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Electric contract may be worth millions for city

May 16, 2002|BY DAN KULIN /Staff Writer

dank@herald-mail.com

The new owner of the paper recycling plant in Hagerstown has accepted an electric-service contract from the city that includes a surcharge that could be worth about $4.2 million over 20 years, city Finance Director Al Martin said Wednesday.

The surcharge covers the cost, plus interest, of about $2.8 million the city is owed for building an electric substation and upgrading power lines at the plant, as well as other unpaid charges, Martin said.

The 20-year contract between plant owner Newstech MD and the city also gives Newstech MD a special electricity rate, Light Department Manager Terry Weaver said. City Light electric rates are generally set to charge customers lower rates the more power they use, Weaver said.

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The contract with Newstech MD is identical to the city's agreement with the former plant owner, Weaver said.

"Newstech looked at the contract, liked it and accepted it," Weaver said.

Newstech MD officials could not be reached for comment Wednesday.

In January, Mark Roseborough, then a vice president at Newstech's parent company Belkorp Industries, said the plant could be running by the end of the year.

Belkorp, which is based in Vancouver, bought the plant for $7.5 million at a bankruptcy auction in November.

At that time, city officials said they were hoping the sale of the plant meant it would be restarted, and the debt to the city paid.

The $220 million recycling plant at the corner of Memorial and Eastern boulevards has been known as 1st Urban Fiber and Hagerstown Fiber. The plant opened in October 1996 and was in operation for less than a year. In December 1998, an involuntary bankruptcy petition was filed in court against the ownership group, Hagerstown Fiber Limited Partnership.

"With the bankruptcy, there was a possibility (the city) could have lost all the money (invested) in the substation, and a very good customer," Weaver said.

He said the agreement is a "great deal for the city."

"The agreement ensures the city will be able to recover its investment in the substation and supply lines," Mayor William M. Breichner said.

Weaver said the money received from the surcharge will go into the Light Fund's cash balance, some of which was used to pay for the previous upgrades.

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