There’s an elephant in the room the councils can’t ignore this budget season: How much money could LCG’s drainage suits cost the city and the parish? And how are we going to pay for those liabilities?
To date, there has been no public accounting of how much the three lawsuits could ultimately cost. All three cases — expropriations of land on Homewood Drive and Lake Farm Road for detention ponds and the spoil banks case in St. Martin Parish — could blow multimillion-dollar holes in LCG’s budget. And the councils need to figure out how to plan for that as they work through the budget process.
Update: LCG won its first round of appeals on the Lake Farm case. The Third Circuit Court of Appeal reversed the trial court’s decision and remanded it for further proceedings.
The range of potential outcomes is wide. But it’s very likely LCG will have to pay up at least seven-figure sums to resolve these disputes. None of that is accounted for in the mayor-president’s proposed budget.
The Homewood detention pond project alone could cost tens of millions should the court order LCG to restore the land it unlawfully seized. Even if LCG wins its appeal, it’s likely to cost millions more to acquire the property than currently budgeted. The appraisal LCG commissioned as part of the expropriation process valued the land at $2.5 million. Several real estate professionals I’ve spoken with believe the value of those 375 acres on the river near Milton ranges from $5 million to $10 million, if not more. Ultimately, the court decides what the actual fair market value is.
So win or lose, LCG will owe more money than is currently budgeted. But that leads us to the next unaddressed question: How will those liabilities be split between the city and parish?
While the Lake Farm Road ponds and the St. Martin Parish spoil banks removal were both city-only projects, Homewood Drive was authorized by joint ordinance, so these liabilities could arguably be split 50-50. But only 10% of the $30 million spent on this project is city money; the rest was parish money received through state capital outlay. We’re talking about a difference of millions of dollars, yet to date there has been no public discussion about how this bill would be split.
The big question relevant to ask during budget season: How will the city and parish pay for these liabilities? And should the councils cut spending in next year’s budget so they can be prepared to pay these bills?
This is urgent for parish government. The proposed budget eats into parish reserves, dropping its general fund balance from $4 million to $1 million. It also spends $8.5 million of parish coronavirus relief funds, leaving only $750,000. And the budget zeroes out the chronically underfunded parish drainage fund. That means less than $2 million would be available in funds to pay damages or additional costs from Homewood, which has parish dollars committed to it.
The city side of LCG’s ledger is at less risk, given its general fund balance of almost $40 million. The Lake Farm and spoil banks projects involve city money only, however, so only the city is on the hook. And the proposed budget also zeroes out the city’s coronavirus relief funds and loads the city up with debt for non-essential infrastructure projects. If it’s not careful, the City Council could end up burning into big chunks of the city’s reserves after a second consecutive year of deficit spending.
It doesn’t have to be this way. The councils could instead amend the budget to keep more funds in reserve for stormy days to come.
The prudent move for both councils is to demand a full accounting of how much money is at risk. Budget season is also the right time to engage the hard conversation about shared costs of potential liability generated by the Homewood suit. And the councils should seriously consider curtailing spending so LCG isn’t left with huge holes in next year’s budget if these potential bills come due.