A new revelation from Bossier City’s contracted city engineer relating to a state grant and a water deal between the city and Port of Caddo-Bossier may explain why a City Council majority passed the deal despite numerous red flags at least one of its members seemed to miss, as part of campaign pursued by the Port, contractor Manchac Consulting Group, and the Republican Mayor Tommy Chandler Administration.
It’s frustrating to me, and perhaps repetitive if not boring to readers, to have to go through this again, because the facts outlined below have been discussed time and time and time and time and time again, and well in advance of the Apr. 4 meeting that approved the deal. But it all necessarily deserves another look as a consequence of statements made at the last, Apr. 18, Council meeting shedding light on the possibility that a strategy of ambiguity engaged in by several parties with a vested interest in seeing the deal go through sought to steer, and seemingly successfully did, skeptical councilors away from a true and full understanding of the deal’s implications.
By now, details of the water deal are familiar: the Port would issue bonds to pay for a water facility for distribution and treatment that Bossier City would run, which would commit itself to a long-term liability equal to the total cost of the bond issue for the right to run it and keep all revenues past costs once that amount had been reached. While the deal would last 40 years, the obligation to rebate (legally necessary because of city ordinances that don’t let the city treat customers in the same water/sewerage class differentially in rates charged) would begin only if and when the city drew a single drop of water from the plant, which could be years into it.
The financial information attached to it made its acceptance on the city’s part at best a risky gamble. The Port’s executive director Eric England quoted figures that suggested the entire cost of the deal (two separate bond issues, one of 20 and the other of 30 years’ duration) would come in around $62 million. Further, given the city’s recent history of an 11 percent margin on utility sales and those revenues generated, to reach the point where enough could be made to keep all revenues would require that the Port’s tenants boost sales by 92 percent or, given typical city daily production, 11 million gallons of water a day from day one of the deal’s kicking off (and would be higher the longer it takes for the deal to begin) – a dubious scenario (alternatively, the new business could be as little as 5.5 MGD, the level at which the city could meets its obligation but not keep any revenues, as the deal states it otherwise keeps half beyond costs up to the amount of bond payments compiled every quarter while rebating the other half, but past that coupon it keeps all).
In other words, unless the city sold to the Port a volume of water so high for so long as to be very unlikely to occur, it would have to hit up utility reserve funds, if not ratepayers, to fulfill its obligation. Yet as has become evident since the Council backed deal, with the full support of the Chandler Administration, at least one councilor, and quite likely others, didn’t see it that way. The clearest articulation of that has come from the only councilor in support who has appeared willing to address and has spoken in detail about the deal and his reasons for support, Republican Chris Smith.
In essence, Smith has said he doesn’t see the deal as a cumulative payoff to the Port. In his conceptualization of it, once the deal starts the city gathers revenues and issues rebates, but once the Port’s bonds are extinguished, the city can leave the deal at any time without full reimbursement. Thus, the perception of risk to ratepayers would diminish substantially.
The problem with this view – let’s call it the noncumulative – is it runs very much counter not only to the actual wording of the cooperative endeavor agreement, but also to the public rhetoric of England’s. And, as it turns out, was a view that the Chandler Administration didn’t discourage councilors from adopting, possibly for a reason revealed at the last City Council meeting, the one after deal approval.
Understanding this requires review of the CEA sections operative to this task. They are worded as follows (emphases added):
SECTION 1.04: Term. The provisions of this Agreement shall remain binding upon the respective parties hereto and their successors in office and shall be in effect for a period of Forty (40) years commencing on the ___ day of ____ , 2023, and ending on the __ day of _____ , 2063.
SECTION 3.02: Receipt of Sewerage. Within the limits and subject to the provisions of Article Ill, Sewer Service of the Code of Ordinances of the City of Bossier City and this Agreement, Bossier City shall accept for treatment such wastewater as may be generated by the Commission and its users. Bossier City will treat all sewerage collected through the sewerage improvements financed with the proceed of the Bonds discussed in Section 1.02 above until such time as the Bonds described in Section 1.02 have been fully repaid, except as otherwise provided in this Agreement.
SECTION 3.05: Invoicing…. Bossier City shall remit to the Commission no later than the fifteenth (15th) day after the closing of each quarter an amount equal to the lessor of: an amount equal to fifty percent (50%) of all collections of revenue by or through the delivery of water and sewer services to the Commission and its users, less documented treatment expenses of Bossier City; and (ii) an amount equal to the pro rata amount of the next ensuing scheduled payment of principal and/or interest (if any interest due) on the Bonds described in Section 1.02 above. In no event shall Bossier City be responsible for remitting such payments described hereinabove, until such a time as water is being delivered and consumed by the Commission and its users.
SECTION 3.05.1: Prepayment. In no event shall the total payments by Bossier City to the Commission exceed the principal and interest payments made or to be made by the Commission on the Bonds described in Section 1.02, unless it is agreed by and between Bossier City and the Commission that early payment or payments should be made on the Bonds. Notwithstanding the foregoing, the total payments by Bossier City to the Commission shall not be less than the principal and interest payments made or to be made by the Commission on the Bonds described in Section 1.02.
SECTION 3.06: Termination of Service. Bossier City may discontinue water service under this Agreement to the Commission or any of its users for failure to pay monthly bills rendered by Bossier City in accordance with Bossier City Ordinances.
Here, four words (those in bold) in 3.05.01 make all the difference. The second sentence of 3.05.01 makes clear that the cumulative view – that once the deal starts the city owes to the Port the entire estimated $62 million, one way or the other by, it would appear, April, 2063 – is the one in effect. And this reflects as well England’s rhetoric, who through appearances to the Council – its regular meetings and the first workshop of two – several times proclaimed publicly that the Port would have to be “made whole” in any deal.
Yet by the second workshop, England dropped that phrasing, perhaps because the cumulative liability to the city was pointed out in this space and elsewhere, and who instead began saying that questions about this part of the CEA would have to be referred to the Port’s counsel – who, conveniently enough, never made a public appearance to have to take these kinds of questions. Still, not once in public did England ever waver from the assertion that any deal would have to have the Port “made whole” – unmistakably meaning whatever the Port spent on bonds the city would have to cover and that this was the view of the Port on the CEA.
In an appearance on a Bossier Watch narrowcast, Smith tried to discount that ascribed meaning as being reflected in that section, saying it applied only to the possibility of prepayment. This is mistaken in triplicate, beginning with the three words “notwithstanding the foregoing” that negates the interpretation that the rest of the sentence applies only to 3.05.01 while in fact applying to all of Section 3 addressing payments.
It’s also mistaken in understanding why 3.05.01 is there. It means that the Port can’t force the city to pay more than principal plus interest due in a period unless the city volunteers. And this leads to the fourth important word, which entirely invalidates the noncumulative thesis: “prepayment.”
“Prepayment” as a concept can’t exist unless a total payment amount already is set in place. If the noncumulative view held, or that the city paid as it went without any further liability, a prepayment clause would be irrelevant, for there would be no final amount on which to calculate what constitutes prepayment, or the excess over the scheduled payment. The very fact that the CEA has such a clause – much like, for example, a mortgage document may have such a clause allowing a borrower to prepay in order to save on interest expenses down the road on the set principal amount – presupposes a fixed liability the payer can’t avoid, validating the cumulative view.
The question now becomes how, and most importantly why, Smith and perhaps others were led astray from understanding this. Here, England contributed by alleging that the city could “walk away” from the deal after extinguishment.
However, in only one place in the CEA is deal termination discussed, Section 3.06, where if the Port tenants stop paying, the city stops acting as their utility (even here, it’s ambiguous whether the city has pay off the full $62 million in this instance). Nowhere else does the issue of early termination arise.
What England appeared to be referring to as “walk away” is Section 3.02, which states after extinguishment the city can quit treating sewage, and may have led to Smith’s and perhaps others’ misunderstanding that the deal was noncumulative. But that section doesn’t address the overall liability in any way, with it just saying the obligation to treat ends, not the obligation to pay. The second sentence of 3.05.01 – referred to in 3.02 as “except as otherwise provided in this Agreement” – confirms that.
That mistaken inference was reiterated by City Attorney Charles Jacobs, who (after England began refusing to answer questions about financial obligations) parroted the notion that extinguishment meant deal off. Still, nothing in the document allows the city unilaterally to terminate the agreement – which includes paying to the Port an amount of money equivalent to the “principal and interest payments made or to be made by the Commission on the Bonds” – except by Port tenant non-payment.
But why would Jacobs do that or, in a larger sense, not be more diligent in making clearer the actual intent of the CEA insofar as the city’s obligations went? It would have been so easy to ask that, for example, the second sentence of 3.05.01 be removed, or that additional language go in that would specify clearly that the city could terminate the deal after extinguishment without owing anything else – and was something that councilors could have directed be done had any realized what was going on and had been of a mind to do that. Yet Jacobs raised no alarms and made no suggestions that would pivot the document from the cumulative to noncumulative view.
The motives of some who backed the deal were quite clear. The ordinance’s sponsor, Republican Councilor David Montgomery, since 2008 has made over $600,000 doing business with the Port, on whose governing Commission sits some of his political allies. The city’s contractor for utilities Manchac Consulting worked both sides of the street, as months prior to deal approval it had been contracted by the Port to draw up plans for the facility and its ancillaries, and can be expected to play a major role and rake in millions of dollars in commissions in the coming buildout.
The Manchac employee seconded as city engineer, Ben Rauschenbach, throughout the process spoke sympathetically of the deal. As it turns out, that may have been not only because of the prospect that approval would bring Manchac future business, but also because Rauschenbach and Manchac, whether with the initial complicity of Chandler and other administration officials, apparently committed the city to the deal months before Council approval in order to secure a grant from the state.
At the Apr. 18 meeting, in conjunction with an ordinance to appropriate funds, Rauschenbach gave details pertaining to the city having won a long-desired state grant to work on utilities infrastructure in the city’s south. It basically means the city can perform the work at one-third cost, ponying up $2.5 million to receive $5 million.
It’s not the first time Rauschenbach talked about the project and grant, having brought it up several times over the preceding few months. In the first round the city applied for it but, he said, according to the rubric that scored requests had fallen a few points short. He added that what he thought this time made the difference, even as he noted the project originated for different reasons, was the port deal which he declared “pushed it across the goal line” – “the ability to supply water to the Port was important to getting the five million.”
The Water Sector Program grant of which he spoke comes from a $300 million pot from the American Rescue Plan, the large debt-fueled package supposedly responding to the Wuhan coronavirus pandemic. At its monthly meetings, the Water Sector Commission comprised of state legislators makes a decision, which it then passes on to the Legislature’s Joint Legislative Committee on the Budget for final approval (memberships overlap).
His comments seemed to suggest recent approval, because the Council only had given the green light to the water deal two weeks earlier. But, in fact, the grant had been submitted back on Aug. 26, 2022, approved by the Commission on Dec. 12, and days later by the JLCB. Indeed, the project scored sixth-highest out of dozens approved. This event even was acknowledged in Ordinance 180 of 2022 passed by the Council on Dec. 20 in that “Manchac Consulting Group has assisted the City in the successful recommendation of the water sector programs $5,000,000 grant award.”
How could a deal only approved in Apr., 2023 be part of a grant application approved in Dec., 2022? Only if the city prematurely had inserted the deal as part of that, with the Port’s blessing but as yet without the Council’s. Keep in mind that at its Oct. 17 meeting the Port had approved its Resolution 19 of 2022 that authorized pursuit of the bonds to build the facility – even mentioning that the money would go to “purchasing the necessary right-of way for constructing and installing a water main, valve, hydrants, and other appurtenances from the southern edge of Bossier City Water System to the Port’s campus which will be used to service residential customers along the route, in addition to future industrial tenants of the Port” – six months before city approval ever came.
In other words, the city had to approve the deal in order to make good its promise to the state that the project the state had funded would include the deal. And if that meant the Chandler Administration joining with Manchac and the Port to downplay that the city was making a hard $62 million commitment in order to cultivate the impression that this wasn’t so as a strategy to convince skeptical councilors, so be it.
So, who was in on it? Obviously Rauschenbach and Manchac, whose behind-the-scenes maneuvering on this should become a serious talking point when the firm’s contract expires next year. That means at some point Chandler and the rest of his administration had to have known and given assent. And as obviously Montgomery, who receives invitations to Port Commission meetings and when the measure first came up, perhaps unaware of what he was letting slip, to the Council delivered an impassioned plea not to delay a matter that “we’ve been working on for quite some years.”
Clearly not were Montgomery’s fellow graybeards no party Jeff Darby and Democrat Bubba Williams, who voted against it. Smith’s dogged pursuit of workshops to explore the topic suggests he wasn’t, nor another councilor who like Smith has a short but clear history of fiscal probity, Republican Brian Hammons, who seemingly unaware that the grant had gone through despite his voting on #180 actually asked Rauschenbach at the last meeting whether the Port deal had contributed to the grant win.
In his Bossier Watch interview, Smith voiced optimism that the decision had been made in an open and deliberative fashion, contrary to the reputation the city has had for its elected officials making backroom deals prior to the election that brought Smith onto the Council. On this deal, that desire seems entirely misplaced. That Smith and perhaps others apparently unwittingly supported a fiscally-suspect done deal isn’t so much reflective of a lyric from the rock band The Who, “Meet the new boss/Same as the old boss,” but an inability to achieve what the line previous to that counsels: “We don’t get fooled again.”