GONZALES — Ascension Parish President-elect Clint Cointment is calling on the Parish Council to hold off voting on a 30-year deal for regional sewer service, citing financial and transparency concerns.
He said the details need more scrutiny and a third-party review before a vote should happen, ranging from the structure of the termination fees and the location of a future treatment plant to the way risk is balanced between the parish and the partnership behind the deal.
"The liability of this current contract has the potential to bankrupt Ascension Parish," Cointment said Monday.
A key council panel recommended a variety of changes to the agreement last week after hearing from its financial analyst but sent the proposal to the full Parish Council.
The deal with Ascension Sewer LLC could be poised for a final vote Thursday night by an 11-member council with six members leaving office in early January.
Under the proposed public-private partnership, the consortium of Bernhard Capital Management and Ascension Wastewater Treatment would design, build, operate and maintain a new regional system that would discharge treated effluent into the Mississippi River near Geismar.
Many of the customers eyed for the system are on community sewage treatment plants owned and run by the parish that send wastewater to the impaired Bayou Manchac or other smaller waterways.
The parish has been under increasing state and federal pressure to create a regional sewer system to clean up discharges into its bayous.
Parish officials have also argued that continuing the status quo could lead to a $27 million deficit in the parish utility fund in 20 years without major rate increases or cash infusions.
The Ascension Sewer deal would bring together 19,500 customers for parish government and Ascension Wastewater, the parish's largest private sewer provider. The $215 million first phase would initially serve about 9,000 customers but is hoped eventually to serve more than 35,000 residential and business customers.
The proposal would also increase rates for those customers. Though the Parish Council would set sewer rates, Ascension Sewer has proposed a starting rate of $57.90 per month with annual 4% increases for the first 10 years, ending at $82.41 a month. Rates could be renegotiated afterward for later system phases.
Cointment has put forward a 22-item list of problem areas or requirements he'd like to see met before the agreement proceeds, though he said that list is hardly definitive.
Jeff Jenkins, a partner and founder of Bernhard Capital, said the concerns Cointment has raised are being dealt with in the edits of the deal expected to be made before the council meets Thursday.
"All of those items have already been addressed," Jenkins said.
Outgoing Parish President Kenny Matassa said it's time to bring the parish sewer system into the 21st century and noted the state has been holding a $60 million low-interest sewer loan for eight years that the parish is now in danger of losing.
"There is no such thing as a perfect deal, but this is a workable deal," Matassa said in a statement. "The next administration can tweak it as they go along."
William Daniel, the parish infrastructure director, said the parish has been working on sewer for 30 years and many of the sitting council members have invested years examining this and past proposals.
"They are familiar with the ideas, economics and obstacles to getting this done," he said. "It certainly makes sense from that standpoint that they are more than qualified and entitled to vote on the proposal."
One of Cointment's top concerns is that the 83-page draft, known as a construction and operating agreement, and a financial analysis of that draft were made public only earlier this month. That has not given the council or the public enough time to examine on the final agreement, he said.
"As of today, there has been no public comment by the attorneys hired by the council to represent the taxpayers' best interest," Cointment wrote in a statement. "This is a 30-year, multi-million (dollar) contract so it is important that we slow down and do our due-diligence."
Jenkins and parish officials said the proposal has been subject to negotiations since February. The partnership has had met publicly with the council Utilities Committee, and its televised meetings also streamed on the internet. The partnership also held a public input meeting earlier this year to explain the plans. In addition, the rate structure was laid out openly. Parish and partnership officials met with Cointment in June about the rough outline of the deal.
"I understand the fact that maybe the election cycle is in the middle of the discussion," Jenkins said, "but you know this has been an extremely transparent process and I think everybody on the existing council would agree with that."
Previously, the parish would not make drafts of the deal available, as Ascension Sewer and parish lawyers negotiated the agreement. Council members could not review those documents unless they signed nondisclosure agreements, council members confirmed.
Even when parish lawyers detailed the parameters of the deal in an early October meeting, a copy of the proposal was not publicly available.
Among the bigger items drawing concern for Cointment, he said, are the termination fees to end the agreement and the way risk is balanced.
The deal lays out several ways the those termination fees should be calculated, but all could be costly for the parish. Under one option, the parish would have to pay back the fair market value of the system at the time the deal was ended.
Even if Ascension Sewer is in default, under the agreement if the consortium goes bankrupt or fails to perform, the parish must pay Ascension Sewer's outstanding debt and pay back the partnership's cash investment in the deal.
For any reason other than default, the parish would have to pay Ascension Sewer's outstanding debts for the project, a minimum of $60 million of the cash that the partnership put up, and whatever else is necessary to ensure the partnership gets a 7% return on investment.
The partnership expects to spend $99 million of its own cash over 30 years, including $78 million in the first three years, according to a financial analysis of the deal. The partnership also plans to seek up to $129 million in commercial and government debt.
Stephen Auton-Smith, an Ernst & Young financial analyst hired by the parish, told the council committee last week that the deal ensures cost overruns are borne by ratepayers, yet offers no clear way also to share savings with them, though the agreement holds that potential for its private investors.
He also said the partnership rate of return isn't out of line with similar deals.
Cointment said the risk of the deal should more balanced for Ascension ratepayers and he wants a cap on partnership's rate of return, saying the partnership would be rewarded for construction delays.
Daniel, the parish infrastructure official, said that language will be changed in the coming edits by either requiring rate reductions or reinvestment in the sewer system.
Jenkins said the deal protects Ascension's ratepayers. Ascension Sewer would stand in the place of the parish to operate the system and the ratepayers would be their customers, a standard practice in the industry.
"Everything that we've done is in line with what a typical municipal utility across the country does," Jenkins said.