City won’t receive $20M grant to pay off customer water bills, debt written off instead

JACKSON, Miss. (WLBT) - Just hours after the People’s Relief Campaign was launched, Mayor Chokwe Antar Lumumba stood in front of reporters touting a $20 million grant received to fund the program as an example of promises made, promises kept.

The announcement was one of several made by officials including the mayor, JXN Water, and community organizers before and after the program began telling customers the funds had been made available to forgive their old water and sewer debt.

“We told you that we were going to find a way to provide relief and equity to residents. And now you see that happening,” the mayor said.

However, at the time those announcements were made, the city had not received the grant and just days after the program officially got underway, JXN Water learned the grant wasn’t coming in.

Even so, nearly $13 million in customers’ bad debt has been forgiven, with JXN Water “writing off” the amounts, rather than using grant money to pay it.

Interim Third-Party Manager Ted Henifin says the reason for the mistake is because of a miscommunication from the U.S. Department of Health and Human Services. He said the funds were pretty much guaranteed to the city at a meeting with the agency prior to the kickoff date of the relief program. However, he only learned later that the information shared by department officials was incorrect.

“There were dollar signs floating in all of our eyes, thinking we were gonna bring in some serious federal dollars to Jackson,” he said. “It wasn’t until after that [kick-off] date that we get a notice from Health and Human Services person that was doing the talking in our... meeting... says, ‘Oh, I misspoke.’”

“The air went out of the room quickly when we learned that.”

The grant would have come from the federal Low-Income Household Water Assistance Program (LIHWAP) and was designed to help customers pay off old water and sewer debt that had accumulated prior to the city’s third-party manager taking over.

As customers signed up and their debts were paid, money from that grant was supposed to be transferred into the city’s water/sewer enterprise fund, not only retiring debt but boosting city revenues.

It turns out Jackson never received the funding and the nearly $13 million that was supposed to be paid off using those funds were actually written off by JXN Water.

“There wasn’t a firm $20 million. Not sure where that number came from on the $20 million originally. I think it came from my staff, so I’m not saying it hasn’t floated around,” he said.

Henifin says Jackson is expected to receive about $960,000 in LIHWAP money from funds awarded to the state. However, that amount is far less than the $20 million previously announced by city and water officials. It’s also $19 million less than was initially expected to end up in city coffers.

Even so, Henifin says customers are still seeing debt relief, but instead of those uncollected amounts being paid off, they’re being written off by JXN Water.

“So, the $13 million is just writing off money, not cash coming into the city,” Henifin explained. “It helps people see a balance reduction on their bill... The LIHWAP money does the same thing but actually brings cash with it to the water fund.”

Officials with JXN Water also touted the $20 million grant. Chief Experience Officer Tariq Abdul-Tawwab, for instance, said the People’s Relief Campaign was designed to provide customers with debt relief, not debt forgiveness.

“If it were forgiveness, it would not be revenue, right? It would just be something forgiven and wiped off,” he explained. “When you have debt relief, that money goes into the revenue because we’re relieving the customer and the customer is still paying their bill.”

Henifin said the mayor and others were not wrong at the time, referencing comments made at a February 22 meeting with state and federal officials.

At that meeting, Henifin says he was told the city would be eligible for millions of dollars in federal LIHWAP funding if the state would expend 25 percent of its current LIHWAP allocation by the end of that month.

Henifin said Mississippi had already spent 23 percent of its LIHWAP dollars. He didn’t believe spending another two percent over the next week would be that difficult. “We didn’t think hitting 25 percent would be difficult at all,” he said. “We were confident the state was in play for more money.”

LIHWAP funds are allocated to the state based on a certain formula. The state then allocates that money. Health and Human Services told Henifin and state officials they were hoping to “claw back” some unused funds from other states and could re-allocate that specifically to help Jackson.

However, those hopes would be dashed days later, when Henifin received an email from HHS saying the state had to spend 75 percent of its LIHWAP dollars before additional funds could be made available. And the deadline to reach the 75 percent threshold had passed.

“At that point, we had already had the kick-off, the press conference had happened,” he said. “That’s really what’s making this whole thing ugly at this point.”

Henifin says he never corrected initial reports because he believed - per his conversations with Health and Human Services - the city would be receiving not only $20 million, but additional money on top of that.

“I thought we’d have a really good story to tell when we get $25 million,” he said. “So, I was sleeping fine at that point until I got the HHS emails.”

The news comes as audits show Jackson’s uncollectible debt has skyrocketed in recent years. Meanwhile, Henifin’s announcement that he would be writing off customers’ debt also raises new legal questions about whether he has the legal authority to do it.

Auditors told the city council last week that Jackson had more than $94 million in uncollectible water debt for the fiscal year 2021, the latest audit available. That amount has steadily climbed since 2017 when auditors found the city had just under $43 million in uncollectible fees.

Jackson has been dealing with uncollectible debt for years.

Part of the reason is that Mississippi state statute prohibits public utilities and municipality-owned facilities from providing free services, meaning the city can’t remove it from its books.

According to Code Section 21-27-27, “no free service shall be furnished by any such system, or combined system, to any private person, firm, corporation, or association.”

The Mississippi Constitution also states that “no law granting a donation or gratuity in favor of any person shall be enacted except by the concurrence of two-thirds of the members’ elects of each branch of the Legislature.”

Henifin believes the Constitution as well as a state statute, is open to interpretation and does not necessarily refer to uncollectible water/sewer debt.

The 40-year public works veteran was appointed third-party manager over Jackson’s water system as part of a federal court order in November.

As part of that order, he was put in charge of the city’s water system, as well as the city’s water/sewer billing system, meaning he inherited the tens of millions in uncollectible debt.

“We’re looking at this sort of as an acquisition, a business acquisition, where you inherit debt from your predecessor,” he said. “I had nothing to do with billing, and now I’m being told to collect this old debt. So, what we’re doing is, if the customer has disputed it and we can’t resolve that dispute with known data, then it’s eligible to be written off.”

City officials declined our request for comment.

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