Covanta Incineration Deal Discourages Rival Recycling Programs

- Kath­leen McLaugh­lin, August 4, 2014, Indi­anapo­lis Busi­ness Journal

The city of Indi­anapo­lis faces finan­cial penal­ties if it launch­es alter­na­tive recy­cling pro­grams, under a pend­ing deal with incin­er­a­tor oper­a­tor Covanta.

The Indi­anapo­lis Board of Pub­lic Works will vote Wednes­day on an agree­ment that’s worth more than $112 mil­lion in rev­enue to Cov­an­ta, which would become the city’s main res­i­den­tial recy­cling provider for the next 14 years.

Cov­an­ta is propos­ing to build a $45 mil­lion recy­cling facil­i­ty next to its incin­er­a­tor on Hard­ing Street. Under the deal nego­ti­at­ed by Repub­li­can May­or Greg Bal­lard’s admin­is­tra­tion, the city would con­tin­ue to send all house­hold waste to Cov­an­ta, but the com­pa­ny would pluck out recy­clables and sell them on the com­modi­ties market.

Com­pa­nies that rely on recy­cled goods oppose the deal because they say Covanta’s facil­i­ty would gen­er­ate sub-par mate­r­i­al for their indus­tries. But the Depart­ment of Pub­lic Works says it’s a way to boost the city’s over­all recy­cling rate with­out requir­ing res­i­dents to sign up for a sep­a­rate curb­side service.

Curb­side recy­cling is cur­rent­ly avail­able for an addi­tion­al month­ly fee through Repub­lic Ser­vices, but par­tic­i­pa­tion is low.

Democ­rats on the City-Coun­ty Coun­cil want the city to pur­sue oth­er alter­na­tives, but that would be impos­si­ble under terms of the Cov­an­ta deal, which were made avail­able to the Board of Pub­lic Works on Friday.

The agree­ment pro­hibits the city from launch­ing new recy­cling pro­grams, and it pro­vides that Cov­an­ta could receive $333,333 a month in liq­ui­dat­ed damages.

“In oth­er words, if a future admin­is­tra­tion wants to switch to a bet­ter recy­cling pro­gram, it will have to pay off Cov­an­ta to the tune of $4 mil­lion per year,” Fred Bieseck­er, gen­er­al coun­sel to the city coun­cil, said in a memo to Demo­c­ra­t­ic Coun­cilor At-Large John Barth.

The major­i­ty of the mem­bers of the Board of Pub­lic Works are appoint­ed by Bal­lard. The pan­el is expect­ed to approve the Cov­an­ta deal Wednesday.

Barth acknowl­edged that the coun­cil has no author­i­ty over the Cov­an­ta con­tract. He com­plained that terms of the agree­ment weren’t known when the Board of Pub­lic Works held a pub­lic hear­ing on the issue July 23.

“It con­cerns me that the whole process of agree­ing to this con­tract has been behind closed doors with no pub­lic input on the details of the con­tract,” Barth said.

The Depart­ment of Pub­lic Works didn’t respond this morn­ing to ques­tions about the Cov­an­ta deal.

Cov­an­ta spokesman James Regan said via email that, while the com­pa­ny is guar­an­tee­ing it will recy­cle 18 per­cent of the waste stream, “It’s in our best inter­est to do better—to recy­cle as much mate­r­i­al as possible.”

Bieseck­er also said the con­tract pro­vides a finan­cial dis­in­cen­tive for the city to sig­nif­i­cant­ly boost par­tic­i­pa­tion in the cur­rent curb­side pro­gram. The city will receive a cut of the rev­enue Cov­an­ta gen­er­ates by sell­ing steam pro­duced by its incin­er­a­tor to Cit­i­zens Ener­gy, but that could dimin­ish, accord­ing to oth­er terms of the contract.

Also under the new deal, the city could receive a share of Covanta’s recy­cling rev­enue. Carey Hamil­ton, exec­u­tive direc­tor of the Indi­ana Recy­cling Coali­tion, said the hur­dle pro­vid­ed in the con­tract is too high.

“Indus­try tells me the city will very like­ly nev­er see a dime based on the para­me­ters in the con­tract,” Hamil­ton said via email.

Here’s a break­down of key points in the contract:

* City will con­tin­ue to pay tip­ping fees, which are $30.04 per ton of trash in 2014. That would gen­er­ate about $8 mil­lion for Cov­an­ta, based on the city’s waste stream last year, which was 267,158 tons. The con­tract would last through 2028, mak­ing it worth at least $112 million.

* City will no longer have to meet a quo­ta to pro­vide 300,000 tons of waste.

* City will con­tin­ue to receive a share of steam rev­enue. City’s share will be 10.8 per­cent, if it deliv­ers at least 260,000 tons of trash. That share will increase or decrease 0.4 per­cent for every 10,000 tons over or under that min­i­mum. Steam rev­enue may be reduced fur­ther if curb­side recy­cling ton­nage exceeds the 2013 amount by more than 5 percent.

* Cov­an­ta must pull at least 18 per­cent of waste for recycling.

* City and Cov­an­ta will share recy­cling rev­enue after the sixth full year of oper­a­tion if 18 per­cent of the waste stream is recy­cled and Cov­an­ta receives $225 per ton (net of recov­ery costs) for the material.

* City will con­tin­ue to pay Covanta’s real and per­son­al prop­er­ty tax­es (as pro­vid­ed in ear­li­er agree­ments), not to exceed $4 million.