Camden County's trash authority will avoid defaulting on a final $25 million bond payment due Wednesday after reaching an agreement with the New Jersey Department of Environmental Protection on Monday.

The agreement authorizes the authority to divert $18.1 million from two accounts that had been restricted for closing costs of the Pennsauken Landfill. The authority would use an additional $5 million already on hand, while the state would chip in $2.1 million.

The 11th-hour move prevents a rare municipal bond default that observers predicted could lead to years of lawsuits and higher borrowing costs for the state or other authorities.

"The most significant thing is this is done without cost to the Camden County taxpayer," said William Tambussi, solicitor of the Pollution Control Financing Authority of Camden County, on Monday evening.

But New Jersey taxpayers could still be on the hook for the debt in coming years.

New Jersey Treasurer Andrew Sidamon-Eristoff wrote in a letter to the authority Monday that his office would recommend that future budgets set aside money to help the PCFACC reimburse the landfill closure accounts, adding that neither the governor nor the Legislature would be obligated to include the money in the state spending plan.

State taxpayers already have provided $152 million since 1999 to keep Camden County's troubled trash authority afloat. The authority owns the land and a private company owns and operates the trash incinerator on the land. The state subsidies have helped the authority pay off the debt on the incinerator, with which it has an agreement to process the garbage for all but one of the county's 37 towns.

The trash plant was built in the early 1990s after the state directed counties to dispose of their garbage within county borders. Camden County's incinerator slashed its rates to stay competitive after court rulings in the late 1990s opened up the state's trash market to outside competition, but couldn't take in enough revenues to cover the debt incurred to build it.

The state then began subsidizing debt payments for Camden County and other trash facilities, doling out more to Camden County than anywhere else. But the state, facing its own fiscal crisis, didn't budget enough for the incinerator's final balloon payment to investors this year.

Officials worked throughout Thanksgiving weekend to come to a resolution.

The authority convened an emergency meeting Monday night, voting to authorize deputy executive director David Luthman to formally execute the agreement with the state.

Contact staff writer Maya Rao

at 856-779-3220 or mrao@phillynews.com.