GONZALES — Ascension Parish lawyers and financial aides and backers of a 30-year deal to finance, build and run a $215 million regional sewer system are working overtime to refine the plan ahead of a critical vote next Thursday.
A key Parish Council panel has recommended the plan but also asked for answers to questions raised by Ernst and Young's Stephen Auton-Smith, the parish's hired financial analyst, before a final vote by the full Parish Council.
Ascension Sewer LLC, whose partners include Bernhard Capital Management and Ascension Wastewater Treatment, is seeking a long-term concession to build a new regional treatment plant along the Mississippi River. The system would consolidate sewer service for tens of thousands of homeowners and businesses in eastern Ascension Parish.
The deal would bring together the 19,500 customers of parish government and Ascension Wastewater, the largest private sewer provider in the parish, under one partnership and boost their rates in the process.
The Parish Council would set sewer rates under the proposed deal, but 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. Rates could be renegotiated afterward for later system phases.
Parish customers currently pay $42.50 per month, while Ascension Wastewater residential customers pay $45 per month.
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If approved by the outgoing council, which has at least six members departing at the end of the year, the sewer deal could lock the parish into a long-term relationship with Ascension Sewer. The agreement would last through 2049 and carries costly termination fees in the tens of millions of dollars if the pact is ended early.
The parish has been under increasing state and federal regulatory pressure to create a regional sewer system to clean up discharges into bayous, but a path to finance that system has eluded parish leaders for more than two decades.
Many of the customers eyed for the system have community sewage treatment discharge that ends up in the impaired Bayou Manchac or other smaller waterways. Parish officials say the new system could remove 2.3 million gallons of daily discharge from Bayou Manchac.
Three-term Councilman Randy Clouatre, who is leaving office in January, urged the council utility panel this week to let the full council decide on the deal, noting that the threat of regulatory action has continued to gather as past councils have failed to act.
But Parish President-elect Clint Cointment, who takes office in January and replaces President Kenny Matassa, said Friday that he was reviewing the agreement closely to make his own recommendation to the full council in time for its next week.
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He had asked the same council panel to continue to negotiate because of uncertainties over rate structure, construction and other costs, and the risk the parish would bear.
"What I hope is that we move with caution. This is a 30-year agreement," Cointment said. "Hundreds of millions of dollars in fees that our residents will have to pay. If you ask me today if I would sign this agreement, the answer would be 'No.'"
Cointment has also called for greater public input after Ernst and Young's financial analysis of the deal and a draft of the sewer agreement itself were made public only late last week.
Though parish and Ascension Sewer lawyers had been working on the deal privately for months, parish government officials had refused to provide earlier drafts of the deal until last week, though an hourslong public presentation on its general parameters happened days before the Oct. 12 primary.
The Council Utilities Committee voted 4-1 to forward the plan Tuesday but asked for answers to several the questions raised by Auton-Smith, who is the managing director of Ernst and Young's U.S. infrastructure arm.
Council members Teri Casso, Oliver Joseph, Aaron Lawler, Daniel "Doc" Satterlee supporting the plan, and Councilman Bill Dawson opposed. Councilman Benny Johnson, another member of the panel, was absent.
As structured, Auton-Smith pointed out, 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.
While the plan left unclear how initial sewer rates were established, Auton-Smith said the protection against cost overruns isn't unreasonable given the plan's early state of development. He estimated the system has only been 5% to 10% designed.
The extra costs, if they materialized, would come in addition to the initial rate structure.
Despite assurances from Jeff Jenkins, a Bernhard Capital partner, that he was confident in the cost estimates, Auton-Smith said construction overruns presented the biggest cost risk. They would have cascading effects on the deal, upward of 20%. Just a 10% increase would boost monthly rates by up to $10 over the initial rate structure.
Without the added savings Auton-Smith suggested Ascension Sewer could achieve to boost its rate of return, the partnership will earn 8% annually, which he considered within the boundaries of similar deals. The partnership would collect $267.6 million to recoup their combined cash investment of $99 million over 30 years plus provide any profit.
In the first three years of the deal, another $20 million in planned spending goes to an undisclosed source. Auton-Smith's report has redacted that line-item.
Ascension Sewer is proposing to sink in $78 million in cash in the first three years, plus seek $129 million in commercial and government debt, to build a system expected to bring in about 9,000 customers in the first phase, an Ernst and Young report says.
As many as 35,000 customers could eventually be connected to the system, but 2,800 of Ascension Wastewater's customers in East Baton Rouge, Livingston and Iberville parishes will not be linked to the new system, though they will be part of the deal and its rate structure.
Under the deal, the parish is expected to put up nearly $16 million in taxpayer cash while $60 million of the financing relies on a state and federal low-interest sewer loan the parish was awarded several years ago.
As part of the analysis of the deal, the parish has put forward its own estimate of status quo growth in the government's base of 2,100 to 3,000 sewer customers. That analysis suggested a $60 per month fee with regular 3% increases, well above current rates, would end up with a combined $27 million deficit at the end of 20 years.
Auton-Smith, the Ernst and Young analyst, suggested the projected deficit might be less than half as much, however, though that plan held many uncertainties.
William Daniel, the parish's infrastructure director, said that if the parish didn't reach a deal, Ascension Wastewater could make its own agreement with someone else to do the same thing.
That would leave parish government not only without the financing strength to build the regional plant on the Mississippi that regulators want but also without control over sewer rates for thousands of Ascension Wastewater's customers.