Creative Attempt to Fill Recycling Cost Shortfall Leads to Lawsuit in Pennsylvania

Opportunities seldom drop into one’s lap. Often, if you don’t ask, you don’t get. Here’s how this strategy played out in a locale where a funding shortfall threatened to undermine a county’s integrated waste management program.

Like jurisdictions elsewhere, Pennsylvania counties periodically update their waste plans, and submit them to a state agency for approval. In 2010, Clearfield County revised its plan to cope with its dwindling ability to financially sustain recycling and ancillary programs. Rural counties in the Keystone State typically have abundant open space and few, if any, municipalities with the population and density that, by state law, oblige them to provide mandatory recycling. As a result, cost-effective recycling in sparsely settled areas is a challenge.

The county traditionally funded its recycling program with administrative fees, which provided 70 percent of the operating costs. After a court ruled that state law preempts counties from imposing fees on waste haulers to help fund recycling, local officials commissioned a study to identify alternative methods to make up the deficit. The study suggested options such as voluntary contributions, sponsorships, in-kind services and user fees.

Here’s where the county got resourceful. Along with revising its plan, the county issued a request for proposals (RFP) for both waste disposal and recycling services. Seeking “tangible financial and/or programmatic support,” the RFP directed that proposals “address the funding shortfall and/or tangibly augment [the] County's programs during the contract period."

Using a 100-point evaluation system, the county graded each of the responses. A company could earn up to 30 points in the “environmental soundness” category (waste reduction, financial benefits to the community, etc). Among the eight qualified disposal facilities that submitted bids, the top scores went to Veolia Greentree Landfill (100 points) and Wayne Township Landfill (62 points) who were the only facilities offering tangible financial support, including stipulated annual cash payments and cost-saving drop-off recycling services.

By comparison, Waste Management of Pennsylvania and its affiliated companies (WM) merely agreed to negotiate a fee, but only after the WM facilities had been designated in the county’s revised plan. Veolia and Wayne scored 30 and 15 respectively in the environmental soundness category, whereas WM’s facilities each received only five points based on their qualified fee commitment.

Although initially awarding the contract exclusively to Veolia, the county ended up signing contracts with both Veolia and Wayne after haulers pressured officials for two disposal sites. The county thereafter submitted its plan revision to the DEP, which approved it.

WM filed an appeal with the state environmental hearing board, seeking to overturn the plan revision. WM argued, among other grounds, that the county unlawfully solicited money and services from disposal facilities by conditioning selection on such support.

The board denied WM’s motion to summarily reject the plan, and upheld the county’s “innovative approach.” State law “anticipates that counties will rely on some local financial assistance to achieve the maximum feasible implementation of recycling programs,” the board’s opinion stated. “We should not ... hamstring the county so long as its efforts to comply with [the law] stop short of imposing new taxes or fees.”

Undaunted, WM took its case to a state appeals court where the company again argued that a county cannot seek voluntary financial support for its recycling program. Calling the county’s tactics “pay-to-play,” WM criticized them as a “vehicle ... to re-impose mandatory fees” outlawed by court decisions.

For its part, the county claimed that voluntary contributions are consistent with the state’s waste reduction and recycling goals. Besides, the county noted, the payments and discounted services counted only 30 percent in the scoring, making it possible for a facility strong in other categories, but offering no support, to be chosen. But even eliminating the environmental soundness category would not have changed the outcome, the county added.

The appeals court upheld the hearing board’s denial of a summary ruling in favor of WM.

“Contrary to [WM’s] arguments, the statute does not restrict local financial assistance to public sources [but] to utilize, wherever feasible, the capabilities of private enterprise...” the opinion said. “[R]ather than prohibiting a municipality’s efforts to avoid costs of its ... waste processing or disposal programs, the statute anticipates such efforts ... treat[ing] avoided program costs the same as grant money from the [state] and income from the sale or use of collected material.”

Although the court declined, pending a full hearing before the board, to unequivocally declare that the county’s approach was consistent with state law, the judges strongly hinted that the plan was likely to pass legal muster.

Waste Management of Pennsylvania, Inc., et al. v. Commonwealth of Pennsylvania, et al.,

No. 1237 C.D. 2014, Jan. 8, 2015