State won't let SPSA collapse, Kaine says

The financial crisis at SPSA has reached the desk of Gov. Timothy M. Kaine.

In a letter to the eight cities and counties served by the Southeastern Public Service Authority, Kaine said he is unwilling to let the troubled waste authority default on more than $129 million in state-backed loans, as has been feared.

As a backstop, the governor said the state would step in and make certain debt payments if SPSA cannot do so in the months ahead.

All bailout money would be recouped quickly by intercepting state aid to the eight localities within SPSA - Virginia Beach, Norfolk, Chesapeake, Portsmouth, Suffolk, Franklin, Isle of Wight County and Southampton County.

"As you know," Kaine wrote in his Feb. 13 letter, "this intercept action is consistent with state law."

The governor's letter and offer is the latest twist in an ongoing

struggle to save SPSA from collapse. The agency, which has handled most local trash and recycling for the past 30 years, owes creditors about $240 million and faces a $16 million budget deficit this year.

Its leaders have warned in recent weeks that without a cash infusion, SPSA might go broke and close its doors by April.

Kaine said that letting SPSA default on loans from the Virginia Resources Authority, a state lending agency, could "trigger a sequence of events that would be unfavorable to the Commonwealth, SPSA member communities and all Virginia localities."

Specifically, the governor is worried about damage to the state's coveted AAA bond rating and its ability to lend money through the VRA to other localities, said Kaine's press secretary, Gordon Hickey.

"He's saying that we'd cover the remainder of the payments," Hickey said Friday.

Hickey described the governor's intervention offer as "kind of unusual," saying Virginia prides itself on being fiscally responsible and is not accustomed to bailing out troubled public authorities, such as SPSA.

SPSA spends about 40 percent of its annual budget on debt service. With revenues shrinking, SPSA is stuck wondering how to remain viable.

Tom Kreidel, a SPSA spokesman, said Friday that the authority had not seen a copy of Kaine's letter and declined to comment on it.

Asked if SPSA needs such help, Kreidel said the authority is empowered to generate enough funds to repay bond money and keep operating by restructuring debt payments or raising trash-disposal rates, known as tipping fees.

Last month, SPSA was poised to hike its municipal tipping fee to $245 per ton of household garbage - the highest such fee in the nation. However, on the day its board of directors was to vote on the increase, another option emerged: delaying debt payments in order to keep about $30 million in hand.

The money, board members argued, would allow SPSA to pay its bills, make payroll and repay its debts on schedule.

The move would have to be approved by the VRA, which since has pledged to help arrange a restructuring plan - but only with closer oversight of SPSA's finances and spending. In his letter, Kaine urged the eight localities to work with VRA officials to complete a restructuring deal.

Each community signed contracts with SPSA in the 1980s committing to do what is necessary to keep the agency afloat and operating. The contracts expire in 2018.

A SPSA vote on a new rescue plan is slated for April.

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