The town of Sterlington continues to raid its trust funds for bond proceeds dedicated to specific uses like sewer system improvements to cover various costs such as the town’s payroll and legal fees among other expenditures, Sterlington documents show.
Under Mayor Vern Breland’s direction, Sterlington has continued the practice of raiding these trust funds for unauthorized transactions in spite of an audit released Oct. 2, 2017 by the state Legislative Auditor’s Office, which declared that practice illegal.
Meanwhile, Sterlington fund documents revealed a handful of the payments made by the town to cover the costs for Breland’s training as a private water and wastewater operator — his second job.
The Ouachita Citizen obtained the fund documents, which included transaction logs for three water and sewer funds, through a public records request. The newspaper submitted the public records request to Sterlington as part of a separate inquiry into recent Sterlington spending.
In early December 2017, Sterlington provided The Ouachita Citizen with several of the requested documents but did not provide the newspaper with the three fund documents also sought. The newspaper pointed out the missing public records to Breland, who was visibly agitated. Breland informed the newspaper it could soon pick up the requested documents, which were furnished a few days later.
Later in December 2017, Fourth Judicial District Attorney Steve Tew told The Ouachita Citizen that his office planned to examine Sterlington Police Chief Barry Bonner’s use of an illegal ticket quota system among officers as well as the suspected misappropriation of funds. Each matter could result in Sterlington officials facing a grand jury, Tew said.
of bond proceeds
Sterlington officials’ actions came under the district attorney’s scrutiny because of the audit report released in October 2017. The audit report examined Sterlington’s finances during the fiscal year ending Dec. 31, 2016. Auditors noted the illegal ticket quota system and revealed the use of cash — bond proceeds — from two restricted, or dedicated, funds to cover unauthorized transactions.
The 2016 audit outlined two unlawful expenditures using revenues generated by the sale of bonded indebtedness: $216,396 from the sewer system trust fund and $105,884 from the water system trust fund. The audit report indicated the bond proceeds were from a $5-million issuance of bonded indebtedness for water treatment facility purchases, construction and improvements as well as a $1.2-million issuance of bonded indebtedness for sewer system purchases, construction and improvements.
State law says bond proceeds in such trust funds shall not be spent for any purpose outside the scope of the issuance of bonded indebtedness. If a political subdivision plans to use bond proceeds for any other purpose than the purpose approved by voters, the political subdivision must hold another election to obtain approval from voters.
The fund documents obtained by this newspaper revealed that Sterlington continued tapping dedicated funds for expenditures that might normally be expected to be paid from Sterlington’s general fund, or main operating fund. Those expenditures, like town employees’ payroll, appear to have been spread across more than one fund, including dedicated funds.
The Ouachita Citizen did not review transaction logs for all of Sterlington’s funds, only three, but those three dedicated fund documents documented expenditures to cover payroll, legal fees and expenses related to Sterlington’s lawsuits against Greater Ouachita Water Co., payments to Breland, employee meals, employee travel costs and employee training — payments unrelated to sewer or water system construction, improvements or additions for which the funds were established.
Town’s money troubles
The October 2017 audit report noted that Sterlington used restricted bond proceeds to cover various expenditures because of cash shortages in other funds.
In recent years, the amount of money available in Sterlington’s general fund has diminished to only several hundred dollars.
A review of Sterlington’s audit documents revealed Sterlington maintained a fund balance of some $500,000 for several years until 2012 during which time the town had begun in earnest its expansion of municipal sewer and water systems. At the end of 2012, Sterlington’s general fund balance dropped to $234,000 and hovered around $200,000 to $300,000 until 2016 when that fund balance evaporated, leaving only $5,904.
As 2017 came to a close, Sterlington’s general fund balance tallied $868, before some final accounting in the last days of December brought the balance to some $31,000.
As town finances dwindled, Breland and other Sterlington officials have continued to tout the rapid growth in Sterlington, citing the addition of residential developments by referring to them in terms of final build-out. In some cases, though, these developments have yet to reach the number of fully developed lots promised by final build-out numbers.
A review of Sterlington’s sewer customer base gives some indication as to the town’s rate of growth within the town’s corporate limits. In 2006, Sterlington had 541 residential sewer customers and 44 commercial sewer customers, according to the town’s 2006 audit report. Ten years later, the geographical size of Sterlington had more than doubled, but the number of residential sewer customers rose to 811 while commercial sewer customers reached 53.
What growth Sterlington has experienced has come with a cost, though.
At several points in recent years, Sterlington has spent up to hundreds of thousands of dollars on certain sewer projects as an enticement to residential and commercial developers. For example, in January 2016, Sterlington officials agreed to spend up to $300,000 in sewer services for the development of Bayou Bend Estates if the developer agreed to have the development annexed into Sterlington.
The ongoing tiff between Sterlington and Greater Ouachita Water Co. stemmed from Sterlington’s practice of attracting developers by paying for water infrastructure in the same way it did with sewer infrastructure. In late 2012, Monroe developer Larry Culp was developing a 32-rental unit development called Jackson Square with water and sewer lines paid for by Sterlington.
Because developers normally would pay for the water lines themselves and then sign ownership of them over to Greater Ouachita in exchange for water services, Sterlington officials objected: the town paid for Culp’s water lines, so it would be losing control and the investment of taxpayer dollars if ownership of them was signed over to Greater Ouachita. Greater Ouachita justified the practice of taking ownership of a developer’s water lines because the water company, not the developer, would assume the cost of maintaining the lines in the future.
Sterlington maintained its ownership of those water lines and has sought to build its own water treatment plant ever since. The town also has continued its costly practice of paying for developers’ sewer and water lines as part of an agreement that concludes with the annexation of the new development.
Sterlington officials have launched costly litigation over several issues in recent years. Last year, Sterlington lost both of its legal attempts to expropriate Greater Ouachita’s water infrastructure. Judgments against Sterlington, for both lawsuits, totaled some $125,000.
Sterlington filed notice of its intent to incur further legal costs and appeal the judgment in the second expropriation lawsuit, according to a Jan. 25 notice filed at Fourth Judicial District Court.
Breland speaks openly
about using restricted funds
Breland has spoken openly about using dedicated funds for one purpose or another — even if it broke the law.
The Ouachita Citizen reached out to Breland for comment on this story, but he has been unavailable. At the Sterlington Town Council’s meeting in late January, Breland was not present though he was apparently communicating with several Town Council members and town staff members through text message. The Town Council did not hold a meeting earlier this week, as it had announced last month.
Breland, who has served as mayor since January 2007, previously spoke with other media outlets about his use of bond proceeds to cover unauthorized transactions. During an Oct. 6, 2017 interview, he told KTVE/FOX14 he took “full responsibility” for the illegal use of restricted funds, citing his prior belief Sterlington was acting within “the guidelines of the law.”
During an Oct. 5, 2017 interview with KNOE/TV8, Breland again assumed responsibility for the unauthorized transactions, arguing the town’s recent financial difficulties forced his hand.
“Did we violate state law...probably,” Breland said. “But, you know, what choice do you have?”
The three fund documents revealed Sterlington’s unauthorized use of bond proceeds continued even after the October 2017 audit report and interviews. Though Breland was made aware of the town’s illegal use of bond proceeds, that practice continued, fund documents show.
Breland has spoken about Sterlington’s improper use of dedicated funds under oath as well. Breland was asked about how Sterlington would pay for a proposed expropriation of Greater Ouachita Water Co.’s water infrastructure inside the town’s corporate limits during a June 26, 2017 deposition.
The deposition was taken prior to a trial in Sterlington’s first expropriation lawsuit, which failed. The Ouachita Citizen obtained a copy of Breland’s deposition through a public records request to Sterlington officials.
Question: “How is the expropriation going to be funded?”
Breland’s answer: “We actually have money, you know, that’s set aside for sewer, we have money set aside for the water system, and then we have funds that are in the general fund.”
Question: “Okay. So you would have to take money that has previously been earmarked, but also some money from the general fund?”
“Yes, sir,” Breland said.
Breland said the Sterlington Town Council gave him prior approval “to do whatever we felt like we had to — to make the water treatment plant a reality.”
Sterlington water fund:
$500,000 through OIB
Transactions listed in Sterlington’s water fund included numerous payments to cover town payroll, town employee meals, employee travel expenses, and legal fees among other transactions unrelated to the restrictions on the bonded indebtedness, according to the water fund transaction log obtained by The Ouachita Citizen.
Sterlington’s water fund is a trust fund for some $500,000 in water treatment utility revenue bonds. Sterlington incurred the bonded indebtedness on Sept. 28, 2015. The bonds were serviced by Ouachita Independent Bank. The bond proceeds could only be used for “acquiring, constructing and installing a new water treatment facility with related infrastructure improvements, extensions, modifications and additions to the wastewater and sewer treatment system,” according to audit documents.
As of Dec. 28, 2016, the fund had some $133,000, which dwindled to some $5,500 by Dec. 6, 2017.
The bond proceeds could not be used to cover unauthorized transactions such as town payroll costs, though fund documents detailed such activity.
Transfers from the water fund were made to cover town of Sterlington payroll costs in amounts of some $1,700 to $3,400 on Dec. 28, 2016 as well as on 16 days in 2017 (Jan. 19, Jan. 30, Feb. 13, Feb. 14, Feb. 27, March 13, March 28, April 4, April 10, April 24, May 8, May 22, June 5, June 19, June 30, and July 17).
The water fund’s transaction logs detailed other questionable transactions. For example, the fund was used to cover two payments totaling $250 for Breland’s continuing education in water system operation certification on Jan. 25, 2017 and May 22, 2017.
The January 2017 payment to Breland was made after the mayor launched a private company specializing in water and wastewater treatment operation, as revealed by a search through the Secretary of the State’s business records. On Jan. 9, 2017, Breland registered his company with the state under the name “Vern Breland, Water and Waste Trainer LLC.”
In his June 2017 deposition, Breland said he began his training in wastewater and water certification before 2007 while he was still a member of the Town Council.
He received various water and wastewater operator certification in 2009, 2013 and 2017, Breland told Assistant District Attorney Jay Mitchell, who serves as legal counsel for the Ouachita Parish Police Jury. The Police Jury was a party to both of Sterlington’s expropriation lawsuits against Greater Ouachita in 2017.
“And have you paid those fees (for the certification courses) personally?” Mitchell said.
“No, sir,” Breland said. “The town paid for those fees.”
“In addition to paying the fees has the town also paid for your travel, lodging, meals, et cetera, during those courses?” Mitchell said.
“Yes, sir,” Breland said.
Later during his deposition, Breland told Mitchell that because of his certification he teaches courses at the Louisiana Rural Water Association and receives compensation for the instruction through his private company.
According to the logs, Monroe attorney Bryan Racer, who previously served as Sterlington’s legal counsel, was paid some $36,151 in attorney fees through the water fund.
Meanwhile, Shreveport attorney Neil Erwin, who represented Sterlington in both of its 2017 expropriation lawsuits, was paid some $6,966 in legal fees. The transaction log also recorded Sterlington’s payments to the Ouachita Parish Clerk of Court for lawsuit-related expenses.
The water fund also was used to cover some $3,600 owed to Will H. Merritt on Feb. 21, 2017 and April 20, 2017. The transaction log did not detail the reason for the payments, except for a payment memo that read “data update” for the April 2017 payment.
Sewer system covers
The Ouachita Citizen also obtained a 23-page transaction log for the Sterlington Consolidated Sewer System fund. The transaction log detailed transactions from Dec. 21, 2016 to Dec. 22, 2017 from a checking account at Cross Keys Bank.
Some of the questionable transactions in the sewer fund included $240 for eight textbooks for Breland’s continuing education as a private water and wastewater systems operator. A payment of some $426 was made April 25 to Breland as well as another payment of some $426 on May 16 for a wastewater test. On Aug. 23, the town paid $154 to Breland for costs related to wastewater operation training.
Some transactions were made from the sewer fund to cover Sterlington payroll costs, usually in amounts of some $1,000 to some $4,800 or to higher amounts of some $5,588 on Dec. 28, 2016 as well as on 27 days in 2017 (Jan. 13, Jan. 30, Feb. 13, Feb. 14, Feb. 27, March 13, March 27, April 10, April 24, May 8, May 22, June 5, June 19, June 30, July 31, Aug. 14, Aug. 28, Sept. 11, Sept. 25, Oct. 6, Oct. 20, Nov. 6, Nov. 16, Nov. 20, Dec. 4, Dec. 14, Dec. 18).
A payment of $32,763.48 also was made from the sewer fund to cover Sterlington payroll costs on Oct. 20, beyond the bi-weekly payroll transfers.
Several of the transfers from the sewer fund to cover Sterlington’s payroll were made after Oct. 2, 2017 when the audit report identified that use of bond proceeds as illegal.
The sewer fund also was tapped for “cash/petty cash” including a $20.44 transaction on Jan. 11, 2017, a transaction for $8.85 in “cash/petty cash” for office supplies on March 1, 2017,
Sewer system funds also were used to cover the cost of office supplies, tools and equipment from Ace Hardware, cell phone expenses and payments to Ray’s Automotive Supply.
The sewer fund also was used to transfer thousands of dollars in bond proceeds to other trust funds, especially at the end of the month or beginning of the month when bills came due. For example, Sterlington made a transfer of $16,140 on March 1, 2017 to fund for the 2015 wastewater and sewer treatment utility revenue bonds serviced by Cross Keys Bank.
Another transfer of $14,120.57 was made from the sewer fund to a fund for the 2014 wastewater and utility revenue bonds serviced by Cross Keys Bank and Marion State Bank. On March 30, two transfers of $5,420 were made to the 2014 wastewater fund with payment memos detailed as “Nov 2016” and “Dec 2016.”
Three transfers of $3,350 were made from the sewer fund to a fund for state Department of Environmental Quality (DEQ) 2011 sewer revenue bonds on March 30. The DEQ bonds were issued in May 2011 for sewer system improvements and expansion. The payment memos for the three transactions were detailed as “Oct 2016,” “Nov 2016,” and “Dec 2016.”
A payment of $17,000 was made from the sewer fund to a fund for the 2013 series revenue refunding bonds on May 8, with a payment memo detailed as “Nov & Dec 2016...” Sterlington made another transfer of $22,600 on May 25 to the same 2013 revenue refunding bond fund. The net proceeds
Several more transfers of thousands to tens of thousands of dollars were made from the sewer fund to several other funds on May 31, 2017 and on Aug. 31, 2017 and on Sept. 14, 2017.
In some cases, Sterlington appears to have transferred money from some of these other funds back into the Sterlington Consolidated Sewer System fund. On May 23, 2017, Sterlington transferred $23,000 to the sewer fund as “due from Town” and transferred $25,500 to the sewer fund on May 26 from the DEQ 2011 revenue refunding bonds fund.
cover lawsuit expenses
Many of the payments from the 2017 Utility Revenue Bonds fund were made to attorneys for lawsuit expenses, according to the fund transaction log obtained by The Ouachita Citizen.
At its inception, the 2017 Utility Revenue Bonds Project fund appears to have begun with a $500,000-transfer on April 26, 2017. On July 26, 2017, a $1.25 million deposit was made to the fund along with another $500,000 deposit. On Nov. 30, 2017, a deposit of $1.75 million was made to the utility revenue bonds fund.
Based on a review of the two-page fund transaction log, it is not clear from where each of those deposits were made, though Sterlington incurred a total of some $4 million through its Utility Revenue Bonds, Series 2017. The money in the 2017 Utility Revenue Bonds Project fund was to be used “for the purpose of constructing and acquiring utility improvements, extensions and replacements to the sewer system.”
The fund transaction logs recorded a payment of $40,000 to Breithaupt, Dunn, DuBos, Shafto & Wolleson, a Monroe law firm which served as Sterlington’s bond counsel, in April 2017 for attorney fees.
Meanwhile, The Boles Law Firm was paid $34,000 in closing fees on May 1, 2017.
Sterlington tapped the fund to pay for at least some $203,000 in legal fees connected to its two expropriation lawsuits against Greater Ouachita Water Co.
Erwin, the Shreveport attorney, was paid $184,167.15 in legal fees on in separate payments in June 2017, August 2017, November 2017 and December 2017.
Racer, Sterlington’s former legal counsel, was paid on many of the same dates as Erwin. Racer was paid $31,860.25 in legal fees. Duke Copeland Reporters, a Monroe court reporting firm, also was paid legal fees from the fund, totaling some $2,700.
Other payments included on the 2017 Utility Revenue Bonds fund sheet included a payment of more than $40,000 to ATMOS Energy to install gas main lines.