Berryville Mayor Tim McKinney has turned up some provocative findings documenting actions by state agencies that contributed to an $18 trash fee assessed on Carroll County landowners. Money trails lead in several directions, and some members of the six-county Ozark Mountain Solid Waste District had more reason to close the landfill than to repair and operate it.
In an interview last week, McKinney shared documents that call into question the status of the $12.3 million bond issue that allowed the OMSWD to purchase a landfill in Baxter County in 2005. The landfill closed in 2012, and a circuit judge ruled last year that all residential and business properties in the six-county area would see the fee on their property tax statements for a period estimated from 20 to 30 years.
At a public meeting on March 28 at the Berryville Community Center, the attorney for the receiver of the funds repeatedly dismissed questions referring to the bonds as unsecured “junk bonds.” Geoffrey Treece called the bonds “a legal obligation of the district,” although he acknowledged that a lawsuit might address that question.
Shortly after purchase of the landfill, the Arkansas Department of Environmental Quality changed its regulations. ADEQ had already failed in its oversight, allowing the overfilling of a cell at the landfill. The OMSWD knew of the problem, but expected an affordable solution. With new regulations, the cost of correction suddenly went from $1.7 million to $6 million, threatening the district’s ability to operate.
In June 2007, top officers of the bond company Crews & Associates sent a letter to Gov. Mike Beebe. “After 18 months of due diligence and careful analysis, we were satisfied that the OMSWD could meet all requirements of the ADEQ,” the letter said. “We were satisfied as to the financial viability of the project and underwrote the bonds.”
The letter further notes that, “If a State Agency can change requirements on an Authority AFTER [emphasis included] the Authority has provided assurances to the capital markets that all obligations have been met, the ability to access these markets in the future will be eliminated.”
The letterhead for Crews & Associates includes disclaimers at the bottom of the page: “Not a Deposit. Not FDIC Insured. May Lose Value. Not Bank Guaranteed. Not Insured by any Federal Government Agency.”
A letter to the governor from bond counsel Shepherd Russell carries other suggestions about the status of the bonds. “The bonds … are secured by landfill and other solid waste collection revenues,” he wrote, adding that ADEQ’s actions “will hurt this bond issue and cause concern for future Arkansas bond issues.”
The bond issue was not secured by a tax levy, but the circuit judge who imposed the trash fee ruled that the OMSWD should have charged a fee all along.
McKinney has served on the OMSWD since its inception. He emphasized that the district made the purchase in good faith. Owning a landfill would eliminate the long-term uncertainties that had begun to complicate solid waste disposal. Although the landfill had already encountered some problems, the OMSWD and the bond company were satisfied the landfill could operate profitably, but no one anticipated the sudden change in policy at the ADEQ or mismanagement by the Northwest Arkansas Economic Development District.
ADEQ
The ADEQ had issued a corrective order to the previous owners of the landfill because of overfilling a cell. The ADEQ then approved the transfer of the permit to the OMSWD. The district had estimated the cost of repair at $1.7 million, but those estimates soared to $6 million as the ADEQ changed its regulations. The ADEQ allowed the overfilling to develop, approved the sale of the landfill, and then passed new regulations that made the landfill inoperable. ADEQ will preside over closure of the landfill, but members of the OMSWD will pay $16 million to the ADEQ in addition to the $11.3 million still owed to bondholders.
NWAEDD
The website for the NWAEDD explains its mission “to provide leadership in planning and implementing programs to improve the quality of life in our District.”
The $12.3 million bond issue covered the purchase price of $9.8 million. The remaining $2.5 million went to the NWAEDD. That money was supposed to cover financial insurance and other fees. The sum also included the $1.7 million estimated to repair the existing problems at the landfill.
During the next several years, the NWAEDD submitted four plans to the ADEQ to correct problems, at a cost of more than a million dollars. The ADEQ rejected all four plans.
By 2009, the OMSWD removed the NWAEDD as manager. All the $2.5 million was gone, and the NWAEDD offered no accountability for where the money went. Even though problems continued to pile up, the district saw immediate savings after firing the NWAEDD.
East-West divisions
McKinney continues to explore ways that history later affected Carroll County taxpayers. Many representatives from the eastern part of the OMSWD wanted to close the landfill right from the start. For several years, haulers from Baxter County did not pay tipping fees, and Baxter County residents enjoyed artificially low rates. Those rates were renewed without approval of the board, and added to the district’s financial problems.
When the district fired the NWAEDD, McKinney became chairman for two years. He proposed hiring Santek, a large solid waste company with experience and resources. “They were the only real shot we had, somebody with deep pockets and the right people,” McKinney said. Although Santek offered an attractive proposal, the members from Baxter County said they wanted to buy the landfill back from the district. Nothing came of that prospect, except a year of delay, while revenues declined and problems mounted.
“The actions of some board members delayed this and made the closing inevitable,” McKinney said. When McKinney again proposed Santek, the eastern delegation found another delaying tactic, suggesting a smaller company.
When the OMSWD voted to default on the bonds in 2014, McKinney was in a minority who wanted to try to repair the landfill. The eastern representatives all voted to default, and McKinney said the members of the district hoped to walk away from the bond payment. As noted, the bond company had deep concerns about recovering its investment.