MedRecycler to Be Financed w/$17 Million in R.I. Tax-Exempt Bonds

by | Mar 14, 2021

Editor’s Note: The state Department of Environmental Management is holding a public hearing on Medrecycler-RI’s solid waste permit Monday, March 15, at 4 p.m. This is a time for people to comment publicly about the company’s plan. Here’s the Zoom link: https://us02web.zoom.us/j/5211383116, Meeting ID: 521 138 3116 by phone at: 1-929-205-6099.

Much has been written about the process Medrecycler-RI hopes to bring to 1600 Division Road – transforming medical waste into sludge through high heat aka pyrolysis – and the opposition the company is facing from residents as well as the East Greenwich Town Council. Less well known is how the plant is being financed.

One of the reasons owner Nick Campanella has said he’s coming to Rhode Island is because of the state’s economic development incentives. Campanella says the facility, which sits in West Warwick right over the East Greenwich line, will provide around 100 construction jobs to get the plant up and running and 30 jobs once the facility is operational.

Based on the economic development potential, the company has received preliminary approval from the R.I. Industrial Facilities Corporation (RIIFC), an arm of Rhode Island Commerce, to offer $17 million in tax-exempt bonds to interested investors. 

During a virtual question-and-answer session with the Department of Environmental Management Jan. 25, Campanella said it was “a vehicle for us to be able to issue tax-free bonds. We’re not using taxpayer dollars or money from the state.”

According to Bill Ash, head of financial services at Rhode Island Commerce, that is accurate. 

They are utilizing a program through the R.I. Industrial Facilities Corporation which provides financing to encourage economic development. 

Ash said this type of program exists in every state in the country. For-profit entities can apply for either taxable or tax-exempt bonds known as “private activity bonds.”

Tax-exempt bonds must comply with IRS rules; Ash said a company seeking tax-exempt bonds “has to pass numerous IRS tests in order to qualify for financing.” The result of those tests determines how many of the bonds could be tax exempt and how many would be taxable. 

Examples of other companies that have been granted RIIFC bond issues are Narragansett Brewing, Ash said. 

“That bond issue was insured by Industrial-Recreational Building Authority (IRBA) and in the event that the brewery fails, and no one buys the assets to continue the operation, the assets (collateral) will be sold with proceeds going to pay off the bond. In the event that the proceeds are insufficient to pay off the bonds, the state’s bond insurance will pay off the remaining balance but in no case more than $5 million dollars. The insurance payment is not an immediate payment in full, rather it is paid over the remaining life of the bond had it not failed.”

Other examples of RIIFC bond issues are Isle Brewers Guild, Key Container Corporation and Ashaway Pines Campground.

What would happen if Medrecycler-RI fails? 

Ash said defaults are “very rare. There has been one over the past decade or so.”

But even still, he said, the state would not be obligated, since the bond would not be a “moral obligation bond,” the type from the infamous 38 Studios/Curt Schilling video game company. In that instance, after 38 Studios went bankrupt, the state stepped in to pay off the bonds after bond rating agencies threatened to cut the state’s bond rating. 

“In the event that RIIFC issues a bond without IRBA insurance (as is contemplated in the MedRecycler transaction), then there is no obligation,” said Ash. “The bond buyer assumes all risk.”

Opponents to the planned facility have noted the state declined to invest in Medrecycler-RI’s parent company, Sun Pacific, over concerns about its financial situation, prompting the creation of Medrecycler. Ash said Sun Pacific would not receive any of the bond proceeds – Medrecycler will get those and the bondholders would be paid back by that entity. 

“Sun Pacific may get a share of the net income of MedRecycler and that is governed by the agreement between the bond buyer and MedRecycler,” Ash said.

He added, “RIIFC or the State of Rhode Island has no financial interest in the transaction.”

So, is the $17 million a done deal? 

No. According to Ash, the company has to first get all its IRS, state and local approvals.

Speaking of local approvals, the West Warwick Planning Board has hired EA Engineering to review the company’s application and the DEM permitting process. 

At this point, EA Engineering has initiated its review of all submission materials, observed the last RIDEM informational meeting, is reviewing all state, federal and local requirements for compliance and has been researching other similar facilities,” said West Warwick Town Planner Mark Carrulo. “EA will also observe the March 15 RIDEM Zoom public hearing. EA Engineering will be advising the Planning Board moving forward through the next stages of approval. However, there is currently no action pending for Medrecycler before the WWPB. As you are aware, the PB issued a master plan (general conceptual) approval to Medrecycler. In order to commence operations, Medrecycler still needs to obtain all of the required state and local permits and apply to the PB for preliminary and final approval. Medrecycler is not able to proceed with its next stage of PB approval (preliminary plan) unless and until it receives the necessary permits and approvals from RIDEM and other local agencies.”

Find more stories about MedRecycler-RI here:

Protesters Up Volume Against Medrecycler-RI

Caldwell, Valverde Opposed Proposed Medical Waste Facility

Public to Hear from Medrecycler Jan. 25

Town Handed 2 Legal Setbacks

West Warwick Medical Recycling Plant Would Use High Heat Technology

Town Appeals Permit for West Warwick Medical Waste Plant

EG Seeks More Input on Planned West Warwick Recycling Plant

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7 Comments

  1. Renu Englehart

    Mr. Ash’s explanation is murky at best. He answered in an affidavit that the state will hold the lease and lease back the project until the bonds are fully paid (Affidavit of William Ash 6/2/2020). There is no remedy in the the state bonds (Amended and Stated Inducement Resolution…10/24/2019)for defaults. Mr. Ash pushed this project along through Commerce Corp. for the last 3 years. None of these documents were readily available, the only way to receive them was to APRA.

    Reply
  2. Peter James

    ““The bond buyer assumes all risk.”

    It was explained by Mr Campanella that one and only individual will be purchasing ALL the bonds for the Medrecycler project.
    ..
    This ONE individual is the only one assuming any risk in case of failure..

    Local and State taxpayers assume no risk from the bonds yet receive the benefits of millions of dollars in tax revenue ,(income tax from new jobs created, property tax from the facility, and local sales tax those workers spend in the surrounding community), cheaper electricity for locals, and removal of medical waste for the environment.

    Reply
    • Jean B McLevedge

      Over the years, various types of activities have secured legislation to make tax-exempt financing available for their project. Years ago, sports stadiums were in this category. Now MedRecycler and other activities have secured legislation giving them access to tax-exempt financing. It has nothing to do with whether they are moral obligation bonds. Any tax-exempt financing structure is removing a revenue stream for the State of Rhode Island.

      Reply
      • Peter James

        Disagree, “Any tax-exempt financing structure is removing a revenue stream for the State of Rhode Island.”, it creates Rhode island revenue from wince no revenue existed before.

        State and local taxes will be paid from workers who would not be working if those jobs were not created from the bonds.

        Sale tax will be collected by Rhode Island from the money those workers will spend in the surrounding communities,

        Local and State taxes will be collected from the operation of the facility built from those bonds.

        Property taxes will be paid by those workers living in the surrounding communities.

        School taxes will be paid by the facility and those workers living in the surrounding areas.

        The above clearly shows how a tax -exempt bond creates several new revenues streams for the State of Rhode Island.that would not exist without the tax-exempt bonds..

        Reply
        • Renu Englehart

          Mr. Ash stated in his affidavit (once again) “the bond issuer (RIIFC) takes title to the project owner’s real property, which the RIIFC to the project owner until the bonds are fully paid”. The state is assuming risk IMO.

          The fact that the facility has not been able to yet been able to post a bonding for factory decommissioning or just looking at its SEC filings https://sec.report/Ticker/SNPW may be of interest.

          Reply
          • Renu Englehart

            Edited to add the RIIFC leases the project back to the owner

          • Peter James

            he added, “RIIFC or the State of Rhode Island has no financial interest in the transaction.”

            That is Mr Ash quote in the above article right?

            Doesn’t that contradict your opinion ” The state is assuming risk IMO.”

            If the state has no financial interest what actual risk is the State taking?

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