The Siemens settlement was apparently used to settle everything but the Siemens debt - all $90 million of bonds plus $102 million in interest.
The city of Jackson issued $89.990 million in 2013 series special obligations bonds to finance the ill-fated Siemens project. The projected attempted to replace all water meters with a more hi-tech version guaranteed to generate more revenue for the city. However, the project turned into a catastrophe and blew up the billing system, crippling the water/sewer system for years.
The city of Jackson sued Siemens and settled in 2020 for $89 million, the full amount of the debt. However, it appears the city did not use the settlement to repay any of the bonds.
JJ reviewed bond documents and was able to determine the balance of the bonds as of a year ago. Posted below are the annual balances of the Siemens bonds.
2024: $72 million
2023: $74.6 million
2022: $77 million
2021: $79 million
2020: $81 million
2019: $83 million
2018: $85 million
2017: $86.7 million
2016: $89.9 million
2015: $89.9 million
It is probably safe to estimate the balance should be approximately $70 million now.
Unfortunately for Jackson, the failure to repay bonds means Jackson will get jacked on the interest. Check out the schedule posted below (copied from the official statement)
Yup. Jackson gets to pay $102 million in interest over the life of the bonds.The game plan for the use of the settlement funds was spelled out by then-Ward 2 City Councilman Melvin Priester, Jr. in a Facebook post:
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.
In his usual effort at being serious, Mayor Lumumba held two town halls so the "community" could say how it wanted to use the funds.
Kingfish note: Apparently paying the bills was just not a priority. The Siemens settlement was a great deal for the lawyers, bankers, and bondholders who will enjoy getting $102 million in interest.
This might explain why U.S. District Judge Henry Wingate went on the warpath yesterday.
13 comments:
Chok got himself a major award for "changing their communities and country with their commitment to public service."
He changed Jackson for sure.
For the Lumumbas, Antard and Rukia, all the town halls, listening sessions, people's assemblies, etc are 100% performative fake crap.
Harvard should pay it. Put their money where their mouth is with the award they gave the former mayor.
People like Antard and Rukia see leaders and they want the glory, the money and the notoriety those people are given but...they have no clue how to do the actual work such positions entail.
And they had zero interest in learning.
They just want to wine and dine at Char, brag about awards and hold press conferences to feel famous.
And there are so many low IQ voters that Chokwe deserved his turn. It was their time. And Choke new he could blame any shortfalls he had on racism and the idiot citizens would defend him.
It worked. It's actually an impressive racket.
Who do you hold accountable? People who have long left office? I am astounded that our judicial system does not have a court-appointed oversight entity when such large sums of money are in play. Otherwise, it's one big cookie jar and everyone's dirty little hands are going to be in it.
#1 = $12.5 mill, #2 = $???, #3 = $7 mill, #4 = $3 mill - so are you saying they should have had about $40 million to put towards the bond principal? It appears that they are just paying the yearly amounts according to the amortization schedule.
I believe I saw in earlier post the former mayor stated all the Seimen’s settlement money, to the penny, could be accounted for. I got a feeling he’s going to have to prove that. When it comes to politicians and money, they look out for themselves first, everybody knows that.🌞
With that kind of money in Choke's pocket he may have left the country by now. (One can only hope).
What was the date of Mr. Priester's post?
What's another trillion or two in deficit when Congress is counting?
Ten million here and ten million there and pretty soon we are talking about real money. Right?
So, what's the solution? Raising water bills over and over again? We know that isn't going to happen, especially if the City retains control of the water system after Henifin.
The Congo doesn't extradite to the US and his surname would fit right in. He could claim that he is Patrice's long-lost grandson. Right?
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