A La. appeals court has until Jan. 5 to rule on BellSouth’s chall...
A La. appeals court has until Jan. 5 to rule on BellSouth’s challenge to a Lafayette, La., bond ordinance that’s to raise $125 million for the Lafayette Utilities System’s (LUS) municipal broadband service project. The 3rd La. Court of…
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Appeals held hearings Dec. 29. At issue is a revenue pledge in the bond ordinance that allows LUS to loan the telecom unit funds from general utility revenues to cover payments on the telecom bonds if the telecom unit has insufficient revenues for a payment. A lower court upheld the ordinance but BellSouth appealed. BellSouth argued that under the 2004 La. Local Govt. Fair Competition Act, such revenue-pledge loans are legal only to cover nonrecurring startup expenses, not ongoing debt service costs. BellSouth also said the city’s revenue pledge arrangement isn’t lawful unless the bonds go into default first. It said a revenue pledge that kicks in to cover a bond payment in order to avoid a default is an illegal cross-subsidy. But the city argued that the law allows revenue-pledge loans for any purpose, at any time, so long as the telecom unit repaid the loans with interest at prevailing market rates. The city said state law allows revenue pledges to obtain better interest rates on bonds, and doesn’t require a bond default before a revenue pledge can be activated. The city said the law allows it to engage in any lawful business practice that private companies can, and said revenue transfers among affiliates, with market-rate payback mechanisms, are a common commercial business practice. The city also argued that BellSouth should have challenged the bond proposition, not the implementing ordinance, so its suit wasn’t timely filed. But BellSouth said it had no problems with the ballot proposition, and its dispute lay in the details of the enabling ordinance. Meanwhile, the La. PSC urged the appeals court to remand the matter back to a trial court, saying BellSouth’s appeal of the bond ordinance is a “collateral attack” on the PSC’s rules to level the playing field between the city’s broadband unit and private telecom providers. In those rules, the PSC agreed with the city’s interpretation of state law regarding revenue pledges and said such pledges wouldn’t be an improper cross subsidy. No party, including BellSouth, appealed the PSC rules. The PSC said state law requires that appeals of PSC rules be brought first to the 19th Judicial Circuit Court, and it would strenuously object to any ruling by the state appeals court that would overturn the PSC’s fair-play rules.