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Audit: Cost for waste-to-energy plant is $835K

An agreement with Anaergia Services to build a waste-to-energy facility at the Central Maui Landfill, touted by Mayor Alan Arakawa to save Maui County nearly $1 million a year, will actually cost the county $835,000 more annually than current landfill operations, according to an audit by CB&I Environmental and Infrastructure.

Released Wednesday, the audit was commissioned by the County Council during the fall of 2014 when the council and the mayor were at loggerheads over a request for six new positions in the Solid Waste Division. The dispute led to reductions in trash service and landfill hours for a month.

“The analysis done by CB&I raises many concerns with the contract signed by the mayor,” said Riki Hokama, chairman of the council Budget and Finance Committee, which will review the audit Tuesday. “Instead of savings, the county may now see higher costs in the amount of $35 million over the 20-year life of the contract.

“Most important, I question the authority of the administration to sign off on such a project with large cost implications.”

The waste-to-energy agreement was proposed by the administration as a “no-cost” contract, so there was no legal basis for council approval of the contract, Hokama said in a news release accompanying the audit.

The county Department of Environmental Management selected Anaergia Services LLC after putting out a request for proposals for an integrated waste conversion and energy project. The contract between Anaergia and the county was executed in January 2014.

Anaergia would build a facility to sort and recover recyclable materials, an anaerobic digester to convert organic waste into biogas and a solid-fuel facility to turn solid waste into a solid-fuel product. The contract calls for Anaergia to divert 85 percent of incoming waste away from the landfill and 65 percent of construction and demolition waste. Also, the county committed to a “put-or-pay” agreement, in which the county commits initially to delivering a minimum of 125,000 tons of trash per year and will pay for any shortfall in tonnage.

The auditor, based in St. Charles, Ill., noted some ambiguity in the “put-or-pay” terminology in the contract that could end up costing the county money and recommended negotiations to clarify the terms.

At the heart of the difference between the Department of Environmental Management’s initial assessment of the benefits of the Anaergia project and the audit’s analysis are the assumptions used to determine the cost and cost-savings of landfill space.

The department used $30 a ton as the cost for landfill space and put the cost of the Anaergia project for landfill space at 20 percent of total trash volume – assuming that the project would divert 80 percent of the waste coming to the landfill.

CB&I said that “detailed cost information underlying the $30/ton value was not available” from the department. In its analysis, the auditor summed up the cost of four landfill developments in the department’s six-year capital improvement plan.

CB&I put that cost at $13.74 a ton to $15.43 a ton, based on forms on financing, and used those figures – which significantly reduced the benefits of the Anaergia project.

Arakawa took issue with the auditor’s lower figure.

“Unfortunately, the audit’s findings were skewed because the auditor refused to use the county’s evaluation of how much landfill space is worth,” he said in a news release Wednesday. “The county values each ‘hypothetical future landfill cell’ at $30 a ton, adjusted from $25.50 a ton for a reasonable rate of inflation.”

He said Hokama “seized upon” the lower figure “to insinuate” that the county’s waste-to-energy project would cost instead of save taxpayers’ money.

“The county will not be paying any more than if we were doing this waste-to-energy project ourselves,” said Arakawa.

He asked Hokama whether the county would be “ripping commercial customers off considerably” if it charges commercial operators $90 a ton to put garbage in the landfill when the cost for landfill space is only $15 a ton?

“Landfills are not just holes in the ground,” Arakawa said. “They need to be engineered to be environmentally sound, not to mention safe for public use, as well as staffed by qualified workers.

“The county asks that the council ponder the true cost of landfills, and what space there is worth, as they take a look at this audit.”

The mayor chose to highlight the part of the audit that justified the six positions requested by the department for the Solid Waste Division back in 2014. The council approved two positions that budget year and the remaining four positions the next year.

The audit said that even with the addition of six staffers “the higher level of staffing remains consistent compared to other public waste systems.” Operating costs for the Solid Waste Division “are generally consistent with other publicly operated systems.”

“Given the approved six positions and current funding levels, CB&I believes that the Solid Waste Division is positioned to operate its solid waste facilities to maintain acceptable levels of regulatory compliance,” the audit said.

The council had questioned why the additional staffing was needed when a significant staff reduction was anticipated with the Anaergia project, Hokama said.

It was not clear if the audit would help reduce the number of missed trash pickups and reduced hours at landfills. Council members were refraining from comment until Tuesday’s Budget and Finance Committee meeting at 9 a.m. in Council Chambers, a council spokeswoman said.

An attempt to reach Anaergia on Wednesday was unsuccessful.

CB&I was commissioned to examine the staffing issue and waste-to-energy contract. CB&I Environmental and Infrastructure is a nationally recognized solid waste consulting group with experience in assessments of public solid waste systems and has completed solid waste projects in island settings, Hokama said.

* Lee Imada can be reached at leeimada@mauinews.com.