The Virginian-Pilot
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CHESAPEAKE
SPSA agreed Thursday to sell its trash-burning power plant and sorting center in Portsmouth to Wheelabrator Technologies Inc. for $150 million and other incentives.
By a unanimous vote, the board of the Southeastern Public Service Authority ended months of bidding and negotiations to privatize a major asset for disposing of garbage in South Hampton Roads.
Wheelabrator, which runs 16 trash-fueled power plants across the country but none in Virginia, is a subsidiary of Waste Management, the largest private garbage company in the world. SPSA opted for Wheelabrator over a similar bid from Covanta Energy Corp., based in New Jersey.
"We're delighted to be selected and look forward to working toward a final contract," said Mark Schwartz, senior manager for business development with Wheel-abrator, which is based in Hampton, N.H.
SPSA customers in six cities and counties - Norfolk, Chesapeake, Portsmouth, Franklin, Isle of Wight County and Southampton County - would see their disposal fees drop if the deal goes through.
Today, they pay $170 per ton of garbage, the highest known rate in the nation. However, because of loans and other financial maneuvers, that rate has been kept artificially low and actually should be $267 per ton, said Bucky Taylor, SPSA's executive director.
Under the Wheelabrator plan, the municipal rate would be $198 per ton the first year, then $200 the next, $202 the following year, before slowly tapering off to $124 per ton by 2018, when SPSA is due to expire.
Customers in Suffolk would continue to pay no disposal fee through 2018 as a perk for hosting the regional landfill. And residents of Virginia Beach would continue to have their rates capped at no more than $66 per ton through 2015.
Also Thursday, the board put off a more comprehensive proposal from a different company, ReEnergy Holdings LLC, based in New York, to buy the entire regional waste authority and all its assets.
A public hearing on that offer, worth $331 million in cash and bonds, was scheduled for next week. But SPSA officials said it is unlikely that a deal with ReEnergy is possible now, given the proposed sale to Wheelabrator and because ReEnergy wants all eight localities to ink new, 20-year service contracts.
Still, ReEnergy is pressing ahead. Its chairman, Larry Richardson, said he expects to meet with local leaders in the days ahead so they can compare costs and benefits against the Wheelabrator option.
Under the tentative deal with Wheelabrator, SPSA would not have to build a proposed expansion onto its regional landfill in Suffolk, a project expected to cost $52 million. That's because the company has agreed to bury all trash that cannot be burned in Portsmouth at private landfills elsewhere in Virginia.
A public hearing has been scheduled for Sept. 23 at 9:30 a.m. at the Regional Building in Chesapeake to take comments and concerns about the proposed sale to Wheelabrator. After that, SPSA and the company would have to finalize a contract and outline a transition period for shifting the plant from public to private hands.
The Navy, which buys steam from the Portsmouth power plant to fuel its Norfolk Naval Shipyard, also must agree to the deal and sign a new contract with Wheelabrator.
SPSA board chairman Don Williams said he is "99 percent sure" that the facilities will be sold to Wheel-abrator, probably by the end of the year.
The $150 million in cash from a sale would be used to help pay off more than $240 million that SPSA owes in past loans and debts, said Taylor, the agency's director.
The waste authority, created in the 1970s, nearly went bust earlier this year from debts and fading revenues. The sale of the power plant was seen as key to retiring those debts and remaining afloat.
SPSA raised the idea of selling its power plant and garbage-sorting center in late 2007. Five companies initially bid on the facilities before the list was narrowed to two, then on Thurs-day to one.
"Clearly, Wheelabrator's offer provides the best economic benefit for SPSA at this time," said William Har-rell, city manager for Chesapeake.
Scott Harper, (757) 446-2340, scott.harper@pilotonline.com
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Review of the proposals.
First, in the Wheelabrator deal, the fees go down from the effective rate the other members pay now without the benefit of the VB forebearance agreement. Second, ReEnergy's submission is simply an offer and a promise, not a deal with a deposit that can be accepted. Third, in their offer, fees go up for VB and Suffolk. Fourth, their proposed fees, even if equalized, are much higher than SPSA's existing average tip fee. Fifth, the precedents they require, that is, new 20 year commitments for all members, a ten year deal with the Navy, refinancing with tax exempt bonds, could delay any deal for years, thereby ensuring that the deal with Wheelabrator will be lost, and ensuring that municipal tip fees will go up dramatically while we wait for a response. Lastly, they had the opportunity to compete with all the other offerers, and chose not to. To me, their offer now is intended to do one thing; scuttle the deal with Wheelabrator. Any fairy tale will do.
Drink up folks, the coolaid is yummy...
Its just amazes me how the obvious Increase in tip fees from $170 up to $198, then $202 and settling down to $124 18 years from now can be characterized as "...would see their disposal fees drop..." Where did you guys go to school? And how can this possibly be the best deal for the Communities? If I recall, the other company's proposal would immediately reduce tip fees to the $85/ton range and pay off all the debt immediately... And now, the lame duck Board is going to ram this thing through without giving the ReEnergy offer a complete and public consideration. These guys are going to be replaced January 1 by a new group who can set aside past malfeasance and make the right decision for the region. We need to voice our opinion loud and strong on the 23rd. 1. Give the ReEnergy offer full and detailed consideration as required by law and 2. postpone the decision until the new unbiased and untainted Board has a chance to review both options. 3. Next election beware!
Koolaid
Let me see if I can answer your questions. First, the current rate is $170. which was articially obtained by Virginia Beach deferring payment on their debt. If they had not the tipping fee would have been $267 as originally proposed. The article stated this but somehow you skimmed right over it.
One thing that has not been mentioned is that if all of the entities would extend their commitment for 12 years then the tipping fee with just SPSA would be much lower than any of those proposed by the offers. The city I represent does not wish (as well as 2 other entities) to extend for 12 more years.
The offer you tout above has a tip fee offer of $93.50 if we extend for the 12 years and that would start the third year. If we did not extend, then it is substantially higher.
Both groups of financial advisers (CAO and SPSA's) agree that the best offer is the one voted on today. This matter has been researched by some of the brightest advisers in these matters and no decision was made hastily. The last 2 offers to buy all were reviewed as well even though you refer to it as if we did not.
As for your 3rd point, I do not fear election. I work to serve those who elected me and do the best
Employees deserve better
Yes Ohio; every cent will go to debt reduction. Of course, 2cents continues to perpetuate the myth that SPSA has been a failure. Frankly, while the board made very short sighted decisions to keep fees too low, thereby not paying off debt on schedule, the operations of SPSA have been quite successful, and all the recent headlines and accusations that caused them have been the result of the Chesapeake lawsuit. Fact is, Chesapeake's representiatives voted for low tip fees, then when the inevitable result occurred, they tried to stick all the other members with their obligations. The court said no, but the damage had been done. A house divided cannot stand. Of course, once the Governor slapped us upside the head, and reminded us that this was our problem, fix it, we have pulled together, and we are working the plan. All that said, SPSA's employees, through all this, have increased productivity, efficiency, and have performed admirably. They deserve better press.
Mr Barrett
Does the board have an idea of the financial game plan for the 150 million? How much of it will actually go towards the debt that is owed? How much will be put aside for landfil closure, etc?
Past perfomance best predictor of future outcomes.
As long as SPSA and their corrupt BOD and executives are involved funds will be misappropriated to incur more debt and prices will never go back down.
The key lesson to learn from the entire SPSA fiasco is that quasi-government private partnerships do not work. The public always suffers for the hubris of government and their representatives who always feel that the citizens have nothing but extra income to rape and pillage.
As a side note, holding the city of Chesapeake to a legal agreement entered willingly, does not mitigate the abysmal failure of SPSA.
All the current former and current executives and BOD members aught to be fully investigated and audited to insure that none of the funds, that the taxpayers have to pay, have been embezzled or otherwise misappropriated.
You can't deny your views
Well Emily, perhaps I came to that conclusion because of your unabashed suppport for the suit that Chesapeake filed against SPSA and the other members that would have left all of us holding the bag because Chesapeake wanted to cut and run. You still pile it on. Even though the Beach has made a $26M loan to SPSA, and allowed refinancing that will cost Beach citizens more, you continue to insult the city that has made it possible for the other cities to have a reduced rate today. You continue to throw gasoline on the fire by implying that the other members subsidize Suffolk and Beach, even though the Court, in throwing out Chesapeake's suit, made it clear that Chesapeake signed an agreement, and they are required to abide by it. Chesapeake representatives voted to accept out of area waste, and they voted for lower tip fees to keep their cost down, without acknowledging that unless debt was paid down, a financial crisis would ensue. It sure did, and they helped create it.
What would Emily do?
Well yes Emily, Isle of Wight reportedly voted on a resolution to request SPSA to mutually terminate their use and support agreement with SPSA. But of course they had the integrity to request this action, and to indicate that if the parties could not agree on a mutual separation agreement, they acknowledged that they would abide by the terms of the agreement they had signed. Now of course, your city, Chesapeake, acted with no such integrity, they sued to get out of their agreement, citing high rates, and the acceptance of out of area waste, both of which were voted on positively by the city's own representatives. The message and lesson is; Isle of Wight stands by its agreements. Chesapeake, on the other hand, believes a contract binds it only if they continue to like its terms. Would you do business with a city council that sued to get out of an agreement that it had signed but no longer liked?
FOR SOME ODD REASON
Mr. Barrett, you have always jumped to the conclusion I am from Chesapeake. I wish I was, because they have been the longest standing SPSA City to call call attention to the problems of this failed organization. You seem to hate everyone and everything from Chesapeake-so, logic tells me they are doing something right :)
Have a good weekend as you revel in the financial stress you have contrived for all the donor cities.
FOR SOME ODD REASON
Mr. Barrett, you have always jumped to the conclusion I am from Chesapeake. I wish I was, because they have been the longest standing SPSA City to call call attention to the problems of this failed organization. You seem to hate everyone and everything from Chesapeake-so, logic tells me they are doing something right :)
Have a good weekend as you revel in the financial stress you have contrived for all the donor cities.