Niagara Gazette

January 8, 2013

Covanta vote expected on Thursday

By Justin Sondel
Niagara Gazette

Niagara Gazette —

A proposed tax break agreement for a local waste-to-energy company will likely come to a vote during today's meeting of the Niagara County Industrial Development Agency's board of directors.

While the proposed 15-year payment-in-lieu-of-taxes deal for Covanta Energy, Inc. in Niagara Falls has been questioned by some critics, NCIDA Chairman Henry Sloma said Tuesday he's prepared to vote on the company's application for assistance and believes his board colleagues are ready to do the same. 

Sloma said his position hasn't changed and that he believes the company needs the tax abatement package to stay competitive.

"This is what keeps them successful and keeps them in the state," Sloma said.

Covanta officials requested the tax break agreement to support plans for a $30 million expansion at its plant off 56th Street. The expansion would allow Covanta to import municipal waste by the ton from New York City by rail. 

In its project overview, the NCIDA claims the proposed plant improvements will create $38 million in "community benefits" for an estimated tax abatement of $8 million over the course of the agreement.

Amy Hope Witryol, a retired bank executive and former state senatorial candidate who spoke against approval of the tax break package during a public hearing last week, said her own analysis of information related to Covanta's operation and the NCIDA's project estimates leads her to believe the deal is bad for taxpayers in Niagara County.

She said documents related to the company's performance, including presentations for stockholders and Securities and Exchange Commission filings, suggest Covanta doesn't need public assistance to move forward with the proposed expansion.

She has been contacting NCIDA and city leaders in recent days, urging them to reconsider the deal, or at least negotiate better terms. 

"If there isn't enough information available to substantiate a reliance on the PILOT to further the project then the PILOT would just send revenue due to Niagara County taxpayers to to New Jersey," Witryol said, referencing Covanta's out-of-state headquarters. 

James Regan, a spokesperson for Covanta, said if the company does not receive the tax break from the agency it would not slow production or lay anyone off. He would not say whether the infrastructure expansion would go forward without the agreement, but that the abatement will help the company ensure jobs into the future and will raise the value of the property.

"There are still things that are undecided and that decision has yet to be made," Regan said.

The New Jersey based company made $219 million in profits in 2011, according to the company's New York Stock Exchange income statement, and $27 million in the third quarter of 2012, according to a quarterly report to stock holders.

In its 10-Q filing — documentation required from publicly traded companies by the SEC — the company suggests it needs to expand to meet demand for current contracts.

"During the first quarter of 2012 we extended a steam sale contract from 2013 to 2021 for our Niagara EfW facility," the document says. "This contract combined with new and extended contracts entered in 2011 will increase the steam demand from our customer base and will require us to invest in capital expenditures in 2012 and 2013 to install a new natural gas boiler and steam line to connect to our new customers."

Witryol submitted a letter to the NCIDA officials challenging the numbers the agency calculated for the project overview. Her calculations suggest the amount of tax savings to be $20 million and the "community benefit" to be just under $1 million over the course of the agreement.

Witryol says that the major discrepancy that she based her calculations on was the assessment of the value of the real property. 

While the city asses the property's value at $44 million, Witryol says that a press release from the company outlining the company's recent debt offering suggests that the Niagara property could be worth upwards of $130 million, meaning that the abatement would be worth much more than the agency suggests.

Regan said the figure could include a number of things not included in real property value such as contract value and equipment, but that the company was unwilling to provide specifics of the debt offering.

"The project debt on the facility doesn't equate to it's value," Regan said. "That's not correct."

Regan said the PILOT is appropriate because it will help the company retain jobs in the future and will create the opportunity for my jobs in the area by growing the infrastructure.

"The new project will actually increase the amount of taxes that go into the system," Regan said.

The agreement application also lists discrepancies in the number of jobs the project will create. The project overview says the expansion will create 23 new full-time jobs and 160 construction jobs during the course of the expansion. 

But in the application there is an addendum that says the company will create 12 jobs in the first year of the agreement and 12 in the second year. On the next page, the jobs are divided into each section of the expansion project. It lists eight jobs being created for the rail transfer facility and six to 10 being created for the special waste handling facility, meaning that, in total, the project could create as few as 14 permanent jobs.

Regan said in an email that those numbers were submitted in error and that between 11 and 19 permanent jobs will be created at the rail transfer station and between six and eight jobs will be created at the special waste facility as a result of the expansion.

The company also projects only half of the construction jobs will be created in Niagara County with 50 coming from Erie County and 30 coming from "other areas," according to the application.

While the company will get a tax break from the county if the board passes the agreement it will still pay an estimated $17 million in taxes over the course of the PILOT. The agency's goal is to create value for the community while driving business, Sloma said.

"To encourage them to go forward you want to make sure that there is some benefit to the community," Sloma said.

All board members have been provided with the comments of Witryol and other community members and will consider those comments when voting, Sloma said.

"We'll see what happens."

Mug - Sloma, Henry Henry Sloma Supports tax break