WALLINGFORD — Covanta Energy has begun negotiations with the town to shut down its trash transfer plant, a move that would result in a significant loss in tax revenue for the town.
The company’s 10-acre plant, located on South Cherry Street, processes trash from Meriden, Wallingford, Cheshire, Hamden and North Haven. The company is under contract with the municipalities until 2020.
Covanta, based in New Jersey, is considering ending operations in Wallingford because it has seen a significant reduction in waste, in part due to increased recycling, according to Mayor William W. Dickinson Jr.
“It’s largely driven by their own internal economics,” Economic Development Coordinator Don Roe said.
Covanta spokesman James Regan couldn’t be reached for comment Monday.
As the host town for the plant, Wallingford receives payment in lieu of taxes from Covanta based on the tonnage of trash received at the plant, in addition to property taxes.
Last year, Covanta paid about $320,000 to the town in lieu of taxes, according to Roe. In total, the company paid about $850,000, an amount Roe said would drop significantly if the plant is shut down.
Dickinson said the loss in revenue would pose added difficulty when balancing the town budget. “Any loss in revenue is a problem,” he said.
If Covanta terminates the current contract, it could be forced to pay a buyout fee to Wallingford, an issue being discussed in negotiations, Dickinson said.
Dickinson, who chairs a policy board for the Wallingford Regional Solid Waste Project consisting of leaders from all five towns, said the towns have begun negotiations with Covanta to determine the “best course of action for all parties.”
Covanta also operates facilities in Bristol and Preston. The company has offered each municipality the opportunity to enter a contract to send trash to its Bristol plant, according to Cheshire Town Manager Michael Milone.
Relocating trash processing from Wallingford to Bristol could be advantageous for some towns, including Cheshire, Milone said.
The Bristol facility charges a smaller tipping fee, a fixed-fee paid per ton of waste processed, according to Milone. The tipping fee in Bristol is $2.88 less than in Wallingford. This difference would save Cheshire about $21,000 annually, for example.
Milone said another factor Cheshire will consider with the move to Bristol is increased costs paid to a private trash collection company. If a municipality relocates its trash processing farther away, the collection company could ask to renegotiate the current contract.
Milone also said the five municipalities established a $2 million reserve fund that could help offset any financial losses. Each municipality shares a portion of the reserve, which is determined by how much trash it produces.
Covanta officials have requested that each town decide whether it plans to relocate its trash processing to Bristol by Dec. 31.
In Wallingford, the departure by Covanta would follow other departures by corporations in recent years, Dickinson said, including Bristol-Myers Squibb Co. and Verizon, which shut down its Wallingford call center with 490 employees last month.
Dickinson said the economic impact is compounded by reductions he expects in state funding in the next fiscal year.
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