The Maryland Public Policy Institute
Now is not the time to load Frederick County taxpayers with debt.
As was made abundantly clear in the past two weeks of reporting on the national political conventions, Americans are not better off economically than they were four years ago and face futures so bright they will need hard hats, pickaxes and headlamps to navigate them.
Median income is down, debt is up and hiring is stagnating. These are not conditions ripe for building a $500 million-plus (when financing and other fees are included) waste-to-energy plant.
Just talk to residents of Harrisburg, Pa. A judge earlier this month ordered the city to stop debt payments on its waste-to-energy incinerator and to hike taxes by 1 percent on earned income to pay for essential city services in the bankrupt capital. The city is under state oversight in large part because of the incinerator, which pushed it at least $320 million in debt.
"I am a widow, 62 years old and living on less than $2,000 per month, and I have additional medical expenses. It's really going to be hitting hard," Harrisburg resident Pat Stringer told The Patriot-News in reference to the 1 percent tax increase.
Backers of the Frederick incinerator may call Harrisburg's case extreme, but it is one of many cities and counties across the nation overwhelmed by debt from infrastructure projects that either went way over budget or never met often rosy financial projections and public employee pension and health care obligations.
Evidence points out that the proposed incinerator is not a good deal for Frederick County taxpayers on many fronts. One of the main reasons is the construction cost. The contract says that the price to build the plant will likely run more than $332 million and requires the company that will build it -- Wheelabrator Technologies -- to kick in $73 million to cover overruns. Herein lies another problem.
As Bruce Holstein, the retired comptroller of the U.S. Government Printing Office and opponent of the project, writes, "If the contribution were properly treated as a loan, the Counties (Frederickand partner) would have to repay the principal amount borrowed plus interest from the date of the loan and only for the actual amount borrowed. By classifying the $73 million as an operating charge, the (Northeast Maryland Waste Disposal) Authority allowed a 3 percent markup to begin on Dec. 4, 2008." Does that sound like a good deal to you?
Then there is the administrative fee, which increases by 3 percent per year for 30 years, and annual membership fees to the authority. We haven't even gotten to repaying the $527 million of revenue bonds to be issued to pay for the project. What happens if the planned volume of trash never materializes, and taxpayers have to cover deficits? And what happens if the electricity generated by the plant is more expensive than market rates? These are all likely scenarios and make building a plant a bad deal for everyone except the authority and Wheelabrator.