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