A La. state appeals court dealt a big blow to a municipal broadba...
A La. state appeals court dealt a big blow to a municipal broadband project in Lafayette, La., striking down a city bond ordinance that would have raised $125 million to finance the Lafayette Utilities System (LUS) broadband venture. The…
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3rd La. Court of Appeals overruled a lower court, saying the bond ordinance violated anti- subsidy provisions of the state Local Government Fair Competition Act. Lafayette can’t proceed with the bond issue, planned for March, until it “complies with applicable law,” said the court. It was weighing a BellSouth appeal challenging a part of the bond ordinance under which LUS could have pledged residual revenue from other utility services to guarantee timely repayment of its telecom bonds. The provision, included to get lower interest rates, would be an illegal cross subsidy absent a requirement that the telecom bonds go into default first, BellSouth said. The city argued that revenue pledges could be activated at any time so long as the telecom unit repaid the pledge at market interest rates. The court flatly rejected the city’s argument. It said the law is very specific in requiring that telecom bonds be repaid “solely” with revenue from telecom services. The court said the law requires a bond default to activate a revenue pledge. It characterized the city’s plan for backing up its telecom bonds as a “revenue assignment,” which is prohibited. The court ensured fair competition by upholding the state law’s subsidy provisions, BellSouth said. Disappointed city leaders said they are mulling their next step. Options include an appeal to the state Supreme Court, a bond ordinance rewrite and revising the municipal competition law.