November 17, 2011 / 1:07 AM / 8 years ago

Harrisburg incinerator operator pushes back in memo

HARRISBURG, Pa (Reuters) - The company hired to fix the focal point of Harrisburg’s financial troubles is working to convince its customers it is not the reason the Pennsylvania city faces a state takeover and/or bankruptcy.

In an internal memo obtained by Reuters, Covanta chief sustainability officer Paul Gilman tells his employees that Harrisburg is $318 million in debt because of the city’s “financial mismanagement,” not because Covanta has been operating the city’s incinerator for the past five years.

“The facility, which should have been debt-free decades ago, is currently drowning in more than $300 million of debt due to ... Harrisburg’s repeated decisions to monetize the increasing market value of the facility by borrowing against it to finance operating costs while being run by the City, as well as funding non-facility City expenditures,” Gilman wrote.

Harrisburg, a city of about 50,000, missed the final deadline on Monday to come up with a plan to block the state from taking control of the beleaguered capital city and find its own way to erase the $318 million debt tied to the incinerator revamp.

Separate from the state takeover is the possibility of bankruptcy. The city council approved a bankruptcy filing in a 4-3 vote on October 12. Federal Bankruptcy Court Judge Mary France is scheduled to decide that matter November 23.

The Harrisburg Authority hired Covanta in 2007 to finish an expensive retrofit of the incinerator started by another company, Barlow Projects Harrisburg LLC.

“At the time, the facility was not operational and was in appalling condition,” Gilman writes in his memo.

“We accepted this truly difficult undertaking and committed ourselves to upgrading the facility so that it would once again be operational, safe and profitable.”

Gilman’s internal communique says that today the incinerator is “cash positive … generating more than $7 million” for the city.

In confirming the memo’s authenticity, Covanta spokesman James Regan said its purpose was to help employees who are working to reassure clients the company is keeping its end of the agreement and is helping to make money for the city.

“I think people are happy to have had something to use and move forward with in communications,” Regan said.

“The incinerator, now, could help save the city,” he said.

Despite the fact Covanta mentions the Harrisburg Authority only once in its memo, Mayor Linda Thompson’s spokesman, Robert Philbin, said it was “a matter for the Harrisburg Authority to review.” He declined further comment.

Attempts to reach the authority for comment were not successful.

Editing by Jerry Norton

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