by Eric Richard

Today I attended a workshop hosted by the Massachussetts Department of Environmental Protection to help municipalities understand more about how to contract with waste haulers to provide curbside solid waste and recycling services.

What follows are my notes from this workshop.  The workshop consisted of three different speakers.    I will make each speaker a different post so people can comment on them separately if they would like.

John W. Giorgio

John is a principal in the municipal law firm of Kopelman and Paige, P.C.

The firm serves as town counsel to 120 towns.  John heads up the environmental and contracts practice group and has negotiated dozens of contracts for towns.

Procurement Process and Public Bidding

Under state law (Chapter 30B), there is an exemption for public bidding of solid waste contracts.  Therefore, if you do not have any local bidding requirements, you can exercise sound business decisions without going out to bid.

This doesn’t necessarily mean that this is the best option.   You really should look around.  Generally towns are putting out an Invitation for Bid or an RFP.

If you go down that route, I recommend that you follow the public bidding process as defined in the law with up front caveats about how you intend to deviate for this.  I would stick with sealed bids, but you might want to reserve the right to award the contract to whoever you believe is in the best interests of the town (not going purely based off price).

As long as you know exactly what you want and can specify those criteria very explicitly, then you can award based on price (through an Invitation for Bid).  But an RFP allows you to base your decision on factors other then price.

With an RFP, you get two separate, sealed results.

• The technical proposal sets forth all of the technical qualifications that person has.  You then rank those proposals based on a set of evaluation criteria.
• The price proposal is delivered separately and you only open the price proposal after you have conducted your evaluation on the technical proposal.

You can then award the contract taking into consideration both the technical proposal and the price.  You don’t have to award to the lowest bidder if you have already determined that another bidder has a better technical proposal.

The key is making sure that your specification is designed to ensure that you are going to get all of the services that you need.

If you aren’t sure what services you want, you may want to talk with some potential bidders in advance.  You could invite the bidders in beforehand and have a conversation w/ them about the services they offer, their view on the state of the market, etc.  This can help influence your actual proposal that you go out to bid with.  You could alternatively do this in a formal process as a Request for Information.

As long as you reserve the right up front, you can negotiate the price down (because it is exempt under 30B), but you do need to make it clear that you are reserving this right up front.

If you know exactly what you want and price is going to be the deciding factor, go with a Invitation for Bid.

Once you go down either of these routes, follow all of the procurement laws.  This includes where, when, and how you publicize information.

If you move to a PAYT model and are purchasing bags or stickers, those are not exempted from the procurement rules.

Length of the Contract

The Uniform Procurement Act says that cities and towns can enter into contracts for up to 3 years.  For contracts longer than that, you need authorization from your Town Meeting or City Council prior to soliciting the bids.  This includes any extension or option in the contract.  For example, a 3-year contract with a 2-year extension is considered a 5-year contract for these purposes.

If you don’t get this authorization in advance, then it technically is not a legal document.

You need to check to see if your town has a local bylaw or ordinance that varies from this.  For example, maybe the Town Manager is able to enter into contracts that exceed this, or maybe there are other restrictions.

Because many of the services that waste contractors are looking to offer will have upfront capital expenditures, that makes shorter contracts less interesting.  If you go for a five year contract, you are likely to get more interest from providers and a lower price than a three year contract.

Who Has the Authority to Sign Contracts?

Boards of Health often think that they have more power than they do.  According to Massachusetts law, they have regulatory authority, but, unless there is a local bylaw that gives them that authority or Town Meeting has specifically authorized the BOH to enter into a particular contract, they do not have the power to contract,

Absent that, you have to look at who has the contracting authority.  In a city, that is generally the mayor.  In a Town, this might be the Town Manager, the Board of Selectmen, or the Town Administrator.

Getting out of contracts (if you have to)

If you enter into a 5-year curbside collection contract and the money is appropriated in the first year, and then you hit a fiscal wall downstream (e.g., if we get out of this contract, we can save the town money) and Town Meeting refuses to appropriate the money, what happens?

Under law, multi-year contracts are subject to annual renewal through appropriations.  If the town refuses to appropriate money, then the contract is canceled with no liability.  You do not have to reserve this right — it is implicit in the contract.

If your community is interested in entering into a long term waste (e.g., 20 years) to secure your solid waste disposal, the town can agree that the town will be liable, regardless of whether the appropriation is made or not.  This will likely give you a better contract with long term security, but it is much harder to get out of if need to.

If your town owns a solid waste system (e.g., a transfer station), and you want to bring in an outside contractor to run this, the law allows the town to enter into contracts for up to 40 years.

Moving Waste Off the Tax Levy

If a town wants to offer trash services to its residents, the traditional choice was to fund this on the tax levy.  It is well established under the law that the town can charge residents (through the property tax) for a service offered by the town.

But, everyone is facing limitations imposed by Prop 2 1/2.  Most cities and towns are up against their levy limits.

Therefore, when you are looking at a solid waste budget that can be not an insignificant portion of your budget, there is a strong temptation to get this out of the tax levy.

What are your options to move this off the tax levy?

One option is going to a pay as you throw system where users are now paying a fee to use the trash and recycling system. This can help a town put a bandaid on their fiscal problems.  It basically acts like an override since you have this additional new fee system that is outside the levy that persists.

However, if you go to a pay as you throw system, you have to institute a fee.  Towns certainly can have fees for service, but you cannot use the guise of a fee in place of a tax.

So, what is the difference between a permissible fee and an impermissible tax?

• The fee has to be exchanged for a particular beneficial service that is not available to users who do not pay the fee.
• Fees are paid by choice.  The party paying the fee has the choice of not utilizing the service and, thus, not paying the fee.
• User fees cannot generate new revenue for the town that can be used for other purposes; they can only reimburse the town for the cost of providing that service.

The trickiest of these items, and the one that towns tend to get caught on, is ensuring that the fee is a “choice”.  In order to survive a legal challenge, you have to prove that you have some sort of an opt out provision. You also can’t have the burden being unnecessarily high. So, how do you make sure you include the element of choice?

• One option is good old competition.  If you can provide the service at a better price than the alternatives, then you will be able to compete by price.
• Alternatively, if you have a use fee, like a sticker or bag fee, then the users have the option of not buying the bag and thus, not participating in the system; users who do not want to participate do not buy bags or stickers and do not benefit from the system.
• You can provide an explicit opt out mechanism where residents have to show that they have a contract with another hauler and, thus, are not subject to the service.

If you are going to implement a user fee, you should seriously consider an Enterprise Fund.  This allows you to show very clearly what your costs are and allows you to prove that the fees are fair.

Mandatory Recycling Provisions

If your town wants to implement a mandatory recycling provision, they can pass a bylaw at Town Meeting based on  MGL Chapter 40 Section 8h.

This allows a town to impose a mandatory recycling provision that sets the requirements for any hauler in town.  This allows you to “level the playing field” to ensure that all providers must meet a minimum set of guidelines.

If the town is contracting with one hauler, you can use this mechanism to ensure that alternative vendors cannot undercut your price by offering lower service.

You can achieve similar results through the Board of Health permitting process. While the BOH can implement permitting processes, a bylaw codifies this much more.  It protects you from the whims of the Board of Health and ensures that any change has to come before Town Meeting again.  This also strengthens your legal strength.

Flow Control Bylaw

If a Town does not control management of all solid waste in the town, but wants to be able to direct where the materials (trash or recycling) go, there are mechanisms called Flow Control Bylaws.

For example, you could pass a bylaw that says “If you do business in this town, then you have to send all trash to facility X.”

In the 1994 case of C&A Carbone, Inc. v. Town of Clarkstown, New York, the Supreme Court struck this down saying that this violated the Commerce Clause because it gave one facility an unfair advantage over another.  People then assumed that Flow Control bylaws where null and void.

But last year in the case of United Haulers Association Inc. v. Oneida-Herkimer Solid Waste Management Authority, the Supreme Court decided that Flow Control Bylaws are acceptable if the recipient of the trash is a public entity (compared to a private/commercial entity).  You have to have some evidence that the public program is promoting a public interest (including increasing or mandating recycling).

If you want to dictate where your trash or recycling goes, this could be a means to do this.