that property taxes, the only other type of taxes which the WLSSD is authorized to impose, would have the same effect on interstate commerce as the waste generation tax, would be available for the same purposes, and would be levied on the same population (with the exception of tax-exempt entities)." In approving the WLSSD approach, the Minnesota Supreme Court stated it was a good model for all Minnesota counties to consider.

As a result, many Minnesota counties -- including Ramsey and Washington -- have switched from collecting some or all of the county solid waste service charge on the property tax statement to instead collecting via the hauler's invoice to customers. Although more administratively complex, this method is often preferred because it more directly correlates the amount of the charge to the amount of waste produced by the waste generator.

D. Ramsey - Washington Analysis and Options

1. Waste Delivery Assurance Historical Summary

Under the initial 20-year Service Agreement with Northern States Power (NSP) that terminated at the end of 2006, Ramsey and Washington Counties were obligated to assure delivery to the Newport RDF Facility of a minimum of 280,000 tons of "acceptable" solid waste per year. The Facility was initially owned and operated by NSP, and ownership was subsequently transferred


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to NRG Energy, which continued to own and operate the Facility until it was acquired by Resource Recovery Technologies (RRT) at the end of 2006.

As previously noted, Ramsey and Washington Counties initially relied on waste designation ordinances adopted pursuant to Minnesota's Waste Designation Statute for delivery of all waste generated within the two Counties to the Facility. After Ramsey County's Designation Ordinance was struck down as violating the dormant Commerce Clause in 1996, both Counties ceased enforcing their designation ordinances and moved to a waste delivery assurance system involving delivery agreements with haulers licensed and operating within the two Counties.

The delivery agreements obligated haulers to deliver all of the waste they collected within the two Counties to the Facility for a subsidized tipping fee. The Counties initially subsidized the tipping fee by utilizing a solid waste service charge collected via property tax statements. Proceeds from the charge were used to reduce the tipping fee from the actual cost paid to NSP/NRG to an amount negotiated with the haulers, with such amounts being lower than the cost of transporting the waste to nearby landfills.

In 2001, certain haulers began either reneging on their contractual agreements or threatening to refuse to sign new delivery agreements unless the amount of the subsidy (and corresponding service charge) was further increased. The Counties then conducted a lengthy and thorough investigation into the potential for establishing a public collection system in the two Counties under which the Counties would regulatorily take over the collection of residential and/or commercial mixed municipal solid waste, and then contract such collection services to one or more haulers with the contract specifying delivery of the waste to the Newport RDF Facility. The Counties undertook such investigation pursuant to the market participant approach previously discussed.

The Counties ultimately chose not to establish the public collection approach but instead implemented the hauler-collected service charge that had been recently authorized by the Minnesota Supreme Court under the Zenith/Kremer decision. As part of the Counties’ decision not to pursue public collection, the haulers also agreed to a reduced subsidy arrangement and longer term waste delivery agreements.

In 2007, under the initial six-year Processing Agreement with RRT, responsibility for contracting with haulers for waste delivery was undertaken by RRT rather than the Counties. The Counties committed to a processing payment to RRT for each ton of waste processed, as well as establishment of a hauler rebate program. Pursuant to the current three-year Processing Agreement with RRT, the Counties’ payment obligation is entirely in the form of a hauler rebate in the amount of $28 per ton.

2. Current RRT Delivery Agreements with County Rebates

RRT was obligated under the Processing Agreement to accept a minimum of 275,000 tons of County Waste in 2013, and is obligated to accept a minimum of 300,000 tons per year of County Waste in 2014 and 2015. [RRT actually received approximately 328,000 tons of County Waste in 2013. Because the county rebates are capped at $8.4 million (300,000 tons), RRT will reimburse the Counties for rebates paid on the additional 28,000 tons.] To accomplish this, RRT


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has contracted with the majority of the waste haulers in Ramsey and Washington Counties for delivery to the Newport Facility of some or all of the waste the hauler collects. The contracts are either in the form of a new agreement or an amendment to a prior agreement, with all contracts expiring on December 31, 2015 (coterminous with the Processing Agreement). The tipping fee is established at $84 per ton for the three-year term, with the ability for it to be modified based upon the price of diesel fuel or the Consumer Price Index. The agreements specifically cite to the Counties’ hauler rebate program as benefitting the haulers.

3. Re-establishment of Waste Designation Under Public Ownership Scenario

a. Waste Designation Plan & Ordinances

Should the Counties decide to acquire the Newport Facility from RRT via the Option provided in the Processing Agreement, the Counties could work to re-establish interstate waste designation within their jurisdictions as the Facility would be “publicly owned.” This would very likely require the Counties to develop a new waste designation plan or to update and amend the Waste Designation Plan initially completed over 25 years ago to reflect the current situation. The Counties would need to follow the designation plan approval process established in the Waste Designation Statute. Following approval of the Plan by MPCA, the Counties would need to conduct the required public hearing and mandatory hauler negotiation processes required by the statute. After completing these steps, the Counties could move to amend the existing waste designation ordinances and begin enforcing them after approval of ordinance amendments by the MPCA.

It should be noted that the process to develop and obtain approval of a designation plan and amendment of the waste designation ordinances will likely take a minimum of one year and potentially up to two years. Therefore, waste designation would very likely not be able to be undertaken by the Counties immediately upon acquisition of the RRT Facility, and continuation of existing hauler waste delivery agreements would likely be necessary in the interim.

It should be further noted that in the past haulers have sought clarity from the contracting entity (RRT or the Counties) regarding key terms for delivery agreement renewal. Such clarity has usually been sought approximately one year in advance of the expiration of the current delivery agreement. Thus, it can be expected that haulers will be wanting to know the intentions of RRT and the Counties in early-2015 regarding continuation of the hauler rebate program.

b. Combination of Designation Ordinances and Waste Delivery Agreements

The Waste Designation Statute exempts from designation solid waste that is required to be delivered to the Facility by an agreement, so long as the agreement is in effect and the hauler is not in default thereunder.

Thus, the Counties could have a system under which haulers that contract with the Counties for waste delivery are exempt from the Designation Ordinances enforced by the Counties. The advantages of Delivery Agreements are that they are directly between the parties and legal enforcement of Delivery Agreements is likely more effective and potentially less costly than


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enforcement action by the Counties under the Designation Ordinances, which would be in place in the event some haulers (existing or new) choose not to enter into Delivery Agreements.

4. Continued Reliance on Private Ownership

a. No Subsidy Scenario

There are two potential scenarios in which the Newport Facility continues to operate and the Counties are not required to continue the hauler rebate program and thus no longer provide a subsidy for a tipping fee at the Facility. One scenario would occur if the Counties exercise their option to purchase but RRT counters that with its ability under the Processing Agreement to negate the option exercise and retain ownership of the Facility. See Processing Agreement, Section 9.05. Under this scenario, the Processing Agreement calls for RRT to continue to operate the Facility for two additional years (through December 31, 2017) with no obligation of the Counties to continue the hauler rebate program.

The second scenario is that the Counties do not decide to exercise the option but RRT retains ownership or transfers ownership to another entity and RRT or its successor decides to continue operating the Facility with no requirement for hauler rebates. It should be noted that this is unlikely given that RRT has previously communicated to the Counties that it would not be able to operate the Facility without rebates for the foreseeable future.

It should also be noted that in the event one of the above scenarios occurs, the Counties would be relying entirely upon RRT or its successor to continue operating the Facility, but there would be no obligation on the part of the Facility owner to continue operating for any period of time unless there is a contractual relationship requiring continued operation between the Counties and the owner of the Facility. Thus, the "no subsidy" scenario has the risk that the Facility owner could cease operation of the Facility at any point unless there is a contractual relationship between the Counties and the operator preventing this, or providing alternatives in the event of such cessation, much as the prior and current Processing Agreements have addressed this issue.

b. Continued Rebate Scenario

Another scenario is that the Counties do not exercise their option and RRT or a successor continues operation of the Facility with a form of the rebate program continued by the Counties. The current rebate of $28 per ton could potentially be adjusted under a new agreement with RRT beginning January 1, 2016.

c. Role of Public Entities Statutes

The Counties in their Solid Waste Master Plans have identified the Newport Facility as the preferred processing facility, which has in turn obligated public entities within the two Counties to utilize that Facility as their primary waste management option after exhausting recycling and other source separated opportunities. As a result, all mixed municipal solid waste generated by public entities in the two Counties is being delivered to the Facility, and pursuant to the public entities statutes, all mixed municipal solid waste collected by private haulers pursuant to municipal organized collection arrangements is also delivered to the Facility.


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The Counties will very likely need to continue to monitor public entity compliance and utilize the public entities statutes for future resource recovery efforts, either at Newport or other preferred facilities. This is a waste delivery assurance method that has proven to work well. However, it must be noted that it does not apply to waste that is not generated by public entities, which is the vast majority of the total mixed municipal solid waste generated in the two Counties.

d. MPCA Enforcement of Minn. Stat. § 473.848

Since 2009, the Minnesota Pollution Control Agency (MPCA) has been exploring renewed enforcement of Minn. Stat. § 473.848 (known as the Restriction on Landfill Disposal Statute). The statute provides that a person may not dispose of unprocessed mixed municipal solid waste generated in the Twin Cities metropolitan area at a waste disposal facility unless the waste disposal facility meets certain standards and:

(1) the waste has been certified as unprocessible by a metro county; or

(2)(i) the waste has been transferred to the disposal facility from a resource recovery facility;

(ii) no other resource recovery facility in the metropolitan area is capable of processing the waste; and

(iii) the waste has been certified as unprocessible by the operator of the resource recovery facility.

The statute defines unprocessed waste as waste that has not, after collection and before disposal, undergone separation of materials for resource recovery through recycling, incineration for energy production, production and use of refuse-derived fuel, composting, or any combination of these processes so that the weight of the waste remaining that must be disposed of in a mixed municipal solid waste disposal facility is not more than 35 percent of the weight before processing, on an annual average.

The MPCA has developed an approach under which landfills and resource recovery facilities receiving waste generated in the Twin Cities metropolitan area would be obligated, via their permits, to comply with this statute and ensure that resource recovery facilities were at capacity before unprocessed waste could be accepted at the landfills. The MPCA's approach was challenged by Waste Management of Minnesota, Inc., which brought an administrative challenge to the MPCA's approach as constituting enforcement of an unadopted rule. In December 2013, the Administrative Law judge issued an order denying Waste Management's challenge. Waste Management could appeal the Administrative Law judge's order. Thus, the status of the MPCA's enforcement efforts could remain in litigation for a period of several additional months.

If the MPCA is successful in implementing the enforcement approach, such enforcement could assure more metro area waste being delivered to the Newport Facility. However, because the MPCA's approach is purely intrastate, meaning enforced only at Minnesota facilities and not at out-of-state facilities (due to interstate dormant Commerce Clause concerns), enforcement of the statute could actually force waste from Minnesota facilities to out-of-state facilities. Given the


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geographic location of Ramsey and Washington Counties, on Minnesota's eastern border and within two hours of major private landfills currently operating in western Wisconsin, there is potential that enforcement of the statute would simply divert waste to Wisconsin landfills rather than the Newport Facility.

In summary, while there is a scenario under which MPCA enforcement of the statute could potentially assure more waste to the Newport Facility, it is also possible that enforcement of the statute may not assist the Facility given the intrastate limitations of MPCA's enforcement approach.

75506321.4

Waste Processing Governance Policy Study

February 20, 2014

Prepared by Joint Staff Committee

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OUTLINE

I. Introduction

II. Dimensions of a Regional Solid Waste System

III. Identification and Analysis of Governance Alternatives a) Joint Exercise of Powers b) Intergovernmental Service Agreement c) Legislative Established Entity d) Waste Management District

IV. Examples of Regional Governance Systems

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I. INTRODUCTION

This policy study investigates the governance options available to the counties, describes the process to implement and consequences associated with each.

II. DIMENSIONS OF A REGIONAL SOLID WASTE SYSTEM 1

The dimensions of a Regional Solid Waste System vary by system. The systems examined in this Governance Policy Study had significant variation in their decision making authority, revenue and financing tools available, regulatory responsibilities, and waste collection/service responsibilities. Common components of regional solid waste systems include the following. How the elements of the regional solid waste system are applied and how they were created define each of the systems.

Regional solid waste systems use a variety of management tools to influence the waste reduction and diversion goals of the region. The tools not only vary by type, but also in regard to the region’s authority in their usage and how they are implemented. Types of tools fall into three (3) broad categories: regulatory and policy; financial; and educational. Many of these tools are used by in the entities examined in this study.

1 Adapted from Summary Research of Regional Solid Waste Management Governance Systems, Prepared for the Solid Waste Management Coordinating Board by Dakota County Environmental Management and Office of Planning and Analysis Departments, September 2010

Regional Soild

Waste System

Decision Making

Authority Leadership /

Political Climate

Service Delievery

Policy / Planning

Revenue and Financing

Regulation

Education and Outreach

Governance Structure

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Regulatory and Policy Tools Financial Tools Educational Tools Measurable and enforceable policies Generator volume-based pricing Coordinated public education

campaigns Regional ordinances and polices Generator disposal and solid waste

tax Technical assistance and hands-on training

Disposal bans Consistent facility tip fees or regional system pricing

Generator and/or hauler feedback

Hauler licenses Grants, incentives, taxes, usage fees, facility host fees, system revenue

Facility permits Product stewardship programs Mandatory recycling Market development and education

grants

III. IDENTIFICATION AND ANALYSIS OF GOVERNANCE ALTERNATIVES

Four governance alternatives are presented in this Governance Policy Study. Each of these four governance options would allow for the owning and operation of a facility or overseeing another party owning and operating a facility for the counties. Note: symbol next to a governance alternative example indicates that there is public facility ownership.

The five alternatives are defined below.

1. Joint Exercise of Powers2

The Joint Exercise of Powers Act (Minnesota Statutes, section 471.59) is the principal part of the Minnesota Statutes addressing local intergovernmental cooperation. The law authorizes local governments to enter into agreements with each other to provide services or other functions. The units of government that may cooperate include all cities, counties, townships, school districts, political subdivisions of adjoining states, and any agency of the state or the United States. Two Joint Exercise of Powers options available to Ramsey and Washington Counties are:

a) Shared Powers Agreement Governments jointly share responsibility for providing a service. For example, two or more cities may cooperate and jointly provide fire protection for residents of each municipality.

b) Service Contract One government contracts with another government for a service. For example, one city might have a contract with another city to provide snow removal.

The authority of the Joint Powers Board varies by agreement. In some case the Joint Powers Board has final authority for spending and decision making. In other cases, such as with the Resource Recovery Project, the final authority is held by the individual Boards of each of the members.

Strengths: Opportunity to develop an agreement that best meets the needs of a specific region. The agreement can be structured to give authority and delegation of power to the new Joint Powers

2 University of Minnesota Extension. Choices for Change: A Guide to Local Government Cooperation and Restructuring in Minnesota. 2008. http://purl.umn.edu/55918

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Board and/or to keep with the individual members – very flexible. The contracting entities hold all the decision making powers in developing the JPA.

Weaknesses: The delegation of authority and authority of Joint Powers Board needs to be determined when developing the agreement. It can be difficult to amend the agreement. The powers of the JPA are only as strong as the powers held in common by all parties to the JPA.

Financing Implications: The agreement can be structured to allow for funds to be raised, i.e. with bonds or taxes.

Solid Waste Management Tools Used3:

• Use flow control ordinances to direct waste to region-owned facilities • Consistent disposal rates at publicly-owned facilities • Regional contracts with haulers for use of region-owned facilities • Regionally-enforced mandatory recycling requirements for residents, businesses, and/or

industry • Consistent and comprehensive education programs • Offer grants to improve recycling rates

Implementation:

• Develop Joint Powers Agreement • Legal and Financial review by all parties • Approval by all County Boards • Timeline: Fast - 3 months to several years

2. Intergovernmental Service Agreement1

This is the most common form of cooperative arrangement in Minnesota. It is an agreement- formal or informal, written or oral-between two or more governments about the delivery of a service or services. These agreements may take many forms. For example, a city may rent another city its sewer cleaning equipment once a year; another city may agree to plow the roads of smaller cities and townships in the area; or the cities and townships in a county may create an economic development office that serves the entire region.

Strengths: The primary advantages of intergovernmental agreements are flexibility and expediency. Communities can combine their resources on specific projects without developing a formal organizational structure.

Weaknesses: In the absence of a more formal organization, financing for projects can be difficult to obtain.


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Financing Implications: Capital financing maybe hard to obtain with intergovernmental agreements since each participating government must raise money for project(s) individually.

Solid Waste Management Tools Used:

• Use reciprocal use agreements to improve efficiency of collection and disposal

Implementation: • Develop Intergovernmental Service Agreement • Legal and Financial review by all parties • Approval by all County Boards • Timeline: Fast - 3 months to several years

3. Legislatively Established Entity

An authority or district established by the Minnesota Legislature, as defined in Statute. Examples of entities related to environmental issues include the Metropolitan Mosquito Control District and the Western Lake Superior Sanitary District.

Strengths: This approach builds upon the strengths of the public sector for control in defining a consistent level of solid waste management.

Weaknesses: The counties give the power to the legislature to develop the entity. The legislature then can develop the entity to meet its needs; thus, giving very little control of the outcome to the counties. Legislative action would be required to make changes to the entity.

Financing Implications: Often have jurisdictional authority and the power to raise revenues.

Solid Waste Management Tools Used4:

• Use flow control to direct waste to region-owned facilities • Consistent disposal rates at publicly-owned facilities • Regionally-enforced mandatory recycling requirements for residents, businesses, and/or

industry • Consistent and comprehensive education programs

Implementation:

• Legislative proposal develop • Garner legislative support • Legislative approval • Timeline: Slow - Minimum of one Legislative Session, likely several sessions


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4. Waste Management District5 Minnesota law provides that a group of counties can petition the Commissioner of the MPCA to establish a waste management district, which is a unit of government with specific duties and authorities established in State law. A Waste Management District has regulatory responsibility and delegation. Minnesota does not currently have any Waste Management Districts.

Strengths: The various governing boards may enact ordinances, rules, and regulations to carry out their various duties, and most have enforcement responsibilities. A Waste Management District, with prior EPA approval, can construct, acquire, and operate a solid waste disposal facility, or contract with other governmental bodies or with private industry for disposal. Often have political and financial autonomy.

Weaknesses: A Waste Management District has extensive regulatory responsibility as defined by State law.

Financing Implications: New expenses, if implemented for RRP would include costs for enforcement and monitoring, federal reporting and data collection requirements. Able to raise funds through bonds or taxes.

Solid Waste Management Tools Used:

• Consistent disposal rates and fees • Regionally-enforced mandatory recycling requirements for residents, businesses, and/or

industry • Consistent and comprehensive education programs

Implementation:

• Proposal development, legal and financial review • County Board proposal approval • Present proposal to MPCA Commissioner • MPCA Commissioner review and approval • Timeline: Slow – 1 year to several years

IV. EXAMPLES OF REGIONAL GOVERNANCE SYSTEMS

Note: symbol next to a governance system example indicates that there is system owns a facility

JOINT EXERCISE OF POWERS

1. Joint Powers Agreements between Minnesota Counties - There are many examples of Joint Powers Agreements to manage solid waste in Minnesota.

5 Minn. Statutes Section 115A.62 to 115A.72

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a) Tri-County (Stearns, Benton, Sherburne), Minnesota The Tri-County Solid Waste Commission, established in 1988, includes Benton, Stearns and Sherburne Counties. Representation and leadership is provided by the Tri-County Solid Waste Commission Board which consists of local county commissioner representation based on population. The Commission is a joint powers enterprise operation of Benton, Sherburne, and Stearns Counties, created with the intention of the Counties to cooperate in a joint venture to provide the greatest public benefit possible for the entire contiguous three-county area in planning, management, and implementation of methods to deal with solid waste in Central Minnesota. The Commission is responsible for coordinating solid waste management activities within those three counties. Other duties include: administration of waste facility and waste hauler contracts; management of a regional HHW program; and coordination of select cooperative waste education, waste reduction, and recycling projects. The Commission does not own or operate any facilities.

b) East Central Solid Waste Commission

The counties of Chisago, Isanti, Kanabec, Pine, and Mille Lacs established a joint powers agreement in 1988 to provide for the management of solid waste. The Commission is a vehicle by which the participating counties plan and execute regional waste disposal and waste abatement options.

c) Pope-Douglas Solid Waste Management Pope-Douglas is a joint powers group for all solid waste management in the two counties. The group owns and operates a waste-to-energy facility with an up-front materials recovery facility and ash landfill, contracts for recycling in both counties, and operates a satellite household hazardous waste facility. Pope-Douglas Solid Waste Management is a component unit of Douglas County because Douglas County is financially accountable for the joint powers.

d) Olmsted and Dodge Counties

The Joint Powers Agreement is intended to deal with waste management activities of interest to the two counties. Olmsted County operates an integrated solid waste management system that provides comprehensive solid waste services to Olmsted and Douglas Counties.

e) Prairieland Solid Waste Board

Prairieland Solid Waste Board was established by Martin and Faribault Counties in 1989 through a joint powers agreement. The agreement authorizes the Prairieland Solid Waste Board to oversee the mixed municipal waste compost facility and to support other solid waste management activities with the two counties.

f) Tri-County Solid Waste Joint-Powers Board

Le Sueur, Nicollet and Sibley Counties, Tri-County, collaborated to develop an integrated solid waste management system to protect public health and offer convenient and efficient services for residents and businesses. The Tri-County Solid Waste Joint-Powers Board consists of two Commissioners from each Le Sueur, Nicollet and Sibley Counties. The Board was formed in 1988 to pool the counties’ solid waste resources. The Tri-County Solid Waste Office administers and

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directs the counties’ solid waste and recycling programs, HHW, resource recovery, problem materials and educational programs. Each county is responsible for solid waste enforcement.

g) Solid Waste Management Coordinating Board In 1989, the Metropolitan Counties created the Regional Solid Waste Management Task Force to study regional coordination options. This lead to the establishment of the Solid Waste Management Coordinating Board (SWMCB) in 1990, created under a joint powers agreement between the seven (7) Metropolitan Counties. Today the SWMCB is a joint powers board of the six Metropolitan Counties that includes Anoka, Carver, Dakota, Hennepin, Ramsey and Washington Counties, serving over 2.6 million people (Scott County withdrew from the SWMCB in 1998.) The SWMCB is comprised of two (2) Commissioners from each of the six member Counties. To enhance intergovernmental coordination, the Board also includes ex-officio representation from the Minnesota Pollution Control Agency (MPCA). The SWMCB does not have the authority to bond, tax or implement other mechanisms to collect revenues for solid waste management purposes. The SWMCB does have a funding agreement with the MPCA, which authorizes the SWMCB to receive and distribute State grant funds to the Counties on behalf of the State, and to use some of the grant money to maintain functions of SWMCB. Member Counties also allocate some of the grant funds for SWMCB functions. The SWMCB’s primary influences in regional waste management occur in a resolute legislative platform and by developing and implementing an education campaign that can be used by Counties and cities. The SWMCB also administers projects and programs to coordinate County efforts, such as: developing household hazardous waste facility reciprocal use agreements, managing hauler licenses, supporting data management needs, consolidating data and information for annual reports to the State, and coordinating projects, such as providing grants to community organizations.

2. Northern Tier Solid Waste Authority (NTSWA) In October 1973, County Commissioners of Bradford, Sullivan and Tioga Counties, Pennsylvania passed resolutions to enter into an agreement for the purpose of forming the first multi-county solid waste authority in Pennsylvania. The Northern Tier Solid Waste Authority (NTSWA) received a certificate of incorporation from the Secretary of the Commonwealth of Pennsylvania on December 4, 1973. After encountering many barriers in siting disposal facilities, the Authority utilized limited grant monies and borrowed funds to construct its first solid waste landfill facility in the Northern Tier. The NTSWA is governed by a nine-member Board of Directors, appointed by the County Commissioners of the three (3) member counties. They are unpaid for their services and meet on the third Thursday of each month to take formal action needed to conduct the activities of the Authority. These meetings are open to the public. Neither county government nor the county commissioners of any of the three counties own or control the facilities or their operations. The Board and Executive Director are solely responsible for conducting the day-to-day operations, future planning and fulfilling the requirements outlined in the NTSWA Solid Waste Management Plan. These actions are in compliance with all governmental and Department of Environmental Protection Regulations.

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3. Spokane Regional Solid Waste System, Washington Residents and commercial establishments in Spokane County generate over 563,000 tons of solid waste annually. The Spokane Regional Solid Waste System (SRSWS) was created by inter-local agreement between Spokane County and the City of Spokane on October 11, 1998, to manage all of the County's garbage. The System developed an integrated plan to include: Waste Reduction/Reuse, Recycling (includes composting), Energy Recovery - the Waste to Energy Facility, Landfilling - both for the Waste to Energy Facility ash and for those items that cannot be reused, recycled, and do not burn. All ten of the existing regional cities and towns and Fairchild Air Force Base joined the System by executing inter-local agreements with the City and County of Spokane. In 2003, the newly incorporated cities of Liberty Lake and Spokane Valley also executed inter-local agreements and joined the System. The System operates as a department of the City of Spokane's government and manages solid waste facilities and contracts for the benefit of residents throughout Spokane County. The concurrence of the County is required for certain major decisions.

INTERGOVERNMENTAL SERVICE AGREEMENT1

1. City of Phoenix and City of Glendale Reciprocal Service Agreement Reciprocal Service Agreement was executed between the City of Phoenix and City of Glendale. The City of Phoenix owns and operates a municipal solid waste landfill and two (2) municipal solid waste transfer stations. The City of Glendale owns and operates a municipal solid waste landfill. The Reciprocal Service Agreement allows both cities to deliver waste to either city’s facility to improve collection and disposal efficiency, vehicle routing, avoidance of excessive travel times and distances, fuel economy efficiency, and reduction of pollution. Either city shall deliver to any or all of the other City’s Facilities up to the maximum tonnage of acceptable waste, which delivered tonnage the parties agree, shall be exchanged on a ton-for-ton basis each month.

LEGISLATIVELY ESTABLISHED

1. Delaware Solid Waste Authority The Delaware Solid Waste Authority (DSWA) was established in 1975 by the State of Delaware. DSWA consists of a seven (7) member Board of Directors appointed by the Governor for three-year terms. DSWA serves the entire state of Delaware, a population of 885,000, and owns, operates and regulates three landfills, three transfer stations and five recycling centers. In addition, the Authority regulates private and municipal solid waste haulers.

2. Western Lake Superior Sanitary District, Minnesota The Western Lake Superior Sanitary District (WLSSD) was established in 1971 by the Minnesota State Legislature as a public corporation and political subdivision of the State. The WLSSD’s Board of Directors is a mix of elected and appointed officials. WLSSD serves a population of 135,000 and provides solid waste and waste water services for 500 square miles around Duluth. It is responsible for the regulation of all solid waste generated in the District and owns a transfer station, material recovery center, HHW facility, a facility to compost yard and food waste. Residual materials are landfilled in Superior, WI.

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3. Palm Beach County Solid Waste Authority, Florida The Solid Waste Authority (SWA) of Palm Beach County is the governmental agency responsible for providing an integrated solid waste management system for Palm Beach County, FL. The SWA provides solid waste disposal and recycling services and programs to the County's 1.4 million residents and businesses. The SWA also provides solid waste and recycling collection services to the residents and businesses in unincorporated Palm Beach County through private haulers under exclusive franchise agreements.

The Solid Waste Authority (SWA) is a Dependent Special District governed by the seven elected County Commissioners of Palm Beach County, Florida. It was created by special legislation known as the Palm Beach County Solid Waste Act, codifying the Authority's Charter. Chapter 75-473, as amended, establishes the Solid Waste Authority as the countywide authority for the management of solid waste to meet the expanding problems related to the processing and disposal of solid waste within Palm Beach Co. The SWA's system is funded through a system of user fees. The primary funding mechanism is the non-ad valorem special assessment that is included on the annual property tax bill of all Palm Beach County property owners. Additional revenue sources include tipping fees, electric sales, recycling revenue, and interest income. The SWA has built a system of facilities that combines recycling, composting, converting waste to energy through incineration, and landfilling to effectively manage the county's waste. The SWA's system includes a waste-to-energy plant, a landfill, a vegetation processing facility, a compost facility, two (2) materials recycling facilities, household hazardous waste collection facilities, and a network of six (6) transfer stations.

4) Regional Railroad Authorities - 1980 Minnesota State Law allowed the creation of Regional Railroad Authorities (RRA). Jurisdictions powers available to RRAs include the ability to: acquire real and personal property within or outside its taxing jurisdiction; hold, manage, control, sell, convey, lease, mortgage, or otherwise dispose of property; apply for state and federal funds, ability to tax; exercise eminent domain; and collect a fee for use of its property.

a) Ramsey County Regional Railroad Authority The Ramsey County Regional Railroad Authority (RCRRA) is dedicated to a long-range vision of transit services to meet changing needs for today and for succeeding generations. The Rail Authority strives to shape the future of Ramsey County and the region by preserving options for rail transit corridors and by providing rail transit services. The Rail Authority shall respond to the changing transit needs of the county's citizens in a manner that is sensitive to the financial impact to county taxpayers. The Rail Authority is committed to planning of integrated transportation services in cooperation with other agencies. The RCRRA Board of Commissioners is comprised of the Ramsey County Board of Commissioners.

b) Washington County Regional Railroad Authority

The Washington County Regional Railroad Authority (WCRRA) is the Washington County government entity charged with the preservation and improvement of local rail service for agriculture, industry, and passenger traffic and provides for the preservation of abandoned rail right-of-way for future transportation uses. Washington County established its Regional

http://www.regionalrail.org/

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Railroad Authority Nov. 17, 1987. The WCRRA Board of Commissioners is comprised of the Washington County Board of Commissioners.

5) Metropolitan Mosquito Control District The Metropolitan Mosquito Control District promotes health and well being by protecting the public from disease and annoyance caused by mosquitoes, black flies and ticks, in an environmentally safe manner. The District covers the Twin Cities, Minnesota metro area which includes Anoka, Carver, Dakota, Hennepin, Ramsey, Scott, and Washington Counties.

6) Minnehaha Creek Watershed District The Minnehaha Creek Watershed District (MCWD) is the local unit of government responsible for managing and protecting the water resources of the Minnehaha Creek Watershed in parts of Minneapolis, and its western suburbs. The MCWD is responsible for 181 square miles that drain into the Minnehaha Creek and ultimately the Mississippi River. The MCWD also includes all or part of 27 cities and two townships in Hennepin and Carver counties. The MCWD uses scientific research and monitoring, public education, grant programs, permitting, and collaborative initiatives with local governments, agencies, and residents, to protect the region’s lakes, rivers, and streams. Protecting and managing these resources is important for recreation, fish and wildlife, the environment, and property values. Established in 1967, the MCWD was created under the Minnesota Watershed District Act. The 1955 act charged watershed districts with integrating water management efforts among city, county, and state agencies. Districts receive funding through local property taxes. The MCWD is governed by a seven (7) member Board of Managers, which is appointed by the board of Hennepin and Carver counties.

WASTE MANAGEMENT DISTRICTS

1. Indiana - In 1990, Solid Waste Management Districts were formed by HB 1240 as a separate local governmental entity to manage solid waste in Indiana. a) Allen County Solid Waste Management District, Indiana

The Allen County Solid Waste Management District (ACSWMD) was established on April 2, 1991. Programs include: Tire Amnesty Day, Tox-Away Day, Christmas Tree Recycling, Backyard Composting Demonstration Site, Household Battery Recycling, Electronics Recycling and Fluorescent Bulb Recycling. In addition to education, the District provides businesses and local governments with financial incentives to expand recycling and composting programs. Its Diversion Credit Program supports local recyclable materials processors by making it economically feasible to process and deliver recyclables materials to industry. The ACSWMD Board consists of seven (7) members including: three (3) Allen County Commissioners, the Mayor from the City of Fort Wayne, a representative of the Allen County Council, A representative of the Fort Wayne City Council, and a representative of other Allen County Communities, appointed by the Commissioners.

b) Monroe County Solid Waste Management District, Indiana The mission of the Monroe County Solid Waste Management District (MCSWMD) is to secure a healthier environment in south-central Indiana, by eliminating waste going to final disposal through reduction of source materials, reuse of reusable materials, and recovery of recyclable

http://www.minnehahacreek.org/permits/cities-within-district

http://www.minnehahacreek.org/permits/cities-within-district

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materials and by offering educational resources and programs; and by promoting sustainable materials practices throughout our communities. The MCSWMD operates five (5) recycling centers. The MCSWMD Board consists of seven (7) members including a representative from the Bloomington City Council, the Mayor of the City of Bloomington, three (3) Monroe County Commissioners, a representative from the Ellettsville Town Council and a representative from the Monroe County Council.

2. Central Vermont Solid Waste District

The Central Vermont Solid Waste District (CVSWD) serves 18 cities in central Vermont. All Vermont communities must either develop or implement their own Solid Waste Implementation Plan. The CVSWD creates one plan for all 18 communities. The CVSWD is responsible for hosting mobile HHW collection programs; hauler licensing and compliance enforcement; organizing composting at all 25 in-district schools; organizing a business composting program for over 70 private businesses; and launching a residential organics diversion program. Additionally, CVSWD has a small grant program for businesses and not-for-profits supporting efforts to expand or introduce new services and products that use or promote reused items in the local economy. A per capita fee of $1.000 per resident helps underwrite CVSWMD’s waste reduction programs and services. Additional funding is received from surcharge tax on garbage, state and federal grants and program fees from participants.

3. Missouri – Missouri Solid Waste Law passed in 1972 and required local governments to plan and implement sound solid waste management practices. The law created a process for one or more counties to form a solid waste management district that would be responsible for developing and implementing a local solid waste management plan. Missouri’s 114 counties are organized into 20 solid waste management districts. The law also levied a landfill tonnage fee to create Missouri’s Solid Waste Management Fund. This fee is assessed on every ton of waste that is sent to a Missouri landfill or is transferred to an out-of-state landfill. Missouri allocates the funds to the 20 districts based on a formula that takes into account population and landfill tonnage fee generations. a) Mid-America Regional Council Solid Waste Management District, Missouri

Mid-America Regional Council Solid Waste Management District serves as a regional solid waste planning agency, since 1990, for local governments in Cass, Clay, Jackson, Platte and Ray counties in Missouri and works cooperatively with Johnson, Leavenworth and Wyandotte’s counties in Kansas. District offers grants to public, private and non-profit sectors to develop waste reduction, recycling and reuse programs. The district also provides direct service to the community through its Regional HHW Collection Program (2 permanent collection facilities and mobile collection sites) and its Recycling Information Line, 816/474-TEAM. Average annual appropriation of Missouri landfill fee is $800,000.

Ramsey Washington Resource Recovery Project February 2014 Work Session Ownership Considerations

February 20, 2014 Presented by: Barry W. Fick 651-223-3042 O Senior Vice President 612-799-0203 C Springsted Incorporated [email protected]

mailto:[email protected]

Ownership Considerations

• Financing Considerations – Capital cost – Security – Investor demand – Effect on issuer

• Operations Considerations – Risk Sharing – Performance Incentives

• End of Life Cycle Considerations – Extension & Sale or Purchase Options

2

Ownership Considerations - Continued

• Recent Market Experience with Solid Waste Processing Facilities – Market perception influences investor requirements

• Interest rates received on debt issues • Debt Security requirements • Covenant requirements

– Challenged projects • Harrisburg PA

• Technology & Market Experience – “New” or “Unproven” technology options riskier to finance

3

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General Ownership Options

• Public Ownership – Ramsey County owns the Facility – Washington County owns the Facility – Both Counties own the Facility

• Ownership Percentage determined by Counties

• Private Ownership – Private Company owns the Facility directly – Private Company owns the Facility indirectly

• Combination or Other Alternative – Public / Private Partnership “3P”

Ramsey Washington Resource Recovery

• Project History – Public Ownership was considered – Private ownership was selected

• Income Tax driven Considerations

• Original Ownership Structure – Private ownership – Northern States Power Company

• Original Project Financing – Debt jointly issued by Ramsey and Washington Counties

• Revenue Bond debt • Secured by NSP First Mortgage Bonds • Debt Service Reserve Fund

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Ramsey Washington Resource Recovery

• Original Project Financing – Variable Rate Bonds (through construction & acceptance) – Converted to Fixed Rate upon project acceptance for operation

• Refunding Bonds – Refunded for interest savings in 1999

• NSP to NRG Ownership Transfer – First Mortgage Obligation continued

• All debt matured as scheduled by 2006

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Private Ownership Considerations

• Private owner incentives – Operating incentive – Residual value incentive – Management flexibility

• Tax benefits – Depreciation – Tax Credits – Loss sharing

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Private Ownership Financing

• Equity Contribution – Reduces financing cost – Incentivizes owner to build and operate efficiently – Passive equity – tax driven limited Liability Company

• Private Activity Debt – IRS Regulations are extensive

• Taxable Debt – Interest rate likely to be higher

8

Private Ownership Operating Issues

• Operating control accrues to private owner – Subject to Service Agreement terms with public entity – Monitoring of compliance with performance terms

• Limited Public intervention likely – Constrained by tax rules

• Other users of facility – Possible use by other private or public entities – Priority for County material & processing

• Dispute resolution options

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Public Ownership

• Full Design Control to Public Owner • Life cycle costs may be lower than private

– Depreciation not a factor • Flexibility in fee structures used

– Per ton tip fee, Contracts w/haulers, Other options • Risk sharing through performance standards

– Establish • Debt free asset at end of financing term

– Facility life exceeds term of financing

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Public Ownership Financing

• General Obligation Bonds – Cost of Capital

• Financial covenants • Terms of debt

– Lowest cost of debt – Reduces debt capacity of issuing entity

• Effect depends on size of financing, other debt plans of issuer – Risk of taxpayer contributions required if revenue shortfall – Risk of credit rating negative effect on issuer’s rating – Competitive sale method – most transparent

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Public Ownership Financing • Revenue Bonds

– Cost of capital • Financial Covenants • Terms of debt

– Limited public obligation for debt service – Debt service reserve required – Larger debt issue required to generate same net – Higher interest cost vs. General Obligation debt – Less effect on credit rating of issuer if debt is properly structured – Negotiated or Competitive sale option considerations

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Public Ownership Operating Factors

• Control of facility vested in public entity – All performance parameters set by public owner

• Lower service fee cost possible – Pay only for processing services from private operator – Public entity staff as operators

• Prioritization of processing – Public material priority processing

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Issuing Authority Options

• Either County separately – Allocation of support by each participating County

• Both Counties together – Used for original financing

• Private company backup support • Joint Powers or Similar Entity

– Legislative authorization • “On Behalf Of” issuer

– Conduit issuer such as Port Authority, State Agency

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Operating Options

• Public Ownership Operator Options – Public employees – Private vendor under Service Agreement – Selection by Request for Proposal

• Private Ownership Operator Options – Company employees – Contract operation (specialist sub-contractor) – Subject to Performance Standards

• Terms negotiated with Public user • Monitoring and remediation measures in place

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Observations • Ramsey Washington Resource Recovery Project

Experience & Financing / Operations Options selected – Prior decisions do not constrain future options – Financing market currently is favorable for issuers

• Interest rates expected to rise in future

• Other Factors – Investor demands can change rapidly

• Assurance of Solid Waste Deliveries to ensure efficient processing is critical to long-term financial success

• Risk allocation is significant investor concern

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Conclusion and Discussion

• Conclusions – Multiple options for ownership available – Multiple options for financing available – Decisions often involve non-financial considerations

• Important factors include – Project Cost – Processing Technology maturity and investor acceptance

• Questions? • Discussion

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Documents

MEETING NOTICE RAMSEY/WASHINGTON COUNTY …