As Alexandria Mayor Jeff Hall, a former Cleco executive, floats the possibility of selling the city’s 126-year-old nonprofit municipal utility, it’s worth remembering that this wouldn’t be the first time Alexandria considered privatization.
Two years after his ill-fated attempt to turn a public swimming pool into a catfish pond, Alexandria Mayor John K. “Tilly” Snyder was finally, mercifully out of City Hall, leaving in his wake a spectacular mess for his successor, a dapper, charismatic Ivy Leaguer and former two-term state Senator named Ned Randolph. The City’s finances were in shambles, and its municipal utility system, which had long been its most reliable source of revenue, somehow couldn’t even figure out how many customers it had.
Across the Red River at the headquarters of the Central Louisiana Electric Company (or the acronym CLECO, as it was known in the years before the company began demanding that the word Cleco was, in fact, a proper noun), executives realized they’d need to act quickly.
A year before, the company had made two separate offers to buy Alexandria’s nonprofit utility system, claiming their effort had been motivated by a sense of civic duty and promising to rescue the city from financial disaster and reduce utility bills for its residents by an average of more than $100 a year.
But Tilly Snyder, while publicly expressing support for the idea, hadn’t taken action after CLECO’s first entreaty, and the majority of the City Council didn’t share his enthusiasm. By the time the company came back with a bigger number, the City Council and the nine candidates who were running to replace Snyder had agreed it’d be best to leave the decision up to the next mayor.
Randolph, who had lost his seat in the state Senate in 1983 due, in part, to Tilly Snyder’s meddling, found his redemption, bolting past the other eight candidates and winning outright in the Sept. 27th primary. He was sworn into office in Dec. 1st, 1986.
“Our pride is back,” he proclaimed, and he wasn’t wrong. Alexandria had been humiliated by the increasingly erratic Snyder, who had been involuntarily committed to a mental health facility earlier that year and then spent nearly two months locked in a legal battle in order to regain control of his office.
But Randolph’s honeymoon wouldn’t last long.
On Christmas Eve, the Town Talk reported on what then-Acting Utility Director Darrell Williamson had revealed the day before: It was impossible to know how much Alexandria was losing- or making- from its utility services because there were “no accurate numbers on the number of electric, gas, and water meters in use.” The accounting was nearly incomprehensible.
“There are no records anywhere,” Williamson said. “Nobody knows (which meters) are there.”
Perhaps this shouldn’t have been much of a surprise. That October, the Rapides Parish District Attorney’s Office began investigating the city’s utility after allegations of fraud and political corruption had surfaced, and there were other reports that a city staffer had mistakenly written off $900,000 in accounts receivable. Ultimately, the investigation didn’t turn up much evidence of deliberate law-breaking, but it, along with a separate audit, did reveal staggering incompetence. Apparently, no one seemed to understand its newly-computerized billing system. As a consequence, it appeared as if Alexandria was bleeding money.
CLECO, which had lusted over Alexandria’s system for decades, smartly understood they’d need to act in a hurry, recognizing that the city’s financial issues were caused by the negligent leadership of the previous administration, not because the utility business itself was inherently unworkable for a municipality.
Knowing their second and most recent offer of $86 million over 11 next years, including $15.8 million upfront, had been rejected by the City Council and criticized for being woefully insufficient, particularly considering the company was only interested in the electric utility and didn’t want anything to do with operating its water and wastewater services, CLECO decided to try again.
During Randolph’s very first month in office, CLECO came back with a third offer: $4.5 million per year for 15 years (or $67.5 million), a 4% franchise fee, and the repayment of all of its bond debts. But the new mayor hesitated.
It’s hard to blame CLECO for pursuing a deal. The previous mayor, despite his experience in government, didn’t have any desire to run a utility, which resulted in a series of missteps and unfavorable deals, and the majority of the City Council and the public had no concept of how valuable the system was or could be. CLECO, on the other hand, understood the business better than anyone in Central Louisiana, and at the time, they were running a smooth and ever-expanding operation. Moreover, because of the poor decisions made by Snyder, the City was looking at the distinct possibility of needing to raise rates, whereas CLECO could commit to keeping their rates the same for the next three years.
Still, with Randolph balking at their offer, they quickly realized that they were dealing with a much more sophisticated leader than the last guy. Snyder, by the way, had converted the pool into a catfish pond because he legitimately believed the City could make a fortune by getting into the catfish farming business. If they were serious about buying Alexandria’s utility system, then they would need to show their cards before Randolph knew exactly what he was holding.
The head honchos at CLECO spent the entire month of January and nearly all of February crunching numbers and preparing for a public relations blitz, and when they came back to Randolph on Feb. 27th, their offer was dramatically more generous: $158 million ($355 million in today’s dollars) in total, with $8 million upfront, $6 million per year for the first five years, and another $6 million annually for the next twenty years plus a franchise fee of 4% (albeit without covering the City’s bills). They pledged to ensure everyone employed by the City would keep their jobs for at least five years and that their retirement accounts wouldn’t be touched. They’d pay off all of the City’s bond debts, and crucially, they’d take the water and wastewater operations as well, giving the City a 2% franchise fee for those services, which they planned on handing over to a third-party manager.
In hindsight, the deal CLECO was now proposing had appeared to be good, at least initially, because their other offers were significantly lower and because the City still hadn’t sorted out its finances.
Only five weeks later, it’d be off the table. But in the interim, both the City and CLECO were scrambling. By law, selling the utility required approval of the voters through a referendum, and so, nearly as soon as the bid landed on Randolph’s desk, he rushed to the City Council, requesting approval to place the referendum on the May ballot.
For its part, CLECO put its PR operation into high gear, commissioning a push poll that showed 60% approval for the deal, hosting multiple public meetings, and churning out a series of ads and press releases touting the benefits.
However, not everyone was buying their sales pitch. When the City Council met to discuss the proposed referendum, they heard from 38 residents. 15 people spoke in opposition, but of the remaining 23 who were there in support, most were CLECO employees. The Council narrowly approved the measure, but at the same time, they also approved hiring their own third-party experts to review the deal.
Not surprisingly, the union that represented City employees sued to prevent placing the referendum up for a vote. Councilman Bob Lawrence emerged as one of the leading critics of CLECO’s proposal, helping to finance a campaign to counter the company’s claims and talking points.
The Louisiana Electric Power Association (LEPA) also sought legal intervention. Then-Sec. of State Jim Brown piled on as well.
When the experts came back with their assessment, they didn’t pack any punches: CLECO’s offer didn’t even come close to what the City would be able to make simply by hanging onto its utility system. By then, the numbers were finally being sorted out, and it became evident that Alexandria’s utilities were in far better shape than had been previously believed.
In early April, a few days before the Louisiana Bond Commission effectively prevented the City from placing the referendum on the ballot, CLECO rescinded its offer.
The City’s utility system, the Town Talk reported at the time, was simply “too lucrative” for it to be sold to anyone.
It is worth noting that the late Scott Brame, a beloved Alexandria civic leader and long-time Cleco Vice President, who had coordinated with the Mayor’s Office, was enthusiastic and completely supportive of the City’s efforts. When it became clear that the City’s numbers were off- and as a result, so were Cleco’s, Scott Brame appeared with Mayor Randolph at a joint press conference, lauding Randolph for his leadership.
Today, the City’s finances are in vastly better shape than they had been when Randolph took office in December of 1986, and regardless of the vague platitudes offered by Mayor Jeff Hall about “long-term trends” or the spurious claims that Alexandria’s municipal utility system is somehow headed in the wrong direction, the truth is that if there is a crisis, it’s the one being manufactured by the current occupants of City Hall. In their haste to justify a superfluous contract with a PR consultant and a Republican lobbyist, they are undermining the goodwill of the most important asset in the City’s portfolio.
On average, Alexandrians pay less for their combined utilities than all but one other community in the state, according to an independent analysis conducted by a local engineering firm, and that community, incidentally, is served by a nonprofit electric cooperative. Unlike Mayor Randolph, Jeff Hall inherited an award-winning, vastly more modernized system and a budget surplus, which is why many are rightfully perplexed and alarmed by plans that anticipates potential job losses and privatization.
If privatization was a a flawed idea in 1987, when the City was in the most dire financial situation in its history, then it’s an even more absurd idea today.
Read Part One: