Some $600,000 to $1.6 million could be missing from the town of Sterlington’s $2-million issue of bonded indebtedness to install water meters and build a water treatment plant through Capstone Metering LLC, the town’s fiscal administrator says.
The state Legislative Auditor’s office tapped I.M. “Junior” Shelton Jr. earlier this year to serve as Sterlington’s fiscal administrator in light of concerns the town had racked up $21 million in debt and could not cover the cost of basic expenses.
Shelton provided an update on his work as the town’s fiscal administrator during the Legislative Audit Advisory Council’s Sept. 12 meeting in Baton Rouge. The Legislative Audit Advisory Council is made up of state lawmakers.
In early 2018, Sterlington incurred some $2-million in bank-qualified bonds through Government Capital Corporation to finance the town’s lease-purchase agreement with Capstone Metering.
“Daunting is a word that is used here,” Shelton said. “That $2 million (debt) is sitting there without any way to pay for it, because they don’t have a water system with revenues to pay for it.”
In his criticism of Sterlington’s deal with Capstone Metering, Shelton referred to former Mayor Vern Breland’s drawn-out campaign to build a municipally operated water treatment plant, independent of any private utility like Greater Ouachita Water Co.
Breland, who abruptly resigned last year, engaged the town in one legal dispute after another as part of his campaign for an independent water system.
“They were trying desperately to start a water company,” Shelton continued. “The first thing I did was tell them to stop talking about that. However, because of their issues in wanting to start a water company, they’re left with $2 million in debt for a lease purchase that I’m having a lot of difficulty getting to the bottom of finding out whether it was a legal contract.
“A lease purchase that was to pay for two water wells. That’s a lease purchase? We just give the water wells back to them? And one of those water wells was built on private property.”
According to Shelton, Sterlington’s agreement with Capstone Metering included the installation of 420 water meters and some other equipment to run the town’s water filtration system.
A review of draws on the $2-million fund raised several questions, according to Shelton. For example, Sterlington made four draws on the account, including one draw of $516,000 for installing 170 water meters, one draw of $516,000 for installing 70 water meters, and one draw of more than $600,000 for installing 40 water meters.
“You’re shaking your head. Me too,” Shelton added, directing his remarks at state Rep. Julie Stokes.
“The math doesn’t work,” said Stokes, who chairs the Legislative Audit Advisory Council.
“When I ask for particulars, I’m not really getting any information,” Shelton said. “From our side too, I cannot find where that money went.”
According to Shelton, Sterlington’s sewer system also had mounted $11 million in bonded indebtedness, though questions about how those bond proceeds were spent also needed answers.
“You would think they would have a state-of-the-art sewer system,” Shelton said. “These bonds started coming in in 2011. It’s a dilapidated system. I don’t know where the money went. I have a thought that they used it just to operate, but I don’t know that yet.”
A letter apparently sent on Sept. 16 by Shelton to Capstone Metering argued that Sterlington’s agreement with the water metering company was null and void, because the agreement “was entered into under pretenses for which Capstone Metering LLC knew were untrue and fraudulent.”
The Ouachita Citizen reviewed the letter and other Capstone Metering documents at Sterlington through a public records request.
“Specifically, the agreement states the Town of Sterlington had the ability to produce water at the time of agreement,” stated Shelton’s letter.
“Nothing could be further from the truth and in fact the ‘lease purchase agreement’ was grossly overfunded in attempt to use the excess monies to acquire everything needed to make water.”
Capstone Metering was aware that Sterlington could not provide water services because Capstone was contracted by Sterlington to drill ground water wells as well as to design, engineer and fabricate a water system, according to Shelton.
Shelton’s letter also indicated that Sterlington drilled a water well on private property without negotiating an agreement with the property owner and that many of the new water meters failed to work.
“With at least one well drilled on private property with a use agreement from the landowner,” stated Shelton’s letter. “Additionally, of the meters installed, numerous installed meters began to leak resulting in removal.”
The Capstone Metering agreement with Sterlington was executed in December 2017 by Breland and Capstone Metering chief executive officer/project manager Scott Williamson, of Flower Mound, Texas.
In their remarks at the meeting, Shelton and state legislators appeared to criticize Breland for the decisions he made as mayor. Under Breland’s tenure as mayor, Sterlington piled on more and more debt while also raiding dedicated bond proceeds to pay for unauthorized expenditures, as previously reported by The Ouachita Citizen.
“I’m afraid in this particular situation, you’ve got somebody very far from Baton Rouge, very rural, really not on a road that’s going to take you into that town, and they were just sort of able to do their own thing,” Shelton said.
State Sen. Mack “Bodi” White was more direct in his remarks.
Speaking of the $21-million debt load on a town of some 1,800 residents, White said, “How long was Mayor Breland mayor there? This is the child. His project. His town.”
“It was totally mismanaged,” said White, R-Baton Rouge. “That debt was accumulated in 10 years. Just a terrible case of mismanagement.”