Short-term fix eases sewage woes

Things have gotten a little bit better behind Georgia and Alton Soileau’s house in Ascension Parish.

The Soileaus said they fought for nine years with their sewer company, Density Utilities of Louisiana LLC and its defunct predecessor, over raw sewage overflows that killed their grass and a noisy lift station pump that kept Alton Soileau, 66, up at nights.

But Alton Soileau said it’s been a bit quieter and less stinky behind his house in the Autumn View subdivision off La. 42. these last three or four months.

The fix, he said, which is pumps on a trailer that are preventing overflows, is only a Band-aid to the larger problems at the sewer lift station.

“Obviously they won’t fix it because it costs them too much money. It’d be too expensive,” he said.

The Soileaus’ story has been repeated at other Density Utilities systems where long-standing problems with sewer overflows, backups or other indications of poorly performing treatment systems have cropped up, residents and officials said.

Density Utilities, a privately held company based in Hammond, operates 32 sewer systems serving 2,300 customers in 10 parishes in Louisiana, including Ascension, Assumption, East and West Baton Rouge, Livingston, St. Tammany and Tangipahoa parishes, according to court filings.

Assumption Parish Police Juror Irving Comeaux said the company has made similar “Band-aid” fixes in the Wildwood and Greenleaf neighborhoods in the southern end of the parish.

“If you look at their (treatment) tanks and everything, they need substantial upgrades, and they don’t have the resources to do that,” Comeaux said.

State health officials said they are working with Assumption Parish officials on possible grants for upgrades, but officials and residents waiting on the long-term fixes from Density Utilities might be holding their collective noses a bit longer.

After two attempts failed to raise capital, Density Utilities of Louisiana filed in March for voluntary Chapter 11 bankruptcy in Georgia, which was nearly five months after its Macon, Ga.-based corporate parent company, Density Inc., also filed for bankruptcy.

In mid-2011, the Louisiana Public Service Commission staff determined that the company had inefficient operations and a management structure too complicated for the company’s size, PSC officials said.

The state departments of Health and Hospitals and Environmental Quality also have standing compliance orders against Density Utilities to fix, upgrade or replace its ailing infrastructure.

Citing lacking funds, the company has fallen behind on the upgrades. In December 2011, DHH fined the company $70,000 over slow upgrades in Ascension Parish. In light of those claims, the state Attorney General’s Office asked Bankruptcy Judge James P. Smith to move Density Utilities’ case to Louisiana.

Density Utilities attorneys have opposed the move, saying many of the company’s creditors are in Georgia.

Smith heard arguments March 22 to move the case but granted Density Utilities 60 days to work out a deal with potential buyers. He set another hearing on the state’s petition for 11 a.m. July 24.

“The AG, at the request of the agencies, is representing the State to protect the State’s claims in the bankruptcy and to ensure that any potential buyer has the financial assurance to bring Density’s facilities into regulatory compliance,” the Attorney General’s Office said in a response to questions.

At $37.25 per month per customer, Density Utilities has the highest rate for sewer services approved by the Public Service Commission in a rate case, commission staff said. Density Utilities told the PSC in 2008 it planned to take over and upgrade the problem-plagued systems owned by sewer provider World Wide Environmental Solutions LLC, PSC officials said.

The company had planned to do a multi-million dollar bond issue for upgrades and then bring rates down as economies of scale kicked in.

However, the bond issue was scuttled in 2008, which company officials blamed, at least in part, on the havoc in bond markets after the recession and resistance in late 2011 from the PSC to pay expenses from the bond issue not tied to capital improvements.

Neil Hertenstein, manager of Density Utilities, said the company had to use its own lines of credit backed by sewer system properties after the bond issued died.

“That (PSC resistance in 2011) pretty much sealed our fate because now we’re in a situation where we can’t borrow any more money and our lines of credit are pretty much run out,” Hertenstein said.

He said all the company could do was take what it was collecting from ratepayers, do repairs on ailing systems that were more expensive to keep running and try for a new bond issue.

“We could not keep it going,” he said.

But in questioning some of the proposed 2011 bond issue expenditures, PSC staff noted that the company had previously paid its corporate parent company $600,000 in management fees between January 2009 and the end of 2010 while spending $200,000 on capital improvements during that period.

Hertenstein said the parent company drew no profits from the payments, instead, it paid Density Utilities’ outstanding bills.

Hertenstein said those fees reflect expenditures to run Density Utilities during an intensive period when the company took over systems.

The regulators ended up approving about $1.3 million in expenditures but the second bond issue failed.

Along with an earlier PSC finding that the company was not spending enough on capital improvements for its rate level, the regulators ultimately required the company to spend $15,500 per month in lieu of a rate decrease.

“We’re just kind of at a standstill until something happens,” Comeaux said. “Either someone buys them out or I don’t know.”