Rocking To The Right Heavy Metal

Cheryl L. Dunson

Landfill owners keep it simple: quality, cost and usable life are the prerequisites they consider when purchasing equipment. On the other hand, the financing methods and preventive maintenance programs are as varied and prolific as the waste streams entering their facilities.

For landfill owners and managers in the public sector, financing options generally are plentiful and lucrative.

"There are more public sector purchasing strategies because governmental agencies aren't going anywhere," says Rhey Houston of Stowers Machinery Corporation in Chattanooga, Tenn. "Most equipment dealers offer governmental discounts with longer payment terms because local governments have perpetual existence. They have the power to generate revenue in the event of financial troubles unlike private companies."

Equipment vendors also have in-centives to offer discounts to the public sector, other than the short-term financial gain of a sale.

"Local governments are very visible, and the bid system makes it difficult to compete if you're offering a higher-quality product," Houston explains. "So, if you succeed in getting a local government to buy your equipment, you've really won one for your flag and [have] outdone your competitor."

Many equipment vendors offer local governments a buy-back guarantee which enables them to purchase equipment below market price, resulting in less depreciation and a stronger residual asset at the contract's end. "Essentially, we can guarantee an amount close to what the local government paid at the beginning of the payment term," Houston says.

Local governments also receive the benefit of discounts on specific models, often the "latest and greatest" in the manufacturer's product line, according to Houston. In most cases, it's a win-win situation for both the seller and purchaser: Local governments buy the equipment at a considerable discount and manufacturers get to showcase a new equipment line in a visible arena.

For private sector landfill owners and managers, financing preferences are based on corporate philosophies and cash flow needs, credit history, and the strength of preventive maintenance programs.

Various leasing programs give landfill managers the latitude to use their capital for other operating needs. But, at the end of the lease agreement, the equipment returns to the seller, leaving the user with no residual asset.

For example, Caterpillar Financial Services Corp., Nashville, Tenn., offers buyers several purchase, lease and rental plans:

* Installment Sale Contracts are adapted to the landfill manager who desires immediate equipment ownership yet wants to pay for the machine over an extended time period. A down payment or trade-in generally is required, and the purchaser receives the tax benefits of ownership. The agreement also represents the lowest total cost option for machine ownership and has the shortest repayment terms, ranging from one to five years based on the equipment's newness.

* Finance Leases allow landfill managers to own or to have the option of owning equipment under a lease. In most cases, the buyer can claim the benefits of ownership, and the repayment terms range from one to seven years. It also offers alternatives such as purchasing the equipment at the lease's end for a predetermined payment as low as $1 or a predetermined price, or returning it.

* Long-Term Rentals are for those landfill managers who want the lowest possible payment and who plan to return the equipment at the end of the lease term. Payment terms range from three to seven years, and the transaction usually qualifies for off-balance sheet financing.

* Value Option Leases are similar to a rental agreement, but the landfill managers may purchase the equipment at a predetermined price or return it at the end of the agreement.

You Bought It? Don't Break It The decision to purchase equipment is the catalyst for other considerations such as selecting vendors and determining servicing needs.

Dealing with an equipment broker can mean more personal service because of size and limited sales territory, says Eddie Reed, director of fleet maintenance and procurement for Santek Environmental Inc., Cleveland, Tenn.

"They also have an infinite number of products they can offer you because they don't have territory restrictions," he continues. "In many cases, they can offer you original equipment manufactured parts which means you're not limited to dealing with the original manufacturer of the equipment for servicing needs."

The result is lower costs for equipment and parts, but limited warranties since brokers aren't selling direct from the manufacturer.

Buying direct from a manufacturer can come at a premium, but the price tag includes longer warranties and a number of in-kind services usually not offered by brokers.

"We're bigger and busier, and our competitors may say we don't give customers the individual attention they need," Houston admits. "But, we make an effort not to let that happen. We make a habit of calling on our customers regularly, as well as offering free full-time instructors to tutor landfill managers in everything from equipment operation, maintenance, safety, management and finance."

Managing more than 60 pieces of equipment spread among the landfills Santek manages for local government, Reed says quality is paramount followed by a strong support system, especially when making new purchases for landfills in new territories.

"I want to know about the servicing dealer, the availability of parts, and the equipment population in that geographic region," Reed says. "It tells me the servicing vendor has a good parts inventory and is prepared to address any potential equipment failures. If we don't have a back-up and we have two to four days of downtime, we've lost airspace which means lost revenues."

When purchasing used equipment, Reed taps into a vast source of information offered by equipment brokers and their network of contacts. Once a potential piece of equipment has been identified, Reed insists on inspecting a number of criteria ranging from records to cosmetics.

"On used equipment, I want to check all the maintenance and replacement records. I inquire into the major components of each piece, looking for major leaks, wear and tear, and checking equipment use hours to verify its age and use.

"I also try to get a feel for the way the owner has maintained his equipment cosmetically. I can inspect the cab area and, based on its condition, I can determine whether the owner instilled pride in his operator to take care of the equipment."

The equipment's future service and maintenance needs also shape the final transaction. Many vendors offer service contracts which must be compared to the cost of providing maintenance internally.

"Generally, dealers have a unique knowledge of their products because that's all they work on," Houston says. "Our mechanics spend hours in training and are specialized."

Dealers offer service contracts not only to increase their after-market share of business associated with an equipment purchase, but also as a marketing strategy.

"The trend today in the landfill industry is partnership agreements between vendors and landfill owners and managers," Houston says. "As equipment vendors, our goal is to offer services from which landfill managers can pick and choose. The landfill manager is establishing how we do business."

Service agreements normally relate to repairs. "It can be one or a thousand items, other than repairs due to neglect or damage, but it tends to be focused on allowing us to contractually agree with the landfill manager to perform certain major service items," Houston explains.

The equipment vendor guarantees the landfill manager a fixed-cost per hour to service equipment. "We forecast the service," he says. "We take the risk and, in return, we get the business. You may know what your compactor's hourly cost is, but we have the advantage of knowing what the hourly cost of every compactor in the nation has been because we have a bigger sample size."

Imagine trying to pick a landfill site surrounded by a dozen different maps and references, and worse, each drawn to a different scale. Now, imagine a single map that contains all the information in those dozen other sources.

Once again, fiction becomes fact in today's technologically sophisticated world with the use of Geographic Information Systems (GIS), which can link electronically-based maps to huge quantities of data for map making and analysis.

The typical GIS, which can be run off of mainframes or desktop computers, starts with a base map, a computerized map of streets over which "data layers" such as fire hydrants, lamp posts, landfills and census information are added.

GIS' value lies in the ability to see all these data layers at once - map information and the information stored in other databases. For instance, in the past, you could use a database to count the fire hydrants located within a particular city. Now, using GIS, you can count the number of fire hydrants within 10 feet of any lamp post and located nearby to a zip code, street or even an exact street address.

GIS' power increases with each new data layer. Advanced GIS can dynamically link data, selecting or avoiding locations based on input from several data layers.

GIS is being used to site landfills by providing data on the location of contaminated sites such as leaking storage tanks and hazardous waste generators. Business and industry also can use GIS to locate disposal facilities near their site. In some cases, information on tipping fees and types of wastes accepted also is available.

In the future, waste managers will access GIS systems for routing and logistics planning. Databases that track trash container locations will modify transportation routes based on when the container was last visited or on whether is it full.

As residents of Northbrook, Ill., tee off on their new golf course, electricity for their homes is being generated under their spikes from refuse they have thrown away years ago.

Lake Landfill's $19 million metamorphosis into a golf course, driving range and practice tees in 1993 also was the first project in the state to produce electricity directly from landfill gas (LFG).

The 198-acre Lake Landfill site is operated by Waste Management (WMX), Oak Brook, Ill., and has served residents and businesses throughout Cook County since 1970.

When WMX was contracted to manage the landfill, it agreed to close the facility by April 1993, put the property to good community use and manage the LFG.

Upon closing, a 15-foot, compacted clay seal and a five- to seven-foot side slope topped off the landfill. Since clay surrounds all four sides and prevents the gas and leachate from escaping, landfill liners were not used. In addition, the nearby Glenview Naval Air Base stipulated that the closed landfill could be no more than 730 feet high.

As the Lake Landfill waste slowly decomposes, LFG - approximately 55 percent methane and 45 percent carbon dioxide - is captured and used to produce electricity. WMX's gas collection system includes 107 drilled boreholes and 24,000 lineal feet of piping. Pumps remove the extracted leachate and recover the landfill gas.

Site technician John Schrott, says that they removed the first set of pumps (that had working parts below the surface) due to repair problems, replacing it with a surface-driven, positive displacement piston pump, Anchor Pump, manufactured by Glen Ellyn, Ill.-based Blackhawk Environmental.

Schrott says that because the working parts are now above ground, they won't have the tendency to freeze when water levels were low, and he won't have to shut the system down to repair it.

The gas is compressed and fed into four turbines which use it as fuel and turn power generators that can produce up to 13.2 million watts of electricity, enough to meet the average needs of approximately 22,000 homes.

In addition, since everything is actively under a vacuum, flares are not used.

Lake Landfill's project has been beneficial for the surrounding area. The golf course opened for the public in late 1995, consisting of only mounds, bunkers, flat spots and fairways and has been constructed on a plateau as well as the site's side slopes.

WMX's permit prohibits trees and shrubs, protecting against roots permeating the clay seal and compromising the landfill's integrity.

The course sits approximately 30 feet above the clay cap, resting on the 300,000 cubic yards of dirt that was hauled in to build the golf course itself.