On Monday, NextGen withdrew their offer to manage LUS hours before the Council voted against considering any deal like it. So now what?
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: Lafayette Parish Tax Assessor Conrad Comeaux has just finished up the latest tax roll, confirming that Lafayette lost hundreds of millions of dollars in movable property since 2015.
$559 million: That’s the total decrease in movable property in Lafayette from 2015 to 2017.
What does “movable property” mean? Movable property refers to the property owned by businesses other than real estate, things like equipment and inventory.
How big of a deal is this? Compared to the overall value of real and movable property in Lafayette Parish of more than $20 billion, we’re only talking about a loss of a couple of percentage points. But when you look at movable property on its own, the decrease is more like 10 percent. What this means is 10 percent less tax revenue generated by movable property, which adds up to millions of dollars of lost income for Lafayette Consolidated Government, the Lafayette Parish School System, the Lafayette Parish Courthouse, and every other organization that relies on property tax millages to fund their operations.
$10 million: That’s the amount the total assessable value of the property tax roll increased from 2016-2017. The reason for this is that real estate values have continued to hold steady or go up, which has offset the losses in movable property. But even here the numbers don’t look great as the total value of real estate in the parish rose more than $400 million to about $18 billion in total. That means the total residential and commercial real estate values in Lafayette Parish only increased a bit more than 2 percent. On average nationally, commercial property values increased more than 7 percent and residential property values more than 5 percent. Put another way, if real estate values in Lafayette Parish had increased 5 percent instead of 2 percent and if movable property values had just held even, the market value of our property tax roll would be about a billion dollars higher and generating more than $10 million in additional tax revenue for the aforementioned entities.
But this is all just about oil and gas, right? While these trends may have started in oil and gas, they’ve spread throughout Lafayette’s economy as retailers are stocking less inventory and banks are seeing deposits go down. And while the value of real estate has been keeping our heads above water, we’re likely to start seeing that area get hit as well, as vacancy rates are higher in apartment buildings and occupancy rates are lower in hotels, both of which can negatively impact the value of those buildings and therefore put downward pressure on property tax revenues for LCG.
▸ The gist: Councilwoman Liz Hebert launched an effort earlier this year to raise money to cover some of the city’s 600 uncovered bus stops. The council approved a budget line item to receive donations going forward, officially activating the effort.
▸ 21 bus stops. That’s the number of stops Hebert’s initiative can cover with sponsor money already committed, stacking on top of the LCG dollars budgeted to cover 11 stops each year. The adopt-a-stop effort targets low-hanging fruit, for the most part, stops that can be covered at a cost of $6,000. Individual donors, companies and nonprofits can contribute to a fund housed at the Community Foundation of Acadiana. That money is used to reimburse LCG’s costs to build a shelter on an as-raised basis.
▸ Eight major donors have come forward so far. Islamic Center of Lafayette (the first group to sign up), Unitech Training Academy, CGI, the Pinhook Foundation and the Lafayette Public School System have each sponsored single stops. McDonald’s of Lafayette sponsored three, UL sponsored five and Lafayette General sponsored eight.
▸ 60 top stops are on Hebert’s target list. Again, that’s the number of stops that can be covered for $6,000, still a small portion of the 600 uncovered stops along Lafayette Transit System bus routes.
“So many of our team members come from all areas of the city and had to wait in the rain or the sun,” said Lourdes Foundation Executive Director Jeigh Stipe, addressing the council in support of Hebert’s initiative. Lourdes is not yet participating directly in the program, but it connected with a manufacturer through Hebert to cover a stop on Lourdes’ campus.
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