SPSA "blatantly and recklessly misrepresented" its financial condition, says a state lending agency owed more than $129 million by the troubled regional waste authority.
In a blistering letter dated Wednesday, the executive director of the Virginia Resources Authority called the fiscal crisis at SPSA "a grave matter" and said the waste authority serving South Hampton Roads failed to disclose the status of other bank loans, even when asked point-blank about them.
The VRA, based in Richmond, will dispatch an accounting team "to sort out and get a handle on SPSA's true financial status," the executive director, Sheryl D. Bailey, wrote in her letter to SPSA's executive director, Bucky Taylor.
While the VRA still is willing to seek a solution to the debt crisis, "such a positive way forward will absolutely require full disclosure and accurate information regarding every single item encountered, both large and small," Bailey wrote.
A Hampton Roads native, Bailey has overseen the VRA for three years, lending more than a billion dollars to local governments for public projects, including taxpayer-backed bonds to help clean up the Chesapeake Bay.
She said in an interview earlier this week that this is the first time during her long career in public lending that such problems have surfaced with a government client in this way.
"Obviously you have concerns when you cannot get full information," she said. "You can't have that and still do business."
Tom Kreidel, a spokesman for Taylor and the Southeastern Public Service Authority, said the trash agency received the letter Thursday and was in contact with Bailey to clear up what he called "misunderstandings."
"We agree that working with the VRA on this matter is in the best interest of SPSA and our member communities" - Virginia Beach, Norfolk, Chesapeake, Portsmouth, Suffolk, Franklin, Isle of Wight County and Southampton County, Kreidel said.
Bailey met Monday with the chief administrative officers from the eight communities to discuss SPSA and its ability to repay $129.4 million in outstanding VRA debts. Overall, SPSA owes more than $230 million and faces a $16 million budget shortfall this budget year.
Few of the local officers would comment on the closed-door meeting other than to say Bailey was clearly upset and concerned about SPSA's future and how that might affect municipal bond ratings and government lending.
Chesapeake Councilwoman Debbie Ritter, who did not attend the meeting but read the VRA letter, said it was "unforgivable" that SPSA did not share the intricacies of its financial problems with its member cities and the state lending institution.
She said it reflects a long history of poor communication and a lack of transparency at the waste agency.
"When business is not conducted publicly, often there's a reason," Ritter said. "Perhaps, this was the reason" - meaning, SPSA's deep financial peril.
In her letter, Bailey said she and her staff were most distressed by three loans and lines of credit from Wachovia Bank to SPSA, worth a combined $29 million.
Two lines of credit were omitted from a SPSA debt spreadsheet during a sit-down meeting with VRA officials last month, and a repayment schedule showed a big loan being repaid slowly between 2012 and 2017.
However, VRA staff later discovered papers that showed how $12.1 million would be paid back in one lump sum in 2011.
In addition, SPSA initially said that little money had been used from a $13.2 million line of credit. But in late January, VRA officials learned that almost half was withdrawn or obligated, and they were stunned to read newspaper articles describing how SPSA had wanted to use the remaining $7 million to pay its operational expenses to keep the agency afloat.
VRA thought that less than $2 million had been drawn from another $4 million line of credit, and that this money was SPSA's source of "daily cash," the letter said.
But VRA learned 10 days later that it actually was "tapped out," according to the letter.
"VRA found it quite disturbing that this information was not volunteered, but provided only with the greatest apparent reluctance after persistent questioning," the letter said.
VRA also was surprised to read in the newspaper that SPSA's board, on Jan. 28, wanted to restructure its debts, including VRA bonds, in order to avoid a massive rate increase for trash disposal, to $245 per ton of garbage from $104.
But, the letter said, the way in which SPSA proposed to restructure its payments was "in blatant contravention of the understanding between VRA and SPSA."
"This series of experiences has left VRA deeply disappointed in how its good will has been blatantly and recklessly misrepresented and misused by SPSA officials and representatives," Bailey wrote.
Scott Harper, (757) 446-2340, scott.harper@pilotonline.com
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Answer to Conservative CPA
As perhaps you can ascertain if you have worked with companies/agencies in dire financial circumstances, near the end, everyone stops bailing the boat and starts performing the old technique of CYA. In this case, with SPSA debt somewhere near 30% of their portfolio, it is totally inconceivable to me that their executive director could have been so ill informed as to not have read the very recent audit which showed SPSA's fiscal situation in excruciating detail. Frankly, if SPSA defaults, so will VRA, and I think their executive director is simply building a case for her own future. Since this article, you may be aware that they have set conditions by which they will refinance, but those conditions are onerous enough that I have no doubt they will not be signed by some members. Once SPSA defaults, then the VRA will have to join with other bondholders to force the cities to pay the required tip fee to cover operations and debt service.
Mr Barrett is a true politico
If you Google my name you will find that I'm not anonymous. Anything but. But what you will find when you Google Mr. Barrett is that he's a true politician. He will never fully answer any question that is posed to him and rarely answers on the substance of any article.
He's been quoted as saying the SPSA is in Great Shape but then goes and states that they've been in trouble since the start. You do know Captain Barrett that in the Navy during an investigation with holding evidence is a Court Martial Offense punishable by the UCMJ? He gets irritated when you talk about moving ships from Norfolk to FLA and says it’s wasteful spending but when you go after his bottom line which is Real Estate in the VA Beach Area he’s all for cutting Oceana…
Remember this, Snake Oil Salesmen were and are easily approachable, but what they have to offer you is nothing more then feel good talk when it suits their interest. Remember that second audit, the one we’re discussing right now? The one where He now says the SPSA has been in trouble since the start… He was also the one who said the SPSA was fine and didn’t need another audit because KPMG said they were doing fine. Tru
comment on the article
Mike Barrett, I know that we are all anonymous blowhards, but you have never commented on the substance of the article at hand. Do you defend lying by your beloved SPSA? LOL
And what would have prevented the disaster that is SPSA?
Bright sunshine, disclosure and transparency. Solid waste disposal is one of the tasks just about every locality in the country has to deal with. Part of the charter of SPSA should have been a comparison of SPSA's total cost per ton to dispose of solid waste compared to other localities around the nation. If SPSA's costs were even a little bit higher then SPSA should have to justify publicly the reasons why. Is our local waste more hazardous, are our land costs so much higher? In short why is a ton of Hampton Roads waste so much more costly to dispose of than say Charlotte, NC or Jacksonville, FL. Through out the life of SPSA it would have made sense to see if SPSA should just be a collector and hand off for final disposal to private companies. Over the years companies such as BFI have thrived, how is it they can dispose of waste so much cheaper than SPSA? Aren't they subject to the same rules and regulations as SPSA? John Hadfield built the Platinum Cadillac of waste disposal systems and we are left holding the bag.
The bottom line as I said before.... The other 6 member
localities have funded the Beach's growth as far as residential solid waste disposal over the last 25 years. Also as I said just as the name Ponzi is associated with a financial "Con" game, the name "Hadfield" should be associated with the worst a government agency can be mismanaged. John Hadfield as the associate director and later as the director was the main architect of the failure of SPSA. John Hadfield took the monopoly created by SPSA to the heights of arrogance beyond what even a fictional Tony Soprano would. In the 80's when it became clear that SPSA could not sustain its wasteful spending SPSA tried to start to control private waste companies until it ended up in a court case where the US Supreme Court ruled against SPSA. Once SPSA realized it was not going to be able to charge 3 to 5 times the national average for waste disposal the handwriting was on the wall. I honestly don't believe the directors from the member localities had any idea how bad things were until possibly the last year. John Hadfield is the reason we are in this mess.
SPSA?
The writer NEVER says what SPSA is. Society for Protection of Security for Animals? Suffolk for Protection for Sludge Annihilation?
This just gets worse and
This just gets worse and worse, lying to obtain loans is fraud and the officers and directors should be prosecuted to the fullest extend of the law.
Identification
Oh, very old, that's classic. Apparently I am one of the few on this forum with the guts to actually post under my own name. I frankly believe that if you can't express your opinion openly and honestly, you may as well just take a pass. So you can be assured that if I post, it is with full disclosure and identification. Clearly, not the case for you.
odd
reviewing mpc123's comments is interesting. Looks Mike Barrett talking to himself......
Such a Deal
Yes, MPC, thanks for explaining that. And the irony is that a few blowhards herein and elsewhere are advocating that we just sell to ReEnergy, ignoring that in their proposal they require that the existing contracts be nullified and new, long term contracts be signed which would raise the tip fee now paid by the Beach and Suffolk. So let us not be fooled; of course members like Chesapeake want SPSA to default so they can get out of their contract and they have used the judicial tactic, the legislative tactic, and now the starvation tactic. If they win, others will need to pick up the costs that they are now obligated to pay. Such a deal!
Not that I am defending Mr. Barrett but he like the other board
members vote according the guidance received from their respective city governments. In Va Beach's case the Va Beach city council. For Va Beach and its agreement with SPSA it would be political suicide for any of the council members to instruct Mr. Barrett to go to the SPSA board meeting as Va Beach's representative and say okay we will pay what the other communities (except Suffolk who pays nothing) are paying. Go to the next Va Beach city council meeting and ask to speak and bring that up, see what kind of response you get. Go to Suffolk city council meetings and ask them to start paying the same as everyone else, good luck on getting out of there alive. If the executive management of SPSA and countless independent counsels tell you that you should be paying this amount and you recommend to your city council that is the cost of doing business and they tell you to keep the fees where they are at for ten plus years while everything else is increasing what do you expect to happen? Just what is going on now, that's what.
"written by junior staff members who..."
But oversighted, signed and approved by much higher levels.
Nice attempt to foist 'blame' on low level employees.
Look in the mirror, Mike
Mike says: "Put the blame where it belongs. on those members who refused to meet their fidicuary obligations to SPSA and chose lower tip fees instead."
Correct me if I'm wrong, but Virginia Beach has the lowest rate out of all the member cities and those rates are capped, correct?
And who is Virginia Beach's representative on the SPSA Board?
Lack of support
Well Mike, I still think the report by the Auditor of Public Accounts was a farce, written by junior staff members who had never set foot in an industrial operation, and who called for every conceivable management tool presented in a college level text book. That said, if anyone actually read the audits performed each year by our independent CPA, they would have known that the method of funding SPSA was broken and was getting worse year by year. As I said previously, the board did finally adopt policies to change the unrestrained borrowing, but did not set the tip fees high enough to allow the policies to be carried out. But again, the employees and the facilities are actually operated efficiently and effectively, but the governance, and the support by the members, has failed and is getting worse by the minute. Put the blame where it belongs. on those members who refused to meet their fidicuary obligations to SPSA and chose lower tip fees instead.
...Continued...
You change your positions more times the Madonna has wardrobe changes.
Your answer on each issue with the SPSA has been we need to understand and fix the problem. This has been your position since last year and the mantra continues. Sometimes, sometimes you have to clean house, remove leadership (including board members like yourself) to fix the problem because that is EXACTLY where the problem is. The "Fix The Problem" mantra comes close to the message of Stay The Course. Well, sometimes you need a Course Correction. You were in the Navy, you know all about changing course. Sometimes you have to turn the wheel or else your boat might just find itself run aground.
The problem with SPSA is two fold. One, it is a Monopoly, second, the leadership needs to be changed. Either that or sell it off.
SPSA, Enron, Any connections???
Yes, least year the audit done on SPSA by KPMG the GA Approved of another audit. To which Mike Barrett said, "So frankly, to me, this is a waste of taxpayers dollars." March 7th on this board at 0849. He also quipped that, "I certainly agree that past business practices were unsustainable, and fortunately, those practices have been changed, new sustainable policies adopted, and the members have placed the organization on a stable financial footing."
I guess that would be the two loans huh.
Let's continue, Just_My_Opinion stated to Mike B that, "I'm afraid that I have to agree with the perception that SPSA may have something to hide."
Mike's Response?:
"Well actually, if you came to that conclusion, you would be wrong."
So what have we learned? Mike thinks the SPSA has nothing to hide until what is hidden is reveled. He's not for another Audit especially when KPMG got more then a hand slap after Enron (They were one of those that audited and found nothing wrong with Enron). He states that SPSA is in a great position until what was hidden was revealed and then states they were in trouble from the start.
You change your position more times then Madonna has w
Mike Barret is correct this started out as a Boondogle
more than 25 years ago with the prodding of the Pilot editorial board. Yes a regional landfill was a good idea but no one really investigated the cost of a government operated landfill versus a public/private partnership. There are a lot of things where competition has a way of keeping prices in check. Virginia Beach is a prime example. Prior to SPSA Virginia Beach had it's own landfills and Virginia Beach trash was dumped in Virginia Beach landfills. The costs were in line with what private trash haulers were charging. There were no politics involved as all of the costs of trash disposal for Virginia Beach residents was paid for by Beach residents and the Beach City manager and council had to scrutinize the costs and justify those costs to their voters. Along comes SPSA and a government monopoly is formed that really doesn't answer to any voters since each member city/county has only 1 representative. Now the buck can be passed and politics can be played. Please note that Virginia Beach under threat of leaving SPSA has it's tipping fees capped at a much lower rate. Basically the other member localities have paid for Virginia Beach's growth in the last 25 years.
Deal with the lying
Mike Barrett, once again your second comment does not deal with the lying issue. Comment on that instead of crying "its not our fault". I agree the members certainly put pressure not to pay more. That is the problem when government tries to run a business. BUT the buck must stop with the leadership. Do you make these same lame excuses at Runymeade?
Same Old Song
And once again the taxpayers are left holding the bag - an empty bag - due to fiscally irresponsible SPSA leadership and outright lying. I guess the SPSA leaders deserve bonuses and all-expense paid trips to Vegas for two weeks for their stalwart leadership and management skills. Sorry, sarcasm got the best of me. I won't do that again, unless I with someone, by myself, or a with a SPSA board member. This whole sorry mess should be investigated by law enforecment to see if there are any criminal violations.
Let me repeat myself
I am tired of the blame pushing for now. What are the realistic options here? I think more concentration on real solutions and less fingerpointing needs to be done. Hang who you want to later, but lets fix the current problem first. There are many employees that are scared to death about losing their jobs here. Can anyone with a good background of knowledge give some insight? Please repond if you have true facts (not opinions).