Reeves: State has never denied water funding to Jackson, cannot discriminate under federal statute

JACKSON, Miss. (WLBT) - Mississippi has never denied Jackson federal money to address water needs, according to a letter Gov. Tate Reeves sent to Reps. Bennie Thompson and Carolyn Maloney.

Monday, Reeves released an 11-page letter he sent to the representatives in response to their inquiry into how the state distributed and would continue to distribute federal funding for water infrastructure work.

Reeves refutes claims that the state had discriminated against Jackson, including telling Thompson and Maloney that the state has approved every application the city submitted for loans under the Mississippi State Revolving Loan Fund.

“My administration is deeply committed to ensuring that all federal funds received by Mississippi for drinking water system upgrades have been in the past and will continue to be in the future made available and distributed among Mississippi’s more than 1,100 water systems on an objective and race-neutral basis,” he wrote.

He also touted the $35.6 million Jackson received in American Rescue Plan Act funds through a new state grant program, as well as the state’s efforts to help restore water to tens of thousands of customers during the Jackson water crisis.

“There is no factual basis whatsoever to suggest that there has been an ‘underinvestment’ in the city or that it received disproportionately less than any other area of the state,” he wrote. “To the contrary, the city has never been denied a request for DWSRF funding.”

SRF loans are the typical way states allocate federal funding for infrastructure work. Cities must apply for the funding, with applications prioritized based on an annual intended use plan, and then funded based on available money.

“Specifically, in FY 2021, Jackson was awarded assistance from the DWSRF in the amount of $27,953,300, that is 68.4% of the total funds disbursed and over 93% of the total amount [awarded] to large communities... throughout the entire state of Mississippi,” the governor said.

In all, records obtained by WLBT - and first reported on by Jackson Jambalaya - show that since 1996, Jackson has only applied for water SRF loans three times, including in 2021 for “O.B. Curtis Water Treatment Plant and J.H. Fewell Water Treatment Plant and water distribution system improvements,” that year’s application stated.

Each time, the city received the full amount requested. However, the governor also tells the representatives that Jackson has only drawn down on about $16 million of that.

Jim Craig, senior deputy director of the Office of Health and Protection with the Mississippi State Department of Health, backed up the governor, saying of the roughly $28 million awarded in 2021, none had been drawn down, but the city has contracts in place obligating most, if not all of it.

Thompson and Maloney contacted Reeves on October 17, seeking several pieces of information, saying “Thompson has long expressed concern about Mississippi’s failure to allocate to Jackson it’s fair share of federal funding, including infrastructure funds.”

Also in October, the NAACP filed a civil rights complaint with the EPA’s Office of Environmental Justice and External Civil Rights seeking “an immediate investigation into the use of federal funds related to drinking water in Jackson.”

As part of its complaint, NAACP said Jackson had only received SRF funding three times, and that the state had “repeatedly... deprived Jackson of federal funds to maintain its public drinking water system in favor of funding smaller, majority-white communities with less acute needs.”

The NAACP complaint was signed off on the National NAACP, the Mississippi State Conference of the NAACP, NAACP President Derrick Johnson, Jackson Mayor Harvey Johnson and others.

Former Mayor Johnson told WLBT the city did not apply for SRF funding during his time in office, in part, because Jackson received better interest rates on revenue bonds.

Johnson served from 1997 to 2005 and again from 2009 to 2013. SRF loans come with a 1.5 percent interest rate, according to state documents. A $40.5 million revenue bond issued by Jackson in 2003 had an interest rate of 4 to 5.25 percent through 2011, while a $35 million bond carried annual interest rates ranging from 4.875 to 6.75 percent, according to copies of the bond documents.

Jackson only applied for SRF loans in 2016 ($10,861.920), 2019 ($12,903,093), and in 2021, documents show, and the city only applied for those after water/sewer revenues began to drop off under the Siemens contract.

The city brought on Siemens around 2013 to overhaul its billing system, in part, to increase WSBA revenues. However, the system never worked, and Jackson’s water/sewer enterprise was nearly bankrupted as a result.

Johnson said the real question is whether the mechanism used to determine which projects received SRF loans was fair, a question he could not answer.

Drinking water SRF loans are administered by the Mississippi State Department of Health, which must submit an annual Intended Use Plan (IUP) to the federal government each year to show how federal funds are distributed.

“How is that priority listing... established? And how was it implemented?” Johnson asked. “Was it done in a fair way or was it discriminatory? I don’t know the answer to that.”

The former mayor’s comments contradict the stronger language in the NAACP complaint, which claims that “the condition of Jackson’s water facilities is no accident” and that numerous state agencies “engaged in a long-standing pattern and practice of systematically depriving Jackson the funds that it needs to operate and maintain its water facilities in a safe and reliable manner.”

They also run counter to concerns raised by Thompson and Maloney in their October letter.

Reeves, meanwhile, maintains the state has placed no “roadblocks” between the city and its efforts to receive state funding, and that Jackson’s financial problems are the result of billing system mismanagement.

He pointed to “a $17 million deficit in 2019 (which was reduced to a $10 million deficit in 2020 due to a $14 million infusion from a legal settlement with Siemens).”

Siemens was responsible for replacing all of the city’s commercial and residential water meters, installing new billing software at WSBA and putting in place a network of transmitters and repeaters to allow meters to communicate with the billing office. The system, though, never worked, and tens of thousands of customers quit receiving regular bills as a result.

Citing those issues, the Lumumba administration sued Siemens for billing system complication in 2019, eventually receiving a nearly $90 million settlement.

Jackson, in turn, gave about $30 million of that to attorneys and used a good portion of the remaining proceeds to prop up its water/sewer enterprise fund, another fact Reeves pointed out in his letter.

Thompson, a Democrat, chairs the House Committee on Homeland Security. Maloney, also a Democrat, chairs the House Oversight Committee. CNN reported that she lost her bid for reelection to Rep. Jerry Nadler in August. In their letter to the governor, the two ask for:

• A breakdown of localities, utilities and other entities that have received or will receive state funds from ARPA and the Bipartisan Infrastructure Law, including the amount received and the racial demographics and populations of areas receiving the awards.
• A detailed description of the additional layer of oversight the city of Jackson is subject to under the Mississippi Municipalities and Counties Water Infrastructure Grant Program.
• And an update of the state’s intended use plan (IUP) for its drinking water revolving loan program, including the intended use plan’s limits on SRF loan principal forgiveness, and the racial demographics of the locations that received drinking water loans in 2022 and/or loan forgiveness, and whether the state would lift the $500,000 cap for forgiveness.

Reeves said that the state does not award funds based on race, in part, because doing so “would violate a number of federal laws, including Title VI [of the Civil Rights Act].”

However, he said that using ZIP code and U.S. Census Data, the state determined 76.6 percent of $41 million in SRF loans awarded in 2021 went to “applicants that serve a majority Black population,” while 41.3 percent of funds awarded in fiscal year 2022 also went to applicants serving majority Black populations.

Thompson, Maloney and NAACP also questioned the $500,000 cap for SRF loan principal forgiveness, with NAACP saying the cap does little for a capital city facing a billion dollars in water infrastructure needs.

Abre Conner, director of environmental and climate justice with NAACP, told WLBT previously that the state’s draft IUP for the current fiscal year set the loan forgiveness cap at $2 million. However, when the plan was re-written to include larger cities like Jackson, the cap was reduced to $500,000.

She said reducing the cap amount gives Jackson little incentive to apply for the forgiveness. “It makes it a little bit less likely that they may want to go through all of that, you know, all of the paperwork for that kind of funding structure, as opposed to a smaller city,” she said. “And, so, for [a small] city, that may make a lot of sense. But for a city as large as Jackson, that’s not going to cut it.”

Reeves, though, says the cap ensures “that principal forgiveness is available to as many ‘disadvantaged communities’ as possible.”

“Pursuant to the IUP, ‘disadvantaged communities’ eligible for principal forgiveness are determined on a race-neutral basis,” Reeves explained. “The amount of principal forgiveness is determined by calculating the percentage of the median household income of the state,” he wrote. “For example, an applicant with a household income 70% or less of the state median household income will be eligible for 45% principal forgiveness.”

Further, he says the IUP regulations are written up based on directives of Congress, which “place emphasis on assisting smaller drinking water systems to ensure that these systems have adequate technical, managerial and financial resources to achieve or maintain compliance.”

The total amount of SRF loans awarded to the state since the program’s inception in 1997 has been slightly more than $261 million, according to state records.

Between 2011 and 2016, the city alone issued nearly that much, $211 million, in water/sewer system revenue bonds, possibly another sign that the SRF program was not designed to serve such large cities.

Reeves goes on to state that the governor’s office “play[ed] no role” in setting up the IUP. That duty falls to the Mississippi State Department of Health.

As for the additional level of oversight placed on how Jackson spends state dollars, Reeves discussed two pieces of legislation. One created the “Capital City Water/Sewer Projects Fund” and mandated that all state money Jackson receives go into a special account that would be governed by the Department of Finance and Administration. Reeves said that bill was sponsored by Jackson’s legislative delegation and passed “with the unanimous support of all Democratic and all Black members of the Mississippi Legislature.”

To date, though, no money has been put into that account.

Reeves also discussed S.B. 2822, which created MCWI. Under terms of that measure, all funds Jackson receives through the grant program will go into an account governed by the Mississippi Department of Environmental Quality. However, no other cities or counties in the state must submit to the additional oversight. The governor did not say why Jackson is subject to that oversight or why the requirement was included in the bill.

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