Editor's note: This story has been updated to clarify that bond attorney Jonathan Charleston says he did not withhold information from the City Council to bring in a private equity firm to operate the PWC.
Former Fayetteville City Councilwoman Tisha Waddell said she thought something might be amiss shortly before the first meeting to discuss a private equity firm’s proposal to pay millions of dollars upfront to operate Fayetteville’s Public Works Commission for 30 years.
On that day - June 19, 2019 - Waddell said she was summoned to a meeting to discuss the proposal with other council members and representatives from the PWC and Bernhard Capital Partners Management, an equity firm out of Baton Rouge, Louisiana.
Waddell said council members were separated into groups for the meeting. Typically, the City Council does its business in public. At times, it will enter into a private meeting to discuss business matters. In order to do that, though, the council must provide the public with an agenda that includes its intentions to hold a closed meeting and a brief description stating why.
But on this day, Waddell said, the council didn’t have to do any of that. Separating into groups assured that a majority of council members would not be present. Without a quorum, the meeting did not require public notice. The council was free to meet in secret.
Waddell said she thinks that separating the council into groups was a way to circumvent North Carolina’s open meetings laws.
“I think that sometimes the small group meeting is so that we can have conversations and not feel like we have to guard what we say,” Waddell said. “But I always think that is an attempt to circumvent public disclosure, even in that instance.”
City officials declined to comment on whether meeting in small groups was designed to circumvent the law, saying that is a question for council members. Councilman Johnny Dawkins acknowledged that it did happen.
Fayetteville lawyer Randy Gregory said he attended the meetings at the request of former state Sen. Tony Rand, a Fayetteville lawyer who Gregory and others say encouraged Bernhard Capital Partners to pursue a public-private partnership with Fayetteville. Rand died in May 2020.
Gregory said Rand set up the meetings and asked that two of them be held to ensure that everyone could attend. It was not an attempt to circumvent the open meetings law, Gregory said.
Waddell said she did not hear anything more about the Bernhard offer for months. But she said she thinks negotiations were happening privately among Colvin, city bond counselor Jonathan Charleston, Steve Benjamin, the mayor of Columbia, South Carolina, and representatives from Bernhard.
By mid-November of 2021, Waddell had become so frustrated with what she calls a lack of transparency and a failure to follow policies and protocol that she resigned abruptly from the council. In her wake, she left a five-page resignation letter containing broad and unspecific allegations, many pertaining to Colvin and the proposed deal with Bernhard.
In the letter, Waddell also alleges:
CityView TODAY continues to look into those allegations.
In her resignation letter, Waddell said that if the council doesn’t investigate her allegations, the city’s residents should take it upon themselves to call for a state or federal investigation into “corruption of members of the City Council.”
Colvin has repeatedly called Waddell’s allegations “baseless.”
CityView TODAY spent more than a month investigating Waddell's allegations concerning the Bernhard proposal. While it found no signs of corruption, it did find evidence showing that people were working behind the scenes to try to broker a deal with the equity firm.
Fayetteville is not the only city Bernhard Capital Partners has asked to enter a concession agreement to operate and maintain their public utilities. The equity firm has courted cities across the Southeast, including more than 10 in North Carolina. None is reported to have accepted an offer so far. Bernhard did acquire Louisiana’s largest private sewer utility operator in 2020.
As North Carolina’s sixth-largest city, Bernhard viewed Fayetteville’s Public Works Commission as the prize, offering much more money upfront than it did the other, smaller cities, partly because Fayetteville is the only city in the state that generates its own electricity. There was talk that the firm could open a headquarters in Fayetteville, bringing in new jobs.
Bernhard’s proposed agreement with the city and the PWC would provide upfront money and benefits totaling more than $750 million to have Bernhard operate and maintain the PWC for 30 years and to pay off PWC's debt. The money would be used to repair the city’s ailing infrastructure.
In exchange, Bernhard would reap PWC’s return on all existing assets and capital additions. Under the concession agreement, the utility’s employees would remain in their jobs and the city would continue to set their wages and control customer rates.
Whether the deal would have been good for Fayetteville remains a matter of debate. The city struggles with stormwater problems, aging water and sewer infrastructure, and a section of western Fayetteville that is still without public sewer 16 years after being annexed with a promise to provide those amenities. (Sewer has been extended to about half of the 40,000 residents of that area.)
“Tony's proposal was to help it get some funds, to use the equity in PWC to try to do something,” Gregory said. “They are sitting down there on many millions of dollars this county could use, the city could use.”
But the PWC eventually balked at the proposal and in May of 2021 officially got out of the negotiations.
In a statement announcing that negotiations had ended, PWC board Chairman Wade Fowler wrote that Bernhard Capital Partners “has not established the transparency and trust necessary for PWC to continue discussions or evaluation of this significant financial transaction that would potentially have had implications for decades to come.”
That should have put an end to any further discussions, PWC officials say, but Bernhard representatives continued to hang around.
A paper trail obtained through state public records laws and other means gives a look into how the proposed concession agreement unfolded.
A document marked confidential in red and dated May 15, 2020, shows that Bernhard initially proposed a concession agreement that would provide the city and PWC between $350 million and $400 million upfront, with another $59 million going to defray the remaining costs of the “big bang” annexation of 2005, including refunds of assessment fees charged to people in the annexation area.
“The proposed partnership would provide a substantial infusion of private investment into Fayetteville, immediately delivering capital for infrastructure projects without raising taxes for a bond,” Bernhard partner Jeff Jenkins wrote to Colvin.
Fourteen days later, another letter marked confidential from Jenkins to Colvin promised to increase the upfront fees to between $420 million and $470 million, and to accelerate completion of Phase V of the annexation by three years, from 2026 to 2023. Bernhard also promised to retire or annul all PWC-issued debt, a total of about $329 million, according to the documents.
A separate confidential document dated the same day says the concession agreement would provide the city more than $750 million in benefits, with delivery possibly coming as soon as Aug. 20, 2020.
Bernhard made it clear in its letters that it wanted to fast-track the concession agreement. In a May 15, 2020, heavily redacted letter to Colvin titled “City of Fayetteville - Proposal for a Concession Agreement,” Jenkins wrote that “substantial value” could be provided to Fayetteville and its residents within eight to 10 weeks.
At the end of another heavily redacted document from the same date titled “City of Fayetteville - Proposal for a Concession Agreement,” Jenkins wrote by hand: “Mayor Colvin, 11 copies of this proposal are within the envelopes. Let’s get to work.”
Bernhard also made clear that it expected negotiations with the city and the PWC to be conducted privately, with as little public knowledge as possible. It took nearly two years from the time the council first heard about the Bernhard proposal before it became public. And it became public only when Dan Kane, an investigative reporter for the Raleigh News & Observer, wrote about it in April 2021.
Part of the reason it may not have been known publicly for so long is that, on Sept. 16, 2020, the city entered into a confidential nondisclosure agreement with Bernhard. The PWC signed its own nondisclosure agreement - commonly referred to as an NDA - with Bernhard in July 2020 and later tried unsuccessfully to back out of it.
A document obtained by CityView TODAY through an open records request says the city could find no record that the council discussed the NDA in a closed session.
CityView TODAY has obtained an audiotape of a closed session from March 2021. On it, Waddell alleges that the NDA for Fayetteville was signed by City Attorney Karen McDonald. Waddell said she was never made aware of the NDA until later. McDonald signed it without telling council members, Waddell said.
On the audiotape, McDonald acknowledged that, in hindsight, council members probably should have had a say in whether to sign the document.
In an email, McDonald said city staff likely advised that they found no records of the NDA being discussed in a closed meeting because those records remain sealed. New city spokeswoman Jodi Phelps added that the records would be part of a closed session and not public unless the council voted to make them that way at someone’s request.
McDonald declined to verify whether she discussed the NDA in a closed meeting, citing attorney-client privilege.
Waddell said the NDA kept the council from revealing almost anything about Bernhard’s proposal to the public.
“When you read this NDA, you will see that from a legal perspective, there was nothing for the city, like we could do nothing,” Waddell said. “Like all we could do was just be quiet and listen. We could not, based upon that information, we could not inform the public of what was going on. We could not have dialogues about it without being in violation of the NDA.”
Amanda Martin, a lawyer for the N.C. Press Association, said the NDA, which has a two-year expiration date, is likely legal because it adheres to state law pertaining to “trade secrets” and also uses the term “confidential information.” Gregory and Charleston said NDAs are used in such business dealings as a matter of course.
When it came to Bernhard Capital Partners, secrecy appears to have reigned long before the nondisclosure agreement was signed.
Waddell said that during the city’s 2020 general operating budget negotiations, she tried to push for a bond issue to pay for infrastructure improvements. But the more she pushed, she said, the more resistance she got and the more frustrated she became.
“So I began to have that discussion at that point and say, ‘listen, why don't we move this ahead?’ ’’ Waddell said. “And at that time, I started getting calls from members of the community, and as these calls were coming in, they were people who were kind of tied into the know. And they were sharing with me about this private equity firm they were hearing about, which jogged my memory and made me remember Bernhard and Bernhard’s entire premise was that they were going to give us all this money for investments in infrastructure.”
After that inaugural meeting with Bernhard in June 2019, Waddell said she never heard anything more from city staff or elected officials about the firm’s proposal until after she sent an email to all of the council members on April 29, 2020. She provided a copy of that email.
“Good afternoon all,” she began. “I have received several calls over the last few months regarding a "private equity firm" who may be looking into an arrangement with the City regarding our fund transfer dollars from PWC to create a partnership to address infrastructure concerns the City currently has. Have any of you heard anything about this? I am trying to find more information!”
At some point afterward, Waddell said, Colvin initiated a private Zoom conference between council members and Bernhard representatives, who she said provided no “significant details” of the firm’s proposal.
Long before then, Bernhard had been asking for documents from the city that would help move the negotiations along.
Two months after the first meeting with the equity firm, the city received an email from Julius Bedford, who identified himself as “part of the team at Bernhard Capital Partners interested in exploring a potential partnership between our firm, the City and the PWC.”
Bedford requested a lengthy list of information, including a detailed schedule of historical and projected PWC revenues and costs, and any recent studies or analyses of rates and capital investment needs.
In her resignation letter, Waddell alleges that Colvin had been communicating with Bernhard “without the involvement of the council and without direction to engage them.”
In an exchange of multiple emails, Colvin repeatedly declined a request from CityView TODAY for an interview to respond to the allegations.
“As you stated I have discussed these matters in great detail on the record. So I’m not sure what I can add to this,” Colvin wrote in one email. “It seems Ms. Waddell should give some specifics to her accusations. Until she does I’m not sure we have anything further to discuss.”
In a later email exchange, a reporter asked Colvin to send him the statement he had already made about Waddell’s allegations. Colvin had previously given a statement to The Fayetteville Observer.
His reply: “I’m sorry, that would be a lot of work. I’m sure the FO articles are available.”
In a Fayetteville Observer story published shortly after Waddell’s resignation, Colvin told the newspaper that members of the City Council have been diligent “to handle the public’s business in a transparent manner.”
“I am proud of City Council’s work to bring new opportunities to our city similar to what is occurring in other cities around the country," he told the newspaper. "Any reasonable examination of the facts will show that Waddell’s accusations are unfounded, baseless and nothing more than her attempt to smear reputations. Most folks will quickly recognize that Waddell’s allegations have more to do with politics than facts."
But when it comes to transparency, it doesn’t appear that Colvin had been sharing all of his correspondence to and from Bernhard with the City Council.
The audiotape of the closed session from March 2021 includes a contentious exchange between Waddell and Colvin. On the tape, Waddell asked repeatedly whether Colvin had provided all of the correspondence he had made and received concerning the Bernhard proposal. She said only two or three of the documents had been shared with her.
Colvin said he would look again but was quite certain he had shared everything. Documents obtained through public records requests to the city and the PWC show Colvin had written, received, or was copied on significantly more letters than Waddell said were provided to her.
“We at the council level never received those items,” she said.
Allegations of a lack of transparency are not new to Bernhard. In January 2021, the Jacksonville Daily Record of Florida reported on findings by a special investigative committee assigned to look into possible violations surrounding the proposed sale of the city’s utility. Bernhard was among the companies that had bid to buy the Jacksonville Electric Authority.
“A yearlong Jacksonville City Council investigation shows evidence that Mayor Lenny Curry’s administration engaged in a “multi-year” effort from 2017-19 to sell JEA and shielded some actions from the Florida Sunshine Law and the public,” the newspaper reported.
The city released a 132-page report of the committee’s findings. Among its conclusions: “Knowing that public sentiment disfavored transferring JEA to private ownership, the city’s effort to market JEA was conducted with a purposeful lack of transparency.”
It doesn’t appear that the Fayetteville City Council is going to conduct a similar investigation into Waddell’s allegations. The council’s Audit Committee announced at a Dec. 6 work session that it didn’t have the authority to ask the council to discuss whether an investigation is warranted. The N.C. School of Government had the same opinion, said Dawkins, chairman of the Audit Committee.
“I believe it's an item that we don’t need to move forward on,” Dawkins told the council that night.
But the council could bring the matter to a vote if a council member requests one. Councilwoman Yvonne Kinston said she hasn’t decided whether to do that.
“I can't say on the record right now how I'm going to proceed,” Kinston said. “I'll just say I'm still looking at those options, because things are developing and coming out daily. So I do want to make sure I'm doing the right thing.”
Kinston said she probably wouldn’t have enough council votes now to approve an investigation.
City Council members are divided on whether they believe negotiations with Bernhard lacked transparency. Council members Dawkins, D.J. Haire, Larry Wright Sr. and Kathy Keefe Jensen said they don’t believe the negotiations were withheld from them or the public.
“I would not concur with there being any kind of lack of transparency,” Dawkins said.
All four of those council members said they think Waddell’s allegations are without merit. They also said they regret Waddell’s decision to resign but were not surprised because of the tensions between her and Colvin during the last two years.
Council members Kinston and Shakeyla Ingram agree with Waddell’s assertion that the details of the negotiations with Bernhard were kept from the council and the public. Council members Chris Davis and Courtney Banks-McLaughlin did not respond to requests for interviews.
Bernhard Capital Partners released a statement attributed to Jenkins, the Bernhard partner, about its role in the negotiations.
“Throughout our discussions with the City of Fayetteville and PWC, we have conducted ourselves in a professional and ethical manner,” the statement said in part.
The statement did not address other questions CityView TODAY asked Bernhard to answer, including:
Greg Barnes is an investigative reporter for CityView TODAY. He can be reached at firstname.lastname@example.org. Have a news tip? Email news@CityViewTODAY.com.