Ascension’s long-awaited public-private sewer plan brings key customer base along with higher rates _lowres

 

The sole bidder to provide regional sewer service to East Ascension Parish says it can deliver the rate-paying customers that parish government has been unable to corral after trying for years to create a system on its own.

Having the customers is critical to financing the $300 million plan to bring public sewage treatment to the parish’s east bank, the sewer proposal says.

Parish officials have been casting about unsuccessfully over the past eight years to finance a regional system without new taxes or large user fees.

They were responding to state and federal regulatory pressure to upgrade sewage treatment in fast-growing Ascension Parish and improve the quality of Bayou Manchac and other waterways deemed impaired due to insufficiently treated sewage.

The plan proposes that most of the initial customer base will be created by buying out two private sewer providers: Ascension Wastewater Treatment and Mo-Dad Utilities. If the transaction goes through, their customers, on average, will see a significant rate increase.

Residential customers would pay an average of $67 per month, nearly double what some pay now, but on par with what Baton Rouge homeowners pay.

Parish officials warned, however, that the proposed rates are subject to negotiations expected to start in the new year with heavy Parish Council involvement.

“This is kind of a fluid situation right now,” parish Chief Administrative Officer Ken Dawson said recently.

Earlier in December, a split Parish Council voted to start negotiations with Ascension Environmental LLC to form a partnership with the parish to design, finance, build and operate a regional sewer system for 30 years.

In that public-private partnership, the private partner, Ascension Environmental, would take on the risk in the beginning with a large outlay of capital but would earn back its money, plus a return, over a three-decade period, the plan says.

The private partner will own the sewer system for the first 30 years at which time the parish will assume ownership.

Business rivals and some council members complained throughout the fall that not enough time was provided to put together proposals for such a complicated undertaking, and some were concerned that there was only one bid.

Enough of the council, though, brushed off that concern and agreed to go with the one bid, saying they were ready to stop procrastinating and finally get the new sewer system started.

“This is a marathon. We are at about mile 10 or 11, but three times before in this parish, we’ve decided to not run 26 miles. We ran 10 or 12 miles. We sat down, grabbed an orange and a drink and decided to go home,” outgoing Councilman Kent Schexnaydre said before the Dec. 8 vote.

“It’s time we move forward,” he said.

Ascension Environmental is the umbrella organization for the corporate entities and private companies who will have a role in the sewer proposal, including underwriter CitiBank; financier Provident Resources Group, of Baton Rouge; Layne Heavy Civil; CSRS Inc., of Baton Rouge; GSA Consulting Engineers, of Gonzales; buyout target Ascension Wastewater Treatment; and others.

Five- to six-year construction

Citing proprietary business information, parish government would not release the full plan, including rate and hookup fees, until after the council voted Dec. 8 to accept the single bid submitted.

The plan views the Ascension Wastewater Treatment and Mo-Dad Utilities customer networks as jump-starting the future system’s customer base and making the system self-sufficient from the start.

The buyouts of the two companies, plus a few hundred existing parish customers, are expected to bring 15,000 residential and 1,000 commercial customers to the deal’s first year.

The partnership plans to put up $240 million in private capital through debt offerings and use an existing $60 million loan already offered to the parish government to build three regional treatment plants for the most densely populated areas of the parish.

Starting in 2018, 30 to 40 neighborhood treatment plants would be shut down each year as the new plants are brought online.

Work would start first in Areas 1 and 2, which correspond roughly with the northwestern part of Prairieville, Dutchtown and Duplessis. The first three phases are projected to be built over five to six years.

The plan does not provide a figure for the fourth plant and its service network to serve East Ascension’s most rural areas, but claims both can be built with cash flow and new development.

When the buyouts of Ascension Wastewater Treatment and Mo-Dad are completed, their customers will switch from flat fees to new rates based on usage. Under the plan, residential customers would have a base fee of $35 per month. Projected average usage of 7,000 gallons per month bumps the fee up to $67 per month.

At $67 per month, Ascension Wastewater’s residential customers would have a 49 percent increase while Mo-Dad customers would get an 88 percent, the plan and state regulatory filings show.

The two companies’ commercial customers would pay $164 per month on average under the plan and face even larger increases.

With the new base rate, it’s possible some Ascension Wastewater and Mo-Dad residential customers who have lower than average water use could pay less than or the same as they do now in the early years of the deal. But the plan also notes user and hookup fees would increase 4 percent annually over the life of the deal.

The plan anticipates one-time fees of $4,500 residential and $6,500 commercial for hookup fees, but those would be reserved for new developments and individual homes outside existing, traditional neighborhood systems.

Dawson said those rural residential customers are expected to make up a small part of the deal’s base of ratepayers.

Coming full circle

Ascension Parish Councilman Benny Johnson led the parish’s exploration into financing a regional sewer system and ran into the dead-ends that have brought Ascension Parish full circle and now facing the current deal.

In April 2011, another bid at a public-private partnership blew up when Ascension Wastewater backed out and the partnership had no customers to help finance the plan.

More recently, the parish tried to finance the system on its own with a $60 million low-interest loan through the state Department of Environmental Quality.

The loan would have been combined with attempts to buy distressed sewer companies and about $10 million in new sewer trunk lines the parish must build as part of state road expansions for La. 73 and La. 42.

An analysis released about this time last year found that without other companies’ customers coming online, the parish would have about 2,000 customers for $70 million in infrastructure.

The parish would have faced millions in annual debt and operational costs that would have had to be made up with money from the general fund or other parish sources, the analysis said. That process has led officials back to a public-private partnership.

“At the end of the day, the citizens are going to have to pay for the system, whether they pay for it as a monthly user fee or whether it’s done in the sense of some type of external revenue or tax, or what have you, to supplement the system to keep monthly user fees down,” Johnson said.

Buyout costs unknown

The purchase prices of Mo-Dad and Ascension Wastewater were not disclosed in the plan nor was how those costs would affect rates. Parish officials say they aren’t privy to those numbers, but the deal will have to go before the state Public Service Commission.

Colby Cook, the commission spokesman, said commissioners will consider the purchase prices when they decide whether the deal is in the public benefit. But the applicant can seek to have parts of the plan considered a trade secret or proprietary and remain confidential.

Employees of Ascension Wastewater Treatment will have top roles in operating the future parish system through another AWT-affiliated company, Wastewater Treatment Construction and Services.

Mo-Dad Utilities, which is based in Denham Springs, does not have a role in the partnership.

Glenn Shaheen, owner of GSA Consulting Engineers of Gonzales and a top executive in the proposed partnership, declined comment on the plan and said he has been asked to refer all questions to the parish.

Officials with Ascension Wastewater and Mo-Dad did not return calls for comment.

Follow David J. Mitchell on Twitter @NewsieDave.