GONZALES An Ernst and Young financial analyst told an Ascension panel that a 30-year deal to finance, build and run a $215 million regional sewer system carried "slightly asymmetrical" benefits for the ratepayers and private partners behind it, ensuring cost overruns are born by ratepayers but offering no clear way also to share any savings with those future customers.

But the panel, the Parish Council Utilities Committee, which has been trying to find a way to build a regional sewer system under state and federal regulatory pressure to clean up discharge into area waterways, forwarded the plan for a possible final vote before the full council next Thursday, charging the private backers to answer the main critiques raised by the analyst.

If approved next week by an outgoing council with at least six departing members, the sewer deal could lock the parish into a relationship with Ascension Sewer for a generation. The deal carries costly termination fees in the tens of millions of dollars.

Success! An email has been sent with a link to confirm list signup.

Error! There was an error processing your request.

Ascension Sewer LLC, whose partners include Bernhard Capital Management and Ascension Wastewater Treatment, is seeking a long-term concession with parish government 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.

Ascension Sewer is proposing to sink in $78 million in cash upfront plus seek out commercial and government debt to finance the initial construction of a system expected to link up 19,500 parish government and Ascension Wastewater customers to the new system in the first phase.

Under the deal, the parish also is expected to put nearly $16 million in taxpayer cash and $60 million of the financing relies on a state and federal low-interest loan that parish was awarded several years go.

The first batch of customers as many as 35,000 could eventually be connected currently have community sewage treatment discharge that ends up in the impaired Bayou Manchac or other smaller waterways. Parish officials say the system could eventually remove 2.3 million gallons per day of discharge from Manchac.

Ascension Sewer is proposing a starting rate of $57.90 per month with annual 4% increases for the first 10 years of the deal, ending at $82.41.

At the same time, the parish has put forward its own analysis of status quo growth in the parish government customer base, suggesting 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 that would require taxpayer support.

The Ernst and Young analyst suggested the deficit might actually be less than half as much, however, though that plan held many cost uncertainties.

Parish government officials also suggested that if the parish didn't reach a deal with AWT, Ascenison largest privcate sewer provider, the company would find a way to make a private deal to do the same thing on its own, leaving the parish without control over a large customer base.

The committee vote late Tuesday night was 4-1. Council members Teri Casso, Oliver Joseph, Aaron Lawler, Daniel "Doc" Satterlee supported the proposal, while Councilman Bill Dawson was opposed. Councilman Benny Johnson, another member of the panel, was absent.

Before the vote, Stephen Auton-Smith, the Ernst and Young analyst, said uncertainty in the construction cost of the proposed system, which he estimated was 5% to 10% designed, held the biggest risk for cost overruns of up to 20%.

He said that just a 10% increase in the construction cost could boost rates by up to $10 per month over the 4% percent annual increases Ascension Sewer is currently proposing.

But, Auton-Smith said the deal has been structured with concern for those costs rising. He explained that the deal is structured to ensure those and other cost overruns would be transferred to ratepayers, which he said isn't unreasonable given the project's state of development.

Yet he noted that aspects of the deal held the potential for Ascension Sewer LLC to earn savings later and boost its 8% rate of return without a clear method pass on any of those savings to ratepayers.

In addition, the deal, as currently written, doesn't outline a clear way for Ascension Sewer to tell parish government when cost-savings happen.

"Right now, as generally drafted, there's a general trend towards cost recovery in the event things go wrong and an asymmetry if things go well," Auton-Smith said.

Auton-Smith's report had also noted that Ascension Sewer's plans lack the details to determine how the initial $57.90 per month rate structure was derived and how changing costs or saving might affect rates.

The council committee called on Ascension Sewer provide more details about its construction plans, work with Ernst and Young or another third party to develop a rate-generating model, better outline how rates could be adjusted higher or lower, and make changes to the deal contract to require annual or quarterly reports to the parish. All of that must be brought that back to the full council by Nov. 21.

Most of the requirements were proposed by Dawson but, under an amendment from Satterlee, the panel chose not to pursue another proposed by him, that Ascension Sewer bring its design to the 30% level.

Instead the panel called on Ascension Sewer to review its agreement with the parish to protect against cost overruns in design and construction, including ensuring cost savings were invested back into the system.

Jeff Jenkins, a partner with Bernhard Capital, told the panel before its vote that, based on his experience with public systems, he felt the construction estimates were solid and wasn't in favor of addition design work. He promised Bernhard Capital would work with the parish and Ernst and Young on the other items.

"We feel pretty firm we're already there. We're willing to put our money where our mouth is," Jenkins said.

Read the rest here:

Long-term sewer deal in Ascension inches toward final vote next week - The Advocate