Area localities back latest SPSA plan

Published 8:31 am Friday, March 27, 2009

Officials from Southampton and Isle of Wight counties and the city of Franklin say a new plan to guarantee payment on more than $71 million in loans owed by the Southeastern Public Service Authority to a state lending agency is the best option for their constituents.

Under the new plan, tipping fees for six of eight members of SPSA would increase from $104 to $170 per ton, or 63 percent. The increase is substantially less than an earlier plan to raise tipping fees to $245 per ton.

SPSA would use the new revenue from tipping fees — and its member localities’ promise to back a refinancing plan — to help pay off the $71.8 million it owes the Virginia Resources Authority.

The Franklin City Council endorsed the plan at its March 9 meeting.

“I think the plan as presented is the best plan for the time period, until July 2010, that could have been put together,” said Ward 1 Councilman Barry Cheatham, who represents Franklin on SPSA’s Board of Directors. Cheatham added that he thought all eight localities served by SPSA would join the plan.

Isle of Wight and Southampton counties are on board.

“I think we all believe (this plan) is about as good as it gets,” said Stan Clark of the Isle of Wight County Board of Supervisors.

Clark, who represents the Newport District and is also on SPSA’s board, said the county “has already authorized me, at the proper time, to support it.”

Dallas Jones, chairman of the Southampton County Board of Supervisors and another SPSA board member, said supervisors discussed SPSA during a closed session Monday.

“We talked about it, we discussed it,” Jones said. “We were waiting until after we found out what the state (Virginia Resources Authority) was going to do with this thing. It wasn’t a done deal yet. We were trying to wait until they signed off on it. And when they signed off on it we were good to go.”

Gov. Tim Kaine told the eight SPSA localities on Feb. 13 that the state would not let the waste authority default on its loan obligations. If necessary, the state would pay off SPSA’s debts and collect the money back from member localities later.

Officials said that under the new plan, taxpayers would see an increase in the cost of having their garbage collected, but nothing else.

“Except for an increase in the tipping fee, the taxpayer will not be affected unless SPSA defaults, which is not going to happen,” Cheatham said. “SPSA, unlike a business, is a state authority and as such cannot go bankrupt. Governor Kaine has already said that if the authority defaults the state will cover it and take the money out of each locality’s state funding. So we could be affected if that happened.”

It is unclear exactly how much the new plan would cost citizens.

“This plan has not been etched in stone, as it will not be considered by the SPSA board until April 9,” Cheatham said. “It is premature to even try to give a dollar figure. The $170 fee, as being discussed, is a proposal by the city administrators and is under study.”

The City Council raised residential garbage bills from $32 per month to $47 per month in February in anticipation of higher tipping fees charged by SPSA.

Cheatham added that the city of Franklin would not keep any excess money collected for higher tipping fees.

“However, please keep in mind that the city picked up a good portion of the projected $245 increase until the end of June with budget reductions, and exactly how that calculates to this decrease (to $170) has not been determined,” Cheatham said. “Next year the entire tipping fee will be passed through to the customers.”

Isle of Wight’s Clark said, “We’re working on trying to figure out how that’s going to be funded right now. I don’t think we have an answer for that. Maybe we can find enough savings internally for this short period of time.

“Hopefully that tipping fee will come down from $170. This is a gap plan just until we get the waste-to-energy plant sold, and then hopefully the tipping fee will come down after that — if we can eliminate some of this debt. It’s either got to come from reserves or from some annual budget savings.”

Isle of Wight and Southampton residents pay for garbage disposal through their property taxes.

Southampton’s Jones said, “It’s going to cost us some money that we don’t have budgeted.” He added that the $170 fee “just delays the cost until we can sell the waste-to-energy plant.”

Two companies — Covanta Energy Corp. of Fairfield, N.J., and Wheelabrator Technologies Inc. of Hampton, N.H. — are vying to purchase the waste-to-energy incinerator in Portsmouth from SPSA.

“I’m not certain, but I’m almost sure that it’s going to happen sooner or later,” Jones said of selling the incinerator.

Clark concurred, saying, “I don’t believe that this organization has an option to hold onto it. I think the debt level is so great, and the call on the debt (is) at our doorstep. I do not believe we have an option not to sell the waste-to-energy plant.”

Cheatham said, “I think it will sell. We will also follow the path of looking into selling other assets as well.”

ReEnergy Holdings LLC, a company based in Latham, N.Y., has offered $205 million for all of SPSA’s assets, which includes the incinerator, a Suffolk landfill, transfer stations and recycling centers. Its offer is contingent on a long-term contract with SPSA’s member localities.

Clark said the latest plan to keep SPSA afloat shouldn’t be considered a bailout.

“We call it a ‘gap funding plan’ because it fills the gap between where SPSA is right now — the budget shortfalls that they have right now — and when they get the waste-to-energy plant sold,” Clark said. “We needed a plan to bridge that gap so SPSA could keep operating. This plan does that. Am I happy that we have to do a gap-funding plan at all? No.”

The VRA sought “full faith and credit” commitments from seven of the eight localities served by SPSA. The eighth, Southampton County, would require a referendum of voters to extend its full faith and credit.

Southampton County Administrator Michael Johnson said the state constitution stipulates that a county cannot assume long-term debt without a referendum. Johnson said the VRA “wouldn’t ask the county to go through such extraordinary measures” and instead asked for a moral obligation, which the county gave last month.

“Southampton County is ready and willing to consider guaranteeing VRA its portion of SPSA’s debt, allocated on the basis of population,” Jones said in a letter to VRA dated Feb. 23.

Isle of Wight County spokesman Don Robertson said that county has the authority to assume long-term debt.