011208 SPSAPresentation to Virginia Beach City Council
Results of Strategic Testing
and Financial Forecasting
(“STAFF”) Model
February 12, 2008
Scope of R. W. Beck’s Review
Objective
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Provide SPSA with a strategic planning tool that will
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allow it to evaluate the financial impact of different
options through 2018
Beck developed analyses that identify whether:
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Financial policies can be met
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Existing Bonds can be repaid
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$100/ton tipping fee can work
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R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model2
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Financial Policies
(Approved by Board on January 24, 2007)
Reserve and Contingency Fund
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Establish an R&C Fund equal to 15% of operating
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budget expenses
Closure/Post Closure Fund
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Cash fund annual closure cost
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Debt Management Policy
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Use available remaining funds to cash fund a portion
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of the capital expenditures
R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model3
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Components of the Model
Other Revenues Tipping Fee Revenues
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(Non-Tipping Fees)
Municipal
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Steam Sales
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Contract Commercial
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Electricity Sales
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Non-Contract Commercial
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Proprietary Waste
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Yard Waste
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Recycling Collection
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Navy
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Fees
Construction & Demolition
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Interest Earnings on
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Reserve Funds
Out-of-Area –In-State
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Others
Out-of-Area –Out-of-State
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R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model4
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Components of the Model
(cont.)
Other Uses
Operating Expenses
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Ash & Process Residue
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Waste-to-Energy
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Agreement Payment
Non Waste-to-Energy
Reserve and
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Contingency Fund
Operations
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Closure Cost –Existing
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Landfill
Cells
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Fleet Maintenance
Cell VII –Final Closure
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Cell VII –Post Closure
Other
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Transportation
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R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model5
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Components of the Model
(cont.)
Capital Expenditures
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Cash Funded
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Debt Funded
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Debt Service Payments
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Existing Debt
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New Debt
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For Flow Control Cases
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Tipping Fee Payment
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Projected Annual Savings for each Community
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R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model6
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Case 1
Current Base Case Analysis
Continuation of Current Business Model –
No Flow Control/Capital Expenditures Based on Current Budget
Assumptions:
1.Municipal tipping fee of $100/ton in 2008, escalating by 3% per year
2.O & M expenses and capital expenditures increase by 3% per year
3.Waste quantities increase by 1.5% per year
4.Capital expenditures of $18 million per year based on current budget
5.Financial policies are implemented
R & C Fund fully funded by 2010
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Closure expense for Cell VI paid as you go
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Cash available is used to help fund capital expenditures
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6.Current Closure Fund of $4 million is used 2009-2011
R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model7
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Case 1
Current Base Case Analysis
(cont.)
7.Debt Service Reserve Fund is released in 2017
8.Balloon payments are made for additional bonds
9.Cell VII is constructed and available in FY2012
10.SPSA owns and operates the WTE system that
continues to operate at historical level
11.SPSA continues to accept out-of-state waste
12.Virginia Beach tipping fee cap ends in FY2015
13.Suffolk municipal waste pays no tipping fee
R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model8
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Case 1
Result of Current Base Case Analysis
Case 1 developed to answer the following questions:
Can SPSA implement financial policies?
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Can SPSA pay off existing debt?
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Will $100/ton meet financial obligations?
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R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model9
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Case 1
Current Base Case Debt Repayment
SPSA Outstanding Debt
$300,000
$250,000
$200,000
New Debt
Existing Debt
$150,000
$100,000
$50,000
$0
20082009201020112012201320142015201620172018
R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model10
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Case 2
Flow Control Case
Assumptions –Same as for Case 1 (No Flow Control) except:
No out-of-state waste
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The same tipping fee is paid by:
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Six Member Communities (Not Virginia Beach or Suffolk)
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Commercial Haulers
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Contract
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Non-Contract
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Norfolk Sludge
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Navy
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Program calculates the level of tipping fee required to
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generate the same level of tipping fee revenues as the Base
Case, absent out-of-state waste
R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model11
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Case 2
Flow Control Case
Municipal Virginia
YEARTipping FeeBeach Cap
$/Ton$/Ton
Estimated Tipping Fee
2008----
$120.00
2009$59$54
$100.00
2010$59$56
2011$61$56
$80.00
2012$64$65
$60.00
2013$66$65
$40.00
2014$67$65
2015$69$65
$20.00
2016$78--
$0.00
2017$81--
2009201020112012201320142015201620172018
2018$83--
Municipal Tipping FeeVirginia Beach Cap Suffolk Tip Fee
R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model12
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Case 2
Flow Control Case
SPSA Community Reduced Municipal Tipping Fee*
Community2009201020112012201320142015201620172018TOTAL
Virginia BeachSavings $000
$0 $98 $0 $924 $692 $445 $183 $8,179 $8,551 $4,470 $23,541
ChesapeakeSavings $000
$2,528 $5,442 $5,723 $5,824 $6,130 $6,451 $6,787 $6,166 $6,446 $3,370 $54,867
FranklinSavings $000
$111 $239 $251 $256 $269 $283 $298 $271 $283 $148 $2,411
Isle of WightSavings $000
$453 $974 $1,025 $1,043 $1,098 $1,155 $1,215 $1,104 $1,154 $603 $9,826
NorfolkSavings $000
$1,958 $4,213 $4,432 $4,510 $4,747 $4,995 $5,255 $4,774 $4,991 $2,609 $42,483
PortsmouthSavings $000
$1,248 $2,687 $2,826 $2,876 $3,027 $3,185 $3,351 $3,044 $3,183 $1,664 $27,089
SouthamptonSavings $000
$279 $600 $631 $642 $676 $711 $748 $680 $711 $372 $6,051
SuffolkSavings $000
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
TotalSavings $000
$6,577 $14,253 $14,888 $16,075 $16,639 $17,226 $17,837 $24,219 $25,320 $13,235 $166,269
*The reduced municipal tipping fee can also be characterized as a cost shift. The intent of flow control is to make disposal
rates equal to all users, treating localities and businesses equally in the cost of waste disposal.
R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model13
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Case 3
Virginia Beach and Suffolk Do Not Adopt Flow Control
Assumptions –Same as for Case 2 (Flow Control Case) except:
Assumes SPSA does NOT receive any commercial waste from
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Virginia Beach or Suffolk
Lost commercial waste in 2009:
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Tons
Virginia Beach157,000
Suffolk23,000
Total180,000
Decreased transportation costs from the transfer stations at
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Virginia Beach and Suffolk
Calculates the level of tipping fee required to generate the same
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level of tipping fee revenues as the Base Case absent out-of-state
waste and commercial waste from Virginia Beach and Suffolk
Note: This case will extend the useful life of the Landfill, butthese
cost savings have not been reflected in this case
R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model14
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Case 3
Virginia Beach and Suffolk Do Not Adopt Flow Control
MunicipalVirginia
TippingBeach
YEAR
FeeCap
Estimated Tipping Fee
$/Ton$/Ton
2008----
$120.00
2009$80$54
$100.00
2010$73$56
2011$75$56
$80.00
2012$77$65
$60.00
2013$80$65
$40.00
2014$82$65
2015$85$65
$20.00
2016$93--
$0.00
2017$96--
2009201020112012201320142015201620172018
2018$99--
Municipal Tipping FeeVirginia Beach CapSuffolk Tip Fee
R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model15
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Case 3
Virginia Beach and Suffolk Do Not Adopt Flow Control
SPSA Community Reduced Municipal Tipping Fee 3*
Community2009201020112012201320142015201620172018TOTAL
Virginia BeachSavings $000
$0 $0 $0 $0 $0 $0 $0 $5,611 $5,866 $3,066 $14,544
ChesapeakeSavings $000
$2,669 $3,860 $4,035 $4,219 $4,410 $4,611 $4,820 $4,230 $4,422 $2,312 $39,588
FranklinSavings $000
$117 $170 $177 $185 $194 $203 $212 $186 $194 $102 $1,739
Isle of WightSavings $000
$478 $691 $723 $755 $790 $826 $863 $758 $792 $414 $7,089
NorfolkSavings $000
$2,067 $2,989 $3,124 $3,266 $3,415 $3,570 $3,732 $3,275 $3,424 $1,790 $30,653
PortsmouthSavings $000
$1,318 $1,906 $1,992 $2,083 $2,177 $2,276 $2,380 $2,089 $2,183 $1,141 $19,546
SouthamptonSavings $000
$294 $426 $445 $465 $486 $508 $532 $467 $488 $255 $4,366
SuffolkSavings $000
$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
TotalSavings $000
$6,944 $10,040 $10,497 $10,974 $11,472 $11,994 $12,539 $16,615 $17,371 $9,080 $117,526
*The cost savings can also be characterized as a cost shift. Theintent of flow control is to make disposal rates equal and
fair to all users, treating localities and businesses equally inthe cost waste disposal.
R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model16
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Comparison of Tipping Fees ($/Ton)
Case 1, 2, & 3
Virginia Beach
YEARCASE 1CASE 2CASE 3
Cap
2008
$100------
2009
$103$59$80$54
2010
$106$59$73$56
2011
$109$61$75$56
2012
$113$64$77$65
2013
$116$66$80$65
2014
$119$67$82$65
2015
$123$69$8565
2016
$127$78$93--
2017
$130$81$96--
2018
$134$83$99--
R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model17
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Comparison of Tipping Fees ($/Ton)
Case 1, 2, & 3
$160
$140
$120
$100
$80
$60
$40
$20
$0
20082009201020112012201320142015201620172018
Case 1Case 2Case 3Virginia Beach Cap
R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model18
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Summary
Based on the current budget, a tipping fee of $100/ton
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escalated by 3% per year is projected to be just
sufficient to:
Meet SPSA’s financial policies, including funding a
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$7.5 million reserve and contingency fund
Repay existing debt and additional debt –via use of
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balloon payments
Allow SPSA to be fully functional through 2018
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R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model19
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