Audit official confirms net cost of proposed waste-to-energy plant

‘No-cost’ contract with Anaergia to build facility comes into questiond

March 16, 2016

By MELISSA TANJI “ Staff Writer (mtanji@mauinews.com) , The Maui News

WAILUKU - Officials with the company that conducted the audit on the county's Solid Waste Division said Tuesday that they would be "hard pressed" to find the $1 million a year in cost savings the county says exists in a proposed waste-to-energy project.

The audit, commissioned by the Maui County Council and released a week ago, found that the Anaergia Services project would actually cost the county $835,000 more annually than current landfill operations. The county had anticipated a $916,500 per year savings in its analysis of the project.

Phillip Kowalski with CB&I Environmental and Infrastructure, which conducted the audit, reaffirmed those assessments at a meeting before the council's Budget and Finance Committee in Council Chambers on Tuesday morning.

With the audit's conclusions showing an expenditure rather than a savings, council Budget and Finance Committee Chairman Riki Hokama said last week that he questioned the authority of the administration to sign off on the project, especially "with large cost implications." The waste-to-energy agreement was proposed by the administration as a "no-cost" contract, so there was no legal need for council approval, he said.

Exactly what would happen next was unclear. The committee deferred action on the audit with future discussions to hopefully include officials with the Department of Environmental Management.

"Chair Hokama and staff will also look at how this will play in the fiscal year 2017 budget deliberations," said Kit Zulueta, Office of Council Services communications director, in an email Tuesday.

The contract with Anaergia was executed in January 2014 and calls for Anaergia to build a waste-to-energy facility at the Central Maui Landfill. The contract calls for Anaergia to divert 85 percent of incoming general waste and 65 percent of construction and demolition waste from the landfill.

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 audit justified the six positions requested by the Solid Waste Division. The council approved two positions that budget year and the remaining four positions the next year.

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

Council Member Gladys Baisa asked the officials from CB&I if the contract with Anaergia was a "good idea?"

"In politics, we dance around a lot of stuff, I don't have time for dancing. I have nine months left on this council. What's the answer?"

In response, Kowalski told Baisa that the auditors were tasked with researching two questions - finding out if the personnel and funding authorized for the Solid Waste Division in fiscal 2015, which ran from July 1, 2014, to June 30, 2015, were sufficient to meet regulatory compliance and whether the waste conversion and energy project would result in a net cost savings to the county compared to current operations.

"I think we are clear in our conclusions. We believe the project will result in net cost and not net cost savings to the county," Kowalski said.

"There are some potential benefits with this project in terms of increasing (waste) diversion," Kowalski added.

As for Baisa's question, he said the audit provides data and recommendations but in the end, "we don't formulate the final policy."

Arun Sharma, president of Anaergia Services, said Tuesday afternoon via phone from San Diego that he couldn't comment too much on the audit because his company was not involved nor was it asked for information. He said the company would have provided information if asked.

He did point out that the $835,000 in additional costs the county could incur per the audit is about "2.3 percent of the solid waste budget." The "only alternative" to the Anaergia project would be for the county to turn to its Integrated Solid Waste Management Plan, which the state required the county to develop.

Sharma said that if the county tried to implement that plan, it would cost 250 percent more than the current Solid Waste Division budget and not the 2 percent more or the $835,000 as forecast by the audit. Capital costs in the solid waste plan were $200 million.

"That would have been a very big number," Sharma said of the costs.

He said Anaergia could accomplish the same goals with its contract with the county. Sharma added that Anaergia "will support the county" in any way needed.

In response to a question by Hokama, Kowalski said there wasn't much data available on projects like Anaergia's nationwide and could not say how much savings could be realized based on broader data.

"It is very much an emerging technology or facility," he said.

The major monetary difference between the Department of Environmental Management's initial assessment of the benefits of the Anaergia project and the audit's analysis lie in the assumptions used to determine the cost and cost-savings of landfill space.

The department used $30 a ton as the cost of landfill space and put 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 detailed cost information on how the county came up with the $30 a ton value was not available from the department.

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 $13.47 a ton to $15.43 a ton, based on forms of financing, and used those figures - which significantly reduced the financial benefits of the Anaergia project.

CB&I is a nationally recognized solid waste consulting group and has 54,000 employees worldwide. It has experience in assessments of public solid waste systems and has completed solid waste projects in island settings. Officials from CB&I's Chicago office attended the council committee meeting.

* Melissa Tanji can be reached at mtanji@mauinews.com. © Copyright 2016 The Maui News. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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