New county-level economic data from the federal government paints a scary and precise picture of Lafayette’s economic decline.
The gist: Fiber and LUS have been formally split since the budget was adopted last year, but the search for new directors to run the now independent agencies was punted until the NextGEN affair was resolved.
Mayor-President Joel Robideaux intends to fill four vacant director positions this year. Fiber and LUS directorships have been vacant since the fall, when the council approved reorganizing Fiber into its own department. It’s an election year, which could complicate the job search, and Robideaux has been slow to fill other director level positions. LCG also currently has interim directors running the IT and planning departments. LCG Communications Director Cydra Wingerter says the search for an new IT director is starting this week.
Some background: LUS Fiber was created as a division of LUS, not a separate department of LCG. The two shared a director — until mid-last year, longtime LUS Director Terry Huval, one of Fiber’s founders — and shared some administrative staff. As Fiber’s operations have gotten off the ground, it’s built out its own support team. After the split, Fiber became its own department, not unlike public works or planning, and is separate from LUS. Since Huval retired last year, it’s been overseen by Interim Fiber Director Teles Fremin. Jeff Stewart serves as interim utilities director.
OK, so what difference does that make? Many have argued that Fiber has long needed its own dedicated director. The thinking is, it’s a $40 million a year operation that needs full-time attention to grow. That was Robideaux’s rationale when he proposed the split last year, and the council has come on board.
Fiber and LUS are financially intertwined, but the split shouldn’t change that. Fiber owes LUS $28 million for loans fronted by LUS in the system’s early days. Fiber has paid virtually only interest on that debt, but is scheduled to make big payments in the next few years, starting with a $1.5 million payment in 2019. Also, Fiber owes $110 million on bonds that are backstopped by LUS. In other words, if Fiber defaults on its bonds, LUS would be on the hook. Robideaux assured the council that LCG is ultimately responsible for Fiber’s debts, and nothing about the split changes the obligations.
Speaking of the council, the new city council will oversee Fiber once the charter amendments take effect in 2020. There was some question at Tuesday’s council meeting whether the split would swap out regulators. LUS is regulated by the Lafayette Public Utilities Authority, a council subset made up of the five city-majority council members. Establishing a city council negates the need for an extra body. Insofar as the LPUA governed LUS, Fiber was under its purview. But, by state law, Fiber is audited by the state’s Public Service Commission. The PSC, for instance, is reviewing the $1.8 million Fiber billed LUS for service to sewer lift stations that were hooked up but never turned on.
What to watch for: Salaries for the new fiber and utilities directors. Last year, council members Bruce Conque, now LPUA chair, and Kenneth Boudreaux argued Robideaux set the salaries too low: $150,000 for the utilities director and $115,000 for the Fiber director. Qualifications and salary for the utilities director will be set in consultation with LUS’s consultant of record, NewGen Strategies and Solutions (no relationship to NextGEN). But the Fiber director’s salary is up to the administration, subject to approval of the city-parish council this year and the city council in the future. Wingerter tells me the $100,000 salary is not set in stone and could rise depending on candidate interest.
The gist: After months of silence, the Lafayette Public Innovation Alliance finally held its first public meeting. The alliance will function as a trust for investing in innovation projects in Lafayette Parish and could serve as a vehicle for the mayor-president’s cryptocurrency and blockchain aspirations.
With big news at Waitr bookending our first year publishing, beginning with its blockbuster sale to a Texas billionaire and ending with CEO Chris Meaux ringing the Nasdaq bell, 2018 has been a year of extremes.
The gist: Waitr announced this morning that it acquired Bite Squad, an online ordering and on-demand food delivery platform for restaurants, for $321.3 million.
Wasn’t Waitr just bought for $308 million? Yep, that was announced back in May and the deal was only finalized on Nov. 16. So less than a month into being a publicly traded company, Waitr has effectively doubled in size. Bite Squad has more than 11,000 active restaurants, compared with Waitr’s 7,700 restaurant partners as of Sept. 30 of this year.
Waitr gets swoll. With this deal, Waitr’s operations will expand to cover a total footprint of 500 cities in 22 states.
Where’d they get all that cash? Landcadia Holdings acquired Waitr for $308 million, but only $50 million of that was guaranteed cash. At that time, Landcadia Holdings was a special purpose acquisition company — a type of entity set for the sole purpose of buying another company — that had raised $300 million. So when Landcadia Holdings became Waitr Holdings, it still had about $250 million left to fund growth. While this deal for Bite Squad was for $328 million, only $202.1 million of that was in cash with the rest paid with 10.6 million shares of Waitr stock. Plus, to help finance a portion of this deal, Waitr has taken on $42.1 million in debt.
This may only be the beginning. Tilman Fertitta — the billionaire co-owner of Landcadia Holdings, the Houston Rockets and Landry’s Inc. — has a track record of growing his businesses through acquisitions. And Chris Meaux — the CEO and cofounder of Waitr — wants to build Waitr into a billion dollar business. So if I were a betting man, I’d say that this won’t be the last major acquisition they make. And that’s potentially great news for Lafayette.
Am I rich yet? Not unless you were one of the original shareholders. The news hasn’t had much of a net impact on the stock price yet, for those of us who have only been able to buy in more recently. (Disclosure, I own some stock in Waitr.) Yesterday, Waitr Holdings’ stock (listed as WTRH on the Nasdaq) ended the day at $11.44. While shares spiked to $12 first thing this morning, they settled back down to $11.48 as of 2 p.m. So I’d hold off on buying that ticket to the moon.
We’re witnessing a changing of the guard, and Waitr’s splash on the NYSE is the latest indicator in the trend.
The gist: If you read the tech blogs, there’s been a big crunch on the crypto market. After a bonkers 2017, the SEC has become a major buzzkill, signaling intent to sheriff the crypto wild west. That could actually make LCG’s crypteaux concept more attractive.
I don’t understand anything you just said. That’s OK. The broad strokes are that Mayor-President Joel Robideaux announced this year that he wants Lafayette to launch a digital currency as an alternative means of public finance. Last year there was a gold rush on the stuff, particularly around Bitcoin, with cryptocurrencies netting billions in profits for investors. There’s been something of a correction in the sector this year, capped off by a ruling by the SEC that initial coin offerings – called ICOs — should register with the federal government and be regulated like any other type of security. Observers have suggested that the developments frosted over what was once the hottest place for investment.
Ok, I understand it marginally better. Good deal. So here’s the thing, lots of people tried to cash in on the cryptocraze. There are digital currencies that support journalism, others that pay cam girls. In Ohio, you can pay your taxes with Bitcoin. The sector attracted a lot of criminal actors and folks that plain didn’t know what they were doing. In a recent talk, Crypteaux architect Joe Castille — perhaps better known as a political consultant, and the ghostwriter of Brian Pope’s demise — characterized the world of crypto entrepreneurship as one lousy with naifs waving white-papers. There’s an argument to be made that the SEC’s ruling will clear out the riff raff like a brushfire, leaving only vetted concepts to thrive in a healthier crypto ecosystem.
Keep in mind that municipal securities are exempt from SEC registration. At least that’s what Investopedia tells me. So while it’s tempting to fear the SEC’s rules on ICOs as a valve closing, in theory a municipally backed ICO could squirt through the regulatory gaps. “Different laws apply,” Castille tells me.
What’s the latest on crypteaux? That’s unclear at this point. Robideaux set up a public innovation trust earlier this year — and put himself on it — but the board has yet to meet. The parishwide trust is a possible vehicle for funds raised in a municipal ICO. LCG recently paid IBM and mega-consultant KPMG $150,000 for developing a Smart City road map that suggests crypteaux and e-residency, concepts championed and researched by Castille, are worth exploring. Castille and his new company, Crypto Research LLC, studies the application of cryptocurrencies and blockchain — a whole other enchilada —in the public sector as a means of addressing budget problems in tax-averse communities. Sound familiar?
Is this crazy? Not necessarily. But it’s a thorny space and one likely to be a tough sell for your average voter. Just because the SEC’s recent crackdown doesn’t necessarily apply to crypteaux doesn’t make the path forward clear.
How Sheriff Mark Garber’s sales tax attempts to solve all his financial troubles in one fell swoop, at the risk of failure.
The gist: The old federal courthouse renovation project appeared doomed last month after council members pounced on purchase provisions that placed the risk of cost overruns on Lafayette Consolidated Government. But new changes to the contract now make the deal an outright $1.4 million sale that requires the development team to pay for sewer upgrades and removing asbestos.
A game changer: That’s how Councilman Bruce Conque describes the revision. The original deal put the $1.4 million purchase price in escrow, with excessive expenses for the project to be paid from that pool of money. In October, Conque and other council members shredded the contract at introduction, fuming that the deal put too much power in the developer’s hands and gave approval of overages to the mayor-president rather than the council. In particular, the deal would take the unusual step of saddling city-parish government with the cost of sewer upgrades needed to accommodate the 68-unit, 25,000-square-foot complex. Developers, in most cases, pay some of the upfront costs for utilities. Downtown and the city’s urban core more broadly are virtually out of sewer capacity.
Kenneth Boudreaux, a perennial no vote on previous attempts to put the city-owned Downtown property back into commerce after years of blight and vacancy, complained that all proceeds from the sale should be “profit.”
The revised purchase agreement appears to hit all major concerns levied thus far: The sale is a lump sum transaction that requires the development team to pay for peripheral infrastructure needs.
“I’m thrilled,” says Conque. “This benefits everyone, and this project can now move forward.
It’s not quite over. Conque and Jay Castille, another staunch opponent of previous redevelopment attempts, will propose two other amendments to the contract, one to prevent the developer from sitting on the project by eating penalty fees against rising costs, and another to require that the facility’s appearance conform to the city’s Unified Development Code. The previous version gave the mayor-president approval of the complex’s facade.
Earlier this year, Mayor-President Joel Robideaux unilaterally selected the team behind the project, led by developer Jim Poche, architect David Weinstein and Ed Krampe, a personal friend of Robideaux’s.
Counting chickens: No vote is final before it’s cast, but early indications place the support count at eight. One of the assumed no votes, Boudreaux, will not be at Tuesday’s meeting after announcing health complications associated with a cancer diagnosis earlier this week. With a majority reportedly on board, approval of the contract would be a significant win for Mayor-President Joel Robideaux after months in the doghouse over his pursuit of a deal to privatize management of LUS.
The gist: Utility rates were hiked in the last two years to pay for rising operating costs and a $240 million bond package that never came to be. On Tuesday, Councilman Kenneth Boudreaux will present a pair of ordinances, one to reduce electric, water and wastewater rates and another to reclaim the revenues for a bond sale.
NextGEN Utility Systems put a spotlight on the rates by promising to lower them for three years. In council discussions over the course of the affair, council members Kenneth Boudreaux and Bruce Conque questioned whether the rates could be lowered, given the bonds were never issued. The idea is that the rates were raised unnecessarily, and thus some value ought to be returned to LUS customers.
Conque says he would support reductions on electric rates only.
Why were rates raised in the first place? In 2016, LUS sought — and received — approval to apply for $240 million in bonds to build a new power generating plant and other pricey capital improvements. Rates were raised 8 percent to finance the debt, but the LPUA, hearing pushback on plans for the new power plant, decided on a phase-in compromise and reduced the authorized amount to $70 million in February 2018. Mayor-President Joel Robideaux has said that event prompted him to reignite talks with Bernhard Capital Partners/NextGEN Utility Systems, despite that discussions had begun in 2016 and never stopped. In April, Robideaux pulled the bond request from the state bond commission agenda the day it was set to be heard, effectively orphaning the rate increase.
Boudreaux says the money ought to finance bonds, given that was the principle justification for raising it.
“We’re in essence taxing ratepayers,” Boudreaux tells me.
OK. Give me my money back. Hold on to your receipt, ratepayer. It’s more complicated than that. LUS interim Director Jeff Stewart says that while plans for the generating plant were shelved, the system needed the funds to rightsize revenue for the water and wastewater systems, and to finance about $100 million in other capital improvements:
- $48 million in electric system upgrades, including LED streetlights ($7M) and a new substation ($14M)
- $41 million in wastewater, including expansion of a sewer plant ($26M)
- $6.5 million in water system projects
These projects were included in the February resolution authorizing LUS to sell bonds. LUS faces flatlining electric revenue growth as customers use less energy and will spend millions to upgrade sewer capacity in Lafayette’s urban core and on an EPA mandated,10-year review and repair of the rest of its wastewater system. Stewart tells me reducing the rates is possible but requires a thorough review.
“The opportunity may exist, but we haven’t fully evaluated those options yet,” he says.
What to watch for: How else the NextGEN affair impacts decision-making around LUS. If there’s a silver lining in the acrimony that erupted over the privatization scheme, it’s that LUS has taken center stage in civic conversation. Major changes are already in play. LUS is set to cleave off Fiber, and both systems will need new directors. NextGEN’s proposal introduced into the public lexicon plenty of new concepts around energy and raised awareness about the disruptions LUS faces going forward.
The gist: Big Blue and mega-consultant firm KPMG outlined a comprehensive smart city action plan for LCG over the past year, developing concepts like digital payments for public services and smart traffic sensors for more efficient traffic control.
Smart cities are what again? It’s a catchall term for the use of innovation to make government more efficient and transparent. More often than not, it’s associated with advances in automation, data and the internet of things (IoT). Concepts can be as cutting edge as AV transit and as boring as fiber-connected traffic counters.
Around 70 initiatives were identified, according to LCG spokeswoman Cydra Wingerter, over the course of the past year. Wingerter shared a sampling of the results, which were discussed in part at a soft reveal during LCG’s PlanLafayette week in October:
- Smart Fire Alarms deployed parishwide and connected via LUS Fiber to improve Lafayette Fire Department response times.
- Digital Payment Network to accept remote credit card payments and platforms like Venmo and PayPal for public services.
- Digital 311 to improve public service requests and provide real time data and collect public feedback.
- Smart Traffic Improvements like predictive analytics, adaptive traffic controls to carve paths for emergency response vehicles and updated sensors for traffic volume. The I-49 Connector got a mention, too.
- Disaster Preparedness Plan includes a companion mobile app for notification and e-learning modules for flood and hurricane prep education. This piggybacks on the city’s Bloomberg Challenge application. Lafayette was a finalist for the challenge but came up short.
I’ve asked for the full list of projects and a copy of the contract with IBM/KPMG, but have received no response from the administration.
Where do Cryptocurrency and Blockchain fit in? You probably aren’t asking this question, but you should. At the Opportunity Machine’s innovation conference in October, Crypteaux architect and Robideaux adviser Joe Castille mentioned that IBM/KPMG validated his public innovation ecosystem concept. There’s a lot to unpack here, but the broad strokes include funding public projects through yields from a cryptocurrency launch — Castille used the I-49 Connector as an example — and establishing an e-residency program to attract blockchain entrepreneurs, an idea that’s worked well in Estonia. Yes, Estonia.
Innovation is a key priority for the Robideaux administration. A Lafayette-based team pitched a freight hyperloop corridor among other transportation concepts at a major conference in Columbus, Ohio, and placed in the competition. Robideaux and mayoral assistant Kate Durio took part.
What to watch for: Whether Robideaux has the political capital after the LUS controversy to get anywhere with his ideas, particularly those that require the council to sign off. Robideaux recognized the challenge in remarks at that conference in Ohio:
So you can have this vision of all these really great things, but when you sit down with your council members and say, “We need to spend money on a smart city initiative,” and let’s just say it’s $1 million. They’re going to come back and say, “How about you spend it digging out that ditch that’s in this neighborhood that’s flooded three times?” That’s the reality that we face.Joel Robideaux,
via Smart Cities Dive
The gist – If you want to buy stock in Waitr before it goes public, today is your last chance. Waitr is scheduled to complete its agreement for a business combination with Landcadia Holdings tomorrow and go public Nov. 16 on the NASDAQ stock exchange under the ticker WTRH.
What’s Landcadia Holdings? Landcadia Holdings is a special purpose acquisition company formed two years ago by American billionaire Tilman Fertitta to raise $300 million through an IPO to invest in acquiring companies. Over the summer the company announced its intent to acquire Waitr for $308 million ($50 million in cash and $258 million in stock) and rebrand itself as Waitr Holdings.
How can I buy Waitr stock before it goes public? Simple: by buying stock in Landcadia Holdings, which is listed under the ticker LCA on the NASDAQ. While you’ll be buying stock in Landcadia Holdings this week, once the vote is approved by its stockholders at a special meeting tomorrow, Landcadia Holdings will become Waitr Holdings with Waitr as its subsidiary.
But should I want to buy stock in Waitr? We don’t provide investment tips at The Current, (you wouldn’t want us to) but it’s worth noting that Waitr is experiencing incredible growth. In the 3rd quarter alone of this year, it grossed $77.7 million in food sales, which represents a 230 percent year-over-year increase. It now serves 235 cities and 7,700 restaurant partners. Also, once this deal is finalized, Waitr will have about $200 million on its balance sheet to invest in additional growth. This growth could come in existing markets, expansion into new markets, or in considering acquiring competitors or complementary companies.
How big of a deal is this to Lafayette? Regardless of whether you decide to invest in Waitr, there’s no denying this is a potentially huge deal for Lafayette. Our market isn’t home to very many publicly traded companies of any sort, let alone those with the growth potential of Waitr. Ideally what will happen next is that there will be incredible demand for Waitr stock, which will increase the price of shares and thereby increase the wealth Waitr’s creating in our community. From there Waitr could leverage its capital infusion to continue its exceptional growth, so that it evolves from a company worth hundreds of millions to one worth billions. These kind of wins are crucial for a still sluggish local economy. — Geoff Daily