On Monday, NextGen withdrew their offer to manage LUS hours before the Council voted against considering any deal like it. So now what?
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The decision was made “in response” to the ongoing discussions of the company’s proposal and the “importance” of the city’s decision whether to accept it.
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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.
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The gist: Swimming upstream of public opinion, the firm making a play to manage LUS is widening the reach of its pitch. Bernhard Capital Partners/NextGEN Utility Systems hung up a banner, so-to-speak, with a temporary outreach center in Downtown Lafayette.
The outreach center puts boots on the ground for a growing PR campaign. This week, NextGEN also created a Facebook page and launched a phone campaign to go along with its digital billboards billing a $1.3 billion offer. Talking points from the phone campaign emphasize the $140 million in up front cash included in the deal, rate reductions and the company’s intention to site its headquarters in Lafayette. NextGEN is renting space in the Omni Center on Jefferson Street for the next two and half weeks, according to Omni Center owner Robert Guercio.
Could environmental progressives be a base of support? In a phone interview, Guercio, a Downtown entrepreneur and sustainability advocate affiliated with Bayou Electric Vehicles, bubbled with enthusiasm about the possibilities NextGEN offers, particularly in modernizing LUS. Guercio said he fought LUS for two years to get LED lighting Downtown and that the utility dragged its feet on renewable energy.
“Why is it so hard for us to do innovative things? Government is kind of clunky sometimes,” Guercio said. “This is their [NextGEN’s] specialty. We’re in business to rent the facility, but I’m also supportive of an effort to modernize LUS.”
LUS announced a $7 million LED streetlight program in 2017. The city owns its 18,000 streetlights, and the Public Works Department pays LUS for electricity and maintenance (replacing bulbs and poles, etc.). In what could be argued was an innovative approach, LUS agreed to fund the program up front because Public Works could not afford to do so. Because LEDs are cheaper to run than the city’s existing lamps, LUS will continue to charge Public Works the contract price for the more expensive conventional lighting until it recoups its $7 million investment.
Bayou Electric Vehicles team has twice unsuccessfully sought funding for Lafayette’s first EV charging station via local pitch competition 24 Hour Citizen Project. Jeff LeBlanc, who made the pitch at the event this year, said that NextGEN will give $3,000 to an upcoming fundraiser, enough for BEV to finally get Lafayette’s first EV charging station placed in front of The Wurst Biergarten on Jefferson St., another Guercio-owned operation.
LeBlanc said BEV’s sole issue is proliferating electric vehicle infrastructure in Lafayette, and it won’t be making any sort of formal statement on third party management of LUS. Speaking for himself, LeBlanc said he’s skeptical of the terms of NextGEN’s proposal, particularly the 40-year contract, though he shares some of Guercio’s frustration.
“LUS had every opportunity to get [Lafayette’s first EV charger] this done over the past two years,” he said.
NextGEN’s critiques of LUS echo others from renewable energy advocates. And that could be why the company might find common ground there.
Who, what, when and how. It’s really unclear what NextGEN’s path to success is. Even if it successfully courts progressives, who else will carry water for the controversial proposal is yet to be seen. Mayor-President Joel Robideaux took an earful for suggesting that public opposition is uninformed, yet he has not voiced dedicated support for an offer he courted. What details a potential contract would include, beyond the exchange of money, are yet to be seen. When and how this moves past the hot air stage, either by vote of the public, vote of the council or a contract with the administration, is unknown.
What to watch for: Whether any part of Lafayette’s political class joins the campaign. Given the toxicity of the topic from the time NextGEN’s communications with the administration were revealed, there’s been no local political capital spent promoting it, outside of the mayor-president’s call to explore options.