▸ The gist: At long last, the public got to see NextGEN Utility Systems/Bernhard Capital Partners’ proposal to run LUS on full display. NextGEN representatives discussed the findings of the startup firm’s months-long assessment of LUS at a briefing Tuesday, arguing that the system is stuck in the 20th century but primed to make technological leaps. Here are some big takeaways:
- It’s a 40-year contract
- There’s $140 million in cash and $184 million in debt relief on the table, plus $920 million in continued in-lieu-of-tax (ILOT) payments and $64 million in conditional payouts. Total compensation here is $1.3 billion.
- LUS employees would remain in civil service.
- NextGEN intends to headquarter its operations here and grow it to run 50 utilities. Lafayette would be the first.
- Jim Bernhard was born in Lafayette and used to eat at Judice Inn.
- Cleco, Slemco and Entergy are sniffing around now.
- NextGEN thinks LUS is reliable and affordable but stuck in the 20th century.
▸ Stuck in the 20th century? Is that right? Sure. The critique that LUS is slow to adopt innovation and is handcuffed to aging power generation is not new. In fact, some local electrical nerds (I say that with both love and self-loathing) —Lafayette's Electrical Discussion, well worth the Facebook follow — last year circulated its "State of LUS" with many similar findings. I’ve actually reported on this a little myself. LUS was nearly burned in the last decade on decisions to reinvest in a coal plant the utility co-owns with Cleco. Cleco runs the plant on LUS’s behalf, even though it’s a minority owner.
Jim Bernhard, the BCP principal, hammered the point that LUS already contracts out for the bulk of its power generation, which is certainly true. In doing so, he implied Lafayette precariously lacks local generation capacity. Yes, only 40 percent of power used by LUS customers comes from generation that LUS owns, and virtually all of that comes from LUS’s coal plant. But to be clear, LUS owns plants capable of generating most of its peak demand should the need arise, like a hurricane. The plants are just so old and inefficient that they generally aren’t called upon to be used. Instead, LUS buys most of its generation very cheaply at market, the result of a strategic decision made in 2013.
In its defense, LUS upped its renewable portfolio this year through a purchase agreement to buy wind energy from the Midwest. The utility has installed smart meters, which Bernhard’s team say are underutilized, and has pursued plans to build new natural gas generation, although Bernhard and others say the type of plant considered is too expensive and outdated. There’s a legitimate policy debate to be had about LUS’s approach to new technology. LUS could become a "utility of the future," to borrow NextGEN’s buzz phrase, but the bigger question is whether LUS needs NextGEN to get there.
"There’s nothing in this proposal that can’t be accomplished by hiring a highly skilled and experienced director," Councilman Bruce Conque tells me. "Everything in there is about management."
▸ Gee, $1.3 billion seems like ILOT of money. It is! But there’s some contention here. Most of the $1.3 billion (71 percent!) is achieved by $920 million in ILOT payments, which LUS already pays to make up for the fact that it doesn’t pay taxes. NextGEN projects its ILOT substitute willl average $23 million per year over the contract’s lifetime. That’s about what the ILOT currently pays. But some argue LUS’s ILOT payments would outgrow the projected average offered by NextGEN, even as utility revenue has more or less flatlined in the last few years. It’s unclear how NextGEN would calculate the payments year-to-year. Even if NextGEN’s version of the ILOT grows, however, it’s hard to call it a net gain. It’s probably best to think of this as a $324 million deal — the cash payment ($140 million) plus the debt relief ($184 million).
▸ NextGEN may need us more than we need NextGEN. Even presenting a management team in place with extensive experience, Bernhard acknowledged that Lafayette would be the first utility managed by NextGEN on its quest to Fortune 500 status and acquisition of 50 utilities. Julius Bedford, an associate with Bernhard Capital Partners, marveled at LUS’s customer service reputation, workforce and revenue stability. "It’s not every day that you come across an asset or company like LUS,"he said. An investor-backed startup like NextGEN needs a win to signal to investors and other utilities that its model works. That means Mayor-President Joel Robideaux ought to have a lot of leverage to negotiate better terms if he chooses to go forward with the proposal.
▸ What to watch for. Whether and how this progresses. The council sent a clear signal on Tuesday that it won’t take the initiative on Bernhard’s bid to run LUS, although NextGEN will reprise its performance at an Oct. 16 council meeting. The ball appears be in Robideaux’s court if he wants to get a deal done. The next step would be a contract brought to the City-Parish Council in the form of an ordinance. But bear in mind there are now other interested parties. Representatives from Cleco, Entergy and Slemco were in attendance, and Entergy reps confirmed they want a shot at the action. Both Cleco and Entergy have broached the topic with Robideaux before, though he says they pursued full buyouts of LUS, not management agreements.
"If [Robideaux]’s gonna pursue this, he’s going to have to state it," Conque says. "And open up the process to anyone that may be interested."
▸ The gist: C. Michael Hill, one of the Lafayette Bar Association’s "go-to guys" for continuing education presentations on ethics and professionalism, was sworn in Tuesday morning to replace embattled — and now multiply convicted — City Marshal Brian Pope. While Pope appeals his felony perjury and malfeasance convictions, he is automatically suspended without pay and has lost all the benefits of his office; City-Parish Councilman Bruce Conque said Pope can retain his city health insurance if he pays 100 percent of the premiums.
▸ The ordeal had to be really challenging for marshal employees. Let’s go out on a short limb here and assume it was a "you’re either with me or against me" atmosphere at the marshal’s office over the past few years. No one — especially a public employee, much less one in law enforcement — should be put in that position, and it could not have been easy for the employees of the marshal’s office to endure this level of anxiety resulting from their boss’s self-inflicted legal wounds. The unfortunate situation the employees were in was recognized repeatedly by the city judges — who appointed Hill — and Hill himself. The message was clear: Marshal employees’ jobs are safe, they’re a competent lot, and they should all be breathing a collective sigh of relief.
▸ Hill, a former federal magistrate judge now in private practice, says he’s not yet considered whether to seek permanency of the interim post but made clear he will be a hands-on marshal. "I’m not the kind of person to sit and watch things going on around me when I’ve got the ultimate responsibility," he said after being sworn in. Local leaders have concluded that the law requires the city-parish council, as governing authority, to name the interim appointment to serve until Pope’s conviction is either upheld or overturned, and anyone interested in the post has to submit an application. This intriguing tidbit from The Advertiserconfirms that Pope could qualify for re-election in 2020 if the appeals process is still underway.
▸ Next steps. Years of legal troubles ignited by The Independent’s public records lawsuit are far from over for Pope, who is staring down seven new felony counts of malfeasance in office for lining his pockets with civil fees (he’ll be arraigned Oct. 23). Public records show that Pope continued to pay himself thousands of dollars in civil fees that are supposed to support the office operations even after the AG opined in January that state law prohibits him from supplementing his income. Pope had been taking in $220,000 a year, more than any elected official in the state. In interviews outside of the parish courthouse last week after Pope’s conviction, prosecutors confirmed ongoing investigations into Pope’s conduct.
▸ At his swearing in, Hill was not even sure what his own salary would be ("I have no clue") — he said he answered the call to serve that came Friday, two days after Pope’s conviction — but was adamant that he would not take the fees in question. "That’s not going to happen," he said. — Leslie Turk
Festivals Acadiens et Creoles is a great place to eat. Victoria’s Secret spokesman Bob Dylan plays the Heymann Center.
What’s Jim Bernhard’s bid to run LUS really worth?
Dark money is poised to have considerable influence at the state and especially local levels.
Robideaux said through his spokeswoman that conversations with Entergy have continued intermittently since at least June of this year.
Chief among them: Can we get out of it?
Billed as a $4.1 billion deal, the offer is heavy on assumed indirect economic impacts.
City-Parish Councilman Bruce Conque says the appointment of former federal Magistrate C. Michael Hill as interim city marshal is a temporary replacement pending final action by the Lafayette City-Parish Council.
▸ The gist: Discussing vetoes and a crunched parish budget, council members criticized the Robideaux administration’s policies and complained about a lack of communication, revealing some tension between the two branches of local government.
▸ Disorder of business: The council took up a dense docket of pressing and contentious issues on Tuesday, including three budget amendment vetoes issued by the mayor-president. Robideaux had previously vetoed measures to give LCG employees a cost of living raise and to add 10 new firefighters, and a maneuver to effectively table his appointment of new directors for LUS and LUS Fiber by defunding the salaries for those positions. The council voted to override the mayor-president’s pay raise veto, while his firefighter veto was sustained. The two bodies reached an informal compromise to defer filling the open director positions until the smoke clears on Bernhard Capital Partners' proposal to privatize management of LUS. At Robideaux’s request, the council will take up a resolution pinning the compromise down in November.
“I wish we would have this discussion during the budget hearing,” Robideaux said, defending his position on the LUS director salaries. “I certainly would have conceded to the council.” Robideaux complained that the defunding amendment, Bruce Conque’s procedural brainchild, caught him off guard. Conque’s amendment reduced the budget salary of each position to $1, sparking a miniature constitutional crisis that pitted the council’s power to appropriate money against the mayor-president’s power to set salaries for his directors. City-Parish Attorney Paul Escott argued Conque’s defunding move was illegal and the the mayor-president’s powers would win out per common legal practice.
“With all due respect, I sent you a memo on Aug. 23,” Conque replied, noting that he asked the mayor-president to delay interviewing for the open positions until a decision is reached on Bernhard Capital Partners' proposal. “I have had no response.”
Conque has made similar complaints about the administration’s responsiveness, or lack thereof, on its move to sell a parish parking garage to the city to shore up the parish budget.
“I don’t like being placed in a political position, painted into a political corner,” Conque said about the transaction, describing the move as late-coming.“This should have happened months ago. That is not fair to this council.”
“We alerted you to the fact that this was an issue,” Robideaux countered, saying that his office had supplied the council via email with options on the garage transaction in August.
▸ Irreconcilable differences: The tension boiling here is a difference of opinion on how to address the parish budget crunch. Council members insisted the 2-percent pay raises Robideaux vetoed were manageable in the current budget, even as they criticized the mayor-president’s garage proposal as a papering over of the parish’s dire financial situation. Conque was the most pointed in his remarks generally — he has previously criticized the administration publicly for leaving the council out of the loop on the Bernhard deal and issues with the Lafayette Police Department — but other council members chimed in with similar discontentment.
“You’re boxing a parish guy in that if we don’t sell the building, we got to find $770,000 to cut,” Council Chairman Kevin Naquin, who represents a majority parish district, said of the garage deal. Naquin argued that administration should have reconciled the parish budget without assuming the sale would go through, saying that the reality of the cuts needed to be felt.
“I made the cuts. And then it’s like, but we should have cut more. You can’t have your cake and eat it too,” Robideaux responded, referring to the deep cuts his administration made in the adopted budget, in some cases 25 percent reductions.
Robideaux has been notably silent on several tax proposals promoted by Naquin, Conque, Jay Castille and Kenneth Boudreaux. He argued Tuesday night that he believes the public elected him to find solutions outside of new taxes.
“The public is looking at me to say do everything in your power before you come to me for taxes,” Robideaux said. “I figure this is the kind of solution the people put me in office to come up with.”
▸ All’s well that ends well: This round of flare-ups resolved amicably with solutions identified. It’s perfectly normal for there to be differences of opinion in politics. On a discord scale of one to Washington D.C., this rates maybe a three. But Robideaux’s moves on LUS have clearly rattled the foundation of trust between the two bodies. That may not be irreversible as yet, but it could prove problematic for Robideaux’s agenda if the council continues to feel boxed out.
Robideaux’s move to sell a parish parking garage to the city fails, sending next year’s parish budget into deficit
▸ The gist: Next year’s budget was balanced assuming the parish would successfully sell a Downtown parking garage to the city for $770,000. On Tuesday, the City-Parish Council voted down the mayor-president’s proposal. Opponents argued it was a bad deal for the city that amounted to a bailout for the cash-strapped parish.
▸ In the red: The 2018/2019 fiscal year, which starts Nov. 1, was set to end with a $105,000 balance in the parish general fund.That figure assumed Mayor-President Joel Robideaux’s proposal to sell the garage went through in the current fiscal year, which ends Oct. 31. Consolidated government’s chief financial officer, Lorrie Toups, warned that the council will need to make deep cuts in general fund expenditures to square the parish’s finances. The council and administration will need to work quickly to find a fix. Consolidated government is required by law to present a balanced budget.
▸ Bailout or buyout: That’s in the eye of the beholder. Council members opposed to the transaction argued the city’s purchase of the dilapidated Buchanan Street garage, which primarily serves parish courthouse employees and visitors, would saddle city taxpayers with a toxic asset needing potentially millions of dollars in repairs. No figure is yet confirmed, but council discussion suggested the needed repairs exceed $3.5 million. That the parish can’t afford to fix — or even demolish — the building is at least in part the administration’s motivation to sell it off. Robideaux argued, however, the deal would benefit both sides: Upon redevelopment or repair, the city would get a revenue generating asset (the garage earns about $90,000 a year in parking fees right now), and the parish would get a liability off its books. He floated the idea of replacing the garage with a larger parking structure that would feature leaseable retail space on the bottom floor. He also noted some interest from private parking companies.
“Too many times we’ve gone to the rescue of the parish with city dollars,”said Councilman Bruce Conque in an often testy exchange with the mayor-president. Conque criticized the administration’s engagement on the issue, saying Robideaux brought the sale before the council at the “11th hour,” forcing the council into a corner: either approve the sale or adopt an unbalanced budget. Robideaux disputed that characterization.
▸ The idea appears to have been in the works for some time. The $770,000 figure comes from an appraisal performed in 2017 and is now out of date. The administration withdrew an earlier attempt at the transaction in July of this year when it failed to produce the right legislation for council consideration and approval. Robideaux suggested the most recent proposal, including clawbacks for the city pending results of new appraisal, in an email to council members in late August.
▸ This garage has been falling down for years. Whether it’s in immediate danger of collapse is unlikely but unclear. Water seeping through facade cracks have rusted some of the steel beams, according to the 2017 appraisal. Conque claimed he was told by the administration that the garage was given a 90-day window to close beginning in early August. When pressed, Robideaux walked back the urgency of the garage’s condition. Robideaux has not responded to a request to clarify that window.
“It’s not a bailout. If I’m a parish guy, I’m gonna say the city screwed us,”Robideaux argued, making note of the inherent conflict of interest in his bifurcated role as parish president and mayor. He defended his solution as one that balanced the needs of both sides of the ledger. The $770,000 figure was the lower end of the 2017 appraised value, he said, and he couldn’t legally sell it for less. He contended that the structure would generate revenue for the city going forward and would accrue more value when the old federal courthouse is redeveloped.
▸ What to watch for: Budget cuts. The council will take up how to reconcile the parish budget in early November. Missing $770,000 is a massive blow to an adopted $12.4 million operating budget. How they get to a balanced budget will figure into ongoing political discussions about how to solve a seemingly intractable budget problem on the parish general fund ledger.