Cooperative Endeavor Agreements Unveiled: A Thorough Guide

Cooperative Endeavor Agreements 101

A cooperative endeavor agreement (CEA) is an agreement made in the interest of the public. Specifically, the purposes of a cooperative endeavor agreement can be economic or social in nature, and sometimes both. For example, the parties may intend to stimulate or expand trade, commerce, industrial development, or employment opportunities, or a charitable, educational, or community purpose. Importantly, the public interest has been broadly defined to incorporate a wide range of purposes. As such , a CEA can relate to a public service, project, or activity that is not necessarily within the province of government. The key characteristic of a CEA is that it promotes the public interest. Courts, agencies and other entities charged with reviewing or implementing a proposed CEA should therefore carefully consider the public purpose stated in the agreement in determining whether the agreement is a CEA and the impact of any related obligation on the public interest.

The Law of Cooperative Endeavor Agreements

Cooperative Endeavor Agreements are covered by a Constitutional, statutory, and judicial framework.
First, Article VII, Section 14(C) of the Louisiana Constitution provides that "[e]xcept as provided in Paragraphs (D) and (H) of this Section, no money shall be drawn from the treasury except in pursuance of an appropriation made by law."
Paragraph (D) provides for public-private arrangements like Cooperative Endeavor Agreements. It states that "Section 14. No money shall be drawn from the treasury, nor shall any obligation be incurred against the state, any parish, municipality, or other public corporation, except pursuant to specific appropriation by law. However, this Section shall not prevent the rendering of services on a free or gratuitous basis by any public officer or employee of the state, any parish, municipality, or other public corporation or other political subdivision of the state."
Paragraph H allows for dedications of the state’s share of tax revenues from sports gaming to qualified infrastructure projects.
Second, the Louisiana Legislative Auditor publishes guidance on the use of Cooperative Endeavor Agreements.
Third, the Louisiana Attorney General publishes an Opinion in which it stated: "In sum, the Attorney General’s office has consistently recognized for over forty (40) years that the holding of cooperative endeavors between a recipient, like the Chamber of Commerce, and a government agency, like the Iberia Parish Airport Authority, provides a lawful method of ‘passing public funds through such agency to the governmental unit or agency making the appropriation, giving the governmental unit or agency the broad authority to designate the entity to which the appropriation should be paid.’"
"The controlling factor in deciding whether or not an agreement can be defined as a valid cooperative endeavor, is that in order for such an agreement to be valid, both parties (the public body and the private body) must receive a benefit from the agreement. Treateaux v. Tangipahoa Par. Drainage Dist. No. 1, 2009-538 (La. App. 5 Cir. 2/16/10), 37 So.3d 1146; Vallon, Inc. v. City of New Orleans, 95-278 (La. App. Orleans/4th Cir. 11/16/95), 664 So.2d 123; St. Bernard Par. Comm’rs Ass’n v. St. Bernard Par. Gov’t, 2002-104 (La. App. 5 Cir. 5/28/02), 820 So.2d 1037."
"In determining whether a competent person or company performed work for the benefit of the public body, the Louisiana Supreme Court has focused on the consideration of whether the private party or recipient of public funds was adequately compensated beyond the benefits associated with the public purpose of the program. The courts take the position that as long as the private entity receives benefits of equal value, no matter how it is structured, the transaction will not be viewed as forbidden payment from public funds. The fact that the private entity which receives public funds obtains an ancillary benefit (beyond the stated public purpose for which the expenditure was made) does not mean the expenditure is inappropriate or constitutes an improper public "gift." Such is the case where the benefit to the private party is simply the "opportunity to participate in a program" administered by the public body, with no further monetary compensation (including the incidental right to sell space).
"This reasoning is consistent with the restrictions contained in the Louisiana Legislative Auditor’s opinions regarding the propriety of paying for office space, telephone service, postage, travel and lodging expenses, and giving equipment and supplies to private non-profit associations like the Chamber of Commerce."

What Constitutes a Cooperative Endeavor Agreement

A typical CEA includes several key components:
(a) Purpose. CEAs require a clear statement of the public purpose to be achieved and the general nature and type of benefits that the public will derive from the venture. See Boudreaux v. Plaquemines Parish Government, 2008-2289 (La. 3/10/09), 8 So.3d 75; Wiggins v. City of Baton Rouge, 2005-1413 (La. 7/10/06), 934 So.2d 114; and LSA-R.S. 47:332 (La. Special Session 2008), Act No. 27, § 6(A)(11).
(b) Parties. All parties to the venture must be parties to the CEA. See Coquille Basin Lev. Dist. v. Plaquemines Parish Gov’t, 2001-2630 (La.App. 4 Cir. 6/19/02), 820 So.2d 1048, 1051.
(c) Benefits. The public body must obtain "direct benefits for the public from the proposed activity." La. Atty. Gen. Op. No. 10-019 (6/14/10); LSA-R.S. 47:332 (La. Special Session 2008), Act No. 27, § 6(A)(11). In Coquille Basin, the Court explained that "[w]here there is no direct benefit to the public [from the activity], the agreement fails to meet the public purpose test." Coquille, 820 So.2d at 1051 (citing Rivertree Apartments and Shopping Center, Ltd. v. Alexandria City Council, 646 So.2d 1063, 1064 (La.App. 3 Cir. 1994)). Thus, "generalized public benefits rather than specific direct benefits do not satisfy this requirement." Id. (citing Leclercq v. St. Bernard Parish, 450 So.2d 111, 116 (La.App. 4 Cir. 1984)). The use of "the word ‘direct’ means that the public body is benefiting from the benefits derived from the activity itself, rather than benefits derived from the consequence of the activity." La. Atty. Gen. Op. 10-019 (6/14/10).
(d) Funding. The CEA must set forth how the public body will fund its performance obligations in order to ensure that it will respond financially to those obligations. See LSA-R.S. 47:332 (La. Special Session 2008), Act No. 27, § 6(A)(13); La. Atty. Gen. Op. No. 10-019 (6/14/10). This is necessary to ensure that the public body "has made financial arrangements to provide funds for undertaking its obligations under the cooperative endeavor agreement" in order to "assure citizens and taxpayers that the arrangement is not a mere promise, disguised gift or donation." Id. (citing State v. Interstate Consolidated Industries, Inc., 2000-2296 (La.App. 1 Cir. 12/28/01), 804 So.2d 623, 626 (La.App. 1 Cir. 2001), writs den’d, 803 So.2d 35 (La. 5/20/02)). The CEA should also demonstrate how the economic benefits to the private entity outweigh any increases in costs incurred by the public entity due to the venture. La. Atty. Gen. Op. 10-019 (6/14/10).
The revenue generated from the project is often used to fund the public body’s performance obligations. LSA-R.S. 47:332 (La. Special Session 2008), Act No. 27, § 6(A)(9). The public body’s performance obligations should "be commensurate with the economic benefits derived from the proposed venture and offset by revenue generated by the venture." La. Atty. Gen. Op. 10-019 (6/14/10).
(e) Performance. A CEA must state the nature and extent of work to be performed by each party, list what property each party will contribute to the venture, and assign value to each party’s contributions. LSA-R.S. 47:332 (La. Special Session 2008), Act No. 27, § 6(A)(7). The CEA should state the methods or criteria used to determine the valuation of contributions to the venture, unless such methods or criteria have been previously set by ordinance or other means. LSA-R.S. 47:332 (La. Special Session 2008), Act No. 27, § 6(A)(7)(b). Actions taken pursuant to the CEA must be open to public input or review and must not be contrary to existing laws. LA. R.S. § 47:332 (La. Special Session 2008), Act No. 27, § 6(A)(10), (12), (14) and (15).
(f) Consideration. There should be evidence that both parties are offering more than "mere generalities or a promise (by one party) to take some action (in the future), without more." Pignalberry v. Accounting Serv., LLC, 2005-512 (La.App. 1 Cir. 3/23/06), 931 So.2d 483, 492 (citing Rivertree Apartments, 646 So.2d at 1064).

Advantages and Disadvantages of Cooperative Endeavor Agreements

Cooperative Endeavor Agreements present many advantages to various entities making them increasingly important in today’s economy. State or local government bodies can transfer public funds and other resources to a private business entity or individual for a public purpose to stimulate economic growth. For private businesses, Cooperative Endeavor Agreements can allow them to defray the cost of certain activities that may increase business.
Benefits to Local Government
Local government may enter into an agreement with a private entity, provided that agreement furthers one or more valid public purposes and that the private entity provides a substantial benefit to the local government, or any combination of these factors. Coop Endeavor can be a means of raising revenues and creating other economic development. Under St. Tammany Parish Ordinance No. 5164, for example, the purpose of the ordinance is:
[T]o provide for the use of…Local Services Agreement, Municipal Assistance Agreements, Cooperative Endeavors Agreements, Tax Increment Financing and Development, Economic Development Districts, Tax Abatement, Employee Training and Development, Human Resource/ Work Force Development, Grant writing and Public-Private Partnership Services, Federal, State, Region and Parish Government Agency e.g. Chamber of Commerce advocacy, and Technical Business Development Services for the purpose of economic development…
Benefits to Private Business Entities
Private business entities may enter into CEA’s with local governments or quasi-governmental agencies to enhance business and/or stimulate the economy. Under St. Tammany Ordinance No. 5160, Property owners are authorized to enter into agreements with the Parish to share in the costs associated with the acquisition, construction, installation, or providing for retail, commercial, and professional development in the unincorporated areas of St. Tammany Parish.
Risks to Public Entity
The Court addressed the risks associated with Cooperative Endeavor Agreements in Greater Baton Rouge Port Commission v. State of Louisiana, 13-CA-14 (La. App. 1st Cir. 2014):
Under various circumstances various local and state governmental bodies have entered into financing, bonding, leasing and development agreements for the construction and operation of public facilities and transportation systems… [T]he legislature, in granting authority to enter into [Cooperative Endeavor Agreements], provided that … Special Purpose Corporations formed pursuant to [La. R.S.] 39:98.1 et seq., appreciated full exemption from all state, parish and municipal taxes in connection with such projects.
Cooperative Endeavor Agreements usually include a hold harmless provision:
The [Company] and the [Agency understand and agree that the [Company] and all persons acting on their behalf are to be liable for any harm or injury caused to any person, property, municipality or agency caused by the [Company’s] negligence or willful action or omission to act in the performance of the transaction covered herein or by any employee, representative, director, or officer of the [Company] acting within the course and scope of the employment and/or representation of the [Company]. As a condition of the execution of this Agreement, the [Agency] covenants and agrees to indemnity, defend and hold harmless the [Company], its partners, shareholders, members, managers, officers, directors, employees, agents, successors and assigns, as well as their respective partners, shareholders, members, managers, officers, directors employees, from and against any and all suits, claims, causes of action, losses or damages, including reasonable attorneys’ fees, court costs and other legal costs that are brought by third parties, including but not limited to the [Agency’s] employees, agents, representatives, political subdivisions, independent contractors and corresponding corporation, commission, authority, board, district, subsidiary, or other instrumentality of the [Agency], and that arise out of the actions or work performed by the [Company] in furtherance of this Agreement, except to the extent that said actions or work performed by the [Company] were due to the negligence of the indemnified parties.
The Parish, Cotter, and related parties shall not be liable for any damages or loss sustained by the [Company], its partners, shareholders, members, managers, officers, directors, employees, successors and assigns, or their respective partners, shareholders, members, managers, officers, directors, employees, investment banker or agents, in connection with the execution and performance of this Agreement, legal fees, litigation costs, or for any indirect, incidental, consequential, special or exemplary damages.
Private entity also agrees to indemnify public entity:
To the fullest extent permitted by law, [Company] shall indemnify, defend, save and hold harmless the [Agency] and its respective agents, servants, employees, officials, and members, as well as their respective successors, assigns, agents (including any investment banker), servants, and employees, from all actions, claims, demands, lawsuits, settlements, judgments, liabilities, damages, punitive damages, costs, expenses, and fees (including reasonable attorneys’ fees and costs), resulting from or arising out of the performance of this Agreement or the [Company’s] acts or omissions, negligent or otherwise, that result in damages to any persons or parties, including but not limited to the [Company]’s employees, agents, representatives, independent contractors and all persons, corporations, municipalities, commissions, boards, districts, subsidiaries, and other instrumentalities of the [Company] or any other private person, corporation, municipality, commission, board, district, subsidiary, or other instrumentality of a private person. Notwithstanding the foregoing, the indemnities granted herein shall not apply to any damages, claims, demands, lawsuits, settlements, judgments, liabilities, damages, punitive damages, costs, expenses, and fees resulting from or arising out of the negligence or willful misconduct of the [Agency] and its respective agents, servants, employees, officials, and members.

Cooperative Endeavor Agreements: Real-World Applications

Cooperative endeavor agreements are not just theoretical tools for municipalities. There are various real-world examples of such agreements already having been successfully utilized. Consider the following:
Lease and Operations of a Business Park
Such an agreement may be used by a municipality to retain the services of a private entity to lease and operate a business park for a period of up to 50 years instead of 30. An example of this occurred with the Port of Greater Baton Rouge.
Inter-Governmental Contract
Forms of cooperative endeavor agreements can also be used between two or more municipalities or even in agreements between a municipality and a private entity. For instance, the Louisiana State Museum has entered into an intergovernmental contract with the Department of Culture, Recreation, & Tourism covering the terms under which it will house and assume responsibility for the statewide administration of State and federal archives, historic preservation, genealogy, and other genealogical programs and facilities (both on and off-site). Collectively, these functions are commonly referred to as the "Louisiana State Archives . "
An agreement was also entered into by St. Tammany Parish and the City of Slidell for their joint use and maintenance of the Slidell Municipal Water System, including all related properties, rights of way, easement, facilities, and appurtenances. This agreement gives Slidell control over the system, and the Parish has agreed to contribute money from its general fund to pay for some of the system’s operating costs.
Use of Tax Increment Financing
Tax increment financing can constitute another tool available to municipalities in financing a cooperative endeavor agreement. For instance, in 2005, the City of New Orleans entered into a cooperative endeavor agreement with the Industrial Development Board of the City of New Orleans to issue tax-exempt bonds to provide funds to finance a 132,000 square-foot expansion of the warehouse of the University of New Orleans Real Estate Foundation. The project also included tenants in the adjacent Commerce Center. A portion of the revenue generated from the development will be dedicated to financing certain public infrastructure improvements and public school projects around the UNO campus.

Crafting a Cooperative Endeavor Agreement

Cooperative endeavor agreements must comply with the public purpose doctrine, Louisiana Constitutional provisions, and all other legal restrictions imposed by statutes and jurisprudence. This can be complex and is not something that should be prepared in-house without thorough legal research by an attorney experienced in cooperative endeavor agreements.
Many CEA’s are proposed as last minute addendums to leases (or sometimes development agreements) and/or even in those instances where a lease or development agreement is not involved, they are proposed several months, if not years, after the project has already been through the legislative process and exhausted its political capital. When properly prepared, the CEA supports the project rather than the reverse. As such, the CEA should be provided to bond and tax counsel years prior to the first dollar in tax credits and/or bonds being sold (if applicable). In short, appropriate legal guidance is critical to the CEA process.
Using the appropriate template CEA, which varies by jurisdiction, simply insert all of the relevant factual details of the project, confirmation of legislative authority, and detail terms of the obligations of the parties, including: Sometimes the CEA is mistakenly treated as optional "consideration" for the other agreements and not treated as a separate binding obligation. It is easy to get caught up in the details of other related agreements and forget the key elements of the CEA, including: As a further note, CEAs (as agreements) are not sanctioned by the Louisiana State Bond Commission. Louisiana’s Constitution authorizes any pledge of earnings, revenues, or income of the state, or any political corporation, municipality, and other public or quasi-public corporation or authority by provisions in the finance documents, and not by a CEA.

Cooperative Endeavor Agreements Revisited: Where They Stand Today

Today, cooperative endeavor agreements are more important than ever in connecting the private sector with the public sector. This is especially true since the relationship between the public and private sectors continues to evolve. Now more than ever, private entities manage government facilities and perform public services as parties to cooperative endeavor agreements. Such relationships highlight the necessity for significant legal protections because private entities assume the risks and responsibilities traditionally associated with governments as parties to these agreements. Relying on the legality of cooperative endeavor agreements, private entities frequently finance, construct, maintain, and operate public properties and infrastructure as parties to these agreements. As private entities assume the roles of the public sector , they become stakeholders in the communities within which they operate.
The communities in New Orleans are not only partners but are also stakeholders in cooperative venture agreements. Hundreds of millions of dollars in currently anticipated investment from private entities in government operated infrastructure, public facilities and spaces, and major sporting events in New Orleans are testament to the importance of cooperative endeavor agreements. Governments at every level benefit from cooperative endeavor agreements by realizing financial and social goals that improve citizens’ lives. As the composition of public entities in the State of Louisiana evolves over time, cooperative endeavor agreements will remain an invaluable tool for collaboration.