Friday, August 26, 2016

New Orleans Public Belt Railroad - City Contract with KPMG

I'm away from my computer but I wanted to post the KPMG contract the City just issued for $55,000 to complete the option for sale of the New Orleans Public Belt Railroad.  

When you read this keep in mind the contractor, KPMG, stands to make a multi-million dollar windfall on the potential sale. This conflict issue has not been addressed by the City or the Mayor...so they just knowingly issued a contract with this vendor fully aware that the conflict exists.  It's one of the main reasons the NOPB Commission voted to remove the option for sale from the original  evaluation back in the June meeting.


Incidentally Emily Sneed Arata was approved by City Council to replace Kyle Wedberg in yesterday's CC meeting.  

Friday, August 19, 2016

New Orleans Public Belt Railroad - A Mayoral Reminder

On July 7, 2016, at a District C Budget meeting in Algiers, I asked Mayor Mitch Landrieu about his intentions to sell The New Orleans Public Belt Railroad, an asset of the City of New Orleans since the turn of the 20th century.  His full reply is in the preceding post but I want to draw your attention to this particular sound byte:


New Orleans Public Belt Railroad - Mayor Landrieu quote on who appointed the Commission members from Jason Berry on Vimeo.


Transcript:
“Now Public Belt Railroad is an independent board…I make some of the appointments, the Governor makes some…and they forget who appointed them and say they want to do whatever they want to do.”
The quote seems to be contradictory.  If the NOPB Commission is an "independent" board is it their responsibility to serve the interests of the entity itself or to serve at the leisure of the Mayor as he implied at the end of the statement?

Last week Public Belt Railroad Commissioner and President/CEO of New Orleans Center for the Arts, Kyle Wedberg, abruptly resigned his position on the Public Belt Railroad Commission.  I emailed Wedberg today to seek comment on the reason he left the Commission at such a critical juncture but I have received no reply as of yet.  His handpicked replacement could sway the balance of power in a future decision to sell the NOPB.  

Wedberg's commission position was one of three Mayoral appointments allotted to the Mayor on the nine-person entity.

In the June 23rd NOPB Commission meeting, Wedberg was the one who originally made the motion to remove the option for sale from an evaluation being created by the company hired by the Commission to evaluate the Public Belt's worth, KPMG, after hearing the objections of major business interests that rely on the NOPB including The Port of New Orleans representatives.  The motion was subsequently voted on and passed but the Commission representative for the Mayor, Ryan Berni, informed the Commission that the City would move ahead with the valuation for sale even if they had to pay for it out of City coffers.

Last week the City made good on that promise and contracted KPMG independently of the Commission to complete the valuation for sale of the Public Belt.  The estimated cost to complete it was valued at about $50,000.

According to an off-the-record source, French based New Orleans RTA contractor Veolia Transportation has expressed interest in purchasing NOPB if the option for sale is eventually passed.

A source also suggested that the Mayor may be replacing Wedberg's commission position with long-time Landrieu cofnidante, Emily Sneed Arata.  Arata has worked in some capacity with Mayor Landrieu since his tenure as Lt. Governor, including serving as Deputy Mayor of Communications under his first Mayoral term.  Sneed left her stint with the City in January of 2016 to take a job with Ochsner Health Systems.

I contacted Arata to confirm or deny her appointment but have yet to receive a reply.

I confirmed through NOPB officials that the Mayor can fill Wedberg's vacated position on the Commission at his own discretion if his candidate is approved by City Council.

The appointment could prove to be the deciding factor on whether or not the Public Belt is offered up for sale.

If you are new to AZ, I would suggest you take some time to go back and read my reporting on Mayor Landrieu's efforts to seize full control of the Wisner Trust back in 2013, there are striking similarities in the story of that partially-owned city asset and what's unfolding now with NOPB:

Starting here:

American Zombie: The Wisner Fund - Battle for the Bayou - Part I

American Zombie: The Wisner Fund - Battle for the Bayou - Part 2

Unfortunately Blogger does not have the greatest ability for searching past posts in a chronological fashion but if you have further interest in the story you can read more simply by typing in "Wisner" in the search field window:

http://www.theamericanzombie.com/search?q=wisner 

Or you can simply ask me in the Comments section.


Thursday, July 14, 2016

New Orleans Public Belt Railroad - Destination Unknown

Right around the turn of the 20th century, at the height of the Gilded Age, when the rise of railroads were creating monopolies and wealth the likes of which this country had never seen...New Orleans found itself in a dilemma.  

The City’s greatest asset, The Port of New Orleans, was completely dependent upon rail service to carry goods back and forth across the country.

The ownership of rail services in the city limits had fractured to the point where freight merchants were being charged multiple times to get their goods to and from the Port.  The railroad lines in the City were gouging the merchants and city officials recognized this could endanger the business viability of the Port.  

In an effort to address the problem, The City of New Orleans Municipal Affairs Committee conceived the idea of a city-owned belt railroad system to bypass the fractious local lines, thereby ensuring price regulation and preventing gouging by multiple “gatekeepers”.  

On August 7, 1900, City of New Orleans Ordinance 2683 was enacted under Mayor Paul Capdevielle, creating the “New Orleans Public Belt Railroad” to be publicly funded and built by 1915.  The organizational structure stated that NOPB would be governed by a Board of Commissioners comprising sixteen “tax paying citizens”.


Established in 1900, the New Orleans Public Belt Railroad currently maintains
25 miles of main track and 97 miles of yard track

Construction began in 1905 and by 1908 the NOPB was up and running with one locomotive.  By 1921 the Louisiana legislature set forth a master plan for the NOPB that was eventually enacted into law by 1976.  

In 1916, the state legislature also passed a constitutional amendment that granted the City, through the Public Belt, the right to build a bridge providing rail passage across the Mississippi River.  After many starts and stops due to lack of funding during the Great Depression, the Huey P. Long bridge was fully funded in 1932 by an agreement between the City/NOPB, the State of Louisiana and a private investor, the Southern Pacific Railroad.  The first train crossed the bridge in 1935.

The NOPB ran smoothly over the past century...with multiple expansions that coincided with the general growth of industry in the Port.  


Going off the rails

In 2010, FOX 8 investigative reporter Lee Zurik uncovered rampant self-dealing within the NOPB Governance centering around then General Manager, Jim Bridger.  


Bridger was using the NOPB and its assets, luxury rail cars, as his own personal slush fund to wine and dine his friends, even taking expensive vacations on the NOPB dime.  Bridger eventually pleaded guilty to violating state ethics laws and was forced to pay out close to $20,000 in fines and restitution.  
It was a serious black eye for the Public Belt which had just spent a lot of money in 2007, under Bridger’s tenure, renovating their Tchoupitoulas Street Headquarters while the rest of the City was still picking up the pieces from the Federal Flood of 2005.  

More than one corrupt head rolled in New Orleans government in the wake of Hurricane Katrina and while Bridger’s wasn’t the most high profile Post-K scandal, it left a stain on the NOPB as a public institution.

Immediately after the scandal unfolded, recently elected Mayor Mitch Landrieu was quick to condemn Bridger and eventually called for the resignation of all fifteen commissioners.

That happened in short order and within a month Landrieu had reinvented the Commission with only nine Commissioners instead of the required sixteen as mandated in CNO Ordinance 2683 from 1900.  The Mayor then had a bill pushed through the 2011 state legislative session, retroactively ratifying his decision to decrease the commissioners from sixteen to nine.

In the very first meeting after his overhaul of the Commission, with his new handpicked commissioners in place, Landrieu began suggesting the Public Belt’s corporate governance was “outdated” and that the entity should be sold, leased or at the very least managed by a private entity. 

Alluding to the Bridger scandal, the Mayor told the Times-Picayune, “We need to convince the people of New Orleans that this asset is being used for their benefit.”

The Public Belt's Mission

Truth be told, the majority of New Orleanians have no idea what the Public Belt does, much less whether or not it serves the public interest.  While it is a publicly owned entity, it was not designed to “serve the public”. 

It was designed to serve The Port of New Orleans, solely.  

It was not created to be a profit-driven market-responsive enity.  To the contrary, it was designed to be a publicly-owned market regulator that ensures the future success of the City’s main cash cow, the Port.

In that capacity, the Public Belt has become a market "bubble" that private companies who rely on it have built their businesses around, assuming it would stay static.

Landrieu puts the wheels in motion

Last Fall, at the behest of the Mayor, the NOPB Commission issued an RFP (Request for Proposal) to conduct an assessment of the entity along with a valuation for possible sale. 

National accounting firm, KPMG, which has a New Orleans office, won the bid and is expected to complete its official survey by late August/early September.  While the official report is still a work in progress, this is a Powerpoint Presentation detailing a financial analysis of the NOPB delivered to the Commission this year by KPMG:

KPMG PPT Presentation 2016

The initial estimate places the valuation of the NOPB somewhere between $61 million to $196 million.

Committee hits the brakes  


Last month, June 23rd, the NOPB Commission held a public meeting to discuss the ongoing KPMG assessment and potential sale, or lease, of the entity. Numerous stakeholders who rely on the Public Belt showed up at the meeting and voiced their opposition to the potential sale or lease, hence privatization, of the entity. 


One of those voicing their concern was David Kearney, President of The Kearney Companies, a warehouse and logistics operation company on the Public Belt line and the second largest customer of the NOPB in respect to volume and revenue.  Kearney is worried about the effect the mere speculation of a potential sale is having on future business development along the Public Belt, by his company and others.




Jack Jensen, President of the largest customer of the NOPB, TCI Companies, a plastics packaging provider, not only voiced his opposition to the potential sale but called for a halt to the KPMG assessment. 



David Schulingkamp, President Pro Tempore of the NOPB Board of Commissioners, asked Jensen exactly how the ongoing assessment and speculation of sale was disrupting TCI and other stakeholder's businesses.



The main concern seems to be the market disruption that privatizing, or even partially privatizing, the NOPB would create.  As Jensen noted, it could give rise to a possible monopoly in the services industry surrounding the Port.  A future private owner of the NOPB could build their own warehouses along the line and undercut existing businesses like Kearney’s and Jensen’s, giving it an unfair advantage in the market.

A Buyer?

One potential buyer who has made his interest known is New Orleans businessman Thomas Coleman, former CEO of International Matex Tank Terminals, a liquid storage facility established by his father, James Coleman, Sr. in 1939.  The company was sold by Thomas two years ago for $1 billion dollars in cash.  Coleman also happens to be the father-in-law of John Georges, who owns The Advocate. 

Ryan Berni, The Mayor's representative on the NOPB, suggested another possible buyer: The Port of New Orleans itself.  However, at the NOPB June meeting the rumor was put to rest by 
Michael W. Kearney, Vice-President of the the Board of Commissioners for the Port of New Orleans and former President of the aforementioned Kearny Companies.


More self dealing?

Shortly after the Commission heard public comment - which was overwhelmingly, in fact totally, opposed to the sale or lease of the NOPB - the commissioners had an intense discussion on whether or not they should move forward with the KPMG study.  

In that conversation, David Schulingkamp, President Pro Tempore of the Commission, noted that KPMG had a vested interest in the sale of the NOPB and stood to potentially make up to $6 million if the Commission decided to sell.  He stated that he had asked KPMG to waive the possibility of receiving the $6 million if the NOPB sale occurred but a KPMG company representative declined that request.  

Commissioner Ruthie Frierson also replied to Bonura stating "To me, it is a conflict."


Not for sale

Taking into account the concern among the private stakeholders in the room, Commissioner Kyle Wedberg then made a motion to go ahead and move forward with the KPMG evaluation but demanded the finished product within sixty days of the meeting date (June 23, 2016) in order to allay the uncertainty the stakeholders are facing with future business decisions they claim are dependent upon the status quo of the NOPB...business dealings ranging in the 100's of millions of dollars.

More importantly, Wedberg moved to completely strike the motion for sale from the evaluation. 

Ryan Berni then stated that the City would move forward with the full evaluation, including the option for sale, in spite of any decision the Commission made to have it removed.  I asked him about this after the meeting and he said the Mayor had “an obligation to the public” to assess the property’s value and consider a sale, irrespective of the Commission’s decision to exclude that option.

To date the NOPB has spent $267,000 on the KPMG study.  To move forward with the assessment another $50,000 is required. Ryan Berni told the Commission that the City is prepared to foot that bill independently of the NOPB Commission if necessary. 

The motion to eliminate the option for sale from the assessment was subsequently approved by a vote of the Commission.

OK
....maybe it is for sale?

Mayor Landrieu seems intent on moving forward with the valuation for sale of the NOPB in spite of the Commission's decision. 

On Thursday, July 7th, I attended a City Budget Meeting for District C at the Alice Harte Charter School on the West Bank.  I asked the Mayor about his original impetus to sell the Public Belt and, now that the Commission had voted to strike the option to sell, would he honor the Commission's decision.  This was his response. 


I’m going to stop here. It’s interesting the Mayor threw out Warren Buffet’s name.  I’m not sure if he’s suggesting Buffett is interested in purchasing the NOPB or if he was simply using him as an example of a private railroad investor.  

Much more to come, including what a NOPB sale might look like and if it's even feasible...stay tuned.

Correction:  In the original post I said Commissioner Ruthie Frierson noted that KPMG stood to potentially make up to $6 million on the sale of the Public Belt.  It was actually David Schulingkamp who pointed that out after a question was posed to the Commission by Chris Bonura, Director of Business Development for the Port of New Orleans.  Frierson was the first person to respond to Bonura's question and stated it appeared to be a conflict, Schulingkamp then brought up that KPMG stood to make $6 million from the potential sale.  I have corrected this in the post and I here is the actual conversation (note: the audio is very low and difficult to hear which is why I did not include it in the original story).


Committee discussion on KPMG from Jason Berry on Vimeo.

Thursday, April 21, 2016

Almost the season

Obviously I haven't been doing a lot of work here on AZ but that will soon change.  I made the decision last year to put my journalism efforts on the shelf during the busiest months of the year where I actually make money (video production and webcasting)....October through May.

Once Jazzfest is over I plan on kicking back into gear for a bloggerific summer.

I have a couple of stories I've been researching and I can't wait to get back in the saddle so stay tuned.

Ashe'.

Saturday, March 19, 2016

Vice - Weediquette: The War on Weed

Vice did one amazing job, as usual, with this short documentary on how our state handles criminals convicted of marijuana possession.  It also touches on how our state's prison system works.  Take forty minutes out of your day and watch this story Louisiana peeps.

Weediquette - The War on Weed

Tuesday, March 08, 2016

PSA - Help Billy Nungesser retire his debt(s)

If anyone has 5k sitting around, that race for Lt. Gov. must have cost a fortune.  Billy Nungesser needs your cash:

Dear Friend:
On Wednesday evening, March 30th we will be hosting a special campaign debt retirement event for newly elected Lt. Governor Billy Nungesser. The event will take place in Uptown New Orleans from 5:30 - 7:30 p.m.
We would like to cordially invite you to become a co-host for this important event as we seek to honor Billy and help retire the debt incurred in his successful campaign for the state's second highest elected post.
As a Gold Committee Host we would ask that you commit to a contribution of $5000 (corporate or personal funds). As a Silver Committee Host a commitment of $2500 (corporate or personal) is requested. If you have already supported Billy but have not given the maximum contribution, you may use this event to reach your campaign maximum level and still qualify as a host.
Billy's leadership in the state's tourism and hospitality, arts and culture and commercial seafood industries makes him critically important to our state's economic and cultural vitality.
Please respond via return email or by telephone at 504-524-3342 by Wednesday, March 9th to ensure that you are included in our event invitation.
On behalf of Billy and his wife Cher, we thank you in advance for your participation and support.

Virginia C. Miller
Donald "Boysie" Bollinger
Greg J. Beuerman 
Gary Solomon
David Kerstein


As soon as this event is over and successful, I'd like to host another party for Lt. Governor Nungesser to help retire the debt he left on Canal Street back in the 90's.  

The sheer cost of replacing sheets was a budget killer for JM, I would love to host a fundraiser to help her recoup the "debt" Billy left...behind...  

Let me know if anyone has any ideas on a party theme.  I know I have a couple.

BTW, Billy is currently lobbying New Orleans City Council members to vote against Councilperson Susan Guidry's proposed changes to lessen criminal charges against marijuana possession.  Seems like he should be busy working on the duties of the Lt. Governor's office he stated in his solicitation above....Louisiana tourism and hospitality....instead of sticking his nose in city matters.

Having some knowledge of the Lt. Governor's past, I have a hard time believing he has a personal vendetta against marijuana users but...hey...politics is a fickle bitch.