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Friday, June 19, 2015

The $170 Million Dollar Washington/Ramsey County Plan to Take Over Private Sector Garbage Processing

3-8-16: Washington/Ramsey County Garbage Processing Plant, 6 Months In; Failing? Counties Refuse to Answer.

9-22-15 update:
The County board passed the plan to begin organizing "waste designation" which is a county ordinance to force trash haulers to deliver to only the county run processing plant  p.272 of 9/22/15 board meeting (yes commissioner Kriesel voted in favor of it and the rest of the purchase package at the 9/22 board meeting. Just going to show his vote on 8-30 over cost concern was purely political pandering. 
See approval of 9-22-15 County board minutes at the October 20th board meeting.)
Even environmentalist are being ignored and lectured to. Check out Alan Muller: 

Here's where garbage is burned from Washington County:
In Red Wing and in Mankato. Local environmentalist and writer Alan Muller did the math and found over 3 million tons of the most harmful pollutants are put into the air every year from this according to the MPCA. No wonder why this harmful practice is being phased out everywhere... except here. The County weighed no other option and jumped in both feet with this:

8-30 update: The board passed the plan with the buyout of Newport plant for a slightly reduced price of $24.4 million instead of the supposedly "binding" $26.4 million from the two year long arbitration battle in court. RRT and their financier Merced Capital have not responded to state how this was possible. The vote passed 6-1 with Washington County Commissioner Gary Kriesel being the only no vote. Aside from his vote here and on May 28th he's never voted against the plan before ie: funding the over $1.8 million (latest figure) to pay for planning the buyout. Kriesel is up for election in 2016 and always campaigns that he's a fiscally responsible with tax dollars. Also note County Debt has Tripled under Commissioner Kriesel's term with not a word, let alone a plan to do anything but apparently kick the can down the road. So be cautious to interpret these votes as anything more than political pandering. 
Kriesel has not responded to to inquiry regarding these votes for us.

Also don't forget the real cost of the facility has many strings attached: ie:
***Upfront cost: before anything can begin the RRF needs immediate facility improvements ($6.65 million) to replacing aging equipment and pay for basic renovations. (Under the RRPB document Titled Achieving the Scope through Public or Private Ownership under "Financial Analysis of Options" p. 31 of adobe file)***  (posted this in The $170 Million Dollar Washington/Ramsey County Plan to Take Over Private Sector Garbage Processing)

In June you were informed about the May 28th 7 to 2 vote of the Washington/Ramsey County Resource Recovery Project Board (RRPB) decision to proceed with the take over of garbage processing. That Part 1, article explained a brief history on the Newport Resource Recovery Facility (RRF) that is likely being bought out for $26.4 million tax dollars and the Counties plan to invest in this declining 80s technology. They believe a rebound in trash incineration will occur if they end hauler rebates and replace with a County hauler mandate to deliver garbage to it. 

This plan relies on ignoring the constitutional right of haulers to deliver to Wisconsin to avoid this new costly plan. Yet the Counties plan to watch it all play out as another wonderful Government program. This part 2 piece will elaborate on this plan and explain it's true $170 million dollar price tag.

Picking up where we left off, the Counties have a bold $170 million dollar three phase plan called "the Scope". It all hinges on a presumption it can succeed where the private sector has failed for the last 28 years despite the multiple owners the facility has had over the years. 

***Upfront cost: before anything can begin the RRF needs immediate facility improvements ($6.65 million) to replacing aging equipment and pay for basic renovations. (Under the RRPB document Titled Achieving the Scope through Public or Private Ownership under "Financial Analysis of Options" p. 31 of adobe file)***

The Timeline:

1.) The base plan 2016 (Scope cost not included): to make the Newport facility not only self sustainable (never been done), but also pay for it's own $26.4 million dollar facility in addition to the $21.6 million dollar yearly running costs (p.20 of the May 2015 Newport Facility Operating Costs Estimate)

2.) The base plan 2018 (Scope cost not included): Not only pay for the Newport facility ($26.4 million), running costs ($21.6 million/yr), but also do it all without subsidizing haulers with rebates as it has always had to motivate delivery of trash (last year $8.4 million/yr). "Hauler rebates are needed in the first two years of public ownership until designation takes effect, and then are no longer needed." (Under the document Titled Achieving the Scope through Public or Private Ownership under "Financial Analysis of Options" p. 32 of adobe file)

3.) The Scope 2016 and beyond (pictured): The complete $170 million dollar plan to massively expand the "waste to energy" facility through the "Scope for Resource Management" (previously adopted 9-2014, see source below*). (The $170 million dollar total was calculated by Eureka Recycling in their article titled "Say No to Newport")

 "Phase 1" is immediate and implements "Source Separation" This increases the annual operating expenses by $3.3 million at the Newport facility (p. 18 of Life Cycle Financial Analysis).  With a massive capital start up cost of $47.1 million tax dollars to pay the 20,000 businesses and the assumed 30% of residents who will set up the system. Total annual running cost for promotion and management is $6.1 million! *(p.6-7).

 "Phase 2" is in 2016 implementing Mixed Waste Processing (MWP) with the construction of a processing facility ($12.7 to $19.7 million) able to add sorting ability to the Newport Facility by 2018. Running cost is $5 to $7 million/yr. Predicted decrease in incinerated waste by at most 5.9% *(p.8-9)

 "Phase 3" is  in 2018 for "Gasification" which has an unknown cost because no public facility in the United States is operating (if that doesn't tell you all you need to know). They also were unsuccessful to find a publicly funded Gasification facility efficient enough to source worldwide. They reached out to eight companies in America that possess the ability to build us a Gasification system to turn waste into bio-fuel and only one responded to the question stating they're not interested (p. 17 of Summary of Responses to Request for Expression of Interest) For any cost estimates the Counties conveniently assume a private company is going to pay for and build a Gasification plant at their cost and risk and then pay $3.7 million a year to the Counties for processed garbage (see Alternate 1 - Procesing and Gasification - Summary). 

6-23 clarification: Yes, only one company responded to the "question" in the September 2014 
Request for Expression of Interest for:
"The RFEI was sent to eight (8) potential providers of MSW gasification technologies. Foth followed up with the potential vendors to determine their interest, one of which (Fulcrum BioEnergy) indicated that the Project Board’s opportunity was too small for them to consider and did not fit their business plan. " [emphasis added]
Experimental small scale technology is what the Counties are banking everything on to phase out incinerating trash. 

*These approved steps were adopted by RRPB on 9-25-14 from the Joint Staff Committee meeting from 9-18-14

Assuming all the stars align for this approved three phase plan the price tag skyrockets from the publicized $26 million dollar cost to over $170 million dollars when you account for capital costs and interest. ie: the $26 million for the Newport facility actually costs tax payers $40 million dollars when taking till 2030 to pay off the loan (see Procesing Only (Base Case) - Summary)

As explained in Part 1, the haulers delivering waste to the Newport facility lose their rebate match incentive and are assumed willing to absorb the cost by force of a mandate.  Also reviewed is the problem with this plan being haulers have the constitutional right of interstate commerce to haul to Wisconsin to avoid the oppressive increased cost. Currently 36,000 tons of the 400,000 tons of MSW produced in the Counties is sent out to Wisconsin according to a September 17, 2014 letter to the Counties from their lawyers. This waste is only recorded from Advanced Disposal delivering to their landfill in Eau Claire Wisconsin. 

It's plausible to think other major waste haulers like Waste Management will also transfer MSW out of State to compete with Advanced who's tipping costs are around the current market average of $50/ton. The Newport Facility currently charges $86 a ton 

It will be an obvious choice for the thousands of residents and dozens and dozens of housing associations in the Counties who will cost compare on what company to use. 
That is: 
A.) Advanced Disposal who is able 
to keep their rates flat being unaffected 
by the sudden 50%+ increase in 
tipping fees caused by the mandate to 
use the Newport facility. Doing this by 
hauling to their Wisconsin landfill.
B.)Their current hauler who chooses 
to comply with the mandate and pass 
the 50%+ increased tipping fee cost 
on to their customers.

The Counties are aware of this massive $30+/ton difference in tipping fee so they came up with a wildly low number of just $65/ton to process waste. They reported this to haulers to soften the difference to avoid haulers from justifying transferring waste out of state for a tipping fee of about $50/ton. 

One massive problem with this wild $65/ton claim: None of the 5 remaining public owned facilities in the State have been able to run at such wildly low tipping fee without taking on hundreds of thousands a year in losses:

Minnesota 2013 Public Facilities Tipping Fees: *(according to the RRPB Feasibility report)
*Olmsted Waste to Energy Facility (OWEF).............  $83/ton (losing a $1 million/yr)
*Perham Renewable Resource Facility..................... $100/ton
*Pope-Douglas Resource Recovery Facility............ $ 82/ton
*(closed in 2014) Red Wing Solid Waste Management ..... $72/ton (was losing $500,000/yr)
Polk County Resource Recovery Plant .............. $83.64/ton in 2014 (p.46 of Todd Co report)
*Hennepin Energy Resource Co. (HERC).......... $60/ton (loses $1.8 million/yr)    

So either the haulers are going to get slammed with increase tipping fees just like the other government run RRFs or the Counties are refusing to realize their scheme will not only be unable to pay for itself, it'll run massive debt. Leaving tax payers to not only pay for the yearly losses of the Newport facility; but also be stuck paying the $170 million dollar debt. 

The Ramsey/Washington County Resource Recovery Project Board appears to be: 
-Down playing the true cost of the buyout 
-Over playing the ability to operate and pay off debt at just $65/ton revenue  
-Completely disregarding the hauler's right to deliver out of state. 
-All while claiming this 80s technology of incinerating trash is what's best for the environment despite clear evidence of the contrary.

Contact your legislators: 

Ramsey County Commissioners:   651-266-8362 651-266-8356 651-266-8360 651-266-8364 651-266-8361 651 266-8365 651-266-8363

Washington County Commissioners: 651-430-6211 651-738-2425 651-430-6213 651-430-6215 651-430-6214