A deal hailed in 1981 by top city officials as an example of creative financing was scorned by Baltimore Mayor Kurt L. Schmoke yesterday as an unfair contract that is draining the city budget.
Under the deal, then-mayor William Donald Schaefer agreed to sell the city-owned Pulaski incinerator to developer Willard Hackerman for $41 million.
The arrangement, which was roundly criticized as a sweetheart deal by others when it was approved by Mr. Schaefer, requires the city to pay 85 percent of the incinerator's operating costs through at least 1996.
Mr. Schmoke said in an interview that his administration has been trying to persuade Mr. Hackerman to renegotiate the contract based on the findings of a consultant's report that shows that the city is paying millions of dollars more than it should each year for the use of the incinerator.
But the mayor said the city cannot legally break the contract, which requires Baltimore to burn a portion of its trash there.
"Our in-house people felt this was a bad deal," Mr. Schmoke said. "So we said, let's go get an outside consultant, get a third party to decide."
George G. Balog, the city's director of public works, said the city paid about $14 million last year and netted about $8.7 million in income under the contract.
Although Mr. Hackerman could not be reached for comment yesterday, the mayor said Mr. Hackerman's "financial guys dispute that this is a bad deal for the city."
Studies done by the city's Department of Public Works indicate that the Pulaski incinerator is outdated and inefficient and that the financially strapped city can save millions of dollars a year by burning its garbage at the newer BRESCO incinerator on Russell Street.
"It is an unconscionable deal for the city," Mr. Balog said. "At a very minimum, the city could save $4 million to $5 million a year if we were relieved of the Pulaski incinerator."
Mr. Balog said the city is paying more than $130 a ton to burn wastes at the incinerator, as compared with $38 a ton to burn garbage at the Baltimore Refuse Energy System Co. incinerator on Russell Street.
And the consultant's report says that the Pulaski incinerator could begin to cost the city more as tighter controls over air emissions and discharges into the sewer system force the city to pay for scrubbers and other pollution-control devices there.
Criticism of the incinerator deal began as soon as it was being considered and continued for years as its implications for the city budget became more apparent.
"There is nothing illegal about it, but it's costing us a bloody fortune," Mary Pat Clarke said in 1983. Mrs. Clarke, now City Council president, then represented the 2nd District.
In justifying the sale of the incinerator for $41 million, Charles L. Benton, who then was Baltimore's finance director and negotiated the deal, said that the city would receive a $4 million infusion of cash and that the incinerator would operate more efficiently under private management. And Mr. Benton said the city should be willing to live with the liberal terms of the contract because Mr. Hackerman had "contributed very generously to city projects," such as youth jobs programs.
But in selling the incinerator, the city forfeited control over its operating costs, which more than tripled in the first year of private ownership.
And the mortgage payments for the incinerator are considered operating expenses, which the city is obligated to pay for from its general fund.