SWBNO and Privatization

Benjamin Edwards, a 9th Ward minister and longtime member of the New Orleans Sewerage & Water Board, was indicted Friday by a federal grand jury for allegedly forcing companies to funnel millions of dollars to himself and his younger brother in order to maintain their work with the board.

The brother, Bruce Edwards, pleaded guilty last week to related charges. Another local pastor, Bishop Oliver “O.C.” Coleman, has pleaded guilty to concealing his knowledge of a portion of the scheme.

The lengthy indictment details numerous instances where Edwards demanded that companies doing city sewerage and water work contribute “donations” or “scholarships” to Third Shiloh Missionary Baptist Church, where he held the titles of reverend, master teacher and director. He then redirected the money to himself and his brother Bruce, it alleges.

 

In 2009, Benjamin Edwards was convicted of fraud and embezzlement with taxpayer money through a scheme involving the Sewage and Water Board of New Orleans. Outlandish in scope, it was not the first, and indeed very likely not the last time federal convictions have emerged in this organizations history. This article will provide a rough timeline and rather damning evidence of what is likely criminal neglect and inhuman contempt for the communities that make Orleans Parish.

A brief history of the Sewage and Water Board in Orleans Parish.

This is the information that I had compiled previously on the Sewage and Water Board.

Who contracts services with the Sewage and Water Board of New Orleans? Veolia.

The same Veolia as Flint, Michigan and Pittsburgh, Pennsylvania.

Veolia has provided services to the Sewage and Water Board of New Orleans since 1992.  They also manage our Public transit system! Over the past 6 years, quite a few changes have occurred for the Sewage and Water Board (S&WB).. In 2012 an ordinance which allowed the S&WB to increase rates by 10% a year for 8 years. This would mean that by 2020, customers will be paying 214% more for their water services.

 

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Even Council Member Stacy Head voted against the rate increases, stating “I didn’t like the process. I’m disappointed that there’s still a lack of understand of what this rate increase will go for.” Residents spoke out against the increase, having a general distrust of the S&WB because its history of political patronage. Ray Manning (of Manning Architects), the S&WB President at the time, said that most of the $583 million in revenue generated would go to pay off the S&WB’s debt. Yet, this explanation was not detailed and Stacy Head attempted to delay the vote for further explanation. Landrieu was accused by Head of attempting to muscle through a rate increase through City Council, while Diana Bajoie was still a member, whom Landrieu had appointed while waiting for the results of a runoff election between Cantrell and Kaplan. The Bureau of Governmental Research also wanted the delay, lamenting the agency’s “dysfunctional governance.” Ultimately, the vote proceeded and the ordinance was passed. Yet since this time, the debt has increased.

 

Now in 2015, Veolia renewed a 10 year contract with the SWB. Right after this renewal, FEMA Agreed to pay $1.2 Billion in disaster aid for streets and water pipes. When added to $800 million FEMA had already promised and $1 Billion in revenue that the City and SWB had collected through additional fees, grants, and bond sales, this is intended to be a $3 Billion investment into the city’s decrepit infrastructure. But it should be noted the structure of the debt that has been passed.

Dated Year Bond Description Dollars Raised Interest Rate Total Repaid
2011 Sewerage Service Subordinate Revenue Bonds, Series 2011  $            8,995,000.00 0.9550% $10,004,938.50
2014 Sewerage Service Revenue and Refunding Bonds, Series 2014  $      172,670,678.80 3.5270% $248,055,452.70
2014 Water Revenue and Refunding Bonds, Series 2014  $      111,224,454.15 4.3095% $202,672,392.36
2014 Drainage System Refunding Bonds, Series 2014  $         15,549,216.40 1.8883% $16,779,929.31
2015 Water Revenue Bonds, Series 2015  $      112,686,115.20 4.0524% $204,479,020.00
2015 Sewerage Service Revenue Bonds, Series 2015  $      112,826,409.80 4.0599% $204,090,277.78
$533,951,874.35 Total Pay $886,082,010.65
Int Paid $352,130,136.30
Avg/YR $17,606,506.82

 

Specifically, the interest rate for each series of bond. After 2013, the interest rate jumps from 0.955% to 4.3%. The reason why is explained in the Board of Liquidation Minutes from November 16, 2016.

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So, for the $534 million raised in debt for the S&WB, the City will be paying out just around $17.6 million per year in interest expense for this debt using raw math. This is approximately 3% of the General Fund expenditures, or rather the equivalent of which is spent on Children and Families.

But then, a report by the Office of the Inspector General comes out from the Department of Homeland Services. The report recommends that New Orleans refund the $2 Billion grant for Infrastructure repair be reclaimed by FEMA. Part of the reasoning seems to be that funds are not being utilized quickly.

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In terms of Water System Efficiency, the city was lacking Pre-Katrina.

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In terms of Street repair, the City roads still required a lot of work.

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And a lack of records.

Then there’s the troubling matter of why we are repairing and not replacing 70yo engines at 1/3rd the purchase price of a new water pump. A contract for a $2 million refurbish on the rotor for a pump was quoted by Siemens, who would only give a 2 year guarantee given the age of the equipment. So SWBNO decided to have a brand new rotor built at the price of $10 million (just the rotor, not the engine). Yet the price of a brand new pump is total $35 million. The debate starts at 9 minutes and continues until 22 minutes into the video.

http://www.swbno.org/form_video.asp?s=news&id=600&vid=finance 071717.mp4

Obviously, I am troubled by what the information indicates, but leave any inferences to you and trained professionals. I’m merely a concerned citizen.

Sincerely,

Danil Faust

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