City never compensated for street engulfed by Champions Square
Tuesday, April 18, 2017
City never compensated for street engulfed by Champions Square
Tuesday, March 28, 2017
Having interviewed Mayor Landrieu in late September of 2016 regarding his intent to sell and/or lease the New Orleans Public Belt railroad, I pressed him on why he seemed so determined to sell, or “privatize”, many of New Orleans' largest public assets. His general response was that the City was in dire financial straits when he took office and desperate actions were needed to pull it out of the hole. Landrieu also continually referenced the wisdom of “public/private partnerships” and how cities all around the country were utilizing them to great benefit.
The Roadmap to the Glory Days of New Orleans Slush
When the Saints almost went marching out
New Orleanians who lived through Katrina have no shortage of traumatic stories and memories they carry with them to this day. But one trauma-inducing event that many people have suppressed or even forgotten about was the threat by the owner of the New Orleans Saints, Tom Benson, to move the Saints out of the city in the wake of the storm under the prospect of greener pastures in San Antonio, Texas.
The 2009 deal between Benson and the State/LSED consisted of two parts.
The second part of the deal involved the newly acquired Dominion Tower and properties purchased by Benson’s Zellia, LLC. In addition to the State agencies leasing over 70% of the office space in the tower, a state organization called the Louisiana Office Facilities Corporation (essentially an extension of the LSED) agreed to lease the New Orleans Center property which included the Mall and area now known as Champions Square, as well as the aforementioned parking garage for $2.3 million annually. The LSED agreed to take on the operations of the parking garage, mall and Macy’s retail store, retaining all revenues up to the $2.3 million mark (to compensate for the rent to Zelia), then any additional revenues would be split with Zelia 50/50. The agreement called for Zelia to be responsible for any initial renovations and repairs to the properties with the LSED maintaining daily operations and maintenance.
Public/Private Partnerships: The Road to Prosperity for the Private
After ratifying the agreement in an LSED Board of Commissioners meeting, Commissioner Robert Bruno stated the deal was (paraphrased from meeting minutes), “One of the most complicated, creative, bipartisan examples of a public/private partnership that could ever be imagined.”
How would one not be willing to invest in a multi-million dollar contract that placed any business risk solely on the State of Louisiana? The deal guaranteed a near full occupancy rate of Benson Tower on top of a guaranteed 2.3 million dollars a year lease for the Champions Square property and the parking garage in which Zelia doesn’t even have to manage (The management of the properties is contracted to the company SMG by the LSED).
All Benson had to do was purchase the properties and the state took on any and all business risk to guarantee Zelia a financial windfall.
|The entire 1400 block of LaSalle Street has been closed to the public
and incorporated in to the Champions Square footprint
The street has been completely closed to automobile traffic with numerous permanent structures erected by the LSED including gateways on both ends of the street. During concerts and events in the Square these gateways are closed to the general public and used as a ticketing entrance for private events.
|One of two permanent "Gateway" structures on each end
of the 1400 block of LaSalle Street
|Even the map at Champions Square show LaSalle Street as an
official part of its footprint
The problem being there is no contract with the City to utilize the street, temporarily or permanently…not even a cooperative endeavor agreement. This is problematic not just for the revenue lost by the City, it’s also a violation of Article 7, Section 14 of the Louisiana State Constitution.
I also filed a public records request with the LSED to see if they had any contracts with the City for the use of the street and to see their contract with Zelia, LLC. While the LSED contract with Zelia mentions Champions Square, there is no mention of the use of LaSalle Street. Therefore, there is no contract that would allow Zelia or the LSED to use it, much less build permanent structures and close it to the public.
After receiving the LSED/Zelia contract I asked their current administration (they were quick to point out they have an entirely new board since the 2009 agreement was established) a series of questions about the nature of the contract and the appropriation of the 1400 block of LaSalle.
In respect to what is known regarding the use of the street, the LSED provided me with a “good faith” letter they sent to the City in 2011 regarding their construction plans for LaSalle which stated they would be pursuing a long-term lease of the property.
The City Real Estate Administrator, Marha J. Griset, replied that they were agreeing to enter into a long-term lease under the following conditions: A deposit shall be made, the City Planning Commission will grant approval, and the City Council will endorse the lease (ordinance). Also that the LSED must continue with the process towards the signing of the long-term lease.
"The City of New Orleans has received the economic benefit of (i) the improvements that were made to LaSalle Street, (ii) the ongoing maintenance, repair, etc. of LaSalle Street, and (iii) increased tax revenues derived from events that occur at Champions Square. "
The loss of 1400 LaSalle to the City without any compensation or contract is bad enough but the fact that a state entity, the LSED, has financed millions of public tax dollars to “improve” the street solely for the benefit of Zelia, a private entity, is a double-whammy to taxpayers.
However, The LSED also has a separate marketing fund for which it is responsible but doesn’t seem to be subject to state audit or public disclosure through the Legislative Auditor. Individuals seeking more information on the marketing fund are directed to the LSED. The reason this is significant is that the marketing fund also makes rent payments that look to be either profit sharing or revenue sharing arrangements for the Champions Square events, I believe this is part of the 50/50 profit split mentioned above but I’m not sure.
As an example, in fiscal year 2014, LSED paid $2.3 million for the lease, but the marketing fund also paid $1.9 million. For fiscal year 2016 the amounts were $2.5 million paid by the LSED and $2.0 million paid by the marketing fund. However, elsewhere these lease payments by the marketing fund are shown as revenue for Champions Square.
Hence, the total amount paid to Zelia by the LSED to date may be significantly higher than $14 million.
In January the Mayor informed many of the non-profit festivals in New Orleans that the City would no long waive various permit costs, including street closures and parking meter rental loss, to these festivals. It greatly affected many of the festivals that already had fixed budgets in place for 2017 and are now facing thousands of dollars in added expenses.
The non-profit entities are now being hit with multiple permitting fees for the use of public streets while Tom Benson has been given an entire street by the City, with the State paying him for its use.
I asked Mayor Landrieu’s Deputy Mayor of External Affairs, Ryan Berni, if the Mayor was aware of the issue…here’s his response:
“We have been working with the State for the last several years on a property swap that would include the street and the State’s portion of Duncan Plaza. For a number of reasons, it hasn’t been settled due to the values of the property not matching up. It is something we are still working on with LSED and the State.”
The only problem with that is that no one I spoke with at the LSED mentioned anything about that deal, so I’m not sure who is negotiating with the City on the matter. Nor could I find any documentation of the deal.
Land swap deal aside, we’ve gone seven years with no contract in place and millions of dollars left on the table. In fact, millions of state tax dollars have been paid to a private entity who doesn’t even own the public property in question.
If you don't have time read it all....just watch this short video for the basic skinny on the story...
Monday, February 06, 2017
Last Wednesday, February 1, 2017, a mandatory pre-bid conference was hosted at City Hall by Ryan Berni, Deputy Mayor of External Affairs for CNO and the mayoral appointee to the NOPB commission. Also present were representatives from KPMG, the firm hired by the City (independently of the Commission) to conduct the evaluation which led to the RFQ.
The room was packed as this Powerpoint presentation was presented to the prospective lease applicants and discussed by Berni and the KPMG team members:
New Orleans Public Belt Railroad Pre-Bid Conference PPT.
Anyone attending the meeting was required to list their name and contact information. That list is here:
New Orleans Public Belt Railroad Pre-Bid Conference attendees
There was a brief question and answer session following the Powerpoint presentation but Berni informed the group that any questions could be submitted to the City's website where they will be publicly answered in an effort to maintain transparency.
He also stated a "cone of silence" has been issued for the NOPB staff and Commission through the RFQ process. I have personally tried to contact the KPMG members heading up the evaluation but I got no response via email. I am assuming they are subject to the City's cone of silence as well.
Many of the questions posed surrounded the complicated contracts and labor agreements the NOPB holds with Class 1 railroads, the NOPB union workers and the Port of New Orleans.
Another question which arose was the exact nature of the partnership between the City, the NOPB and the prospective partner. Berni stated that the City is looking for a partner to lease the "operation and asset management transfer" of the NOPB. This subsequently brought up the issue of the property tax exemption the NOPB now enjoys as a public entity and how that would affect the new management entity. Berni replied that "different assets will be attributed differently" in respect to property tax exemption.
Probably the biggest question mark with the RFQ is the nature of the current agreement the NOPB has with the Port of New Orleans. Right now, because the structure of the NOPB is designed to solely serve the Port (not necessarily generate a profit), the Port has a $1/year lease agreement with the railroad. If a private entity takes over the NOPB, that agreement will most likely be renegotiated...if the Port even chooses to do business with the new entity.
There was no clear answer from the City on how the Port and other issues would play out but Berni stated later in the meeting the City was looking for the applicants to propose solutions to the management challenges in their quotes. The unknowns of the Port contract along with the complicated trackage rights issues with Class 1 railroads are going to make any proposal by the private bidders somewhat of a challenge.
One other issue that struck me personally is that there are no safeguards for the existing Port vendors who utilize the NOPB. Berni did state they expect the prospective bidders to be "focused on local customers as opposed to third party entities" but it's not clear how the City would enforce that intent, especially after the current administration exits the stage.
Page 12 of the Powerpoint presentation highlights some of the select transportation and storage warehouse companies who depend on the NOPB.
The multi-million dollar question is how a private entity taking over the NOPB will disrupt, undercut or even bankrupt these existing local businesses. There is no non-compete clause or provision for the prospective manager of the railroad mentioned in the RFQ so the private partner could theoretically build their own warehouses and competing business to cannibalize some or all of the existing businesses in this slide.
In previous posts, I documented some of these business owners' objections to the privatization of the NOPB as well as this RFQ that was just issued by the City.
As of now, the City is planning on choosing a preferred bidder on June 23, 2017.
However, the acceptance of a bid does not guarantee the NOPB Board of Commissioners approving the private/public partnership. They did vote to research the possibility of the lease but they haven't voted on approving a lease as of yet. That factor wasn't brought up in this pre-bid conference but it will have to occur at some point....the Powerpoint schedule states board approval would take place in the Summer of 2017 after the preferred bidder is chosen by the City.
Coming up, I will take a closer look at the Port's relationship with the City and the viability of public/private partnerships the City of New Orleans has executed in the past.
As always, email me with any questions or use the comment section.
Sunday, January 15, 2017
In the last post, I introduced an interview I conducted with Mayor Landrieu about his intent to sell and/or lease the NOPB. In that interview I asked him if the company the City had hired to provide an evaluation of the railroad was taking in to account the myriad contract agreements and trackage rights with Class/Tier 1 railroad companies the NOPB had developed over the past 100+ years since it's inception.
I didn't get a very clear answer...from the Mayor or his appointee to the NOPB Commission, Ryan Berni.
I don't have the full evaluation from KPMG but I do have an abbreviated version and it states that it was created under the assumption that existing"rights and leases" would remain intact.
That is quite an assumption.
I have not seen the full KPMG evaluation but it appears they did not address the complications of "clear title" to the NOPB's assets and operations.
Here is the abbreviated KPMG Evaluation material I currently have:
Upcoming...In our interview, I asked Mayor Landrieu about the wisdom of selling off City assets, his affinity for public/private partnerships and his strategy of "bully politics" when it comes to appointments to public boards, e.g., Wisner.
Coming soon...stay tuned.
Wednesday, November 30, 2016
In this first sound byte, I asked the Mayor why he seemed so intent on selling and/or leasing the NOPB when nearly all of the other stakeholders, including the main stakeholder - The Port of New Orleans, were adamantly opposed to changing the status quo of the entity established over a century ago. He quickly corrected me stating that his intent was not necessarily to sell the NOPB but to get an evaluation of the entity as a City asset:
NOPB - Mayor Landrieu - reasoning behind KPMG evaluation from Jason Berry on Vimeo.
The KPMG evaluation was delivered to the City a couple of weeks ago and in the last Board of Commissioners meeting the Mayor's representative on the Board, Ryan Berni, announced that the evaluation did not recommend a sale. However, it did recommend either entering a public/private partnership for the lease of the Public Belt to be managed by a private company or maintaining the status quo of the NOPB with the City making improvements to the line in a yet to be determined agreement with the NOPB.
Berni then informed the Board that an RFP will be floated by the City to determine interest in the public/private lease option.
As I've posted previously, the Public Belt was originally designed to be a kind of market regulator for the Port of New Orleans. It was never designed to be a profit-generating entity. The Belt is a unique municipal asset among American cities in that it was created as a public entity to control rail costs for merchants looking to do business with the Port of New Orleans.
In that respect, many of the businesses that have invested in New Orleans, such as warehouses located along the NOPB line, built their investments on the premise that the rail lines connecting the Port to the Tier 1 railroads would remain in the public realm. By privatizing the Public Belt (even as a public/private lease) a private company would immediately look at ways to gain a competitive advantage and subsequently pose a potential threat to the bottom line of not just the ancillary companies serving the Port but the Port itself.
In the nearly 116 years since the NOPB's inception, some very complicated agreements with the Class 1 railroads have sprung up along with murky, undefined trackage rights. The most notable is a Joint Maintenance Agreement for the Huey P. Long Bridge involving The State of Louisiana, the NOPB (City of N.O.) and two private Tier 1 companies: BNSF and Union Pacific. .
(For reference and the sake of brevity, I will list some of the main issues at the bottom of the thread for those who want to dig through them.)
In the interview, I asked both the Mayor and Ryan Berni if the KPMG evaluation was taking into account these myriad contract agreements and trackage rights issues that have developed over the last century surrounding the Public Belt and if it was even possible to create an accurate evaluation without understanding and unraveling these complications:
NOPB - Complications in trackage rights, etc. from Jason Berry on Vimeo.
I have not yet obtained a copy of the KPMG evaluation but have reached out to representatives from the company for comment. I am not sure if the evaluation did take in to account any, all or none of the agreements of which I queried Mayor Landrieu and Berni.
In the meeting last week, Port stakeholders voiced their opposition to the public/private lease option and even the release of the RFP, stating it was creating a market disruption for future investment and business in the Port. Berni dismissed the concern, noting that the NOPB just turned in a record month.
Also in the meeting, a letter was read from an attorney who represents the Tier 1 companies, Carmac M. Blackmon, esq., voicing the national rail carriers opposition to the public/private lease of the NOPB.
The dissent of the Tier 1 companies is disconcerting. If these companies such as BNSF and Union Pacific decide to play hardball on the trackage rights issues upon the NOPB being leased to a private company, it could lead to a protracted legal battle with the City resulting in the NOPB losing access to portions of the NOPB line. Worse, it could lead to some or many of the Tier 1 companies deciding to pull out of New Orleans completely, creating a significant disruption in Port business and operations.
I asked the Mayor if he was concerned about the effect the potential sale/lease of the NOPB was having on the Port, I will address that issue in the next post.
Contractual Issues surrounding the New Orleans Public Belt (not a definitive list):
- The NOPB has twelve agreements with Canadian National Railway that range from trackage rights, customer service and wharfs, intermodal, and interlocker usage and maintenance. Canadian National actually owns a portion of the NOPB mainline that allows the NOPB to use for free.
- The NOPB has three agreements with CSX Railroad regarding trackage rights, track maintenance, and signal maintenance of the Almonaster Bridge over the Industrial Canal which lies on the CSX mainline.
- BNSF has trackage rights from Avondale, over the Huey P. Long, all the way to Gentilly.
- The Huey P. Long Bridge is under a Joint Maintenance Agreement between BNSF, Union Pacific, the State of Louisiana and the NOPB. It is unclear how the two Tier 1 rail companies would react to a private company taking over maintenance and full access to the bridge of which they have an ownership interest.
- The City would have to get federal approval from the Surface Transportation Board to lease the NOPB.
- Will the City protect the labor union jobs if the NOPB is leased to a private company? Currently the NOPB supports about 160 high paying jobs. How many of these jobs will be eliminated if a private company runs the Belt?
- Local stakeholders have existing agreements and contracts with the NOPB. Will these contracts be honored and if so for how long?
- The lease of the NOPB could greatly affect the New Orleans Gateway, particularly the highly trafficked French Quarter. As of now, the City has ultimate control over the union workers that operate the NOPB and can control issues surrounding highly trafficked tourism events such as Mardi Gras. The introduction of a private company could negate much of the control the City exercises over the rail usage and interfere with high volume events. Especially if the Tier 1 companies choose to exercise their own trackage rights and bypass the NOPB altogether.
- Under current state laws, the NOPB and the City do not share revenue, expenses, or legal liability. How will these issues be resolved and will it require changes to law on the state level?
- Currently the NOPB is exempt from property and sales tax. Would these exemptions be eliminated if a private company runs the Belt and if so how would that affect the cost of business for the Belt and subsequently the Port?
Friday, November 18, 2016
Public Belt Railroad - Ryan Berni reports on City's decision regarding the outcome of the KPMG report from Jason Berry on Vimeo.
During public comment a handful of stakeholders once again objected to changing the status quo of the NOPB and the issuing of the RFP. One comment led to a somewhat contentious exchange between David Kearney, President of the Kearny Companies, Inc. and Ryan Berni starting at about the 4:40 mark:
Public Belt Railroad - Public Comment on KPMG report and announcment of Public-Private Partnership RFP from Jason Berry on Vimeo.
I didn't have a lot of time to comment tonight because I have some real world work to knock out but I plan on making some more in-depth posts over the weekend including publishing some excerpts from an interview with Mayor Landrieu about the status of the Public Belt. He was kind of enough to grant me an audio interview about the NOPB back in September.
More to come.
Friday, October 28, 2016
As my readers know, I've written extensively about Caroline Fayard's father, Calvin Fayard, in respect to his role as a plaintiff steering committee attorney with the BP oil spill settlement and as one of the law firms who bullied their way in to the Wisner Trust oil spill settlement. While Caroline did play a part in both stories, especially the Wisner drama, I figured I would just let the stories speak for themselves if anyone wanted to read about it.
Then Fayard announced she was opposed to the lawsuit the state is filing against oil and gas companies to hold them accountable for the damage they've done to our state's coast. She said, "It's very easy for politicians and people to say, 'Let's just sue. Litigation's expensive. It's costly. It's time consuming. And there's no guarantees."
I literally spit coffee on my keyboard the first time I read that.
Still....I had nothing to say.
Now...well...now...her campaign went and did this absurd, tasteless bullshit:
Caroline Fayard chooses to continue running David Duke-themed anti-Foster Campbell ad, loses Alliance for Good Government endorsement
After she accused Campbell's campaign of being focused on attacking her family:
An act of desperation? Absolutely...and a pathetic one at that. But the blowback has been swift and merciless leaving even the little, penny-ante sycophants running for cover (i could link that but I won't).
There's only so much sanctimony and hypocrisy a zombie can take, homeys.
Sooooo.....let me remind you of a little Vanity Fair article that was published back in June of 2006 in the wake of Hurricane Katrina.
It showcased Carloline's father, Calvin, playing Billy Joe Baddass in the front yard of his multi-million dollar wedding cake house (paid for with litigation that doesn't always work).
The online version of the story doesn't have the photos that were included in the magazine edition but luckily Zombie has a scanner.
|Who you gonna shoot, Rambo?|
Look at those swingin' dicks with their thousand dollar suits and Remington shotguns just waitin' for a "thug" to try and loot their mansion.
Finger on the trigger...judges on speed dial.
Here's the corresponding paragraph to the picture:
Some of the city’s richest residents stepped into the breach, taking security into their own hands. In New Orleans’s upscale Uptown neighborhood, well-heeled and well-armed property owners, sometimes with security guards to assist them, kept possible looters at bay, carrying firearms openly in their neighborhoods and looking after neighbors’ homes and valuables—even keeping a close watch on friends’ irreplaceable art collections. Attorney Calvin Fayard—one of the region’s major political fund-raisers for the Democratic Party, and the owner of the so-called Wedding Cake House, one of the city’s grand mansions—would remain at home and on guard with a coterie of like-minded friends. Some would use their powerboats to rescue the marooned. Their neighbors would dine on gourmet food from nearby specialty stores. Some would bathe in their stagnant swimming pools. One or two would take the opportunity to fly by helicopter to the office to shred potentially sensitive business documents—to prevent them from falling into the wrong hands, should law and order break down altogether.
It cracks me up that he actually posed for this photo...replete with sunglasses and Armani, Perlis, (whatever) suit. He must have been really proud of himself. And something tells me even though Brinkley buried "Some would use their powerboats to rescue the marooned" in the middle of the paragraph as a compassionate caveat, Calvin was most likely not in that number.
Fayard's campaign is trying desperately to associate Foster Campbell with something racist. Meanwhile, her Pops was flaunting that bullshit in Vanity Fair during the most vulnerable period this city ever experienced.