Thursday, February 20, 2020

Priester Speaks

Jackson Ward 2 City Councilman Melvin Priester, Jr. was nice enough to break down the Siemens settlement on his Facebook page for the rest of us:

Some quick thoughts regarding settling the Siemens Litigation.

This is a good settlement.

After attorneys fees, the City will net approx. 60 million.

Given that we did $30 million of consent-decree infrastructure work unrelated to the water-meter part of the deal, netting $60 is an outcome that works on multiple levels.

If we had gone to trial, we could have potentially earned much more. But we also could have lost and received nothing. We certainly would have taken several more years for a resolution and the atty-fees and costs would have been higher. Fifty/fifty odds of getting a positive judgment at trial worth $200 million, five years down the road, minus the even higher attorney fees give you a net present value value that lines up exactly where we are. That's why it's a solid, solid settlement.

What do we do with the money? This is the order I think we are required to go in.

1.) We repay the internal city accounts that we depleted to cover the shortfalls created by the crisis. So, a good chunk (approx. 12.5 million) will go back into the general fund to repay the loans from the general fund to the enterprise fund (i.e. the water-sewer department).

2.) We also have to replenish special accounts we are required to keep at certain levels within the enterprise funds as part of our bond covenants (note: I'm talking about bonds beyond just the Siemens bond).

3.) We repay the $7 million loan we took out last year to work on stabilizing the water-sewer billing system.

4.) Pay bills in the public works department that we have been deferring because of the water-bill crisis ($3million).

5.) Further repair the water-billing/metering infrastructure. Because we borrowed to do #3, we've actually made a lot of progress. We still have our challenges but I think when we get through #1-#4, we'll have enough to execute the plan for making the system work as it should.

6.) Pay on the loan associated with the Siemens projects.

So why not use all of the money and make a major pay down of the Siemens specific loan? #1 and #2 are legal requirements we have to do. So those automatically come off the top. #3 in a sense is a Siemens related loan and it has a very short term, so let's knock that out. #4, is a damage that results from the Siemens issues and are water related bills, so we need to pay those bills. #5, again is something we have to spend on to make things function. Plus, by doing #3 and #5, you get to the sort of functional space where you generate the income to service the debt.

What to do with repayment to the general fund? Honestly, we need to think about this. I certainly think we have to use it on hiring new people, esp. in the public works department and police departments. But I don't want to use a one-time infusion of money to create an on-going and indefinite expense. But the City has been extremely understaffed in core departments because we have not offered competitive pay. We offer extremely competitive medical benefits, but our pay is so low that we are working with a skeleton crew. The water-bill crisis has been a driver of that. On the other hand, I'm loathe to spend money received until I am certain we have things sorted in water-sewer.

Last thought: I know we've been focused on water-meters, but this issue is just a small part of a bigger structural problem. We have $600 million to $1 billion dollars of water/sewer repairs we need to make under the consent decree. Our population is declining and our population is made of way too many people struggling to make ends meet. Even if we get the water-meters and billing sorted, we still are confronting the existential challenge of what does it cost to fix Jackson, where is that money coming from, and how do we ensure that water bills are affordable for everyone.

I'm not telling you who to vote for, but without significant federal investment in urban water infrastructure projects, the people of Jackson will have to pay for the necessary maintenance and repairs to our crumbling water-sewer system. Pay that via what? Water bills. We have had a very important and significant event occur, but we're not out of the woods by a long shot. Still, we have some breathing room and I'm very thankful to be in this position rather than the cliff we were looking over just a few months ago.
No motion to dismiss nor notice of settlement has appeared in the court file.  Stay tuned.


Anonymous said...

Leave it to Melvin Priester, Jr. to act as the intellectual voice of reason and the "adult" in the room.

Anonymous said...

I am not opposed to contingent fee arrangements which are often the only way someone can get good representation. But are we to understand that the attorney fees on this non-litigated matter are going to be $30 million dollars!?

Anonymous said...

At least this guy puts forward some semblance of a plan. The problem is there is not a definitive plan this very moment.
They were planning to reach a settlement, they damn well should have an exact strategy and budget ready to go. The terms of the settlement outlining where every cent is going should have been released simultaneously. There are no new facts here just a final number. If nothing else an “ inflated plan” to make the whole should have been part of discovery. Establishing damages including future damages had to be part of trial preparation. Does this settlement adhere to and Is it financially sufficient to cover the cost to get the billing component corrected?

Anonymous said...

So a Birmingham based firm gets 30,000,000 dollars for less than a years work.


Anonymous said...

$30 mil in attorneys fees-

Anonymous said...

Standing by. "Whatever it takes."

Anonymous said...

Antar couldn't have penned this explanation if his life depended on it. Also doesn't have the balls to talk about the freaking $30 million that seems to have gone to the lawyers. (hey good for them) Priester is not a genius or anything (although top of his class for a year at Murrah!) but compared to other options he is a good choice to lead the city in the near future. If he can shake free of Bennie and his momma he has my vote.

Antar tries to be MLK or Obama or Morgan Freeman just reading a press release. Just talk like a normal person and quit trying to sound smart. Cause it isn't working.

Jeffrey Epstein didn't kill himself said...

"I'm not telling you who to vote for, but without significant federal investment in urban water infrastructure projects, the people of Jackson will have to pay for the necessary maintenance and repairs to our crumbling water-sewer system..."

Pardon me, but why would the federal government (in other words, YOU) be responsible for this, and /or make an investment in the city of Jackson? The city has been mismanaged for decades and critical preventative maintenance wasn't done - so now this is the responsibility of people outside of Jackson?

Sorry, but the city will have to file for bankruptcy, which will force city hall to act as adults and prioritize its spending. Stupidity isn't a just cause for a bailout.

Anonymous said...

Yes, because THIS is how city government should work... **eyeroll** how about a board work session and not an individual social media session to make these decisions?

Also, should we beat our chest before the money hits the bank?

Anonymous said...

$30 million in attorney's fees? I realize that this was done on a contingency basis, but I have to wonder if it was required to go through some sort of bid process? 1/3 of such a large sum is unreasonable in my opinion. I'll bet they could have found good attorneys who would have done it for less of a percentage.

Anonymous said...

KF is there any way to see what the collection rate is on all metered accounts monitored by the COJ? I don't have a Harvard MBA, but, uh, I don't know...getting collections up might be a great place to start. I'm all for helping people who are struggling to make ends meet, but please name one other service provider who will ignore 180day+ past due accounts and not shut off service... ATT & Comcast shure as hell won't. Entergy makes sure they get their check too. HELLS BELLS hinds county tax collector and a mortgage companies/banks will literally sell the property on the front steps of the courthouse if you don't pay. Even credit card companies will turn you over to collection agencies if you are behind. It's immoral for the local government to "pick-n-choose" which accounts it enforces.

Anonymous said...

Raise your hand if you are confident a huge chunk of this money won't end up in the general fund and go to the Mayor and councilmen's pet projects . . . or worse.

Anonymous said...

Morgan and Morgan attorney fees (considering every nickle and dime they also charge) are 45% if a jury is empaneled. 40% if filed and settled out of court. Do the math.

If tried in county court, you've gotta have a 12/12 to get a win. If moved to federal 8/12. Consider the risk inherent in not getting a dime. Quit bitchin'.

Anonymous said...

60 mil for the zoo!

Anonymous said...

I'm with 2:35, and serious question: Exactly what is the return to the federal government on an "investment" in the Jackson water system? Unless the word investment is just being used to mischaracterize spending to rectify years of incompetence.

"Whatever it Takes" said...

The reason that baby chok stated at the presser that he wasn't taking questions from the media is because of the $30,000,000.00 gorilla in the room.

There will soon be some disappearing money magic tricks.

Anonymous said...

Good explanation by Priester. Good day for Jackson. Keep moving forward to resolve the water/sewer issues.

Anonymous said...

"The cliff" will return very soon, except there won't be any big settlement coming.

In other news, I spent about 3 hours yesterday driving from UMC to St. D and Baptist in my Ford F-150. The damn streets are beyond horrible.

Anonymous said...

So Melvin gets praised for his highly intelligent approach without addressing the goofiness of the city giving $30M away. Why didn't Melvin "I'm brilliant" Priester push for a better deal on the legal fees? Surely the City Council had to approve the legal fee agreement. If not, Melvin should be addressing that problem

As for his tome on how the money will be spent, have we descended to the point that the obvious payments seem insightful?

Cynical Sam said...

@4:48 PM - But the streets at and around Baby Chok's house are well maintained, and his driver drives him in a city car, so if a wheel or two are damaged the generous taxpayers of NE Jacktown pay the bill.

Theca Jones of the Roguish Gent Podcast said...

@7:29 when you can't perform even the basics of city governance then, yes, the obvious is insightful. The descent began long ago while the rate of decline has accelerated under Mayor

Anonymous said...

@3:45 PM You are wrong on so many levels? First county court only has six jurors, and you only have to have 5 of the 6 in a civil case to get a verdict. In circuit court it is 9 of 12. Federal courts do it differently depending on the judge. I have have seen as few as seven in federal court. Regardless, Morgan & Morgan might well charge 40% and 45% respectively, but I assure you this case was over their tiny little heads. Be that as it may, my point is that with such a large amount in issue, the city should have negotiated a much better percentage than 1/3. There are plenty of very good lawyers out there who could handle the case and would have gladly charged a lot less of a percentage. And my original point was that I wonder if this contract was required to be bid out, because if the city had bid it out, it would have been a much lower percentage.

Anonymous said...

Federal court requires a unanimous jury verdict. If the case looked like a slam-dunk, maybe the city could have gotten a competent litigation firm to take it for less than the standard 1/3 contingency fee. Maybe the city could have gotten someone to take it on an hourly rate, but that would have required a large retainer paid up front to bill against. A client can't rewrite an attorney fee contract after the fact based on the result of the case. That makes no sense in any business relationship where outcomes are uncertain.

Remember ALL your bankers said...

I'm glad to see that someone is at least considering the question of what to do with the money - if it is received at some point down the road.

But like the Councilman says, the first place that the money should go is to repay what was "borrowed" due to the water/sewer fund being depleted.

That includes all the various 'loans' that Priester mentions, which were from funds that the Council has the oversight over. No faulting his logic there.

But he failed to mention the one other major outstanding loan of the water/sewer enterprise fund - the $15 million or so that was borrowed from the 1% Sales Tax monies - which should also be repaid from these dollars as the debt comes due in September and there is little chance that the money will be in the enterprise fund to repay these loans otherwise.

With that being done, there can be additional street repair, drainage projects, and other work done throughout the city. And without it, the water/sewer operation will have to continue operating on a shoestring, eventually leading to an EPA takeover of the system.

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