GONZALES — Ascension government advisers working on 30-year deal to transform parish sewer service say they made several changes to the proposed agreement to rebalance risk toward the benefit of ratepayers amid calls from the Parish President-elect Clint Cointment, the sitting Parish Council and others to negotiate a better deal.
One change, for example, would require Ascension Sewer LLC, the Bernhard Capital Partners consortium seeking the concession to consolidate sewer service, to pay out of pocket for up to $10.75 million in any construction cost overruns before seeking the first rate increase.
But, some controversial parts of the deal, like lucrative termination fees for Ascension Sewer that Cointment and others contend could bankrupt the parish, were lessened but not eliminated, leaving some critics saying the proposed agreement still poses an unfair risk to the parish and its residents.
Other parts of the deal, including an important computer model to be used in future rate requests, remain a work in progress. Those and other changes were detailed this week in a presentation to the Parish Council, which held off on a previously planned final vote, as Cointment, several councilmen-elect and members of the public urged the council to take more time with the proposal.
"We do need parishwide sewer, but we don't need it this way," Pam Alonso, a Dutchtown notary and member of a parish Republican Party organization, told the council. "We need it so it's in our best interest, and everyone wins. It should not be so the parish loses and a company wins."
Ascension Sewer is proposing to build a $215 million regional sewer system to consolidate waste treatment now handled by community package plants and to direct sewage to a new plant near Geismar for discharge into the Mississippi River.
The agreement would bring together 19,500 customers of parish government and Ascension Wastewater Treatment, the largest private sewer provider in the parish and a partner in Ascension Sewer. About 2,800 of the Ascension Wastewater customers who would be part of the partnership are outside Ascension Parish in Livingston, Iberville and East Baton Rouge parishes.
Under the deal, residential rates would start at $57.90 a month, a 36% rate increase for parish government customers and a nearly 29% rate increase for Ascension Wastewater customers. Rates would rise by 4% annually for the next 10 years, ending at $82.41 per month.
Businesses would face separate commercial rates. Businesses and homeowners on individual systems outside subdivisions would also face costly hookup fees. The common 5/8-inch residential water meter hookup would cost $2,500. Parish officials say they are working on a program to subsidize those fees.
Overruns or other unanticipated changes, like lower-than-expected customer growth, could force increases above the rate schedule to ensure Ascension Sewer maintains an 8% rate of return on its investment.
In comments earlier this month, Stephen Auton-Smith, managing director of Ernst & Young's U.S. infrastructure arm, said the proposal then had ensured cost overruns were borne by ratepayers, but offered no clear way also to share savings with them, though the proposed agreement held that potential for its private investors. He added then that construction overruns presented the biggest cost risk.
But during the presentation Thursday, Auton-Smith and David Fleshman, a lawyer representing the parish, suggested major progress had been made in refashioning the agreement.
Councilman Randy Clouatre asked Auton-Smith for his big-picture take on the revised deal.
"Is this a one-sided contract," Clouatre asked, adding, "as far as risk and liability, financially?"
"It is more financially balanced than it was this time a week ago. I think it is … yeah, it is much more symmetrical," Auton-Smith responded.
Even if the consortium did have construction cost overruns beyond $10.75 million, the partnership could only seek higher rates for those costs beyond that threshold, the draft agreement says.
Another trigger would allow the parish to direct Ascension Sewer to lower rates or reinvest in the system if improved financial conditions allowed, including if customer growth rates exceed 5% annually on a three-year average. Auton-Smith had noted the prior deal lacked any clear way for the parish to seek savings.
The consortium would also be required to turn over audited financial statements, monthly cash flow and customer data reports, and other information.
Auton-Smith added that with a rate request, the consortium would have to turn over financial information so the parish could compare the partnership's rate of return with those of other utilities. If the rate of return is better than expected, the parish could use that to try to mitigate any rate request.
"And clearly, if they are more profitable than they are expected to be, that (access to information) will act as a disincentive to ask for a rate increase because that will open all of that up," Auton-Smith said.
While negotiations continue, Parish Council Chairwoman Teri Casso said she will call a council meeting, a special one if needed, to bring the matter for a vote once other pending elements of the deal are finished.
In an interview, Cointment said that based on what he heard Thursday night, the changes haven't yet done enough to protect the parish and ratepayers.
One of his major concerns, he said, remains that the proposal does not have a cap on Ascension Sewer's rate of return. The termination fees and the partnership's ability to incur debt without Parish Council authorization, including from an affiliate of the Ascension Sewer's partners, worry him also.
"Ascension Parish citizens need to know that until my issues are answered, they need to get ready to pay, because they will, because I'm looking at the financial side of this and the liability side of it and it has not been addressed," Cointment said.
The new proposal eliminates one of the more costly ways termination fees were to be calculated: requiring the parish to pay the fair market value for the new sewer system. Other methods remained but were revised in ways that potentially lessened the cost some.
Jeff Baudier, managing director of Bernhard Capital, called the fears about termination fees a "red herring." He said parish and partnership economic analyses show the deal would bring hundreds of jobs and millions of dollars in savings for parish government coffers.
"Bankruptcy is not a possibility. In fact, this partnership creates and protects a thriving financial future for Ascension Parish," Baudier said in a statement.
A regional sewer system has been a goal that has eluded generations of parish leaders even as regulatory controls on water quality in the bayous that now receive local sewer discharge have tightened and have been seen as a threat to continued growth in the parish.
Barker Dirmann, president of the Ascension Chamber of Commerce, wrote in a recent letter that a survey of its members found 95% of respondents supported pursuing the agreement.
"We are in full support of Ascension Sewer’s proposal as this important infrastructure project will enhance economic development in the parish and, more importantly, will improve the quality of life for our residents in the decades to come," he wrote.