New York Town Recaptures Waste

A local government does not interfere with interstate commerce when it assumes control over municipal solid waste collection and disposal, even if such action shuts out private sector service providers, according to a ruling by a federal appeals court [USA Recycling, et al. v. Town of Babylon. et al., No. 957129 (2d Cir., Sept. 19, 1995)].

After the state legislature closed landfills used by Babylon, N.Y., and other nearby communities, the town's officials solicited proposals to construct and operate an incinerator.

In 1987, Babylon passed a flow control ordinance designating the incinerator as the exclusive disposal site for locally generated waste. After the Supreme Court's Carbone decision in 1994, the town stopped en-forcing the ordinance (see World Wastes, August 1994, page 143).

Instead, Babylon established a commercial garbage collection district, covering both businesses and commercial properties. The plan was to consolidate municipal collection and disposal of waste generated in the district, replacing contracts between individual generators and some 17 licensed waste haulers. The plan was expected to save local businesses up to $8 million a year.

Following competitive bidding, the town engaged Babylon Source Sep-aration Commercial Inc. (BSSC) on terms that gave the company an exclusive license to collect waste from commercial generators in the district. Babylon pays BSSC a base fee for standard service to each parcel and additional fees for extra services. If BSSC delivers commercial refuse to facilities elsewhere, it has to pay the disposal costs itself.

To finance the program, the town charges a flat $1,500 annual assessment to commercial property owners, and individual businesses pay user fees for garbage they generate beyond the base amount.

Babylon amended its code to make it illegal for a commercial generator to dispose of its waste by contracting with an unlicensed hauler. In addition, the town stopped renewing the licenses of garbage haulers who had contracts with businesses located in the district.

In December 1994, several waste hauling firms, commercial property owners and small businesses filed a lawsuit in federal court, charging that the new system unlawfully discriminated against interstate commerce in the waste collection and disposal markets.

Earlier this year, U.S. District Judge Thomas C. Platt ruled that Babylon's waste management system violated the Commerce Clause of the U.S. Constitution.

The U.S. Court of Appeals for the Second Circuit reversed Platt's decision, ruling that Babylon's takeover of solid waste collection did not illegally interfere with interstate commerce. The judge reasoned that all private garbage haulers - local and out-of-state - were equally excluded from the local garbage market. The court also said the town's hiring of private contractors to operate a public-owned incinerator and to perform collection services constituted "market participation," which is exempt from scrutiny under the Com-merce Clause.

"This case boils down to two simple propositions," said the appellate court. "First, towns can assume exclusive responsibility for the collection and disposal of local garbage. Second, towns can hire private contractors to provide municipal services to residents. In neither case does a town discriminate against, or impose any burden on, interstate commerce. The local interests that are served by consolidating garbage service in the hands of the town - safety, sanitation, reliable garbage service, cheaper services to residents - would in any event outweigh any arguable burdens placed on interstate commerce."

Babylon, observed the court, imposes its fees uniformly throughout the district. "The town's imposition of benefit assessments and user fees within the district has the legitimate and nonprotectionist goal of apportioning the costs of providing services ... in an equitable manner," said the court.

Upholding the constitutionality of Babylon's contract with the hauler, the court found that BSSC was merely a contractor doing the town's own work - not a preferred seller of collection services. Moreover, the court said, the town's hauler selection process neither discriminated against nor burdened interstate commerce.

Besides strictly following municipal procurement laws, Babylon "aggressively solicited proposals from a national audience" and "notified national trade publications ..., spoke with representatives of industry trade groups such as the Solid Waste Association of North America, and contacted national waste hauling firms by telephone to generate interest in bidding."

Evidently mindful of well-established practices, the court concluded: "If we were to rule in the plaintiffs' favor, the municipal garbage systems upheld by the [Supreme] Court in [two venerable 1905 decisions] would be unconstitutional, and municipalities could no longer undertake the traditional local governmental function of collecting town garbage."