Tuesday, April 29, 2014

Stripe's New Owner: Energy Transfer

West Texas convenience stores are a window into the financial machinations that occupy corporate executives today.  In 2007 Town & Country sold out to Susser Holdings, which converted our region's T&C stores to the Stripes brand.  Susser monetized half of its petroleum operations by spinning off Susser Petroleum in September 2012.

Yesterday Energy Transfer Partners (ETP) announced it would acquire all of Susser for $1.8 billion.  Consider what Zack's had to say about Susser after it shot up 36% (as a result of the announced deal):

This convenience store chain has seen four negative estimate revisions in the last 30 days.
Two aspects of the deal caught my eye.  First, Energy Transfer Partners plans to shift "existing Sunoco and Susser retail businesses into Susser Petroleum."  These moves are expected to "generate significant cash proceeds to ETP over the next several years, further strengthening ETP credit metrics."  Such an internal shift could be a method for ETP to monetize its retail holdings, possibly at a premium price.

Second, ETP will hold the General Partner interest and Incentive Distribution Rights in Susser Petroleum, which could later become a cash bonanza should Susser Petroleum be sold.

"An exchange of SUSP GP/IDRs held by ETP for ETP common units held by Energy Transfer Equity (ETE), combined with the eventual monetization of SUSP units would allow ETP to fully exit the retail business in a highly accretive manner."

This means two Energy Transfers, Energy Transfer Partners and Energy Transfer Equity, could make huge money off the 50% stake in Susser Petroleum.

West Texans can expect:

Entry of the Sunoco brand into Texas and neighboring states presents opportunities for additional margins through expansion of dealer and distributor channel.

Expansion of the Stripes business into adjacent states.
I hope that margin expansion isn't due to higher gasoline prices, but someone has to pay for corporate complexity and legal machinations, not to mention executive incentive pay.

Update 4-30-14:  The move of assets to Susser Petroleum is a tax avoidance move as Susser Petroleum is a Master Limited Partnership.

Update 6-15-14:  Several Stripes locations in San Angelo have no gasoline to sell.  I just drove by one with yellow bags over all the gas pump handles.  It seems harsh weather impacted refinery operations utilized by Susser Petroleum. 

Monday, April 28, 2014

San Angelo's John Fortenberry: Serial Violator of SEC Laws

The U.S. Securities and Exchange Commission issued public administrative and cease and desist orders against John Fortenberry of San Angelo for securities fraud.  The order included Fortenberry's prior offenses:

Fortenberry has twice previously been subjected to cease-and-desist orders in connection with securities fraud. In 2004, both the Pennsylvania Securities Commission and the Texas State Securities Board ordered Fortenberry to cease and desist from selling unregistered securities.

According to the Administrative Proceeding Fortenberry victimized two investors of a total of $300,000. 

In 2010 and 2011, Fortenberry intentionally used the name “John”—a misspelling of his middle name—when soliciting investors and drafting Premier’s partnership agreement.
The document states:

In all, Fortenberry took at least $148,500 of investor proceeds in undisclosed management fees, personal expenses, and cash withdrawals, none of which was disclosed to Premier’s investors. Indeed, instead of using these assets of Premier for its investment purposes, he acted for his self-interests and misappropriated the assets for his own personal benefit.

Fortenberry used Premier’s (investor) funds to pay for travel and concert tickets for his family members, personal credit card payments, clothing, jewelry, groceries, cable bills, utilities, insurance, unknown expenditures via PayPal, a Netflix subscription, car repairs and maintenance, gasoline, convenience and liquor store purchases, and trips to various restaurants and coffee shops.
What's next?

IT IS ORDERED that a public hearing for the purpose of taking evidence on the questions set forth in Section III hereof shall be convened at a time and place to be fixed, and before an Administrative Law Judge.

IT IS FURTHER ORDERED that Respondent shall file an Answer to the allegations contained in this Order within twenty (20) days after service of this Order.

This Order shall be served forthwith upon Respondent personally or by certified mail.

The order is dated April 28, 2014.  Does he already know?  Will he find out via certified mail or the internet?

The original SEC filing from August 2010 shows the fund paying $200,000 in finders fees for a $9.99 million fund.  He never came close to raising the nearly $10 million but Fortenberry came close to bleeding his investors of $200,000.  This story should be interesting to follow.  

Sunday, April 27, 2014

Standard Times Endorses Furniture Fiasco Player

The Standard Times editorial board endorsed Elizabeth Grindstaff for City Council SMD 5 in the upcoming election.  Former Assistant City Manager Grindstaff served under City Manager Harold Dominguez and Interim City Manager Michael Dane.  She coordinated the renovation of City Hall which came in way over budget and a year late.

Also, Grindstaff told a former City Council she never had one conversation with Water Chief Will Wilde on the $100,000 purchase and installation of furniture without required City Council approval.  City e-mails show Grindstaff encouraging Wilde to advance the purchase so the city could be out of the old West Texas Utilities building.  Guess who moved into that facility?  Coincidentally, it was Grindstaff's current employer Texas Pacifico, which not long ago sought economic development aid to the tune of $250,000.

Elizabeth Grindstaff has donations and endorsements from some of the finest people in San Angelo.  I expect her to win, which ironically will prevent Texas Pacifico from getting economic development funds while she serves on Council.

Serving the public means having to answer difficult questions and honesty is best.  It remains to be seen if her misrepresentation in Council chambers continues or if that was a one time event.

Saturday, April 19, 2014

Development Corp: Economic Impact Analysis

San Angelo's Development Corporation will meet once a month starting this Tuesday.  The agenda for the April 23rd shows:

3.  Consideration of approving necessary Corporation disbursements and authorizing the designated Board members to sign related Corporation checks.  (Presentation by Roland Peña, Economic Development Director)
Under disbursements is a recommendation the Board pay for an economic impact analysis model from Impact DataSource, which has Jerry Walker as principal.  This is different from the regional economic index proposed months ago by Ingham Economic Reporting.

The Impact DataSource model makes ten year estimates on the economic impact of employers growing jobs, whether those are existing companies or new ones.  One would expect economic development professionals to be able to make projections, i.e. create their own model.  City staff have done this numerous times, with MedHab the most prominent estimation the last few years. 

As for Impact DataSource's spreadsheet software, it's a make or buy decision.  Will the COSADC board look at this as an unbudgeted $5,000 item that needs proper explanation and board approval?  Will they want to know what purchasing steps staff undertook to remain in compliance with city policies, unlike City Council's Furniture Fiasco?

Projections are projections.  One key is understanding how a measure is calculated.  Another is comparing reality to best guesses.  What different happened?  Why?  In those situations learning can occur.  One aim of the COSADC board should be to educate and inform citizens on economic development.  Any companies missing their milestones should keep the COSADC board as well as the public up to date. 

Monday, April 14, 2014

City Council Has Taxing Agenda

San Angelo's City Council went from meeting on April Fool's to Tax Day.   The April 15th agenda is chock full of meaty items.

1.  Approval of April 1 minutes:  Council approved pumping water from the South Pool in the consent agenda.  The proposal cited two possible ways to move water from the South Pool.  Given there was no discussion of this item last meeting, the public is unaware of the city's plans for pumping.  Will this be mentioned?

2.  Energy Demand Response Services RFP award:  Council will consider awarding the our energy saving franchise to Energy Curtailment Specialists of Buffalo, New York.  The energy saved will result from shifting water treatment to lower demand times of day.  The city expects to be paid $163,720.30 annually for its participation.  What additional operating costs come with this?  Will it impact overtime, employee schedules, even employee retention?

3.  Foster Road Gas Station:  One citizen called it a truck stop complete with hookers.  Council will revisit this hot item from last meeting.

4.  Water Conservation Plan:  Once again the city has a vague water conservation plan.  The last council talked for years about having specific incentives for citizens to reduce water use.  Citizens are still waiting.

5.  West Texas Water Partnership:  In Executive Session council will discuss the duty of the attorney to maintain confidentiality and invoices dated 2-24-14 and 3-7-14.

6.  Economic Development Negotiations:  Executive Session.  Who's next for incentives?  The Development Corporation gave no clue.

7.  SAPAC:  The Performing Arts Coalition is back.  They get to sublet renovated City Hall space for market rates while paying $1 per year.  It's nice for citizens to give SAPAC that cash generating franchise.  Councilman Morrison hasn't been a fan of aspects of the SAPAC arrangement.  Will that change as Mayor?

8.  Water Related Matters (in addition to Water Conservation Plan and South Pool pumping from last meeting).  The Water Advisory Board, historically a rubber stamp for San Angelo's Water Chief, will be discussed.  Current water sources are on the agenda as is the city's participation in weather modification.

9.  Water Fee Rebates:  This item is to be considered twice a year, April and November.  These dates virtually ensure citizens won't get a rebate.  The city makes big money off water in June, July and August.  April is too early and November too late.  Also, the city's fiscal year ends September 30.  The time to consider a rebate is in August or September.  It need only be done once a year and that time frame makes much more sense.

Update 4-17-14:  Staff recommended no action and Council concurred.

10.  Val Verde Water Company:   An offer letter will be discussed.

Update 4-17-14:  The offer letter was not discussed as the item needs to be addressed in Executive Session through a West Texas Water Partnership report.

11.  Record Accounting for the Martifer Hirschfeld incentive:    This will be interesting as Hirschfeld, which bought out Martifer, hasn't come close to meeting its employment commitments.

Update 4-17-14:  Council moved this item to their Executive Session, discussion of Martifer-Hirschfeld incentive.  They gave no report on this after executive session.

12.  Animal Shelter Advisory Committee:  I'm sure Bradley Petty is a great person, but his animal bonafides aren't apparent.  San Angelo has many dedicated animal experts and volunteers.  More of these people could and should be advising council.

That's enough for now.  The tale of the tape will be interesting. 

Saturday, April 12, 2014

MedHab in Midst of Fourth Capital Raise

SEC filings indicate MedHab is in its fourth capital raise.  Founder Johnny Ross sought nearly $1.1 million in investment with over $770,000 in the bag.  The filing came nearly two years to the day after San Angelo's City Council approved a $3.6 million economic development package for up to 227 jobs.  At the time I wrote:

The City of San Angelo approved a substantial investment in MedHab through job incentive money, paying for renovations, helping with capital equipment costs, paying a portion of a building lease, 100% tax abatement, dirt cheap space and refunding a portion of code compliance fees.
To date MedHab has only used city owned office space for $1 per year.  That could soon change.  The Development Corporation planning meeting mentioned a business incubator tenant moving out in the next six months.  MedHab's website has a different look, one a bit more promising of future developments.

I imagine the City's economic support has been a great selling point in Medhab's last two capital raises.  After missing many milestones MedHab could be closer to the rosy scenario painted on January 3, 2012. 

Sunday, April 06, 2014

Turner Ends ConchoInfo

After ten years Jim Turner stopped blogging on ConchoInfo.  He has provided an important voice in our community, especially at San Angelo City Council meetings.  Jim will be missed.

While Jim won't be adding new content, I hope ConchoInfo remains available as an important historical record.  I wish him well in his work and personal endeavors. 

Friday, April 04, 2014

Furniture Fiasco: Grindstaff's Micromanagement in Reverse

The Standard Times reported:

“We are not going to be throwing any mud,” said Elizabeth Grindstaff, who is running for SMD 5. “At least that’s not my intention.”

Grindstaff said she hopes to make San Angelo a friendlier place for business, having had experience both in city government and in the private-business sector.

“I believe in a kind of grass-roots approach,” Grindstaff said. “I believe in making development easier in San Angelo, in spreading out that tax burden.”

She added that she thinks the council should be a policy board and, while it should expect a lot from city staff, it shouldn’t micromanage.

And candidates shouldn't have lied to city council about the role they played in Council's biggest embarrassment, the purchase and installation of over $100,000 in Water Department furniture for the new City Hall.

A star player in the Furniture Fiasco Production could soon be sitting on the City Council dais.  That's not mud, but a simple fact.  Surprising San Angelo!

Update 4-7-14:  The Standard Times reported on a candidate forum hosted by the Tom Green County Democratic Party.  Elizabeth Grindstaff said:  "The city has a staff paid to do a good job, and council needs to listen and act accordingly.  The city needs to be willing to instill a conservation ethic in the community."  “We need people to get involved,” Grindstaff said. “Don’t wait until something is wrapped in a bow and ready for council to approve it, get involved in different committees, go to the hearings.”

Update 4-12-14:  Grindstaff's campaign finance report shows a number of donations from prominent locals, i.e. there are a lot of good people on this list.  With this kind of support I expect her to win a Council seat.  Council won't be able to reconsider a Texas Pacifico economic development grant with Grindstaff on council.  She would need to resign and Texas Pacifico wait six months before such an award could be considered.