Judge Raps Lafayette, La., on Bonds

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The City-Parish Council of Lafayette, La., is weighing its next move now that a state judge has faulted the community’s methodology of using bond proceeds to fund the build of a fiber-to-the-home broadband plant without a public vote.

The plan was successfully challenged in the 15th Judicial Court for the parish of Lafayette in a suit initially brought by local phone provider BellSouth Corp. Cable incumbent Cox Communications Inc. and the Louisiana Cable & Telecommunications Association also joined in.

The city-parish council approved a telecommunications overbuild by Lafayette Utility Systems last year. The utility plans to leverage an existing 65-mile fiber loop into a cable and communications system passing 55,000 homes and 6,000 businesses.

LUS officials have cited consumer research which indicates 75% of potential customers would drop commercial providers for municipal service. But Cox already offers a triple-play bundle, and BellSouth has announced plans to add video to its regional offerings.

City officials said they had the authority to approve the project without submitting plans for a public vote.

Following the November approval, the community said in December it would issue $125 million in bonds to fund the project. Collateral includes utility ratepayer revenue, plus the physical plant.

BellSouth sued in January, asserting the funding plan structure triggers one or more state laws requiring at least a public hearing — and possibly a referendum — before the city can issue bonds.

PROCEDURAL CALL

“This legal action focuses on a narrow, but important, legal issue. It is not about the merits of the LUS proposal or even the city of Lafayette; it is about determining the appropriate procedure for issuing bonds of this nature in Louisiana,” BellSouth president of Louisiana operations William Oliver said in a statement when the suit was filed.

On Feb. 23, state Judge Byron Hebert ruled for the incumbent providers. The proper bond rules require the city to publish four notices of intent to issue the bonds, and to call a public hearing.

If a petition is presented at that hearing, with sufficient legal signatures, the council would have to hold a public election on the project.

The parish council planned to vote on the bond issue March 1, but delayed action after the court ruling. It could follow the judge’s directions or appeal the ruling.

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