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Business + Innovation

Coronavirus stimulus not enough to save Lafayette’s oil and gas industry

The gist: The purpose of the recently passed federal stimulus is to counterbalance the hit that’s happening from stay-in-place orders crippling economic activity. While this stimulus will help a number of businesses weather this storm, it’s not near enough to protect Lafayette’s oil and gas industry, which faces existential threats that require more than short-term subsidies.

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Survey highlights initial impact of COVID-19 on Acadiana businesses

The gist: Acadiana’s businesses already feel widespread economic pain, according to a survey conducted by a coalition of local economic development and community organizations, including LEDA, One Acadiana and more. Of roughly 1,000 local businesses surveyed between March 19 and March 25, 91% expected revenue to decline. 

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91% of respondents expect revenue to be down. 72% of all respondents say they expect revenue to be down significantly.

The majority of respondents have already seen their businesses hurt, with order cancellations and decreased demand. As a result, a majority of respondents are watching spending closely and adjusting work schedules.

35% have already reduced staff or expect to. Another 32.7% are unsure if they’ll need to do that. An average of 64% have already reduced operational hours, shifts, work days, and/or wages, with that number increasing to 88% for those businesses who responded on the last day the survey was live.

More than 20% said they couldn’t make it a month given current economic conditions. Some couldn’t make it another week. Nearly half of businesses were unsure how long they could hold out. Here’s a breakdown based on how much longer they felt they could stay open given current conditions:

  • 7% one week
  • 22.2% one month
  • 8.8% six months
  • 2.3% other
  • 45.1% unsure how long
  • 14.5% other 

Respondents encompassed a variety of types, industries, and sizes of businesses, with more than half having 1-10 employees, more than 70% being located in Lafayette Parish.

The federal stimulus could help local businesses navigate these choppy waters. This survey was conducted before the federal stimulus package was passed, part of which is designed to keep small businesses afloat for a couple of months. Some of the responses to this survey referenced their hope this would keep them alive. The forgivable loans available to small businesses to retain staff are starting to take applications today. 

This coalition plans on conducting another survey in mid-April to track the ongoing impact of COVID-19. Full results of this first survey can be seen here.

Link: Banks urge patience as PPP rollout gets off to a rocky start

The ambitious $350 billion Paycheck Protection Program passed by Congress one week ago to help small businesses weather the coronavirus crisis rolls out this morning amid confusion and mixed signals.

Updated federal guidelines for the program were not issued until late Thursday night in a 31-page “interim final rules” document, just hours before the PPP was supposed to begin accepting applications, and most banks are still not ready.

Source: Banks urge patience as PPP rollout gets off to a rocky start

How you can help Lafayette’s economy

The challenges facing Lafayette’s economy may seem overwhelming but you can help right the ship by spending money or making it, and that means more than just shopping local.

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COLUMN: Fiber’s fragile finances

Since launching 2008, LUS Fiber has missed its financial projections by $70 million. That puts it in a vulnerable position.

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Column: If we want to fix Lafayette’s roads, we must stop building new ones

Lafayette’s roads suck and both our city and parish budgets are in disarray. But that doesn’t mean we can’t do something about this problem. We just need to reprioritize maintaining the infrastructure we already have.

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Hold the phone: Is Lafayette actually seeing a brain gain?

The gist: There’s been a lot of talk about brain drain lately, the exodus of educated talent. It’s become a meme-level concern among young professionals. But oddly, the data doesn’t necessarily back up the anxiety. 

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Metro Lafayette actually leads the state in brain gain. That’s a term I just made up. While Louisiana overall has shed its college educated workforce out of state, Lafayette has added 3,600 new residents in that cohort between 2005 and 2017, according to UL economist Gary Wagner. Lafayette appears to be sucking up that talent from other Louisiana metros. 

Pause the celebration. Lafayette is doing better than a state that lags behind the rest of the country. And jobs are coming back slowly, relative to the losses. It’s possible, Wagner told a Downtown luncheon Wednesday, that Lafayette won’t ever recover the job losses. 

Healthcare is poised to be Lafayette’s main economic driver. Oil and gas, the regional fuel for decades, has slipped to fourth among sectors in terms of wage share. But Lafayette’s healthcare industry has trended up and is just about to take its perch as the top sector. “Eds and meds” are often cited as the desirable white collar jobs to attract in economic development. To the extent that’s true, Wagner says, Lafayette is relatively well positioned to pounce.

Some obstacles are out of our control. Wagner argued that “bad state policies” in taxation and regulation are holding the state back. He characterized the raft of policies broadly, noting that the policies are longstanding thorns.

COLUMN: Lafayette’s economy is rising but not recovering what was lost

GDP, personal income, employment, retail and real estate sales are all increasing, but without oil and gas recovering our economy is trending towards mediocrity.

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Costly upgrades could spell retirement or conversion of LUS’s coal plant

The gist: For the first time in its history, Lafayette’s publicly owned utility opened its doors to public involvement in how it plans for the city’s power needs, a process called an integrated resource plan, or IRP. A big decision before LUS and its customer-owners: what to do with its coal-fired power plant. 

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We own a coal plant? Yes, you do. Well, technically you co-own it with CLECO. The plant, called Rodemacher 2, is located in central Louisiana and accounts for 265 megawatts of the LUS power portfolio. The plant was built in the 1980s and has taken on millions in upgrades to keep pace with regulatory changes. 

“I think the unit will be converted to natural gas or retired,” LUS Power Manager Jeff Stewart said at a Tuesday public hearing to a crowd of two dozen attendees, including several renewable energy and environmental advocates who have criticized the system’s lack of public involvement and continued investment in its coal plan. 

Consultants estimate $43 million in new upgrades are needed. The investment would update the aging coal plant to comply with federal environmental regulations governing water discharges and emissions. Michael Borgstadt of Burns and McDonnell, the consulting engineer guiding the IRP process, said new revisions to those rules were released in early November, which could affect the price tag. How much, exactly, is unknown, though he said costs shouldn’t vary greatly from those currently anticipated. 

LUS still owes $50 million on compliance investments made in 2012. The system issued bonds to pay for upgrades on Rodemacher needed to comply with emission standards issued by the Obama administration. At the time, critics called for the system to be retired or converted to cleaner-burning natural gas. LUS opted to stick with coal, but natural gas prices bottomed out in the fracking boom. The system now faces more costs to keep the unit in compliance while natural gas prices remain historically cheap.

“We have an opportunity to make decisions that have a positive impact,” said Laura McColm, a Lafayette resident and LUS customer, at the Tuesday hearing. McColm, like other attendees, urged LUS and its consultants to consider the costs associated with pollution and be wary of making big, risky investments that cost ratepayers for years. By and large, participants were upbeat about the chance to give feedback and engaged in a lively discussion with Stewart and the consultants on hand. 

A 2016 IRP resulted in plans to build new power generation that was later scuttled. LUS then took criticism for a lack of transparency in conducting the power plan — also led by Burns and McDonnell — which ultimately resulted in a $120 million plan to build new power supply powered by natural gas. Rates were raised 9% to pay for a $250 million bond sale that included the new power plants, but the City-Parish Council voted not to go forward with the plan. 

With power planning, LUS is shooting at a moving target. Market conditions in the power industry are in turmoil because of constant regulatory changes, new technologies and shifting fuel costs. The Obama- era Clean Power Plan likely would have forced the retirement of the coal plant, Stewart tells me, but current rules have eased the pressure on coal plants broadly. Still, coal is on its way out. 

“We’ve known for years that coal would be a target,” Stewart says. “[Rodemacher] could be a good retirement in terms of economics.” 

What to watch for: More opportunities for public input. Stewart expects another hearing by spring of next year. LUS has made available other channels to give feedback on the IRP. The plan is set to wrap up by summer of next year. It will be up to LUS and the City Council — which is replacing the Lafayette Public Utilities Authority as LUS’s regulator — to decide what to do with the results. Ratepayers can submit feedback by email to IRPfeedback@lus.org. The deadline for public comment on this phase is December 15, 2019.

Innovation trust eyes Downtown, Oil Center for ‘innovation district’

The gist: The public innovation trust created by the mayor-president is targeting Downtown and the Oil Center as potential anchor points for a new innovation district. Trustees discussed options last week at the body’s fifth and final meeting of the year. 

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Get caught up, quickly. Mayor-President Joel Robideaux spearheaded the creation of the parishwide Lafayette Public Innovation Alliance last year. Its focus is growing Lafayette’s innovation economy. There is still no clear plan for how to fund these activities or execute upon these visions.

Uh. What’s an innovation district? Innovation districts are a national trend. The idea is to find the part of your city with the highest potential for nurturing startups, designate it an innovation district, and then try to stack as many economic incentives as you can to give companies that locate there the best opportunity to succeed. Examples include cities like Chattanooga, Tenn., and Cambridge, Mass.

Robideaux wants LPIA to lead the process of establishing this innovation district. He worked with LEDA staff to conduct an initial analysis of where an innovation district should be located in the city of Lafayette. The results of this analysis, presented Wednesday, suggested the best locations would be Downtown or the Oil Center.

But designating an innovation district will require council approval. Today that means the City-Parish Council, but come January Robideaux believes it will mean the City Council. One added wrinkle is that LPIA was set up with the parish as its beneficiary, so the Parish Council has authority over nominating and removing LPIA’s trustees.

Details of what Lafayette’s innovation district will ultimately mean “still has to be determined,” according to Robideaux. Trustees Bruce Greenstein, Chris Meaux and Ramesh Kolluru discussed the need to conduct some comparative analysis and economic modeling and to garner feedback from companies that might move here to better understand what incentives should be offered in this innovation district.

Robideaux and his political consultant Joe Castille have been pitching major companies. The United Bank of Switzerland, KPMG, Deloitte and Medici Ventures were some of the companies that Castille, also a campaign consultant to mayor-president candidate Josh Guillory and the local Republican Party, mentioned in his remarks to trustees.

They’ve been pitching a vision for transforming Lafayette into a techno-utopia. That vision could involve everything from setting up an e-residency program so entrepreneurs can claim residency here and start businesses in Lafayette without actually moving here to making LCG a testbed for digital ledger technologies that are trying to improve the delivery of public services, to LPIA even issuing its own cryptocurrency.

Robideaux plans to start meeting with interested VC funds to better understand their needs. Castille believes there are hundreds of billions of dollars in investment capital available to be deployed into these types of technologies. He suggested that some of the companies he’s met with with have already indicated they want to establish a presence in Lafayette, if LPIA and LCG come together to make this vision a reality.

What to watch for: Where the innovation district ultimately lands and what role the trust will play under a new administration. Robideaux, who appointed himself chair, will stay on despite leaving office.

Waitr’s rocky year gets rockier

The gist: Waitr Inc.’s stock price hit new all-time lows last week, sinking below $1 per share. Meanwhile, paperwork has been filed for a class action lawsuit on behalf of investors accusing the app-based food delivery company and key personnel of materially misrepresenting the state of its business. Waitr’s rough first half of the year keeps getting worse.

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That’s a loss of tens, if not hundreds, of millions for South Louisiana’s economy. Before Houston billionaire Tillman Fertitta bought Waitr and took the company public last fall, the majority of its shares were owned by founders, investors and employees who lived in or around Lake Charles and Lafayette. Even after the deal with Fertitta closed, the locally owned portion of Waitr’s shares was likely still worth tens, if not hundreds, of millions of dollars. Now the vast majority of that wealth has evaporated.

Some investors are suing to recoup their losses. The legal complaint filed in the Western District of Louisiana asserts that Waitr’s management misrepresented the company’s financial strength and the success of its business model. Among other issues, the investors say the company’s reliance on employed drivers rather than contract labor offered no advantage and claim Waitr’s $323 million acquisition of competitor BiteSquad failed to pay off. Companies with crashing stock prices often face litigation from disgruntled investors. But the additional legal jeopardy comes at time of struggle for the once booming startup. 

The suit follows legal action taken by drivers and restaurants earlier this year. Drivers filed class action lawsuits in February and March claiming they were making less than minimum wage in violation of federal law. And some restaurants filed a class action lawsuit in May claiming that Waitr broke contracts when the company raised the percentage of revenue taken from restaurants. The first driver class action lawsuit was dismissed by the plaintiff, but the second driver class action and the restaurant class action are still ongoing. 

“The claims are baseless and wholly without merit,” according to a statement from Waitr. “We intend to vigorously defend our company against these unfounded, unsubstantiated allegations.”

Waitr continues to shed leadership. Part of what spurred the latest drop in stock price from $1.11 on Wednesday to 62 cents on Thursday last week was the news that CFO Jeff Yurecko is leaving the company, as are two board members. Waitr’s last CFO, David Pringle, resigned in February of this year. Founder Chris Meaux resigned his position as CEO in August, followed by company President Joseph Stough in September. Meaux remains chairman of Waitr’s board. 

Waitr only has enough cash to run through March of next year, according to its latest financial report. Waitr lost $24.9 million and ended that quarter with $72.8 million in cash. At the current burn rate, the company could run out of cash in less than three quarters. If Waitr’s new leadership can shrink those losses, that runway can be extended. But the company has limited options to raise more capital given its stock price and long-term debt load of $80 million.

What to watch for next: What happens in November. In early November Waitr will release its third quarter earnings. That will show if the company has found a way to extend its runway and bump up its stock price. Another weak quarter could be crippling.

Lenny Lemoine invests in historic Whitney Bank building in New Orleans’ CBD

The gist: Within months of selling a major stake in his construction firm to Bernhard Capital Partners, Lafayette businessman Lenny Lemoine has teamed up with Baton Rouge developer Mike Wampold to buy the 108-year-old former Whitney National Bank building on St. Charles Avenue in New Orleans. 

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