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Gerrard Talk

Presentation About Metro Enviro Litigation
Village of Croton-on-Hudson

Michael B. Gerrard
Arnold & Porter LLP

September 7, 2004

I am here this evening to bring the public up to date on the status of the litigation over the Metro Enviro facility, and to summarize negotiations that have taken place over the last several months.  The Village Board will be scheduling a public hearing to receive comments before it makes any decisions on this matter.

The site has been used for storing and processing materials for decades.  The Village granted a special use permit to Industrial Recycling Systems for wood processing and recycling in 1988.  In 1997 the Village Board appointed a bipartisan citizens committee, including several local residents with considerable expertise in environmental management and environmental law, to study the facility. The 22 members of that committee unanimously recommended that the facility be issued a special permit for a construction and demolition debris transfer station.  Thus, after several public hearings, the Village Board issued such a special permit to Metro Enviro LLC in May 1998.  That permit allowed the processing of 850 tons per day, with the possibility of an increase to 1,000 tons per day in the third year.  The Village Board also conducted an environmental review at that time, and concluded that the transfer station would not have a significant effect on the environment.

In March 2000 the operation was purchased by Metro Enviro Transfer LLC, a subsidiary of Allied Waste.  The special permit expired in May 2001, but Metro Enviro Transfer LLC had applied to renew it in time, and the Village Board extended the permit a total of 13 times.

During 2000, 2001 and 2002, after it was bought by Allied, the facility committed many violations.  The most serious of these were acceptance of waste in excess of the permitted amount, and falsification of records about these receipts; and the repeated acceptance of industrial waste.  In the fall of 2002, the Village Board held several hearings to investigate these violations, and on January 27, 2003, the Village Board unanimously voted to refuse to renew the special permit and to shut down the facility.

Metro Enviro immediately brought a lawsuit against the Village in New York State Supreme Court alleging that the Village did not have the authority to shut down the facility.  On February 19, 2003, Justice Francis Nicolai ruled for Metro Enviro and annulled the Village’s decision.  Instead, Justice Nicolai directed the Village to issue the permit, “upon such reasonable conditions as it may deem appropriate.”

The Village appealed this decision.  On May 10, 2004 the New York State Supreme Court, Appellate Division, Second Department, reversed Justice Nicolai and found that the Village had acted properly in shutting down the facility.  On June 6, 2004, the Village directed Metro Enviro to shut down as of July 14, 2004.

Metro Enviro filed a motion with the New York Court of Appeals asking it to review the Appellate Division decision, and meanwhile requesting a stay in the shutdown order.  On July 12, 2004, Judge Robert Smith of the Court of Appeals issued a stay pending a decision by the full Court of Appeals on whether to take the case.  His order had the effect of reinstating Justice Nicolai’s decision, pending further action by the Court of Appeals.

The Court of Appeals has not yet announced a decision on whether to take this case.  Judge Smith’s stay remains in effect.  That means that Justice Nicolai’s decision is back in force, and the special permit continues in effect.    

I now move from recounting the past to predicting the future.  That, of course, is much more difficult.

Several things could happen at this point.  The worst case would be if the Court of Appeals decides to take the case, and then reverses the Appellate Division decision and upholds Justice Nicolai’s ruling that the Village did not have the authority to shut down Metro Enviro.  If that happened, Metro Enviro could stay open, and the Village would have very little leverage.

I do not think that is likely.  I think the odds are that the Court of Appeals will refuse to take the case, and if they take it, I think it is likely that they will affirm the Appellate Division.  But there are no guarantees.

If the Court of Appeals does not take the case, or takes it but then affirms the Appellate Division, Metro Enviro would close.  But that is not the end of the matter.  The site will still exist, and it will still have an owner who wants to receive rent from someone.  So if Metro Enviro is closed down, it is almost certain that someone else will come forward wanting to use the site.  It may be another solid waste company that wants to continue the operation of the construction and demolition debris transfer station. It may be a company in a different business that wants to put another use there – probably an industrial or warehousing use that can take advantage of the site’s proximity to the railroad and to Route 9A.

If someone acquires the facility from Metro Enviro and wants to continue operation of the C&D transfer station, we will argue that the special permit has been cancelled. The new applicant will argue that the right to a special permit runs with the land. That applicant is also likely to argue that in any event the construction and demolition debris transfer station use is a legal nonconforming use, and as a new party that has not violated any permit, the new applicant is entitled to receive a special permit.  I think we would have the better side of that argument, but there are no cases directly on point, and this is a dispute that would almost certainly lead to another round of litigation.  The odds would not be as strongly in the Village’s favor as they are in the current proceeding against Metro Enviro, which indisputably violated the permit on many occasions and in several respects.

If someone acquires the site and wants to operate something there other than a C&D transfer station, the Village may or may not find it acceptable.  If it finds it unacceptable, there may be litigation about that.

There are also a number of other possible scenarios for the future of the site.  Most of them would involve at least the possibility of expensive, protracted litigation.  And whenever there is litigation, there is also doubt about the outcome.  Recent history shows that this kind of litigation can cost the Village several hundred thousand dollars.

Shortly after we won in the Appellate Division, Metro Enviro called us and said they would like to discuss whether it is possible to settle the litigation.  In part because of the uncertainty of future events if we ultimately won the litigation against Metro Enviro, the Village Board authorized Rick Herbek, Seymour Waldman and me to have discussions with Metro Enviro.  We have done so, and we have reported back to the Village Board on those discussions.  Because of the progress of the discussions, the Village and Metro Enviro have jointly asked the Court of Appeals to delay its decision whether to take the appeal.

It is also relevant that several other things have happened outside the courtroom since the Village Board voted on January 27, 2003 to shut down Metro Enviro:

-- On February 7, 2003, DEC renewed Metro Enviro’s state permit and expanded its capacity (though the capacity has remained limited by the Village permit).

-- Walter Mack, the federal court monitor, has issued several reports that deal with Metro Enviro and other Allied facilities.  These reports were highly critical of Allied, but for the most part they dealt with events in 2000, 2001 and 2002, and events that involved personnel, most of whom are gone.  None of his reports dealt with events subsequent to January 27, 2003.

-- Since January 27, 2003, neither DEC nor the Village has issued any violations to Metro Enviro, and the only evidence of new violations since that date was one  incident of blowing litter and one incident of operating after 5 p.m.  

-- No evidence has come forward that Metro Enviro has actually damaged the health or environment of the Village.  Judge Nicolai ruled that there was no such evidence.  We did not dispute that; we argued, instead, that such evidence was not needed in order to shut down a facility that was violating its permit, where the permit conditions violated were designed to protect public health and the environment.  Not counting the two minor infractions I just mentioned, since January 27, 2003 there have been, to the knowledge of the Village and DEC, no further violations of permit conditions that are designed to protect public health and the environment.

My plan this evening is to report to the public on where the discussions that we have held with Metro Enviro have taken us.  After I am finished with my presentation, and after we have heard from Rick Herbek, I will invite questions.  Tonight is not a public hearing.  The Village Board will be scheduling a public hearing to take formal public comments on the proposal I am presenting tonight.

I will start by telling you about the proposed agreement in a very brief nutshell, and then going back over it in more detail.  In a nutshell, the agreement would have these most important elements:
1.  Metro Enviro could stay in operation as a C&D transfer station.
2.  Metro Enviro would be subject to very clear terms for closure in the event of future violations.
3.  Metro Enviro would be subject to more intense monitoring than it is now.
4.  Metro Enviro would make very substantial monetary payments to the Village to reimburse it for the costs of the litigation, the cost of monitoring, and any other impacts the facility may have on the Village.

Now to go over these terms in more detail:

Metro Enviro’s permit would be renewed for two years, starting on October 1, 2004.  The total amount of waste that can be received is the same amount as now—850 tons per day, and 300 tons on Saturdays.

At the end of the two-year period, Metro Enviro’s permit would be renewed for an additional three-year period, unless during the prior two years:
a) there had been repeated, material violations of the permit; or
b) the DEC permit had been revoked; or
c) there had been one or more violations of the permit that resulted in substantial verifiable harm to public health, safety or the environment.

If these violations have not occurred and the permit is renewed, then during years three, four and five Metro Enviro could accept up to 1000 tons per day, and 300 tons on Saturdays.  This is what the Special Permit in 1998 provided, except that we are adding the additional restriction that during any calendar week the tonnage cannot exceed a total of 4,550 tons; that reduces the permissible weekly tonnage from what it would be without this weekly limitation (5,300 tons).  It is still more restrictive than the facility’s permit from DEC, which allows an average of 1000 tons per day up to 6000 tons per week, meaning that some days the waste receipts could exceed 1000 tons per day.  That would not be allowed under the proposed agreement.

The proposed agreement also clarifies the hours when Metro Enviro can operate.  The old special permit, the proposed new special permit, and the DEC permit all provide that the operating hours are 8 a.m. to 5 p.m. on weekdays and 9 a.m. and 1 p.m. on Saturdays (except that DEC allows operations until 5 p.m. on Saturdays).  There has been an ambiguity about whether this means the facility could only receive waste during these hours, or whether the facility could only do any internal work during these hours as well.  The proposed agreement clarifies this by specifying that waste can only be received between 8 a.m. and 5 p.m. on weekdays and 9 a.m. and 1 p.m. on Saturdays, but the facility can engage in internal operations between 6:30 a.m. and 6:30 p.m. on Monday through Friday, and 8 a.m. and 2 p.m. on Saturday.  We believe that everyone benefits from this clarification.  It does not increase the amount of waste the facility can accept, but it makes it easier for Metro Enviro to clean up its tipping floor and otherwise make sure that the operation does not create dust or odors.

There has also been some ambiguity over the conditions under which the Village could shut down Metro Enviro.  That is a major reason there has been such extensive litigation.  The proposed settlement would clarify this.  It would modify the special permit to provide that the Village could immediately shut down the facility, without a prior hearing, if any one of five events occurred:
1.  There are imminent hazards posed to the public health, welfare or the environment
2.  There is a blockage of a fire lane
3.  There are repeated, persistent, or uncured negligent violations
4.  There is a grossly negligent, reckless, callous or intentional violation; or
5.  The violation has caused substantial verifiable harm to public health, safety or the environment

The Village Board could also permanently revoke the permit if any of the last three kinds of violations occurred – repeated, persistent or uncured negligent violations; or grossly negligent, reckless, callous or intentional violations; or a violation that has caused substantial verifiable harm to public health, safety or the environment.  Before making a stop work order permanent, the Village Board would have to have a public hearing.

It is understood that isolated accidental occurrences, and isolated occurrences resulting from ordinary negligence, that do not result in substantial verifiable harm to public health, safety or the environment would not alone be enough to preclude future renewal of the Special Permit, or be a basis for suspending or revoking the permit.  However, the kinds of violations that occurred in recent years – such as falsification of tonnage records, and repeated acceptance of industrial waste – would be a basis for revoking or refusing to renew the permit.

The agreement also provides for a substantial amount of monitoring of the facility.  The Village would hire a monitor who would have full access to the facility and its records.  Metro Enviro would pay the Village $25,000 per year toward the fees and expenses of the monitor; if the Village chooses to, it can spend more than that on a monitor, but it will not receive additional reimbursement for that.  One area we are now exploring is the possibility of installing air monitoring devices to see if any harmful dust is escaping the site.  (So far as we know, that is not occurring, but this would make sure.) There are some engineering challenges with that kind of monitoring, but we are actively looking into it.  The proposed agreement provides that Metro Enviro would allow the Village to install monitoring devices.

The proposed agreement also cleans up some obsolete or ambiguous terms in the special permit.  It incorporates into the permit some requirements of the Fire Department.  It limits the amount of parking and storage that Allied can have on site, and it limits the height of the stored items.

The proposed agreement provides for substantial payments and other benefits to the Village:

First, and most importantly, Metro Enviro would pay the Village a transfer station impact fee, which would be in addition to the real estate taxes paid by the facility.  The first year the fee would be $4.00 per ton; the second year it would be $5.00 per ton; and, assuming the permit is then renewed, $5.25 per ton for the third, fourth and fifth years.

At the outset of these negotiations, we did substantial research into the impact fees that other transfer stations and other solid waste facilities are paying to other municipalities around the country.  I can report to you that, as far as we can tell, the fees involved here are very much at the upper end of what any municipality in the United States is receiving per ton for solid waste management facilities.  Typical fees are between $1 and $3 per ton, with the higher amounts typically going to places that have landfills, which have worse environmental impacts than transfer stations  We were able to achieve fees at this level due to the bargaining position that resulted from our victory in the Appellate Division.

These fees add up to significant amounts, as shown in this chart.  Last year Metro Enviro received approximately 132,000 tons of waste.   This year they are running at a rate of about 150,000 tons of waste.  At the lower rate, the annual income would be $528,000 during the first year, $660,000 during the second year, and $693,000 during years three, four and five.  At the higher rate of 150,000 tons/year, the annual income to the village would be $600,000 the first year, $750,000 the second year, and $787,500 during years three, four and five.

Next, Metro Enviro would reimburse the Village for its legal and expert fees in this litigation, to the amount of $440,000.  That payment would be $220,000 the first year and $220,000 the second year.

Next, Metro Enviro would pay the village $25,000 per year for the cost of monitoring the facility.  The monitor would be selected exclusively by the Village.

Metro Enviro would also allow the Village to dispose of its own C&D debris at Metro Enviro at favorable rates.  The Village generates substantial quantities of concrete, paving materials, and trees and tree stumps every year.  We cannot at the moment estimate the magnitude of savings from this benefit, so I am not including it in the tally of savings.

Another benefit to the Village would be that Metro Enviro would make available, for $1 a year, the area of approximately 28,000 square feet at the northeast corner of their site for the Village’s use in storing equipment and materials, such as for the Department of Public Works.  This will improve DPW and other Village operations, and it will also allow the Village to compost its own leaves, saving about $13,000 per year that would otherwise be spent in paying the Village of Ossining to take these leaves.

When all this is added up, the revenues and savings the Village would realize range between $706,000 per year and $983,000,a year, depending on the year and on the assumptions of how much waste will be processed.  At the lower end of this range, the savings and added revenue translate into the equivalent of $224 on the average tax bill; at the upper end, they translate into the equivalent of $310 on the average tax bill.  Another way to put these figures into perspective is that the Village’s annual budget is approximately $12 million, and its annual non-tax revenues are about $4 million.

Let me now go back to the various ways all this could play out, depending on what could happen in court.

Leo Weigman has put together a chart that shows some of the scenarios. An earlier version of this chart was reviewed by the Village Board of Trustees before they decided to call this meeting.  We have made copies of this chart for everyone here this evening, and a blowup is displayed here.

The final topic I would like to address right now is the procedures going forward.  We did not think it would be fair to give the public all this information tonight and ask for comments the same night, without giving you a chance to think about this and consider it. Thus tonight Mayor Elliot will ask that a public hearing be scheduled for September 27, during the next regularly scheduled meeting of the Village Board, so that anyone who wishes can comment on this proposal.  Meanwhile, the proposal is being sent for comment to the Village Planning Board and to the Westchester County Planning Board.  This is purely advisory, and we do not believe it is mandated by law, but it would be useful to have their input, and we will request it.  We will also be in touch with DEC.

An environmental assessment form is also being prepared under the State Environmental Quality Review Act so that the Village Board can decide whether the approval of this settlement and the extension of the permit could have significant environmental impacts, warranting the preparation of an environmental impact statement.

The Village Board has made no decisions yet other than to entertain these discussions.  It will make a decision after it hears the views of the public at the September 27 public hearing.  We hope that you will take the time between now and then to consider this presentation.  

Rick Herbek will now address the financial implications of the proposed settlement for the Village.  After he is done, we will  invite questions.  Extensive comments, as opposed to questions, should be deferred to the public hearing, when the five minute limit that will be used tonight will not apply.  We are now putting the finishing touches on the documents that would accompany the settlement, particularly the draft settlement agreement and the draft revised special permit.  We will make those public and put them on the Village web site when they are done, in the next few days, and we will invite comments on those at the public hearing as well. Thank you.