Loading...
HomeMy WebLinkAbout1982-12-23-NESWC-rpt.pdf ?tylt,E £aa€ Seed 24244 ease/tarn Town Office Building RECEIVED 120 Main Street %/ i I SELCCTMEN' North Andover, Ma. 01845 Ot:u 2 81982 Telephone 682.7212 December 23, 1982 Dear Local Official In light of the series of recent changes affecting the NESWC project, I thought it would be helpful to provide all the appropriate officials in the 21 NESWC communities with a complete and accurate status report on the project Happily, I can report that all 21 communities are now authorized to sign the closing documents that are required so the project can proceed to financ- ing Seventeen communities have already signed these closing documents, and UOP has agreed to step in and take responsibility for Amesbury's trash Consequently, the underwriters now advise us that the bonds will be marketed during January; bond closing is scheduled for February and groundbreaking for March The project is proceeding well The sudden and unexpected reversal of position by the IRS generated a great deal of confusion in many communities Just for the record, the following is a chronology of the series of events related to the IRS ruling 1 In late October, we were informed that IRS was prepared to issue a- favorable ruling on whether _ a construction .subsidiary'sprofit could be financed with tax-exempt bonds 2 On November 19, closing documents based on this favorable ruling were circulated to communities for their signatures so as to achieve our goal of year-end bond closing 3 On November 24, IRS notified us it had reversed itself and would instead issue an unfavorable ruling 4 On November 29, a revised closing document was issued to communities reflecting UOP financing concessions to keep the projected 1986 tipping fee at $17 30/ton and declining thereafter Parallel efforts to reverse the IRS decision were being carried out with some assistance \,,�rr�� �(J\ from members of Congress \V" \ 5 On December 10, the unfavorable tax ruling was V confirmed after review at the highest IRS levels Even though the project will not now enjoy the benefit of a favorable tax ruling, the declining price of the NESWC contract remains the lowest price resource recovery option available to communities in this area (see attached graphs) As an aside, it's interesting to note, that according to the under- writers, the NESWC contract, when compared with other resource recovery projects Local Officials December 23, 1982 Page Two in other states has one of the best 20 year service fee projections in the country Finally, it has come to my attention, over the recent weeks that a number of misstatements have been circulated to NESWC community officials by competing companies I would like to set the record straight 1 It is a gross misrepresentation to say that the bond issue is "now expected to reach $275 million (as compared to the) $74million bond issue which was presented originally " First, the $74 million is "UOP's guaranteed base design, construction, and startup cost as of October 1 1980 " It does not include escalation, interest during construction, bond issuance expense, and reserve funds which are routinely included in a total bond issue Second, the current projected bond size is $194 million, not $275 million as suggested The accurate information is that the bond issue has grown from $140 million to $194 million, primarily as a result of the higher interest rates 2 Dracut is still a member of the NESWC project, but has not yet been able to obtain the quorum required (350) at two special town meetings scheduled by the Selectmen for the purpose- of ratifying the selectmen's vote to join NESWC 3 The $17 30 Service fee is not the "estimated best case" service fee It is, instead, a fairly conservative estimate of the projected service fee in the first year of plant operation Thereafter the price declines Built into that pricing projection are several conservative assumptions Let me just cite two conservative assumptions relative to energy prices First, we have assumed average annual of-1 inflation over the next 20 years will be 8% For the last 15 years the average annual oil inflation has been close to 14% We have also assumed oil inflation will equal normal inflation even though oil has inflated at almost twice the CPI for the last 15 years Second, these price pro- jections are based on conservative assumptions regarding the percentage of power that will be sold at "on peak" prices The NESWC plant will produce something on the order of $50,000/day in energy revenue in 1986 It is understandable that companies who offer contracts which retain 100% of this energy revenue as corporate profit, will compete aggressively for trash contracts But we think it goes beyond the limits of fair and respons- ible competition when companies misrepresent the facts Local Officials December 23, 1982 Page Three I, as chairman of the NESWC Executive Committee would appreciate receiving calls from anyone who may have received similar critical observations about the NESWC project so that we may respond accordingly My number is 862-0500 extension 28 I, speaking for the NESWC communities, deeply appreciate your cooperation and understanding With best wishes for the season, I remain, Sincerely, Walter J Tonaszuck NESWC Executive Committee JKS/m Enclosures a {'ECEIVED, SELECTMEN 12/6/82 OE.G 2 8819823 COMPARISON OP DISPOSAL ALTERNATIVES 60 - 50 - afS Y 40 — oiv ryes • 30 - ¢�S RFI Offer B • 20 - NESWC Projection ca c 10 - c 1986 1990 1995 2000 2005 a YEAR o. H -10 - -20 - -30 - -40 -