Jackson Jambalaya

JXN Water Manager Ted Henifin made it clear Jackson's water/sewer system should return to its control.  Mr. Henifin released a transition report that recommends converting JXN Water to a non-profit company that will continue to operate the system. It is a safe bet such a proposal will not be taken too kindly by the wise men of Jackson.   

Mr. Henifin first slapped Jackson with some history in his transition plan: 

When the Stipulated Order was entered, the staffing levels of the city water and sewer divisions, and WSBA were a fraction of the size required to adequately run the utility. Equipment was in disrepair as well. As a result, nearly all operations had to be contracted out by JXN Water to rapidly restore service to the community. Those contracts engage 288 full-time equivalent positions.

before making it clear why he recommended against giving the water/sewer system back to the city of Jackson 

At the time the Stipulated Order was entered, water and sewer rates were significantly below levels needed to generate adequate revenues to fund a utility of the size of Jackson’s. Historically, the elected officials would not raise rates to appropriate levels and even since the Stipulated Order was entered, the elected officials have twice failed to support required rate increases and, incredibly, actively opposed the second one, delaying implementation by nearly one year and significantly undermining the financial position of both the City (as to debt payments) and the utility. Instead of supporting the critically necessary rate increase – which was validated by the City’s own rate expert - the City asserted that the utility should “tighten its belt” and “live within its means” as do City departments. That is exactly the approach that led to decades of failure and the ultimate collapse of the water system. Moreover, the City has consistently violated and sought to have JXN Water violate the City’s bond covenants by paying debt service ahead of operating expenses when the bond covenants expressly require the reverse....

On top of the lack of will to raise rates when needed, the City also has a shocking record of not pursuing collections – often due to elected official intervention. When the Stipulated Order was entered only 50 percent of ratepayers receiving a bill were actually paying the bill. Most utilities collect 95 percent or more of their bills.

The lack of political will to raise rates or collect payments for services provided raises serious questions about the wisdom of returning the system to the full control of elected officials in Jackson. The water and sewer system is burdened with significant long-term debt created by flawed decisions of the City leadership. 

Indeed, the city blew up its finances with the Siemens deal, only raised rates twice in a decade, and repeatedly issued moratoriums on water cut-offs for non-payment of services, regardless of who was Mayor. However, that is just the water system.  The Receiver has more to say about the sewer system;

On top of the water system mismanagement, the sewer side is even worse. Decades of mismanagement led to a federal consent decree in 2013. City leadership ignored even that federal intervention, with the Department of Justice conceding in open court in 2023 that the sewer system was in worse shape in 2023 than it was when the Consent Decree was entered in 2013. That led the Court to take over the sewer matter as well.

Ouch.   

Mr. Henifin opines any entity operating the water/sewer system should be completely independent from  Jackson government.  The law allows the city to form a Utility Commission but the city would be able to replace commissioners at will.  "Election transitions would likely trigger turnover in the Commission with patronage,"  said the Receiver. You think?  See CMU.   

The legislature created the Jackson Metro Water Authority when it passed HB #1677 this year.  A nine-member Board of Directors would govern the authority.  The Governor (3), Mayor (3), Lieutenant Governor (1), Ridgeland Mayor (1), and Byram Mayor (1) appoint Directors.  However, Mr. Henifin points out U.S. District Judge Henry Wingate blocked part of the law and the case is on appeal. 

There is also the matter of bonds.  The system has $150 million in debt.  HB #1677 allows the Authority to lease the system's assets from the city of Jackson.  However, the Receiver says it will be hard for the Authority to borrow money when it does not own the assets outright as well as keeping the debt on the city's books. A double whammy for both parties.  

Mr. Henifin addressed the option of privatization.  Privatizing the water/sewer system avoids the obstacles of the other two options: 

The City of Jackson, in consultation with the court, could seek a private owner/operator to purchase the water and sewer system. Many cities around the country have privatized these systems. The private owner would be regulated by the State Public Service Commission.

The Receiver acknowledges one flaw in privatization is the company could focus more on short-term profits instead of investing in the system.   However, there is a final option, one that is little discussed but drew great favor from the JXN Water Manager. 

Section 51-41-1 of the Mississippi Code allows the creation of a corporation - non-profit or for-profit - to manage a water system in order to comply with a court order.  The Court could convert JXN Water to a non-profit entity with a Board of Directors. All Directors must be customers.  The Court could appoint the initial board of directors.  By-laws could provide the procedures to elect Directors from the rate payers. (KF: Nothing stopping the by-laws from establishing minimum qualifications for Directors.).  

The non-profit could issue debt to be used to purchase the assets from the city of Jackson.  

Kingfish note: Can't disagree with one thing he wrote although HB #1677 would be the best route to go.  The politicians of Jackson are not capable of operating the water system.  The recent court fight over a rate increase was simply more evidence.  When Henifin tries to raise rates, they bitch.  When collection rates are too low, they bitch.  When he cuts off water service for non-payment, they bitch.  All these bitches know how to do is bitch, right.  It's what they do.