Legislation could block proposal to charge customers for water based on property values

JACKSON, Miss. (WLBT) - State lawmakers appear to be taking a look at plans to change Jackson’s water rate structure, as evidenced by bills introduced this week that could prohibit the city’s third-party water manager from charging customers based on the value of their homes.

On Monday, Rep. Shanda Yates filed a bill that would amend state law to prohibit water bills from being “unreasonably preferential, prejudicial or discriminatory” and that rates “shall be calculated in equitable proportion to the services and benefits issued.”

The deadline to file legislation was January 16. The measure has been placed in the House Public Utilities Committee.

A similar bill was filed in the Senate by Sen. Joel Carter. It was placed in the Senate Energy Committee.

Both pieces of legislation come weeks after Interim Third-Party Manager Ted Henifin said he would like to implement a new water billing rate structure based on the assessed value of customers’ homes.

Henifin’s plan, if enacted, would replace the city’s current rate structure, which charges customers a flat rate for every 748 gallons of water used.

Henifin, who came to the city during the August/September water crisis as an “executive on loan” from the U.S. Water Alliance and took over as third-party manager at the end of November, says everyone needs to be working together to solve Jackson’s water problems.

“This is a tough enough job right now... trying to bring the system back around and get it onto a sustainable path... it’d be shame on us if we don’t find ways to ensure that Jackson’s really on a sustainable economic path, as well as a sustainable path to provide clean and safe drinking water to all Jacksonians,” he said.

“It’s disappointing that people want to put up some barriers before they’ve even had a chance to get out of the gate. But, you know, I’ll play the cards that we’re dealt, and it’s not going to keep me from trying to come up with proposals that can put us on a sustainable path.”

Yates was prompted to look into the measure after hearing from several of her constituents. Yates represents Northeast Jackson, an area that could be disproportionately impacted by Henifin’s proposal.

“I don’t hear from my constituents about a lot of things, but there was a huge initial outcry about this particular issue, and, so I told them, that I would look into it and see what, if anything, could be done,” she said.

Yates represents Northeast Jackson, which has some of the most valuable properties in the city. Ratepayers there could face higher bills as a result of Henifin’s proposal.

She says the measure is a starting point to see what the state can do to prevent property value-based billing from being implemented and said it could be changed during the legislative process.

“It’s not an unfairness argument. It’s simply more so this has never been done before,” she said. “How is this really going to work? Have all the issues been fleshed out? It’s more of a functionality sort of thing, and I do have a lot of questions. And I’ve asked those questions to Mr. Henifin, and he’s admitted he doesn’t have an answer for all these things yet.”

“It’d be an issue of Jackson potentially being a guinea pig with this type of billing system in the midst of all the other water issues that we’re having.”

Jackson has faced numerous water challenges in recent months. In August, the city’s main treatment plant shut down, prompting a temporary state takeover. In December, the system shut down again around Christmas, due to days of sub-freezing weather.

Henifin, who was appointed third-party over Jackson’s water system as part of a federal court order, recommended a property value-based billing as one of several steps to address Jackson’s ongoing water issues, in particular, those in the billing department.

He argues that the idea would be more equitable and would take the burden of higher water bills off poorer residents. He also told WLBT that he envisions a structure where bills would be no more than two percent of a person’s assessed property value and that rates would be capped to ensure that no customers would have artificially high statements.

The plan would also bypass Jackson’s “faulty” billing system, which court records say has “contributed to poor maintenance, limited capital improvements, and ultimately, system failures.”

“The federal dollars have been great, fabulous. But they’re all one-time infrastructure money,” he said, referring to the roughly $800 million in federal money coming to the city. “We really need to set a path for a sustainable future that’s going to generate enough revenue to support and maintain all the things we build with that wonderful infrastructure money.”

He says that even if the city collected 100 percent of bills under its current rate structure, the revenues would not be enough to operate and maintain the system.

“There are cities all over the country that aren’t fully funding their utilities and [it’s] just going to catch up with them at some point. It’s caught up to Jackson now,” he said. “So, the question going forward is... are there better ways to collect revenue to make sure that you’ve got enough money to move forward?”

He said Jackson’s debt service alone is $19 million. “You’ve got to raise that much before you can even maintain your system,” he said. “And then, your bondholders want you to have a little [in] reserves on top of that. And a good utility would have some cash on hand. So, [there are] lots of places to go. But I can tell you right now that we’re not raising enough revenue.”

According to the city’s latest bond catalog, since 2011, Jackson has issued $238.6 million in water/sewer revenue bonds. The bonds are to be retired using collections from the city’s Water Sewer Business Administration office. For fiscal years 2023 and 2024, the city will have to pay more than $19 million in principal and interest.

Even so, Yates says the idea isn’t sitting well with a lot of people. “I think before we change something like this so drastically, it needs to be very well thought out, very well executed, and not just done very quickly,” she said. “It’s going to cause more problems than it may potentially fix.”

Under the stipulated court order, Henifin has the ability to raise water rates in certain cases. However, Yates doesn’t believe the measure gives him the ability to change how water can be billed.

“He definitely has the ability to raise or lower rates. I don’t think anybody disputes that,” she said. However, she said the third-party manager likely would not have the authority under the order to go against state statute. If either of these bills passed, they would amend existing state statute.

“So, it’s not an issue for him to do this unless a state law is passed, at which point, I do not think the order would give him the authority to circumvent state law,” she added.

According to a copy of the stipulated order, the third-party manager is required to develop within 60 days of the court order’s effective date, a financial management plan to address short, medium, and long-term needs for the water system and water sewer billing system.

That plan “may include suggested rate structure changes or alternative governance options, including the mechanism for assessing customers for water and sewer usage and appropriate accompanying rates,” the court order states.

Henifin says he hasn’t taken a deep dive look at either bill but said on their face, they could prevent a property value-based plan from being implemented.

Yates says her legislation would not prohibit Henifin from raising rates, assuming it passed. “He would still very much have the ability to raise rates or lower rates, he would just have to do it based on usage.”

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