The Camden County Pollution Control Financing Authority is set to pay off a $25.2 million incinerator debt to bondholders on Wednesday.
David Luthman, deputy executive director of the PCFA, said officials worked through the holiday weekend to obtain New Jersey agency approvals to use $18 million of restricted funds to make the $25.2 million payment. Those approvals included the blessing of the state’s Department of Environmental Protection.
“There were lot of people who spent a lot of time working through the Thanksgiving holiday and right through late [Monday] to make sure that everybody was on the same page to get the job done,” Luthman said.
The authority has about $5 million of unrestricted funds and will receive $2.1 million from the state to help make the Dec. 1 payment. PCFA officials will grab $18 million from several restricted funds and repay them over five years, according to Luthman.
The Dec. 1 payment is a final, balloon payment on the authority’s junk-rated Series 1991A bonds. The debt does not carry bond insurance and there is no government entity placing its guarantee behind the bonds.
Once the authority makes the payment, it will have no outstanding long-term debt.
In the past, the state has helped the authority meet debt-service costs. It has allocated $150 million to the PCFA since 1999 for such expenses.
Earlier this year, the state Treasury Department announced it would give $2.1 million to the authority in fiscal 2011 — far short of the $25.2 million payment. The fiscal year began July 1.
State officials urged authorities with incinerator bonds to refinance the debt as New Jersey reduces its support for their debt-service payments. The fiscal 2011 state budget includes about $16 million for principal and interest payments on solid-waste debt held by local authorities.
The internal borrowing between PCFA funds will not require Camden County residents to repay the incinerator debt.
“The PCFA has reached an agreement with the state that will result in no cost to the Camden County taxpayers, no liability on the part of Camden County to replenish the escrow funds, and no refinancing costs to the PCFA ratepayers that concludes the state’s failed solid-waste financing policies,” William Tambussi, a partner at Brown and Connery LLP and the authority’s solicitor, said in a statement.
“The PCFA will now work towards a fiscally sound solid-waste policy for Camden County unencumbered by the state mandated debt,” he said.
Fitch Ratings rates the Series 1991A bonds C. Moody’s Investors Service assigns a Caa1 with a developing outlook.
Standard & Poor’s dropped the incinerator bonds to CC from CCC on Nov. 12 and placed the troubled debt on credit watch with negative implications.
The Camden incinerator began operating in 1991, when the state mandated that solid waste must be disposed of within the same area that generated it.
A U.S. Supreme Court decision in 1994 and subsequent rulings prohibited that policy, which was known as flow control, thereby allowing cities and towns to take their garbage elsewhere.
The PCFA lowered its tipping fees — the charge for unloading or dumping waste — to compete with other incinerators outside of the county.
While that move retained Camden customers, it forced the agency to rely on the state to help meet debt-service costs.