Puttin’ the Hammer down: Home elevation horror stories and rumored happy endings (Updated)

Sunday, the T-P’s Hammerman checked in with another good installment covering the Home Elevation Grant boondoggle. It is a long story that I will not rehash today but the bottom line Hammerman found a bit of silver lining to homeowner protections belated added to the program by the Jindal Administration. I will not dispute the silver lining part but there was one part of the story where a huge red flag was raised and I say that as someone who knows a thing or two about construction finance. Let’s highlight it:

Of the 12 busiest elevation contractors, only the two with the richest share of the grants — Orleans Shoring and J-Con/Davie Shoring — have managed to get final payments on more than 80 percent of their projects. The state has signed off on nearly 500 jobs done by Orleans, and on 439 for J-Con/Davie.

The next closest is Coastal Shoring, with 290 jobs that received advance grant payments. But fewer than 60 percent of Coastal’s jobs have received final payment, and there’s a warrant out for owner Jerl Kershenstine’s arrest on contractor fraud charges for allegedly collecting grant money to lift a Kenner house, failing to do the job and refusing to let the owner change contractors. Kershenstine is arguing it’s a false arrest.

More troubling is that Coastal is far from the only firm taking more than six months to finish lift jobs after getting 80 percent of the money up front. The state considers more than a third of the 242 contractors with active, grant-financed jobs “noncompliant” because more than half of their projects are still unfinished six months after they were paid the advance.

If memory serves those grants were for $160,000 per residence. Multiplying 290 by 160,000 and 80% means ol’ Pappy Kershenstine has snagged $37,120,000 in advance payments give or take and finished work on around $27,840,000, which means he is playing with around $9 million in overbilling aka “float” aka Billings in excess of cost and estimated earnings on the unfinished work as of the date those statistics were compiled. Unlike fine wines construction projects do not get better with time.  A rule of thumb I use when auditing commercial contractors is that all overbills should be in cash and in the bank. Granted, if the project is profitable a portion of the overbill will eventually become profit but in this day and age margins are mighty slim in the construction industry so the best approach, especially on short-term jobs like these home elevation contracts, is to finish the work and then count the extra jingle. IMHO this program should not have fronted money to contractors period because it is inevitable some of the newer companies doing elevation and shoring work will go out of business before the related work under contract is completed and the belated added surety requirements won’t mitigate all the financial damage.

With that said it is worth mentioning that Team Kershenstine fought tooth and nail the subpoena in Pappy Kershenstine’s criminal case seeking Coastal Shoring’s banking records but I do not know whether the investigators have gotten them yet. This is important because it has been alleged in comments to the T-P reporting and here on Slabbed that Kershenstine has engaged in certain very unsavory business practices.  Without access to Coastal’s business records I have no way to verify those assertions but given what we do know via the very good reporting on this topic by the T-P is the program as a whole is rife with problems and with that assertion there is no dubiety.  How Coastal Shoring fits into that narrative is still very much an open question but early indications are not good for taxpayer.

I’ll have some more applied mathematics for the Slabbed Nation a bit later today.

Update:

Fedupwithitall gave a better parameter for the average contract at $100,000 per so following is the money analysis using that amount:

 

sop

13 thoughts on “Puttin’ the Hammer down: Home elevation horror stories and rumored happy endings (Updated)”

  1. Make the average contract 100k and you are there. Still enough cashola to attract JP bottom feeders. The front story could be that there exists/has existed:
    incompetent management,
    misappropriation of federal funds,
    fraud,
    lack of experience or training,
    disregard for employee and homeowner safety,
    close ties($$$$$) with JP politicos currently indicted and/or under investigation,
    innapropriate relationships with recently former parish employees and current members of state agencies.
    The proof could be in the financials of the company and/or the relatives of company officers as well as relatives of the various pigs at the trough.

    Looks like we will have another rug to sweep things under as this rug is being pulled out from underneath this ‘crew’.

    1. I updated the post for the parameter you provided. Can you tell me how much net is reasonable for this kind of work?

      sop

      1. 35-40% EBITDA, no shit.
        When a business plan was offered with those numbers I was laughed at by local banks. The exact words by one privately held local banker was “this is a pipe dream” and we were dismissed out of hand.

        My team was within 60k gross revenue in our projections over 16 quarters.

        I did get a chance to share that information with the local banker who made that comment, 2 years later.
        I now know what smug feels like. Not profitable to me, but nice.

        Make no mistake, owners of these shoring companies are rolling in cash. Only through the above listed reasons could they screw this up. Most of them have. The ones that haven’t have won through sheer volume.

        1. 😯 Anybody in construction that pulls down those kind of margins has a right to be smug.

          I was somewhat surprised Orleans has a decent track record in finishing jobs but they left a ton of money on the table on that school move project last year.

          The money and potential margins have certainly attracted all sorts of greed driven operators. The little I know about the shoring industry is it is a high risk type of service because when things go bad on a project the bad is usually catastrophic financially in terms of contract size and that does not count the safety issues. It follows experience is vital to longevity in the field.

          I like hearing banker stories. I have a few myself. :mrgreen:

          sop

          1. I bet you do have stories.
            Orleans has one of the best PR firms in town. Orleans has dropped houses, killed employees and really screwed over homeowners and the grant program. Orleans employed New Path Recovery(Kurt WIltshire) early on and reaped the benefits via Courage and David at HMGP. Good PR firm works pretty well doesn’t it?
            The house in Orleans commercial with the broken steps…. is a job they did. It was very widely rumored that Orleans dropped a house last week. No reporting was done. The phones were burning up last week trying to find that house by many people. From engineers, law enforcement and several elevation contractors.
            If I knew where it was you would surely know as well.
            Gulf Coast Elevations-Charlie Johnson’s group out of Florida dropped a house on Rye St in Metairie a couple of months ago. Gulf Coast brought in steel beams and had it back up in place within 4 hours. Nobody was hurt. JP Inspectors came 2 days later to inspect. The slab is in pieces. The contractor was Personal Touch out of Kenner. Never reported to the news or OSHA.
            I could go on and on.
            Just for clarification, I have not profited significntly from my many labors involving this industry. The companies have.
            My smugness comes from having done the research to define the market and providing balls-on numbers. Bean counters don’t get payed, they get played. No disrespect intended sop81_1.

          2. No offense taken. Somewhere in that statement is why I do not discount my hourly rate.

            I bet Hammerman would be interested. You’d be surprised how much goes on that never lands on the local medias radar screen.

            The broken steps belong to Christian Cancienne? Now that is a ballsy commercial LMAO!!! I have an off the record story about Cancienne I wish I could share.

            In terms of risk the contractor bears it. Subcontractors complicate things some as it adds more parties. The middle men and PR people like former Senator Julie Quinn are the ones that make the $$$$ with none of the risk. Sweet deal huh.

            I’ve still got work to do tonight but lets make a point to visit in the next day or so via email. I know I’m interested.

            sop

  2. Looking forward to it. I have quite a few off the record stories to share with you as well. You and your readers all know that much is brought to the local media and is quashed before it ever sees the light of day through threat of litigation and outright intimidation by the men behind the curtain. I am indeed fed up with it all.

  3. I hired coastal shoring had nothing but issues with them from the get go .They wrote things in my contract they could not fullfill do to code violations ,They filled the area where my porch is, with broken concrete underneath .i have issues with the openings under the house where the plumbing is they were surpose to close that in to prevent cold air from seeping in that was never done .I have had issues with all the brick work i could go on and on i wrote letters and called with no reply .In my opinion i was taken for a ride by Coastal Shoring .

    1. There is always the rumor mill but the truth is Slabbed is between topics and the staff here needs a break.

      This happens periodically. Anyone wanting to guest post is welcome to email it in.

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