LOS ANGELES -- The League of California Cities is opposing state legislation that it says would restrict the ability of local governments to legislate waste-stream flow control systems and to finance materials recovery facilities.

Senate Bill 1074, authored by state Sen. Charles M. Calderon, D-Montebello, is scheduled to be heard Aug. 16 in the Assembly Natural Resources Committee.

S.B. 1074 amends the California Integrated Waste Management Act, passed in 1989 to encourage recycling and to address other municipal waste disposal matters. Under the act, cities and counties must create a plan that reduces waste sent to landfills by 25% by 1995 and 50% by the year 2000.

Cities and counties depend on flow control authority to guarantee a revenue stream that can help retire debt or cover other expenses for materials recovery facilities. The facilities often are partly funded with proceeds from recycled materials collected by franchise waste haulers of local governments.

A League of California Cities' analysis of S.B. 1074 said the bill would weaken municipal jurisdiction over flow control. One result might be the loss of an adequate waste stream to fuel materials recovery facilities, said Yvonne Hunter, legislative representative for the league.

"Financing availability for these MRFs often is dependent upon an adequate waste stream flow," Hunter told Calderon in a recent letter outlining the league's opposition to S.B. 1074. "Without the ability of local governments to direct that flow as appropriate, these MRFs will not be financially viable," she said.

Gordon Hart, a consultant to the Senate Committee on Toxics and Public Safety Management which Calderon chairs, indicated disagreement with the league's conclusions.

Hart said S.B. 1074 addresses the question "to what extent should local governments be able to exclusively direct commercial recyclables to a single recycler?"

The consultant said S.B. 1074 was modeled after a Florida law passed last year that won support from both sides of the issue -- the waste hauling and recycling industries.

Hunter said passing S.B. 1034 without amending the flow control language would make meeting waste diversion mandates under the waste management act impossible for local governments.

"Everybody agrees that to meet the 50% waste reduction goal [by 2000] you have to promote recycling in the commercial sector," Hunter said. "If cities don't have the option to regulate the commercial sector to provide public financing for MRFs, how are we going to meet the 50% goal?"

S.B. 1074 supersedes another bill also authored by Calderon, S.B. 924. Currently inactive, S.B. 924 is designed to codify a case pending before the state Supreme Court, Waste Management of the Desert v. Palm Springs Recycling Center Inc.

In that case, the California Fourth District Court of Appeals said local governments cannot use their police power authority to control the distribution of recyclable materials. The state high court is expected to hear oral arguments this year.

Meanwhile, the League of California Cities is lobbying in favor of S.B. 450, introduced in February by Sen. Ralph C. Dills, D-Gardena. S.B. 450, pending in the Assembly Natural Resources Committee, is not expected to be considered until January. The bill would uphold the right of counties and cities to control the removal of recyclables from their communities.

Arthur Terzakis, a consultant to the Senate Governmental Organization Committee which Dills chairs, said S.B. 450 was stalled by misunderstandings concerning the measure's purpose.

"I have letters in my file arguing S.B. 450 would prevent people from taking their cans and bottles to a local recycling center to get their five-cent deposit back," Terzakis said. Such mischaracterizations of the bill convinced Dills to postpone additional hearings this year. However, Terzakis said Dills wants to meet with interested parties to possibly craft amendments to make S.B. 450 acceptable to all sides.

In another development, Bob Feyer, a partner with Orrick, Herrington & Sutcliffe, said the U.S. Supreme Court in May agreed to review the constitutionality of a Clarkstown, N.Y., ordinance requiring the disposal of trash at a designated facility.

While the Palm Springs Recycling and Clarkstown cases "don't exactly cover the same topics, the U.S. Supreme Court ruling will be of very great importance," Feyer said. "It would provide an interpretation of the federal Commerce Clause of the U.S. Constitution as it applies to flow control regulations at the local level."

Many municipal market participants will follow the Supreme Court case closely, partly because it has implications for waste flowing to garbage-burning incinerators that were financed by tax-exempt bonds.

Feyer of Orrick Herrington said "the expectation is there will be some definitive guidance from the U.S. court on this topic." The case will be considered during the Supreme Court's 1994 term which begins Oct. 4.

Feyer also said that the Commerce Clause is within the power of Congress to regulate and that there are bills in Congress on flow control issues.

Regardless of the Supreme Court's ruling, "it is within Congress' power to pass an act saying states and municipalities have the power to regulate the disposition of waste collected within their jurisdictions," Feyer said. "If that happened, that would be the law."

Without federal guidelines on the issue, Feyer said, the California legislature could move to toughen the powers municipalities are granted over flow control.

Feyer said Palm Springs Recycling involves an interpretation of a California statute -- the waste management act -- which also can be amended by the legislature. In effect, lawmakers could approve statutory guidelines to either strengthen or weaken local government authority over solid-waste disposal.

Feyer said the legislative fate of S.B. 450 and S.B 1074 -- as well as other waste management bills -- could make the state Supreme Court decision in Palm Springs Recycling "less critical because if [legislation] changes the underlying statute, the court's ruling may not be as important."

Brad Altman is a reporter for California Public Finance, a weekly newsletter of The Bond Buyer.

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