The Commission must give approval because half of the deal involves the state issuing the bonds to build the facility. That is a new aspect of the deal, as private investors are anticipated to put up money for the other half and supporters tout that this improves the risk to the state regarding the deal. In fact, it and other changes to the dynamics surrounding the deal have done nothing to make it an enterprise for which taxpayers should bear responsibility.
Beginning with the financing issue, the private sector will touch the deal only if at least half of the risk is borne by the state. Translation: it’s going to fail to pay back construction costs, and it’s worth only half of the $135 million (up $50 million in estimated costs over the past couple of years) cost to build, so when it goes into default, the private financial backers essentially will repossess all of it despite backing just half of it. Meaning: at best taxpayers must subsidize a money-losing operation for the foreseeable future; at worst, they throw away $67.5 million for nothing.
Proponents also claim that a new study (disputing conclusions made by two previous ones) shows that this default won’t happen. The study, performed by an engineering, not accounting or auditing, firm in consultation with one of the two farming entities expected to profit off the mill’s presence, and using parameters established by the Department of Agriculture and Forestry whose commissioner Bob Odom long has fought for the mill’s building, in using them leaves out pertinent information and makes other unsustainable claims:
Perhaps most crucially, it assumes that the federal government will continue to subsidize prices of sugar despite world trade trends and enforcement of free trade headed in the opposite direction (as the U.S. found out a few years ago in the case of steel); reduction or elimination of price supports would cause significant retrenchment in sugar production making it harder still for the mill to meet its debt payments
Even in the unlikely event that these supports continue for an extended period of time, in order to meet payments the mill may muscle into the controlled allotments that private mills currently follow (because of federal payments to restrict production to keep prices up), thereby driving private sector entities out of business in favor of the state-backed mill and reducing economic activity and government revenues thereof (which is why most mills except for those directly involved in the planned one oppose the deal).
Simply, no expert, reasonable economic projection shows that the mill makes good fiscal sense for the state or even cane farmers. State Treasurer John Kennedy has remained properly suspicious of this deal from the beginning, but his critical stance will go ignored unless Gov. Kathleen Blanco puts principle before politics and stands up to Odom and his ally Senate President Don Hines by instructing her votes on the commission to go against the funding – regrettably, something she often demonstrates little fortitude in doing.