The gist: Long considered the goose that laid the golden egg, Lafayette Utilities System, along with its sister entity, LUS Fiber, is now mired in political controversy heading into Saturday’s mayoral runoff between Carlee Alm-LaBar and Josh Guillory. Mayor-President Joel Robideaux has floated accusations of unlawful transactions between the systems, initiated leadership changes and launched an internal investigation, all of which have drawn suspicions of political motives.
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.
Analysis: Lafayette will have its hands full paying for pay raises
The City-Parish Council’s decision to authorize $3.8 million in pay raises for the Lafayette Police Department was unanimous but not without complication. While the move is a victory for police, who said the new money was needed to stop a crisis in officer turnover, the added costs have put a spotlight on a weakening of the city‘s finances. And there […]
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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.
Lafayette sheriff files suit claiming Lafayette Parish, LCG not paying bills at parish jail
The gist: In early October, Lafayette Parish Sheriff Mark Garber filed suit against Lafayette Parish and Lafayette Consolidated Government, asking the court to decide what costs the parish is responsible for to run the parish jail. Filed in state district court, the suit claims the parish hasn’t been paying its fair share, and if Garber’s right, parish government is in an even deeper financial hole than anyone realized.
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3 min read
Making noise in Quiet Town
Lafayette’s Quiet Town neighborhood is starting to get quiet again because Alzina Dural is making noise.
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8 min read
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.
Robideaux’s LUS, Fiber management shakeup was not prompted by Public Service Commission
The gist: Changes to LUS and LUS Fiber leadership, announced suddenly the night before October’s primary, were said by the Robideaux administration to be tied to an ongoing internal review of transactions between the systems that was requested by the Louisiana Public Service Commission. PSC representatives, however, contradict that assertion — saying no such internal review was asked for, and the leadership change is not related to any request from the commission.
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Get caught up, quickly. LUS and its sister company LUS Fiber have been under fire for a pair of potential violations of a state law that prohibits government dollars from propping up the municipal telecom. The most recent of the two, $8 million paid over eight years for a power outage monitoring system, was self-reported by Mayor-President Joel Robideaux in July. In a press release distributed Oct. 11, Robideaux announced he was removing LUS and Fiber’s interim directors, claiming the swap was made to “facilitate an internal review on behalf of the Public Service Commission” and linked the review to the power outage monitoring payments. Robideaux named his chief administrative officer, Lowell Duhon, to oversee LUS, and Kayla Miles, Fiber’s business administrator, as LUS Fiber’s interim director, replacing Jeff Stewart and Teles Fremin, respectively.
“Subsequent to the self-reports, the PSC requested that a more in-depth and internally unbiased review of all LUS Fiber inter-agency transactions be performed, necessitating the staff changes,” Robideaux wrote in his October press release, suggesting that the PSC itself had requested the leadership changes or supported the decision.
There is no written record of such requests from the PSC. Requests for management changes “would absolutely be in writing,” commission spokesman Colby Cook says. “We rarely make those kinds of recommendations. It’s a financial audit.”
PSC Executive Secretary Brandon Frey confirms the commission has not asked for an internal review of inter-agency transactions. “There is nothing pending on anything like that,” he says.
To date, the PSC has investigated only one self-reported violation from 2018. Robideaux’s July letter concerning the power outage monitoring system triggered no new review or request from the PSC, according to PSC staff. The last formal correspondence between the administration and the PSC was a June audit report concerning the 2018 discovery of payments from LUS to Fiber for services to sewer lift stations and some electric system components that were never connected. After a comprehensive review of inter-system transactions, the PSC found that besides the $1.7 million in sewer and electric payments paid out over several years, which Fiber reimbursed, the system was in compliance with state law and PSC rules, according to the report.
The June report raised concerns about having a single director run both Fiber and LUS. Longtime Director Terry Huval ran both LUS and LUS Fiber, an arrangement PSC staff wrote “may have weakened the strength of internal controls.” That concern was moot by the time the audit was concluded, as two different interim directors were already in place by the end of 2018.
Robideaux took widespread criticism for a bid to privatize management of LUS. The deal, first revealed by The Current in the spring of 2018, would have sold management rights to private equity firm Bernhard Capital Partners and at one time potentially included Fiber. Huval retired early from a previously announced decision to step down amid the controversy. The episode pitted Huval against his former boss, as the retired director publicly opposed the Bernhard deal. Later that fall, the City-Parish Council and the mayor-president agreed to divide LUS and Fiber into separate divisions. Robideaux appointed Stewart and Fremin to their interim posts, which they held without incident until October’s shakeup.
The self-reports have figured in political campaign materials. The Lafayette Parish Republican Executive Committee, whose Facebook page is run by Robideaux’s political consultant Joe Castille, used these transactions as a wedge issue against Councilman Bruce Conque, who lost his re-election bid to Andy Naquin, and mayor-president candidate Carlee Alm-LaBar.
(Disclosure: Alm-LaBar gave seed money to The Current in 2018; view our list of donors here.)
The administration has yet to officially respond to the June report from the PSC. Within a month of receiving the June audit, however, Robideaux claimed to have found the second potential violation of the act and said he hand-delivered a letter outlining those findings to the PSC, writing to the PSC that LUS may have made illegal payments totaling $8 million to LUS Fiber over an eight-year period. He actually hand-delivered the letter to Public Service Commissioner Craig Greene, when he visited the commissioner to discuss the June report.
“[Commissioner Greene] hasn’t had any more conversations other than when Mayor Robideaux had given us the letter, and we said we’ll get this to our staff. We gave no formal recommendation as to what they should do with [it],” says David Zito, Greene’s chief of staff. “None of the commissioners have approached us, and we have not approached any of the other commissioners about it.”
The legality of cross-subsidization between LUS and Fiber is regularly tested in annual attest audits, and interagency transactions are run through LCG’s finance department. In his letter, Robideaux, an accountant, took issue with the accounting method used to price the cost of power outage monitoring system, saying the approach likely violated state law. An audit conducted by LUS Fiber’s independent auditors in 2012 and a PSC audit for 2011 and 2012 did not take issue with the payment computations, which were based on the annual estimated savings from power outages. That means numerous oversight mechanisms, including Robideaux’s own administration, would have failed to detect any problems.
Robideaux has not asked the PSC to audit that issue, yet he references it as one of two self-reported findings to justify the leadership changes.
“We are committed to providing the most complete and unbiased report possible to the PSC, and the need for fresh sets of eyes is what prompted the naming of new interim directors at LUS and LUS Fiber,” LCG spokeswoman Cydra Wingerter writes in an emailed response to questions about the management changes sent this week. “The outcome of this in-depth, internal review will be formally provided to the PSC, and it is expected that a decision will be made as to whether the findings will be included in the initial self-report or taken up separately.”
Robideaux told commissioners in the July letter that Fiber’s annual attest audit began in May 2019 and would be filed with the commission by August. As of Tuesday, the attest audit had not been turned over to the PSC, its records show.
“There’s nothing pending at the commission involving the July letter,” says the PSC’s Frey. “I don’t think there’s been any request from them to open up an audit.”
Police pay increase wins council support but exposes city’s looming budget problems
The gist: The City-Parish Council voted unanimously Tuesday to move forward a $3.8 million police union backed pay plan, which would allocate the money from the city’s general fund if passed at final adoption next month. The vote and the sprawling discussion around it exposed increasing pressure on the city’s finances.
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Get caught up, quickly: Police officers trained by the Lafayette Police Department are leaving for higher paying jobs, according to Chief Toby Aguillard, who characterized the departures as a crisis in remarks to the council. LPD lost 15 officers last year and 18 so far this year, he said. Meanwhile, the city side of Lafayette Consolidated Government is already slated to eat up $11 million of a $50 million general fund balance just to pay for regular operating expenses next year. Drawing $3.8 million in recurring expenses would deplete the general fund more quickly.
If the council approves this pay raise, and nothing else changes, the city general fund will run out of money by 2024. LCG Chief Financial Officer Lorrie Toups shared a pro forma to show what will happen to the city’s general fund balance:
| 18-19 | 19-20 | 20-21 | 21-22 | 22-23 | 23-24 | |
| Ending Fund Balance | $45M | $30M | $21M | $12.5M | $5M | -$1.4M |
The city general fund will also break LCG’s fiscal policy of maintaining at least a 20% operating reserve by 2021. That means LCG will have less capacity to respond to emergencies and as a result will have to pay more to borrow money since lenders will see LCG as a riskier investment.
These numbers were based on a best-case scenario. Toups assumed 2% per year growth revenue, which hasn’t happened in years, and effectively no growth in expenses, which isn’t likely given the many funding needs throughout LCG.
Starting pay for a city of Lafayette police officer is $34,600. Starting pay for any other city in the parish is or will soon be about $40,000, according to Aguillard. Starting pay in McKinney, Texas, where several LPD officers are said to be transferring, is $72,000. An LPD officer with 10 years of experience makes $62,000. The city of Lafayette’s police department just isn’t price competitive and as a result is at risk of continuing to lose talented officers.
The fire department is working on a new pay plan. Fire Chief Robert Benoit spoke in favor of the new pay plan for police, and expressed his hope that LPD and the council would support the fire department as well when it introduces its own proposal in the coming months.
Increasing pay for firefighters will also cost millions of dollars per year. Council member Kevin Naquin tried unsuccessfully to amend the police’s plan to include $3 million for the fire department.
Councilman Kenneth Boudreaux wants to increase all LCG employee salaries 5%. Last year, the council passed a 2% pay raise for employees, overriding a mayor-president’s veto. And this spring, the council approved a 2% cost-of-living increase for all LCG employees, including police if LCG’s property and sales tax revenues increase by 2% or more. If Boudreaux’s new 5% proposal passes, it would mean an increase of another few million dollars in additional annual expenses.
All together, increasing pay for police, fire and all of LCG’s other employees could cost $10 million per year or more as proposed. If no new revenue were found or budget cuts made, the city would deplete its general fund by the end of 2022. Most other LCG employees are paid in part by the parish general fund; a government-wide pay raise would put even more pressure on a constrained parish budget.
New revenue appears necessary to make the police plan work. Mayor-President Joel Robideaux supported increasing police pay and said it can be paid for by a mixture of fund balance, new revenue and more budget cuts. Specifically, he mentioned the possibility of bringing back red light cameras around schools and using that money to support the police pay raises.
Boudreaux proposed two amendments to offset added costs. The first was to eliminate $726,000 budgeted for positions at the police department that are currently vacant. The second was to zero out the $1.9 million budgeted to pay for overtime at the police department. Both amendments failed after receiving significant pushback from the public.
Councilman Jared Bellard proposed eliminating all vacant positions across LCG. He advocated passionately for the need to find the money to fund this new pay plan for police, and suggested also looking at eliminating funding for non-governmental organizations.
What to watch for: A potentially electric final adoption vote on Nov. 5. The council will then determine whether to approve LPD’s new pay plan and/or tweak it further. But if Boudreaux and Bellard follow through on their proposed legislation, the council could face plans to provide 5% raises to all LCG employees and to eliminate all vacant positions across LCG. Hanging over these discussion is the tension of priorities, as councilmembers and the administration angle to find money in a shrinking budget.
ICYMI: Robideaux shakes up LUS/Fiber leadership just ahead of primary
The gist: Breaking the day before Saturday’s primary, Mayor-President Joel Robideaux removed interim directors for LUS and LUS Fiber, installing his chief administrative officer over the utilities system and elevating a longtime staffer within Fiber.
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3 min read
Get caught up, quickly. LUS and its sister company LUS Fiber have been under fire for a pair of potential violations of a state law that prohibits government dollars from propping up the municipal telecom. The most recent of the two, $8 million paid for a power outage monitoring system, was self-reported by the mayor-president in July. Last year, Robideaux put LUS and LUS Fiber under the authority of separate directors, following the exit of longtime Director Terry Huval, who retired early partially in protest of the mayor-president’s effort to sell management of LUS to Bernhard Capital Partners. Robideaux appointed Huval lieutenants Jeff Stewart (LUS) and Teles Fremin (LUS Fiber) as interim directors of the now independent divisions.
The shakeup was sudden. The directors and the Lafayette Public Utilities Authority, the council sub-agency that oversees LUS, were informed Friday afternoon, shortly before a press release was circulated announcing the decision.
Fremin and Stewart remain with LUS and Fiber. Robideaux temporarily put CAO Lowell Duhon in charge of LUS, and Fiber business administrator Kayla Miles over LUS Fiber, moving LCG Communications Director Cydra Wingerter to fill in for Duhon. Both civil service employees, Fremin and Stewart have returned to the positions held prior to their interim appointments.
Robideaux suggests the move was requested by the Public Service Commission. The PSC is a state agency that has limited regulatory authority over LUS Fiber, primarily for the purposes of enforcing a state fair competition law passed to protect incumbent telecoms when Fiber was created more than a decade ago. A press release sent out Friday claims the PSC requested an “internally unbiased” review of transactions between Fiber and other municipal agencies.
“It is important that we provide the PSC with assurance that this review process removes any internal bias that might be associated with long-term employees,” Robideaux says in the release. “The best way to accomplish that is with fresh sets of eyes.”
The PSC produced an audit in June. It was spurred by the 2018 discovery of $1.6 million in payments to Fiber for services that were never connected. Fiber reimbursed those payments before the PSC audit. The audit report went to an administrative judge in August. The judicial review is ongoing, and the PSC hasn’t taken action since July, when Robideaux self-reported more questionable payments.
Lagniappe. The Advertiser reported what it claims are more suspicious payments totaling $4 million over eight years. The report, published shortly after Robideaux’s press release, centers on charges for a set of communications hubs used by LUS, for which Fiber bills the utilities system $680 a month. It’s unclear whether the payments violate state law — Fiber is audited annually with transactions examined by LCG’s finance department — or if the administration intends to report them. The administration did not respond to requests for comment.
COLUMN: A post-primary postmortem
Christie Maloyed unpacks what went down during the jungle primary and what’s to come in the runoff.
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7 min read
Youngsville mayor makes late endorsement of Alm-LaBar
Youngsville Mayor Ken Ritter, a Republican, issued an eleventh hour endorsement of Carlee Alm-LaBar, a no party candidate, in Saturday’s runoff for mayor-president. Ritter is the first Lafayette Parish mayor to formally back a campaign.