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TextBoard Makes Right Decision on Covanta
During our meeting last week, the Board of Supervisors made the right
decision when we opted not to purchase the Covanta incinerator, and
instead agreed to a new long-term lease.
Some background: twenty years ago, under an agreement between the County
and Covanta, County revenue bonds - backed by the anticipated revenue
stream generated through tipping fees (the money trash companies pay to
dump the trash) - were used to build the incinerator in Lorton that burns
most of the trash produced in Fairfax County. The County did not use tax
revenue to make those bond payments. State law provides the County with
the authority to require all trash companies in the county to take their
trash to the incinerator, thus “guaranteeing” a revenue flow to support
the bonds. The energy produced by burning the trash is sold to Dominion
and Covanta and the County split the profits. It’s been a
mutually-beneficial relationship.
The contract stipulated that at the end of twenty years - when the bonds
were paid off (now) – ownership of the incinerator would pass to Covanta
unless the County purchased the facility. The purchase price, $417
million, would be determined by a formula in the contract, so this
spring, we were faced with the decision whether to purchase, or allow
Covanta to receive ownership, with its operating agreement with the
County set to expire in 2016.
Negotiations grew serious last year when the County indicated it may
exercise its option to buy. Subsequently, Covanta offered the County a
new contract under which the County would lease the facility from
Covanta, and receive an extended operating agreement for Covanta. The new
lease terms are more favorable to Covanta than the old lease, and this
was the source of some Board members’ desire to purchase.
However, even though the lease extension is less favorable to the County
than the old lease, it still costs residents less money than buying the
facility, at least for the next twenty years. Had we purchased the
facility, we would have made money after twenty years if the facility was
profitable at that time. But, if things changed and it was not
profitable, the County would have been stuck with the costs of owning a
50 year old incinerator. Not a good risk in my book.
I argued in closed session in favor of the lease extension, and that
position prevailed. Our partnership with Covanta will continue, and we
did not take on a needless risk. It was a good day for the County.
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