How is my water bill going to change? Third-party manager reveals plan to shore up Jackson’s water finances

JACKSON, Miss. (WLBT) - Customers in the capital city are likely going to see major changes in their water bills come October 1, so says the city of Jackson’s court-appointed water manager.

On Friday, Interim Third-Party Manager Ted Henifin revealed his plan to shore up Jackson’s water finances over the next five years, including implementing a new billing rate structure that would base customers’ bills in part on their homes’ value.

The aims of the plan are not only to bring in more revenue but to pay off debt, restore the city’s bond credit rating, restore confidence in the billing system and ensure the city continues to bring in enough money to maintain its beleaguered water system once the roughly $1 billion in federal assistance runs out.

“[The federal funds are] going to do wonders to get the system back in working order, but [they’re] not going to keep it in working order if we don’t have a recurring source of revenue,” he said.

[Read: ‘Stars have aligned for Jackson’: Mayor announces $800 million in federal funding for water, sewer]

Under the proposal, residential customers would pay at most $150 a month for water, while business customers would pay, at most $600.

Henifin says the median residential bill now is around $50 a month. As for the business cap, “that’s going to probably be a little bit high, and for many is going to be low,” he said. “It’s going to be an economic incentive, potentially, to bring your business, your restaurant, to Jackson.”

He says 92 percent of the city’s roughly 50,000 residential customers would pay below the cap, and that only ratepayers with a home valued at $160,000 or more would pay the full amount.

“I think that there will be outliers and all these cases where people are gonna say, ‘Oh, it’s way more than I currently pay,’ or ‘that’s way less than I currently pay.’ [But] we have to settle on something,” he said.

Currently, the city charges customers a flat fee for every 748 gallons of water used. However, the city’s billing system has been in shambles for years, in large part, due to complications stemming from the Siemens contract.

Jackson brought on the firm a decade ago to install a new, high-tech billing system that would allow meters to communicate directly with the billing office. However, that system never worked.

The city currently has a contract to replace those meters with Sustainability Partners. With more than half of the Siemens meters replaced, revenues for the last fiscal year were up. However, many customers say they’re still not receiving bills while others say their bills are too high.

Henifin, meanwhile, issued a stop order to Sustainability Partners in December, saying many meter boxes - the casings that enclose the meters - will have to be reinstalled.

“I definitely think we could get the meters in place and maybe fix the billing system in a year or two,” Henifin said. “I don’t think I can build confidence in that meter system in a generation.”

Henifin was named third-party manager over the city’s water system on November 29. As part of the federal court order appointing him, he was required to draw up a financial plan showing how he would short, mid and long-term needs for the water system. He submitted that plan to the U.S. Department of Justice, Environmental Protection Agency, Mississippi State Department of Health, and the city of Jackson around midnight.

“Again, this was done quickly... We know we can generate the revenue we need in this particular model. So, that’s the magic numbers that we need at the moment, and I think that what they’ll do is generate enough money to put us on a sustainable path, again, where we’d have 90 days’ cash in the bank in five years [and] generating $20 million a year in capital improvement money to plow back into our system year after year after year.”

Henifin’s plan is contingent, in part, on whether the Legislature approves a measure blocking it.

Two bills are currently making their way through the legislature that would prohibit municipalities from charging for water based on anything other than water used. S.B. 2338 passed the Senate on Thursday and was transmitted to the House. A similar bill has passed out of a House committee but as of Friday afternoon had not been brought up for a vote.

Rep. Shanda Yates, who authored the House measure, says she hasn’t had a chance to fully read through Henifin’s plan. She says revenues would likely increase if Jackson fixed its current billing system, rather than put in place a new rate structure.

“What do we actually get if we just fix the problem and have a metering system that works effectively and efficiently like every other city has?” she asked. “I don’t know if that data and information are in his report or not, because I have not had a chance to look at all of that.”

Henifin initially didn’t elaborate on what would happen if that legislation passed, but later said if the current structure remains in place, customers will see a 50 percent rate increase this fall, followed by additional incremental increases over the next 20 years.

“You need to jump the rate really as high as you can in one year at the beginning, and then you need to do a series of smaller... rate increases over the next 20 years,” he said. “You can’t just ramp it up with a percent or two a year. It doesn’t work. You’ve got to jump in at the beginning so that you can so... it gets to the 90 days’ cash on hand and the five years $20 million dollars a year... investment available going forward.”

Henifin also addressed whether he would push the proposal if he saw a backlash from residents. “I’m here for the city of Jackson. And, so, if there’s widespread reaction from the 160,000 people that benefit from the water, obviously, I’m going to retool this to make it work for the citizens,” he said. “If there’s widespread reaction from other parties, I’m not so sure I’m going to change it much and I can drive it forward.”

The plan was drawn up by PFM, a Philadelphia-based financial advisor, and Stantec, a consulting firm with headquarters in Dallas.

Another big part of the proposal includes using a portion of the city’s federal allocation to retire the city’s $290 million in outstanding water debt.

Much of that debt comes in the form of revenue bonds, which are based on the amount of water/sewer revenue the city generates each year. Henifin says the city currently pays about $23 million a year to cover its debt service, more than a third of what the city council budgeted to bring in as part of the 2021-22 budget. (The 2022-23 budget was not available on the city’s website.)

“This debt’s killing us,” he said. “On top of that, I’ll talk about the other big addition on top of that, which is the metering... that’s another $10 million. So, between debt service and metering, we almost need as much money as it takes to operate the whole system.”

With those expenses, the city does not have the money to set aside in reserves, as required by its bond covenants, a fact that has not gone unnoticed by the credit rating agencies.

“When you want to borrow money, you gotta go up to New York and you got to visit with Standard & Poor’s, Fitch, and Moody’s. And they hold a lot of power because they determine, based on their analysis, what your credit rating is going to be,” he said. “Right now, you’re in the B, double-B, lower A-minus, B-minus... basically junk bonds. We could not go to the market today and borrow money for the city of Jackson’s water system.”

“So, the goal here is to get to the point where we could do that if we needed to.”

Henifin says if the city pays off the $290 million using federal funds, it would still have enough left in allocations to make significant system improvements.

“We’ve got about a billion dollars. When you add all those sources together, we can still make all the repairs we need to make to make this system sound and sustainable,” he said. “And then remember, we’re on a path to start generating $20 million a year in five years.”

“Spending this one-time expense to retire debt is not hurting us at all,” he said. “And frankly, we can’t spend all of that money in five years anyway.”

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