LAME-duck council legacy is BANKRUPTCY if Ascension Sewer deal gets done

How low does Doc Satterlee have to stoop to see eye-to-eye with Kenny Matassa?

Did the Ole’ Chicken Doctor pull a fast one?

Ascension’s Parish Council is scheduled to approve (or deny) a 46-page Construction, Operating and Cooperative Endeavor Agreement, along with eight appendices on Thursday.  The contractual terms have never been discussed publicly, not the ones that will bankrupt the parish anyway.  That’s how one-sided (against the parish and in favor of Ascension Sewer, LLC, the consortium headed up by Bernhard Capital Partners) this deal is.

There’s a reason that Ascension Sewer wants to avoid a jury of Ascension citizens (Notes deleted for public consumption) 

Why would an Ascension Parish governmental entity ever agree to exclude rate-paying citizens from the pool of potential jurors if/when lawsuits get filed?  The same reasons the Parish Council, led by the Utilities Committee and its chairman, Councilman Daniel “Doc” Satterlee, has refused to publicly discuss the contract details…Details so confusing and never analyzed, where the devil can be found.

No matter how awful Ascension Sewer’s performance or egregious its conduct in soaking parish citizens in furtherance of its bottom-line, the parish can NEVER terminate the agreement before its 30-year term because it would mean bankruptcy.  Ascension Sewer can opt out by terminating the agreement any time it is denied a rate increase, which would invoke Appendix IV: OPERATOR TERMINATION FEE.

“The Operator Termination Fee shall be an amount equal to the greater of the following:

(i) The fair market value of the System. For purposes of the foregoing, fair market value of the System shall be determined by an internationally recognized appraisal firm, assuming an arms’ length transaction between an informed and willing buyer and a seller under no compulsion to sell, and assuming no encumbrances and debt associated with the System will remain in place, and based upon the then-current condition of the System (excluding the value of the assets owned by the District on the Effective Date of the Agreement).”

In no way will this be an arms’ length transaction and Ascension Sewer would have the parish and its taxpayers over a barrel.

The System will be riddled with debt and encumbrances, but the parish will have nominal ownership (with no control) of significant assets.  Ascension Sewer gets $75.8 million in cash, up front, from the parish which gets all of Ascension Wastewater Treatment’s assets and customers but none of the money paid in monthly rates.

A casual reader might assume that the parish would get credit for that cash infusion since the Termination Fee valuation excludes “assets owned by the District on the Effective Date of the Agreement.” Ascension Sewer’s lawyers are pretty clever, though.  The Effective Date is that upon which the agreement is signed, before the parish has acquired any of those assets which happens later, prior to “Commencement Date” of the agreement.

So, the parish would have to pay for Ascension Sewer Treatment’s (and other) assets twice, receiving no credit for the initial $75.8 million up front payment.

The only other option in Appendix IV could be worse.  It envisions a sum arrived at by adding:

  • the principal amount of any outstanding debt incurred by Ascension Sewer, along with prepayment penalties or costs (an amount sufficient to “retire” all its debt); and
  • the greater amount of $60 million or the combined equity contribution by Ascension Sewer (an incentive to pump more and more cash into the equation if ever there was one, efficiency and frugal stewardship of citizens’ money be damned); and
  • an amount necessary to achieve no less than a 7% return on that combined equity contribution.

We won’t even speculate on how high that number can grow.  Neither has any elected official of Ascension Parish not named Bill Dawson.  The District 2 council representative is the only member that has asked a single meaningful question throughout this entire regrettable proceeding; without getting any meaningful answers in reply.

In a final burst of incompetence lame-duck president Kenny Matassa erroneously claimed “the next administration can tweak” the agreement.  How often do you see Matassa and Satterlee on the same side of things?

Utilities grappling with Ascension Sewer agreement (will resolution come before new council sworn in?)

At the November 12 meeting of the Utilities Committee it was Dawson who imposed, or attempted to, conditions that would have ensured certain of the more vital concerns were addressed.  His motion included the language:

“Initiate a contract to bring project design to, at least, a level that reduces “sensitivity” (see above) to plus or minus 10%, payment for such design to be negotiated at a reimbursable rate and to include:  (a) a timeline; (b) a schedule of construction and operation; and (c) identification of package plant/treatment plants to be connected to the system.

Utilities Chairman Satterlee’s amended motion eliminated the verbiage in regular font above, replacing it with:

“Send agreement to the full council with additional language to protect against overruns within the cost of design and construction projects that are proposed; including if costs are below budget, such costs would be invested back into the system.”

The rest of Dawson’s original motion seen below, and the provisions in bold font above, were approved by a 4-1 vote of Utilities (with Dawson himself the lone “no” vote):

  • Have a 3rd-party, possibly Ernst & Young, prepare a rate-generating model that is done according to a specification agreed to by both parties;
  • Include language in the C & O agreement specifically outlining how rates will be adjusted or set in accordance with rate-generating model.  Rates to increase (if costs increase) or decrease (if costs decrease);
  • Address Ernst & Young’s recommendations regarding transparency, require annual or quarterly reports by amending the C & O agreement; and
  • After all of the above is completed, send modified C & O agreement, and rate-generating model back to Ernst & Young for review; then for public comment, then to the Utilities Committee.

None of which has occurred, not publicly at least.  What about approved motions’s requirement that public comment be received, then back to the Utilities Committee for further scrutiny?

And, yet, there it is on Thursday’s agenda of the full council:

(8) Utilities Committee Recommendations: (Chairman Daniel Satterlee)
a) Approval of Construction, Operation, and Cooperative Endeavor Agreement between ACUD #2 and Ascension Sewer, LLC

Did the Ole’ Chicken Doctor pull a fast one?

That would have a certain symmetry since this awful deal has many of the earmarks of…

Vulture Capitalism

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