At the time of publication of “Does the proposed LCSWMA purchase of plagued Harrisburg incinerator make sense?” , NewLanc invited Jim Warner, CEO of the Lancaster County Solid Waste Management Authority, to comment by means of a Letter to the Editor.
NewsLanc inquired: “Perhaps the County Municipal Solid Waste Management Authority has secured an independent feasibility study. If they have, it should be shared with the public and critically reviewed by the Lancaster Newspapers immediately.”
It added: “And if the LCSWMA has not obtained a feasibility study from a highly reputable source, then breaks should be put on the deal and heads should roll!”
Warner called publisher Robert Field shortly after 5:00 PM on the day of publication and was highly agitated concerning why NewsLanc would asks questions that Warner considered negative.
When queried, Warner acknowledged that LCSWMA had not yet sought outside advice in analyzing the Harrisburg Incinerator investment but he said an engineering report would be conducted and submitted at the time they seek financing.
Field asked why the LCSWMA would want to arrange a purchase for the incinerator before performing an essential part of the ‘due diligence’ process. Warner responded that 25 years of successful experience is an indication that they are making a proper judgment.
Field, himself a veteran businessman, questioned whether a quarter of a century experience of disposing of refuge in Lancaster County prepared the LCSWMA for spending over $150 million for a long troubled incinerator in Dauphin County.
Warner responded that NewsLanc was projecting “a half empty glass” in raising the questions. He said that Field should have come to his office to discuss matters.
In his Letter to the Editor the following morning, “LCSWMA’s CEO: ‘No situation where Lancaster funds will be utilized’ , Warner states: “Most importantly, LCSWMA predicts no situation where Lancaster funds will be utilized to pay for operations or debt associated with the HMERRF. In fact, the HMERRF will provide a positive, annual cash flow. This positive business model assures stable tipping fees for Lancaster County and eliminates an increase in the foreseeable future.”
“Embarking on this regional initiative requires extensive due-diligence, as well as intensive operational and financial risk assessment—which LCSWMA has aggressively executed. We have performed a detailed financial analysis with independent, expert review; which will forge the contractual agreements that precede LCSWMA’s purchase of the HMERRF.”
Warner took umbrage at the notion to NewsLanc’s assertion that an Authority does not have to answer to other governmental bodies, such as the county commissioners. He pointed out that LCSWMA staff has to answer to its own directors!
Walter assured Field that the Incinerator was in good working condition and has been for the past two years. However, within two days, the Harrisburg Patriot-News published “Harrisburg incinerator may need millions in repair before sale”. It reported:
“ABC27 spoke with the head of the Harrisburg Authority Monday. He said there’ s no way around spending more money on the incinerator before it’s sold.
“The state receiver even talked about those changes in his plan “It is estimated that $5 million to $10 million in additional capital investment would be needed to bring the RRF (the incinerator) to peak operating performance,” he said.
“The Harrisburg Authority said the millions are necessary for capital improvement projects. They need to make upgrades to the ash land fill, air heaters, and the eighth stage turbine blade which allows them to generate more electricity.”
In his Letter to the Editor, Walter states: “Most importantly, LCSWMA predicts no situation where Lancaster funds will be utilized to pay for operations or debt associated with the HMERRF. In fact, the HMERRF will provide a positive, annual cash flow. This positive business model assures stable tipping fees for Lancaster County and eliminates an increase in the foreseeable future.”
Déjà vu the “predictions” by the Ted Darcus chaired Lancaster County Convention Center Authority during the final stage of approval of the Convention Center Project. In both cases, no outside feasibility studies from independent authorities were sought.
When the County Commissioners took it upon themselves to order the PKF feasibility study for the Convention Center, the study predicted the heavy losses which are occurring (the Convention Center Authority estimates about $1,500,000 in red ink for 2013.) The PKF study recommended downsizing or scrapping the project.
This is an example of what economists refer to as ‘Moral Hazard’. If Warner is correct, the LCSWMA will profit. If he is wrong, despite his promises, the Lancaster public will have to make up the losses through higher waste disposal fees. The public losses could equal or even exceed that from the Convention Center Project.
The LCSWMA has absolute authority in this matter. But it also has a moral obligation to the community to secure valid outside analyses of both the current condition and long term viability of the historically trouble-plagued Harrisburg Incinerator, as well as the economic feasibility of the acquisition.
As Field reminded Warner when Warner was touting his 25 years of successful management, “Pride cometh before the fall.”