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Presque Isle Convinces Tri-Community to Give up $400K Liability Cushion
By: David Deschesne
Fort Fairfield Journal, January 31, 2018
FORT FAIRFIELD—In a display of the power they’ll be bringing to the table, Presque Isle’s representatives to Tri-Community Landfill’s merger meetings issued their first veiled edict in December, before the merger between the two landfill organizations was finally approved.
As part of the negotiations, the topic of Tri-Community’s $400,000 self-funded liability account came up. When it was suggested Presque Isle contribute their share to the account, they promptly responded that the account should be dissolved and the money returned to the owner communities of Caribou, Limestone and Fort Fairfield.
The Maine legislature has set a maximum allowable tort claim liability for landfills at $400,000. Historically, TCL had set aside that money in an escrow account, along with money to cover the cost of capital equipment expenditures and landfill closure/post-closure care. Presque Isle suggested TCL eliminate the $400,000, presumably so they wouldn’t have to contribute to it.
“The liability through the state is up to $400,000 and for many years, Tri-Community has held that $400,000 in reserve and actually it's part of the merger negotiations,” town manager, Jim Risner told the Fort Fairfield town council at their January 17 meeting. “We asked Presque Isle, you need to pony up your portion of that. Presque Isle's going why are you doing that? If you look at your reserves, you have more than enough in reserves if you're going to get sued. The probability of getting sued at all is slim. The probability of getting sued multiple times where you reach that $400,000 is even slimmer so why tie up $400,000 where you're not making any money, when the probability of needing it is so minimal and you've got the reserves anyway. So, the board discussed that over a couple of months and said if we're not going to have the $400,000 we need to disperse it before Presque Isle joins, so we're disbursing between the three current members.”
The TCL board followed Presque Isle’s direction and voted unanimously on December 22 to reduce the self-funded liability account from $400,000 to $0.00. The money was recently disbursed with Fort Fairfield receiving its share, or $92,308 on January 2, at which point it was placed into their Administrative Reserve account.
Mark Draper, Solid Waste Director for TCL said TCL had historically funded reserves for three distinct purposes, which were:
1.) To balance the current liability for the cost of eventual closure of the landfill and to maintain the landfill for at least 30 years after closure;
2.) To cover the cost for planned major capital purchases; and,
3.) For self-insurance to the extent of the tort claims limit of liability ($400,000).
The amounts necessary for each of these reserves were calculated monthly, and analyzed annually by the TCL Board during the budget process.
“In my history with TCL, each of those reserves has been fully funded. However, there was the realization that TCL would not need each of those reserves simultaneously,” Mr. Draper told the Fort Fairfield Journal. “In other words, it is highly unlikely that TCL will close the landfill, need to buy new equipment, and be sued to the $400,000 limit all at the same time. Furthermore, as a member of the Maine Municipal Association Property and Casualty Pool (our insurer), TCL is already covered against lawsuits. The Board came to this understanding as they were evaluating reserves during the negotiation process with Presque Isle.”
Mr. Draper explained State law limits TCL’s liability to $400,000, but he is not aware of any mandate that requires such a reserve. “Since the reserves were in excess of what the Board felt was necessary, they made the decision to disperse the funds to the three current owners prior to Presque Isle becoming a co-owner.”