The MOSA board on Thursday moved ahead with preparations to sue Montgomery County for not living up to its end of the trash authority’s service agreement.
At the same meeting, however, the board ignored the strong objections of its own attorney and voted against a measure affirming that the service agreement itself is legal and valid.
At issue is Montgomery County’s refusal to pay a $171,369 penalty it owes the Montgomery-Otsego-Schoharie Solid Waste Management Authority for not dumping enough trash.
The public authority is responsible for getting rid of roughly 117,000 tons of garbage created in the three counties. Montgomery County in 2007 fell 1,731 tons short of its obligation to deliver 90 percent of the estimated waste generated in its borders, but the service agreement binding the three counties requires full payment for that waste regardless.
Citing “years prior” in which they believed a portion of transportation and disposal costs were forgiven in some instances, the Montgomery County Board of Supervisors earlier this week resolved to pay only $69,621.
That action was a violation of the service agreement, MOSA bond attorney Christine Chale said Thursday.
Chale said the service agreement, created at MOSA’s inception, is a contract that bankers needed for assurance they would be paid back the money they loaned MOSA to close Montgomery County landfills and establish facilities to collect garbage.
MOSA governing board chairman Ed Wesnofske presented a resolution calling for board members to acknowledge the service agreement itself is legal and valid. The board refused and also moved to require that a bond attorney other than Chale review whether the service agreement requires the counties to pay shortfall bills in their entirety. The board wants the second legal opinion before deciding whether to sue; it set a 30-day deadline for obtaining this.
Chale said the decisions were so serious as they relate to MOSA’s guarantee to bondholders that she is legally required to report them to the companies that sell and insure the bonds.
John Thayer, a Montgomery County representative on the MOSA board who argued for allowing Montgomery County to pay only a portion of its bill, said he did not like the fact that the resolution was presented.
Schoharie County representative Phil Skowfoe said he felt like he was being bullied into agreeing the service agreement was legal and valid.
During discussions, Chale cautioned MOSA board members that the resolutions declaring the validity of the service agreement and that of the trust indentures securing the bonds were not necessary because they were simply stating fact.
Skowfoe, one of four board members voting “no,” cited Chale’s statement that the resolutions were not necessary.
“I voted no because it wasn’t needed,” Skowfoe said.
“The chairman of the board put us all in an awkward position without any forewarning,” Skowfoe said.
Wesnofske said any board member can make motions as well as ask to amend resolutions.
Montgomery County representatives Olga Podmajersky, John Mattas and Thayer all voted no on the resolution, and they did the same in the next resolution “acknowledging and declaring the legality and validity of the authority’s trust indentures.”
In a credit profile report issued at the end of 2007, Standard & Poor’s upgraded MOSA’s bond rating from BBB+ to A- with a stable outlook, according to the report provided by Standard & Poor’s senior marketing manager, Christopher Mortell.
In more than one instance, the credit rating report cites the service agreement as grounds to consider the MOSA bonds stable, or worth buying in terms of investors.
“There are service agreements in place with Montgomery, Otsego and Schoharie counties that require each county to guarantee tonnage on an annual basis sufficient to support MOSA’s operations, maintenance and debt service,” the report states.
The “stable” outlook for the bonds reflects “MOSA’s adequate debt service coverage and strong overall reserve position,” according to the report.
In addition to about $8.5 million in reserve funds, analysts provided a stable outlook for the bonds because “Standard & Poor’s Ratings Services expects the member counties to fulfil their service agreement obligations,” the report states.
MOSA’s bonds are insured by MBIA, a financial institution with a core business in “credit enhancement of municipal bonds and structured financing,” according to its Web site.
Elizabeth James, vice president for corporate communications at MBIA, provided a statement reading: “MBIA is carefully monitoring its exposure to the Montgomery-Otsego-Schoharie [MOSA] Solid Waste Management Authority. However, bondholders of MBIA-insured credits can rest assured that they will receive full principal and interest on a timely basis.”
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