NC town official’s endorsement of public-private deals lacks a key detail: Who he works for
In an opinion article written for local media, Morrisville Town Councilman Steve Rao advocated for public-private partnerships along the lines of those a Louisiana company is pitching around North Carolina.
What he didn’t mention in the article is that he works for a lobbying firm that represents the company. In interviews with The News & Observer, Rao said he did not know Louisiana private-equity firm Bernhard Capital was a client of State Federal Strategies, the lobbying firm where Rao has worked of counsel since June.
“There was no correlation,” said Rao, who is not a lobbyist.
But public records show a colleague of Rao’s at the firm provided him with information about Bernhard Capital three months before he submitted the opinion essay.
Documents The News & Observer obtained this week from the Town of Morrisville show Rao received an email on Jan. 24 from Richard Sullivan, a partner with State Federal Strategies who is registered as a lobbyist for Bernhard. The email was titled “Background Documents,” and Sullivan said he was sending a one-page summary about “North Carolina Municipal Services [a Bernhard Capital Company],” and a general presentation pitching the company’s concession agreements to manage public utilities. Those documents were attached to the email.
Asked about the email, Rao said he “may have known” State Federal did some work with Bernhard, but he didn’t know the company was a client.
“I honestly didn’t know,” Rao said. “Nobody told me. Maybe I need to get better about asking.”
Rao submitted his piece as officials with two cities have shown interest in the concession agreements — Fayetteville and Kinston. The board of the Fayetteville Public Works Commission, which is separate from the city government, said in an opinion article in The Fayetteville Observer this week that it wants to fully disclose the details of Bernhard’s proposal and has asked the company to agree to lift a nondisclosure agreement.
“This release would allow us to have a transparent conversation with our community about the full understanding of the concession offer and impact it would have on essential electric and water services, customer bills and the financial health of the PWC,” the board wrote.
Bernhard has contacted roughly a dozen communities across North Carolina offering to pay them, in some cases, tens of millions of dollars to manage their utilities for decades, The News & Observer revealed in a story published April 10. Two days later, Rao sent his opinion article to N&O Associate Opinion Editor Ned Barnett.
Pitch for public-private infrastructure partnerships
“I hope all is well and I am sending you this Op Ed in response to the Dan Kain (sic) Article,” Rao wrote in an email to Barnett. “I actually think Public Private Partnerships work well for Towns and we need options like the one talked about in his article.”
The N&O hasn’t published the op-ed, but WRAL’s opinion section posted it April 13.
WRAL’s posting included this editor’s note: “Steve S. Rao is a council member at-large and former mayor pro tem of Morrisville and serves as a board member for the New American Economy, a bipartisan coalition of mayors and business leaders, committed to comprehensive immigration reform. He also serves on the N.C. League of Municipalities M Task Force on Race and Equity.”
That editor’s note is word-for-word how Rao describes himself on the op-ed he submitted to the N&O.
(After this story was posted Friday, his op-ed to WRAL was amended to include an apology: “I want to apologize that I did not disclose that I serve as of counsel for State Federal Strategies, a government relations and lobbying firm. At the time of my Op Ed, I was not aware that Bernhard Capital was a State Federal client and any opinions I share with any news media outlet is in my role as a public official and not to position or sell any products or services for specific companies.”)
In the op-ed, Rao wrote that there is a huge need for infrastructure investment, but he didn’t mention Bernhard Capital by name.
“For local leaders struggling to balance the need for critical investments in infrastructure with the need to invest in other priorities that would position their communities for long-term competitiveness and viability, it is imperative to consider alternative and nontraditional financing approaches,” he wrote. “Private-sector partners can bring unique solutions to these communities, with readily available capital not bound by traditional financial restrictions and experienced leaders who bring decades of public- and private-sector expertise in maximizing the performance of infrastructure systems.”
In another op-ed piece on immigration policy that the N&O and WRAL ran nearly six months ago, Rao mentioned his work for State Federal Strategies: “He also serves as Of Counsel to State Federal Strategies, where he advises them on the Technology Practice.”
Morrisville is not among the communities where Bernhard is pitching a concession agreement. Rao said he didn’t know what other communities Bernhard is reaching out to beyond those the N&O initially reported.
Bernhard Capital is a private equity firm out of Baton Rouge, Louisiana. Documents obtained from three North Carolina communities show it is offering tens of millions of dollars in upfront payments in exchange for managing publicly-owned utilities for 30 years. It would collect the revenues from those utilities during that period and expects to come away with an 8 to 11% return for its investors.
Many specifics in Bernhard Capital’s preliminary proposals are not being disclosed as some communities have signed nondisclosure agreements with the firm.
Bernhard quietly began approaching the North Carolina communities two years ago; they are among roughly 100 across the Southeast the company is pursuing.
During that time, the company’s leaders have made campaign contributions to Gov. Roy Cooper, a Democratic state senator in Fayetteville and a political committee committed to keeping Republicans in control of the state Senate. The company also said it sought and received advice from Dan Gerlach, the former president of the Golden LEAF Foundation and a former top aide to then-Gov. Mike Easley, without paying him.
Correspondence provided to the N&O by Fayetteville city officials shows Sullivan reached out to city officials in September and October 2019 to help gather information so Bernhard could make a proposal. That was at the same time Sullivan registered as a lobbyist for Bernhard.
Last year, the company added Doug Miskew, a lobbyist with Public Sector Group.
Frayda Bluestein, a professor with UNC-Chapel Hill’s School of Government, said there is no state law that addresses disclosure of conflicts of interest in a public official’s “speech and expression.”
Morrisville has a written policy for “Code of Conduct and Commitment to Ethics.” While it says council members “should endeavor to create an environment of transparency and candor at all times in the governmental unit,” it does not mention potential conflicts of interest.
Jane Pinsky, director of the NC Coalition for Lobbying and Government Reform, said while state law and local ordinances may not require such disclosure in the case of opinion articles, elected officials should do so.
“Good government requires that elected officials go beyond the letter of the law and err on the side of openness and transparency,” she said. “At this moment in time when trust in government is at an all-time low, our elected officials need to do everything they can to restore that confidence, and openness and transparency is a key way.”
This story was originally published April 30, 2021 at 11:19 AM.