Port official has business tie to city

By Joshua Benton and Homer Brickey
Blade Staff Writers

Page 11

J. Patrick Nicholson, the new vice chairman of the Toledo-Lucas County Port Authority board of directors, relies on the city of Toledo for a quarter of his business.

But he and Mayor Carty Finkbeiner say that the multi-million-dollar business deal will not give the mayor any extra sway over his port authority votes.

“I’m very friendly with the mayor, but he won’t have any extra say in how I vote because we do business with the city,” Mr. Nicholson said.

Mr. Nicholson is the chairman of N-Viro International Corp., a sludge-processing company based in Toledo.

The company has patented a process that mixes sewage sludge and kiln dust to make the sludge more environmentally acceptable and useful as fertilizer.

The firm has been in financial trouble for several years, with its stock price dropping 93 per cent since 1993.

The company’s biggest client is the city of Toledo. Every year, N-Viro treats nearly two-thirds of the city’s sludge at a cost of more than $1.2 million a year to the city.

Since 1994, the city has spent $10.1 million on sludge processing. Just under $6.5 million of that has gone to N-Viro.

Toledo provides about a quarter of N-Viro’s annual revenues.

In August, Mr. Finkbeiner tapped Mr. Nicholson to serve on the port board.

In December, Mr. Nicholson was named the board’s vice chairman.

But Mr. Nicholson said that the fact that the city is his most important client won’t make him any more pressured to follow the city’s will on port issues.

“Twenty-five per cent of our business is obviously important,” he said. “Toledo is our centerpiece, our flagship. But I don’t think the city will have any undue influence because of our business relationship.”

He said he will listen to the mayor and city council on port issues “because they appointed me, not because of our contract.”

He pointed out that he had twice turned down the mayor’s offer of a port appointment.

Mr. Finkbeiner said he will not use the city’s deal with N-Viro to try to influence Mr. Nicholson’s votes on the port board.

“I chose Pat Nicholson because he is a leader who is not afraid of criticism, and his being on the port board isn’t going to influence how we deal with his business or the other way around,” the mayor said.

He praised Mr. Nicholson’s civic leadership, which includes two previous terms on the port board in the 1970s and 1980s.

The mayor pointed out that the city’s relationship with N-Viro dates to before his first term as mayor began in 1993.

Mr. Nicholson said the first deal with the city was approved in 1988.

“As long as it continues to be cost-responsible and efficient, we’ll continue using Pat’s company,” Mr. Finkbeiner said.

N-Viro’s facility is at the Bay View sewage-treatment plant and is owned by the city.

But because N-Viro has a patent on the technology, the city would not be able to use the equipment inside the facility if it used another company.

If the city chose to build a new facility, it could cost tens of millions of dollars, Mr. Nicholson said.

N-Viro’s services are more expensive than the other sludge-treatment service the city uses, Whitehouse’s S&L Fertilizer.

N-Viro charges $38.60 per ton of sludge processed; S&L charges $36.

But Don Moline, the city’s utilities director, said that N-Viro’s treatment produces a more environmentally friendly end product than S&L’s, which uses river dredgings to treat the sludge.

N-Viro has won several national awards for the quality of its product.

“Theirs is our preferred way to go,” Mr. Moline said. “It’s the highest on the chain of options and the most environmentally responsible.”

Both services are cheaper and more environmentally friendly than the city’s third option: putting the sludge in a landfill at $38.80 a ton.

The city and N-Viro are in the process of extending their current contract, which expires at the end of 2000, for five years.

Mr. Nicholson said he was not involved in those negotiations, but he said he expects no major changes in the new deal.

Like many startup companies, N-Viro has struggled to achieve profitability in its first 5 1/2 years as a publicly traded company, which makes its Toledo contract all the more important.

N-Viro has shown losses totaling nearly $11 million since it went public.

In one year, 1994, the firm lost $7.3 million.

N-Viro turned a profit in only one year – $534,000 in 1997. It appears to have slid back into the red since then: Losses through the first three quarters of 1998 totaled $121,000.

Company financial statements and filings with the Securities and Exchange Commission depict N-Viro as a company that used many maneuvers to stay afloat – cutting back staff, cutting salaries of top executives, offering stock to creditors in lieu of payments, and doing a “reverse split” of its stock to keep the price high enough to avoid expulsion from the Nasdaq Stock Market.

A few stockholders profited early, right after N-Viro’s initial public offering in October, 1993.

The stock opened at $9.50 a share and went up to $10 a share.

But because of the effect of the “reverse split” in 1995, the stock’s adjusted price in late 1993 is figured at $40, compared with recent prices in the $2.50 per-share range.

In other words, N-Viro’s stock this week was worth about 6 per cent of what it went for 5 1/2 years ago.

By late 1995, two years after the public offering, Nasdaq was threatening to delist N-Viro’s stock because its per-share price had fallen to around $1.

N-Viro shareholders approved a 1-for-4 reverse split – meaning that shareholders got one new share for four old shares.

Since that time, N-Viro’s stock has had ups and downs, and in the last year it has traded from $1.06 to $3.56 a share.

It closed yesterday at $2.69 a share, up 19 cents, on volume of 28,800 shares.

Mr. Nicholson has taken several pay cuts since the company went public.

Although his employment contract allows him a minimum annual salary of $250,000, he drew $125,000 in 1997, and a document filed with the SEC last year said he would draw $131,250 for 1998 and “will continue to accept a reduced base salary until such time as the company’s profitability permits payment of the $250,000 annual minimum.”

For the last several years, N-Viro’s board has received stock in lieu of cash for their service. Before that, board members received about $12,000 a year in compensation.

The members of the corporation’s board, according to a filing with the SEC, are Mr. Nicholson; Terry J. Logan, a professor of agronomy at Ohio State University; Michael G. Nicholson, the company’s vice president of sales and marketing; James D. O’Neil, the company’s vice president of engineering and operations; Frederick Kurtz, president of PARCOR, Inc.; Bobby B. Carroll, president and chief executive officer of Pozzolanic Contracting and Supply Co.; B.K. Wesley Copeland, a physical chemist; Wallace G. (Jack) Irmscher, a self-employed consultant, and Charles B. Kaiser, Jr., who is retired.