The nonprofit agency that handles solid waste for Portland and about four dozen other communities says it’s ready to eliminate a longstanding annual assessment and save the 21 municipalities that own it nearly $2.5 million in the fiscal year that begins July 1.
The proposal could cut trash disposal costs in half for the members of ecomaine, which burns trash to make electricity and separates and sells recyclables at its 26-year-old plant on the outskirts of Portland.
Ecomaine’s board will consider eliminating the assessment at a meeting Monday. The details will be reviewed and discussed at meetings this winter.
The proposal is based on an unusual turn of events for any quasi-governmental agency: Ecomaine is flush with cash. It has about $23 million in the bank and recently became debt-free, unlike many of its municipal owners.
Ecomaine’s newfound financial health already has enabled it to gradually reduce the annual assessments, as well as the fees it charges communities and private haulers to bring trash to the plant.
But with so much cash, questions are being raised about why the agency doesn’t return more of its surplus now to communities that must borrow money, and pay interest, to fund road repairs and other projects.
“Now that the debt’s paid off, they don’t need all that cash,” said William Downes, a financial analyst in Cape Elizabeth who consults nationally on biomass and waste-to-energy plants. “I can’t think of any business, anywhere, that has more than 100 percent cash relative to its operating revenues.”
Ecomaine says much of the money is set aside for a critical obligation: closing out the plant’s nearby landfill, where ash from waste burning is deposited. The ash landfill is expected to last until 2038 at least, but the general manager and board of directors have decided that the agency should strive to pre-fund the closure, rather than borrow money years from now.
“Why should residents of tomorrow have to pay for material we landfill today?” said Kevin Roche, ecomaine’s general manager.
HIGHER REVENUE BRINGS LOWER FEES
Contributing to ecomaine’s conservative approach is a troubled financial history, and questions about whether the state’s solid-waste policy will continue to favor incineration over landfilling.
Originally named Regional Waste Systems, the agency was formed in 1976, when Maine was phasing out old-style, polluting landfills. The waste-to-energy incinerator was built in 1988.
The agency suffered from poor management in its early years and fell $70 million in debt. A major reorganization led to the hiring of Roche in 2004, and the name change to ecomaine.
The turnaround is evident in ecomaine’s latest financial report. Cash from operations was ahead of projections, and power sales were among the highest ever. Ecomaine also was able to invest $4.8 million in capital improvements, after making a final debt payment.
Those developments paved the way for cuts that will have lowered assessments this summer by a total of 48 percent over four years, and reduced disposal fees by 20 percent.
“Our cash reserve policy provides that when our financial position permits it, our first priority is to provide financial relief to our owner member communities,” ecomaine’s management wrote in its latest financial statement.
That policy also reflects a reluctance to ask members to pay for some unseen, major expense in the future. “We need to be in a financial position so we don’t have to go back to the communities for any more money,” Roche said.
ANALYST SAYS TOO MUCH IN THE BANK
Unanticipated expenses could stem from a downturn in electricity rates, changes in the market for recycled materials or equipment problems that cripple the incinerator.
But in the view of Downes, the financial analyst, ecomaine is being too cautious. It has a captive market for trash disposal, based on contracts with cities and towns. If the plant suffered a major mechanical failure, he said, that risk could be covered by insurance.
Downes estimates that ecomaine could prudently operate with a cash reserve in the $5 million range, far less than the $23 million on hand. It could set aside $1 million a year toward the ash landfill closure and have enough in the bank, a quarter-century from now, to do the job.
“It’s an abundance of caution based on problems they had 10 years ago,” he said.
The United States has more than 85 waste-to-energy plants. Most are privately operated so their financial details aren’t public. Downes said his review of audited financial reports for Maine’s two other quasi-public plants – Mid-Maine Waste Action Corp. in Auburn and Penobscot Energy Recovery Co. in Orrington – show that they maintain strong cash reserves, though far less than ecomaine’s.
Downe’s analysis isn’t being embraced by the ecomaine board.
“We’re in good financial shape, probably the best we’ve ever been,” said Michael McGovern, the board’s chairman and the town manager in Cape Elizabeth. “But we need to be stewards of what we do now, and stewards of what we do in the future.”
McGovern has asked the board to consider eliminating the annual assessments, which were established to secure debt financing. The matter will first be taken up by the board’s finance committee later this month.
BALANCING RESERVES, FEE-CUTTING
Eliminating the assessment in the next fiscal year would free up $480,138 for Portland, which pays about one-fifth of the annual assessment based on its trash tonnage. The smallest member, Pownal, could save $10,402.
South Portland would save $312,549. That money could help offset expected cuts in state revenue sharing, said City Manager Jim Gailey, vice chair of the ecomaine board. The city also pays interest on about $56 million in outstanding bonds, mostly for renovations at the high school.
Gailey stopped short of endorsing the proposal to eliminate the assessments, until he gets more details from ecomaine’s staff. His goal, he said, is to balance the desire to return money to cash-strapped communities with the need to save for ecomaine’s future expenses.
“You still need to have some kind of reserves for problems you may come into,” he said.
One project on the horizon is a facility to compost and recycle food waste and other organic materials that don’t burn well in the incinerator. Ecomaine has been studying whether the project, which could cost more than $6 million, would make sense, and what would be the best way to pay for it.
On a broader scale, Roche is keeping an eye on the state’s solid-waste policy.
Maine has been a national leader in using waste-to-energy plants to reduce the volume of trash and preserve landfill space. Four plants operated here until last year, when the Maine Energy Recovery Co. incinerator in Biddeford shut down.
Much of the trash that once went to Biddeford is now going to landfills, Roche said. The resulting competition is putting pressure on ecomaine to lower its rates to maintain the trash volumes it needs to generate power.
Roche is taking a special interest in a proposed law that would maximize the use of the state’s three incinerators and distribute money to encourage recycling and composting.
On a related note, ecomaine plans to launch a social media campaign next month featuring Spose, the Wells-based rapper perhaps best known for his music video “I’m Awesome.” The aim is to explain the benefits of waste-to-energy plants.
Tux Turkel can be contacted at 791-6462 or at: