The Virginian-Pilot
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Eight local cities and counties are poised to bail out the region's troubled trash authority, leaving many residents to pay more for services and localities on the hook for millions in new debt.
If all member jurisdictions agree, the plan would provide the Southeastern Public Service Authority with the breathing room it needs to get its financial house in order, officials said. The money would buy the authority 15 months to sell off assets and reduce or retire the $240 million in debt that officials call crippling.
Municipalities have been warned that without a rescue plan, the authority could run out of money and close down this spring. It has been operating at a deficit this year.
Led by Norfolk City Manager Regina V.K. Williams, local city and county managers devised the bailout that Norfolk City Council is expected to pass at its meeting tonight, Mayor Paul Fraim said. Most SPSA member cities haven't considered the plan yet, but the Franklin City Council has already approved it.
"I'm not happy about this," Norfolk Councilman Barclay C. Winn said. "But the alternative is to do nothing, and we can't afford that."
The plan would grant SPSA nearly $33 million in savings and new revenue from the refinancing of some existing debt and a new line of credit, all to be backed by the municipalities.
It also would raise the "tipping fees" that six cities and counties pay SPSA to $170 per ton of garbage from $104 per ton. That's less than the $245 per ton SPSA had previously proposed, which would have been the most expensive in the nation.
Tipping fees would rise in Norfolk, Chesapeake, Portsmouth, Franklin, and Isle of Wight and Southampton counties.
No accurate numbers have been released on what the fee increases will mean to the average family. However, Portsmouth officials said Monday that an increase to $175 per ton would cost an average homeowner an additional $9 per month, with garbage fees rising to $41 from $32.
In Portsmouth, fee increases generally are passed directly to residents. The City Council met Monday night to discuss the issue and briefly mulled absorbing some cost increases in the general budget and adjusting the real estate tax rate to help pay for it.
Norfolk officials have said this year all cost increases will be passed on to residents.
Suffolk would continue to pay no tipping fees because it hosts SPSA's primary landfill. However, the city would join Portsmouth, Franklin and Isle of Wight and Southampton counties to guarantee refinancing $71.8 million in loans SPSA owes the Virginia Resources Authority.
That state agency must approve the refinancing, which would save SPSA about $15 million over the next 15 months. Authority officials are scheduled to meet with regional leaders on Friday to discuss the plan.
Under the additional terms of the bailout, over the next 15 months Virginia Beach would temporarily forego nearly $28 million in rebates of tipping fees it is scheduled to receive for hosting a landfill. The city would be guaranteed repayment at a later date.
Finally, Norfolk and Chesapeake would agree to provide SPSA a $17.2 million line of credit, to be evenly split between the two cities. The credit would be repaid after SPSA sells some of its assets
Bucky Taylor, SPSA's executive director, said the bailout would give his organization enough time to sell assets, including its most coveted facility, the Portsmouth waste-to-energy plant.
Covanta Energy and Wheelabrator Technologies are negotiating with SPSA to purchase the plant, which Taylor said he hopes will be sold by this fall. It likely will generate more than $200 million, SPSA officials have said.
Taylor said SPSA might also sell other assets, including its landfills, transfer stations, trucks and recycling operation. At least one company, ReEnergy Holdings LLC, has bid to purchase all of SPSA's assets.
By the terms of SPSA's contract with the region's cities and counties, its $240 million debt must be paid off by 2018. That has forced SPSA to attempt to pay off debt aggressively - Taylor said about $40 million of SPSA's current $102 million annual budget is for debt payments. Without the bailout plan, SPSA would be operating with an $11 million deficit in the current fiscal year, which ends June 30, and $17 million next year.
Pilot writers Jen McCaffery, Mike Saewitz, Dave Forster and Deirdre Fernandes contributed to this report.
Harry Minium, (757) 446-2371, harry.minium@pilotonline.com
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SPSA
My recollection is foggy but aren't the local cities a bit responsible for this problem? Seems to me that in past budget years the SPSA board voted to not charge their members more for their services to help the cities balance their budgets, and aren't the city politicians on the board? Everyone wanted a free ride and now it seems that across the board it's become time to pay the piper. No matter what we need to dispose of our trash somewhere somehow. And the politicians are doing what they do best, point fingers at someone else for our problems.
Financial interest
Yes, I got that; no problem, that is why I get paid the big bucks to serve on the SPSA board. I believe all the members are calculating the financial effects of the ReEnergy proposal, and to a large degree, that determines their position. Collectively, SPSA has agreements with all of them that could not be abrogated without unanimous approval. Of course, SPSA is not set up to make money; it is a compact between eight members to dispose of their municipal solid waste. If it made money, the "profit" would simply be returned to the members. To my knowledge, the Navy has expressed no official opinion on the potential sale, but all parties know that their approval must be obtained. Given the efficiencies and experience of the two firms, and the safeguards the Navy requires, I would expect approval of the selected proposer. Lastly, both proposers will say what they will pay, and what tip fee they will require SPSA to pay.
Thank you Mr. Barrett
I'm sure you needed it. I don't know about anyone else but, I was just trying to push your buttons on the ReEnergy deal. Regardless, I know VB will never let go that tip fee until, if ever, it is in VB's best financial interest to do so. Right or wrong. I also don't think that selling the whole operation outright would be a good idea nor would letting it fail be. Getting rid of the power plant... now that's not a bad idea; That thing is getting old and needs to be profitable to do proper repairs and SPSA doesn't seem to know how to make money. So, I really was curious what the Navy's stance is. Can one assume they, the Navy, have not indicated any problems? Should the plant be sold, would Covanta and Wheelabrator or whomever be required to accept a certain amount of waste from SPSA or would they be able to bring in waste from other sources?
delayed response
Well yes, I have been on vacation. The ReEnergy proposal requires all the cities to renegotiate and extend their agreements with ReEnergy were they to be in a position to buy all of SPSA's assets. That may be attractive to some of the members, but not necessarily to all. Also, the collective membership has expressed a desire to have a competitive post SPSA environment, and selling to one firm that would control the market may be financially troubling in the long run. In terms of the potential sale of the RDF/WTE plants, the Navy has been briefed on the possible sale, but no formal approval has been requested not rendered. However, both firms have experience in providing energy to DoD entities in similar situations. I guess in this environment, the reporter could not resist the temptation to use the term bailout; I perhaps would have made it clear that SPSA is an extension of its members, who are also its primary customers; I don't think the term bailout applies.
I say let it file for
I say let it file for bankruptcy. That what every other business has to do when it can't pay it's bills and remain viable. These people don't deserve any more of a bailout than the auto industry. Let it go.
Where the heck is Mike Barrett?
I have never seen an article go by about SPSA that he did not have some informative comments. Is he on vacation?
Is it true that the ReEnergy Holdings LLC would fail because VB refuses to renegotiate their agreement with SPSA that caps their tip fee at $54?
Also, has the Navy and, I guess the Pentagon since they had to give their OK the last time, approved the sale of the plant? Not this sale per say but, any sale; to anybody? Is SPSA just grasping at straws here?
Maybe
After reading more there is the catchphrase. Increase to the average HOMEOWNER of $9.00. We get it again..
The Article
Does say that the GARBAGE fees in Portsmouth would increase by $9.00 a month. There is also mention of adjusting property tax, so which one is it?
Portsmouth WATCH OUT!!!
The idea of raising the Real Estate tax to pay for tipping fees is just a smoke screen for getting more money from the overburdened Portsmouth taxpayers. The City of Portsmouth WILL LIE to the taxpayers when it suits their purpose. If a raise of 1 % in the real estate tax would make up the difference for tipping fees, council will ask (woops they never ask) council will SET a new rate of 2% higher to get extra money for the Social Services to build some more VDHA houses. Guess who pays the real estate taxes on all the VDHA houses in Portsmouth??? It comes from State money. Yours, mine and everybody else. Maybe they could also use some of the money to give the City Manager a raise. He only makes 165 thousand dollars and can't manage the city out of a wet paper bag.
Let me expand my comment
Just out of curiosity, with regard to the plant, if the Navy contract states they can terminate the contract without cause, pay not more than $98.5M to satisfy debt service requirements, and that having done so, SPSA must return ownership of the plant to the Navy then how is this issue addressed in any sale of the plant by SPSA. How does that work? That's from the SPSA 2008 Annual RW Beck Report.