Some have raised concern that extracting only LUS’s electric division for private management could destabilize the system’s other utilities: wastewater and water. The three systems have entangled debt and rate structures that are messy and risky to pull apart.
▸ The gist: Last week Jeff Jenkins, one of Bernhard Capital Partners’ founders, told The Current the company’s plans for LUS include making it part of what will ultimately be a Fortune 500 company headquartered in Lafayette. This week, his partner Jim Bernhard confirms that Lafayette has out-of-state competition for that proposed corporate headquarters, a city Bernhard says has an “advantage” over Lafayette because that contemplated transaction has not leaked to the press.
▸ Jim Bernhard points his finger at an unnamed “disgruntled employee.” (On July 13, The Current broke the story of the Robideaux administration’s plans to entertain an offer from BCP to manage LUS’s electric division.) “They have a utility we are attracted to, we looked at the university there and also because of the oil and gas industry there — we felt it was a place we could attract people to work for a long period of time,” Bernhard says. “We thought Lafayette was a good opportunity, and we thought it was the right place, but the other place has an advantage because we were not prepared to go public with our plans in Lafayette when some disgruntled employee leaked the information. But we decided we were not going to let a disgruntled person derail our plans, so we regrouped.”
▸ Bernhard says $15 billion will be invested in the new venture. Last week Jenkins would only say the company was in talks with “multiple” entities like LUS across the South, but Bernhard is now being more specific, saying the company hopes to acquire or take over management of 30 to 40 power companies in “mostly in small cities. They range in different sizes from $1 billion to $100 million.” While an early BCP assessment valued LUS’s electric division just north of $525 million, a comprehensive appraisal of the city-owned utility is still underway, and terms of a potential agreement could change.
▸ It’s unlikely this deal will fly in Lafayette, says one former LUS employee. Andrew Duhon, who retired from LUS in January 2017 after nearly 30 years — most recently as customer and support services manager — understands why LUS is so enticing. “We’re really like the star in the public power arena,” he says. Duhon, however, can’t imagine any scenario under which Lafayette stakeholders give up control of their 120-year-old utility system. He says since the early 1940s, when LUS was in desperate need of upgrades, poorly managed and in jeopardy of being taken over, the public has shown a willingness to reinvest. “Despite a much bleaker picture for the utility back then versus the model system we have today, the people of Lafayette decided to keep [the] system. They issued bonds for new generating facilities and developed a model bond ordinance that, among other things, required a well-managed system run by professionals,” recalls Duhon, who also is a CPA. “The citizens of Lafayette in the ’40s knew what they had — control of their economic destiny through ownership of their utility,” he adds. “Public power consistently beats investor-owned utilities in rates, in reliability, in service, in accessibility.”
Additional reporting by Stephanie Riegel
In the upcoming fiscal year the city general fund will bring in just over $100 million and end the year with a fund balance of almost $40 million. The parish general fund will bring in less than $12 million and end the year with a fund balance of about $100,000.
▸ The gist: Resignations and reorganization have combined to open four director level positions for Mayor-President Joel Robideaux to fill, including some that have been vacant since the beginning of the year. In the coming months, Robideaux will need to appoint replacement directors for planning, information services and technology and, if his restructuring proposal goes forward, separate directors for LUS and LUS Fiber.
▸ Top billing: Robideaux faces a generational decision at LUS. As if replacing outgoing Director Terry Huval, who served four administrations as LUS’s top exec over three decades, wasn’t enough, Robideaux has proposed splitting Huval’s job in two in this year’s budget, cleaving off LUS Fiber into its own separate department. Huval announced his retirement in April shortly after the mayor revealed to him privately his intentions to split off Fiber. Huval ultimately resigned early, reportedly in response to public revelations of Robideaux’s consideration of monetizing the electric system.
▸ Taking his time: Robideaux’s proven to be a deliberative executive, taking several months to fill top positions in his administration when vacated. Information services has not had a permanent director since Robideaux took office in 2016; instead, two successive interim directors have overseen the department. Robideaux took a year to replace outgoing Police Chief Jim Craft, a Joey Durel appointee, with current chief Toby Aguillard, who took over in November 2016. Mark Dubroc succeeded interim Public Works Director Tom Carroll three months after Carroll’s March 2017 announcement that he would leave the provisional post within a couple of months. Former Planning Director Carlee Alm-LaBar gave notice of her resignation in May and officially stepped down in June. Her position is currently held by an interim director.
▸ What to watch for: The search to replace Terry Huval, how long it takes and how it interacts with potential private management of the electric division. It’s clear the delay in starting the search was related to Robideaux’s decision to reorganize LUS and Fiber and possibly connected to his talk to privatize the city’s electric company. He’s not going to announce positions that don’t yet exist. Arguably the clock starts upon the council’s approval of the upcoming budget.
Dividing LUS and Fiber is not a new idea. Some argue that Fiber deserves a full-time director to run effectively. And indeed, Robideaux pointed to Fiber’s $1.7 million overcharge of LUS, which triggered an audit, as evidence of the need for separate directors in his remarks to the council. But a challenge here will be attracting talent at lower pay. Robideaux proposes paying the utilities director $150,000 and the Fiber director $115,000. Combined, the two salaries exceed Huval’s salary of $256,000. Meanwhile, Robideaux has called for a transformative review of LUS’s future, saying the community will need to reckon with major changes in the 120-year-old utility. He’ll demand innovative thinking, it seems, but the pay may not attract the talent up for the challenge.
For what it’s worth, comparable utilities director positions in Chattanooga, Tenn., (combined telecommunications and power oversight) and Lincoln, Neb., (power utility only) pull down more than $350,000 in annual payment. Both of those positions, however, oversee larger operating budgets. The current operating revenue for LUS is around $250 million and Fiber around $40 million.
Robideaux has less than two years left in his first term in office. That presents an odd deadline: Any incoming director, particularly one answering a national search, would have to stomach the possibility of a change of administration less than two years into being installed. The longer Robideaux waits, the heavier that factor weighs.
As part of its plan to take over management of LUS’s electric division, Bernhard Capital Partners is presenting a vision of creating a Fortune 500 company headquartered in Lafayette.
▸ The gist: Following a rocky roll out and a series of sometimes tense town halls, council members have tweaked the details of a proposition to create separate city and parish councils. Most notably, updated amendments would prohibit termed-out incumbents from sitting on either new council, clarify protocols that govern the privatization of LUS and shift the boundaries of proposed district maps. Each issue had sparked suspicion among voters of the split council’s intended purpose and outcome.
▸ Policy whack-a-mole: When the first version of the split council amendments went public at the beginning of July, it spawned surprised and irritated opposition in several different corners. Backers of the proposition contend that the proposition was just that: a proposal to be refined. Over the last three weeks, cosponsors Bruce Conque and Jay Castille have worked to mollify the overriding concerns, and the latest amendments published July 5 are the result. Here are the major updates as they stand:
Maps: The parish district map remains the same. The city map creates two majority-minority districts roughly based on areas currently represented by Kenneth Boudreaux and Pat Lewis, the council’s two black council members. Downtown would move to District 5, the majority black district based on Boudreaux’s current boundaries; it was originally included in proposed District 2, which is based on Bruce Conque’s current district.
Term limits: Updated language prohibits term-limited council members from sitting on either council. There are four termed-out members: Boudreaux, Castile, Jared Bellard and William Theriot.
LUS: Charter provisions governing the sale or lease of LUS are expanded to account for professional management agreements, the acquisition creature currently considered by the Robideaux administration. The provision closes a “loophole” whereby a management agreement would not require approval by general election and clarifies that an election would be called by vote of the city council, not the combined council as currently practiced. The original charter only explicitly considers a sale or lease. Robideaux has acknowledged receipt of a legal opinion, related to management agreement, that the arrangement would circumvent a sale.
▸ What to watch for: Final tweaks and a final vote at the Aug. 7 council meeting. Councilwomen Hebert and Nanette Cook will propose a “rollover” mechanism to tweak the term limit provisions. Hebert, Cook, Naquin and Conque would deduct terms served on the city-parish council from future eligibility. Conque, for instance, has served one term and would thus be eligible for two more on the city council, should he run.
Conque says he will tweak the LUS provision to require at least a two-thirds vote — oddly, in this case, four out of five — of the city council to call for an election in the event of a sale, lease or management agreement monetizing LUS.
Early indication is the split council proposition has the the six votes required to call an election this fall. Although once it goes to the public, all bets are off. Success at the ballot box largely depends on whether the changes made sufficiently satisfy voter skepticism.
“My constituents feel like they’ve been listened to,” says Liz Hebert. Hebert says term limits was the overriding concern. Still, assuming the council votes to put the proposition before voters in December, it’s likely that opposition will continue to mount. Opponents argue the proposition is rushed, that the details are unknown and that their policy prescriptions won’t fix the problems they’re meant to solve.
▸ The gist: Longtime Cajundome Director Greg Davis didn’t think it was right that he hold onto his $160,000 a year job while having to deliver news to seven other employees that their positions were being eliminated. So the 63-year-old, who has worked for the Cajundome since it opened in 1985 — 25 years as director — announced he’ll retire at the end of October, three years earlier than he’d planned.
▸ His second in command, Pam Deville, was elevated to director, a move that alone will cut $120,000 in salary expenses. In all, Davis’ plan will save the struggling venue half a million dollars, a figure that represents a 13 percent reduction from the $3.8 million it spent on payroll (including taxes and benefits) in 2018. The venue’s annual operating budget is $7.8 million.
The drastic steps were prompted by a $400,000 deficit for the current fiscal year, a number that for the first time exceeds the operating subsidy paid by Lafayette Consolidated Government to prop up the entertainment venue. That subsidy, $392,000, was cut to $376,000 for next fiscal year; in recent years it was as much as $500,000, and at times — like at the height of the IceGators’ popularity— has been zero (another $100,000 LCG provides annually can’t be used for operations). Davis says a study by LEDA concluded that the the subsidy averaged $358,000 annually for the first 30 years of the Cajundome’s existence.
“I’d been looking at this [financial situation] for at least four to six months,” Davis says, explaining that he was holding out hope a couple more concerts would be booked in the current year. That didn’t happen. And concerts are where the money is.
▸ It’s the economy, stupid. While Lafayette’s economy may be showing signs of stabilization in the aftermath of the hit it took from low oil prices and resulting job losses, concert promoters seem to think we’re still suffering too much to take a chance on us, Davis suggests. “I think we’re going to overcome it. We’re going to book more concerts. You book the right concert in this market, and it will do well.” Case in point: the Garth Brooks series, which accounted for five of the eight concerts the Cajundome hosted last fiscal year. Brooks alone sent $217,400 directly to the Cajundome’s bottom line from ticket and suite sales, concessions and merchandise. Eight concerts, which is the Cajundome’s average, were enough to finish last year in the black, the six booked this fiscal year were not. In past years, the venue has hosted as many as 10-12 concerts.
Davis is leaving the Cajundome in competent hands and in great physical condition, the result of a $21 million renovation completed in December 2016. That capital improvement (and the construction of the convention center) was funded by a bond sale backed by the Lafayette Parish hotel-motel tax the state rebates to the venue, money that can be used for capital improvements and maintenance but not for operations.
▸ What’s next for Davis? The community activist and lifelong North Lafayette resident plans to continue devoting much of his attention to education reform, specifically reversing the mindset that black children, especially poor black children, are incapable of excelling academically. He’s on the board of TM Landry College Prep, which is moving from Breaux Bridge to Lafayette in September, taking over the former call center at Northgate Mall. “TM Landry is … a walking contradiction to that belief,” Davis says. “It’s going to provide outstanding examples of black children who are achieving at high academic levels to overcome this myth that because of the color of your skin and because you are poor, that you are not capable of high achievement.”
Seventy percent of Americans continue to trust their local government, a level that has held relatively steady for over four decades and across party lines.
Nearly two weeks since The Current broke the news, Mayor Joel Robideaux presented a detailed timeline of his talks to privatize the electrical division of LUS through a management agreement with a private equity firm based in Baton Rouge. Robideaux had come under fire for leaving council members out of the conversation, most of whom only learned about the deal in media reports.
▸ The gist: On Tuesday, the Lafayette City-Parish Council voted to approve the creation of a new public trust, called the Lafayette Public Innovation Alliance, and seat its first trustees. They were approved to serve five-year terms by the City-Parish Council. Future trustees will be nominated by the mayor-president and approved either by the city-parish council or, if the proposed charter amendments pass, by the parish council. Robideaux named Lafayette Parish the beneficiary of the trust.
▸ The trustees are:
- Chris Meaux – CEO of Waitr
- Bruce Greenstein – EVP, chief innovation and technology officer at LHC Group
- Mandi Mitchell – assistant secretary of Louisiana Economic Development
- Ramesh Kolluru – VP for research, innovation and economic development at UL Lafayette
- Joel Robideaux
▸ Uh, what do they do, exactly? The primary goal of this trust is to produce and attract more technology and software development talent in Lafayette. There are no local public dollars being invested into the trust at this time — although Robideaux did offer to throw in the first $100 if that was required to make it kosher. The intent is to leverage the trustees’ contacts nationwide to find grants and get the trust funded and off the ground.
“Certainly any effort regarding a Lafayette-based cryptocurrency would naturally fit within the goals of the trust as I see them,” Robideaux wrote in an email. “More specific, if Lafayette develops a digital token and that token can generate seed money for the trust, then I would be elated.”
▸ What to watch for: Innovation districts. Robideaux indicated the fund could finance innovation districts that would help the region attract new talent. “We need to produce more talent locally, or implement a strategy to attract talent from other places…specifically technology talent,” he said at the meeting. While there was nothing specific about what that might entail, the idea resembles similar efforts underway in Chattanooga, which claims to be the first mid-sized city to establish an innovation district.
Not every argument against separate councils holds water, but some are compelling and worth exploring