Audit: Loudon County losing money on landfill

LOUDON The Loudon County Solid Waste Disposal Commission continues to struggle with the challenge of saving enough money for closure and post-closure costs associated with the Matlock Bend Landfill.
According to a draft of the most recent yearly audit, which was released last week, the commission has failed for seven straight years to accrue additional funding for closing the landfill. The audit also showed an increase in estimated liability for the closure costs.
Current and former members of the commission said the problem is that the commission spends too much money and doesn't receive enough of a share of the money generated by the landfill.
A draft copy of the commission's audit for the period ending June 2014 shows a net operating loss of about $71,000 on about $384,000 in revenue. The commission has suffered a net operating loss sometimes more than $200,000 per year every year for at least the past four years, according to the audit.
The landfill is ostensibly managed by the waste commission, a seven-member intergovernmental agency created by the county and the cities of Loudon and Lenoir City.
Santek Environmental Services of Cleveland, Tenn., manages the day to day operations of the landfill and collects the tipping fees, a portion of which are given to the commission to invest for closure costs.
The commission has accrued almost $3 million in the fund since taking over management of the landfill in the early 1990s. With about 13 years left on the 20-year contract, estimates peg closure and post-closure costs at more than $7 million.
Since the contract was signed in 2007 however, the fund has been depleted due to lower revenues and an investment strategy in which the cost of managing the funds exceeded the interest paid.
"It's extremely important that we address the closing costs," said Kelli Littleton-Brewster, a Loudon County commissioner and a member of the solid waste commission.
One of the biggest challenges to improving the bottom line is the 2007 contract, she said.
The contract negotiated under the guidance of Knoxville attorney Bud Gilbert allows Santek to set the tipping fee. The fee at the Matlock Bend Landfill is $28.70 per ton. Santek has the right under the contract to set even lower tipping fees for customers on contract.
By comparison, the Alcoa-Maryville-Blount County Landfill charges $42 per ton and McMinn County charges about $38.25.
In addition to tipping fees, Santek also makes money hauling trash to the dump, noted Loudon County activist Pat Hunter.
"It's win-win for them and lose-lose for us," she said.
Because Santek is not responsible for the closure costs of the landfill, it's in the company's interest to set the tipping fee as low as possible and to deliver as much waste as possible to the Matlock Bend landfill, Hunter said.
In recent discussions with Santek, the company offered to add about $1.29 per ton to the tipping fee. Santek has also suggested extending the contract past 2027 to have more time to save for closure.
Extending the contract without first putting out for competitive bids might not be legal under state procurement rules, Hunter said.
Among the ideas that might make a big difference in building the closure fund is a surcharge added by Loudon County Commission to every load dumped at the landfill, Hunter said.
"We need to look at all options," said Littleton-Brewster.
County commissioners last year estimated that it would take a surcharge of at least $3 per ton to put the fund on track to meet the projected closure costs.
Santek did not respond to requests for an interview or to written questions submitted by email.
Aileen Longmire was one of the first members of the waste commission back in the 1990s when she also served as treasurer. She said that in addition to not bringing in enough money from the tipping fees, the current commission is fiscally irresponsible.
The commission doesn't have a yearly budget and doesn't properly review expenditures on such items as travel and attorney's fees, she said.
According to Littleton-Brewster, the commission has been taking steps to cut expenses, including moving commission attorney Kevin Stevens to a flat monthly fee of $2,500. Commissioners also eliminated their own $50 per meeting stipend.
Loudon County Mayor Buddy Bradshaw was answering questions about the landfill even before he took office in August. He wants the waste commission to understand that it has a responsibility to the residents of the county.
"It's a big potential liability," he said. Bradshaw said he appointed Littleton-Brewster to the commission because she is not afraid to ask questions. As a county commissioner she also understands her financial responsibility to the tax-payers.
Last month Bradshaw announced that Tom Paul, who represents Tellico Village on the waste commission, would not be appointed to a new six-year term. Paul, who had been appointed last year to fill out the term of another commissioner, came under criticism earlier this year for excessive spending on a trip to a conference in Gatlinburg.
Longmire said that Paul's reimbursement of about $900 for the conference was an example of excessive spending. "There was no budget, there was no amount set aside for expense for the conference for attendees and no votes on the expenditures," she said.
According to waste commission Chairman Steve Field, the actual reimbursement given to Paul was about $860. The increased cost was a result of late registration, Field said.
"It's still three times the average cost of any other member that attended the same conference," Longmire said.
Bradshaw replaced Paul with Tellico Village resident Bruce Hamilton. County Commissioner Henry Cullen said Hamilton is a retired IBM manager "with a good head on his shoulders."
The waste commission has tried to reduce the management fee charged by the county trustee's office. Over the past few years the fee has been more than the interest the commission earns on the closure funds. State laws require the funds be invested in low-risk, low-yield investments. A recent attempt to challenge the fees resulted in an opinion from the state attorney general's office that the dispute was a local matter.
A proposal to transfer the closure fund to Santek so that the company could invest the funds itself for higher yield was described by activist Hunter as "letting the fox guard the henhouse."
The waste commission also has looked into creating new sources of revenue. Several years ago the commission discussed a "gasification" project that would tap into the natural gas or methane created by the landfill.