A group of industry veterans has offered to buy the Southeastern Public Service Authority, pay off its debts and untangle the mess at the agency. Considering that SPSA's board last week tentatively approved the highest disposal fees on the planet, you might think the agency would be eager to consider all possibilities.
You'd be wrong.
SPSA's leaders quickly rejected the bid submitted by ReEnergy Holdings even as they endorsed a tipping fee of $245 a ton, the highest in the world.
It was the second time in a year that SPSA trashed the company's bid without public debate.
This shouldn't be the last word on the subject. As a matter of simple financial prudence, local governments and residents must insist that SPSA give the proposal a much fuller airing.
Because of the financial drag the agency has become, private firms with experience in garbage removal and recycling should have a chance to make their case to overhaul the entire system.
SPSA would prefer to sell off its waste-to-energy facility and use the revenues to restructure. But what the region needs shouldn't be hostage to what SPSA wants.
Skeptics and advocates for the utility may shudder, and not only because the $205 million offer by ReEnergy seems so perfect. Could it really be that simple to end SPSA's troubles? Why hasn't any other firm made an offer? Is the deal good enough?
Adoption of the plan would create a veritable garbage monopoly for ReEnergy in Virginia Beach, Norfolk, Chesapeake, Portsmouth, Suffolk, Franklin and Isle of Wight and Southampton counties - the eight localities comprising SPSA, which is itself a monopoly.
Exchanging a private monopoly for a dysfunctional public one may indeed be a bad idea. But it needs more analysis than it has received.
The fiscal model that heralded SPSA's birth, long since obsolete, is no longer sustainable.
SPSA Chairman Don Williams, a Norfolk City Council member, said the slumping economy has reduced the amount of trash SPSA expects by 20 percent in the current fiscal year.
SPSA has about $240 million in debt and faces a $16 million shortfall in the current budget year. When space fills up in the Suffolk landfill, the authority must pay closing and post-closing costs. When contracts with the localities expire in 2018, it's uncertain how garbage and recycling would be handled in the region.
But SPSA "should be changing the model of needing more trash to fuel the operation," said Bryan Collins, a Chesapeake City Council member and the city's representative on SPSA's board.
Given all that, ReEnergy's offer seems to be a godsend.
The company was formed last year and includes the local firm of Kaufman & Canoles as its counsel. Two key principals, Larry D. Richardson and Thomas E. Beck, boast years of experience in the solid waste and recycling industry.
ReEnergy would offer $205 million to buy SPSA - including the landfill, transfer stations and trucks - and pay off the outstanding debt. It would assume the closure costs at the landfill. Plus, Richardson said, it believes it can reduce tipping fees significantly.
There are several caveats. ReEnergy wants all eight of the localities to agree to the proposal, signing at least 20-year contracts, or it won't go forward.
The municipalities have separate interests, too. Currently, Suffolk pays no tipping fees because it hosts the regional landfill. Virginia Beach's rate is capped at just under $54 a ton. Would those cities give up those advantages to help their neighbors?
If SPSA sells some of its assets piecemeal, the value of the system is lower, Richardson said, and that would kill the deal. ReEnergy also would lay off employees, though it has declined to say exactly how many.
Despite those issues, the plan deserves serious consideration, not dismissal. ReEnergy's offer appears to be more than just a mirage. It should be up to the localities to decide how real it is, and whether - given SPSA's tarnished history - the agency can afford not to pursue such radical change.
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disclosure
Yes, of course, I am aware of that, and of course that is a factor in the evaluation of the proposals. Of course, one of the other major waste management companies is a partner with ReEnergy. The issue at this point is transparency so we know all the players and what are their prospective roles. If the member jurisdictions decide they want to sell the system to one company and renegotiate their service contracts, that is what will happen. If not, perhaps the board's stated objective can be accomplished. The members and SPSA will be informed by the recent study of alternatives completed under the auspicies of the Chief Administrative Officers and conducted by SCS, a national engineering firm with qualifications in the waste management area. They opined that the citizens/rate payers had created value in SPSA's major assets and that those assets would have considerable unused potential going forward post 2018.
spsa
What kind of "golden parachute " would Bucky Taylor reciece on a buyout package? Seems that's what the real motivation is. If we need to reduce operating deficit, let's start with the compensation levels of the board and the executive director.
spsa
Well, Bucky Taylor has done it again! We need only look at the mess he made of Southampton County and the fiasco he made in Franklin before realizing it's no surprise the SPSA is in such a mess. Time for folks to wake up and get rid of him and the idiots that brought him aboard. Ask Bucky about the "incubator" project he so ardently pushed for in Franklin. To incubate an insurance agent waqs a total waste of taxpayers money. Hey Bucky, can't you ever touch anything without making a monumental mess?
Selling WTE only
Speaking of competition Mr Barrett. Has anyone mentioned that Wheelebrator, one of the bidders on buying just hte WTE plant, is actually owned by the largest garbage hauler in the region as well as the landfill that is closest to SPSA... That doesn't sound very "competitive" to me...
Stop calling it a monopoly...
Guys, its not a Monopoly and to call it one again and again falls right into the hands of SPSA's board and staff protecting their sacred cow. SPSA is a monopoly because its members have passed laws forcing everyone to use it (at whatever price). If ReEnergy buys the assets the members woud have the chance to negotiate solid, fixed 20 year terms. But that's less than half the garbage in the Hampton Roads. Business and Industry would have the CHOICE to use the SPSA system or go to one of 3-4 other landfills, recycle plants, transfer stations in the region. Remember folks, the Cities are getting rid of $240mm in debt and anouther $30 million in closure liabilites. They do need to committ to use the system for some period of time. In order to give this issue a fair hearing, we (and the Pilot) need to stop using the same old scarey terms and catch phrases like Monopoly, New York Trash... Yes, SPSA currently is a monopoly because they passed laws taking away private choice but make no mistake, ReEnergy will have to compete on price and service in the marketplace to earn private industry's business. Mr Barrett likes to say this is veeerryy complicated. In reality it is quite simple. SPSA
ReEnergy and SPSA
I am delighted with SPSA's decision. ReEnergy Holdings was formed by Riverstone/Carlyle. For those who are completely out of the loop--Pilot's editors?--Carlyle is the gorilla in the room when it comes to fossil fuels and directing energy policy on a global scale. (George H.W. Bush, James Baker, Saudi Arabia, OPEC, the War in Iraq--any of this ringing bells????)In addition, as a Portsmouth resident, I am very concerned about losing the City's right to ban out-of-state garbage if the RDF plant is sold to a private corporation with more clout than the U.S. Government.
Good comments
The Doc and Mike have made valuable, knowledgeable comments to which the editorial staff would be wise to listen. In fact, the comments have more value than the editorial. Well done, gentlemen.
Sign of the apocalypse
I am forced into agreeing with Mr. Barrett on at least one point.
The notion that selling SPSA's assets piecemeal would lower its value is a self serving evaluation on the part of ReEnergy.
OF COURSE, they would like to purchase SPSA as an intact monopoly, able to charge any fee they choose with no competition. But PRICE and VALUE are not the same thing. ReEnergy might pay a higher price for an intact SPSA, as their profits as a monopoly would not be limited by competition. But the value to the people of the region is not just the price, it is also the efficient disposal of wastes at a reasonable ongoing cost.
A competitive system of refuse disposal companies serving the region has a lot more value to the people than a mere privatized version of SPSA.
Confuse instead on clarify
You missed a unique opportunity to bring clarity to a complex situation, and instead have muddied the waters for your readers. First, SPSA did not reject the offer from ReEnergy; it simply indicated it did not have the authority to act on it. Second, just as you have suggested, if the members unanimously agree that ReEnergy's proposal has merit, it will be given a "thorough vetting" as you have suggested. Third, we believe that in selling assets we should attempt to ensure a competitive environment for disposal, and that is the tactic we have implemented in the evaluation of proposals now in process under the PPEA for the sale of the refuse derived fuel plant and the waste to energy plant. Lastly, your acceptance of the claim by ReEnergy that..." if SPSA sells some of its assets piecemeal, the value of the system is lower..." is shocking given the source of the comment. In summary, next time, don't wade into a matter like this unless you know what you are talking about.
Easy to get in, hard to get out
Having made the foolish error of creating a monopoly, it will be hard to break it up. But that is what must be done, SPSA should be sold to private operators, but as several separate, but integrated specialized entities. It will be messy and expensive.
But what we should be doing is learning a painful lesson and NOT repeat the mistake by creating still more government monopolies in other areas.
As dysfunctional as SPSA has become, it is not simply a matter of poor administrators who are responsible, it is the NATURE of government created monopolies to be dysfunctional and expensive. There are no contrary examples.
Oh, and the larger the monopoly, the worse it will be, as there is less outside competition to compare with. This should be kept in mind by anyone thinking a single payer health care system is a good idea.
SPSA Sale
Fire all the CEO's, managers and board members. None of them have done anything for the Tidewater area. The CEO won't be able to line his (and others) pockets if he sells. FIRE THEM....it's our only way clear as the new pack can't be as bad....can they!