LANCASTER, Pa. — The public works agency that is buying the Harrisburg, Pa., incinerator could issue the bonds to pay for the purchase as soon as early November, its chief executive said.
"This is a big deal. If anyone can make it work, it's us," James Warner said Monday during a lengthy interview at Lancaster County Solid Waste Management Authority headquarters. "Our stakeholders are very supportive and gave us a vote of confidence in our ability to pull it off. It's a solid business plan."
The timetable, though, depends on the Commonwealth Court of Pennsylvania's approval of Harrisburg's recovery plan. Justice Bonnie Brigance Leadbetter has scheduled a hearing for Sept. 19 in Harrisburg.
Lancaster's purchase of the trash burner is a lynchpin of state-appointed receiver William Lynch's plan, called "Harrisburg Strong," to keep Pennsylvania's capital out of bankruptcy.
Bond financing overruns over the years to retrofit the incinerator have left Harrisburg, population 49,000, mired in $363 million in debt for the trash burner alone. Harrisburg's overall debt exceeds $600 million.
According to Warner, should Leadbetter approve the plan within days of her hearing, rating presentations and a roadshow will follow. Warner, who has run the agency for 18 years, envisions an early-November sale and a Nov. 18 closing.
Warner said he would not ask Moody's Investors Service to rate the bonds, replacing Moody's with Fitch Ratings.
He is still chafing from a Moody's warning in February that acquiring the Harrisburg incinerator could result "in a multiple-notch rating change." Moody's rates the agency's Series 2006 resource recovery system revenue bonds A3, while Standard & Poor's assigns its AA-minus rating.
"To say that we could be subject to a multinotch downgrade with no information available was a little uncalled for," said Warner.
Lancaster, whose namesake county abuts Harrisburg's Dauphin, expects to pay $131 million, although rising municipal bond interest rates could affect the pricing. Offsetting the price are $16 million it will receive in roughly equal amounts from the state, through a Redevelopment Assistance Capital Program grant, and a transfer from the Harrisburg Authority, which now owns the incinerator.
That $16 million will enable Lancaster to make needed capital improvements over the first five years of ownership. It plans $43 million of capital improvements over the 20 years.
"We have a tremendous record of successes and wins," Warner said while leading a tour of headquarters. "We don't fail at stuff. This is a solid business plan."
Warner pointed to 20-year contracts with Dauphin County and the City of Harrisburg — both include "put or pay" clauses — and a 20-year agreement for the state to purchase electricity generated in Harrisburg, all adding up to guarantees for 82% of revenues for the project. The remaining 18%, he said, is priced "very conservatively" in the model.
Proceeds of a government-to-government sale of electricity, he added, will not be subject to an alternative minimum tax.
Combined, the 20-year waste delivery agreements with Dauphin County and the City of Harrisburg, plus the electric contract, guarantee 82% of revenues for the project, Warner noted.
Covanta Energy operates Lancaster's home facility across from Franklin & Marshall College as well as the Harrisburg incinerator, which Lancaster will rename the Susquehanna Resource Management Complex.
"That's crucial," said Warner. Covanta took over the Harrisburg trash burner after the original contractor, Barlow Projects Inc. of Colorado, went bankrupt.
Lancaster has coveted Harrisburg since 2008, according to Warner. His need for an expansion facility coincided with Harrisburg's implosion, as incinerator debt spiraled from an initial $30 million bond issue. The agency also has a waste-to-energy facility in Conoy Township, and the Frey Farm landfill in Manor Township, both straddling the Susquehanna River.
Warner and the authority's board have undertaken several rounds of due diligence on Harrisburg's facility.
"We wanted to make sure it didn't take a crap a year after we bought it," said Warner.
Many parties still must sign off on Lynch's 357-page plan, including creditors.
Under the plan, major incinerator creditors Assured Guaranty Municipal Corp. — the bond insurer — and Dauphin County are pegged for haircuts of up to 30%, possibly more if bond interest rates continue to rise, although Assured and Dauphin could recoup on the back end, through a 40-year lease of the lease of parking assets, the other major component of the plan.
"In this business, nothing is a done deal," said Warner, who nonetheless senses the finish line. "I have 12 screws in my neck from making stops at the goal line," he said, referring to football injuries. "Now I see the goal line."