Most capitalists have an abiding belief that the private sector operates with greater efficiency than the government. And they’re largely correct. Government doesn’t have to worry as much about the bottom line and thus is less oriented toward fiscal prudence. Government, for example, often offers above-market compensation packages to its employees.
But if there’s one area that seems even less efficient, it’s that gray area of government — the quasi-public agencies that seem to operate with limited transparency and accountability compared to their public- or private-sector counterparts. For the most part, these entities are expected to generate revenue as a business would, but they don’t attract the kinds of entrepreneurs who can run them as efficiently as the private sector, so invariably they run into problems.
One of 11 quasi-public agencies in the state, the Connecticut Resources Recovery Authority is a case in point. We’ve all heard about the massive problems associated with quasi-government federal agencies such the U.S. Postal Service, Fannie Mae, and Freddie Mac. Those organizations made huge mistakes that would have killed off comparable private-sector companies.
But even by those low standards, CRRA is a troubled agency. Established in the early 1970s under the leadership of Gov. Tom Meskill, CRRA operated under the commendable premise that the old “town dump” model wasn’t the most environmentally friendly way to process waste and promote recycling. CRRA moved aggressively into recycling and over the years has built three trash-to-energy incinerators that produce enough electricity to power 150,000 homes. Problem is, the more recycling the authority facilitates, the less energy it produces in its profitable incinerators. In other words, CRRA is at cross purposes with itself.
But CRRA has been plagued with problems for years. In 2001, the authority made an ill-fated $220 million unsecured loan to Enron, the energy trading giant that went belly-up after a widely publicized accounting scandal. When Enron went bankrupt, CRRA raised its tipping fees to cover its losses, resulting in a protracted and costly lawsuit from 70 member towns seeking compensation for the overcharging. Six years later, the arrogant CRRA, which did eventually recover the money from Enron, was nonetheless slammed with a $35-million judgement.
And the bullying tactics didn’t stop there. A couple of years before that, CRRA had begun forcing its member towns to let it cart away recyclables from local transfer stations without paying, even if those municipalities already had deals with other paying haulers that netted the towns tens or hundreds of thousands of dollars in revenues. This angered those towns to the point that they considered arbitration. The towns backed off but the resulting ill will no doubt set the stage for the Enron litigation.
Now we learn from the Courant’s Jon Lender that fully one third of CRRA’s employees earn six-figure annual salaries. CEO and President Tom Kirk, for example, makes $292,586 a year, almost twice what Gov. Dannel P. Malloy makes.
And the authority seems perpetually entangled in the odious lobbyist/lawyer/legislator soup that permeates the Capitol. Yes, CRRA has lobbyists. Why would CRRA hire lobbyists when government agencies don’t? Just another example of quasi-public efficiency, I guess.
I’m sure I’ve forgotten to include some of CRRA’s other missteps, but the final nail in the coffin could be that, as energy prices continue to drop, revenues from its trash-to-energy plants have plummeted, resulting in millions in losses per year, even as CRRA faces capital replacement needs that will increase its overhead by $13 million in 2015. And according to DEEP Commissioner Daniel Esty, additional losses have occurred because of “a reduced volume of solid waste as a result of the diversion of materials from the waste stream.” In other words, the increased recycling the authority was promoting reduced burnable solid waste and therefore eroded CRRA’s profits. Talk about a bad business model.
Consequently, there have been calls from lawmakers and the governor for CRRA to “reinvent itself” and find new revenue streams, or face dissolution.
I vote for dissolution or receivership. It’s difficult to see how such a dysfunctional organization could reform itself from within. If they’re looking for a new leader, I hear there are former Enron executives looking for work.