The Gov. Tom Kean – Mario Cuomo “Handshake” Deal on the Port Authority Essex County Incinerator (Part I)

I recently learned of the Center on the American Governor at Rutgers Eagleton Institute.

I had hoped that they would prominently put Gov. Christie’s record in critical historical context, particularly with respect to the Governor’s extraordinary assertion of broad executive power and his unprecedented record in both rolling back environmental regulations and in failing to pursue any new “legacy” initiatives.

My hopes were dashed. Crickets on any of that. How can a NJ based Center simply ignore our current controversial Governor?

Of course, I find this a cowardly abdication of the truth telling role of the University and the public intellectual.

But I did find and read with interest a May 14, 2013 roundtable, which I urge those interested in “history” to read, see: Environmental Policy in the Kean Administration 

 [I put “history” in quotes for a reason. Much of what I read was nostalgia, personal recollection, at best selective, and attempts at revisionist rehabilitation. But, I gave a similar homage on the Byne legacy a pass , so I can’t be too critical. The difference is that I was not around during the Byrne Administration, but was during Kean.]

Given that I joined DEP in 1985 during the first Kean term and was involved in several issues at the Gov. Office level during his tenure, and in light of the fact that the Center has solicited both oral history and rigorous policy analysis input, I thought I’d briefly share a few of those first hand experiences – more in the vein of informed oral history than rigorous policy analysis – for the historical record.

But, what I can assure readers at the outset, is that these observations are more fact and law based and meet a higher standard of accuracy than what I read in the Kean Roundtable.

Here, in a letter to John Weingart at the Center,  is Part I of what I hope to be a multi-part series: I repeat, it is not my intent to engage in rigorous historical or policy analysis here. I can document all this at a later date and would be glad to document and respond to any questions raised by readers.

Greetings John – I just came across your Center on the American Governor and read portions of the May Gov. Kean roundtable discussion.

In the interests of history, I’d like to share 3 first hand policy anecdotes of Kean environmental policy – formally – for the historical record:

1. The Kean – Mario Cuomo “handshake” deal on the Port Authority Essex County incinerator

I joined DEP in 1985 as a planner, at a time of huge growth in DEP staff. I began in the federally delegated RCRA Subtitle C (hazardous waste) program, but after 2 years, moved into the State RCRA Subtitle D (solid waste) program. Joe Wiley was my mentor.

At that time, one of the most controversial environmental issues was the siting and development of garbage incinerators. The push to incineration was driven by what was called a “landfill disposal [capacity] crisis”.

The Kean policy implementing the Solid Waste Management Act was to promote in state disposal “self sufficiency” and called for 21 individual Counties to site and develop in county disposal facilities. The Kean DEP backed “resource recovery” as the most advanced disposal technology. The Kean policy was to give counties virtually exclusive control over the solid waste planning process, including controversial capacity analysis, siting, and technology decisions. DEP essentially rubber stamped county planning decisions.

The role of recycling was minuscule because the initial 1982 Recycling Act was essentially a voluntary program. A small Office in Newark implemented the Act. That Office was headed by Mary Sheil and had virtually no role in County or DEP solid waste planning decisions.

State policy makers understood that “resource recovery” was a capital intensive technology and that there would be dramatic “rate shock” when those facilities went on line – disposal costs would increase from the $20-$30 per ton range to the $120 per ton range. A consultant, the Mitre Corp I think, produced a Report that laid this all out. That Report led to the 1985 “McEnroe” legislation (NJSA 13:1E-136 et seq) and the $168 million Resource Recovery and Solid Waste Disposal Facility Bond Act.

The McEnroe legislation had two key parts: 1) a set of disposal taxes to generate funds to support county solid waste programs (about $20 million/year) and 2) a negotiated procurement process that deregulated incineration contracts from “rate base” review by the Board of Public Utilities. The economic deregulation was designed to promote private investment by increasing private industry profits. At the same time, other federal laws (PURPA, tax laws, et al) provided subsidies to energy production from these incinerators, so it was really an all out, across the board push to develop the incineration technology.

On top of all that, stepping outside its passive role to defer to County planning decisions, in north jersey, the DEP initiated a landfill closure and “transfer station” initiative, forcing counties into high cost disposal export contracts. The DEP over-rode County primacy to impose transfer stations in several counties, including day to day management of the procurement and planning activities.

The strategy behind this initiative was not only to close environmentally polluting landfills, but also to transition and soften the “rate shock” of incineration, i.e. taxpayers would view incinerators a providing a lower cost option than transfer station export.

None of this was popular.

Public hearings on County Solid Waste Plans and DEP solid waste incinerator facility permits were attended by hundreds of people, frequently triggering protests. By the late 1980’s, that issue became a top priority of state environmental groups and was extensively covered in the media. As I recall, a group named “GREO” – Grass Roots Environmental Organization” – led by Madelene Hoffman and supported by a scientist named Peter Montague, NJ PIRG, and the NJ Environmental Federation were the lead environmental advocates on this issue.

During that time, one of my roles was to represent the DEP on the NJ State team that negotiated loan agreements to Counties under the 1985 Resource Recovery and Solid Waste Disposal Facility Bond Act. (RRSWDFBA)

This role included related project finance and planning issues, including conducting DEP reviews of County solid waste management plans; reviews of “resource recovery” contracts under the 1985 “McEnroe” negotiated procurement legislation (NJSA 13: 1 E-136 et seq); managing disbursements of several hundred million dollars in grants to Counties from “McEnroe” solid waste tax revenues; and allocation of private activity bond volume cap (PAB) to projects under federal tax laws.

The PAB allocations were made by the Treasury Department, but policy was directed and coordinated through the Governor’s Office to allocate a scarce resource along State responsibilities, including housing, economic development, and environmental projects.

I dealt frequently with Robin O’Malley in the Governor’s Office on these issues.

And I often did not agree with the policy decisions that were made. (1)

The first and biggest ($48 million) loan from the RRSWDFBA we negotiated was with Essex County.

Long story short: after about 18 months of loan negotiations, the State (Treasury, DCA, DEP, AG Office) was ready to execute the loan agreement. It was a very complex financial arrangement between Essex County, the Port Authority, and a private vendor (I think they were called American Refuel at the time, but it could have been Ogden Martin).

The State loan team was invited to McCarter & English Newark Offices to meet and formally execute the document.

Essex County was represented by a retired judge named Curtis Meanor, who chaired the meeting.

Drama emerged at literally the last minute, when the State [Deputy] Attorney General, [DAG] Nancy Stiles (since deceased) surprisingly announced that the State could NOT sign the agreement because it would violate the Constitution and federal tax laws.

The source of the legal problem was the fact that the $48 million loan agreement actually was a grant (while the RRSWDFBA was limited to low interest loans) and that it allowed for arbitrage profiteering in violation of federal tax laws.

Immediately after AG Stiles made this announcement. Mr. Meanor literally went berserk.

His pale white face turned beet red and he pounded the table, calling DAG Stiles a “little bitch” in the process.

He demanded that DAG Stiles call her boss, AG Carey Edwards, and tell him that the Essex Loan was backed by “a hand shake deal between Tom Kean and Mario Cuomo”.

We were surprised by DAG Stiles’ last minute legal objection and I was absolutely shocked by Mr. Meanor’s behavior and the Kean Cuomo claim.

DAG Stiles then directed the State team to leave the room while she called AG Edwards.

I watched DAG Stiles as she then spoke with AG Edwards. I heard only Stiles’ side of the conversation, but a few moments into that conversation, her face turned pale and – almost trembling – she said “yes sir”.

Stiles then directed the State team to reconvene with the Essex team. She then immediately announced “The State is read to sign the loan agreement”. The documents were executed andy the meeting abruptly ended.

My boss at the time, Joe Wiley was present and can confirm all this.

In fact, on the hour long car ride back to Trenton with Wiley, I asked him what the hell just went on and why the DAG signed an illegal loan agreement.

Wiley’s reply: [paraphrase] “Bill, you have a family and a promising DEP career. I’ll assign you other interesting work.”

End of part 1 – I will send 2 additional personal experiences.

#2 will be:

Meeting DEP Commissioner Dewing at DEP Employee Orientation Day

#3 will be:

DEP Commissioner Daggett and the Draft Statewide Sanitary Landfill Closure Plan

Submitted in good faith by

Bill Wolfe  10/5/13

[End note:

#4 might be:

An Inside Deal to Make Edgeboro Landfill Closure Funds Tax Exempt

“Never in my 19 years at DEP and four more at the siting commission, never was there a time I had to take a position I disagreed with.”