Dispute With Brewery Seen as Threat to Irwindale Bonds

Permanent financing for the proposed trash-to-energy plant here may be in jeopardy because of mounting controversy surrounding the project, according to City Manager Charles Martin.

Martin, who is scheduled to receive nearly $500,000 for his legal advice on a $395-million bond issue to finance the project, said, “I think the bonds have been put in real jeopardy. They may have been tarnished beyond repair.”

The controversy intensified this week when spokesmen for Miller Brewing Co., which opposes the plant, accused the city of threatening reprisals for disclosing Martin’s financial gain and other details of the project. City officials denied the allegation.

Martin said opposition to the plant has created so much controversy that he fears that investors will shy away from the project.

But Dennis Enright, the New York City financial consultant for Pacific Waste Management Corp., which would own and operate the Irwindale plant, said the project’s fate rests with the state Energy Commission and other regulatory agencies. “Negative publicity is not helpful” to a bond sale, he said, but “I don’t think there will be any difficulty if the permits are issued.”

An authority created by the city of Irwindale sold bonds for the project last December under a plan that reinvested the proceeds with the Federal National Mortgage Assn., the nation’s principal wholesale dealer in mortgages. The plan gives promoters until next summer to secure permits to build and operate the plant and to line up contracts with trash haulers for 3,000 tons of refuse a day. The trash would be burned to generate enough electricity to serve 40,000 homes. Revenue to repay bonds would come from dumping fees and from the sale of electricity.

Thus far, the bonds have been sold on the basis of reinvestment with the Federal National Mortgage Assn. When this temporary arrangement is replaced by a long-term financing plan, bond holders will decide whether to turn in their bonds or stay with the investment, based on the financial prospects of the waste-to-energy plant.

The site selected for the plant is in a 200-foot-deep gravel pit on the north side of the Foothill Freeway at Irwindale Avenue. Across the freeway is the Miller Brewing Co., which employs 1,000 workers in a $300-million plant opened six years ago.

Clifton E. Amos, manager of community relations at Miller headquarters in Milwaukee, said his company objects to the project for several reasons. He said the promoters have no experience with waste-to-energy projects; the plant would pollute the air; trash trucks rolling to the site would create traffic congestion, and there is at least a slight threat of ground water contamination.

Miller has hired lawyers, environmental experts and a political consultant to fight the project, spending what Amos said was “tens of thousands of dollars.”

The effort has included copying more than 13,000 documents in the files of Pacific Waste Management Corp. under an unprecedented discovery process approved by the state Energy Commission.

Laurence Peck, president of Pacific Waste, said Miller’s attorneys ostensibly were looking for documents about the proposed plant’s effect on the environment, but instead obtained and circulated all sorts of material from the company’s files.

Miller’s attorneys used some of the documents to urge the removal of Energy Commission Chairman Charles Imbrecht from the permitting process because of alleged links to the applicant. Imbrecht denied any impropriety and accused both Miller and Pacific Waste of misrepresentations.

Another document that surfaced in the discovery process showed that Martin, who serves both as city attorney and city manager of Irwindale, will receive nearly $500,000 for legal work in connection with the bond sale. Michael Montgomery, corporate counsel and a stockholder in Pacific Waste, will receive the same amount for work on the bonds, and there are large payments to other laywers and consultants.

Amos called a press conference this week to accuse an Irwindale official of threatening Miller Brewing Co. for divulging information gleaned in the discovery process. Amos said, “There is no basis to seek to have such information suppressed unless one perceives that having an informed public might be personally or politically embarrassing.”

Amos said the threat was made when Fred Lyte, Irwindale’s development consultant, met with Michael A. McAndrews, an attorney who represents Miller.

In an interview later, McAndrews said Lyte told him that police would stop all trucks entering and leaving the brewery for “safety inspections” and that charges that Miller discriminates against Latinos would be leveled unless Miller stopped disseminating information.

Lyte denied making the threats. He said he mentioned to McAndrews that years ago an Irwindale rock and gravel company had found its driveway closed after getting into a dispute with a previous city manager. He said he cited the example to show “the overreaction that can take place” when a company and city government clash. “I said I didn’t want to see that kind of thing happen,” Lyte said.

Lyte also said that he told McAndrews that the brewery has done less for Irwindale’s largely Latino population than it should, but that he did not suggest that anyone would organize an anti-Miller campaign among Latinos.

McAndrews said Lyte’s recollections “were pieces of the conversation, but small pieces.” He said there was no question in his mind that Lyte was making threats, probably with the knowledge and approval of other Irwindale officials.

Lyte insisted that he was only trying to bring the city and Miller Brewing Co. together by meeting with McAndrews, whom he regarded as a friend.

“It was a friendly attempt to hold out the olive branch, and they do a knife job,” Lyte said.

Lyte, who has earned more than $3 million as Irwindale’s development consultant since 1976, said he personally stands to gain nothing from the trash-to-energy project. He recently signed an agreement with the city redevelopment agency fixing his fee at 3% of the building permit valuation on projects he attracts to the city, but compensation for waste-to-energy projects was specifically excluded.

Although Irwindale officials said they have no intention of retaliating against Miller Brewing Co., Xavier Hermosillo, who was hired by the city as a public relations consultant for the trash-to-energy project, said this week that he had encountered prejudice against Latinos at the brewery. Hermosillo was public relations director at Miller’s Irwindale plant for four years, leaving last October to establish his own public relations agency with clients that include, among others, the makers of Coors beer.

Hermosillo said he had heard Miller officials refer to the Irwindale City Council as “a bunch of dumb Mexicans” and encountered racist attitudes “from middle management to the top.” All five members of the City Council are Latinos.

Amos said Miller has “an exemplary record” of employing Latinos, helping Latinos obtain distributorships and contributing to Latino organizations. He said 24% of the work force at the Irwindale brewery is Latino.

If Hermosillo was aware of any discrimination when he was employed at Miller, he should have reported it to his superiors, Amos said. “We would have taken immediate action.”

Hermosillo said Miller’s suggestions of police harassment might be aimed at diverting attention from what he said he observed to be one of the plant’s main problems--workers who drink free beer at the brewery during the workday and get arrested for drunk driving on the way home.

Amos denied there had been any problem with drunk driving and noted that, in any event, the brewery discontinued serving free beer at the beginning of the year and instead gives employees three cases of beer a month to take home.

Amos said one of the oddities of the Irwindale project is that the promoters have absolutely no experience in the waste-to-energy field.

The lack of experience is conceded by Pacific Waste’s parent company, Conversion Industries Inc., of Vancouver, Canada, in documents filed with the U.S. Securities & Exchange Commission. The documents said that as of June 30, the parent company and its subsidiaries had only seven full-time employes and Pacific Waste’s only material assets were its right to build and own a trash incineration facility in Irwindale and the bond financing on the project.

A prospectus filed by Conversion Industries Inc. disclosed that in addition to the $395-million bond issue, an additional $40 million will be needed to complete construction of the Irwindale plant. The tax-exempt provisions of the bond financing will prevent the company from using bond funds for certain kinds of equipment.

The total construction cost of the Irwindale plant is listed at $260 million, but the capital cost, including carrying charges and financing fees, is estimated at $547 million.

While Pacific Waste officials concede their inexperience in the waste-to-energy field, they say they will contract with experienced companies to design, build and manage the plant.

Pacific Waste has hired HDR Techserv, which has designed a number of waste-to-energy plants, to provide engineering services and manage the effort to obtain permits for the plant. The stock prospectus estimates HDR Techserv’s fee at about $2 million.

In addition to Miller Brewing Co., several legislators and city officials have gone on record against the Irwindale project. The Monrovia City Council formally declared its opposition Tuesday night. Mayor Paul A. Stuart said the project would damage air quality. Pacific Waste officials say they are confident that they can design the plant to meet state and federal air quality standards.

Residents concerned about the Irwindale plant and similar plants proposed for the Puente Hills and Spadra landfills and in the city of Azusa will hold a meeting at 7:30 tonight at Newton Junior High School, 15616 Newton St., Hacienda Heights, under sponsorship of the Hacienda Heights Improvement Assn.