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Home My WebLink About011208 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 ? Provide SPSA with a strategic planning tool that will ? allow it to evaluate the financial impact of different options through 2018 Beck developed analyses that identify whether: ? Financial policies can be met ? Existing Bonds can be repaid ? $100/ton tipping fee can work ? R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model2 ¦ Financial Policies (Approved by Board on January 24, 2007) Reserve and Contingency Fund ? Establish an R&C Fund equal to 15% of operating ? budget expenses Closure/Post Closure Fund ? Cash fund annual closure cost ? Debt Management Policy ? Use available remaining funds to cash fund a portion ? of the capital expenditures R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model3 ¦ Components of the Model Other Revenues Tipping Fee Revenues ?? (Non-Tipping Fees) Municipal ? Steam Sales ? Contract Commercial ? Electricity Sales ? Non-Contract Commercial ? Proprietary Waste ? Yard Waste ? Recycling Collection ? Navy ? Fees Construction & Demolition ? Interest Earnings on ? Reserve Funds Out-of-Area –In-State ? Others Out-of-Area –Out-of-State ? ? R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model4 ¦ Components of the Model (cont.) Other Uses Operating Expenses ? ? Ash & Process Residue ? Waste-to-Energy ? Agreement Payment Non Waste-to-Energy Reserve and ? ? Contingency Fund Operations ? Closure Cost –Existing ? Landfill Cells ? Fleet Maintenance Cell VII –Final Closure ? ? Cell VII –Post Closure Other ? ? Transportation ? R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model5 ¦ Components of the Model (cont.) Capital Expenditures ? Cash Funded ? Debt Funded ? Debt Service Payments ? Existing Debt ? New Debt ? For Flow Control Cases ? Tipping Fee Payment ? Projected Annual Savings for each Community ? R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model6 ¦ 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 ? Closure expense for Cell VI paid as you go ? Cash available is used to help fund capital expenditures ? 6.Current Closure Fund of $4 million is used 2009-2011 R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model7 ¦ 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 ¦ Case 1 Result of Current Base Case Analysis Case 1 developed to answer the following questions: Can SPSA implement financial policies? ? Can SPSA pay off existing debt? ? Will $100/ton meet financial obligations? ? R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model9 ¦ 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 ¦ Case 2 Flow Control Case Assumptions –Same as for Case 1 (No Flow Control) except: No out-of-state waste ? The same tipping fee is paid by: ? Six Member Communities (Not Virginia Beach or Suffolk) ? Commercial Haulers ? Contract ? Non-Contract ? Norfolk Sludge ? Navy ? Program calculates the level of tipping fee required to ? 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 ¦ 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 ¦ 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 ¦ 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 ? Virginia Beach or Suffolk Lost commercial waste in 2009: ? Tons Virginia Beach157,000 Suffolk23,000 Total180,000 Decreased transportation costs from the transfer stations at ? Virginia Beach and Suffolk Calculates the level of tipping fee required to generate the same ? 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 ¦ 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 ¦ 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 $117,526 *The cost savings can also be characterized as a cost shift. Theintent of flow control is to make disposal rates equal and fair to all users, treating localities and businesses equally inthe cost waste disposal. R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model16 ¦ Comparison of Tipping Fees ($/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$99-- R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model17 ¦ Comparison of Tipping Fees ($/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 ¦ Summary Based on the current budget, a tipping fee of $100/ton ? escalated by 3% per year is projected to be just sufficient to: Meet SPSA’s financial policies, including funding a ? $7.5 million reserve and contingency fund Repay existing debt and additional debt –via use of ? balloon payments Allow SPSA to be fully functional through 2018 ? R. W. Beck, Inc. Results of Strategic Testing and Financial Forecasting (“STAFF”) Model19 ¦