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RESPONSES TO QUESTIONS RAISED REGARDING PROPOSED MATERIAL PROCESSING FACILITY JANUARY 15, 2013 1. What are the benefits of this proposal to the City? During the first year of operation the City will receive $163,756 in taxes, lease payments, and fees. This amount will increase over time. In addition, Casella will assume certain facility operating expenses now covered by the City. We estimate these savings at about $90,000. The total positive impact to the City’s bottom line will be in the range of $253,756. In addition, an underutilized city facility will be put to productive use and create 25 new jobs; the City will be guaranteed the best commercial rates for accepting and processing our recyclables; and Casella will assist in educational efforts and programs to increase recycling. 2. How large an area will be leased? The leased area will include about 3 acres encompassing the current shredder building and some surrounding land. It will not include any portion of the City landfill, the outdoor drop-off recycling area, or the gatehouse, all of which will continue to be staffed by City employees. 3. Will this involve the landfill? The landfill will remain owned and operated by the City. No materials will be accepted in the landfill from Casella’s operations. 4. Will single stream material come from out of state? All material will be from within the State of Maine with the exception of recycled materials recovered from processing at KTI’s facility in Lewiston. Proposed lease gives City right to audit and verify sources. 5. Will it affect MWAC’s ability to receive sufficient waste? Not directly. While recycling rates may increase as zero sort is implemented, this would occur naturally as more communities move to single stream recycling. The materials handled by Casella and other recyclers are already removed from the waste stream. Draft lease proposes that Casella exercise all reasonable commercial efforts to utilize MWAC for its residues. 6. How much residual waste will there be and where will it go? Casella estimates residuals (materials received at the facility that cannot be recycled) are estimated at approximately 7.5% of material received. At start, residuals will be roughly 1,500 tons per year. At capacity, this will increase to 3,000. Casella to use reasonable commercial efforts to utilize MWAC. ---PAGE BREAK--- 7. Will the recycling facility/landfill remain open to the public? What hours? Yes. The facility will remain open to the public with its current hours of 7:15 a.m. to 2:45 p.m. Monday through Friday; Saturday from 8 a.m. to noon. 8. How much truck traffic? Initially, 7 inbound and 4 outbound trucks are expected per day growing to 11 inbound and 8 outbound at capacity. The most recent data we have available on truck traffic in the area comes from 2011 counts on Plourde Parkway south of the Turnpike. That count showed 1,117 trucks per day. At startup, the additional trucks traveling to the City’s solid waste facility would increase truck traffic at that location by about at capacity by about 1.7%. While there may be fewer trucks on River Road, that road also carries truck traffic from Fed Ex and Estes Trucking as well as from construction related activity in the area. 9. Why shouldn’t the city take bids/issue an RFP Casella has existing municipal/commercial contracts that are sufficient to justify a facility in Maine. The only other such facility in Maine is Eco-Maine which still has capacity for additional material and is unlikely to be interested in a second location. Other companies are unlikely to be interested since they do not have existing single-stream contracts/volumes to justify such a facility. 10. How is the City protected against lawsuits by Casella The lease includes dispute resolution provisions that require mediation and arbitration as alternatives to court action. Should the City be sued, the suit would be thrown out and directed to mediation/arbitration. Mediation and arbitration are both less costly and less time consuming. In addition, the a City Development Corporation has leased land for the KTI operation on Plourde Parkway for twelve years without disputes or court actions. 11. How will hazardous waste be handled While relatively little hazardous material is found in single-stream recycling, what is found will be handled in accordance with state and federal rules and regulations, will be segregated and appropriately stored, and disposed of in an appropriate manner. 12. Casella is anti-competitive and seeking a monopoly At the moment, there are a number of firms that are able to contract for recyclable collection. There are currently two organizations that provide sorting capabilities – Eco Maine and Casella. This agreement is unlikely to change this. 13. Instead of single stream, can the City make more by separating? At the time the City moved to single-stream, a full financial analysis was undertaken. It showed that the City would save approximately $40,000 per year by moving to this method, assuming that no revenues would actually result from the sale of these materials. These savings were realized during the first full year of operation. In addition, the City received $48,595 in revenue during FY12 and has received $957 so far ---PAGE BREAK--- this year. While the market has declined, the City’s agreement precludes us from paying anything for recyclables, even under poor market conditions. While higher revenues are possible if a community separates materials, the cost of doing so is higher, especially if the cost of capital equipment, such as bailers, is included. It is generally recognized that single stream is less expensive due to savings in costs to collect the materials and reduced costs to process them for reuse. In addition, the City experienced a 35% increase in material recycled during the first year of single stream. During the first quarter of the second year, we experienced a further 15% increase. This reflects both an increase in the acceptable materials and the ease offered to residents through this method of recycling. 14. Zero sort material is contaminated and has lower market value Improvements in automated sorting equipment have largely eliminated this problem. In addition, end users have established quality standards that must be met for such materials. Automated pre-sorted systems meet and exceed the required standards and are often of similar quality to curb sorted/processed materials. 15. How will environmental liability be handled? To establish a baseline on the property, a Phase I environmental analysis will be conducted at Casella’s cost by a company approved by the City. If there are problems identified, a Phase II may be undertaken. Environmental liabilities are assigned, by lease, to Casella. In addition, we anticipate few issues given the limited hazardous waste likely to come to the facility. 16. Westbrook is against the proposed Casella transfer station – we don’t want municipal solid waste brought here. Westbrook has approved the transfer facility. In speaking with Westbrook’s City Administrator, they are pleased with the project and have a good working relationship with Casella. Casella will accept only those recyclable materials specified in the lease. This does not include traditional municipal solid waste. 17. Casella has a track record of landfilling recyclables The City’s lease authorizes us to review not only records relating to the origin of the material, but records on the locations to which it is shipped. 18. Considering the city has firsthand knowledge in dealing with Casella as a corporate citizen given KTI’s operation in Lewiston, what has its track record been? The property on Plourde Parkway was originally leased by KTI in November 1985. The lease was for 30 years. The land was originally owned by the City but subsequently transferred to South Park Corporation. The South Park Development Corporation was founded in July 1986 to develop an industrial park near what is now Exit 80. Its founding principals were to provide fully serviced development sites for the purposes of promoting orderly growth, accommodating the diversification and expansion of the City of Lewiston industrial base, and providing increased employment opportunities. An independent board was created to manage the affairs of SPDC. ---PAGE BREAK--- Casella acquired KTI in 1999. The lease was revised and update in 2010 in recognition of a significant investment on Casella’s part to upgrade and update the installation. Casella has met all of its obligations under the lease to date including the required investments and improvements to the property. KTI provides the City of Lewiston with approximately $120,000 per year in disposal benefits for bulky and wood waste. For the current tax year, Casella/KTI pays $43,060.27 in real estate tax and $18,366.35 in personal property tax. They have two trucks registered in Lewiston that had excise tax of $750. Their current lease payment to South Park is $2,498.57, or roughly $30,000 per year. This represents total revenue to the City/South Park of more than $92,000. 19. After the building is built what negative consequence could occur if Casella goes out of business? Should Casella go into bankruptcy, it would constitute a default of the lease which would give rise to several alternatives depending on the actual circumstances. If there is a mortgage on the lease, the mortgage holder or its nominee would have the right to enter into a new lease with the City under the same terms and conditions as the lease with Casella. If a mortgage holder forecloses on Casella’s interest in the lease, they would assume the responsibilities of Casella under the lease and would have the right to assign the lease to another party with the City’s consent. Absent a mortgage, a default would occur and the City would have access to the proceeds of a bond posted by Casella. That bond would be in the amount of $500,000 for the first two years of the lease and $225,000 starting in year three, with the amount of the bond adjusted annually based on a formula tied to the change in Gross National Product. Note that the City has not directly invested in this proposal nor has it provided any financing or tax breaks to the company. At worst, we would retake control of the property and have access to the bond to address any City costs in doing so. Under the assumption that there is a sufficient market to justify the facility, it is also possible that another operator may express interest. If not, the City would then have the property back and could use it for whatever purpose we wished. 20. What costs might the City incur under this proposal Should this lease be approved, some changes will be required at the Solid Waste Facility. To accommodate relocating certain materials from the existing building, primarily sheetrock and municipal solid waste delivered directly to the facility, construction of a cover over a portion of the outdoor recycling area will be required to ensure that these materials remain dry. Alternative arrangements will have to be made for winter storage of certain mowing and summer use equipment now stored in the existing building. We estimate that the worst case costs associated with these changes is $310,000 if a cold storage building must be built. Of this, $140,000 is available in bond funds issued for solid waste facility improvements for projects that have either been completed or which will no longer be needed. An additional $40,000 is available from other bond funds remaining after projects have been closed out. The remainder can be covered through available economic development funds and/or the first year lease payment of $67,656. I would note that the worst case cost estimate should be recovered by the City in approximately 15 months through revenues from Casella and expenditure reductions associated with the facility that will be leased.