Ignore the facts. Incinerator deal plowing forward

Here are three key paragraphs from the Lancaster Sunday News article: “County waste authority might soon close deal to buy Harrisburg incinerator.”

1) “In February, ratings agency Moody’s warned LCSWMA that its credit rating could see a ‘multiple-notch ratings change’ if it bought the incinerator. Citing the troubled history of the facility, which included a botched retrofit in the early 2000s, the millions in debt generated and the incinerator’s toxic public reputation, Moody’s fretted about ‘potential heightened risk’ in buying the incinerator.”

2) ” ‘LCSWMA is not responsible for the Covanta loan nor is there any plan for us to pay it off,’ Warner said in an e-mail.”

3) “[LCSWMA Executive Director James] Warner also dismissed concerns about potential environmental problems on the incinerator site. In the late 1980s, both the state Department of Environmental Resources and federal Environmental Protection Agency raised the possibility of soil or groundwater contamination due to the disposal of ash on the site. However, in response to questions from one activist last year, a Pennsylvania Department of Environmental Protection spokesman said none of the waste buried on the site was hazardous. Last week Warner agreed, insisting there are ‘no hazardous waste liability issues.’ “

Concerning #2: Warner simply says that LCSWMA won’t be responsible for the Covanta loan or any plan to pay it off. Of course they won’t. But the Harrisburg Authority will use LCSWMA funds to pay off Covanta and other creditors.

Warner himself reported this to his board, as recorded in LCSWMA’s own minutes:

As NewsLanc previously reported, Warner told the board that the original $45 million sale price of the incinerator had swollen to $124, but that the total borrowing could reach $150 million, including “the subordinated debt to pay off the Covanta loan; that principal will likely only be due in 20 or more years which could be another $15 to $20 million, putting the total debt at around $150 million.”

Concerning #3: Jim Warner doesn’t cite any environmental study that has been conducted to determine the current toxicity of portions of the stored incinerator ash. Instead he quotes a “spokesperson” from the state government.

The Department of Environmental Proection recently released to NewsLanc a thousand pages of thirty years of DEP records critical of the stored ash.  See “DEP documents reveal long history of hazardous wste at Harrisburg Incinerator.” Nevertheless, Warner would have us believe, all that DEP has documented in the past is to be disregarded because “a Pennsylvania Department of Environmental Protection spokesman said none of the waste buried on the site was hazardous.” (See Bill Keisling’s rebuttle in “Comments” below.)

Concerning #1: Moody’s has it right. Unless the authorities are prepared to provide expert environmental and financial feasibility studies from reputable sources, LCSWMA will face a lowering of its credit ratings and bond underwriter and purchaser resistance. So far, there is no evidence such reports exist. (Remember the much touted “Feasibility Studies” in support of the Convention Center Project that didn’t exist either?)

Maybe the deal will close in September; maybe it won’t. If it does, don’t be surprised if the new bond holders receive some sort of state guarantee or the bonds are somehow purchased through a state contrivance.

Governor Tom Corbett needs $40 million for his 2014 re-election campaign. Creditors are owed $350 million, perhaps four times more than the value of the incinerator.

Does the governor allow Harrisburg to file for bankruptcy and have the matter adjudicated by a federal bankruptcy court, with the likelihood of current bond holders and other creditors losing a great portion off their investment? No.

Corbett pulls together a way to see that most if not all of the debt is paid off, thus not only earning the gratitude of the lenders (likely in the form of huge campaign donations) but also creating still another feeding trough for bankers, attorneys, consultants and others as up to $350 million of bonds from LCSWMA and others are sold (who in turn should express their gratitude with campaign contributions.)

It is all part of the same pattern: Don’t tax fracking natural gas extraction as do other states…receive millions in campaign contributions. Don’t prosecute Jerry Sandusky … receive hundreds of thousands in campaign contributions from Second Mile Foundation supporters . Now bail out the creditor for the $350 million, which otherwise is largely down the drain… help fund the 2014 campaign. Corbett didn’t invent the system for raising money but he seems to be perfecting it.

Then again, the bond holders can always look to the citizenry of Lancaster to cover losses through higher trash collection charges.

The sleights of hands aren’t yet over. Nor is NewsLanc’s coverage.