Ascension should get out of the Sewer Business. Vote YES on April 24

“Trains” at current Darrow-Hillaryville treatment plant (among parish assets up for sale)

Early voting for the April 24 election to approve, or not, the Sewer Conveyance and Franchise Agreement proposed between National Water Infrastructure, Inc. (NWI) and the parish begins on Saturday (April 10-April 17, excluding Sunday).  If you are a taxpayer in Ascension Parish, or one of those individuals representing them, there is a lot to like about the deal.  President Clint Cointment and what appears to be a united Parish Council are giving full-throated support of the ballot initiative:

“Shall the Parish of Ascension, State of Louisiana (the “Parish”) sell its east-bank wastewater utility system (but excluding the corporate limits of the City of Gonzales and the Town of Sorrento) and grant franchise to operate same to National Water Infrastructure, LLC, as per the written Sewer Conveyance and Franchise Agreement dated as of February 11, 2021, on file in the office of the Clerk of Court of the Parish of Ascension?”

Just because it has unanimous support from Ascension’s parish president and 11 council members does not necessarily make it a bad deal; particularly considering that local history has proven beyond any doubt that the parish is incapable of accomplishing regional sewer treatment.  Ascension can barely handle the 2,000 “customers” it already has, each and every one of whom is being subsidized by every other residence and business in the parish.

Finalized on December 28, 2020, the agreement bears little resemblance to the one rejected by a 7-2 vote of the Parish Council on December 20, 2019.  Palpably angry citizens packed the Council Chamber that evening, five days before Christmas on a Friday night, some spewing venom after months perceiving they had been ignored.  Chief among the public speakers that night was Parish President-Elect Cointment who, along with Councilman-Elect Chase Melancon, spent ten days in negotiations trying to improve what was a 46-page document (not including Appendices).

The current version, sans appendices and prefaces is 13 pages, less dense and more easily digestible than a 2019 version unfathomable to lay readers and lawyer-types alike.  Remove three pages of esoterica about cross-indemnifications and the agreement is more straight forward than could have been expected.  To our eyes most, if not all, of the risk to Ascension Parish and its taxpayers has been eliminated.

Among our chief objections to the original were all those contractual provisions unsusceptible to clear understanding without a slide rule and T-square; which meant uncertainty for Ascension Parish and its citizenry at a supreme disadvantage if matters ever went to court.  Only a fool would want to lawyer up against Bernhard Capital Partners, the driving force behind NWI.

Certain of the parts we could understand were more worrisome still.

By its terms NWI (it was called Ascension Sewer back then) could terminate the agreement virtually at will, invoking an Operator Termination Fee so onerous as to require Ascension to sell municipal bonds to pay NWI’s debt off.  A bankruptcy waiting to happen, but nowhere to be found in the current version. The provision’s removal makes the current proposal immeasurably more palatable to every taxpayer (though NWI’s customers will see rate increases; more on that below).

2019’s verbiage envisioned the parish putting up $15.8 million in cash along with $60 million from a DEQ loan; compared to the guaranteed $9.3 million paid to Ascension for purchase of assets and $500,000+ in annual franchise fees (based on 4.5% of NWI’s gross revenues) for the agreement’s duration, 20 years.  The franchise, the fee for which is paid in return for NWI’s right to access Ascension’s right-of-way for construction and maintenance of its system, is “nonexclusive.”

Then there’s the $4 million or so in annual subsidies currently borne by the parish to provide sewer treatment for approximately 2,000 of its own “customers.”  That subsidy obligation will only increase with the passage of time; upgrades to parish treatment plants are sorely needed right now (like $2.5 million for the sewer treatment plant at Oak Grove Elementary).  Ballot approval would shift that responsibility, and those customers onto NWI’s books.

The math is simple.  Over the next 20 years Ascension will have nearly $20 million in new money, plus $80 million in savings for road and drainage improvements, recreation or some other area of acute need determined by the governing authority.  For these reasons alone, the deal is a good one for Ascension Parish.

Without taking out the DEQ loan, Ascension retains important bonding capacity and the ability to afford matching fund requirements to unlock state and federal dollars.

The downside?

Unlike 2019, there is no rate schedule stated anywhere in the agreement because Ascension Parish Council will not be the rate-setting authority as in the old proposal.  Under its terms the starting monthly rate was going to be $57.90 with an 4% annual increase built in for ten years, resulting in monthly bills to NWI customers in the low to mid-$80 range.  Success at the ballot box means rate increases would require approval by Louisiana’s Public Service Commission, just like it does now, and limited to NWI customers (NWI acquired Ascension Wastewater Treatment, the largest private provider in the parish).

Most assuredly, rates being paid by existing customers are going to increase.  But, since NWI has insisted it will proceed with its new treatment plant whether the deal gets done or not, those rates are going to increase regardless of the outcome on April 24.

Assuming voter approval, NWI is contractually bound (in Phase I) to complete construction of the system capable of removing “at least three million gallons-per-day from Parish waterways for discharge into the Mississippi River…within 60 months after the Commencement Date.” Failure by NWI to meet the 60 month deadline, if not cured within a stipulated 90-day period, can result in a termination of the franchise by a two-thirds vote of the Parish Council.

That would complete what is deemed Phase I, the only construction/operating obligation assumed by NWI unless/until 15,000 new customers are added to the system.  That would trigger the obligation to “design and construct an additional four million gallons-per-day regional treatment plant for discharge in the Mississippi River.”

How does NWI expect to add so many new customers?  Nowhere does the agreement contemplate forcing existing sewer treatment units onto the NWI system.  It does include the following:

“The Parish shall, in consultation with the Company, work to amend or enact ordinances if necessary to require all newly developed properties within the Service Area to apply to the Company to be registered and connected to the System upon the acceptance by the Company of its development plan for wastewater disposal pursuant to the Parish Unified Land Development Code.”

Which does not seem like such a big deal since Ascension Wastewater Treatment’s entire business model was predicated on acquisition of new subdivision treatment plants for one dollar.  No new subdivision Homeowners Association wants responsibility for treating its own sewer; every developer wants to be rid of it too.  Ascension Parish should follow their example.

Get out of the sewer treatment business while the getting is good.

 

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