Surging Bonding Costs

Michael Fickes

In a little noted cost area, bonding costs have risen dramatically for waste companies, which often own their landfills. Local government regulations require waste companies to bond landfills to ensure that funds will be available to pay for environmental damage that the facility may cause.

Bonding companies rely on the credit markets to perform on the bonds they have written. The collapse of the credit markets that heralded the recession drove many bonding firms out of the waste industry. “There are many fewer bonding companies in the market today compared to a few years ago,” says Mary O'Brien, chief marketing officer for Jacksonville, Fla.-based Advanced Disposal.

Making matters worse, continues O'Brien, the companies that remain have grown more selective about the industries they are willing to service. Add to that the fact that cities and counties are demanding the higher, more secure bond ratings, and some waste companies are losing their ability to bond their landfills. “Local governments used to accept B-rated bonds,” O'Brien says. “Today they want A- or A.”

Many smaller waste companies cannot meet the more strict underwriting standards that accompany higher bond ratings. Even if those firms have healthy residential businesses, they are in danger of losing disposal income produced by tipping residential waste at their own landfills.