Lewiston council to vote on 20-year contract on Jan. 22

By Hillary Lister

Don’t Waste ME

On Tuesday, January 22, the Lewiston City Council is expected to vote on whether to enter into a 20-year contract with Casella Waste, allowing the debt-ridden company to expand operations at the Lewiston Transfer Station on River Road.

In August, with little public notification, the council voted to enter discussions with Casella for a plan that was marketed as building a recycling center that would take in only Maine waste. On December 11, the city council held a work session on the proposed contract, providing more details on the plan.

According to City Administrator Ed Barrett, Casella would build a 4,000-foot expansion to the city’s shredding facility and lease the building and three surrounding acres for $60,000 a year. Out-of-state waste from Casella’s KTI Bio Fuels operation in Lewiston would be allowed in the proposed single-stream center.

Last year, KTI imported over 180,000 tons of waste from southern New England, most of which ended up in the state-owned, Casella-operated JRL dump in Old Town. JRL is only allowed to take in Maine waste, but thanks to lobbying efforts by Casella, waste that is “processed” in Maine facilities like KTI legally becomes Maine waste; therefore, it is allowed in the state dump.

According to Barrett, the Lewiston facility would only take waste from other Casella operations in Maine and would only take Maine waste. Casella’s proposal would send waste that couldn’t be recycled to Auburn’s MMWAC incinerator to be burned, and the ash would be sent back to Lewiston and dumped in the city landfill. It is unclear what definition of Maine waste is being used and whether the single-stream facility could take in out-of-state waste and “process” it into Maine waste, making it eligible to be dumped in the state-owned JRL landfill in Old Town.

The automated recycling process results in significant mixing of materials, many of which can’t be marketed. Representatives from Casella have told city officials that only 7.5% of the materials coming into the facility would not be recyclable. That is far below the figures from a national survey of 36 programs by Governmental Advisory Associates in Westport, Conn., which estimates the average residual waste rate among single-stream programs to be 16.6%.

One reason for the difference may be that waste companies often count any materials that are used as “daily cover” on landfills as recycling, instead of residual waste. By its own numbers, Casella’s operation is expected to produce an extra 3,375 tons of non-recyclable waste a year. At the rate of 16.6%, that number increases to 7,470 tons of waste added to Maine landfills.

At the August and December meetings, members of the public asked whether out-of-state waste that was contracted to be imported to Casella’s MERC incinerator in Biddeford would be sent to Lewiston following MERC’s closure this winter. Casella has been seeking approval to send that waste to Westbrook and Old Town, but it does not appear that either option will be approved and ready before MERC is closed.

Will Lewiston now end up with out of state waste that was going to MERC? In response to public concerns about Casella’s history of lawsuits and contract changes in other communities, Barrett emphasized that Lewiston would be free from these concerns since it would be leasing the property. That claim did not reassure audience members who pointed out that a significant amount of Casella’s operations are leased from cities or states. That has not stopped Casella from threatening lawsuits when it didn’t get its way, or from seeking major changes to the contracts and lease agreements to allow expansions at practically every facility it operates.

Casella started the year with a financial risk profile defined as “highly leveraged” by Standard & Poor’s, with over $594 million in adjusted debt and bonds receiving junk status ratings of CCC+. In November the bond rating improved slightly to B-, but S&P’s comment on Casella’s financial situation remained the same: “The outlook is negative.”

On December 3, shares of Casella Waste fell to their lowest price in more than two years, with a net loss to shareholders of $21 million in the quarter ending October 2012. $9.7 million of the loss was related to paying off debt, and makes up only a fraction of the hundreds of millions of dollars owed by Casella. Wunderlich Securities analyst Michael Hoffman called the company’s quarterly results “just plain ugly.”

That same day Casella announced the replacement of its President Paul Larkin with the company’s current chief financial officer Ed Johnson. No reason was given for the change of president, though there was speculation at the city council meeting that it may have had to do with insider trading and the fact that Larkin had sold 12,582 shares of Casella stock on July 10, 2012 at an average price of $5.24 a share, just prior to a sustained drop in value in following months.

On December 6, Casella acquired BBI Waste and Blow Brothers (“We’re #1 in the #2 Business”) for $20 million plus 625,000 shares of the company’s stock. BBI operates seven locations in Maine and New Hampshire and collects about 105,000 tons of waste that will now be going to Casella’s operations in Maine. In light of continued acquisitions and increasing debt, some are speculating whether Casella is setting itself up for government bailouts by trying to make itself too big to fail.

Lewiston insurance agent and investor Dan Mynahan spoke at length about Casella’s finances. “My major concern is Casella,” he said. “There’s fights every time these people get involved in a community. The stock is not doing well. They do not make money, they’re not on track to make any money in the near future.”

Mynahan pointed out that Casella’s debt at is financed at 11%, meaning they’re borrowing at distressed rates. He doubted the company would be able to refinance as planned in 2014.

Mynahan questioned the provision that would allow Casella to mortgage the leased property and equipment, pointing out that the lease is not an asset unless it’s worth a lot more than what’s being paid.

He also questioned if the city was truly getting a good deal leasing property in a high-value area near the turnpike, considering the costs of road maintenance and potential to discourage other businesses from locating in the area.

Mynahan asked city councilors to look at Casella’s credit, character and capacity. “This is a broke company, and we’re going to enter a 20 year partnership with them,” he said. “Marriages don’t last

20 years. This company does not have any net worth, none, zero, they are a bankrupt company. You have a company that has a deficit net worth of some $80 million. And it’s been that way: they haven’t made any money in years, they won’t. They had gross income of $26 million, they have $48 million overhead.

“Casella tried to get into the landfill,” Mynahan said. “We fought them off there. Casella is back. They’re not a good corporate citizen. Have they shown us their great character? They engage in litigation with almost every city they sign agreements with.”

Other members of the public raised questions about the company’s character, asking if the city could trust the company’s promises. Barrett mentioned that Casella was going to give employment preference to people from Lewiston and surrounding towns. This promise was questioned by an audience member who pointed out that companies cannot legally make promises to hire local workers without being subject to discrimination challenges.

Concerns were also raised about a provision allowing hazardous waste to be processed and stored temporarily on site, as well as the fact that there was no definition of how long “temporary” would be.

The public was assured that councilors would seek answers to these questions, and that the language of the contract was not finalized. When asked when a copy of the final contract would be available for public review, the city administrator replied that a copy should be available the week of the council vote.

Members of the community group “Don’t Waste ME,” which was involved with stopping Casella’s proposed takeover of the Lewiston dump in 2006 are attempting to get a copy of the contract by the January 8 City Council meeting. They expect that to be the last council meeting where members of the public will have a chance to speak on the subject, prior to the January 22 vote.

Auburn recently decided to switch from contracting with Casella’s single-stream program over to contracting with Almighty Waste’s dual-stream recycling program. Dom Casavant, chairman of the city’s Solid Waste Subcommittee, pointed out, “The problem with a single-stream program is that it renders most of the commodities recycled practically worthless,” due to mixing of glass with paper and cardboard.

The Almighty Waste contract would allow Auburn to see profits off the sale of higher value sorted recycled goods by keeping glass separated from paper and cardboard.

Auburn, like many towns across the country, is realizing it can generate income more income by sorting and selling materials through dual-stream recycling program than it can through single-stream.

Considering the realities of the recycling market and Casella’s financial distress, there seems little need for Lewiston to rush into a 20-year contract that could have major effects on how surrounding towns handle waste and recycling, deprive residents of Lewiston and surrounding towns any return from selling higher-value sorted recyclables, and make Central Maine the dumping ground for out-of-state waste.

More information available at: dontwasteme.wordpress.com.