Deal likely to turn trash into treasure

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OLD TOWN – The $26 million Casella Waste Systems Inc. will pay the state, which in turn will pay Georgia-Pacific Corp. for the West Old Town Landfill, is a drop in the bucket compared to the profits the company will make over the next 30 years.

“The $25 million they paid upfront – that’s serious money, but in the big scheme of things that’s not serious money,” said state Sen. Tom Sawyer, R-Bangor, who is the former owner of Sawyer Environmental in Hampden. “Had I known Casella was the only bidder, I would have put my bid in. It’s [running a landfill] not rocket science.”

The numbers indicate Casella’s revenues in west Old Town could total in the billions of dollars by the end of the 30-year contract.

A law passed in 1989 requires that all new commercial landfills be owned by the state, but the initial purchase and operation of such a facility is too costly for the state given Maine’s current budget crisis, according to state officials.

If approved, a Casella official said the West Old Town site is expected to receive one-half to two-thirds the amount of waste that the company’s Pine Tree Landfill in Hampden now receives. When the Hampden site reaches capacity, which is expected to happen in a decade, even more waste will be sent to West Old Town, according to Don Meagher, Casella’s manager of planning and development.

These figures do not include any future contracts that Casella may decide to enter into, including those now in the works with some southern Maine companies.

On a busy day, Pine Tree takes in 25,000 tons of waste. During the winter months that number is reduced to about 13,000 tons of waste a day because of the lack of construction debris. Dollar amounts for operating costs and revenue at the Hampden site are not made public, according to Meagher.

However, the Operating Services Agreement between Casella and the state for the West Old Town Landfill quotes tipping fees at $48 and $58 per ton depending on the type of waste. Those figures will be adjusted annually according to the going rate and changes in landfill law that would require adjustments to fees. These prices do not include waste disposed of by Georgia-Pacific, Lincoln Pulp and Paper or host communities that will receive reduced tipping fees as part of the deal.

According to Casella’s 2003 annual report, the company took in more than $420 million in revenues, had assets of more than $602 million and debts totaling more than $302 million.

“Over time, somebody is gong to make a lot of money over this deal,” state Sen. Edward Youngblood, R-Brewer, said. “They’re playing those numbers very close to their chest. This West Old Town Landfill has the capacity to be four or five times more profitable over Hampden. You’re talking big dollars over the next 30 years.”

State Rep. Matthew Dunlap, D-Old Town, said he didn’t “know the exact figures” but added Casella wouldn’t have jumped into the mix if there wasn’t “considerable benefit.”

The state is in the final stages of a three-pronged purchase deal with G-P and Casella, which has been hired to run the landfill if the agreement is approved.

The big hurdle in the plan is the Department of Environmental Protection amendment application that would allow the landfill to accept waste from sources other than the mill and to accept much larger amounts. The DEP decision, which Sawyer classified as “one of the lynchpins of the whole thing” should be made today. Public input lacking

The private manner in which the deal is proceeding has some local people concerned.

“I still wish there could be more public input,” Rep. Mary Cathcart, D-Orono, said on Monday. “I think it would have been better had they really had a formal public hearing months ago.” Cathcart previously admitted that she was not aware of how big a deal this was when she voted in favor of the landfill sale last year.

“I don’t consider it a backroom deal,” she said, but noted that it was definitely presented as a way to save 150 jobs at G-P.

The sales agreement between the state and G-P and the operating services agreement for the state and Casella both were signed Feb. 5. These agreements allow the state to take ownership of the G-P landfill and for Casella to operate it. If the plan is approved, G-P would reinvest $25 million to purchase a biomass boiler to reduce operating costs and another $1 million would be placed in an escrow account.

“I think it’s unfair that the state’s falling back on the fact that they didn’t have to have a public hearing because it’s only an expansion,” Youngblood said.

If it was anyone but the state who was proposing such a plan, they would have had to have a public hearing, Youngblood said.

“I feel badly for the people involved in this effort,” he said. “It’s unfortunate that these people won’t get an opportunity to be heard.”

State can’t take it over

Youngblood, who is a banker with Bangor Savings Bank, and Dunlap said despite the long-term potential for profit, the state cannot afford to run the facility.

“There really isn’t any money,” Dunlap said. “We’re cutting Medicaid and we’re making deep cuts in many, many programs. Plus, you still would have to have an operator. This is really where the private company would be better suited.”

“It would have been very difficult given the present budget difficulties to come up with [the $26 million],” said Youngblood.

In addition to the purchase price, Casella is paying considerably more, said Lee Umphrey, director of communications for the governor’s office.

“According to [consultant] Alan Stearns in the governor’s office: revenue will be created, but the operator is required to pay up front: purchase price, capital costs for capacity expansion, liability insurance, performance bonding and more,” Umphrey said in an e-mail interview. “The operator has a 30-year horizon to recoup costs and generate a profit. The state, similarly, would have had no ‘profit’ for 10 to 15 years, and would have had to have put [tens] of millions up front.”

In addition, part of the process required that the operator be qualified to run a landfill, Umphrey said.

“I talked with people in the administration and I expressed my concern that the state not be the owner and the operator; I don’t think it’s appropriate,” Sawyer said. “This way if you don’t like what the operator is doing you can fire them.”

State Rep. Joanne Twomey, D-Biddeford, said she is concerned about the amount of trash imported by Casella, which operates the Maine Energy Recovery Co. incinerator in her city. Twomey said she has actively opposed Casella for the last 10 years.

“The trash business is one that the state has buried its head in the sand over,” Twomey said. “We continue to truck out-of-state waste into Maine from Massachusetts, New York, New Jersey, Pennsylvania, Texas and on and on.”

Although some say Maine landfills should stop accepting out-of-state waste to save space and extend the life of existing landfills, Meagher previously has said that out-of-state waste is a necessity. Without it, he said tipping fees would be too costly for local towns and companies to be able to afford to use the facilities.

Casella needs more room

There is no way to determine exactly how much money Casella Waste Systems Inc. will make running the West Old Town Landfill because estimates of operating costs and expenses are not available. Sawyer said when he sold Sawyer Environmental to Casella in 1996, the company grossed $25 million.

Currently G-P pays between $1 million and $2 million in operating costs annually at the facility and another $2 million to $3 million every couple of years for expansion cells.

Casella’s 2003 annual report states the company has used profits to reduce its debts from $450 million in 2000 to $310 million in 2003, a drop of $140 million. During the same period, Casella has increased its landfill capacity from under 10 million tons to nearly 30 million tons.

“Our top priority is the addition of disposal capacity throughout our region,” said John Casella, chairman and chief executive officer, in his letter to shareholders dated Aug. 15, 2003.

Casella reported revenues of $112 million for the second quarter of its 2003 fiscal year, during December 2003. The fiscal year runs from July 1 to June 30. The company also announced it had an outstanding total debt level of $308.6 million.

Nobody wants a landfill in their back yard, Dunlap said, but the truth is the landfill is needed.

“The state’s interest is really having a safe, environmental landfill to dispose of municipal solid waste,” said Dunlap. “The point is the landfill is there and it’s not going anywhere. It’s a valuable asset and G-P is going to sell it, whether they sell it to the state or another company.”

Dawn Gallagher of the DEP is expected to make a decision on the amendment application today. A public information session will be held from 3 to 8 p.m. Tuesday, Feb. 24, at the Ramada Inn on Odlin Road in Bangor. People will have the opportunity to ask questions and express concerns to representatives of DEP, Maine Department of Transportation, the State Planning Office, Georgia-Pacific and Casella.