MORE ON FOX CITIES' FINANCIAL RISK IN PCB CLEANUP

New Study Reveals Financing Options

By Michael Horne

In a previous posting on the Fox River cleanup, we raised the unpleasant truth that it is entirely possible that local governments might face lawsuits from the paper companies over their actions contributing to PCB pollution.

If the Publicly Owned Treatment Works (POTWs) that accepted hazardous waste from Fox River paper mills accept liability or are found liable through court proceedings, and if they are required to contribute funds for the long delayed cleanup of the river, it will almost certainly have a direct impact on property tax payers.

This is particularly so if the POTW insurers successfully limit or eliminate their potential liability. This likely option would be in their economic self-interest as demonstrated by their success when they battled the paper companies along these lines.

That little bit of obvious bad news seems to have given Fox River governments a serious case of shut mouth. Apparently, local officials, mindful of the mighty wrath of the Wisconsin Taxpayer, have kept this issue terribly quiet, although news stories have leaked out and disappeared on the subject over the course of the past decade.

An adverse result could be devastating for the financial health of the cities involved. Taxpayers would have to fund at least $40 million to make up for the difference in the funds allotted by the paper companies and their insurers for the cleanup.

Thus far, the State of Wisconsin Department of Natural Resources has emphasized that “the municipalities are not responsible parties,” in the words of Bruce Baker, deputy administrator for the DNR.

However, six paper companies, the DNR and the Environmental Protection Agency huddled in Washington in early October to hammer out some sort of deal that would allow the cleanup of the river to begin as expected next year.

Because of the complex negotiations involving hundreds of millions of dollars and a wide net of potentially responsible parties, including the municipalities that handled paper mill sewage, parties are disinclined to – or forbidden to – talk, even to the taxpayers.

Options for the communities to recoup or to pay for their potential share of the cleanup are few, and would vary according to circumstances.

Property taxpayers could pay a special assessment for the cleanup, sewerage treatment customers could pay increased fees or levy capital charges, municipalities and sewerage districts could issue bonds, which of course would be paid by taxpayers, or the municipalities and sewerage districts could seek wastewater funding sources, like those available from the state of Wisconsin.

Even there the picking is slim, with the best one probably being the Clean Water Fund Program (CWFP) of the DNR.

This program offers about $300 million annually for regular loans. No single applicant may receive more than 35.2% of the available subsidy each biennium.

The funds are available on the basis of a competitive environmental priority screening system.

This makes things look pretty good for the Fox River area, if the goal is to come up with funding rather than face the threat of suit from the paper companies.

It is interesting that as this issue is coming to a head that there has been so little awareness of the liability of municipalities. However, the stories are carried in the Fox River newspapers, and have been for years. They apparently don’t percolate to Milwaukee or Madison.

On January 15, 2002, the Appleton Post-Crescent headline read “Fox River legal quagmire threatens to soak cities … Taxpayers could become liable in cleanup process.”

The story envisions what might happen in the event the cleanup of the Fox River were undertaken as a Federal Superfund case, rather than if undertaken as a State of Wisconsin negotiated settlement between parties.

A study of Municipal Liability appeared in the Seton Hall Legislative Journal, and it provides a clear and succinct argument that under Superfund, the Privately Owned Treatment Works indeed would face considerable liability for their actions. It also outlines several alternative scenarios for municipalities to raise funds for their potential liabilities, and is the sort of document that should at least be studied and debated openly, which is not happening now. It is time for the elected officials in the Fox River communities to openly and accurately tell their constituents the liability they face for their role in the pollution of the river and of Green Bay.