‘Yes’ vote to SPSA increase was watching out for city
Published 7:54 am Saturday, January 17, 2009
As the representative to Southeastern Public Service Authority for Franklin, it is necessary to provide details to city residents regarding my recent vote in favor of the ridiculously high tipping fee that SPSA has presented.
As I stated during my campaign, I strive to maintain openness and transparency with the citizens of our city. As you can imagine, based on my ideals of financial restraint and responsibility, I faced a large degree of internal debate regarding this vote. Ultimately, I was faced with the realization that if this fee had not passed, SPSA would fail. Should SPSA fail, Franklin may be heavily affected by the aftermath. This organizational failure would have been the result of several major underlying issues.
First, Virginia law and covenants in all of the Wachovia loans, as well as conditions on the bonds, require that SPSA charge a tipping fee sufficient to cover its costs. Additionally, Franklin is in contract with SPSA to pay these tipping fees. In the event that SPSA does not charge enough to cover these costs, SPSA is in breach of the covenant and the debt can be called in for immediate payment. Currently, SPSA cannot cover the amount of this debt if it was to be immediately recalled.
Another issue is determining whether any of the debt accrued by SPSA becomes the responsibility of a member municipality. Further research indicates that this does not appear to be the case. While this is good news, the question then becomes whether or not the financial collapse of SPSA impacts the bond and credit rating for Franklin. My understanding is that damage to these ratings may indeed occur since Franklin is a member municipality that allowed SPSA to be in default. Sadly, given all of these facts, I saw nothing positive for Franklin regardless of whether I voted for or against the pending increase in tipping fees. As such, I sought to maximize Franklin’s ability to come out in as positive of a position as possible, personally believing that — as has been reported — a sale of all or part of SPSA will soon occur.
The question that I hear most often is, “How did SPSA get in this predicament in the first place?” From my perspective, there were four primary factors in getting SPSA to this point.
First is poor organization. There was no plan for sound operation and way too many “freebies.” Virginia Beach and Suffolk have super deals with the organization, while the rest of us foot the majority of the bill. Second, the decision of the SPSA board to keep tipping fees too low in the earlier years perpetuated a borrow-and-spend attitude to cover the expense for what it wanted or needed. Third, the previous Boards of Directors did not receive good information from the organization. An example of this is with regard to the flow control issue. The Board of Directors in place at the time was told that this control can and will happen. Once the budgets were in place for approximately six months, they were told that litigation may be required in order for this control to happen and that, on the other hand, litigation may cause the control issue to fail because some very important “big picture” issues had been overlooked during the planning stages. This information was too little too late for that board to be able to act effectively on behalf of SPSA.
Finally, because of the downturn in the economy and competition from private landfills, the tonnage being collected is substantially less than what was originally budgeted for and the associated revenues are reduced. In summary, the extreme shortfall at SPSA can be attributed to inadequate fees in the past, mounting debt that is now coming due for repayment, only six of the eight entities being required to make up the differences in cost, and reduced tonnages.
What can we do about it? Ideally, Suffolk and Virginia Beach must start doing their fair share and pick up a fair proportion of the costs and should come to the table to help reduce the burden to the organization as a whole; however, their individual contracts with SPSA do not require them to do this, so we must start looking at other options. One would be to start selling a controlled portion of the waste to an energy plant. No finalized offer has been presented, but it is my understanding that the amount of revenue taken in from this sale would be substantial in helping SPSA to cure the debt. This “fix,” however, is only viable if SPSA lives within its means in the future. Failure to make this change will return it to this exact spot down the road.
Another option is selling the entire SPSA operation to a private contractor. In order for this to occur, an affirmative vote must be cast by all eight member municipalities. The current proposal raises far too many concerns for me personally at this point, but the vote that I would cast would be that vote decided upon by the Franklin City Council with the input of the citizens of our city.
One of the largest concerns that I currently have is the potential for Franklin to remain locked into SPSA, even if bought by the contractor, for an additional 20 years. I have expressed this and other concerns to the potential private buyer in an effort to make the proposal at hand more equitable for Franklin.
While nothing is fail-safe, I voted “yes” for the increase to make it significantly less likely that Franklin is harmed in the short-term. To have voted “no” would have placed Franklin at a high risk for taking on financial repercussions brought about by its SPSA membership — something that this city is not prepared to shoulder. The upcoming SPSA budget is due for approval soon. I am going to be working diligently to identify unnecessary expenses in an effort to keep our tipping fees down. I am also investigating what actions SPSA may take that will result in the most positive outcome for Franklin long-term. I am still in favor of partnering in the future to meet our local needs, especially with Southampton and Isle of Wight counties. This would have to be organized from the beginning such that the partnership is equal across member municipalities.