WASHINGTON - Moody's Investors Service is cautioning municipal bond issuers to familiarize themselves with complex federal landfill regulations scheduled to go into effect in October.
In an Aug. 16 report on the regulations, Moody's stressed that the rules generally will not have negative credit implications for issuers and noted that most municipalities are well positioned to enter the brave new world of waste disposal.
"It's doable," said Marie S. Pisecki, a Moody's vice president and supervisor of Northeast regional ratings. "It's not so onerous financially, and most places have taken the necessary steps. But it's complex," Pisecki said in an interview Friday.
In the report entitled, "Perspective on Solid Waste, " Moody's says, "Issuers should have a clear understanding of the impact of [the new rules] on their solid waste disposal practices and have appropriate plans in place to meet all [the requirements.]"
The new rules, developed by the federal Environmental Protection Agency under Subtitle D of the Resource Conservation and Recovery Act of 1976, establish uniform national standards for the disposal of municipal waste in landfills. They go into effect Oct. 9.
The regulations set rigorous requirements. New and expanded facilities, for example, must be lined and equipped with systems to capture landfill leakage. The rules also require that landfills closed after Oct. 9 be covered and monitored for groundwater leakage for 30 years after closure.
The rules were first proposed in 1991, leading some municipalities and private enterprises to plan excess capacity at facilities on the assumption that acceptable disposal sites would be at a premium.
But that has created a temporary glut in capacity, leading to some credit concerns, according to Moody's.
"Low disposal prices at private landfills compete with municipal systems, creating potential credit concerns for the municipal system if waste is lost to competitors," Moody's notes in its report.
Moody's says that private landfill costs are usually lower than those for most municipal systems because they cover disposal costs only. The fee structures for municipal systems usually cover other costs in addition to disposal, such as recycling programs.
The success of recycling programs - along with a reduction in consumer and commercial waste as a result of the recession - also has complicated solid waste management for municipal planners, Moody's says. "In general, the less waste that goes to the landfill, the higher the per-ton cost" for the facility, Moody's says. However, Pisecki noted in an interview that waste shortages "on a macro level send prices down."
Moody's says that the apparently conflicting forces will continue to be at play for the foreseeable future because it is unlikely that the current glut in disposal capacity "will end quickly."
Other credit concerns arise from the increased costs that the new rules will impose on municipalities. "Operating costs will rise if waste has historically been disposed in landfills that lack the environmental protections required under Subtitle D," Moody's says in the report. "Ability and willingness to absorb such costs is an important credit factor."
Capital costs may also rise, posing challenges for small communities, Moody's says. But for most localities, "the debt needed to close an old landfill, while not welcome, will probably be manageable," Moody's says.
"Solid waste is clearly an issue," Pisecki said. "It's something issuers should focus on. They should know what's going on even if they are not directly involved in disposing waste."