SPSA presents another plan

Published 8:49 pm Thursday, January 29, 2009

In a surprise move on Wednesday, the Southeastern Public Service Authority released a money-juggling plan that, if approved, could provide the cash needed to operate in the short-term.

“This is not by any means a done deal,” warned Tom Kreidel, a spokesman for SPSA. “This is one thing we are pursuing to try to restructure our debt.”

The tentative plan consists of four steps, the first of which was passed by a vote of the trash disposal authority’s board of directors. The board voted to ask for permission from Wachovia Bank to use a $7.5 million loan — initially acquired for capital expenses — for operating expenses, instead.

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That move, if the bank approves it, would give the authority enough cash to make it through a debt restructuring process, which would break up SPSA’s $240 million debt so that the authority has a lower financial obligation during the next two years.

The extra money from restructuring debt would keep SPSA open long enough to sell its waste-to-energy plant, and the money from that sale would then go toward paying off debt and operating costs.

By delaying principal, SPSA can save more than $12.4 million in fiscal year 2009 and $18.1 million in fiscal year 2010.

Without a sale of assets and the subsequent commitment of large amounts of cash toward paying down its debt, though, the move could cost the authority nearly $50 million in extra finance and interest charges, according to a presentation Wednesday by The Public Financial Group, which advises SPSA on financial matters.

The presentation also notes that if SPSA defaults on its bonds, each of the eight member localities would be liable for a portion of the value of those bonds that are due at the time.

In the case of a default within the next two years, Suffolk’s liability through 2010 would be almost $200,000. Theoretically, the city also faces more potential liability during the next 10 years, as SPSA’s $240 million in debt continues to grow.

But agency officials are confident they will be able to sell the waste-to-energy plant for as much as $200 million, and they have expressed their intent to devote that income to paying debt.

The plan announced Wednesday is a response to the impending cash shortage that SPSA faces. Another response — a tipping-fee increase from $104 to $245 per ton — had been on the board’s meeting agenda until late Tuesday, when a notice went out that the necessary public hearing, also scheduled for Wednesday, was canceled, because it had not been advertised properly.

In exchange for hosting the regional landfill, Suffolk pays no tipping fees for its trash disposal. But the City Council voted on Monday to “reluctantly” support the increase, nonetheless.

In a Dec. 21 e-mail to city managers, SPSA executive director Bucky Taylor said that failing to raise the fee would likely mean SPSA would not have enough cash to survive another 60 days.

In addition to the proposed refinancing plan, SPSA’s board set another public hearing on the $245-per-ton rate. That hearing will take place April 8 at the regional board room, 723 Woodlake Drive, Chesapeake.

Suffolk Councilman Leroy Bennett, the Suffolk representative to SPSA, did not return a call for comment.