LANDFILLS: Creative Financing Helps Landfills Strapped For Cash

Chuck Satchwill

Using a unique construction bidding process, an Ohio waste authority has developed a financing approach that is allowing it to expand an existing landfill while maintaining a positive cash flow.

The Solid Waste Authority of Central Ohio owns and operates the Franklin County Sanitary Landfill near Columbus, Ohio. Currently, the authority is constructing the landfill's sixth and final phase, covering approximately 16 acres and including more than 1.5 million tons of air space.

Ordinarily, a construction project of this magnitude requires large sums of money to pay several contractors as each work segment is completed. However, with the assistance of SCS Engineers, Cincinnati, the authority will implement an alternative financing process.

Rather than individually contracting each service for Phase VI, the authority hired a single contractor for construction and subsequent operation of the facility. The winning bidder, Laidlaw Waste Systems, Burlington, Ontario, subcontracted all labor, is overseeing construction and will assume responsibility for the facility's day-to-day operation. When the facility is fully operational, the authority will pay the builder/operator by reimbursing the firm for its costs.

In the reimbursement process, the authority will pay the contracting firm the bid rate for each ton of incoming refuse plus a construction surcharge. The surcharge is based on the construction bid price divided by the total air space contained in the phase. For this portion of the contract, the construction surcharge will be $1.73 per ton on all waste disposed at the facility. This surcharge will continue until the cost of construction has been fully recovered. After that time, the authority will continue to pay the per-ton rate for the remainder of the site life. At the current rate of waste inflow to the landfill, it will take approximately 18 months for the contractor to receive full payment for the construction of Phase Vl.

Four contractors responded to the advertisement for bids. Such a positive response indicates the contractors' willingness to consider innovative ways of doing business, according to project engineers. Laidlaw was selected based on its low bid and its history with the authority. It is difficult to compare the cost of financing construction using this method versus conventional financing. Undoubtedly, the companies included the cost of financing in their bids.

This bidding method has several advantages. For example, the Solid Waste Authority of Central Ohio can finance the expansion, begin to operate the current phase and avoid depleting scarce funds. The winning contractor can make a profit on the subcontracted services and realize long-term income from the landfill operation. Finally, the taxpayers are assured that their wastes are properly disposed at the lowest possible cost.

As landfills struggle with limited funds to finance capital improvements, creative approaches like Franklin County's may offer relief.