The gist: Depending on a pair of council votes next week, NextGEN Utility Systems could walk away from Lafayette or find itself in a potentially lengthy open competition for the right to run LUS.
NextGEN could ride on to the next town pending the result of a City-Parish Council resolution, authored by Councilman William Theriot, officially opposing “for now” the sale, lease or private management of LUS. While non-binding, the resolution would signal to NextGEN — and any other interested party, for that matter — that the current council isn’t interested in monetizing LUS. NextGEN Managing Director Jeff Baudier, a former Cleco executive who joined NextGEN in April of this year, says the firm is spending too much money to face the futility of a dead deal (Jim Bernhard told the council the company had already spent $1 million), should the council resolve to oppose private management.
“We can’t keep beating our head against the wall,” Baudier tells me. Despite mostly negative press, he says, the firm has received interest from beleaguered and indebted cities across the Southeast, where the company hopes to one day operate 50 utilities.
Meanwhile, NextGEN could face other bidders if Councilman Kenneth Boudreaux’s resolution calling for a request for proposals succeeds by vote of the LPUA next week. And those bidders, Baudier points out, would have a look at all of NextGEN’s cards.
“Now our competition can come in and copy our structure,” Baudier tells me, noting that the company’s public proposal and presentations expose NextGEN’s pricing. NextGEN, by way of parent private equity firm Bernhard Capital Partners, has been in talks with the Robideaux administration since at least late 2016. Robideaux signed a non-disclosure agreement with BCP in April 2017 and supplied the company with LUS financial and operational information before the group’s formal due diligence study began in April 2018. Baudier says an NDA is a normal course of business for the firm.
Should the conversation continue? That’s the question at the heart of both resolutions. There’s virtually universal recognition now that NextGEN’s proposal is tainted by an early lack of transparency. Even Robideaux called for a reset and admitted that his unilateral approach was a “misstep.” But some argue that the administration’s failure to disclose the talks shouldn’t derail an important conversation about the future of LUS. Boudreaux believes the RFP process conducted by LUS’s contracted consultant — confusingly, NewGen Strategies and Solutions — can air it all out.
“I’m convinced this is going to give us the best snapshot of LUS we’ve ever had,” Boudreaux tells me. “But the process doesn’t guarantee anything happening … and this is at someone else’s cost, by the way.”
An RFP could be long and painful. Boudreaux pegged the end of January 2019 as the deadline for LCG to arrange its part of the RFP, a process that could be tricky in and of itself. Some estimate a fully vetted bidding process could take 18 months, lingering this issue into next year’s elections. Meanwhile, per a resolution passed earlier this month, LUS would remain without a permanent director until the private management pursuit is exhausted. That means progress at a crucial inflection point for LUS would remain stalled.
What to watch for. Whether and how NextGEN wins enough favor to get a second act. Early indications would stack the odds against the company. Both resolutions will be considered on Nov. 5, but Theriot’s outright opposition measure is the trump card; the full council will take it up after Boudreaux’s RFP proposal is heard at the LPUA, which meets before Monday’s council meeting. (Ordinarily on Tuesdays, the council meeting was rescheduled to accommodate Election Day.) NextGEN has a short window to show there’s enough public support for considering its bid. To that end, Baudier will hit the airwaves in the next few days. Conventional wisdom holds that the public is by and large opposed to the deal, but Baudier pushes back on that sentiment.
“There is no way that 160,000 residents know about every part of this deal,” he says.
Where’s the vision? NextGEN’s offer puts $324 million in financing on the table for use by a tax-averse community. Baudier says the firm’s management concept is commonplace internationally as a means of raising money without raising taxes. Communities tend to get behind these deals, he offers, when they see an identified use for the cash windfall. Lafayette has yet to put an idea forward, potentially tamping down enthusiasm. He says it’s not NextGEN’s role to provide one.
Speaking of votes. Baudier reaffirmed to me that the firm has no intention of structuring a deal to avoid a public vote.