Covanta renews incinerator contract with Chester. City’s receiver says it missed out on $10M

In Montgomery and Delaware counties, what do you wonder about the places, the people, and the culture that you want WHYY to explore?

Covanta Holding Corp., a controversial waste incineration company that has been the focus of environmental justice concerns, has extended its contract with the city of Chester for an additional three years under the same terms.

Yet pollution issues are not the reason Chester’s state-appointed receiver, Michael Doweary, is upset about the contract extension. His office asserts that the city has missed out on nearly $10 million in host fees because of a deal city officials made in June 2017 with Covanta.

“This was a situation where the city of Chester lost out on a significant amount of revenue to the benefit of the Delaware County Solid Waste Authority,” said Vijay Kapoor, chief of staff to the receiver.

The big question is why Chester officials would accept a deal in which the city loses out on millions of dollars in the first place. But in the meantime, the receiver’s office says it hopes to renegotiate with Covanta this month.

Chester has been receiving host fees for the incinerator from Covanta since 1989. The city negotiates the payment through host community agreements.

“These types of agreements are common, but there’s a host agreement in place where the whole municipality is paid a fee per ton for the amount of trash that is incinerated at the facility,” Doweary said.

The Covanta facility, formally known as the Delaware Valley Resource Recovery Center, incinerates about 3,500 tons of trash per day not only from Chester but also from towns throughout Delaware County, as well as from Philadelphia, New York, New Jersey, and Ocean City, Maryland.

Delco’s trash is handled by an independent body known as the Delaware County Solid Waste Authority, whose board members are appointed by the County Council. Waste from the solid waste authority accounts for 30% of the total trash burned in a given year — from the perspective or Covanta and the city of Chester, the authority is essentially a customer.

According to a presentation made by the receiver’s office to Chester’s Municipal Financial Recovery Advisory Committee and confirmed by the county Solid Waste Authority:

• Prior to the 2017 agreement, the host fee rate for all waste was $4.92 per ton. But afterward, the host fee for trash from the Solid Waste Authority was inexplicably lowered by nearly 60%, to just $2 per ton. To put that in historical context, the first host community agreement signed in 1989 had a host fee of $2.50 per ton.
• The Solid Waste Authority’s current host fee at the incinerator is much lower than the $5-per-ton host fee that it pays to have its ash and waste dumped at the Rolling Hills Landfill in Berks County.
• Covanta’s 2017 deal with Chester also lowered the host fee for non-Delaware County customers to $4.45 per ton.
• In the four years since then, host fees from the county Solid Waste Authority accounted for only 15% of the total fee revenue, despite contributing about 30% of the trash. The authority has saved nearly $5 million — at the city’s expense.

The receiver’s office estimates that Chester has already missed out on roughly $6 million in host fee revenue and will lose out on another $5 million if the current three-year contract extension remains in place. It says it doesn’t know why the city would negotiate a deal like this.

“That’s a question that is probably best posed to the people who were there. Obviously, the receiver wasn’t there. I wasn’t there. We weren’t at the table. We would just be speculating as to what happened and why, and I think the right people to ask are probably the people who were there,” Kapoor, the receiver’s chief of staff, said.

Who knew about the reduced host fee, and when?

Jim Warner, interim chief executive officer of the county Solid Waste Authority, confirmed for WHYY News the host fee reduction cited by the receiver’s office. Warner, who started at the authority in December 2021, said he, too, is unaware how the host fee came to be lowered.

“I do not know why it was reduced. A lot of people are curious — a lot of people want to know,” Warner said.

According to Warner, the two people at the Solid Waste Authority who would have known would be his predecessor, Joe Vasturia, and the authority’s previous solicitor, Mike Gillin — both of whom passed away last year.

Warner said he hasn’t been able to find written documentation of the reason for the reduction. One binder he has located includes notes from the negotiation, he said, but the writings assume the host fee would remain at pre-2017 levels. He said there is a “void” in the records.

“We’re negotiating with Covanta. Covanta is passing through that number to the city. As far as I can tell, there’s no direct negotiation between the authority and the city,” Warner said.

He promised that the authority will be transparent if it finds a document that explains the mystery behind the reduction. But he added that Chester officials should already know why.

“It takes two parties to agree, so the one end that agreed to it is the city of Chester, so they’re there, and they can be asked,” Warner said.

In an interview with WHYY News, Mayor Thaddeus Kirkland said the reduction was the result of negotiating tactics used by the Solid Waste Authority board appointed by the then-Republican-controlled County Council.

“The Delaware County Solid Waste Authority played a little hardball with the city and with Covanta. So much to the fact that if we did not do a contract, the city would have been in position to lose $5 million in host fees,” Kirkland said.

The mayor said the Pennsylvania Department of Community and Economic Development hired Econsult Solutions to do a financial condition assessment in 2018 that details the change. Though the report doesn’t reveal the reason for the host fee reduction, Kirkland said that the reduction itself shouldn’t be news to the receiver’s office.

Kapoor, however, said the receiver’s office was not aware of the Econsult report, which was done when the fiscally collapsing city was under the guidance of state-appointed Act 47 coordinators.

“I would say in response … that the receiver and the Act 47 coordinator are two completely different entities. Once the city was placed in receivership, the receiver was the entity and is the group that is now here in Chester and is working to get it out of the financial emergency,” Kapoor said.

Doweary and Kapoor brought up these concerns at the Jan. 25 virtual Municipal Financial Recovery Advisory Committee meeting, which led to a tense back-and-forth between receiver Doweary and Mayor Kirkland.

Kirkland wanted the city’s solicitor, Kenneth Schuster, to speak on his behalf at the meeting, but Doweary wouldn’t allow it. Kirkland responded that it was unfair to allow Kapoor a chance to speak and not Schuster.

“Do you have any questions, comments or concerns to the deal you did with Covanta in 2016 that yielded in the city losing almost $10 million?” Doweary asked Kirkland.

Kirkland came back with a jab of his own about a Covanta facility in York and the salaries of the state-appointed receiver and his staff, which he believes should be made public.

Kirkland later told WHYY News that he was upset about the interaction.

“​To try to send a false message to the community, I won’t stand for it. That does upset me. That does take me out of character. That does make me a little unhappy and have to say some things that draw attention to the truth,” Kirkland said.

To concerned city residents and advocates hoping Chester would ditch its relationship with the incinerator —  cited in a 2019 study as one of the largest polluters of its kind in the country, an assertion Covanta has repeatedly denied — the receiver was empathetic.

“We do share in the environmental concerns that have been raised. But … our focus is on the financial situation of the city. This one step should not be seen as it just makes the environmental concerns go away. This is just one incremental step into addressing the relationship between the city and Covanta,” Doweary said.

Kapoor went on to say that host fee revenues make up a significant portion of the city’s budget.

“If those revenues went away immediately, this issue would be in even more serious financial trouble than it is now,” Kapoor said.

Kirkland was less sympathetic to the pollution concerns that have been raised over the years by people whom he said “do not live in Chester.”

“If you go down to the residents who live in the city, like I do, and go right down there in that neighborhood where Covanta is, those residents will tell you that they have no issue with Covanta. They feel safe in that community,” Kirkland said.

He added that people should actually be concerned about the Delaware County Regional Water Authority plant, nearby Philadelphia International Airport, and the surrounding highways. Covanta has been a “true partner” with the city, the mayor said.

In a statement, a spokesperson for Covanta told WHYY News that it is pleased to continue the partnership with the city. The statement went on to highlight that the community host fee is four times the minimum requirement.

“​​What has not been recognized by the Receiver is that the Host Fee payments made by Covanta are $3.7 million in excess of the alternative required by Pennsylvania Act 101,” the statement read. “Covanta provided this amount every year despite the facility’s financial loss from the expiration of the Atlantic City Electric and Gas agreement in 2016. The expiration of this agreement and changes in the power markets and regulations represented a significant loss of revenue and a material loss in the facility’s profitability. We are hopeful these facts will resonate and look forward to continuing our discussions with the Receiver.”

The activist group Chester Residents Concerned for Quality Living, or CRCQL, sent WHYY News a statement expressing disappointment over a contract extension it believes doesn’t benefit the city.

“It’s unfortunate that the city has decided to continue with this same agreement at the expense of our residents’ health. CRCQL will continue to push for the clean air that is our constitutional right,” the statement read.

Issues at the Solid Waste Authority

The city of Chester, the receiver, and Covanta will be headed back to the negotiating table soon. But one of the company’s largest customers at the incinerator will also be pondering its future.

The Delaware County Solid Waste Authority’s contract with Covanta expires at the end of April. Chester residents concerned about pollution and environmental racism view this as the first step toward finally ousting the incinerator from the city.

Warner, the authority’s interim CEO, said it is facing numerous challenges, including staff shortages, distressed transportation assets, and the need for more landfill space. Covanta contract talks are only going to make things more difficult.

Though Warner would not reveal whether the authority was certain to renew the contract, he said that a transition to something different would be a hurdle.

“Delaware County is not blessed with a geographic advantage where there are landfills right nearby that are easily accessible with available capacity. So the fact is that it’s likely Covanta will play some part in the near-term future of Delaware County’s waste plans,” Warner said.

He added that the county needs the infrastructure in place if it would like to make changes. With the contract deadline coming up, the Solid Waste Authority has been in “active discussions with under what terms may some contract extension happen.”

But at this time, he said, there is no contract agreement in place.

In the past, Delaware County Council members — including former chair Brian Zidek — have acknowledged the “burden of environmental degradation” that Chester residents experience. The County Council even hosted a public meeting last year on the future of trash disposal.

A renewal of the Covanta contract would likely be seen as a departure from previous stances individual council members have taken.