“They’d (Cleco) been trying to run me off. Instead, they ran me in.”
Alexandria Mayor Jeffrey W. Hall, Jan. 7, 2020.
THE ELECTRIC SLIDE
Part One of an ongoing series.
This is the first installment of the Bayou Brief’s newest, ongoing series, “An Exercise in fUtility,” about Alexandria Mayor Jeff Hall’s nascent, behind-the-scenes effort to push through the partial or complete privatization of the city’s most important asset: its 126-year-old nonprofit, $500 million municipal utility system, also known as AUS.
On Sept. 8th, 1894, Alexandria voters approved a plan providing for the municipal ownership of utilities, and by April of 1895, a waterway system had been completed and its downtown streets were awash with city-powered electric lights. Almost immediately, Alexandria’s prescient and progressively-minded investment began paying huge dividends. Six years later, at the turn of the century, its population had doubled, and during the following decade, it doubled again.
The Times-Picayune reported on Alexandria’s decision to build and operate its own power plant in June of 1894, only three months before the municipal utility was formally created. After three years of working with unreliable and expensive swindlers, the City Council wisely realized they could cut out the middle man and build the infrastructure themselves.
In 1909, Alexandria Mayor J.P. Turregano traveled around the state at the invitation of other cities to deliver a presentation on the benefits of a municipally-owned system. 100 years later, Mayor Jacques Roy took home the Louisiana Municipal Association’s top prize for policy innovation in recognition of the city’s forward-thinking approach in expanding and renovating its power plant.
Today, AUS provides around $10.5 million a year in-lieu-of-tax contributions to the city, funding its public transit operation, its award-winning and AZA-accredited zoo, its public golf course (which has been hailed as the best public course in the state by Golf Digest), and a number of capital projects and infrastructure improvements. A privatized system, even in the best case scenario, could only provide a fraction of the current revenue.
During the past two years, utility companies and private start-ups have ramped up efforts in Louisiana to acquire nonprofit municipal systems and nonprofit electric cooperatives, either through making a lucrative, cash-only purchase offer or by proposing long-term management agreements or some combination of the two.
During its meeting last Tuesday, which lasted a mere eight minutes and for reasons not yet made clear was not broadcast to the public, the Alexandria City Council voted to move discussion over a proposed, no-bid contract with John Kyte of Ruston, a veteran PR and crisis communications consultant, to its Finance Committee. Their next meeting is scheduled for Jan. 21st. According to a draft agreement obtained by the Bayou Brief, Mayor Hall hopes to have Kyte assist with an evaluation of the utility system and to then lead a “public information campaign” that would educate citizens on their utilities “options.”
This series is based on a comprehensive review of court filings, public records, financial documents, expert studies, and news reports, spanning across the course of more than 140 years, as well as interviews and discussions with more than a dozen individuals, including those with personal knowledge of the city’s municipal utility system and its contentious history with Cleco. In addition, I exchanged numerous messages with the presumptive consultant, John Kyte, via email and text, though, to be sure, he has only an ancillary role in a political saga that has stretched out for nearly 30 years.
While the facts contained in these reports have been exhaustively researched, I want to make it abundantly clear from the very beginning: I have an opinion on the subject, which is informed by my experience working as the special assistant to the previous mayor, during which time I had a direct role in crafting, negotiating, and managing contracts with planning consultants. Although I left city government to enroll in law school in August of 2011, I continued to serve as an informal policy advisor until 2018 and had briefly returned in a part-time capacity in 2016.
In July of 2018, the Current’s Leslie Turk reported about secret talks between Jim Bernhard’s NextGEN and former Lafayette Mayor-President Joel Robideaux regarding the potential privatization of LUS, its nonprofit municipal utility system. Three months before, unbeknownst to the public or members of the City-Parish Council, Robideaux had signed an agreement with the Bernhard-backed start-up, which allowed “the company to study LUS’s books and operations for a possible $526 million deal.” Council members only became aware of the discussions because of the Current’s reporting. In November, they passed a resolution that effectively killed the deal.
Although there is now a substantial body of scholarship that suggests privatization of municipal utility systems, particularly electric power systems, rarely, if ever, results in better outcomes and disproportionately harms communities of color and those living in poverty, the temptation of receiving a large infusion of cash, especially in cities where revenues have dropped precipitously due to diminishing demand, can be hard to resist.
Last July, the City of Opelousas voted to renew its lease with Cleco, but not without opposition and criticism from citizens. “Several people who spoke during the meeting said CLECO’s utility rates, which they claimed have risen to $400 monthly in some cases, are a burden on the city’s poor and retirees who are living on a fixed income,” the Daily World reported.
“They (Cleco) are getting over on you,” Wilbert Levier, an Opelousas resident and Cleco customer, told the City Council. “I really don’t care how much they have helped the city. You need to find someone else.” Levier wasn’t buying it, and he was hardly alone.
Last October, Jacksonville, Florida, which owns and operates the eighth largest public utility in the nation, announced the nine finalists selected to bid on purchasing the system. One of those nine, Macquarie Infrastructure and Real Assets, is the parent company of Cleco.
And just yesterday, at a press briefing, Hall was asked directly whether selling the city’s nonprofit system to Cleco was an option.
“No, that’s not an option yet,” he said. “We have not discussed the options yet. We are going through the process of determining, evaluating our situation first, and once we evaluate that- because of the changing dynamics of the utilities systems, the markets themselves- then we’ll identify what are some of the options at the proper time.”
I asked Kyte how exactly he had been recruited to Alexandria.
“I became involved with the City of Alexandria when a mutual acquaintance of Mayor Hall and mine, who was aware of the City utility issue, suggested to the Mayor that if the City needed someone with a utility background to provide communications counsel and support, he might consider contacting me,” he wrote in an email.
“The Mayor did contact me, and we discussed the electric utility situation in Alexandria. I outlined what I thought the communications needs might be around the City evaluating the utility system and options, if any, for a better approach and the communications challenges in explaining those options, and any potential action on those options, to the Alexandria community,” Kyte stated.
When I pushed him on the name of the individual who connected the two men, he made it clear the acquaintance had nothing to do with the work and reiterated his decision to keep the person’s name confidential.
”Was it Jim Berhard or an associate of Jim Bernhard?” I asked.
“No, and no,” he replied curtly.
I told him that Bernhard had previously made some preliminary inquiries about structuring a deal in Alexandria around the same time he had been pitching Lafayette, which earned a brief mention in the Current’s coverage. Did he know anything about that?
WHEN THE PAST IS PROLOGUE
In early 1973, shortly after he earned a Bachelor’s in Accounting from Grambling State University, the storied HBCU in North Louisiana, 22-year-old Jeffrey W. Hall returned home to Alexandria and quickly landed himself a job at City Hall, where he could put his degree to use.
His parents, Willie and Florice, were both widely-admired public school teachers who had instilled in their children and their students a belief that an education opens doors. (When Willie died from a tragic fall while attempting to film a Peabody High School football game in 1983, the local school board voted to rename an elementary school in his honor; today, the school is known as W.O. Hall Sixth Grade Academy).
But had it been 1963 and not 1973, someone like Hall, despite his education and a brief stint working for the Rapides Parish Police Jury, wouldn’t have ever been considered for an administrative job in city government. John K. “Tilly” Snyder had just been swept into office, however, and the new mayor had agreed to open up more opportunities for minorities.
For the past half-century, Alexandria has never had a population of more than 51,000 people, but because it’s situated at the literal crossroads and in the geographic center of the state, it serves a region nearly eight times its size, which means the decisions made by its mayor can occasionally reverberate far beyond the city limits.
That was the case when Jeff Hall, in 1973, became one of the very first African Americans with a desk at City Hall, working as an accounting clerk in the city’s Internal Audit Department. Within a year, his supervisor, Velda Lee, had recommended him for a $1,200 pay raise and a promotion, something Snyder, an erratic and mercurial man who was later involuntarily committed to a mental health facility, nearly prevented when it came up for consideration in front of the commission that had governed the city at the time.
By 1977, with a new administration taking the reins, Hall was the only employee in his department who stayed put, though eventually he’d move over to the city’s legal services division.
In 1981, Hall left the public sector for a new job with Central Louisiana Electric Company, better known as Cleco (a proper noun, not an acronym), the utility giant that monopolizes much of rural north and central Louisiana.
By then, compared to his colleagues in city government, he was already a veteran, and he was just 29.
Nearly four decades later, Jeff Hall, now a millionaire and a two-term state representative, would return to City Hall, after winning election as Mayor, the first African American to hold the office in Alexandria’s 215-year history.
A genial, bookish man who spent much of his career at Cleco living in South Louisiana, with a stint in Amarillo, Texas, and had shuffled around various management positions before being named the company’s first Chief Diversity Officer. Hall had largely remained out of the local spotlight until 1999, when the state legislature approved the creation of a new political subdivision, the Alexandria City Economic Development District (ACEDD).
ACEDD had been established as a way for proponents of inner-city redevelopment projects to attract independent funding from the federal government and national foundations.
Jeff Hall would become its chairman and biggest champion. (ACEDD’s enabling legislation was sponsored and introduced by state Rep. Israel “Bo” Curtis, a longtime political powerhouse who, notably, had actually opposed renaming a school after Jeff Hall’s late father Willie, when Curtis served on the local school board).
ACEDD, unfortunately, never achieved any tangible successes, aside from an earmark from then-Sen. David Vitter that provided around $800,000 to develop preliminary plans for a new recreation and entertaining destination near the Red River. Hall, as the organization’s chair, had been pushing for a city marina on the Red River, and as chair, he was able to enter into a no-bid contract with a local engineering firm to begin studying and designing sketch mock-ups of the proposed marina. Hall’s push for the project seemed to be largely based on his own assumptions, which were reinforced by presentations by the firm being paid to design the facility.
After Hurricane Katrina, the Army Corps of Engineers implemented more onerous requirements for construction projects near levee systems, making Hall’s proposal much more unlikely, and when Gov. Bobby Jindal signed a new ethics law that required members of state boards and commissions to submit personal financial disclosure documents, Hall resigned rather than reveal any details about his finances.
With its chairman gone and other members rolling off, ACEDD went dormant, with $400,000 in federal funding left unspent. Though Hall would intermittently express interest in restarting the organization, he’d hoped to circumvent the mayor, who had no desire to resuscitate the organization, which could only establish a dedicated source of revenue by raising taxes. For reasons that have yet to be explained, Hall no longer had concerns about complying with the state’s personal financial disclosure requirement, though he never officially rejoined the defunct organization.
Hall’s first campaign for office was in 2014, when he challenged incumbent Mayor Jacques Roy. But Roy remained popular and Hall had run a lackluster campaign. Roy won outright in the primary; Hall finished in second, earning 33.6% of the vote. He wouldn’t have to wait long before catching a break. In mid-December, state Rep. Herbert Dixon vacated his seat, and Hall quickly declared his candidacy. Two months later, he clobbered his two opponents, Alice “Red” Hammond, a perennial candidate, and Daniel Williams, the city’s Community Services Director, winning 84% of the vote.
Hall’s years as a state legislator in Baton Rouge were largely forgettable. He had been well-liked by his colleagues, though many assumed he wasn’t ever really in the job he wanted.
With the exception of a couple of failed attempts at restructuring ACEDD, he steered clear of controversy and stayed out of the news. He introduced a staggeringly small number of bills, and during his final session, perhaps realizing that his name wasn’t yet on a single piece of legislation, he brokered a deal with a colleague, amending a bill his colleague had written to replace the author’s name with Hall’s, according to two legislators familiar with the maneuvering.
As a mayoral candidate in 2018, Hall had the benefit of deep pockets and an open field when Roy, the three-term incumbent, decided not to seek another four years. The election was relatively sleepy, and Hall ran a quiet, middle-of-the road campaign. Meanwhile, his two opponents, Kay Michiels and Catherine Davidson, battled for what each had anticipated would be a runoff election against Hall.
In public appearances, Hall sidestepped questions about potentially privatizing Alexandria’s utility system, something that had been raised as an issue because of his three decade-long career at Cleco, the private energy behemoth headquartered in Pineville, Louisiana. This deserves emphasis, because well before he had ever taken office, there had always been an implicit understanding that Jeff Hall could try to privatize the municipal utility system if he was elected.
Internal polling showed that Hall’s connection to Cleco, which eventually settled a lawsuit by the City of Alexandria that alleged the company systematically defrauded ratepayers over the course of several years (which coincided with Hall’s tenure at the company), was his greatest vulnerability.
Had it become more of an issue, the public would have had even more reason to be concerned about his potential plans for the municipal utility.
By the time Hall had retired from the company, he’d risen to senior management, becoming its first-ever African American VP and its Chief Diversity Officer. His remarkable success at the company had made him wealthy. He drove luxury cars, wore expensive suits, and built a large home in what had then been Alexandria’s only gated community.
Until the utility giant had been accused of ripping off city residents, Hall’s association with Cleco had always been considered a positive.
But there was more about his record at Cleco than most voters were aware. More than a decade before he was elevated to senior leadership, Hall had played a pivotal role in brokering two different takeovers of community-owned nonprofit utility systems.
In 1993, Jeff Hall had been instrumental in facilitating a management agreement between Cleco and the City of Opelousas, which I mentioned earlier.
Four years later, he was directly involved with Cleco’s acquisition of the publicly-owned Teche Electric Cooperative, which the company still considers to be one of its most significant achievements.
This is not to assign him with some sort of malevolent intent. I mention these only because both deals shape how Jeff Hall, the mayor, understands the utility business. It also may help to explain why he wants to hire a crisis communications consultant to help him negotiate how to pitch the public on the “options” he hasn’t yet “evaluated.”
BEFORE YOU BUY IT, WE BREAK IT.
“We’re looking at the dollars. When we look at the trends from the last audit, the last several audits, the trend is not going in the direction that I think it ought to go,” Mayor Hall said yesterday in response to a question about why he was concerned over the municipal utility. He attempted to clarify what he had just said, but it only made his answer seem more convoluted.
He claimed the City was in a strong position, but that it would need to study “long-term” trends in the future. He also implied that plans for the City’s utility system were now outdated, asserting that it hadn’t considered anything beyond 2019.
There’s no other way around it. The City of Alexandria’s most recent contract with Cleco projects out to 2034, the year it expires, and when the city completed work on the renovations and expansion of its own D.G. Hunter Power Plant, it anticipated a 20-year life-cycle; that’d be 2036.
This is the crux of his justification for hiring Kyte, a PR consultant who, among other things, once worked on behalf of a nuclear power plant as well as three of the world’s largest chemical manufacturers but has most recently served as a spokesperson for the hospital group Willis-Knighton and for a lumber company in LaSalle Parish, to be his lead consultant on crafting a plan and public information campaign about the city’s municipal utility system. I intend no disrespect toward Kyte, who did manage to impress me with his communications savvy, but even by his own admission, he’s never actually done this kind of work for a municipal government before.
A project with a similar scope as the one outlined in Kyte’s draft agreement ordinarily would require the city assembling together a team of people through a competitive process.
It would also involve at least some consideration, upfront, over the possibility that paying a consultant with taxpayer dollars to spearhead a “public information campaign” about utilities “options” could be legally problematic, considering that state law requires any privatization deal be approved through a referendum on the ballot and the state Constitution prohibits the expenditure of public money on campaigns about ballot initiatives.
Hall has budgeted only $50,000 for the work he hopes to give Kyte, and notably, the draft agreement contains no specific language requiring that Kyte disclose any other clients involved in the energy industry.
Finally, as any cursory review of the recent audits of the City of Alexandria would reveal, the municipal utility system is in good financial shape. It’s not “trending” in the wrong direction. The confusion, whether it is deliberate or not, seems to be over the fact that last year it budgeted about $8.7 million more in pass-through costs than it should have. That’s primarily because the price of natural gas was lower than predicted.
And sure, that sounds like a big chunk of change, but only if you don’t understand how a municipal utility system operates. Instead of taking in $121.7 million, it took in $113 million. Correspondingly, it spent less money than it budgeted as well.
But only 5% of the revenue generated from fuel costs winds up in the city’s General Fund. There are a few nuances, but they’re largely inconsequential to the bottom line. In simple terms, the city utility buys energy for its customers, and because it’s a nonprofit, its margins are thin. Customers are charged only a fraction more than what the city pays for its energy supply, and because the city buys from the same pool of energy as private utilities like Cleco or Entergy, that means a city ratepayer almost inevitably will pay less for their electricity than a private customer, all other things being equal.
It’s a solid model.
Last year, when the city budgeted more for energy costs than it ended up purchasing and billing to its customers, it showed a loss of $8.7 million, though the net result was that it wound up with around $435,000 (5% of $8.7 million) less than anticipated (again, along with a corresponding decrease in expenditures).
It’s worth noting that, somewhat ironically, Mayor Hall’s decision to hire five new employees for his office, who now comprise the Internal Audit Division, a throwback to Hall’s first job under Tilly Snyder, will cost the city government $496,000 more every year, a 47% increase in spending for the Mayor’s Office.
I realize this is wonky and somewhat in the weeds, but it’s important because Mayor Hall’s recent alarmism about “trends not going in the (right) direction” seems to be nothing more than a pretense used to justify “evaluating” “options” for those interested in privatization.
The real existential threat to the municipal utility isn’t a reduction in energy costs, which is why they weren’t able to hit their projections last year. As outgoing Finance Director David Crutchfield outlined in a cover letter affixed to the current budget, it’s the possibility of increased energy costs, which would be more difficult for folks living on a fixed income.
As of the time of publication, you can still find a series of objectively true statements about Alexandria’s 126-year-old municipally-owned utility system buried in the archives of the city’s social media accounts.
“Unlike for-profit, investor-owned utilities, the AUS does not pay dividends to shareholders or corporate officers,” the City once explained on Facebook. “All of its earnings in excess of cost are reinvested in the local community.”
But if you wait too long, don’t be surprised if these online posts disappear. There’s a new social media policy in place and a crisis communications professional waiting in the rafters.
Clarification: In an earlier version, I listed the value of the city’s utility system as $300 million. According to three industry experts, the value is approximately $500 million.