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Executives with the firm trying to buy all of SPSA’s assets, operations and debt say they’re sweetening their $331 million offer to the regional garbage agency and its eight localities.
The move by ReEnergy Holdings of Albany, N.Y., smacks of increasing frustration, however, because at least three communities have already voted to reject the offer, and several local officials say they’ve gotten a good deal with the sale of the waste-to-energy facilities to a competing company.
Staff and board members at the Southeastern Public Service Authority should still listen to ReEnergy; by law, they have to.
Larry Richardson, ReEnergy’s executive officer, told The Virginian-Pilot that he understands several communities don’t want to sign 20-year contracts — something ReEnergy had initially demanded. So far, elected officials in Norfolk, Franklin and Isle of Wight County have voted to reject the company’s proposal. ReEnergy needs all eight communities to sign up to make the plan work.
Richardson says the company will offer options, including a term ending in 2018; that’s the same year the localities’ contracts with SPSA are set to expire. The financial advantages for the communities “are compelling,” Richardson repeated last week.
Yet ReEnergy may be waging a losing battle. A new state law mandates that SPSA must consider the company’s offer; it doesn’t mean SPSA has to agree to the terms. Board members and local officials question, for instance, whether the company’s financing plan is feasible.
Meanwhile, SPSA consultants and staff have vetted the $150 million proposal by New Hampshire-based Wheelabrator Technologies to buy the plants in Portsmouth.
The deal also would mean the subsidiary of Waste Management Inc. could take non-burnable trash to its own landfills; that would save SPSA another $52 million because it wouldn’t have to expand the regional landfill in Suffolk.
SPSA and the member communities are working tirelessly because the agency has debts and loans amounting to $240 million. And even with the Wheelabrator deal, the disposal rates for six of the eight communities will hover around $200 a ton, the highest in the country.
The garbage authority and local communities must continue to entertain plans to buy SPSA’s assets. They must keep taxpayers in mind. And they must make the best deals, the smartest ones, to improve the agency’s stressed bottom line.
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Let's be real about SPSA
Let’s be real when we talk about SPSA's debt and where it can from and why we have it hanging over our collective heads. Money was spent like it was water on trips, expense accounts, and way too many six figure employee salaries. There was NO ACCOUNTABILITY, and still isn’t, and they went over board. Now we the citizens are left to pay the bill. Over 400 employees and probably half were unnecessary. You act like the mess we are in was an accident well it wasn’t SPSA just kept meeting behind their closed Boardroom doors and let the past president do what ever he wanted and everyone when along for the joyride. As I also recall Virginia Beach isn’t the only city lending SPSA money. Oh and one other thing everyone isn’t against the ReEnergy Plan!
Teamwork Prevailed
Well Gypsy, saying that does not make it so. On the whole, the SPSA staff through the years has been competent and capable, and their was accountability. Of course, when you get sued by one of your members trying to get out of its obligations to SPSA and the other members, a lot of accusations get thrown around. You try to lay all the problems with debt on the former executive director, ignoring the fact that the member representatives often felt they had explicit instructions from their city councils to keep the tip fee as low as possible. That was a board matter, not a staff matter. Actually, Virginia Beach is the only city that has given a loan to SPSA, but all the other members participated in some way in making the short term fiscal plan proposed by the city managers work so that the refinance from VRA could occur. In the end, teamwork prevailed.
Member communities have not rejected ReEnergy
My public relations firm repesents ReEnergy Holdings, which appreciates public discussion of this issue. It's important to point out, though, that this editorial gives the impression that three SPSA member communities have rejected ReEnergy's proposal. They have only rejected the 20-year contract requirement, not the proposal itself. On November 9th, the final refined offer from ReEnergy will be made, as will that of any other firm seeking to purchase all of SPSA's assets. These offers will hopefully be independently assessed to determine their value to the region's taxpayers. With this information, SPSA's member communities will then reject or accept the offer. To accept will mean that the SPSA board will need to put itself out of business.
future prospects
First, thanks; I think the Pilot editorial staff has taken the time to look at this issue as a whole, not is response to the latest article from it news staff, and by doing so, has developed a much for nuanced understanding of the business and political arrangements. While you could not avoid a mention of high tip fees for some members, you seem to have placed the overall financial situation in context. Yes, six communites have obscenely high tip fees, regretably because past representatives chose low tip fees over a debt repayment schedule. That said, the response from the private sector has shown that SPSA has built value too, and in fact the performance of its core mission, that is, disposal of municipal solid waste, is done efficiently and effectively. The existing members are inextricably involved in the decision about the sale of assets, and the city managers have been actively and productively engaged as well. This bodes well for the future.
SPSA Rates
The reason SPSA's tip fee will be $198 is because of its profligate borrowing over the past few decades. That has stopped. It's also because Virginia Beach is loaning SPSA money, which must be repaid. Everyone should know that the tip fee for six localities will likely inch up over $200/ton in 2011 and 2012 after it sells the Waste to Energy Facilities to Wheelabrator (hopefully soon), but then will come down. By 2018, the "service fee" charged to the localities by Wheelabrator will be around $55. If the participating cities and counties (SPSA will not exist by then) add another $15 to cover costs of operating their transfer stations and trucking trash to the WTE plant in Portsmouth, the total tip fee will be about $70/ton. That' s a whole lot less than $200. So there is definitely a light at the end of this tunnel.
One last thing. SPSA has given the ReEnergy bid plenty of consideration. So have the cities and counties, all of whom have rejected it, some by binding resolution. Virginia Beach and Suffolk are not going to accept anything that compromises their current financial advantage, and attempts by ReEnergy to buy them off with host fees or some other inducement will o
Lesson
In all due respect, it was not the borrowing that was the problem, it was the refusal to set the municipal tip fee high enough to pay off the debt in a reasonable and prudent time. Frankly, when you create an industrial enterprise like SPSA, with very expensive equipment and infrastructure requirements, you must maintain and sustain it so borrowing is essential to privde disposal assets. But so is paying back the debt, and because some members refused in the early years to understand that, the amount of debt remaining, with the requirement to pay it all off by 2018, makes the annual payments so high. The lesson is not to not borrow; the lesson is to establish a debt payment schedule and stick to it.