Ted Henifin, Jackson's federal water czar, released his Jackson water plan this week.
The plan has some very good news for Jackson, stating, "Sources combine for more than $814 million dollars available to address the System’s infrastructure and other needs."
The plan outlines failure of the existing metering system, which will cost a whopping $10 million a year to operate once fully installed.
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As an alternative, Henifin proposes a tax based on property values with bills ranging from $10 to $150 a month. But a non-metering plan is not expected to be fully implemented until 2030 and only if it is so allowed by state law. (A bill just passed in the state senate banning the used of property values for water billing.)
The report states, "Using true total property value as the basis of the pricing structure, the median single-family residential monthly service fee would be approximately $50, and the most frequently occurring bill would be between $30-$40. Single-family parcels with true total value at
$160,000 or above would be capped at $150 per month. 92% of single-family customer monthly bills would naturally fall below the cap, and 75% of single-family customer bills would be less than $90 per month. The table on the right shows true total values in increments of $10,000 and the respective monthly fee associated with the single-family property values."
The plans recommendations are as follows:
• Implement the financial model Scenario D.
o Use a portion of the $450,000,000 provided under section 1452 of the Safe Drinking Water Act to retire all debt as soon as practicable ($23 million in annual debt service savings)
o Implement a property attribute-based rate for water and sewer services (Generates $70 million in annual revenues)
o Eliminate metering for water consumption ($10 million annual savings) when possible (no earlier than 2030 in this plan) as permitted by State Law
• Continue to refine the concept for future governance.
o Work with the community and the Parties to develop a fully detailed transition plan
o Propose an appropriate amendment to the Order to implement the resulting concept no later than September 30, 2023.
• Add the sewer and stormwater systems to the Stipulated Order (a one-water solution)
o Gains savings for sewer with shared resources
o Prioritizes investments in sewer with resources not restricted to drinking water
o The three systems are inexorability connected and should be managed as one
• Continuously refine and update this Financial Management Plan as new information becomes available
The plan lists short, medium and long-term goals.
Short term goals are:
• Retire all debt using a portion of the $450 million provided through the Consolidated Appropriations Act, 2023.
• Implement an alternative rate structure effective in FY 2024.
• Establish written financial goals as governing principles establishing (i) minimum days cash on hand (e.g., 90 days) (ii) full funding of capital program, and (iii) establishment of cash fund capital / pay-go target of $20 million per year to align with medians for A rated utilities (e.g., 1.35x debt service coverage).
Medium term goals are:
• Complete implementation of rate structure alternative.
• Stabilize revenue and collections resulting in the System generating net revenues from rates to move towards financial goals established above.
• Adopt a new governance structure for the utility management, with ownership of the assets remaining with the City.
• Fund portions of the capital improvement plan with current revenues, ramping up to the policy target of $20 million per year by FY 2029.
Long term goals are:
• Build to an investment grade credit that is sustainable and affordable for the citizens of Jackson.
• Fund all but the largest capital improvements with cash during the Planning Period. One borrowing of $100 million, which may be financed in multiple tranches, is projected in the FY 2030 timeframe to construct a new plant or completely rehabilitate the existing facilities.
The reports introduction did not paint a rosy picture of Jackson's situation, stating:
"The City, like many older core municipalities, has experienced a loss in population over the past decades, leaving a smaller number of customers to pay to maintain an oversized and aging water system. The loss of customers does not reduce the costs of operating and maintaining a drinking water system, as those costs are largely fixed and are only incrementally impacted by reduced consumption. Plant sizes remain unchanged, requiring the same staffing. The size of the distribution system and related storage facilities do not change with population loss. The only savings of a reduced population is found in the incremental reduction in chemicals and power used to treat and distribute the water, a very small percentage of the cost of providing reliable and safe drinking water to a city of 150,000 spread over more than 100 square miles.
"Compounding the rising operating and maintenance costs per resident, the System is stressed with aging infrastructure and escalating costs of repair and replacement. As stated in the Moody’s Investors Service (“Moody’s”) rating report dated October 24, 2022, “The System has struggled for years to effectively manage and resolve its infrastructure challenges, which is a key component of the of the System’s failure to improve.” Exacerbating the cost of infrastructure, the City faces major construction cost inflation, including materials and labor. For example, iron and steel prices increased over 40% between December 2020 and December 2022 (PPI: Iron and Steel). The Consumer Price Index has increased by 14% over the same time period (CPI: U.S. Cities) and inflationary figures are significantly higher than in previous years adding cost pressures to the City’s ratepayers in all other aspects of their lives.
"The loss of revenue caused by a shrinking population and the escalating costs of infrastructure and maintenance must be made up with increases in water rates. Increased rates could lead to further population loss as citizens with the means could move to adjacent suburban communities with lower taxes and utility costs. The cycle is a slow death spiral that many cities in the United States have faced over the past four decades. In the City’s case, the issue is complicated by its high poverty rate with nearly one-quarter of the population at or below the Federal poverty level. over (26.1% per U.S. Census Bureau). Unable to raise rates without significant impact to those at or below the poverty level, the City has been unable to generate the needed funds for operations, maintenance, and regular reinvestment, the System has suffered from underinvestment and minimal maintenance. The result is a system that has little to no capacity to overcome any interruption like source water changes, or large or numerous (due to cold weather) pipe breaks. Without adequate revenues, staffing levels cannot be maintained and the remaining staff are overworked. "
