Feeds:
Posts
Comments

Archive for the ‘Transparency’ Category

OGB sale proposal included in Executive Budget to be presented to joint legislative committee next Thursday

Posted in ALEC, American Legislative Exchange Council, Budget, House, Senate, Legislature, Legislators, OGB, Office of Group Benefits, Politicians, Transparency on February 3, 2012| 8 Comments »

Don’t say we didn’t warn you.

As recently as Jan. 31—less than a week ago—we told you that Gov. Bobby Jindal is following the playbook of the American Legislative Exchange Council (ALEC) almost to the letter.

That playbook includes a section entitled “Tools to Control Costs and Improve Government Efficiency.” Among the “tools” it recommended were:

• Adopt a state hiring freeze;

• Reform state pensions;

• Delay automatic pay increases (we wondered where legislators came up with the term “automatic” in freezing merit increases a couple of years back);

• Embrace the expanded use of privatization and competitive contracting.

Each of these has already been done or is in the process of being done.

Next Thursday, the administration will present the governor’s Executive Budget for Fiscal Year 2012-2013. Included in the budget will be the proposed sale of the Office of Group Benefits (OGB) for $189 million, to become effective Jan. 1, 2013.

The committee meeting is scheduled to be held at 9:30 a.m. in House Committee Room 5.

The $189 million apparently is the price tag derived by Morgan Keegan, the Memphis banking firm that stands to reap a $750,000 bonus over and above the $150,000 for assessing OGB’s value if it is successful in negotiating the OGB sale at the $189 million price.

Morgan Keegan was itself only recently sold after being fined $210 million nearly two years ago by the Securities and Exchange Commission for misrepresenting critical information to investors.

Whoever ultimately purchases OGB will take with them the $500 million surplus now carried on the OGB books which the new operators will use to pay claims.

LouisianaVoice has also learned that once the sale of OGB is successfully negotiated and the agency is taken over by private industry, premiums will rise by approximately 10 percent.

There are other proposed changes coming that we can tell you about next week.

We can tell you this much, though: It ain’t gonna be pretty.

Read Full Post »

Notable Quotables (in their own words)

Posted in Charters, Education, Governor's Office, Notable Quotables, Transparency, Vouchers on February 3, 2012| 2 Comments »

“We are going to create a system that pays teachers for doing a good job instead of for the length of time they have been breathing.”

—Gov. Bobby Jindal, unveiling his education reform package before the annual meeting of the Louisiana Association of Business and Industry on Jan. 17.

“It’s a Biblical principle: if you double a teacher’s pay scale, you’ll attract people who aren’t called to teach.”

–Alabama State Senator Shadrack McGill (R-Woodville), speaking at a prayer breakfast in Fort Payne, Alabama, earlier this week. At the same time, he defended a 62 percent legislative pay increase as a deterrent to lobbyist influence.

Read Full Post »

Notable Quotables (in their own words)

Posted in Ethics, Governor's Office, House, Senate, Legislature, Legislators, Notable Quotables, Transparency on February 2, 2012| Leave a Comment »

“We have significant concerns that premature disclosure of the report will prejudice the (solicitation for offers) and negotiations process. This is not a matter of secrecy, but a basic component of our ability to make decisions that are within our purview, to direct the integrity of a successful procurement.”

–Commissioner of Administration Paul Rainwater, in a letter to Senate President Joel Chaisson last June 8 in which he attempted to justify the admininstration’s refusal to provide a copy of the Chaffe & Associates report on the Office of Group Benefits to legislators. Likewise, Rainwater is now withholding the contents of the state’s contract with Morgan Keegan from the OGB Policy and Planning Board.

Read Full Post »

Jindal economic strategy: consultant shows up for $150,000, privatizes a viable state agency and collects $750,000 bonus

Posted in Budget, Ethics, Governor's Office, Health Care, OGB, Office of Group Benefits, Privatization, Transparency on February 2, 2012| 1 Comment »

Here’s a can’t-miss formula for success that Gov. Bobby Jindal is asking us to accept with no questions asked:

First, hire a consultant who was hit with a major fine for misleading clients—we’ll call him Shady—to find employment for a second consultant—we’ll call him Sneaky—who was also fined for misrepresentation.

Then a third party enters the picture to contract with Sneaky to broker the sale of a major asset even as Shady continues to negotiate for full time employment for Sneaky.

Set the contract at $150,000 just for Sneaky to show up to make a determination of the asset’s financial worth.

Then, if the asset sells, well, let’s give Sneaky a nice fat bonus of say, $750,000 for providing “unbiased advice” on the bidding process and contract negotiations.

We will repeat that last part: Sneaky is expected to give “unbiased advice” in its efforts to collect an additional $750,000.

Remember, too, that Sneaky has already been fined $210 million for misrepresenting critical information “exactly when investors needed it most.”

That is precisely the scenario that currently exists with the contract between Morgan Keegan brokerage and the Louisiana Division of Administration regarding the proposed sale of the Office of Group Benefits (OGB) and its $500 million surplus.

After the state’s attempt to engage Goldman Sachs at a cost of $6 million to market OGB to private investors—you may remember that Goldman Sachs helped write the request for proposals (RFP) for the OGB sale and then submitted the only proposal—fell through over demands by Goldman Sachs that it be indemnified from any potential litigation.

A new RFP was then issued and Morgan Keegan was the low bidder last July.

But Morgan Keegan had recently agreed to pay $210 million to settle allegations that it had fraudulently marketed mutual funds filled with subprime mortgages and artificially inflated the funds’ prices.

So Regions Financial Corp., Morgan Keegan’s parent company, decided to divest itself of the troublesome brokerage firm.

So, who did Regions retain to explore “strategic alternatives” for Morgan Keegan?

None other than Goldman Sachs which, less than an year earlier, was fined $587 million over claims that it had misled investors in collateralized debt obligations linked to subprime mortgages.

Morgan Keegan eventually sold, but at a price that was less than the value it had recorded on its financial books.

Now comes word that if Morgan Keegan, which is being paid $150,000 to determine the financial value of OGB, will rake in a bonus of up to $750,000 more if OGB is subsequently privatized.

Commissioner of Administration Paul Rainwater promised that Morgan Keegan, which contributed $1,000 to Jindal’s 2007 election campaign, will provide “unbiased advice” in its efforts to help market OGB.

In what is becoming an all-too-familiar refrain, OGB board Chairman James H. Lee attempted to obtain a copy of the Morgan Keegan contract from the administration in November but was told it was not finalized.

The contract, however, was signed by Morgan Keegan’s managing director on Oct. 31 and an OGB representative on Nov. 2.

Something’s a little rotten here. It’s a lot like efforts to obtain the infamous Chaffe & Associates report last year. Jindal hired Chaffe to make a quickie determination of OGB’s book value but then Rainwater refused to make copies of the report available to legislators and the media.

When a copy of the report was finally “leaked,” it had dates that were inconsistent with receipt dates provided LouisianaVoice by Rainwater and the contract was not date-stamped as are all documents received by the Division of Administration (DOA).

Lee said he has been trying since August to obtain a quorum of the OGB board of directors but at least one of the governor’s three appointed members is absent for each meeting. Normally, there are five members appointed by the governor, but two of the appointive positions are currently vacant.

“It is my opinion that they (the Jindal administration) have the full intention of selling off OGB as quietly as possible before anyone realizes what is going on,” Lee said. “Should this happen, the active and retired employees of the state will see reduced benefits and the taxpayers will see increased costs,” he added.

Former State Sen. Butch Gautreaux (D-Morgan City), a former member of the OGB board, said he is unclear as to why Jindal insists on privatizing a state agency that saves the state money. He opined that the governor may want to dismantle OGB and its $500 million surplus in order to more easily criticize President Barack Obama’s national health-care program.

“He needs to destroy it (OGB) for his personal ambitions,” Gautreaux said.

That should come as no surprise to anyone who has watched this governor.

His first agency to privatize was the Office of Risk Management (ORM). The state paid F.A. Richard & Associates (FARA) of Mandeville $68 million to take over ORM. In less than a year, the FARA contract was amended by $6.8 million. Two weeks later, the contract was transferred—without the prior written consent of the state, as required by the contract—to a second firm and months later it was transferred to a third firm, again without the legally required written consent.

ORM was the first of a succession of agencies that Jindal has either tried to privatized or announced intentions to do so. They include state prisons, the state’s Medicaid program, OGB, and education.

The one thing that Jindal has never once explained to the voters of Louisiana is this:

If things are so badly run in this state, if things are so screwed up, if state employees are so stupid and lazy and teachers so pitifully inept and impossible to fire “short of selling drugs in the workplace,” (Jindal’s words, by the way) how did we ever make it this far?

How is it that one day we woke up as a state and realized that only one man had been anointed with the answers to all our ills, just one man who could solve the problems of state retirement, prison costs, Medicaid administration, public education, higher education, employee health benefits, and state agency risk exposure?

How is it that one man is so incredibly blessed with such vision, such gifts of perception, insight, understanding and infinite wisdom? How indeed?

We will probably never know the source of all his wonderful attributes. After all, as the Shreveport Times recently observed, Jindal has spent four years “limiting or avoiding extended interviews about his programs with journalists outside Baton Rouge, not to mention fighting efforts to open his administration’s records to public view.”

Considering the fact that the Times has consistently carried the water for the Republican ideology, those critical words are especially surprising—and harsh. The paper further observed that Jindal made dozens of trips to northwest Louisiana but most of those were controlled settings, so access was limited. “Fortunate is the hometown journalist who can ask a follow-up question before a governor’s aide whisks away his boss,” the paper said.

Earlier this week, the Baton Rouge Advocate noted that the Zachary and West Feliciana Parish school systems, two of the better performing systems in the state, are facing financial disaster because of Jindal’s refusal to increase funding through the Minimum Foundation Program for public education. It’s no secret that public education is subordinate to his obsession with funding charter schools, vouchers and virtual schools.

Only weeks after it was announced last March that ORM would be privatized, an ORM employee was in a restaurant in downtown Baton Rouge around 4:30 p.m. when Jindal aides strode in and informed her that she would have to leave because Jindal had a fund raiser scheduled at the restaurant at 5 p.m.

“I paid for my food and my drink and I’m going to stay right here until I finish,” the defiant employee said.

She did, and on her way out, she met Jindal as he was entering the establishment. Jindal approached her with his hand extended and asked, “How are you today?”

“Not well at all,” was her curt reply. “You just privatized my agency and put some good people out of work.”

Jindal blinked and mumbled, “I’m sorry” before moving past her.

Sorry, Guv, we aren’t buying it. To be truly sorry, one must first be compassionate and one must be sincere. It also helps to have a little class.

Read Full Post »

Jindal in need of deniability in Toledo Bend water sale issue; à la John Kerry, he was for the sale before he was against it

Posted in Campaign Contributions, Ethics, Governor's Office, Toledo Bend, Water Sale, Transparency, Water Sales on February 1, 2012| 4 Comments »

There is one intangible asset that is absolutely essential to the survival of any politician: deniability.

Gov. Bobby Jindal would dearly love to have that deniability right now.

The Sabine River Authority (SRA) has decided, for the time being, at least, to hold up on its proposal to sell up to 600,000 acre-feet (196 billion gallons) of water from the Toledo Bend Reservoir.

The action came after Jindal’s chief of staff Stephen Waguespack announced on Dec. 29 that the administration opposes a proposed sale of water from Toledo Bend reservoir by the Sabine River Authority of Louisiana (SRA) to a group of Texas and Louisiana investors.

The only problem with the administration’s stated opposition is that just four months earlier, an Aug. 25 letter, from Waguespack informed the SRA that the governor’s signature is required for the sale of water “outside of the boundaries of the state of Louisiana.” He added that no such concurrence would be considered “unless it is, at a minimum, the product of a competitive RFP.” In other words, the governor, through Waguespack, gave his tacit approval to the sale provided there was a “competitive RFP.”

Reminiscent of John Kerry, Jindal was for it before he was against it.

The board, thus empowered by the administration’s implied approval, on September 22 authorized by unanimous vote the preparation of the RFP for the out-of-state water sales contract. The result was a proposal from Toledo Bend Partners (TBP) that would lock the state in to a 50-year contract with an option to renew for an additional 49 years.

RFPs were sent to five separate firms or individuals who expressed an interest. A sixth was picked up at SRA offices by a representative of Toledo Bend Partners (TBP). The TBP proposal was the only one submitted pursuant to the RFP.

Public opposition to the proposed sale was such that Jindal, through Waguespack, quickly backtracked. “There’s talk of a January vote and I think that is way too fast,” Waguespack said. He said he was reviewing the proposal which he said would need Jindal’s signature.

That was quickly followed by a Jan. 12 vote by the SRA board to suspend any proposed out-of-state water sales until a comprehensive water plan for Louisiana has been completed.

But the issue is far from dead. There is too much revenue at stake and with another potential budget deficit looming, the state desperately needs revenue. With Jindal’s dogged insistence on no new taxes, coupled with his push for even deeper tax cuts, that revenue has to come from other sources.

That’s where his agenda for privatization comes in and the sale of water to private investors is part of that agenda: rather than selling the water directly to consumers, Jindal instructed the SRA to take proposals from private investors—a middle man, as it were.

And that is precisely why this issue demands a closer inspection to consider not only how the sale would affect the local area but also to see who the principals are and how much money is involved—on both ends of the sale.

While considerable emphasis has been placed on the potential revenue of $54 million per year for the state, little has been said of the potential windfall to the investors if the sale ultimately goes through or of strong political connections on the part of the individual investors.

And while most assume the water will be resold to municipalities in Texas, nothing definitive has been said about the investors’ potential market.

Toledo Bend, which sits astride the Louisiana-Texas border and is jointly-owned by the states of Louisiana and Texas, was created in the 1960s at a cost of $70 million for the purpose of water supply, hydro-electric power generation and recreation. It is the only public water conservation and hydro-electric power project to be undertaken without federal participation.

In order to express large volumes of water use, terms are generally expressed in acre-feet. One acre-foot equals 43,560 cubic feet and is equivalent to 326,700 gallons.

The reservoir covers about 185,000 surface acres, giving it a storage capacity of nearly 4.5 million acre-feet. The reservoir’s annual surplus water supply—water that may be sold—is slightly less than 2.1 million acre-feet with Texas and Louisiana each apportioned half of that total.

That gives Louisiana more than a million acre-feet per year in surplus water.

To put these numbers in perspective, imagine one acre of land covered by one foot of water; that’s one acre-foot of water. There are 7.48 gallons in a cubic foot and 748 gallons in 100 cubic feet.

An Analysis of Proposed Water Sale Agreement between Sabine river Authority, State of Louisiana and TBP says the Sabine River Authority of Louisiana “has the express statutory power” to enter into any and all contracts and other agreements with any person, but “in the case of contracts or agreements involving the sale and/or consumption of water outside the boundaries of the state of Louisiana, written concurrence of the governor is required.”

Louisiana’s counterpart, the Sabine River Authority of Texas, has been selling water to Texas municipalities and other water systems, including 600,000 gallons per day to Houston. Louisiana currently sells its water only for hydroelectric generating, historically tapping less than 3 percent of its annual allocation of surplus water.

Water supply demands in Texas are expected to grow. The 2007 State Water Plan for Texas anticipates that municipal demand will increase by 92 percent between 2010 and 2060—from 1.5 million acre-feet to 2.9 million acre-feet.

The water sale analysis calls for SRA to sell up to 600,000 acre-feet—196 billion gallons—of water per year to TBP at a price of 28 cents per thousand gallons ($91.24 per acre-foot).

Under its proposed 50-year contract, TBP would pay SRA the $91.24 per acre-foot on top of an annual “reservation fee” that begins at $1 million and gradually escalates to $25 million after 35 years. In addition, SRA could choose between taking 1 percent of gross revenues from water sales or 20 percent of net profits.

That price is substantially higher than the current sale price of one cent per thousand gallons ($3.27 per acre-foot) currently paid by Entergy to operate its hydroelectric generator that straddles the Louisiana-Texas border at Newton County, Texas, and Sabine Parish.

Should the sale to TBP eventually be approved, it is anticipated sales to Entergy will be terminated when the current contract expires in 2018.

And while it is generally assumed that TBP will purchase the water for re-sale to municipalities, there is no guarantee of that. Consider the development of the Haynesville shale formation in northwest Louisiana and east Texas and the Eagle Ford shale formation in south Texas, said to contain rich oil and natural gas deposits. The method of extracting the oil and gas is expected to be hydro-fracturing, or fracking, a procedure that takes millions of gallons of water to break up the rock formations and release the oil and gas.

The going price for water for fracking is considerably higher. In Anadarko, Pennsylvania, a community near State College, drillers are paying $6 per 1,000 gallons. In Shalersville, Ohio, near Akron, the price for potable water to perform fracturing runs between $5.20 ($1,700 per acre-foot) and $8.88 ($2,903 per acre-foot) per thousand gallons, depending on the volume.

In California, the state’s water-distribution and pricing systems vary widely and are highly complex. More than 2,800 local agencies provide water service to 35 million people and 8.7 million acres of irrigated farmland.

While about 75 percent to 80 percent of the state’s water goes to agriculture, all users must vie for the limited resources available in the state, with diversions from the Sacramento-San Joaquin and Colorado systems being the most important. Water prices vary widely by jurisdiction, ranging from less than $10 per acre-foot to more than $100 per acre-foot at the retail level.

Because of stipulations that limit water availability based on reservoir and ground water levels, depending on wet or dry years, there are no guarantees of unlimited access from those myriad systems.

At a purchase price of 28 cents per 1,000 gallons, the sale of tens of millions of gallons of water at those prices represents a significant markup and an eye-popping return on investment for the TBP that could approach 2,000 percent.

All of which begs the question that if the SRA has surplus water to sell and there is the potential of a seller’s market, why can’t the sales be made directly to the end-users without a middle man? Why is it necessary to involve TBP?

To get an answer to that, it is important to know just who the players are and they would be principals of TBP. It is also important to know that campaign cash has a way of flowing almost as freely as, well…, as water.

TBP is a Delaware chartered entity comprised of trusts and entities owned by Billy Joe “Red” McCombs of San Antonio, Donald T. “Boysie” Bollinger of Lockport and Aubrey Temple of Coushatta and their families.

McCombs, who presides over the Koontz-McCombs Development Co., a string of automobile dealerships and radio stations, is a major player on the political stage. Between June of 2007 and August of 2010, he made 21 political contributions totaling $280,000 to Texas Gov. Rick Perry. He also made a $5,000 contribution to Jindal in November of 2010.

Jindal endorsed Perry for the Republican presidential nomination immediately after Perry announced his candidacy. He campaigned vigorously for Perry in Iowa, New Hampshire and South Carolina, leading to speculation that Perry would reward Jindal with a choice appointment if he were to win the presidency.

Bollinger is chairman and CEO of Bollinger Shipyards, a family-owned business established by his father, Donald Bollinger, in 1946. Donald Bollinger, Sr. served as Secretary of Public Safety under Gov. Dave Treen.

Bollinger, his family and businesses combined to contribute $10,350 to Jindal in 2003 and 2007. Tidewater, Inc., and Bank One of Louisiana, on whose boards he serves, also contributed another $7,000 to Jindal in 2007.

Tidewater, Inc. Political Action Committee (TIDEPAC) also made five contributions totaling $25,000 to Jindal in 2003 and 2004.

Temple, a banker and founding chairman of Louisiana Workers Compensation Corp., is a former chairman of the SRA. He and his wife made six contributions totaling $25,000 to Jindal between September 2006 and March 2011.

Steve Cummings, TBP CFO and treasurer, contributed $1,000 to Perry in October of 2010, and board member James Weaver contributed $1,000 to Jindal in December 2010 and $15,000 to Perry in June 2009 and December 2010. Both men are from San Antonio.

Rep. Gerald Long (R-Winnfield), in a Jan. 4 letter to the Sabine Index, pledged to meet with Jindal to discuss the issues surrounding the proposed sale. “As you may know,” he said, “any decision to sell water will be made by Governor Jindal and not the local SRA or the Louisiana Legislature.”

Long was the recipient of a $2,500 campaign contribution from Bollinger Shipyards last Aug. 4. Six days prior to that, he received a $2,500 contribution from the Jindal campaign.

In its proposal submitted to SRA, Toledo Bend Partners included nine letters of endorsement from Texas and Louisiana residents and political leaders, including former governors Buddy Roemer, Mike Foster and Kathleen Blanco.

Two of those letters, from Blanco and Texas Lt. Gov. David Dewhurst, supported the proposal to sell water but neither mentioned TBP by name. The remaining seven letters, including those from Roemer and Foster, specifically endorsed TBP for the contract.

Several of the letters were suspiciously similar in their wording, almost as if their letters were drafted from a template and presented to the presumed authors for their signatures. Two called the proposed sale a “win-win” opportunity.

Letters from Corbin Robertson, CEO of GP Natural Resource Partners; Paul W. Hobby, founding chairman of a Houston-based private equity business, and Texas State Senator-elect Ronnie Johns each submitted letters with identical wording: “Toledo Bend Partners encompasses a group of individuals whose business and civic leadership in Texas and Louisiana span many decades.” Robertson and Hobby went even further to say, “Specifically, B.J. “Red” McCombs’ track record of successful collaboration involving business and government entities in Texas is long-standing and distinguished.”

Both men also said in their respective letters, “I believe Toledo Bend Reservoir is an outstanding resource that should be managed with an eye towards the benefits that will be realized by current and future generations of Texas and Louisiana residents.”

Foster and Johns also had identical wording in their letters, each saying “Because power generation is heavily concentrated between May-September, Toledo Bend Lake levels are oftentimes strained during the summer months. Further, downstream residents may experience flooding as a result of the water releases” (from the hydroelectric generating plant).

Read Full Post »

« Newer Posts - Older Posts »