Where there's smoke

Audit says Detroit is owed millions by incinerator authority

Feb 23, 2011 at 12:00 am

For the past several years this rag has been trying to keep a close eye on the Greater Detroit Resource Recovery Authority, which oversees disposal of the city's municipal waste.

Our initial impetus involved questions about the waste-to-energy incinerator, where GDRRA sends Detroit's garbage to be burned. Along with health and environmental issues, activists seeking to have the city cut its ties to the facility have long maintained that it isn't financially viable.

These same activists have also repeatedly claimed that there is a woeful lack of transparency in the way the GDRRA board — all city officials appointed by the mayor — operates.

Which brings us to John Prymack, who is the hired director of GDRRA.

On Tuesday, News Hits sent Mr. Prymack an e-mail asking him about some scuttlebutt going around that GDRRA has overcharged the city more than $44 million. We were told that the problem related to what are known as "tipping fees" — the amount the incinerator's operators charge to have trash disposed at the facility.

We asked Prymack if there was any truth to the rumor. He responded almost immediately, phoning to say there was "no truth whatsoever" to the allegation.

And so we contacted the original source, who provided us with a copy of an audit conducted by the firm PricewaterhouseCoopers. A cover letter on the document, which was sent to the GDRRA board of directors, is dated Nov. 8, 2010.

Early on in the document is a narrative overview provided by GDRRA itself. On Page 3 is this statement:

"The largest portion of current liabilities as of June 30, 2010, and 2009 are due to the City of Detroit for $21,703,645 and $22,554,159, respectively. In 2009, the Authority received tipping fee revenues from the city of Detroit in excess of debt service requirements and has recorded those overpayments as funds owed to the city."

Doesn't seem to be much equivocation there, does it?

We e-mailed Prymack a copy of that statement, and asked him to explain the discrepancy between what's stated in the audit and his "no truth whatsoever" statement to us. Maybe we're misreading the situation entirely, but as of press time, we were still waiting to hear back from him.

While the good news for the city is that it could be owed a $44 million windfall, the bad news may be that there appears that GDRRA — which is entirely funded by the fees it charges Detroit to oversee its garbage disposal, doesn't have the money to repay it.

According to the audit, GDRRA's net assets, as of 2010, total just $34.7 million. The bulk of that is about $28 million in escrow funds being held by DTE, which buys electricity generated at the incinerator. Those funds are supposed to help guarantee the facility remains in operation until 2024; the escrow money, in theory, is being held to cover any potential higher costs to ratepayers if incinerator electricity is no longer available.

But GDRRA has been promising that the escrow money will be turned over to the city, and is working with DTE and the state's Public Service Commission to have those funds released early. In fact, $20 million in escrow money is included as revenue in the current city budget.

There's never been any mention of that escrow money being tied to this newly revealed $44 million that GDRRA apparently owes the city.

So there are some big questions here, and we're not the only one to have them. Councilmember Ken Cockrel Jr. raises them in a Jan. 19 letter sent to Prymack and Al Fields, the group executive in charge of utilities for the Bing administration and the chair of the GDRRA board.

(Cockrel, in his letter, talks about both the 2009 and 2010 figures, but says that as of the end of the 2010 fiscal year, the amount that GDRRA apparently owes the city is just $21.7 million, and not $44 million. As of press time we are unable to explain the discrepancy.)

Whatever the total, though, Cockrel wants GDRAA to cough up what's apparently owed.

"How do you plan, given the Authority's balance sheet, to repay these tipping fee overcharges to the city of Detroit, and over what time period?"

Kudos to Ken for seeking a direct answer to a direct question. We look forward to seeing the responses.

Here are some other questions that need to be asked: Where did that $44 million go? Who's responsible for making an error that large, and what will be the consequences once that's determined?

Brad van Guilder, who works at the nonprofit Ecology Center in Ann Arbor, is one of the activists who have long been bird-dogging GDRRA. He and others have consistently complained about the difficulty in getting reliable information from the authority.

This latest revelation may be a tipping point.

"There has been a lot of questionable activity at GDRRA all along," he contends. "There's long been a lack of transparency in terms of access to documents. We had to fight for years just to get notice of when meetings were being held."

Now, he adds, would be a good time to have an independent forensic audit conducted to find out what exactly is going on, and where that $44 million went.

On the other hand, we could all just believe John Prymack when he says there's really no truth whatsoever to all this.