Later this month, about a week before Christmas, Harrisburg should complete its sale of the facility that the journalist Paul Beers once called the “infernal furnace.”
The Lancaster County Solid Waste Management Authority (LCSWMA) will pony up somewhere between $126 and $132 million for it, helping the facility shed the $350 million or so in debt it accumulated over the years. The purchase will also, it’s hoped, help ditch the adjectives—“troubled,” “ill-fated,” “botched,” not to mention “infernal”—that have historically preceded its name.
In the meantime, though, those adjectives will continue to amuse employees like Guy Lefever, who started working at the incinerator in 2009 and has always known it as a functional facility.
“People come up here, and they’re blown away,” he told me one morning in late September. “They’re thinking it’s just gonna be a run-down building, and trash laying all over the place. And it’s not.”
We were standing a few dozen yards from an ash heap, where the scorched remains of solid waste from households in Pennsylvania and New Jersey arrive fresh from the burners all day. A couple of ravens scavenged for surviving morsels. The land around the incinerator is close to capacity, so a pair of trucks spends most days at this heap, loading ash onto haulers that will take it elsewhere.
Lefever, a solidly built man in a clean, blue dress shirt, with a doughy lower jaw like Bill Murray’s, starts many sentences with, “So basically,” in the manner of someone whose job often involves translating technical terms. “So basically,” he said, as we watched the vehicles work amid a thin cloud of ash, “the truck comes up, dumps it out, they spread it out, stockpile it, and then load these trucks to go out to the different landfills.”
According to Lefever, “troubled” is not the only misnomer attached to his place of work. The incinerator is also not technically an incinerator. Covanta Energy, its operator, prefers the term “EfW,” for “Energy-from-Waste,” although the amount of stock you put into this distinction probably says something about your industry. The Harrisburg incinerator achieves the “E” in “EfW” by using the heat from its burners to produce steam, which, in turn, powers a turbine, producing electricity. Nonetheless, some environmentalists have condemned incineration as a wasteful and hazardous method of dealing with trash.
Reconciling the claims of energy companies and their watchdogs can be an exercise in futility. Covanta’s website refers to EfW electricity as “clean, renewable energy,” relying on a definition of “renewable” as “derived from natural processes that are replenished constantly.” But a fact sheet from GAIA, the Global Alliance for Incinerator Alternatives, contests this pretty much absolutely. “Municipal waste,” GAIA says, “is non-renewable, consisting of discarded materials such as paper, plastic and glass that are derived from finite natural resources such as forests that are being depleted at unsustainable rates.”
Tours of the incinerator start in a squat, brick outbuilding, where a colorful graphic mounted on the wall of a conference room provides an overview of the facility’s moving parts. We stood in front of the graphic for about 40 minutes while I tried to picture the combustion process Lefever was describing within the abstract boundaries of a line drawing. Then we put on hard hats and safety vests and headed for the entrance.
People like Lefever often refer to “feeding” the incinerator, and the first stage in the long meal occurs on what’s known as the tipping floor, where garbage trucks pull up one at a time and “tip” their cargo out onto a cement bay. As we approached, a short line of trucks curled back from the entrance, waiting their turn. Inside, the floor was loud with the grumble of diesel engines and the warning peals of heavy machinery going in reverse. It smelled like wet garbage, but not in an oppressive way. “It gets better over the winter,” Lefever said. We watched as a large hauler backed up and tipped its load. As it drove forward, a block of dripping waste slid out, in the exact shape of its container. Then it settled, its edges melting away, until it was just another pile of trash.
The price the haulers pay to deposit their waste is known as a tipping fee, and it’s the primary source of income for the facility. It’s also the subject of a fair amount of controversy. Different municipalities are charged different rates, for reasons having to do both with volumes of trash and other, more political considerations. Historically, Dauphin County’s fees have been drastically lower than the city’s; last summer, the city’s fee was $200 per ton, while the county’s was $77. Under the terms of the sale to LCSWMA, the fees will gradually become more equitable over the next couple of decades, until both the city and county are paying $115. But, in the short term, the city’s fee will remain much higher.
Preserving the disparity is one of the less savory requirements of the state-appointed receiver’s recovery plan for the city. Higher fees mean more revenue for LCSWMA, which, in turn, translates to a higher sale price for the facility. The receiver’s team viewed the higher sale price as critical, because the proceeds will help pay down the incinerator debt, but many residents are still unhappy about it.
In addition to paying more to dump, the city will also be contractually obliged to deliver 35,000 tons of waste to the incinerator each year. Many residents aren’t particularly happy about this, either. But if trash is the facility’s food, then the burners, like teenagers, need to be constantly eating. If there isn’t sufficient trash to keep the fires burning, they must be restarted with gas, at cost to the owners. The demand for trash is so great, in fact, that Lefever must occasionally bid for waste from outside municipalities. (In the olden days, he said, some incinerators may have even accepted trash for free, because “they were making a god-awful amount on their electric side.”)
From the tipping floor, we headed to the control room, where a shift supervisor named Troy was watching a set of big-screen monitors. “So if this was MTV Cribs, you remember that show?” Lefever said. “Well, this is where the magic happens.”
From this station, Troy could keep an eye on temperature levels, burn rate, flame height, steam output and just about everything that happens to the trash once it enters the burners. Some screens showed color-coded blueprints of the equipment, spotted with lines of data, and some provided live camera feeds from inside the facility. On one feed, lead-colored ash trundled along on a conveyor belt. On others, unbelievably, you could watch the garbage actually burning. Tiny fisheye lenses, cooled by constant air streams, provided the images: ghostly orange-and-black blurs, smoldering at temperatures as high as 2,000 degrees.
Troy, like Lefever, spoke in industrial shorthand. (“So here’s your pit, crane operator feeds grapples in here, trash goes down the chute, and here you got feed rams that are pushing your fuel off, you know…”) They talked about “wet stuff,” meaning moist, slow-burning trash, which produces dark spots in the flames on the video feed. Whoever is manning the control room must monitor the amount of wet stuff in each burner, in order to ensure a well-paced, thorough burn. “If your fuel would be a consistently steady fuel,” Troy said, “you wouldn’t have to do much. But trash is trash. One load comes in, it’s all paper, and the next load comes in, and it’s restaurant waste. You got a constant different waste stream.”
From the control room, we headed out to observe the crane operator, who spends the day plucking up trash from the tipping floor and feeding it to the burner.
He was sitting inside a glass box, manipulating an enormous grappling claw. Essentially, his job is to manipulate a smelly, 70-foot tall teddy picker. He dropped the claw, closed it around a massive clump of trash, and then hoisted it to one of the chutes and let it spill. Occasionally, rather than empty his claw into a chute, he’ll unload it on one of his stockpiles along the edges of the floor. The stockpiles keep the tipping floor clear for incoming trucks, but they also allow for the mixing of wet and dry waste to achieve a more consistent burn.
We passed back along a catwalk between the boilers and stepped outside. Lefever pointed out the baghouses: big, funnel-shaped filters that strip particulates from emissions en route to the smokestack. The effectiveness of these filters is something environmentalists also question, although the state Department of Environmental Protection, which monitors the facility’s emissions, has issued few violations, and the ones it has have been minor. “Really, you don’t see anything coming out of the stack,” he said. “It’s all being captured.”
I looked up. The stack seemed to be emitting nothing more than little white wisps of cloud.
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The things that have troubled the incinerator in recent years have afflicted it almost from the beginning. In September 1966, City Council approved a project that, at the time, was projected to cost $4.5 million. By the time the facility came online, five years later, that cost had nearly tripled. After repeated breakdowns, it nearly tripled again.
Then, as now, the incinerator became a measure of the office of the mayor: both the scale of its ambitions and its command of city finances. Paul Beers, surveying the facility’s early history in several columns for the Patriot, recalled that Mayor Al Straub called it “the Rolls-Royce of incinerators” in 1969. But his successor, Harold Swenson, condemned it as “a facility that far exceeds our needs and our ability to pay.”
And then, as now, the trouble came mostly from two quarters: the difficulty of securing a sufficient waste stream and the need for its technology, never quite ready for prime time, to comply with environmental regulations. Beers reported that, in order to pay for itself, the incinerator needed to run at 85 percent of its capacity. It routinely ran at 60 percent. Neighboring municipalities, Beers wrote, could not be cajoled into committing to the city’s project.
In addition, the incinerator was continually plagued with mechanical problems. In 1978, it caught fire. In 1979, there was a cave-in, the aftermath of which, Beers wrote, “epitomized all the comedy and tragedy” of the facility. Its manager, Jack Karper, “hurriedly rescued the garbage reserve so there would be trash to feed the flames and make steam…Explained a jubilant Karper, ‘Thank God we saved the garbage. It represents dollars.’”
In 1984, after years of regulatory violations—mostly over where the city was storing waste after burning it—Mayor Stephen Reed corralled the operation under a newly minted “Department of Incineration and Steam Generation.” Some improvements were made, including the addition of a new steam line, but the compliance issues persisted. In 1985, an inspection revealed the city was burning a greater-than-allowable quantity of sewer sludge. In 1988, a succession of tests on the smokestack discovered emissions violations, and ash repeatedly escaped the site and landed on private property. Eventually, the city reached a consent agreement with the state Department of Environmental Resources and completed major capital repairs in 1990 and 1991.
In 1993, Reed engineered a sale of the facility to the Harrisburg Authority. The deal ushered in what you might charitably call an era of creative financing. The “sale,” to an authority of the city’s own making, drew revenues to the city of around $27 million, and, at the same time, saddled the incinerator with an additional $34 million in debt—the acquisition price, plus $7 million in bonds for capital improvements. In other words, the incinerator acquired substantial debt that had nothing to do with expanding its operations, ensuring its regulatory compliance or improving its equipment. The pattern would be repeated throughout the 1990s, until the debt load had climbed to nearly $100 million.
2003 was something of a watershed year. Dauphin County had pledged its waste stream to the incinerator, promising revenues that might have been sufficient to pay its bills, except that the federal Clean Air Act threatened to sharply limit the facility’s capacity. The city faced a choice. It either could shut down the operation, assuming its debt, or it could borrow once more to retrofit the incinerator and increase its capacity, with the hopes of generating enough revenue to cover the cost. The city opted for the retrofit.
City officials, for several years prior, had been eyeing a potential contractor that could upgrade the facility at the lowest possible price. The contractor, Barlow Projects, had installed a burner in Perham, Minn., using “churn-and-burn” technology that used forced air to circulate the waste, rather than moving grates, which were constantly breaking down in the Harrisburg facility. The Perham installation’s capacity was 50 to 100 tons per day—far short of the 800 tons the city required. Nonetheless, Barlow concluded it could complete the retrofit. The upgraded incinerator, in Barlow’s projection, would produce a cash surplus of $57 million by 2028.
Barlow, though, did not complete the project on time or on budget, and ultimately the firm was fired. The company’s projections of a cash surplus relied on dubious assumptions about electricity prices and interest rates, not to mention its own construction costs. A forensic audit, commissioned by the Harrisburg Authority and completed in 2012, pointedly questioned why Barlow was even allowed to submit a financial analysis of its own project—which, furthermore, was not subject to a public bid. The decision “to allow Barlow to certify the feasibility of its technical approach, to estimate the project’s cost and purported financial benefit, and then to obtain the contracts to actually conduct the work, appears questionable at best,” the audit says. “There are no indications that the City, the Authority or their advisors identified the conflict or potential problems.”
But the city, the authority and its advisors, following the pattern set by the 1993 sale, were far past the point of measuring debt against any future capacity to pay. Like the incinerator, which fed new trash to old trash to produce electricity, they were issuing new debt to pay for old debt. By the time Covanta was hired to finish the project, the facility’s debt totaled $280 million. The authority could no longer service it, and the city, which had promised to pay in its place, was on the hook.
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The trick of municipal finance—in a sense, the trick of finance generally—is how to make something out of nothing. A city wants to build an incinerator, but it has no money. What should it do?
If the city were like me, and followed the advice of my old boss (“stay out of debt, kid”), it would sock away a little bit of each year’s revenues until it had enough for an incinerator. The problem with this method is that it would lead to the building of exactly zero incinerators.
An alternative is to borrow now and pay the bill later. The favored tool of municipal borrowing is the bond issue. A bond is a promise to pay, and in the case of a capital project like an incinerator, it comes with a certain built-in elegance: the promise sows the seeds of its own fulfillment. The debt builds the thing that earns the revenue to pay the debt. Between the tipping fees and the electricity sales, the incinerator should be able to pay all of its workers and still have enough left over to pay back what’s been borrowed. The city comes away owing nothing, and, in the meantime, careers have been made, families supported, kids sent to college, and everyone has avoided being drowned in garbage.
The term for debt that can be paid back with user rates is “self-liquidating.” When a local government classifies debt as self-liquidating, it’s essentially reassuring taxpayers that their taxes will never be raised to cover the debt, because the project will pay for itself. It’s important for governments to make this classification, because state law imposes strict limits on how much a municipality can borrow, based on its revenues. Self-liquidating debt doesn’t count against the limit, which frees up the municipality to borrow for other projects.
In Pennsylvania, the entity charged with watching the taxpayers’ back in the municipal borrowing process is the Department of Community and Economic Development (DCED). When a local government wants to issue new debt, it must submit a five-page statement to DCED tallying its various outstanding obligations. The third page of this statement, known as an 8110(b) certificate, requires the government unit to sign off on a one-sentence pledge that says, in essence, that any debt that was classified as self-liquidating in the past is still self-liquidating. A government that gives this assurance is said to have filed a “clean” 8110(b).
On Oct. 4, 2012, the Pennsylvania Senate held the first of two hearings to try to determine what, exactly, had gone wrong in Harrisburg. In a period lasting just under 20 years, the debt load on an incinerator that the city had bought for $27 million had ballooned to nearly $350 million. Huge portions of the borrowings were used to refinance prior debt and generate “working capital,” to cover the costs of operation. A remarkably small portion of the debt went towards actual improvements on the facility, which should have been an indication the project had ceased to pay for itself. Yet each time it borrowed, the city filed a clean 8110(b).
One question for the legislators was how the city was permitted to keep classifying the incinerator debt as self-liquidating. Steve Goldfield, a financial advisor to the state-appointed receiver who contributed to the forensic audit, raised this question during the hearing. In addition, he asked, if the debt didn’t go towards improvements, what was it spent on?
Goldfield’s testimony lasted two hours. After Goldfield, the senators listened to representatives from DCED, to former board members of the Harrisburg Authority, to former Mayor Reed, and to a handful of lawyers and financial advisors, among others. Most of those involved at the time of the borrowings came supplied with reasons why they weren’t to blame. DCED was desperately short-staffed and could rarely give more than a cursory review to the assurances made by local officials. Local officials relied on the advice of professionals, not being qualified themselves to assess technical projects. The professionals, for the most part, fobbed off culpability onto other professionals.
Goldfield, in his testimony, was careful to point out the many factors outside the city’s control. Revenues for an incinerator project were particularly volatile: there was the unpredictability of electricity prices, the unreliable flow of trash, the need to comply with environmental regulations. But Goldfield also described the disturbing pattern that emerged with each new bond issue. Harrisburg wasn’t just borrowing to fix the incinerator; it was using the construction project as a back door to extra debt above its limit.
Each time the Harrisburg Authority issued new debt, it sought guarantees from Harrisburg and from Dauphin County, and in most instances, the guarantees were provided. There’s nothing irregular about guarantees in and of themselves. Municipal bonds, like any other form of debt, have interest rates tied to the amount of risk the bondholder assumes in purchasing them. To reduce the amount of risk, and therefore the interest rate, the borrowing entity can seek a guarantee from a municipality, which pledges to pay bondholders in the event of default.
But the city and the county also charged the authority fees for those guarantees, in the several millions of dollars. In his testimony, Goldfield was quick to note the suspect nature of these charges, especially as applied by the city. In 23 years of working in municipal finance, he said, he had only seen one other instance of a municipality charging its own authority a fee for a bond guarantee.
In addition, there was something peculiar about the way the fee amount was calculated. “The guarantee fee, through serendipity or something else, matched the structural deficit in the city’s budget,” Goldfield said. In short, each time the authority issued new debt, the city sliced off a piece exactly large enough to fill a hole in the general fund.
It has occasionally been said that, under receiver William Lynch’s plan, various creditors and professionals will receive what they’re owed, while the city’s taxpayers receive nothing. Particularly in regards to the incinerator, this interpretation has some intuitive appeal. The facility, the thinking goes, was built with Harrisburg-taxpayer-backed borrowing, but now it will be sold to enrich the coffers of some other municipality.
The problem with this argument is that it skips over everything that taxpayers received under Reed. Tax revenues were insufficient to cover the budget, yet, for years, tax rates stayed low. This was true, in fact, for rates across the board, including water and sewer rates and fees for using public parks. Part of the reason there’s been so much grumbling lately is that prices that ought to have gone up gradually each year are now playing dramatic catch-up.
It’s one thing to be cheated and lied to, of course. The state attorney general has announced an investigation of whether any of Harrisburg’s officials or their advisors cheated or lied, and the receiver’s plan includes a hope for some civil claims from the professionals who escorted the city down a financial hole. But the borrowed money didn’t all just go to a few suits in city hall. Might some part of the deal reflect Harrisburg’s payment for two decades of willful ignorance?
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A very small portion of the incinerator’s revenues has nothing to do with burners or electricity. It comes, instead, from scrap metal recovered from the waste. The ash, leaving the boilers on a conveyor belt, passes beneath a big, spinning magnet that sucks metal up from the stream and whisks it onto a mound of salvaged scrap.
Towards the end of my tour, Lefever led me up a ramp, to a point from which I could peer into a large cement box. The magnet, like a giant spool, revolved at the leisurely pace of a paddlewheel. Bed springs, chicken wire, coffee cans and oil pans piled up below, effaced to an identical smoky blue-gray.
We climbed some stairs to the room where the turbine, a dull nest of pipes and dials, sits underneath a high ceiling. It was about as large as a mid-sized Winnebago. I was struck, again, with a sense of disbelief: how could such an extraordinary amount of debt be saddling a facility that was, in physical scope, so comprehensible?
Outside, we pulled out our earplugs and shed our safety jackets and hats. On the perimeter of the facility are a couple of capped landfills. They used to be more of an eyesore (“I think people were calling it ‘Mount Ashmore,’” Lefever said), so they seeded them with temporary grass covers. Now they look like ancient burial mounds—hills too square-shaped to be naturally occurring.
We walked to the active part of the landfill. Between the boilers and the ash heap is a span of city garages and, beside them, a lot that amounts to a graveyard for retired city vehicles. We passed some garbage trucks, still in use, and an outmoded fire truck, long abandoned. At the end of a gravel road, a truck was depositing a load of new ash, water-soaked for cooling purposes, and spreading it out to dry. It will remain there a while, picked at by scavengers. Then haulers will come and take it away, and it will cease to be Harrisburg’s concern.
