A local government may take over municipal solid waste operations and may limit private haulers without violating the U.S. Constitution, according to a ruling by a federal appeals court [Sal Tinnerello & Sons Inc. v. Town of Stonington et al., No. 97-7919, 2d Cir., April 3, 1998].
The town of Stonington and neighboring towns formed the Southeastern Connecticut Regional Resource Recovery Authority (SCRRA). In 1992, SCRRA built an incinerator to serve the member towns, paying for construction with the proceeds of state bonds.
Under contracts between SCRRA and the towns, each municipality guaranteed to deliver a set amount of solid waste to the incinerator. The guarantees ensured enough revenue from tipping fees to operate the facility and pay bondholders. A town that didn't meet its quota would pay the equivalent tipping fees for the undelivered trash.
For its part, Stonington promised to deliver 10,000 tons of solid waste per year. With 4,000 tons from residential collections, the town depends on collections from businesses to provide the balance of its commitment.
The contract between Stonington and SCRRA also required the town to adopt an ordinance forcing haulers to deliver locally collected waste to the SCRRA incinerator. The flow control measure became unenforceable in 1994 when the U.S. Supreme Court ruled that such restrictions were unconstitutional.
Unrestrained, the haulers took their loads to disposal sites where tipping fees were considerably lower. By March 1997, almost none of Stonington's commercial waste was being delivered to the incinerator.
After considering alternatives in dealing with the waste shortfall, town officials decided on a municipal takeover of commercial solid waste collection. The decision avoided a tax increase, assured disposal at a proper facility and initiated volume-based fees for commercial waste generators.
Following several public meetings, Stonington adopted a plan giving the town and its contractors full control of commercial waste collection. The town then solicited proposals from local and national private waste haulers, expecting that commercial haulers already serving customers in Stonington would submit bids.
Sal Tinnerello & Sons ("Tinnerello") had some 70 commercial accounts in Stonington under written and verbal contracts with customers. But Tinnerello refused to bid because it believed the arrangements were unconstitutional. The town signed a one-year contract with the successful bidder to deliver locally generated commercial waste to the incinerator. Until the current contract expires and Tinnerello successfully bids on a subsequent contract, the company cannot collect waste in Stonington.
In June 1997, Tinnerello filed suit in federal district court to stop the town from enforcing the waste-hauling plan. The court refused to issue an injunction because the plaintiff did not prove it was likely to win on the merits at a full trial. On appeal, the U.S. Court of Appeals for the Second Circuit upheld the lower court's ruling.
The Constitution prohibits states and localities from passing laws that impair contractual relations. However, the Supreme Court has ruled that the proscription is not absolute. Thus, the courts may sanction government interference with contracts depending on (1) whether the impairment is substantial; (2) whether the law serves a significant public purpose; and (3) whether the means chosen are reasonable and appropriate.
The appeals court assumed Tinnerello's contracts were significantly impaired, but found that "safe and efficient waste disposal" and "imposing solid waste costs on an equitable, user-fee basis" are legitimate public goals. Moreover, the appellate panel refused to second-guess the town on what is an appropriate method to collect and dispose of waste.
The appeals court also rejected Tinnerello's claim that the plan unlawfully interfered with interstate commerce. The town's contract purchase of waste-hauling services was "permissible market participation," the opinion said. Citing past rulings, the appeals court said that "a buyer of disposal services can dictate ... where its contractor disposes of waste without violating the Commerce Clause."
By dissolving the private market for commercial waste collection, the court noted, the town engaged in market regulation in two ways: (1) commercial waste collection was limited to haulers that won contracts; and (2) other haulers faced a hefty fine if they engaged in such activity.
However, such regulation didn't discriminate against interstate commerce, the court concluded. Waste generators buy collection and disposal services only from the town, which then dumps the waste where it deems appropriate. In selecting its contractor, the court noted, the town sought bids from local and national service providers. Indeed, the winning bidder was a national company.