THE BIG STORY
The budget of tomorrow, literally
If you buy what the critics are selling these days, it’s as if J. Wellington Wimpy crafted the state’s proposed $24 billion budget for the next fiscal year. You know Wimpy: He’s the round-faced, portly fellow, from the Popeye comic strips, who always is angling for a burger, as in, “I would gladly pay you Tuesday for a hamburger today.”
Critics contend Gov. Bobby Jindal is putting off tough decisions—layoffs and substantive cuts—that need to be made now in advance of the upcoming regular session. Instead, they argue, he’s kicking the proverbial can down the road in hopes of addressing them in the next budget cycle, which is still more than a year away.
Here’s the lay of the land: The state is facing a $1 billion shortfall in the 2010-11 ?fiscal year, which becomes reality July 1, and a $1.7 billion subsequent decline is expected in the 2011-12 fiscal year.
As a result, the $24 billion budget proposal for 2010-11 that Jindal sent to lawmakers in early February is about $5 billion less than the current 2009-10 budget. In response, Republican and Democratic lawmakers are already asking for more reductions out of fear that the state isn’t properly preparing itself for the challenges still ahead.
“If we don’t, we’re facing the cliff in 2012,” Appropriations Chairman Jim Fannin, a Democrat, recently told The [Alexandria]Town Talk. His House committee is charged with drafting the budget bill and will spend more time with it than any other entity.
Lawmakers from Jindal’s own party are crying for blood as well. Jindal’s proposed layoffs fall short, many argue, of the 3,000 state jobs being axed—half are already empty and the rest could be achieved through normal attrition. Some GOP lawmakers are ready to dig deeper. “We’re ready. We want to cut,” says Rep. Gordon Dove, another Jindal chairman.
Then there’s philosophy. The governor is using one-time monies to take the place of recurring revenues in his new budget proposal. That’s money that won’t be there for the 2011-12 fiscal year, when federal stimulus dollars will begin drying up. Jindal has also promised that he won’t raise taxes in the upcoming session, but then lawmakers can only levy taxes in odd-numbered years. The governor has not weighed in on taxes next year.
Higher education, which represents a large bulk of state spending, is scheduled to suffer only a $5 million reduction in spending; there appears to be a move afoot to give colleges a hand up on tuition costs, which could soften the blow in next year’s session. Meanwhile, spending on Louisiana’s fledgling Medicaid program is set to decrease by $300 million, although it’s a $6.2 billion program.
To a true freshman like Sen. Norby Chabert, a Democrat, who has yet to serve in a session, it’s a curious strategy. His thinking is that all sectors of government should be expected to streamline. “If these two areas are going to be spared cuts, then that means someone else is going to take a beating,” he says.
Medicaid, however, is a looming problem and could derail everything. It’s a complex situation: The federal spending formula that decides how much money Louisiana gets in Medicaid matching funds is based on its per-capita income over a certain period. Since the 2005 hurricane season, this figure has increased by more than 40% because of two factors: Louisiana lost a large number of poor families, and billions of dollars in federal recovery money have been directed to the state.
Next year, the federal share of Louisiana’s Medicaid costs is expected to decrease by 10 percentage points, a change that could mean an additional $500 million in costs for the state annually. The Louisiana Hospital Association estimates that this shortfall could result in a loss of approximately 8,390 jobs statewide, a decrease in personal earnings of $340 million and a reduction in overall business transactions of $660 million.
It’s a lot of food for thought, even for a hungry, fictitious character like Wimpy.—Jeremy Alford
IN SHORT
Quantity and quality
Capital Region business leaders often say finding quality—and qualified—workers is their biggest concern, which explains why some have taken an interest in the proposed Career Academy charter school, spearheaded by the Louisiana Resource Center for Educators. A recent dinner at LRCE headquarters drew banker and former Gov. Buddy Roemer, Turner Industries CEO Roland Toups and Exxon chemical plant manager Dan Schuessler.
“Our top concern is education,” Schuessler says.
In theory, every student who graduates from the school will have a high school diploma, a trade certification or comparable college credits, and the soft skills and basic work ethic needed to be a dependable employee. Focus areas would include manufacturing, health sciences, hospitality and tourism, and transportation, distribution and logistics. Organizers plan to create an all-business culture with 240 full-time freshmen and sophomores in 2011 and grow slowly from there, eventually accepting part-time students. A site has not yet been selected.
On Feb. 11, final revisions were being made to the charter application, which will be submitted to the East Baton Rouge Parish School Board on Feb. 26 and possibly voted on in April. LRCE expects they’ll need to raise about $230,000 in startup money for equipment from external sources.
“This is a good model. I support it,” Superintendent John Dilworth said. School Board President Jerry Arbour has also been receptive, LRCE’s Kate Meeley says. There is often tension between the education establishment and charter school supporters, but the board has approved three charter schools in the past several months, suggesting growing support for the concept.
“I didn’t think I’d live to see this kind of alignment,” LRCE Executive Director Nancy Roberts says.—David Jacobs
Metro Council mayhem
The controversy over the reappointment of Collis Temple Jr. to the BREC Commission came to a head when former commissioner Carroll Breeden filed suit against the Metro Council and the city of Baton Rouge, alleging the council had failed the public by misinterpreting term-limit laws that render the move invalid. The suit calls for Temple to be removed from office and for the Metro Council to hold another vote to replace him. While it’s unlikely the council will dismiss Temple without a court ruling, District 9 Councilman Joel Boé has spearheaded an effort to change the wording of the law to prevent those removed from office from serving again before sitting out a full term. A change to the plan of government would require the Metro Council to pass a measure that sends the proposed change to city-parish voters for approval.—Emma James
Head of the class
The winners of Business Report and Junior Achievement’s 2010 Business Awards & Hall of Fame have been selected. They are: Gary Mockler of Mockler Beverage, Hall of Fame laureate; Matt McKay of All Star Automotive Group, Businessperson of the Year; Mo Vij of General Informatics, Young Businessperson of the Year; Woman’s Hospital, Company of the Year [100 employees or more]; and Business First Bank, Company of the Year [less than 100 employees].
Nominations from the public were judged by a community panel including: Charles D’Agostino, LSU Louisiana Business Technology Center; John Davies, Baton Rouge Area Foundation; Adam Knapp, Baton Rouge Area Chamber; Cornelius Lewis, Gulf Coast BIDCO; Phyllis Mouton, Baton Rouge Community College; and Jennifer Winstead, Pennington Foundation.
The recipients will be honored at the 27th annual awards banquet on April 20 at the Crowne Plaza Hotel. Tickets are available by calling Junior Achievement at 928-7008.
BUSINESS OF POLITICS
To the max
Gov. Bobby Jindal filed his annual campaign finance report with the state Ethics Board earlier this month, and it details more than $4.7 million worth of contributions that were handed over in 2009. According to the Louisiana Republican Party, more than 73% of donors gave $100 or less in 2009. But in political circles, it’s usually the donors who give the maximum $5,000 per election cycle that get all the attention. For Jindal’s future runs, more than 500 businesses and individuals reached that financial peak. Of that group, though, there are only 10 individuals from Baton Rouge: Michael Albritton, David Deloach, Brad Dutruch, Ernie Matherne Sr., Daniel L. Miremont, Anjani Narra, Janice Pellar, John Christopher Pilley, Robert Shreve and Nancy Valluzzo. Perhaps, due to Jindal’s national profile, money out of Red Stick doesn’t have the heft it usually does. But then again, some of the donations originating from others barely warrant a mention. For example, Kenneth Chalmers of Palatine, Ill., and Eli Shefter of San Diego each donated an entire penny to Jindal on Feb. 25—the day after Jindal’s response to President Barack Obama’s State of the Union was panned and lampooned around the nation.
A seat on death row
The vice chairman of the House Criminal Justice Committee has introduced a bill that would change who is allowed to witness a state-sanctioned execution on death row. Specifically, House Bill 22 by Rep. Damon Baldone, D-Houma, would delete the requirement that witnesses to death sentence executions be Louisiana residents only. At present, there may be no fewer than five and no more than seven witnesses, and all must reside in Louisiana. Changing the law would allow people residing in other states, who were victims of a crime committed in Louisiana, to participate in the final phase of the justice process, Baldone says. In addition to resident witnesses, state law allows the following persons to be present during an execution:
• The warden of the Louisiana State Penitentiary at Angola, or a competent person selected by the warden
• The coroner of the parish of West Feliciana, where Angola is located, or his deputy
• A physician summoned by the warden
• The operator of the electric chair, who must be a competent electrician, never have been convicted of a felony and be qualified to administer lethal injection
• A priest or minister, if requested
Baldone says the proposal is supported by officials at the Department of Corrections, which is the agency that oversees Louisiana’s prison systems.—J.A.
EXECUTIVE SPOTLIGHT
John W. Milazzo Jr.
President/CEO
Campus Federal Credit Union
Hometown: Baton Rouge
John Milazzo Jr. is attached to his wheels. The president/CEO of Campus Federal Credit Union can often be found tinkering under the hood of his 1966 Ford Mustang convertible—his key means of getting to work on time and in style during his 100-mile plus daily commute from Napoleonville. It should come as no surprise that traffic is one thing Milazzo would change about Baton Rouge. Improving infrastructure tops a list of initiatives he would like to see tackled. He also advocates improvements to education and drawing young people to the area. How to accomplish these goals? Milazzo says his hope is that the “citizens of our great city come together and put differences aside for the betterment of this place we call home.”
Want to read more of Milazzo’s Q&A? Click here.
FAST FORWARD
Scratching off the list
Jim Roland is at it again.
When Business Report first wrote about Roland’s active lifestyle in its July 27, 2009, issue, the Window World CEO broke down some of his “bucket list” adventures—things he wants to do before kicking the bucket, from the 2007 movie starring Jack Nicholson and Morgan Freeman.
While Roland wouldn’t admit to having a formal list, he did detail an action-packed year that included scuba diving in Bonaire, skiing in Montana, duck hunting in Argentina, traveling in Italy and attending the Indianapolis 500, where he met racing legends John Andretti and Richard Petty in Pit Row.
Roland kicked off 2010 by climbing Mount Kilimanjaro in January. At 19,340 feet, it’s the highest peak in Africa. It was Roland’s first trip to the continent, and he says it probably won’t be his last. India and the Himalayas are on his list, too.
So what’s next for Roland? A private 21-day excursion through the Grand Canyon with his wife, six children and family friends in six or seven boats is on the books for October, a trip he applied for 10 years ago.
“White-water rafting is something I’ve always wanted to do, but we live in Louisiana,” he says dryly. “Unless the dam breaks, there’s really not that much to do.”—E.J.
Mining silver in the Golden State
Sure, there’s Louisiana wine; apparently, they even make wine in France. Yet California is the dominant supplier for the U.S. vino market. While most of the commercial grape harvest comes from that state’s Central Valley agricultural heartland, premium grappa is associated with the Napa Valley and Sonoma Valley regions north of San Francisco.
One esteemed vintner there is so specialized that it exclusively bottles harvests of cabernet sauvignon. Silver Oak Cellars’ newest offering, a 2005 Napa Valley cab-sauv, went on the market Feb. 6 for $100 a pop.
Prior to the launch of Silver Oak in 1972, President David Duncan says his co-founding father’s partner, Justin Meyer, was the “heir apparent” at Christian Brothers Winery. “They were making 30-some wines,” Duncan says. “He really wanted to focus on doing one thing and doing it right. We just started with that single-focus dedication and really haven’t wavered.”
The company has grown from a “milk barn” operation to making 100,000 barrels per year, but its per-bottle price of $70 to $100 has been steady, despite challenges from other high-end winemakers to discount.
Duncan says Silver Oak uses 100% American oak barrels and delivers wine with a rich bouquet and long finish. “Put it in your mouth and swallow it after a good meal, you’ll really experience it over 30 to 60 seconds,” he says.
Online prices range from $340 for a magnum set of wine to $1,500 for an “ultimate release day” package of wine, pour stoppers and winery tour tickets. Local vendors include Whole Foods Market, Martin Wine Cellar, Calandro’s Supermarket on Government Street and Maxwell’s Market on Corporate Boulevard.—Todd R. Brown
ON THE BEAT
Capitol gains
New exhibits inside the Old State Capitol are already open to the public while others are slated for completion by early summer. The Governors’ Portrait Gallery on the second floor rotunda and the “Long Legacy” exhibit on the first floor are ready now. Funding is in place for the second phase of the redesign, featuring an exhibit that tells the story of the Old State Capitol through the eyes of the daughter of the family who donated the site, the author of a Civil War diary.
Happy happy, joy joy
Baton Rouge ranks No. 1 out of 185 U.S. metro areas in “life evaluation,” one of six categories of the Gallup-Healthways Well-Being Index. With all six categories factored in, Baton Rouge ranks No. 54, up from No. 151 in 2008. The other categories are emotional health, physical health, healthy behaviors, work environment and access to basic necessities. Louisiana ranks No. 38.
Going once, going twice
The clubhouse at The Bluffs near St. Francisville will be put up for auction. The auction is set for noon March 5 at the clubhouse. Sperry Van Ness/Gilmore Auction of Kenner has been authorized by First American Bank of Vacherie to sell the 19,786-square-foot facility. The clubhouse has been in limbo since March 2009, when former owner Jim Tanner shut down the golf course.
Rollin’ on the river
Pinnacle Entertainment says it spent nearly $5.8 million in pre-opening costs last year for its planned River Road casino resort. That’s down from the nearly $7.5 million Pinnacle spent in 2008, the year East Baton Rouge Parish voters passed a referendum to allow the casino development. Pinnacle says it is continuing title and design work for the $250 million resort.
Globalization strategy
Geoshield, a locally owned but internationally distributing company based out of LSU’s Louisiana Business & Technology Center, has opened its second distribution center in Saudi Arabia. The office in Al-Hasa will install the company’s window films for use in commercial and residential building and in automobiles.
The doctor is in
Baton Rouge-based myPhone MD, a business that fixes broken Blackberries and ill iPhones, has opened its second local store on Airline Highway between Goodwood Boulevard and Old Hammond Highway. Conrad Green and Jeff Lyons launched myPhone MD in September, offering quick repair service on ailments such cracked screens and broken lock buttons.
A real sub-station
A deal for the state to buy a parking garage at Third and Convention streets clears the way for a downtown police office and a Roly Poly restaurant. Plans are to open the office and the restaurant in the next three or four months, says Brad Way, an agent with NAI/Latter & Blum, who represented the state and Roly Poly in the parking garage purchase. This will be the fourth Roly Poly in Baton Rouge. Establishing the downtown police office has been a long-standing project for city and police officials. Sgt. Don Kelly, a police spokesman, says the office will be a place where officers can work when they’re handling downtown events as well as a place to store equipment. Kelly says the office won’t be a substation, since there won’t be officers on duty round the clock. “It may evolve into a fully staffed station, but for now, this will be a place police can go in and out of,” he says.—Timothy Boone
Village expansion
Developer Mike Wampold has exercised an option for an additional 606 acres by his Longwood Village mixed-use community. Wampold bought the land for $908,700 from the Gianelloni heirs. He bought the initial 520 acres between Nicholson Drive and Spring Lake from the family in 2005, paying $11.8 million for the land. The lower price reflects that much of the land in the new tract is low, Wampold says. “This will be the recreational component,” he says, with lakes, stables and jogging trails. Longwood Village will be a “community of the future” with single-family homes, office space, retail and schools. The project had its conceptual use plan approved by the Planning Commission in 2006, but Wampold is waiting for the market to rebound before he starts developing the site. “We’ve got some engineering going on out there,” he says. “But we’re not in any big hurry.”—T.B.
At an impasse
An arbitration hearing between development company R.W. Day and Associates and MAPP Construction over the Southgate Towers condominiums, on Nicholson Drive south of LSU, has been delayed until summer.
MAPP owner Mike Polito declined to comment on the arbitration. Gray Sexton, an attorney for MAPP, says the hearing involves a counterclaim filed by Day, alleging that excess moisture in the building’s interior has resulted in “organic growth” that damaged sheetrock, molding, flooring and studs.
Day wants the affected materials—stucco, exterior skin, walls, felt and metal studs—to be replaced and the units repaired, while MAPP wants to coat and caulk the affected units. The hearing is scheduled for June 7.
Sexton says MAPP also is waiting for the Louisiana Supreme Court to review a writ application on a $4.7 million settlement awarded to the company by the 19th Judicial Court. MAPP alleged Day owed it money for building the condos.
The decision originally was postponed because of the holiday season, and then by the illness of Chief Justice Kitty Kimball, who in January suffered a stroke. Sexton expects a ruling soon. R.W. Day did not return calls seeking comment.—Emma James
A vertical square
For developer Jimmy Nunnally, it’s all about the lifestyle.
His pitch for the Village at Magnolia Square, a traditional neighborhood development in Central, is simple: a return to easier days with recreation, restaurants and retail blocks away from the front door. Nunnally and partner Steele Pollard are taking on a market and ahead of projections with a newly opened sales office, three showcase homes currently under construction, and groundbreaking on the first two lots sold in the 79-lot first phase.
“Louisiana is ahead of most of the other states in home sales, Baton Rouge is ahead of most of Louisiana and Central is ahead of everyone,” Nunnally says. “If you’re in the right location with the right project, things are good.”
Nunnally and Pollard have worked on the TND for almost four years, having acquired the land in September 2006. They would like to break ground on the retail space before summer. One lease has been signed with an unnamed New Orleans-style restaurant that will occupy most of the first building. Talks are under way with three potential leasees, but no contracts have been signed.
Nunnally would like to attract businesses that are locally owned and operated. Construction of a pool and fitness facility is scheduled in mid-to-late summer.
Most of the focus this year will be on selling homes in the development, Nunnally says. The showcase homes will provide examples of the classical architecture that will be the standard for Magnolia Square, and different floor plans are available.—E.J.
