A New York company has revived its offer to buy SPSA outright, for at least $205 million, and privatize all trash and recycling services in South Hampton Roads.
The new offer from ReEnergy Holdings LLC, based in Albany, comes as the Southeastern Public Service Authority struggles to survive a tidal wave of debts, shrinking revenues, critical audits and increasing private competition after 30 years as the region's garbage-disposal agency.
ReEnergy made a similar, but less detailed, bid for SPSA in August. But its proposal was rejected by agency leaders without even a public vote.
This time, though, ReEnergy has teamed up with local business partners and is finding a more receptive audience among the eight communities served by SPSA: Virginia Beach, Norfolk, Portsmouth, Chesapeake, Suffolk, Franklin, Southampton County and Isle of Wight County.
Vincent Mastracco Jr., an attorney with Kaufman & Canoles, a Norfolk law firm representing ReEnergy, said the new offer would be rich enough to retire all outstanding SPSA debts, and would result in much lower disposal fees within two or three years. The tipping fees at SPSA today are $104 per ton of garbage, making them some of the highest in the nation.
ReEnergy, Mastracco said, wants to buy all of SPSA's assets, including the regional landfill in Suffolk and nine transfer stations, and it would invest millions to improve the waste-to-energy power plant in Portsmouth.
The company proposes to sign 20-year service contracts with each of the member communities, he said, and would financially encourage localities to recycle more of their garbage - a contrast to the current system, which tries to collect as much trash as possible for incineration or burial.
"It's time we do things differently in this region," Mastracco said.
Bucky Taylor, SPSA's executive director, said his agency has received the new offer and is considering it, among other alternatives.
Several local officials said they have met personally with ReEnergy representatives but still have many questions.
"It might look real attractive in the short run," said Betty Jean Meyer, a Chesapeake deputy city manager, "but we're not so sure about the long run. But we're giving it due diligence; it's on the table."
Taylor said "a strong likelihood" exists that if SPSA's board of directors decides to sell everything to the private sector, other offers from other waste companies would follow, likely leading to a bidding war.
Started in the 1970s, SPSA today is about $240 million in debt and faces a $16 million budget shortfall this year. It is weighing bids from two private companies for purchasing the waste-to-energy plant that burns about half of all of SPSA's trash, and intends to sell equipment and shutter a yard-waste facility in Virginia Beach next month.
ReEnergy's "team" consists of its core staff in New York along with Kaufman & Canoles, bond attorneys from the firm Edwards Angell Palmer & Dodge, and Waste Industries USA Inc., a private trash company that does business in Virginia, North Carolina and other Southeast states.
Waste Industries is perhaps best known locally as the developer of a proposed megalandfill, known as Black Bear, just across the Chesapeake border in northeast North Carolina. That project, however, has been derailed by concerns among lawmakers in the Tarh eel State.
ReEnergy itself was created just this year as a subsidiary of Riverstone Holdings LLC, an investment firm. ReEnergy wants to acquire waste and biomass facilities and is currently bidding to take over such energy plants on the East Coast, according to its Web site.
According to its written proposal, ReEnergy would purchase SPSA and retire its debts with cash and by borrowing money through new tax-exempt bonds.
Mastracco said the company would likely pay more than its published $205 million price for SPSA - "maybe 10 or 15 percent more," given changing economic and debt conditions.
ReEnergy has asked SPSA to make a decision on its offer by June 30, saying in its proposal that "time is of the essence."
Scott Harper, (757) 446-2340, scott.harper@pilotonline.com
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Private Enterprise - Monopoly
SPSA had a monopoly only because they used the power of government to force us all to use them. But if RE buys the transfer stations, WTE and landfill, they will be one of 4 options for the cities and businesses to choose. There are 4 landfills owned by different companies within 75 miles. There are also private transfer stations and recycling centers and don’t forget Mt Trashmore II. Once they get rid of SPSA, the cities can go wherever they want if the price isn't right. No, breaking it up into pieces would be a disaster. This is such a no-brainer folks. I say this company came up with a great idea to get us out and we should take the money and run. If they fail, getting rid of garbage isn't nearly as hard as SPSA wants us to think.
reasonable debate
The issues addressed in this forum very much parallel the issues the board and its members must wrestle with. No one denies that a private sector solution would have been best; however, at the time, there was no private solution on the horizon and members had operated landfills that were no longer permitted. In any case, the creation of SPSA and the construction of the landfill, the refuse derived fuel plant, the waste to energy plant, the transfer stations, the fleet, and recycling and other services, met the needs of the members. Now, private sector firms see value in this system, and the board does too. The question is how best to protect the public investment in the system and ensure that this investment inures to the members and by extension to their citizens while ensuring that the disposal services are available at reasonable cost. The CAO/SCS report clearly recommends that the valuable resources need to be available and operated for public benefit.
Barrett's Rose colored glasses
Once again Mike Barrett proves his poor financial acumen by stating that SPSA has created valuable public assets. Of course assets have value, duh. The issue is how was that value created. In this case it was through exhorbitant debt. I could buy assets worth 200M if someone would loan me the money. The key is that the company has created no intangible value (goodwill etc) that anyone would pay over and above the debt amount. This out of state company is buying assets, not the debt. I have not seen the balance sheet so I don't know the book value of those assets. Did you notice that this was not a stock deal (if it could even be done as one since SPSA is public/private)? The reason is that the company's stock has no value because of the debt. Assets less liabilities equals equity (stock value in simplistic terms. Maybe Mr. Barrett's CFO at Runymeade should clue him in.
Mr. Tabor is correct that monopolies are bad business. For a private company to come in and require the local cities to do anything as a precondition of the deal tells me that SPSA only has value to the extent that these cities agree to these conditions. Each city should open up the trash/recycling b
Get over yourself Barrett
".....that in fact SPSA and its members really have created valuable public assets."
What a hilarious and arrogant statement. The SPSA and it's members have not "created" anything but a losing proposition with bad contracts. You make it sound like you guys whipped this stuff up yourself.
This "valuable asset" was "created" with OUR VALUABLE TAX DOLLARS and this "valuable public asset" is now losing money and must have a private firm take it over and actually run it like a responsible business.
Privatize, but not by monopoly
Local governments banded together to create a government run monopoly in forming SPSA. Monopolies are always a a bad idea.
It would be a further mistake to sell this monopoly to a single private entity, as the monopoly would persist where it would never have materialized in the private sector in the first place.
SPSA should be sold to the private sector, but it should be broken up into competing privately owned packages. No one entity should own all the permitted landfills in the region, nor should the cities have only one hauling company from which to seek bids.
Forming SPSA wrecked the free market in waste disposal, and in admitting it was a bad idea, the cities should strive to undo that damage as much as possible and restore a competitive market.
I know it sounds too good to be true BUT...
Wow, its only every so often that a real NO Brainer comes along. Let's see, we can retire all the debt, eliminate all the future liabilities for closing the landfill and WTE, take the politics out of the system and reduce the costs to the citizens by 25% or more for the next 20 PLUS years??? Now I know Mr Barrett wants to try and salvage something here so I'll concede that the assets do have value, but what SPSA created was and still is a complete disaster, a "government" failure of monumental proportions. Sure the real estate and the WTE have value but SPSA has slowly but surely destroyed it. The new company is offering the big money because of the opportunity it sees, not the broken system Mr Barrett praises. Virtually nothing SPSA is doing will continue when private enterprise takes over. there will be new investment, management will have real expertise, there won't be any politics and the new owner's profit motive will squeeze much needed change and efficiency out of the system. The new company is right, time is critical and if the SPSA board and our politicians decide to talk about it for another 6 to 12 months or tries to squeeze a few more dollars out by having an auction th
Look on the Bright side
Well it is ironic that it takes an outside proposal from one private sector firm to confirm to many who have posted herein that in fact SPSA and its members really have created valuable public assets. It is now up to the board of directors and of course to the members to determine how best to act as stewards of these valuable resources now and in the future. Our integrated solid waste system actually has an overall tip of about $65/ton; the problem is that some pay none, some pay less, and a few pay much, much more. The problem is really not about efficiency nor productivity, it is about how the costs are allocated to the members, the private sector users, and to our citizens in general. Again, it is ironic that the ReEnergy proposal acknowledges that as well; they require that the existing agreements be scrapped and new long term service contracts be signed by the members. This is the time for cool and rational thought, deliberation, and perhaps a bit of regional commitment.
Freedom of Information Act? Anyone know how much we can find?
I don't know much about it but it's being used against Blagovich. Can we use it against government funded operations as all the watchdog groups do?
The real issue here, not
The real issue here, not even mentioned in the article, is the power that the proposed buyer will have to import increased amounts out of state trash. Why else do you think they want to purchase a money losing outfit like the SPSA?
Typical of the Pilot's coverage as it moves from an acceptable second-tier news outfit to a third-rate paper lacking even a business section.
Lower Real Estate Taxes to Compensate
Chesapeake Taxpayers, should be up in arms and ready to storm City Hall if highly taxed homeowners, now have to pay to have our trash collected. If this occurs, I hope our elected officials will lower our real estate taxes to the amount we will have to pay a private company to pick up our trash. Trash collection services, should be included in the total tax a resident pays. There are some nice high salaries floating around in City Hall, and 5% percent raises have not been seen since 1995, throughout the United States. 2% has been the normal raise given for several years now. Taxpayers need the burden reduced on them, not piled on.
Come on Barret
Tell us how anything that private business can do government can do better. Yeah, right. Thank you for producing such a fine example.
A Bad Idea
It is a mistake to privatize basic public services. If that wrong-headed decision is made, we will come to regret it and will be held hostage to profit-based corruption as charges rise.
NO !
If a New York Company buys SEPSA, be prepared for tons and tons of out of stat garbage to be shipped to Va.
Don't Miss An Opportunity Again
It's inconceivable to think that SPSA cannot operate a profitable landfill! Not being privvy to the internal workings, I am suspecting inefficient and inept management. I have four different friends that each own their own private transfer stations and roll-off dumpster business. They are profitable in spite of their significant investment in property, trucks, and cans. The Board needs to resign themselves to the fact that SPSA needs to be sold to a company like ReEnergy or one like them.