GDP, personal income, employment, retail and real estate sales are all increasing, but without oil and gas recovering our economy is trending towards mediocrity.
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.
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 [email protected] The deadline for public comment on this phase is December 15, 2019.
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.
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.
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.
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.
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.
The gist: Wednesday morning Lafayette General Health and Ochsner Health System ended years of speculation in local health care circles, sparked largely by a 2015 strategic partnership, that the two would eventually become one.
Property tax rates for the airport commission and the library system would be increased to voter-approved ceilings if the council passes a pair of ordinances introduced this week.
The gist: Lafayette General Health announced the launch of a new $10 million innovation fund with investments from Acadian Companies, LHC Group, Ochsner and the Schumacher Family Foundation. The goal of this fund is to make investments in health care startups that can deliver good return and improve services for the system and its partners.
This is Healthcare Innovation Fund II. Was there a Healthcare Innovation Fund I? Yes, it deployed $3 million of LGH’s investment capital along with a match from the state into seven companies. All of those companies are still operating, and one of them, HealthLoop, was purchased by GetWell last year.
The investments have been successful. LGH is actively using products from five of the companies and working on the other two. The funds provide LGH an opportunity to earn income as an investor, supporting the organization as a whole, but also gives the system access to new concepts and innovations in health care.
Now LGH is taking its investing to a whole new level. For the new fund, LGH is increasing the size of its investment pool to $10 million and is bringing along some heavy hitter investment partners in Acadian, LHC, Ochsner and Schumacher.
“You’ve got a billion dollar not-for-profit health system in Lafayette General, a publicly traded home health company worth almost four billion dollars, one of the largest employee-owned company and ambulance service providers in the country, the guy who started one of the largest emergency room management companies in the country, and another $3 billion statewide not-for-profit health system in Ochsner,” says Cian Robinson, LGH’s executive director of innovation, research, and real estate investments. “So you’ve got some really smart people, subject matter experts, sitting around the table that are very quickly able to vet if this is good for their company,” he adds. “For me what that does is lessen risk, in particular execution risk.”
This fund will make investments ranging from $250,000 to $1 million per startup. LGH is looking for startups that offer solutions that drastically improve patient care/experience, accelerate the move toward value-based payments, innovate backend automation/productivity, or use data or deep learning to affect health care delivery.
But LGH and its investment partners aren’t just providing cash. “All of the folks mentioned as investors have agreed to open up their ecosystems,” says Robinson. “So the startups we invest in get to work with our CIOs and senior VPs to help them with product-market fit. And we help them with going into the market. It’s truly a sandbox for health care startups to thrive in.”
LGH is also looking for additional investors. Robinson says they’ve raised $6 million of the fund’s $10 million target, so there’s still $4 million available. Minimum buy in is $250,000 with the maximum investment being $2 million. LGH charges no management fees, as it’s covering the cost of operating the fund. Interested investors can reach Robinson at [email protected], as can startups seeking investment.
The system is also running a real estate fund that’s actively investing and in the coming months is planning to launch a $50 million Opportunity Zone Fund, which will primarily focus on developing real estate on LGH’s campuses located in Opportunity Zones, like the Oil Center.
Why this matters: LGH is Acadiana’s largest not-for-profit health system, so these funds are important just from the perspective of strengthening its bottom line while providing access to innovations that improve operations. But it’s also important because it’s an opportunity for Lafayette to leverage its economic strengths by combining the efforts of some of its most significant employers. And all this energy is focused on health care, one of Lafayette’s industries with the greatest potential to make up for the billions in GDP lost in the oil and gas industry.
Lafayette’s real estate market is ice cold, and it may get worse before it gets better.
The gist: Recent employment numbers from the state workforce commission show an increase in jobs in the Lafayette area. But those same numbers show continued job losses in Lafayette’s oil and gas industry. It doesn’t appear to have bottomed out yet.
2,400 is the number of jobs added in June 2019. The biggest gainer was Leisure and Hospitality jobs — the service industry, essentially — which added 1,100 jobs. Education and Health Services added 500, the next biggest growth sector.
200 is the number of jobs lost in Mining and Logging, the segment that accounts for the oil industry. Construction took the most losses with a reduction of 300.
Roughly 12,000 mining jobs have been lost since 2014 — a 50% decline. That means Lafayette has lost more than 10,000 oil and gas jobs in the last five years. The oil and gas industry used to directly account for 10.6% of all jobs in Lafayette, but now that total is down to 6.6%.
The national oil and gas industry is growing while Lafayette’s is shrinking. While nationally the industry still hasn’t recovered all the jobs lost during the crash, oil and gas employment nationally has increased every year since 2016. Even though the losses have slowed, Lafayette’s oil and gas industry has shrunk every year since 2014.
Jobs are growing in Lafayette, but employees are making less money. High paying oil and gas jobs are often replaced by lower paying jobs in restaurants, hotels and schools — exactly where recent growth sectors are. Per capita personal income in Lafayette Parish has fallen from approximately $51,000 in 2014 to under $46,000 in 2017. During that same period, per capita personal income in the state rose from $41,811 to $43,660.
Why this matters: Clearly, Lafayette’s oil and gas industry hasn’t hit bottom. Just because the crash has slowed doesn’t mean it’s over. What we’re seeing is further evidence of the establishment of a new normal, not just a downturn based on temporary market conditions.
The gist: Waitr started the year on a high, buying up equal-sized competitor Bite Squad and hitting $14 a share in March. Since then, the nascent public company hit the rocks, facing lawsuits, potential restaurant strikes and a stock that’s fallen below $7.
The gist: Since going public, Waitr has faced legal attacks from disgruntled drivers. This week, citing efficiencies, the food delivery app company terminated several dozen employees in a move that took its workforce by surprise.
Approximately 80 employees are said to have been let go. Waitr has not confirmed that number officially, but the figure has circulated among current and former Waitr employees. A staff segment that worked to onboard new restaurants took the brunt of the reduction. In a statement, Waitr said the layoffs were a “difficult decision” and asserted that no jobs would be outsourced as a result. The company will focus workforce development on technology, customer success, sales and accounting, which remain “areas of growth.”
Growing pains. A blog post written by one former employee based in Florida laments Waitr’s transition from scrappy startup to corporate monolith. His wife, who worked remotely, was among those fired Thursday. His post portrays a callous and sudden dismissal:
They had a mandatory “integration meeting” in which they summarily terminated 80 people. They gave them 5 minutes to collect their things. They had police on site to escort them from the building. … It didn’t matter what these people did for the company. Some of them having been there since day one.
Asked to respond to the blog account, Waitr referred to its general statement.
Lake Charles, Lafayette and Bite Squad employees were impacted. Lake Charles’ NBC affiliate KPLC is reporting 25 let go. Employees at both Lafayette offices were also terminated, but the number and distribution are unclear. Earlier this year, Waitr struck a development deal with the state, receiving $1.5 million to outfit its new Downtown Lafayette HQ, along with a performance-based retention grant that caps at $1 million over five years. Waitr is expected to deliver 200 direct jobs to the Lafayette market.
Waitr says the layoffs were a necessary result of its Bite Squad acquisition. Waitr bought the Minneapolis-based competitor last year for $321 million and has since been in the process of integrating the two workforces. Waitr has reiterated the company’s pledge to grow in the state of Louisiana.