DIGEST

CRRA and Other Quasi-Public Agencies

Background

• A Quasi-public agency (QPA) is an entity created by law as a government corporation with the power to raise and expend funds outside the government's administrative and financial controls.
• The Connecticut Resources Recovery Authority (CRRA) was established as a QPA in 1973, to develop and implement solid waste disposal, recovery, and recycling facilities.
• CRRA oversees four comprehensive solid waste disposal projects including: Mid-Connecticut, Wallingford, Bridgeport, and Southeast. Each project has its own unique legal, financial, contractual, and operational structure.
• In FY 02, CRRA had operating revenues of $157.5 million and expenses of $173.0 million. Service fees accounted for 66 percent of the revenues. Earning from the generation of electricity contributed 27 percent of the revenues.
• The principal on CRRA bonds outstanding as of June 30, 2002, was $239.0 million, of which $204.6 was backed by the state.

Problems

• A failed deal with Enron led to an estimated $24 million decrease in operating revenues for CRRA's Mid-Connecticut project in FY 02.
• CRRA lacked the administrative controls and oversight mechanisms necessary to assure compliance with the authority's own policies and procedures.
• CRRA operated under a management culture that ignored legislative policies and mandates and pursued its own interests in a somewhat ad hoc manner.

Response to Problems

• An act passed during the 2002 legislative session replaced CRRA's old board of directors with a new one effective June 1, 2002
• The new board has taken a number of steps to deal with CRRA's problems. It adopted a mission statement that emphasizes the importance of municipalities, rewrote the authority's policies and procedures to assure more accountability, worked closely with the attorney general in pursuit of money lost in the Enron deal, and selected a new president.

Alternative models

• Models for managing solid waste disposal systems include: public agency, quasi-public agency, and private industry.
• While the most popular approach appears to be the QPA model, examples of all three have been found in operation.
• None of the models considered for handling the disposal of municipal solid waste were clearly superior under all applicable criteria.

Changing models

• Changing the state's management model for solid waste disposal from a quasi-public agency to either a state agency or private sector model prior to 2015 would have to be done on a project-by-project basis and require renegotiating existing agreements with municipalities, vendors, and bondholders.

RECOMMENDATION

CRRA should be continued as a quasi-public agency through at least 2008.

At least three full years prior to the scheduled termination of the municipal service agreements governing a project, the CRRA board should form a special committee consisting of representatives of the authority and all municipalities involved in the project to develop options for disposing of solid waste at the conclusion of the existing agreement.

The options analyzed by each special committee should include turning the function over to the private sector.

Other quasi-public agencies

• The reimbursement policies now in effect at quasi-public agencies governing the personal use of vehicles, cell phones, and credit cards, preclude the need for legislative action.
• The state's quasi-public agencies are not in compliance with the spirit of C.G.S Section 1-122, or in selected instances the requirements of C.G.S. Section 1-123, governing the reporting of information to the General Assembly and the public.
• Noncompliance with reporting requirements by quasi-public agencies is made possible by the General Assembly's lack of a formal system to track and assess reports required of quasi-public agencies.
• Critical data on the financial activities and operational practices of quasi-public agencies are not developed by sources independent of the agencies.

RECOMMENDATIONS

The board of directors of each quasi-public agency identified in C.G.S. Section 1-120, if it has not already done so, should adopt written policies governing the use of vehicles, cell phones, credit cards, and such other items as the board deems necessary.

Reports required by C.G.S. Section 1-122 and Section 1-123 should be submitted to the Legislative Program Review and Investigations Committee for an assessment as to whether the reports meet the statutory requirements. Within 30 days of receiving a report, the program review committee should notify those designated to receive the report of its availability and the committee's assessment of the report's compliance with legislative intent.

The State Auditors of Public Accounts shall be responsible for performing or contracting for the performance of all compliance and financial audits of the quasi-public agencies identified in C.G.S. Section 1-120. Each quasi-public agency shall annually pay the state auditors for the cost of the audits, whether performed by in-house audit staff or through a contract with an outside audit firm.