City Council transfers $18.4 million to third-party water system manager

JACKSON, Miss. (WLBT) - Jackson’s third-party manager now has some money to spend, a month after a court tapped him to take over Jackson’s beleaguered water system.

On Tuesday, the Jackson City Council approved transferring more than $18.4 million from city coffers into accounts managed by Interim Third-Party Manager Ted Henifin.

The majority of those funds, $15,149,500, will go into the ITPM’s capital improvements account. The rest, about $3.26 million, will go into an account to run both the water department and water billing department.

The transfers were approved on a 6-0 vote. Ward 3 Councilman Kenneth Stokes was absent from the meeting.

“We will be coming back... hopefully at the next meeting, so that we’ll be ready to go in February,” Deputy City Attorney Terry Williamson told the council. “Because under the order, we’re supposed to transfer $1 million each month.”

The $15 million transfer comes from the city’s American Rescue Plan Act which were awarded to Jackson directly as part of a federal COVID-19 relief measure. Those funds will go toward water infrastructure work.

The remaining $3.26 million comes from money the city budgeted to run the water division and Water/Sewer Business Administration office for the 2022-23 fiscal year.

Amounts did not include funding for salaries.

“We’re still kind of working through that and trying to determine how many of those employees will work for the third-party administrator but remain city employees, which means we’ll continue to pay them, or how many will be on his payroll,” Williamson said.

Chief Financial Officer Fidelis Malembeka said the third-party manager has established his own private companies to employ city workers and offer benefits.

According to the Mississippi Secretary of State’s Office, Henifin formed JXN Water, an S corporation, on December 7.

“I need to hire people, pay invoices, hire contractors. While that requires a business license, opening bank accounts, you’ve got to have a Federal Tax Identification Number. You’ve got to be incorporated. So, I’ve incorporated,” he said.

Some city employees, especially those who at or nearing retirement age, likely want to stay on with the city to receive full retirement benefits from the Public Employees’ Retirement System.

The question is whether Jackson would continue to pay those workers and hold those funds out of the court-mandated monthly transfer to the O&M account, or transfer all the funds and be reimbursed once the transfers are made?

“The logistics have to be worked out there,” Malembeka said. “The third-party manager has an established organization but would not have PERS retirement.”

Employees who were hired prior to June 30, 2007, are fully vested with four years of PERS membership at age 60 or with 25 years of creditable service, a copy of the PERS Membership Handbook states.

Malembeka was unsure how many employees were in the water department or WSBA or were close to retirement.

[What will be the fate of Jackson’s water plant operators under the federal court order?]

Henifin was placed in charge of the city’s water system as part of a federal court order.

In November, U.S. District Court Judge Henry Wingate signed off on an interim stipulated order, which placed the ITPM over the water system and water billing system.

The order, which is designed to bring Jackson’s water system into compliance with federal water quality laws, required Henifin to establish three separate accounts to fund order mandates.

The city was required to make the first transfers into two of the accounts within seven days of being set up.

A third account to fund Henifin’s office expenses, also was established. That will be funded by a grant from the Environmental Protection Agency.

In a January 3 filing, Henifin’s attorney notified the court that the operations and maintenance account and capital improvement accounts had been established.

This fiscal year, Jackson will be required to transfer $15,911,397 into the O&M account. The transfer approved by the council on Tuesday included the initial $2 million deposit and the $1 million deposit for the month of January.

Jackson also is required to transfer $22.9 million into the capital improvements account, less any amount the city has already spent on infrastructure improvements this year.

The $15,149,000 will go toward projects that were approved as part of a matching grant program established by the state last year.

In 2022, the Mississippi Legislature created the Mississippi Municipality and County Water Infrastructure Grant Program. The program provides a dollar-for-dollar match for cities and counties across the state that use their ARPA allocations to cover water, sewer and drainage work.

In November, Jackson was awarded $35.6 million in matching grants for a number of water and sewer projects.

Malembeka said Henifin would be responsible for implementing the water projects associated with the ARPA funding, and that the transfer had been approved by the state.

Water projects to be funded with ARPA include replacing a raw water pump at O.B. Curtis, installing a 48-inch transmission line from the J.H. Fewell to south Jackson and automating the chemical feed systems at Curtis and Fewell.

Work on the 48-inch main is about to wrap up. The amount the city spent on that project was held out of the funds it transferred to the capital improvement account, officials tell WLBT.

The roughly $7.6 million project will improve water service for residents in Belhaven, Belhaven Heights, parts of downtown Jackson, south Jackson and along the I-55 S corridor.

Henifin previously said that automating the chemical feed systems at Curtis, an improvement that could help the city better maintain water production at the facility.

Having an automated system also would have helped Jackson recover more quickly from the latest water crisis, which began around Christmas Eve, after a major cold front came through the area, damaging the city’s already fragile water infrastructure.

On Saturday night, Henifin had hoped to push more water into the distribution system, but production at Curtis fell off after the operator struggled to modify the chemical dosing based on temperature changes in the supply.

“What happens now is the operator watches, see it starting to change, dials in a little more [chemical], and has to wait and see the result, then dials in a little more, then usually dials in too much. And they have to dial it back down,” he said. “It’s this constant... dosing of chemical which you can avoid with a computer-based flow process.”

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