SPSA chief pledges change after scathing state audit

A special report by the state Auditor of Public Accounts describes SPSA as an agency adrift, lacking a clear business plan and suffering from poor leadership, rising skepticism, heavy debts and lax oversight.

The report also says that the Southeastern Public Service Authority, which handles most trash and recycling in South Hampton Roads, spent bond money on projects not approved by its board of directors and that its staff could not fully explain where all such borrowed money had gone over the years.

"SPSA lacks a detailed, thought-out plan to implement its mission and determine exactly what businesses the authority should remain in or enter," according to one section of the 60-page document, released Friday.

Bucky Taylor, SPSA's executive director since August, said the audit "hardly is flattering." But he pledged to use its many recommendations as a guide to continuing to reform an agency that has served eight counties and cities in the region for the past 30 years.

"It's something we need to look at straight up, study and then implement the things that will help us be a better organization," Taylor said. He noted that the agency agrees with most of the findings.

Taylor replaced John Hadfield, who ran the agency for the past decade before retiring. Other top executives also have left SPSA in the past two years, including the personnel director, the public affairs director, the recycling coordinator and the operations chief.

Called a performance audit or special review, the report was requested by state Del. John A. Cosgrove, R-Chesapeake, and approved earlier this year by the Virginia General Assembly.

Since May, analysts have spent hundreds of hours poring over financial records, reviewing internal documents, interviewing agency employees and critics, and "basically trying to figure out the decisions SPSA has made over the years and why they did so," said Walter Kucharski, the state's auditor of public accounts.

The study found no wrongdoing or illegalities, Kucharski said, though he expressed concern about a lack of planning, insight, internal controls, bookkeeping and accounting.

"It's not what we're accustomed to seeing in government," he said.

Cosgrove, a former Chesapeake city councilman, frequently has questioned SPSA's policies and practices.

The report "pretty much solidifies what we've been saying for a long time now," he said: "that SPSA is a bloated, mismanaged, overly bureaucratic organization that has no chance of reforming itself in its current structure."

SPSA, he said, "has denied, denied and denied for years that they have a problem. But anyone who looks at this agency and sees 500 people doing the work of 50 knows that something's not right."

Cosgrove said he likely will seek to amend SPSA's state charter during the next legislative session, which begins in January in Richmond.

The agency owes about $234 million. But when interest is factored in, SPSA must pay about $314 million to retire its debts by 2018 - the year the agency's contracts with its member localities expire.

That number, though, does not include new borrowing, for items such as replacement trucks and equipment and improvements to its facilities.

Auditors suggest the total debt bill could reach nearly $500 million by 2018. And they question whether SPSA knows how to cope with such a tab.

Management and the board, according to the report, "have not developed a detailed plan on how they intend to repay their currently outstanding debt and new issuances over the next 10 years."

To curtail its reliance on borrowed money, SPSA two years ago sharply increased its fees for handling a ton of municipal garbage, from $57 per ton to the current $104.

The idea was to become more of a pay-as-you-go organization. Plus, SPSA needed to start socking away money to close and monitor its regional landfill in Suffolk.

But this approach has faded after just one year, the report says, and SPSA again is proposing to borrow money for capital improvements - more than $21 million this fiscal year - while setting aside less cash than promised.

Agency executives told the auditors they had no choice: Revenues are less than projected, and expenses are higher, especially at the power plant in Portsmouth.

SPSA's board of directors consists of eight voting members, one each from Virginia Beach, Norfolk, Chesapeake, Portsmouth, Suffolk, Franklin, Isle of Wight County and Southampton County. Most are elected officials with little background or expertise in the complex world of waste management.

According to the report, some members said in interviews that they received little information, training or orientation about their responsibilities, leading to a culture of board members often following what staff tells them to do.

SPSA is due to expire in 10 years. But officials still are not sure whether the agency will continue to exist as before, exist in a different form or simply dissolve. They have tried to plan for the future but have been sidetracked each time, the report says.

"They're kind of in limbo," said Kucharski, the state's top auditor. "Decisions and planning need to get done."

Scott Harper, (757) 446-2340, scott.harper@pilotonline.com