Chef Menteur Landfill Deal Audited

Remember that deal?

The new landfill, to a degree, grew out of the Gentilly settlement. As operations were scaled back there, Waste Management sought and received the conditional-use permit it needed for the new landfill from City Hall, courtesy of Mayor Ray Nagin, who in February invoked emergency powers after Katrina to waive the city's comprehensive zoning ordinance. The same day, Waste Management pledged to give 22 percent of the revenue it receives from the new facility to the cash-strapped city.

Mayor Nagin used his emergency powers to fast track a landfill in New Orleans East for Waste Management, who conveniently pledged to “donate” 22 percent of the profit to the city. Sounds sketchy?

The Department of Homeland Security, the department that oversees FEMA, thinks so and has audited the deal.

The audit says the city was double-dipping into federal funds. FEMA was paying for the debris removal. The U.S. Army Corps of Engineers would transport the debris to the Chef Menteur Landfill and would pay Waste Management to deal with it. FEMA would reimburse the USACE with federal funds. Essentially, federal funds were going into Waste Management’s pockets, which is one form of federal assistance. The city didn’t have to pay for any of the debris removal process. That is the first dip.

Then Waste Management then took 22 percent of the money the federal government paid the company and set it aside to give back to the city as a “donation.” That’s the second dip. It was like the federal government was paying the city 100 percent for debris removal at the Chef Menteur landfill plus 22 percent lagniappe. I am sure the federal government would have been much happier if the city had negotiated with WM to lower the dumping fee 22 percent, rather than kicking 22 percent of the federal funds back to the state.

Which is exactly what the auditor is asking for (pdf):

FEMA did not require the City to pay for debris removal necessitated by Hurricanes Katrina and Rita, but the City should not profit from those debris removal operations, especially when the profit (donations) appears to be at the federal government's expense. Therefore, in substance, the donations should be treated as a credit and deducted from the City's final claim for other disaster costs, effectively to reduce FEMA’s costs for the City's debris removal.

In total, the auditor is recommending $860,000 be deducted from further federal funds headed to the state.

There’s more:

The landfill operator's tipping fee for Chef Menteur was $5.00 per cubic yard, which is significantly higher than the $3.50 tipping fee at the nearby Gentilly and the $2.75 tipping fee at Highway 90. Under the donation agreement, the landfill operator is to pay the City $1.10 of the $5.00 tipping fee, which reduces his net revenue fiom the tipping fee to $3.90, an amount closer to the Gentilly tipping fee.

WM inflated its prices to receive a profit comparable to nearby landfills plus the money it would “donate” to the city. It basically added the city’s 22 percent to its normal price. That sounds more like a tax than a donation.

With the price inflation, this deal is bordering on an illegal use of federal funds. It’s a good thing the landfill’s existence did not rely on this agreement of a “donation” to the city.

Uh oh.

However, the donation agreement also says that the landfill operator will submit its calculation of the 22 percent of landfill revenues "to the City along with payment and will give the City the opportunity to validate the calculation. The Donation shall become effective upon, and continue so long as, [the landfill operator's] disposal operations continue at the landfill."

Common sense tells us that the beneficiary of a voluntary donation would not normally require the donor to (1) sign a notarized agreement, (2) submit calculation of donated amounts to the beneficiary for validation, or (3) continue donations so long as the donor operated a business that required the beneficiary's authorization. These requirements provide convincing evidence that the landfill operator's "donation" of 22 percent of gross revenues was contingent on the City's approval to operate the landfill.

The Chef Menteur landfill was a bad idea ecologically and now we are seeing that it was just a bad idea.

We’ve been C-Rayed again.