ROSELAND--The three-year saga of the failed Louisiana State Cypress plant in Roseland is close to resolution by State Agriculture and Forestry Commissioner Mike Strain.
He announced a $1.3 million settlement Nov. 23 with a Texas credit union after the state got stuck with loan guarantees made by his predecessor Commissioner Bob Odom. Strain will pay for most if not all of the loan guarantees from his agency budget.
The loan guarantees were for the $5 million cypress mill privately owned by partners Frank Vallot and Bill Bell. The partners received a $3.2 million loan guarantee from the Louisiana Market Commission. Louisiana State Cypress was supposed to employ 40 people with the potential to add another 40 employees as the company grows. The company failed--and the lender came looking to the Market Commission, and Commissioner of Ag and Forestry.
Here are some questions and answers in a complicated case that is far from over.
Q: How much did Commissioner Odom guarantee?
A: $7 million.
Q: How much was interest costing the state on this bad loan?
A: Strain said interest cost $1,500 a day.
Q: Where is the mill?
A: It's on a rural road in Roseland on about 35 acres.
Q: Any idea of the value?
A: The value is what a buyer will pay for the equipment and land. Equipment has been estimated around $1 million. The land appraised for $182,000 three years ago in 2009. That value is out of date as land values have fluctuated much since then. No lender would accept an appraisal more than a couple months old.
Q: What's the oversight?
A: The Legislature at some point allowed then-Agriculture Secretary Odom to make loan guarantees as long as the total did not exceed $20 million. In 1978, the Legislature removed oversight of the Louisiana Bond Commission over the La. Market Commission in guaranteeing these types of loans.
Q: What caused the failure of Louisiana Cypress?
A: Many factors. Walmart and others stopped buying cypress mulch under pressure from environmentalists. La. Cypress stopped paying its loan notes with Texans Federal Credit Union.
Q: How will the sawmill and lumber equipment be disposed of in Roseland?
A: Commissioner Strain says it will be auctioned off. The Texas credit union wanted its money--it did not want to take over the property and sawmill equipment. Forestry and lumbering is a big business in Louisiana and the Southeast, as well as other regions such as the Northwest. The condition of the sawmill equipment isn't clear. It is not new. The popularity of web-enabled auctions has grown and it could certainly expand the ring of prospects to bid on the equipment globally.
Q: Were others interested in what was left of Louisiana State Cypress?
A: At one time, Ponchatoula retired businessman Bill Johnson, 86, expressed interest in the past year. He hasn't spoken publicly about it since an initial announcement in the Ponchatoula Times.
Q: Will the La. Market Commission back any more of these business loans?
A: Commissioner Strain says no. He is now focusing on solving a similar bad loan with a Lacassine syrup mill that failed. His predecessor Bob Odom had guaranteed that one too. Strain said he dissolved the Market Commission.
Q: Who is Frank Vallot?
A: Frank Vallot was the owner of Acadian Cypress & Hardwood, a cabinet and architectural millwork supply company, on US 51 in Ponchatoula. The business has locations in five states – Texas, Louisiana, Florida, Arkansas and Oklahoma – and expects to generate sales totaling $45 million in 2005, according to the 2005 press release by Ag Secretary Odom. Acadian Cypress is near the site of Louisiana Cypress Builders, a pioneer in lumbering cypress in the Manchac swamps in the 1930s to the 1950s. It was owned by Col. Robert Lindsay.
Q: Will this affect others in forest products, lumber and sawmills?
A: It's too early to tell. On one hand, Strain's efforts to clean up the three-year court battle sends a positive message about the state and the La. Department of Agriculture and Forestry. On the flip side, lenders at commercial banks, land banks, private investors, venture capitalists and others with money may scrutinize deals all the harder.
The original news release from Commissioner Bob Odom in 2005
Cypress Sawmill Opens Today in Roseland
Release Date 7/8/2005
Louisiana State Cypress sawmill is open for business following a ceremonial board cutting today in Roseland, Commissioner of Agriculture and Forestry Bob Odom said.
“This is a great day for the people in this area,” Odom said. “New jobs have been created and landowners have another market for their timber.”
The $5 million mill is privately owned by Frank Vallot and Bill Bell. The partners received a $3.2 million loan guarantee from the Louisiana Market Commission. Louisiana State Cypress will employ 40 people with the potential to add another 40 employees as the company grows.
Odom praised the duo for their efforts to efficiently and effectively use the cypress resources surrounding the Florida Parishes mill.
“They pledged to make solid wood products first and to make mulch only as a by-product after every other inch of the log had been used to make boards. They are using the latest and best sawmill technology to get the most out of each log that comes in,” Odom said. “Most of these logs would normally go to mulching operations but Louisiana State Cypress will use them to make solid wood products that are in high demand by consumers. This is a huge commitment because for every 1 person it takes to make mulch it takes seven to make a board.”
Vallot said the mill will take cypress hardwood from Louisiana and Mississippi landowners within about a 100-mile radius from the mill.
“Initially we will only take cypress and we will do it in an efficient, sound manner,” Vallot said. “My partner, Bill, is a professional forester and member of the Florida Forestry Council. He has 22 years of experience is sustaining cypress forests so this will be done with great care and caution.
The company’s cash flow projections show $3.8 million for the remainder of 2005 and $7.6 million in sales next year.
Vallot is also the owner of Acadian Cypress & Hardwood, a cabinet and architectural millwork supply company, in Ponchatoula. The business has locations in five states – Texas, Louisiana, Florida, Arkansas and Oklahoma – and expects to generate sales totaling $45 million in 2005.
Vallot said cypress is the number one product used in his cabinet and millwork operations, but the limited number of local sawyers has taken a toll on his business.
“About seven years ago, I started looking into opening a sawmill. I had plenty of landowners to supply me with cypress but there weren’t enough mills to cut the products I needed,” Vallot recalled.
His solution to the problem was opening his own sawmill.
“Frank had the vision and determination to seek out answers and solutions to the problems he was facing in his business. He’s willing to take a risk to make things happen and that is to be applauded,” Odom said. “There’s no doubt in my mind that he will be successful in this venture and the entire community will benefit.”
Forestry is Louisiana’s highest valued agriculture crop. The payroll and income derived from money generated by the forestry and wood products industry totaled an estimated $5.3 billion in 2004, a 35.12 percent increase from 2003. Forests cover 14 million acres, about 50 percent of Louisiana's land area, making it the state's greatest single land use.