Jackson will soon have as much as $25 million to address problems with its water/sewer billing system.
Earlier this year, Mayor Chokwe Antar Lumumba announced the city had settled its case with Siemens Industry, with Siemens agreeing to pay the city $89.8 million.
The city should receive payment in full by early May.
Of that amount, around $30 million will go to attorneys’ fees; at least $15 million will go toward reimbursing the city’s general fund for water/sewer expenses; $7 million will go to repay an emergency water loan issued last year: and between $12 million and $17 million will go toward rebuilding the city’s water/sewer enterprise fund’s reserves.
Once the dust settles, Jackson will have between $20 million and $25 million to address remaining problems with its water/sewer billing system.
“We’re looking at what we need to do to have an entire system fix,” said Chief Administrative Officer Robert Blaine. “Everything is on the table, from starting over with a new system to repairing what we have.”
Proceeds come from the city’s settlement with Siemens Industry. Jackson hired the firm in 2012 to completely overhaul its billing system. Last year, the city brought suit against the firm and its subcontractors for breach of contract.
According to court documents, the city was supposed to save the city around $122 million over a 16-year span.
Instead, because of complications resulting from the work, Jackson was losing as much as $24 million a year in uncollected water and sewer revenues.
As a settlement, Siemens agreed to repay Jackson the $89.8 million in contract costs.
Of those proceeds, $30 million will be paid in attorneys’ fees. Jackson was represented by Winston Thompson, as well as John M. Johnson and Brian C. Boyle, both of Alabama and Texas-based Lightfoot, Franklin and White LLC.
From there, $15 million will go to the city’s general fund, to reimburse it for propping up the water department in recent years.
Traditionally, the water and sewer department is funded by revenue collections. Those collections go into a special enterprise fund, which is used solely to cover department operations, water/sewer upgrades and water/sewer bond debt retirement.
Because collections had fallen off, Jackson leaders had to prop up the enterprise fund with general fund monies.
The Siemens contract included replacing some 65,000 water meters across the city and installing a wireless network that would transmit those readings to the city’s billing department.
When it was approved in 2012, then Mayor Harvey Johnson said the contract would result in more accurate readings, and therefore generate more revenue for the city.
Instead, court documents showed that Jackson was losing $2 million in revenue each month as a result of complications.
The Lumumba administration has been working to right the system since taking office.
Last year, the city issued a $7 million short-term bond to make some fixes. Major work associated with that bond included lifting the new billing software, installed as part of the Siemens contract, off of city servers and placing it on a cloud-based system.
Settlement proceeds will be used to repay that $7 million.
Funds also will be used to rebuild the city’s water and sewer reserve fund to bring the city into compliance with its water/sewer bond covenants.
Jackson has around $230 million in outstanding water and sewer debt. That amount includes the $90 million in bonds the city issued to pay for the Siemens contract. The bonds were issued based on the city’s ability to repay the debt from its water/sewer enterprise fund.
As part of the bond covenants, the city must maintain a reserve fund equal to that year’s debt service, to ensure payments can be made even if water collection revenues fall short.
Because collections had fallen, those reserves also had been depleted, Blaine explained.
“We want to make sure we have those reserves in place.”
The remaining $20 million to $25 million will be used to make continued improvements to the billing system.
In the past year, the city has made significant upgrades. Even with those improvements, deficiencies remain.
Among problems, Blaine said too many customers are receiving “flat-rate” bills, rather than statements based on actual meter readings.
In November, the city implemented a flat-rate billing program, in part, because nearly a fifth of the city’s 52,000 customers were not receiving regular statements.
Typically, customers are billed based on their monthly meter readings, which is based on the amount of water that goes through the meter into homes or businesses.
When those meters don’t work, the current system issues what are called “estimated bills.” After three estimated bills, the system stops sending statements to those customers all together.
Those accounts are then deemed as “stranded.”
Stranded bills create a problem for the city, in part, because when customers don’t receive statements, they don’t pay. And without those payments, revenues in the water department dry up.
As a result of stranded accounts in 2018, Jackson’s water/sewer enterprise fund nearly went bankrupt.
With flat-rate bills, customers pay a set amount each month, which means the city receives at least some of its expected revenues.
Blaine said about 20 percent of Jackson’s customers are still receiving flat-rate statements.
Said Blaine, “We have some priorities we have to meet, but we will be looking at redoing the billing system to ensure that customers’ bills are correct and on time.”