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.
Challengers are already mulling 2019. LUS could be the platform they need.
On Monday, NextGen withdrew their offer to manage LUS hours before the Council voted against considering any deal like it. So now what?
If the public doesn’t have all the facts, it’s in part because he’s not providing them. The bottom line is Robideaux’s account raises some red flags. Here are a few of the big ones.
Chief among them: Can we get out of it?
Bernhard Capital Partners appears ready to make its pitch to the Lafayette Public Utilities Authority on Oct. 9.
▸ The gist: Emails exchanged between LCG officials and representatives of Bernhard Capital Partners, the private equity firm pursuing management of LUS, show regular sharing of information between the camps beginning in 2017 or earlier, and at one time included an interest in purchasing both the electric division and Fiber. Fiber is not on the table in current discussions; at some point talks turned from a sale to a management agreement.
▸ Robideaux signed a non-disclosure agreement with Bernhard on April 10, 2017, according to Jeff Jenkins, a Bernhard principal. Bernhard and the administration exchanged revisions of the NDA in late January 2017.
▸ Bernhard received a slew of LUS documents throughout 2017 and 2018. Over the summer of 2017, the emails show that now-retired LUS Director Terry Huval sent Bernhard reps copies of Fiber’s depreciation schedules and several months worth of financial statements for LUS. Correspondence shared among Huval, Robideaux and Bernhard reps show a primary interest in the electric system. "From what I recall, the mayor quickly took Fiber off the table, and that was fine with us," Jenkins said in an interview Wednesday.
Robideaux has described vaguely the genesis of his discussions with Bernhard about LUS, noting in a memo emailed to council members on the LPUA that, after some initial meetings, Robideaux kept Bernhard’s suggestion of a management agreement in his back pocket until March 2018. He also said that LUS "has never been for sale."
That month LUS Fiber was found to have billed LUS $1.7 million for telecom services that were never used over several years. The discovery triggered an audit by the Public Service Commission, which regulates Fiber.
"With an impending PSC audit, Terry’s planned retirement, and unfunded generation needs, I reopened conversations with Bernhard on a non-binding agreement," Robideaux says in his memo. However, email records, obtained by The Current via public records request, indicate the conversation was never closed.
In February 2018, for example, Robideaux received a legal opinion from Bernhard that a management agreement would not require a public vote, the emails show.
▸ A value study of LUS matches Bernhard’s interest in both Fiber and the electric division. Robideaux says he commissioned LUS’s engineer of record, NewGen Strategies and Solutions, to do a value assessment of LUS in the spring of 2017, spurred by general interest in the idea of sale he heard while running for office. The resulting study, delivered to LCG in July 2017 and later shared with Bernhard, contemplates a franchise agreement for both the electric division and LUS Fiber — creating the appearance that the assessment was done specifically for Bernhard. Robideaux has not responded to a request for comment.
▸ Bernhard is expected to produce an offer in the next two weeks. Jeff Jenkins, a Bernhard point man in the play for LUS, says the group will turn over an analysis of LUS in the next two weeks and will likely include its offer. The firm has completed is 90-day due diligence study of LUS, which began after Robideaux signed a non-binding letter of intent in April of this year. The firm is considering private management of all three LUS utility systems — electric, water and wastewater.
▸ 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.
Terry Huval, director of LUS for 23 years, has hurried his retirement amid revelations that the Robideaux administration is in talks to privatize the system’s electrical division.
Andrew Rodgers, a Chattanooga-based technologist, smiles as he speaks to an eager Acadiana audience, his hands moving like a Cajun grandmother. A keynote speaker at Lafayette’s inaugural Smart Community Summit, his energetic presentation to a room full of Lafayette notables is fueled by one driving force — belief in the powers of cooperation and technology. “Researchers and academia work in […]