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TRIBUNE INVESTIGATION
Of big claims, insiders and a sludge plant
How the Chicago sanitary district bought into a company's dubious track recordFrom Seattle to Stickney
By David Jackson
Tribune staff reporter
September 20, 2007
Eight stories tall and sheathed in corrugated steel, the windowless tower juts above the umber lagoons of the world's largest sewage treatment plant, in west suburban Stickney.Its outer walls are painted white, but Chicago sanitary district officials use a dark nickname for this structure.They call it "the Black Box."Its four 60-foot-tall ovens are designed to each day swallow about a quarter of the district's sludge and churn out 150 tons of fertilizer. The dry pellets, small as mustard seeds, are supposed to be safe enough to spread on farms where food is grown for human consumption.District officials say the $217 million project will help protect a vital public trust: the Midwest's "inland ocean" of freshwater lakes, underground aquifers and sun-splashed rivers.But the company that won the lucrative contract did so based on questionable assurances about its executives' track record at a similar facility, government records show. At the very time one of those executives was persuading Chicago officials to hire his company, Seattle authorities were cutting short its contract. They complained about noxious fumes, fires and unreliable output.Chicago sanitary district officials never reviewed government files in Washington state to verify the claims made by the company, Metropolitan Biosolids Management LLC."I only recall one telephone conversation with the people from Chicago to discuss the project," said John Smyth, project manager for King County's Department of Natural Resources and Parks.The history of Chicago's project also is tangled by the city's old-school insider politics. Records show extensive ties between the sanitary district superintendent who championed the Black Box and the MBM executive in charge of building it today.The showcase plant is now nearly four years behind schedule. The Metropolitan Water Reclamation District of Greater Chicago plans to levy more than $1 million in late charges against MBM. In 2004, top district officials tried unsuccessfully to end the deal because of construction delays and permit disputes.District officials say the past problems have no bearing on the project's prospects and add that some of the delays came because they are closely monitoring MBM's work.The firm was created by former district General Supt. Bart Lynam, who left office in 1978 about a year after a federal jury acquitted him of corruption charges in a high-profile district bribery scandal.Lynam's current corporate partner, and MBM's majority owner, is a division of Veolia, the French-based conglomerate that calls itself the world's largest water company and a pioneer in the global trend toward privatizing government water services. Veolia was not involved in the Seattle operation.In Chicago, district officials expect operations to start in January after a 60-day test to confirm the plant's safety and effectiveness. MBM will own and operate it for 20 years, and the district will pay the $217 million in installments as sludge is processed.In a letter to the Tribune, Lynam said his Seattle plant met its contract requirements, and he called the Chicago project "a very 'green' operation for the good of the community."For Veolia, the Black Box represents a new solution to a pressing public need, and company executives say its future is untainted by Lynam's earlier, shuttered venture.Veolia's own experience, though, shows how pelletizer technology remains a tricky enterprise. In 2003, a fire nearly destroyed a Veolia plant in Toronto that officials hope to open later this year. And in Atlanta, Veolia and city officials are locked in a federal lawsuit over who is to blame for a long-stalled pelletizer project there.The company says it is constantly refining the technology. The Stickney facility, for instance, will have added fire protections and odor controls, making it far better than Lynam's Seattle operation, said Veolia Water Vice President Michael Wheeler. "We want this to be a showplace people come from all over the world to see."A well-placed advocateA first-time visitor might be forgiven for gazing up slack-jawed through the nearly finished building's grated metal floors. Its ovens shimmer with the latent power of rockets on a launching pad. Twisting feeder tubes and squat turbines are housed in a cathedral-tall cinder-block shell. The air pressure will be lowered inside to help draw dangerous fumes through a series of high-tech scrubbers."This is an important project," said the district's current general superintendent, Richard Lanyon, adding that the district needs to find ways to better recycle and even sell its treated sewage.Although the district doesn't stand to lose money in the Black Box deal, which is being financed in part by bonds issued through the Village of Hodgkins, insiders already are profiting. In addition to his role as an MBM principal, for example, Lynam runs a firm that has submitted at least $200,000 in "consulting" bills to serve as a liaison with the district and provide "technical input" and marketing, according to construction invoices examined by the Tribune. Such arrangements are not prohibited.When MBM bid for the project, Lynam found a staunch advocate in the now-deceased Chicago sanitary district chief who oversaw the Black Box contract.Hugh "Mac" McMillan had reported to Lynam at the district during the 1970s, then succeeded him as general superintendent. McMillan left the district, and during the 1980s he and Lynam both served as corporate officers of Paschen Contractors, then a major district contractor.Rejoining the district as superintendent in 1994, McMillan soon launched the Black Box as his administration's top priority. He gave it that secretive name because the district asked prospective firms to craft an innovative design but didn't tell them what sort of technology to use. At district meetings, McMillan brushed back questions about Lynam's Seattle operation, calling it a "success" and "proven technology."In December 2000, after overseeing MBM's selection as the Black Box contractor, McMillan retired to join a key Black Box subcontractor responsible for the project's engineering design, permitting and legal counsel, records show.The district has no "revolving door" policy that limits post-employment work in the private sector, so district officials say McMillan's private-sector affiliations with Lynam were not inappropriate. "It was known to us," Lanyon said of McMillan's ties to Lynam and the contract.A spokesman for Consoer Townsend Envirodyne Engineers, the subcontractor McMillan joined, said he did not work directly on the Black Box account.Lynam's letter to the Tribune said he didn't learn of McMillan's move to Consoer Townsend until after it took place. Lynam added that he and McMillan did not work together at Paschen: "In fact, we lived at opposite ends of the country. He resided in Florida."McMillan died in 2004. Today, his likeness gleams from a metal plaque outside the district office pavilion named after him on Erie Street.A bit of sewage alchemyFreshwater scarcity is emerging as one of the 21st Century's signature issues, and big cities such as Chicago are scrambling to rinse the ceaseless gush of waste from homes and factories.That urgent quest has spawned a multibillion-dollar industry, from boring deep wells that render methane gas from municipal waste to melting sewage residue into a glass aggregate that can be mixed into asphalt.But few places have the vast needs of Chicago's sanitary district. Each day, more than 1 billion gallons of wastewater sluice to one of the modern world's civil engineering marvels. At the 560-acre Stickney Works and six smaller sites, the slush is screened, dried slowly in long ponds or in rapidly spinning drums, fed to cleansing microorganisms and run through anaerobic digesters until it has the clumpy consistency of lawn soil after a spring rain.Each day, the district pays contractors about $27,000 to haul some 300 tons of this final sludge cake to landfills and farms.In the district's map-lined offices, a half-block west of Michigan Avenue's glittering boutiques, global engineering firms vie for wastewater treatment contracts alongside inventors who peddle miracle machines.Here, in 1996, then-General Supt. McMillan announced the Black Box proposal with a sobering speech."At the moment, I am not confident that we have, even today, an ability to dispose of our current production," McMillan told district commissioners.Hauling and landfill costs were soaring, and suburban residents had grown increasingly vocal about noxious fumes at Stickney and other preliminary treatment sites, he said.Like his counterparts across the country, McMillan sought an innovative technology to produce a drier product that would be cheaper to truck. While that process might leave traces of heavy metals and household chemicals, it could destroy enough pathogens to allow the district to market a fertilizer safe enough to spread on food-crop fields.With his Seattle sludge pelletizer, McMillan's friend Lynam proposed just such an alchemy.Boots-in-muck entrepreneurWorkers at Cunningham Manufacturing Co. in Seattle thought a rat had died. They ripped out the walls of an upstairs office bathroom in a vain effort to locate the stink.A few doors away in the swath of shipping firms and factories that form Seattle's South Park industrial district, United Iron Works employees started going home sick.Then 140 South Park workers signed a petition demanding that Seattle officials shut the sewage treatment plant run by Lynam's company. They said its fumes caused stomach flips, sore throats and headaches.This was the back story to the "patented technology" Lynam pitched to Chicago officials.Lynam moved to Seattle after resigning from the district in 1978. There he launched the first of three firms that partnered with giant construction and water companies to bid for government and industry contracts.Starting in the 1980s, Seattle officials were under pressure to tear down five 30-foot-tall sewage digesters stacked on an outcrop of Discovery Park, a trail-laced preserve that tumbles onto beaches rimming Puget Sound.In hopes of removing at least some of the digesters, local authorities in 1989 awarded Lynam's company a 20-year contract to build a pelletizer. But soon after he opened his South Park demonstration plant, the Puget Sound Clean Air Agency cited it for eight air-pollution regulation violations from 1992 to 1994. During that time, the agency took the unusual step of filing a civil lawsuit to force Lynam's company to comply with air-emission laws.From government records and interviews, Lynam emerges as a tireless, boots-in-the-muck entrepreneur who disputed odor complaints as he struggled to keep his experiment afloat."They really tried to make it work," said King County project manager Smyth. And so did local government officials; Smyth was assigned an "odor beeper" so he could quickly address complaints.In his letter to the Tribune, Lynam called the eight Puget Sound air-regulation violations "allegations" and said Seattle's "antiquated sewer system" was the source of any foul smells.Lynam's company, however, did acknowledge odor problems in correspondence with Washington state officials, stating that machinery breakdowns and human error caused the emissions. The firm hired odor consultants, upgraded equipment, retrained staff and at one point cut back plant hours to run only at night.In August 1994, police responding to a fire noticed a stench from 12 blocks away and "believed that there was a decaying corpse in the area," their incident report said.Nine months before the South Park demonstration contract was slated to end, Lynam's company -- then called PCL/SMI -- agreed to "terminate for convenience" and avoid default, a King County report said."They shut down before they got a shutdown order," Smyth said in an interview.For his part, Lynam said his team made improvements to the South Park plant, but "because it was a temporary facility, we agreed to end the project." His company had "gained valuable experience and knowledge," which was the plant's purpose, he said.Seattle officials still hoped to replace the Discovery Park digesters so they pressed forward with Lynam's strategy to build a second, larger plant in the park. "We decided to go ahead," Smyth said.Safety concerns stemming from two flash explosions delayed that plant's required performance tests, according to a local government report. And odor problems persisted."Smells like a sewer outside," Albert and Della Gordon said in a July 1996 complaint to the clean-air agency.Lynam told the Tribune that the odor complaints stemmed from nearby municipal pipes and said his company bolstered the facility's fire protections.Still, his fertilizer pellets sometimes came out fluffy, making them difficult to truck and spread on fields. One food grower stopped taking deliveries after tractor drivers and farmworkers complained of breathing difficulties and skin rashes. "We do not wish to put our employees at risk," John Huffman of Natural Selection Farms Inc. wrote in a May 1996 letter.Lynam told the Tribune that the dust was "pathogen free."On Nov. 13, 1996, a week after being elected governor of Washington, King County Executive Gary Locke sent Lynam a notice of termination "effective as of the date of this letter.""By ending this experiment now, we can lower rates, reduce odors and ensure environmental safety," Locke announced.In public statements about the termination of PCL/SMI's contract, King County officials said the venture was cut short "for convenience, not cause."Lynam cites that phrase as evidence that his Seattle project "met the contract requirements."But Smyth gave a different explanation. "What that essentially means is that we wanted out of the deal but didn't want to go through long and drawn-out litigation," he said.At the time the Seattle contract was canceled, Lynam told local reporters that his company had been blindsided. "This came as a complete shock to us," he said. "I know what we are doing is environmentally right. This is unquestionably the best way to do it."To this day, many Seattle officials and activists admire Lynam's intentions. "He's a publicly spirited guy. He wants to make it work for all the right reasons," said Metropolitan King County Councilmember Larry Phillips.But municipal sludge is smelly and combustible, Phillips added. "It takes time to get this perfected, and locally we just ran out of time."Even as his Seattle venture was being cut short, Lynam began laying the groundwork for a new future in Chicago.Questions raised, rejectedIn the months after McMillan announced his Black Box proposal, Lynam's PCL/SMI company was one of 27 firms that sent the district expressions of interest in bidding.On Nov. 15, 1996, two days after King County mailed Lynam its notice of termination, Chicago officials wrote Lynam to ask for "additional information" about his Seattle plant, district records show.In his response a month later and in other bid letters, Lynam said his 1990s Seattle operation "successfully" produced 60 tons of dry fertilizer pellets per day.According to government files examined by the Tribune under Washington state's Open Records Act, that facility never passed the 60-ton-per-day acceptance test required by King County authorities. It produced an average of only 41 dry tons of pellets per day during its best month.Lynam's December 1996 bid letter also said his Seattle operation "had no violations of our permits."That was true of his second plant, but the first South Park facility paid penalties for regulation violations and faced the government lawsuit. In recent interviews, Chicago district officials said they were unaware of the South Park plant's infractions."Violations always matter," General Supt. Lanyon told the Tribune. But Lanyon added that Lynam needed only his second plant to qualify Metropolitan Biosolids Management for Chicago's contract: Bidders had to have run a facility that produced 30 dry tons of treated sewage and operated for one year during the last five years; it didn't need to be currently functioning. Lynam's second Seattle venture matched those specifications.He told the Tribune that King County government officials had "made a political decision" to cut short his company's contract because pressure from a local union made it difficult for the city to supply enough sludge. In a 1997 newsletter, a union leader claimed credit for stopping Lynam's company.In interviews, though, union officials said the opposition Lynam cites did not arise until the plant's final 90-day trial period. And Smyth called those union troubles a "misleading" explanation for why the county cut short the contract. By then, he said, the union resistance was "another nail in the coffin."Back in Chicago, numerous bids were winnowed. MBM's proposal, which was significantly lower than the others, gradually advanced through several years of open competition.Finally, at a November 2000 district board meeting, Commissioner Patricia Young asked McMillan why Lynam's Seattle plant was shuttered. "Can you explain what happened with that operation, why it failed?""It did not fail," McMillan said. "We have representations from the owners of that facility -- I'm talking about the municipal agency -- that it did not fail to meet the contract requirements.""So why is it not operating anymore?""Union disputes.""Union disputes?""That's correct," McMillan said.A month later, at a December 2000 board meeting, Young offered a motion that the district adopt revolving-door hiring restrictions like those enforced by the City of Chicago and Cook County.Again, McMillan shut her down. No commissioner seconded Young's motion, so it failed.Days later, with Young as the lone dissenting vote, commissioners authorized the district to award Lynam's company the Black Box contract.----------dyjackson@tribune.com
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Labels: Chicago District Sludge Pellets
