In re Sullivan County Regional Refuse Disposal Dist.
| Decision Date | 24 February 1994 |
| Docket Number | 93-12639.,Bankruptcy No. 93-12640-JEY |
| Citation | 165 BR 60 |
| Parties | In re SULLIVAN COUNTY REGIONAL REFUSE DISPOSAL DISTRICT, Debtor. In re SOUTHERN WINDSOR/WINDHAM COUNTIES SOLID WASTE MANAGEMENT DISTRICT, Debtor. |
| Court | U.S. Bankruptcy Court — District of New Hampshire |
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Harold T. Judd, Asst. Atty. Gen., Concord, NH, for State of N.H.
Frank Spinella Jr., Hibbard & Spinella, Concord, NH, for Mirra Co., Inc.
Jeffrey L. Jonas, Boston, MA, for Brown, Rudnick, Freed & Gesmer.
William S. Gannon, Wadleigh, Starr Offices, Manchester, NH, Diane M. Puckhaber, Rogers & Puckhaber, Concord, NH, of City of Claremont.
Joseph D. Leverone, Manchester, NH, for Hargo Industries.
David Kibbey, Newport, NH, Business and Industries, Kenneth A. Colburn, Concord, NH, for interested parties.
David A. Sears, Peabody & Brown, Manchester, NH, for debtor.
Robert A. Olson, Brown, Olson & Wilson, Concord, NH, for Sullivan County Regional Refuse Disposal.
John M. Sullivan, Sulloway, Hollis & Soden, Concord, NH, Christopher T. Katucki, Goodwin, Proctor & Hoar, Boston, MA, for Wheelabrator Claremont Co., L.P.
Jess T. Schwidde, Glinka & Schwidde, Rutland, VT, Bruce A. Harwood, Sheehan, Phinney, Bass & Green, Manchester, NH, for Town of Ludlow, Vt.
Frederick Coolbroth, Devine, Millimet & Branch, Manchester, NH, for Calvert Tax-Free Reserves Vt. Portfolio.
This case presents the Court with a series of complex questions regarding whether the above-named municipal debtors should be permitted to remain in the bankruptcy court under their chapter 9 petitions. The record establishes that the debtors did not exercise pre-bankruptcy their assessment powers to require their member municipalities to contribute, through tax levies or otherwise, sufficient monies to meet a burgeoning debt of some $1,133,442.61 as of the filing date in unpaid service fees for usage of an incinerator facility. The incinerator was constructed by a private party under a joint venture agreement between the debtors and the facility operator.
Those central facts are at the heart of a number of the issues raised by the objecting parties to these chapter 9 petitions. This case involves a manifestation of the recent trend to "privatization" joint venture agreements between municipalities and private parties willing to provide capital improvements that would otherwise require taxation or direct bonded indebtedness by the municipalities. As such, it raises significant questions with regard to the appropriate treatment of the financial obligations involved when disputes arise between the parties — including when resort to chapter 9 relief under the federal Bankruptcy Code is warranted and permissible in such situations.
On September 16, 1993, the Sullivan County Regional Refuse Disposal District and the Southern Windsor/Windsor Counties Solid Waste Management District each filed a chapter 9 petition with this Court. The Sullivan County Regional Refuse Disposal District and the Southern Windsor/Windham Counties Solid Waste Management District are each solid waste disposal Districts formed pursuant to the requirements of the New Hampshire Waste Management Act and the Vermont Solid Waste Disposal Act respectively.1
The Sullivan County District consists of 15 towns and cities in New Hampshire as member municipalities.2 The Windsor Counties District consists of 14 Vermont towns and cities as member municipalities.3 The case was filed in New Hampshire since the Districts' financial problems relate to a "waste-to-energy" incineration plant constructed in Claremont, New Hampshire, under a joint venture contract between the Districts and a predecessor company to the present plant owner and operator, Wheelabrator Claremont Co., L.P. (hereinafter referred to as "Wheelabrator").
The two districts operate collectively pursuant to the NH/VT Solid Waste Cooperative Agreement under the trade name of the "New Hampshire/Vermont Solid Waste Project" which has been generally referred to as the "Project" by the parties both inside and outside this Court proceeding.4 The "Project" was organized in March of 1982 for the purpose of providing for the disposal of solid waste for the 29 communities making up the membership of the districts. The record is clear that the "Project" is not a separate legal entity although "it" apparently hires employees, maintains bank accounts, and issues correspondence and financial reports in its own name. This Court will eschew reference to a nonentity — whether named or not — and will deal with the District entities as the debtors actually before it.
As of the date of the filing of the chapter 9 petitions on September 16, 1993 the schedules indicate that the debtors have total liabilities of approximately $1,330,000 (excluding bonded indebtedness) comprised of the service fee debt of $1,133,442.61 owing to Wheelabrator; secured claims of approximately $19,000; priority claims of approximately $3,000; and trade debt of approximately $175,0005.
At the date of filing the debtors had approximately $750,000 unencumbered cash on hand.6 However, the debtors had coming due in December of 1993 a payment on outstanding bond indebtedness of approximately $800,000. The latter relates to the outstanding bonds in the principal amount of $2,450,000 held by the Calvert Funds. The total outstanding bonded indebtedness of the debtors' Districts at the date of filing was $4,950,000.
On September 22, 1993, Wheelabrator filed a "Motion to Dismiss and Objection to Entry of an Order for Relief." (see Court Doc. No. 6). On October 27, 1993 a bondholder's representative filed an "Objection by Calvert Funds to Chapter 9 Petitions."7 (see Court Doc. No. 3). Also on October 27th, the State of New Hampshire filed an "Objection of State of New Hampshire to Chapter 9 Petitions" (see Court Doc. No. 40). Additionally, on November 5, 1993, the Business and Industry Association of New Hampshire filed a "Statement In Support of Motion to Dismiss and Objection to Entry of an Order for Relief' (see Court Doc. No. 53).
As noted above, the two debtors involved in this case are solid waste districts organized under federal and state legislation encouraging municipalities to band together in such districts to take care of the pressing environmental problem of disposal of solid waste of the coalition. The objective is to act on a joint and unified basis to share costs and eliminate duplication of services on a hopefully more economic basis to meet the increasing challenge of the waste disposal problem. N.H.Rev.Stat.Ann. § 53-D (1991); Vt.Stat. Ann. tit. 10, § 1201, et seq. (1992).
The New Hampshire District, the Sullivan County Regional Refuse Disposal District, was organized by a creation document executed on December 17, 1981 (see Exhibit 107). The Vermont District, Southern Windsor/Windham Counties Solid Waste Management District, was organized by a creation document executed on December 16, 1981 (see Exhibit 107(a)).
On April 12, 1985 the two Districts acting as the NH/VT Project entered into a "Waste Disposal Agreement" between themselves and NH/VT Energy Recovery Corporation, a New Hampshire Corporation, which among other things provided for the designing and building of a "waste-to-energy" incinerator facility to provide for disposal of solid waste from the member municipalities in addition to their landfill operations. (See Court Doc. No. 31).
On July 1, 1985 the parties executed an amendment to the Waste Disposal Agreement under which the original corporate party was replaced by SES Claremont Company LP (see Court Doc. No. 31) and a further separate Amendment on July 1, 1985 making various miscellaneous changes to the substantive terms of the original agreement (see Court Doc. No. 31). Subsequent to 1985, and prior to the commencement of the chapter 9 proceedings in this Court, the position of SES Claremont Company LP under the Waste Disposal Agreement was taken over by Wheelabrator, one of the parties moving for dismissal of these chapter 9 proceedings.
Under the terms of the Waste Disposal Agreement the Districts were required, through their member towns and cities and otherwise, to deliver a guaranteed annual tonnage (GAT) of solid waste for the incinerator facility each year and to pay a service fee for the use and reservation of the capacity of the facility. (See Court Doc. No. 31; Waste Disposal Agreement ¶ 6.2). The Agreement provides for collection of "service fees" for the use of the incinerator at stipulated rates. (See Court Doc. No. 31, Waste Disposal Agreement, ¶ 6.4). The Agreement further provides in paragraph 6.7(b) an absolute obligation to pay these fees for the minimum tons stipulated or actual tons delivered, if greater, as follows:
The Districts acknowledge and agree that their obligation to pay all amounts payable to the Company, or on behalf of the Company to the Trustee, pursuant to the terms of this Agreement shall be absolute and unconditional under any and all circumstances, shall not be subject to any counterclaim, setoff, deduction, abatement or defense based upon any claim the Districts may have against the Company and shall remain in full force and effect without regard to, and shall not be released, discharged or in any way affected by, any circumstance or condition (whether or not the Districts shall have knowledge or notice thereof).
(See Court Doc. No. 31, Waste Disposal Agreement ¶ 6.7).
The original agreements between the Districts and the member municipalities empower the Districts to assess the member municipalities for any shortfall in meeting their operational liabilities if the Districts' revenues are otherwise insufficient.8 The stipulated procedure was a two-stage process in which the "joint meeting" of the Districts would first address the question of a cash shortfall and, if appropriate, recommend assessment which...
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