In December of 2015, the county sent out a request for proposals (RFP) for the creation and operation of an Alternative Waste Processing facility that would serve the county in a 20 year contract. In April of 2016, the county selected Freedom Energy Hernando LLC over WastAway LLC and Energy3 LLC. The registered agent for Freedom Energy Hernando LLC is Leland Nathan Mundy. The LLC’s effective date is 3/1/16 and the articles of organization was filed on 3/7/16.
Contract negotiations with Freedom Energy have been ongoing. The company would use waste to energy fuel pellet technology in which they process waste into a fuel pellet that they sell to customers such as public utilities, manufacturers and paper mills. No potential customers were discussed in the meeting on October 11th and it’s not clear what would happen if Freedom Energy LLC couldn’t sell the pellets.
In August, concerns arose over the project resulting in a potential $1.1 million loss to the county and discussion ensued on terminating the project.
In September, the county provided Freedom Energy Hernando with the data supporting the uneconomical nature of the project which could cost $4 million per year.
On October 11, Attorney for Freedom Energy Hernando, Jake Varn presented the Board with his take on the figures, providing a rose colored outlook for the county and the project, so much so that the county may consider adding the handling of C&D material and tires to the current RFP if legally feasible.
Varn provided the board with handouts indicating the revenues generated by the landfill operation and expenditures- all numbers given to him by the county.
The county brought in over $7.7 million in FY 2016. The majority comes from non ad valorem assessment at $4.7 million followed by tipping fees which generated $2.6 million. Currently the county collects $54.50/ton in tipping fees for class I waste.
(In the RFP, the county indicated that in fiscal year 2012-2013, 111,150 tons of class I waste was collected. The $3.3 million/year project cost calculation is based on a figure of 88,000 tons/year. )
Total landfill expenditures for FY 2016 was a little over $7.3 million. The landfill operation was “profitable” by $427,578.
Mr. Varn did not agree with the county’s assessment that the project would result in a $1.1 million loss to the county landfill per year.
He went over several areas where Freedom Energy Hernando would be absorbing costs including $1.1 million in operating the convenience centers and $621,000 in recycling operations.
He also stated that by reducing the amount of class I refuse by 70%, the project will extend the life of the cell 3 landfill to the year 2039.
After going through a litany of areas where his calculations differed from the county calculations for the better, Mr. Varn stated,
“You can argue about the numbers but the difference is, you go from a -1.1 to a +3.0. That’s a 4 million dollar difference sports fans. You can cut our numbers in half and we’re still going to get a million dollars of “in the black.” The county is still going to come out ahead in the process.”
He continued,
“We’re locking in our costs for a 20 year time period and we’re competing against your operation that has a track record of at least a 50% increase on an annual basis in recent years.”
Costs for solid waste operations in 2013 was $2.9 million, in 2016 it was $4.4 million.
Commissioner Nicholson read off several questions he had prepared including,
“It’s my understanding that the county loses money with the C&D (construction and demolition refuse) operations. Is Freedom Energy willing to assume these operations provided you’re fairly compensated at a price agreeable to the county?”
Mr. Varn stated,
“One thing that startled us when we met with the staff, was that they were saying that they were going to start putting the C&D material into cell 3, which is a class I facility because they are running out of capacity. That to me does not make good economic sense. A C & D landfill is constructed far more cheaper… I don’t know of anybody that puts C&D material into a class I facility. It’s very expensive to do that. I believe we can take that if the county wants to- that’s not part of the RFP now- but anything that I see that’s operational that I think we could do better – the other thing is the waste tire. That is something that is doable and can be negotiated.”
Referring to his engineering experience, Mr. Nicholson said, “You don’t put Cand D stuff into a landfill- you just don’t do that. I’d appreciate not having the tires go in there either. There’s a lot better use for the tires.”
As part of the contract with the county, a land lease will have to be executed. The RFP indicates up to 15 acres could be used to construct the facility. Freedom Energy Hernando LLC will be investing in all the building, equipment and operational expenses.
Commissioner Rowden asked Mr. Varn whether the county will be asked to be a guarantor for any loan obligations for the project.
Mr. Varn stated, “No Ma’am the only thing that will be involved is that we’re going to need a land lease and we’ll be putting equipment into that land lease.”
For investing in the infrastructure and operations, Freedom Energy Hernando will receive $39/ton of class I material (out of the county’s $54.50/ton). If C&D and tires are added to this, there would be additional compensation.
Chairman Adkins asked, “What I’m hearing is that if we dedicate some land for this process- Freedom Energy Hernando Could bond that land.”
Mr. Varn responded, “No we’re not bonding. We take the land and build a building and inside the building put the equipment to put this process in place so it could process the solid waste. At the end of the lease, we can take it all out or we can leave it if the county wants it.”
Commissioner Dukes asked about the possibility of processing the waste of neighboring counties and Mr. Varn said that they would need a provision in the contract that would cover that eventuality.
Commissioner Nicholson wanted to see an agreement come back to the county on October 25th for the alternative waste processing project with the addition of the C & D and tire processing, but the attorneys were not sure if the additional scope of work was legally feasible.
Staff was instructed to speak with Mr. Varn about the figures he went over indicating the $3 million in savings and come back to the board November 8th.
The discussion with the board is slated sooner rather than later, for October 25th and will be reported on in the November 4th issue.