Camden County incinerator short $25 million for its final bond payment

TRENTON - Camden County's trash authority has just seven days to make a final $25 million bond payment, and little money to pay it.

But the Local Finance Board adjourned a Tuesday meeting with leaders of the authority without finalizing a plan to prevent what the state says could be New Jersey's first government bond default since the 1930s.

After knowing for at least five months that neither the state nor the authority could pay investors by Dec. 1, officials are working to dig up the cash over the Thanksgiving holiday.

Among the proposals being considered for the Pollution Control Financing Authority of Camden County (PCFACC) is diverting money from its restricted accounts, though that would have to be paid back later. One potential source of funds is a recent $11 million court settlement that was to go toward environmental remediation at the Pennsauken landfill.

The debt was incurred two decades ago to build a trash incinerator that handles waste disposal for all but one of the county's 37 towns.

Local Finance Board Chairman Thomas Neff said Gov. Christie believes state taxpayers should no longer subsidize these projects, but Neff added that he wanted to avoid the "catastrophic" effects of a default.

Bankruptcy, costly lawsuits, and a negative impact on the credit ratings of other governing bodies in New Jersey were among the grim consequences of stiffing investors outlined at the meeting.

A default would make the situation "1,000 times worse," with millions of dollars being spent and five years going by before anything is resolved, said Neff.

"The only party that would probably win is the club of which I'm a member, and that's the attorneys," joked Philip Norcross, who serves as bond counsel to the trash authority.

Even so, authority lawyer William Tambussi said the incinerator would continue operating if investors were not paid next week. Additionally, Camden County taxpayers would not be on the hook for the debt, which is not backed by the county government or otherwise insured.

The board summoned agency officials to a special hearing to discuss their finances, but little new information was revealed during testimony lasting about an hour and 15 minutes. The Department of Community Affairs, which oversees the board, is sifting through boxes of financial documents delivered by the authority on Monday.

Instead, representatives of the trash authority spent much of the meeting discussing the origin of the crisis.

The authority issued bonds backed by trash revenue to build an incinerator in South Camden in 1991, following a state mandate in the 1980s directing counties to dispose of all their own waste. But the courts ruled in the late 1990s that "flow control" was unconstitutional, opening the market to outside competition.

The trash plant cut its disposal rates to compete, but couldn't bring in enough money to pay off its debt. Under Gov. Christie Whitman, the state began subsidizing bond payments for trash plants facing similar problems around the state.

The Camden County incinerator, which is privately owned but has an operating agreement with the PCFACC, has received $152 million in subsidies from New Jersey taxpayers since 1999. That's far more than any other county incinerator, but the financially struggling state didn't set aside enough money in the budget adopted in late June to cover this year's payment.

The state has said it will chip in only $2 million from the $16 million set aside in this year's state budget for subsidies to multiple trash facilities in other counties.

"We would not be here this morning if New Jersey's solid-waste system was not declared unconstitutional as a result of [the court decisions], but we all have to deal with that reality," said David Luthman, the PCFACC's deputy executive director.

The authority has seen declining revenues, due to competition from Pennsylvania and the economic downturn, and its credit ratings have been downgraded to junk.

But its debt is profitable, carrying a 71/2 percent interest rate for investors.

"This is the biggest welfare case in the state of New Jersey. . . . This incinerator should never have been built in the first place," Jeff Tittel of the Sierra Club told the Local Finance Board.