Landfill plan would unite firms, public authority
William Tuthill Business Review Reporter
Two New England waste-handling companies are vying to build and operate a landfill in central Montgomery County, in partnership with the financially struggling local public waste authority.
The Montgomery-Otsego-Schoharie Solid Waste Management Authority is looking to bring in a private company to jointly run its waste management program as a competitive business, retire its heavy debt, and eliminate the need for ongoing subsidization.
The two companies, Waste Systems International Inc. of Lexington, Mass., and Casella Waste Systems Inc. of Rutland, Vt., have proposed building a landfill on one of three possible sites in the towns of Root, Charleston or Glen. According to their proposals, a large regional landfill, importing trash from outside the area, would turn a profit and bolster the ailing MOSA.
A third proposal, by Waste Management of New York LLC, said the market does not warrant building a new landfill, however.
The Root and Charleston sites have been proposed previously for landfills, but those plans have been held up by local laws prohibiting landfills. In fact, the principals of the company that proposed a privately owned landfill in Root in 1997 now have joined with Casella Waste Systems in its bid to partner with MOSA.
Opponents of privatization argue that a public-private partnership could give a private company the power of eminent domain, to get around local laws and zoning restrictions.
"A partnership would be private when it suits them, and public when it suits them," said Patricia Freund, a board member of Citizens Environmental Coalition in Albany, which has fought the construction of a landfill in Root.
Freund argued that corporate profit motives will conflict with the goals of good government. "It's just too dangerous," she said. "This is why government is a distinct entity."
MOSA officials dispute the claim that they are willing to give or sell the authority's government powers.
"There is no way that eminent domain can simply be given to another entity," said Gilbert Chichester, executive director of MOSA. "If there is a partnership, wherein the authority is a valid and viable player, it could be worked out where [the private partner] could use those powers to the benefit of the authority."
Privatization is not new in the waste industry, and has been welcomed in some places.
"It is working fairly well for us, by taking the risk out of the public domain," said Thomas Moreau, general manager of the public waste authority in Chittenden County, Vermont. The Chittenden Solid Waste District, which includes the city of Burlington, has contracted out certain functions to both Waste Systems International and Casella.
"We use the privates for their entrepreneurial skills and their speed of getting things done," Moreau said.
MOSA does not have an operating landfill. Five years ago it selected the Charleston site for such a facility, but those plans are on hold. The authority does own and operate five transfer stations to collect trash for disposal at a Rochester-area landfill run by Waste Management of New York, a subsidiary of Houston-based Waste Management Inc.
Waste Management, in its bid for a public-private partnership, only proposes to continue its current disposal contracts with MOSA. Richard Sturges, Waste Management's regional manager for community relations, said there is too much uncertainty in trash volumes to justify the expense of a new landfill.
MOSA is not considering Waste Management's proposal, however, because it does not provide a long-term solution to the authority's deficits, authority officials said.
This is the first concrete move toward a public-private partnership by MOSA, which currently does not handle enough trash to cover its expenses, and is operating with $26 million in debt.
A time frame for implementation of the proposed privatization has not been set, however, because the proposals have not been refined.
"The proposals do sketch out some of the specific points, but a lot remains to be worked out," said Chichester, the MOSA executive director.
Elected officials in each of MOSA's three member counties, who must approve a public-private partnership, are reviewing the proposals. The full MOSA board would have to act as well. "It's premature to look at any kind of a schedule," Chichester said.
Casella Waste Systems, through its wholly owned subsidiary Casella Waste Management of New York Inc., has expanded into the Capital Region in the last two years, mostly by purchasing rural waste-hauling companies. Like many companies in the rapidly consolidating trash industry, Casella is pursuing a "vertical" strategy--that is, controlling the hauling, processing and disposal of solid waste.
Casella has been watching the situation at MOSA for the last two years, said Steve Slater, director of acquisitions and special projects manager. "We have the financial capability and we thought it was a good fit," he said.
At the same time, Environmental Solutions, a solid waste engineering firm in Niagara Falls, has been pursuing building a landfill in the town of Root that would draw trash from a large region. When the plan was blocked by local ordinance, the company began exploring the idea of a partnership with MOSA.
Now the company's principals, John Battaglia and Robert Gerhard, have formed a joint venture with Casella in the proposal before MOSA.
The group has proposed entering into a long-term lease for MOSA's assets and taking over the operation of the solid waste system. The partnership also would pursue building a regional solid waste disposal facility in Root, Charleston or Glen, with the goal of getting the necessary permits within 24 to 30 months.
Battaglia, president of Environmental Solutions, said market studies have shown that a large regional landfill, with a capacity to take up to 3,000 tons of trash a day, is economically feasible.
The proposal by Waste Systems International outlines a three-year lease/purchase deal for MOSA's five transfer stations. During that three-year period, the company also would assist the waste authority with obtaining the necessary permits to build MOSA's proposed landfill in Charleston. If the landfill were built, the company would pay MOSA, with the total payments "not to exceed the then-outstanding balance of MOSA's debt existing as of today."
