Department of Community Affairs



Department of Environmental Protection






















On May 1, 1997, the United States Court of Appeals for the Third Circuit affirmed a District Court Ruling that a principal element of the State of New Jersey’s waste flow control regulations, specifically N.J.A.C. 7:26-6.5, is unconstitutional as it discriminates against out-of-state operators of waste disposal facilities. The Third Circuit also eliminated the two year transition period, necessitating that each county must now reevaluate its solid waste strategy in light of the new timeline directed by the Court. On November 10, 1997, the United States Supreme Court denied the State’s petition for certiorari such that the Third Circuit’s decision is final. In order to provide an orderly transition to waste disposal options, each of the State’s 21 counties and the Hackensack Meadowlands Development Commission needs to develop and implement plans that address their own specific long-term solid waste disposal needs.

The federal court decisions have had an immediate pricing impact on disposal rates in the region. Public and private landfills, along with the five Resource Recovery Facilities (RRF) in the State, have seen a drop in the solid waste tipping fees assessed, in an attempt to become market competitive and sustain their current share of the solid waste disposal market. This reduction in the tipping fee is having an impact in the various counties on the ability to continue to provide environmentally sound solid waste disposal services at the lowest possible cost. Long term planning for solid waste disposal services is vital to satisfy the dual obligations to dispose of solid waste in an environmentally responsible manner and to minimize solid waste disposal costs. The economic impact may require some of the various counties to unbundle the rates for solid waste disposal through the assessment of an Environmental Investment Charge (EIC) for the full and timely recovery of debt service costs incurred to finance the establishment of the various county systems in accordance with State law and the policies of the Department of Environmental Protection. The overall costs to provide solid waste disposal will be reduced and the tipping fees to be charged for use of the facilities will be competitive in the marketplace.

As a result of the Atlantic Coast decision, it is obvious that the regional market will undergo significant transformation from the continued effects of the loss of waste flow. It is also obvious that tipping fees must be established to become market competitive, and that special revenue sources will be required until the county or county authorities can implement the necessary plans to become market competitive in the long term while meeting their operations and debt service requirements. The focus of these Partnership Agreement Program utility reviews is short term viability, the ability to meet debt obligations without guaranteed waste flow, and the ability of the county or county authority to implement long term operational plans. The efforts to reduce the cost of solid waste disposal have focused on the renegotiation of existing agreements and the possible retirement and/or restructuring of outstanding obligations. Obviously, the county or county authority must maintain competitive tipping fees and maximize all other income potential to mitigate unanticipated market changes.





Solid Waste Partnership Program

The Report of the Passaic County Utilities Authority (PCUA) Budget Review Team


There is no doubt the cost of operating a Solid Waste Disposal System - and the rates that support it - have been steadily rising over the last decade. Now, with the legal challenges to the control of waste disposal, a special review program has been initiated to deal with the outstanding debt issued to finance solid waste systems in accordance with the Solid Waste Management Act, and the Solid Waste Utility Control Act. As part of the Solid Waste Partnership Agreement Program, there is state budget language to "subsidize county or county authority debt service payments for environmental investments incurred as of June 30, 1997…in accordance with criteria and program guidelines established by the Commissioners of DEP, DCA and the State Treasurer… Expenditure of such funds are conditioned upon the State Treasurer having conducted or contracted for an operational audit of such county or county authority, and such county or county authority having implemented the audit recommendations to the satisfaction of the State Treasurer."

This review recommends steps to be taken over the short term, but long term implications will be considered in ongoing discussions with all entities involved in final determination of the Solid Waste Partnership Program conditions.

This review and report was completed in response to the Passaic County Utilities Authority (PCUA) choosing to participate in this special review program. This is the first step in the process of the state assisting authorities in the post Atlantic Coast era. The PCUA will now need to evaluate its options based on these findings and recommendations and fully participate in ongoing discussions with its professional staff, consultants, facility operator, the county and the state in order to develop a final partnership agreement. If aspects of the alternatives provided need to be changed, they will become part of the dialogue between the entities involved. This Partnership Agreement Contract will ultimately be between the Department of Treasury, the Department of Community Affairs (DCA), and the Department of Environmental Protection (DEP), the County of Passaic and the County Authority designated as the implementing agency for solid waste in Passaic County.





The authority was created in March, 1987 by the County of Passaic pursuant to the Municipal and County Authorities Law of the State of New Jersey for the purpose of implementing the county solid waste management plan including the authority’s solid waste disposal system within the geographic boundaries of the county. The authority relied on a system of waste flow controls to secure repayment of its obligations, including debt and administrative and operational expenses.

The loss by the authority of its ability to control and enforce the flow of solid waste generated within Passaic County caused the authority to experience financial difficulty. The authority was unable to procure all components of a system in a non-discriminatory fashion prior to the denial of certification on November 10, 1997. As a result, the authority declared an emergency for a 90 day period and entered into a contract with American Ref-Fuel until alternative solid waste services could be procured.

The PCUA has made a considerable effort to address its multiple financial difficulties after the Atlantic Coast decision. Prior to Atlantic Coast, all solid waste generated within Passaic County borders was hauled to privately owned and operated transfer stations located in the county, and then tipped at a Pennsylvania landfill designated by the PCUA. This system permitted the PCUA to generate revenues sufficient to cover operations and debt service costs. A resource recovery facility was planned, to be located within the City of Passaic borders. The resource recovery facility project was ended when the state disallowed the construction of the incinerator; however, the costs of acquisition of land, planning and professional services for the project still exist and must be repaid.

The loss of New Jersey waste flow regulations caused a significant reduction in waste flow to the system, resulting in little operating revenues being generated by the authority. There seems to have been many factors that resulted in a mass exodus by the municipalities in Passaic County from the solid waste system, some of which dealt with economic issues, and some concerning philosophical differences on how the county waste disposal system should proceed. With $78.9 million of outstanding long term debt, and with only Pennsylvania landfill capacity and land in the City of Passaic to show for it, the PCUA faced an $8.7 million dollar debt service payment due March 1, 1998 with little tonnage coming through its system, and a deficit in the debt service accounts of approximately $5 million. The PCUA took action to address this deficit, as discussed later in this report. Authority officials developed a strategy based upon economic considerations to attract municipalities back into the system. Several issues concerning authority leadership, and even its existence, were in the forefront causing considerable diversion from the mission of the organization. The executive director resigned, with the comptroller and deputy director/county administrator taking over those duties. There has been a significant downsizing of the operations of the authority with the accompanying reduction of staff, from 16 employees in February to four employees at present. In March of 1998, the authority made $230,000 in severance payments to ten employees, including the payment to the executive director.

The CFO/Comptroller, and authority commissioners have taken significant steps to communicate with municipal officials in order to gain support for their solid waste disposal plan. Authority officials and representatives worked closely with the Passaic County Solid Waste Advisory Council to develop a plan for the county solid waste disposal system that included a mechanism for the repayment of the authority’s debt through a system of regulatory waste flow control and/or environmental investment charge. With the debt service component removed from the tipping fee, the PCUA now had the ability to "market" to its municipalities solid waste disposal services at the American Ref-Fuel Facility located in the City of Newark, Essex County, at a competitive rate of approximately $46 per ton. The authority has also slashed its operating budget to $1.50 per ton by downsizing personnel, selling authority assets, and cutting back on expenditures. The PCUA also has an agreement to sell the parcel of land intended for the incinerator to a private developer for $4.4 million. This action will bring ratables and jobs to the City of Passaic, and provide funds to pay down debt. All of these actions have been met with approval by most municipal officials and residents.

The biggest current problem looming before the authority is the November 15th debt service payment for the unsecured 1991 Resource Recovery Bonds. This payment amounts to $3,044,000, including principal and interest. Authority account balances show approximately $2,094,000 in bond reserve and bond service accounts to pay this debt. This leaves a shortfall of approximately $950,000 for the November 15th debt service payment. Authority officials have advised the team that any monthly revenue has been used toward operating expenses, and the unrestricted account balances have been steadily decreasing. Several of the freeholders and county officials have indicated that their preference is to let the authority default on the November 15th debt service payment, because they were advised that the state was ready to "bail them out".

This is the second time this year the authority has faced a financial crisis. The authority notified the county on February 11, 1998, of the approximate $5,000,000 deficiency amount necessary to pay the $8,937,665 principal and interest payment due March 1, 1998. Under the terms of the deficiency agreement, the county was required to have the $5 million deficiency amount on hand with the authority trustee as of February 15, 1998. Due to litigation brought by the City of Paterson, the bond proceeds could not be available until the scheduled February 26 closing date. In the event that the bond closing did not occur as scheduled, the county had scheduled a meeting for February 27th at which time action could have been taken to approve a temporary emergency appropriation to fund the deficiency requirement.

Prior to the February 1998 sale of $5.7 million in refunding bonds, Moody’s Investor Service downgraded Passaic County’s bond rating from A1 to A3 because of concerns over the county’s high debt burden, its trash funding crisis and its long-term fiscal health. No other county government has a bond rating lower than A3. In comparison, neighboring Bergen County enjoys a AAA rating.

Authority officials are encouraged to continue their efforts to structure partnerships with communities in the County of Passaic to address their solid waste disposal strategy, and find solutions to their long term debt problems. In partnership with the Board of Chosen Freeholders, Solid Waste Advisory Council members, and elected and appointed officials within Passaic County, the authority should continue to work towards a solution to the solid waste crisis presently facing the county. Any State subsidy pursuant to this Program is strictly conditioned upon the county and county authorities agreement to implement, and taking of steps necessary to implement, the recommendations of this audit to the satisfaction of the State Treasurer.



One possible solution to the current debt shortfall is the sale of property owned by the PCUA in the City of Passaic. The authority purchased an 18 acre site in the City of Passaic for an incinerator over a decade ago. The authority condemned the property, however, final air permit approvals were never forthcoming and the incinerator project was stopped in 1991. On April 25, 1996, the authority sold approximately three acres of this site to Passaic Beth Israel Health System for $501,000. In April of 1998, the authority announced that it plans to sell the remaining 15 acres of vacant land formerly earmarked for an incinerator, the authority’s only asset beside landfill capacity in Pennsylvania, to Garden Commercial Properties for $4.4 million. It is expected that a large major retailer would be brought into the site, which is located near the end of the Route 21 expressway. State highway officials are moving ahead with plans to extend Route 21 to Route 46 in Clifton, which would provide easy access to the site. Besides the economic benefit of increased ratables and jobs to the city, it will provide the injection of $4.4 million to the PCUA to offset its debt service obligations. Authority counsel handling this transaction has advised the team that the proceeds from the sale of this property must be used to pay down debt. A signed agreement of sale contains a November 1st closing date, however, as a result of buyer due diligence and the need to have a remedial work plan approved by NJDEP for environmental contamination on a small portion of the site, the closing is likely to occur in late December 1998 or early January 1999. Note that this closing date is after the November 15, 1998 debt payment due on the Solid Waste Revenue Bonds and, as such, the proceeds of the sale will not be available to make that payment.

The authority has considered selling its rights in the Alliance Landfill in Pennsylvania, but has determined that any such sale, transfer or assignment is highly unlikely and faces substantial obstacles and can only be resolved through expenses and protracted litigation. Authority officials cite limitations on the alienation rights contained in the agreement. Also, Authority officials have reason to believe that by virtue of the authority’s inability to direct waste to Alliance Landfill following the loss of waste flow after Atlantic Coast that Alliance will not continue to honor the landfill agreement. Further, to the extent that the Authority in the future has the ability (through waste flow or contract) to utilize the landfill authority officials also believe that pricing is so favorable (approximately $27/ton) that it is in the best interests of the ratepayers to maintain this asset and its pricing, and believes that any effort to sell the capacity would be financially imprudent.

We encourage all partners involved in the sale of land transaction to work toward a speedy settlement. This land sale is a "win-win" for the PCUA, the City of Passaic, and the ratepayers of the County of Passaic.

We recommend that proceeds from the sale of the property be used to write down the authority’s debt. We further recommend that PCUA provide the State with a formal proposal regarding the sale of its landfill capacity rights, and we reserve the right to recommend action regarding this asset until that time. Finally, if at any time in the future additional assets purchased with solid waste debt or any other accounts funded by solid waste debt are discovered by the State, we reserve the right to recommend the use of these proceeds to further reduce the debt obligation of the county or county authority.



The PCUA issued $5,695,000 in Solid Waste Disposal Revenue Bonds, Landfill Refunding Series 1988, dated February 15, 1998. The proceeds of the bonds, together with other funds of the authority, were used for refunding $5,000,000 of the $8,690,000 final maturity of the $30,930,000 Solid Waste Disposal Revenue Bonds, Refunding Series 1992A, funding required reserves, and paying the cost of issuing the bonds. The required reserve is 10% of the principal amount of the bonds, or $569,500. Pursuant to Local Authorities Fiscal Control Law, N.J.S.A. 40A:5A-6, the authority received approval from the Local Finance Board within the Division of Local Government Services, Department of Community Affairs, as amended on January 14, 1998. Also, pursuant to N.J.S.A. 48:3-9, the authority received approval of this financing from the commissioner of the NJDEP.

The authority issued $57,998,886.60 in Solid Waste Disposal Revenue Bonds, Series 1987, in order to acquire license and easement rights for the disposal of solid waste at landfills designated by Chambers Development Company, Inc.

The authority issued $30,930,000 in Solid Waste Revenue Bonds, Refunding Series 1992A to provide funds for the refunding of all of the Serial 1987 Landfill Bonds. $5,000,000 of the $8.690,000 final maturity of the Refunding Bonds was currently refunded as part of the 1998 financing. The balance of principal and interest due on March 1, 1998, was paid from monies on hand in the Revenue Fund.

The authority issued $23,590,241.10 in aggregate accreted amount at issuance of Solid Waste Disposal Revenue Bonds, Refunding Series 1996 to provide funds for the refunding of all remaining outstanding 1987 Landfill Bonds, which bonds mature on March 1st in each of the years 1999 through 2002.

In order to secure the 1987 Landfill Bonds, as well as the 1992 and 1996 Refunding Bonds, under the county landfill deficiency agreement, the county agreed to pay the authority such sums of money as may be required to provide for debt service on outstanding Landfill Bonds, maintain required reserves, and pay administrative expenses pertaining to the project. County Landfill Deficiency Agreement was determined to be in the best interest of Passaic County taxpayers, residents and ratepayers to assure the payment of debt service on authority bonds. The debt service is an unconditional and unqualified obligation of the county.

In addition, the authority issued $36,495,000 in Solid Waste Revenue Bonds, Series 1991A to provide for the permanent financing of certain outstanding project notes. These bonds are not secured by the County Landfill Deficiency Agreement.

The authority has issued various series of project notes to finance its solid waste activities. This includes the following:

$2,720,000 Taxable Project Notes, Series 1998, originally issued to finance a portion of the acquisition of the cost for the RRF site located in the City of Passaic;

$2,670,000 Taxable Project Notes, Series 1998A, originally issued to finance settlement costs with PenPac, Inc., the owner and operator of the transfer station component of the solid waste system under a system of regulatory flow control until November 10, 1997;

$6,685,000 Tax Exempt Project Notes Series 1998B originally issued to finance the acquisition of rights to the Empire Landfill Facilities (following the purchase of Empire by U.S. Systems, Corp., now known as Alliance Landfills).

The project notes mature August 4, 1999. They are secured by an amendment to the County Landfill Deficiency Agreement. The authority has attempted to refinance the project notes with long term bonds but cannot gain market access without a new county deficiency agreement to provide credit support for those bonds. The county’s effort to refinance the authority’s outstanding unsecured solid waste bonds with a county deficiency agreement has been thwarted by litigation.


We support the authority’s refinancing and restructuring plan with respect to its existing debt service in order to fix the lowest possible debt service component of the authority’s rate, to have the lower debt component assessed against solid waste generators within the county as a separate assessment on user charges as an EIC. This plan was approved by the Local Finance Board on August 12, 1998. Further, upon the passage of State legislation we recommend that the authority consider a plan to lower the debt service component further by refinancing.

We reserve the right following the authority’s submission of a restructuring plan to recommend financing through the State, including the extension of debt service payments over a period of time deemed appropriate by the State Treasurer.





The City of Paterson filed three lawsuits in January of 1998, challenging the legal authority of the Local Finance Board in the Division of Local Government Services, DCA, to approve and the authority to assess, bill and collect the EIC, and the authority of the NJDEP to certify a plan amendment approving the EIC. As a result, the authority proposed a system of regulatory waste flow control until the challenges to the EIC are resolved, either through the courts or through legislation. The authority’s plan is described below in greater detail under Solid Waste Management Plan and Amendments.



The Passaic County Board of Chosen Freeholders developed and adopted a Solid Waste Management Plan in accordance with the provisions of the Solid Waste Management Act on June 13, 1979. Pursuant to the provisions of an amendment to the plan, the PCUA was designated as the implementing agency for the plan.

The PCUA relied primarily on a system of waste flow controls consisting of waste flow rules promulgated by NJDEP and a solid waste disposal franchise granted by NJDEP to the authority in order to secure the repayment of its obligations, including debt obligations, and administrative and operational expenses. The validity and enforceability of NJDEP waste flow rules was declared unconstitutional as a result of the order and judgment of the Third Circuit Court of appeals in Atlantic Coast Demolition and Recycling Co., Inc. v. Atlantic County Board of Chosen Freeholders et al. As a result of the inability to direct certain classifications of solid waste through its solid waste system, the authority was faced with financial difficulties due to the inability to collect tipping fees necessary to meet its obligations.

In 1995, the authority filed with the Local Finance Board, Department of Community Affairs a petition requesting a financial difficulty hearing, anticipating a final decision in Atlantic Coast. The authority also filed a petition seeking to unbundle its solid waste rate with NJDEP in order to segregate the debt service component in a manner that would permit it to be paid from an EIC.

Subsequent to the decision of the Third Circuit Court of Appeals, the Freeholders adopted an amendment to the plan proposing a system of regulatory waste flow control resulting from non-discriminatory procurement of solid waste transfer station and transportation and landfill services consistent with the commerce clause of the Constitution. The authority could not complete its non-discriminatory procurement of solid waste flow services in a timely manner, and declared an emergency and entered into a contract with American Ref-Fuel of Essex County, Newark, N.J. for a 90 day period for delivery of solid waste generated within the district. Waste generators within the county were only obligated to use this vendor on a voluntary basis, and a substantial number of generators chose other facilities. This further reduced the revenue being collected by the authority to meet it debt service obligations and fixed administrative and operating expenses.

The Plan Amendment proposed to unbundle the authority solid waste disposal rates to create a separate EIC to be imposed on solid waste generators to allow the authority to recover costs associated with the development and implementation of its solid waste disposal system.

The Local Finance Board subsequently approved, after public hearings, the implementation of a financial plan consisting of:

The EIC includes debt service charges only - bonds and project notes. At 31.18/ton, the PCUA would need to generate 28,865 tons in 1998 to meet the November 15th payment. At projected tonnage of 150,000 for 1998, the EIC would generate $4,677,000 in funds to meet debt service payments. Given the inability to collect the EIC, it is unlikely that the authority will be able to collect EIC revenues sufficient to make the November 15th payment.

The authority based its EIC calculation on 1993 tonnage data because it believes it most accurately reflected the historic basis for allocating the costs of developing and implementing the county system. Since 1993, the tons of solid waste delivered to the county system from municipal waste generators has remained constant at approximately 220,000 tons. There has been a sharp drop in the number of tons of commercial waste delivered to the county system. Municipalities would be billed quarterly for the municipalities’ share of the EIC as well as its share of the EIC for commercial waste.

The authority received responses to a non-discriminatory re-procurement for solid waste transfer station and disposal services on December 23, 1997. Following a review of those bids, the authority authorized an award on February 9, 1998, of a two year contract to American Ref-Fuel of Essex County, Newark for the processing of Type 10 municipal waste. The authority also negotiated terms and conditions for the disposal of other waste types at the Hackensack Meadowland Development Commission facility. The Plan Amendment was defeated by a 7-0 freeholder vote on February 27, 1998.

As indicated above, the PCUA and SWAC undertook an active partnership in revising the plan amendment to meet board approval. Subsequently, Plan Amendment #2-1998 was developed and put forth to the Freeholder Board for approval. Also, in April 1998, the authority applied to the Local Finance Board to revise the EIC based upon more realistic tonnage figures and the inability to refinance the unsecured Solid Waste Revenue Bonds.

The Passaic County District Solid Waste Management Plan, Plan Amendment #2-1998 provides for the following strategy to deal with their current financial difficulties:

Option to Exit County System

Following the commencement of regulatory flow control within the county, municipal waste generators have the right to exit the system under the following conditions: the municipality shall certify its total costs for solid waste disposal services are more economical than total costs to be incurred through the use of the county system, and were obtained as a result of procurement in accordance with Local Public Contracts Law; the municipality agrees to pay the EIC and confirms it has the obligation, power and authority to pay the EIC; the alternate method of disposal is environmentally sound and satisfies all criteria of the NJDEP for disposal services.

In light of the financial difficulties plaguing the authority, the success of reinstituting appropriate and legal solid waste flow control in other counties in New Jersey, and the absence of any other plan to deal with the current problems facing solid waste management within the County of Passaic, we strongly recommend that Plan Amendment #2-98 be adopted by the Board of Chosen Freeholders of Passaic County. This will provide a source of revenue to address debt service and operational needs, and a coordinated county-wide solid waste disposal system. Without the approval of Plan Amendment #2-98, the county has no recourse to capture revenue through an EIC needed to meet future debt service obligations. Any State subsidy pursuant to this Program is strictly conditioned upon the county and county authorities agreement to implement, and taking of steps necessary to implement, the recommendations of this audit to the satisfaction of the State Treasurer.









Solid Waste Rates - Pursuant to an Agreement with American Re-Fuel

The following chart is a breakdown of the applicable rates under the agreement with American Ref-Fuel:


Less than 100,000 tons

100,000 - 150,000 tons

More than 150,000 tons

Year 1





$47.75 disposal




$31.18 debt service




$ 1.50 administrative

$ 1.50

$ 1.50


Year 2





$50.75 disposal




$34.46 debt service




$ 1.50 administrative

$ 1.50

$ 1.50

The above rates do not include hauling charges to the Ref-Fuel incinerator in Essex County, as each solid waste generator is responsible for making hauling arrangements. The authority estimates distance from Paterson at 19-20 miles. Therefore, the team estimates cost of hauling to be around the $6 - $8 per ton.

As a result of inaction by the County of Passaic, American-Ref Fuel has formally rescinded its disposal agreement effective July 27, 1998.

In accordance with our recommendation to adopt Plan Amendment #2-98, action should be taken to encourage all communities within the County of Passaic to use the designated county solid waste disposal facility. As a result of inaction by Passaic County, the PCUA must initiate negotiations with multiple parties for solid waste disposal. These, at a minimum, would include the Bergen County Utilities Authority and American Ref-Fuel of Essex County. The opportunity behind this approach is to attract the lowest cost alternative due to the immediate nature of PCUA’s situation for paying its annual debt service obligations.

Of the 16 communities in Passaic County, only Paterson has signed a long term contract for solid waste disposal services with a transfer station located in town. Paterson’s five year deal has an annual average cost of $56.05 per ton over the term of the contract, or $4.5 million. Including an annual average EIC of $37.79 per ton, the deal actually costs $93.84/ton. Based on 80,285 tons of solid waste produced in Paterson annually, the actual cost over the term of the contract is $37,669,722, or $7.5 million annually. Paterson also authorized a collection contract that costs $1.8 million annually.





The authority made a mortgage note loan to the Passaic Industrial Center Associates on October 24, 1989, in connection with the relocation and condemnation of properties acquired for siting of the resource recovery facility. The principal sum was $2,913,718. The note bears an interest rate of 9.5% and is payable in monthly installments of $26,946 commencing on December 1, 1989 and thereafter on the first day of each succeeding month, with final payment due on November 1, 2009. As of December 31, 1997, there is a receivable amount on the books of the authority of $2,350,788.



There are several issues in litigation between the PCUA and various entities at present.

In Chambers Development Co. vs. the PCUA, Chambers claims that a License Agreement for the disposal of solid waste at Chambers’ facility was unlawfully terminated when the authority entered into a license agreement with the Empire Sanitary Landfill. The PCUA initiated an action for declaratory judgment seeking a determination regarding the continued effectiveness of the contract. This matter is in discovery and the process is ongoing.

In Foster Wheeler Passaic, Inc. vs. the PCUA and the County of Passaic, Foster Wheeler filed a liquidated damage claim under a proposed but unapproved RRF service agreement. The Appellate Division held that the service agreement was an enforceable contract despite the lack of McEnroe approval. A trial will be held on remedies and pretrial discovery is ongoing.

The Borough of Taylor, Pennsylvania assessed a realty transfer tax upon the license and easement granted to the PCUA by Empire in the amount of $3,606,687 as of January 10, 1997 with interest and penalties accruing. This tax was based on disposal rates payable and tonnage to be delivered to Empire over the life of the contract instead of the value of the interest in land conveyed under the easement. The PCUA requested redetermination of the tax assessment with the Treasurer of Taylor in April of 1997. No further action has been taken in this matter.

The Riverside School District filed a Municipal Claim which assessed a realty transfer tax in the amount of $3,832,369 as of September 1997 against the PCUA. This filing initiates a civil action. On January 7, 1998, Empire alleged Riverside breached a Stipulation and Agreement that stated a payment to Riverside in lieu of any other tax based on the disposal of waste.

Grinnell Solid Waste Haulers filed a petition with NJDEP involving a contract for transportation services. Because of the contract with Ref-Fuel, Grinnell no longer hauls for the PCUA. Some issues remain regarding past monies potentially owed.

There is a matter pending before the Office of Administrative Law involving the setting of a rate for solid waste transfer station services provided by PenPac, Inc. Since December 1992, PenPac provided these services pursuant to an interim rate, subject to adjustment for over recovery by PCUA or under recovery by PenPac. A decision regarding ratesetting methodology has been issued and a decision regarding the results of that methodology is expected soon.

There is an appeal pending by the City of Paterson challenging the PCUA’s proposed EIC and a deficiency agreement entered into in connection with a proposed refunding of authority debt. The matter has been fully briefed and is scheduled for oral argument in October.



The following is a summary of solid waste disposal tonnage for the categories for which tip fee rates are determined (1997 and 1998 are projected tonnage numbers):




































Data provided by the PCUA indicate that approximately 23,000 tons/month are required for adequate revenue streams to pay debt and operational requirements. An analysis of authority records indicate that during the first ten months of 1997, they were receiving an average of 21,692 tons monthly. There is a sharp drop off of tonnage in November and December of 10,411 and 4,946 tons, respectively. In January 1998, the authority received 1,932 tons; in February, the authority received 348 tons; in March, the authority received 175 tons, and in April, the authority received 1,022 tons. The picture looks dire without the reenactment of flow control.


Initial/Proposed Tip Fee Components




Debt Service



Transfer Station









Operations and Maintenance



Host Community Benefits



Accumulated Deficit






*transportation/hauling charges are the responsibility of the waste generator

**rates are based upon delivery of 160,000 tons 1998







Proposed Budget

Adopted Budget


Operating Revenues




Non-Operating Revenues




Total Revenues




Administration Expense




Other Expense




Principal Payments/Debt




Interest Payments/Debt




Total Appropriations




The 1997 PCUA budget totaled $31,050,000 based on annual tonnage of 280,000. Of that amount, $8.01/ton, or $2,243,036, went towards operations, maintenance and enforcement. The authority’s total payroll for 1997 was $914,215. The 1998 PCUA budget totals $16,266,224, or a reduction of $14,783,776, and is based on annual tonnage of 275,000, and of that amount, $1.50 per ton, or $412,200, is set aside for administrative costs. This is a reduction of over $1.8 million from the 1997 budget. For 1998, the authority is anticipating the receipt of 160,000 tons from June 1, 1998 through December 31, 1998, reflecting the timing of the adoption of the plan amendment by the Board of Chosen Freeholders.

As stated previously in the report, this tonnage expectation, and revenue projections based upon tonnage, are unrealistic due to a lack of regulatory waste flow control. Revenues are inadequate to support budgetary requirements of the PCUA at present.


Account Balances as of August 31, 1998

Cash & Investments - Restricted

95 Notes Construction Fund


Haulers Escrow




Liquidity Reserve


Interest Refunding


Debt Service - Revenue


92 Construction Fund


Future Debt Service


Debt Service - 36 Mil


95 Debt Service


96 Project Notes


98 Debt Service Fund


98 Refunding Bond Account


92 Escrow Fund


Cost of Issuance Fund - 98 Notes


Gross Revenue Fund


Total Restricted Funds



Cash & Investments - Unrestricted


Payroll Account


Voucher Account


General Account


Envir Quality & Enforcement


Unemployment Fund


Trust Transporter


Host Community


Earnings Fund


96 Refunding W/C


Total Unrestricted Funds



The authority is required by bond resolution and note resolution to maintain each of its investments in the fund in which the investment was made. The authority had a cash and investments balance, as of December 31, 1997, of $11,219,044 in restricted and unrestricted funds. As of March 31, 1998, the balance in restricted and unrestricted funds had fallen to $6,100,476.30.

The authority saw a decrease in solid waste tipping revenues of $5,704,673 from 1996 to 1997. The financial statement shows a deficit of $3.8 million in the reserve for debt service. The City of Paterson and the Borough of Totowa received Host Community Fees of $830,199 in 1996 and $675,224 in 1997. There are no host community fees due in 1998 because of the utilization of the American Ref-Fuel facility as the designated disposal site.



On March 20, 1991, the County of Passaic adopted an amendment to its Solid Waste Management Plan to increase the recycling component to meet the county goal of recovering 60% of the municipal solid waste stream through recycling by the close of year 1995. 1994 recycling tonnage figures submitted by the sixteen municipalities in the county indicate that the overall waste reduction goal of 60% was reached a full year ahead of schedule.



In May of 1998, the Board of Chosen Freeholders began investigating the creation of a county improvement authority. The improvement authority would have the power to spur economic development through the financing of development projects in the county, create housing and pool loan programs. The Freeholders cite the fact that Passaic County has lost approximately $61 million in ratables on a tax base with an equalized valuation of $23.6 billion in the past year, and ranks in the bottom half of the state in economic development. Part of a plan developed to spur economic development through various projects throughout the county includes the creation of an improvement authority as the financing mechanism. Other counties also have improvement authorities develop, implement and oversee solid waste disposal services, such as Mercer County and Gloucester County. However, the dissolution of the Passaic County Utilities Authority it appears to require that the county take over the outstanding debt. There are several issues concerning the outstanding debt that would have to be examined by bond counsel and other officials to determine the feasibility of such a move.

Based upon interviews with freeholders and other county officials, it is clear the Board of Chosen Freeholders is proceeding with its plan to abolish the Passaic County Utility Authority in favor of the creation of a Passaic County Improvement Authority.

The PCUA is already in place and operational with many on-going needs, employees, debts, contracts, municipal liaisons, and obligations reaching beyond the current situation. In addition the PCUA Board has a non-partisan make-up and has consisted of members from both parties over the last few years. These issues currently consume the efforts of the Board, the freeholders, the SWAC group, and other interested parties, such as haulers and PenPac which operates the transfer station in Passaic County.

The creation of an Improvement Authority will bring a number of issues to be addressed:



The Passaic County Utility Authority is somewhat unique among authorities that operate a county’s solid waste disposal system. The loss of New Jersey’s flow control regulations allowed the loss of expected revenue and the authority has not been able to re-establish flow control despite efforts to amend the solid waste plan through SWAC and the Freeholders to finalize the EIC which was approved some time ago by the Local Finance Board. With this scenario in mind, it should be pointed out that within the last year, in order to achieve economies and efficiencies, the authority has substantially reduce its work force to meet debt obligations involving outstanding bonds, excessive litigation, and of course administrative costs.

At the time of LGBR’s review, the PCUA had been reduced to a Deputy Executive Director (part time), a CFO, a part time Finance Director, and three clerical support personnel. In the interim during our initial interviews and prior to this report, it is our understanding the authority has released an additional clerical support position reducing staff further to five officials.

LGBR feels that additional cuts in administration are probably insignificant with regard to the total financial picture; however we suggest some minor steps which we believe could enhance public perception and reduce some costs.


The current structure permits the authority to utilize a part time finance person, who also happens to be the Director of Finance for the county, to utilize county operations to meet payroll needs, help with computer needs, respond to PERS concerns and generally assist with internal finance needs of the PCUA. Although the county should and could continue this assistance, we are unable to justify the part time nature of the payment afforded to this individual. We believe the payroll amount forwarded to this individual should cease (estimated at approximately $7,990 annually). We do believe the county can continue to assist but absorb those functions into its own budget rather than tapping an already nearly empty funding source at the PCUA. However, we suggest that this position be retained to assist the PCUA during the absence of the CFO/Acting Director, and be eliminated upon his return.

Upon the return of the CFO/Acting Director, we recommend eliminating payment to the part time financial assistant.

Savings: $7,990

The part time Deputy Executive Director is also the County Business Administrator and acting in the capacity of the deputy director for the PCUA since the settlement was reached with their former Director. The county pays the "part time" Executive Director approximately $42,047 annually for this additional duty to compensate for time and effort to coordinate the county’s role and add leadership to the PCUA. This is in itself is not a bad idea, but it does cause the public to possibly question both the amount and real time afforded to the authority. We believe this figure could be reduced and additional authority granted to the CFO to operate the PCUA daily while the county Business Administrator operates a runs a very busy county. We believe the reimbursement granted to the County B.A. be reduced to approximately half its costs or about $20,000.

The PCUA has adopted a policy that permits the Freeholders sit on the Board and deal with operational concerns, litigation, personnel, and now solid waste issues so they are a well informed group capable of making many administrative decisions without constant updates by the County Business Administrator, the CFO, or other county official; therefore we feel the compensation granted to the part time Executive Director is excessive and can be controlled to reduce costs. Indeed we found both the Board and its members as well as the CFO to be advised more by counsel than any other official. Certainly the county should continue with a degree of leadership, but we believe realistically the county is over compensating for this part time role.

Reduce payment to the part time Deputy Executive Director.

Savings: $22,047

Our table of organization suggests a staff of four individuals with a part time director and full time CFO and two additional clerical support. The clerical support can support the Executive Director in his part time capacity while the accounting assistant can aid the full time CFO in his responsibilities.

Much discussion occurred regarding the possible elimination of the PCUA. We believe this idea may have negative consequences based on its current financial and contractual obligations as well as continued litigation. Therefore, we recommend the continued existence of the PCUA even if an Improvement Authority is established. Such an organization could consist of the CFO and one clerical support until all obligations of the PCUA have been met or contractual considerations attached to the CFO have been satisfied.

Total Savings: $30,037


James A. DiEleuterio, State Treasurer

David Mortimer, Associate Deputy State Treasurer

John J. Coughlin, Director, Local Government Budget Review Program

Jane M. Kenny, Commissioner, Department of Community Affairs

Stephen Sasala II, Acting Director, Division of Local Government Services

Robert C. Shinn, Jr., Commissioner, Department of Environmental Protection

Gary Sondermeyer, Assistant Commissioner for Environmental Regulation


PCUA Review Team

JoAnne M. Palmer, Team Leader

Local Government Budget Review Program

Matthew DeKok, Local Government Budget Review

Dave Cockerham, Local Government Budget Review