Court-appointed utility is allegedly shortchanging up to 13 city departments.
JXN Water is proposing an additional $10 monthly rate increase on city water customers to cover a $3 million monthly deficit threatening to deplete reserves and exhaust repair funds. But the utility is also being called upon to pay an additional $3 million to the City of Jackson for unpaid collected fees.
The city is requesting JXN Water submit revenue it has collected from monthly water fees as it battles its own municipal budget problems. Parasitic suburbs, chronic underfunding by the state’s Republican-led government and GOP governors’ refusals to consider city infrastructure bonding bills has forced generations of Jackson mayoral administrations to defer necessary water infrastructure repairs. This led to frequent boil-water notices and a massive weather-related failure at one of the city’s main water treatment plants in 2020.
In 2023, the US Congress stepped in and apportioned more than $600 million to rescue the city’s infrastructure. The Department of Justice also issued an order installing former U.S. Water Alliance Senior Fellow Edward “Ted” Henifin as Interim Third-Party Manager over the disbursement of the federal money for repairs. Additionally, it put Henifin in charge of drumming up revenue in the majority Black city of Jackson, allowing him to act outside the office of the city’s mayor and council to set and approve residents’ water rates.
Henifin transferred city water department repair duties, water delivery and bill collection services to the newly created JXN Water government utility. And it is there that revenue continues to be assessed on water delivery and repair orders. The Jackson City Council has since removed many aspects of the water-related budget from its annual budget considerations.
But the city of Jackson and JXN Water are bickering about the details of their financial responsibilities while both entities face serious budget issues in the foreseeable future. The next mayor walking into the office (or returning a third time), may also find JXN Water unwilling to accommodate city requests.
A financial outlook that JXN Water released last month predicts system reserves “would be depleted by the Summer of 2025.” Additionally, $150 million of the “flexible funding,” system JXN Water uses for water line repairs and daily operations is slated to run out as early as April. To cover the loss, Henifin is proposing raising water rates an average of $10 a month for city residents, on top of the hike JXN Water levied last year.
“That’s a big price increase for some residents, particularly those who are impoverished or living on fixed incomes,” said former Mayor Harvey Johnson Jr. “I believe we raised rates about as high as we justifiably could under my administration. We couldn’t fairly move them any higher without being an undue burden on residents.”
But while Henifin is considering hikes to make the water system more self-supporting, city officials say JXN Water shorted the city of much needed revenue collected from “Indirect Costs and Franchise Fees” that it still owes the city.
Indirect Costs and Franchise Fees (ICFF) were additional charges on every city customer’s water bill. The municipality has been collecting them for ages. City employees say the charges preceded Lumumba’s administration, and Johnson recalls no council or administrative move to apply them in his administration, as does former mayor Tony Yarber.
The fees added up regardless of origin, according to information requests. City officials billed JXN Water for $993,482 in ICFF fees that JXN Water allegedly levied between October 2023 and January 2024 and failed to pass on to the city. Jackson accountants are also seeking an anticipated $248k for almost every month in 2024 between February and December, amounting to more than $3 million in total unpaid invoices. The city uses money collected from the fees to fund the care and maintenance of public buildings, city purchases, the legal department, internal audit services and the Finance Division, among many other services, according to information requests.
It was unclear this week how ICFF charges are connected to the city’s enterprise fund, which was intended to be the sole source of money for the city’s water system before a federal judge reassigned water collection and maintenance to JXN Water. Sen. John Horhn, D-Jackson, who is running for mayor this month, said enterprise fund money, “by law, cannot be mingled” with the general budget.
The debts still appear to be outstanding in March, many months after city officials were laboring to nail down reliable revenue to present to council members for the 2025 budget debate last September. At the time, Jackson Deputy CFP Sharon Thames, told councilmembers the city was working to communicate with JXN Water over unpaid invoices.
“… We’re compiling a list of everything that hasn’t been paid and where we need to get those funds from,” Thames told the council. “There are some things coming in that are past due … and our goal is to pay that and try not to come out of the general fund with it.”
BGX emailed Henifin last December regarding nearly $7 million in unpaid invoices on ICFF costs, in addition to SRF Loan Tax Inceptor Funds and payroll invoices the city claims JXN Water accrued over two years. Around the time of our inquiries, JXN Water opted to pay the invoices for the outstanding SRF Loan Tax Inceptor Funds and the payroll reimbursement money for water department employees. However, Henifin still refuses to pay the ICFF costs, and he informed BGX that “there is no franchise fee or indirect cost allocation costs required per the stipulated orders” of the court agreement under which JXN Water operates.
"Franchise fees and indirect costs" do not currently appear on city customers’ water bills, and Henifin did not immediately respond to follow up questions about whether JXN Water continues to couch these or other additional fees under “water availability charges” on bills. City officials warn that the utility’s continued refusal to transfer past or future ICFF costs will leave Jackson to pay affected plumbers, electricians, accountants and city attorneys out of the general fund. Council members warn this could inevitably strain an already tight budget.
Ward 7 councilwoman Virgi Lindsay said the budget needs every revenue stream possible to stay balanced, and she lamented the yawning silence between JXN Water and city officials over the last year.
“Henifin doesn’t talk to us very much,” Lindsay told BGX.