The town of Orrington has no way to foreclose on the $2.5 million mortgage for a shuttered trash incinerator if the private owner stops making payments, as the two parties never entered into a mortgage agreement.
When Eagle Point Energy Center, the trash plant previously known as the Penobscot Energy Recovery Center, was most recently purchased in February 2024, Orrington said it converted $2 million in unpaid taxes and $500,000 of additional capital into a mortgage.
Evan Coleman, the majority owner of Northern Farms LLC — which has a 75 percent stake in the plant — signed a promissory note in March 2024 for monthly payments of $24,721 starting in July.
However, there is no mortgage agreement for the property between Orrington and Northern Farms LLC, according to the limited liability company contract for EPEC that both parties signed on Feb. 17, 2024. The Bangor Daily News obtained a copy of the contract from Orrington after the BDN filed a Freedom of Access Act request and then sued the town over delays in fulfilling the request.
There is no mortgage recorded in the Penobscot County Registry of Deeds.
The lack of a mortgage agreement is a “risky practice,” experts said. Without it, Orrington has no way to foreclose on the facility if Coleman stops making monthly payments to the town, which would make it more difficult for Orrington to ever recoup the $2.5 million it is owed.
If all the town has is a promissory note, and no mortgage on the underlying property, Orrington will have to sue the company if the monthly payments are not made, said Andrew Kaufman, professor and director of the Business and Transactional Law Certificate Program at the University of Maine School of Law.
“Where the [promissory] note is apparently not even effectively secured by a mortgage, the outcome here is far less predictable,” Kaufman said of the business venture.
Even if the town won a theoretical lawsuit, it would have to share EPEC’s assets with any other creditors, instead of recouping all of its money through foreclosure, Kaufman said.
“The reason for having a mortgage is you would get first dibs on the property that is subject to the mortgage, to pay off what’s owed to you before the company’s assets are used to pay anybody else without a mortgage,” Kaufman said.
While the Maine Municipal Association doesn’t have the full scope of the situation, “in general entering into an agreement without a contract that outlines the terms and conditions of the agreement is a risky practice,” said Kate Dufour, director of advocacy and communications.
Orrington has no additional comment on the advice of its legal counsel, Town Manager Chris Backman said.
There’s also ambiguity in the contract that could create additional confusion, Kaufman said.
For example, the limited liability contract between Northern Farms LLC and Orrington says in one spot that Northern Farms is responsible for providing an additional $2 million in funding. In other spots, it says a “Class A member.” Both Northern Farms and Orrington are Class A members.
That creates uncertainty around who is responsible for providing an additional $2 million funding if it’s needed, Kaufman said. It’s not uncommon to see ambiguity in contracts, he said.
In theory, the money should be provided by Northern Farms; however, an argument could be made that Orrington should provide the money, Kaufman said. That vagueness could result in both sides refusing to put in the money and the project stalling.
“When the sword starts swinging, you’re never sure which side of the sword of ambiguity you’re going to be on until the facts actually pop up,” Kaufman said.
