Jackson Water says 12% rate increase is essential to avoid system collapse, outlines path to solvency

Ted Hennepin, the court‑appointed interim manager for Jackson’s water utility, told the select committee that the system — once described as “brought back from the dead” — has made measurable progress but remains financially fragile.

“Decades of mismanagement and underinvestment led to unprecedented failure of a state capital city’s water utility,” Hennepin said, summarizing work since October 2023 to repair leaks, reduce daily plant demand from roughly 50 million to about 35 million gallons, and fix more than 200 sanitary sewer overflows. He said those operational gains make the system more reliable but do not close a multi‑year revenue gap.

Hennepin presented a five‑year financial plan that assumes a near‑term 12% rate increase, additional modest increases in later years, and short‑term borrowing supported by one‑time reallocated SRF funds. He told the committee that even at full collection the current rate structure produces insufficient revenue to meet annual debt service and state law requirements.

“If everyone paid their bill, our current rates would only generate enough money to pay our operating costs,” Hennepin said. “We fall short by over $20,000,000 per year of meeting those obligations with the rates we have now.” He cited a state code provision (Section 21‑27‑7) that requires municipal rates to generate revenue sufficient to meet operating expenses and debt obligations.

Hennepin said the plan restores long‑term solvency by 2028–29, contingent on rate increases and access to loan programs administered by the state: roughly $400 million of the 2022 federal SRF appropriation is committed to projects now under design or construction, and Congress recently allowed use of about $54 million for eligible operating costs.

But the proposed 12% increase is stalled. Hennepin said the increase was proposed to the city council in April, the council declined to implement it, and a federal judge, Henry Wingate, has enjoined the meantime. Hennepin said the stipulated order makes him the interim manager with authority to implement certain measures, but the judicial action and local opposition have delayed the necessary steps to qualify for SRF loans from the state (MDEQ).

Committee members pressed Hennepin on affordability and customer protections. He described a SNAP‑based customer class that reduces the fixed availability fee (example: residential availability charge roughly $40/month, reduced to $10/month for SNAP‑eligible customers) while keeping consumptive charges uniform. Hennepin said about 600 households now use the reduced availability charge but that roughly 15,000 residents could qualify by SNAP status.

On customer service and disputes, Hennepin said the utility has improved call‑center access, added staff and an appointment center, and is rolling out an online billing dispute form; however, customers must still pay disputed amounts to avoid disconnection while the dispute is processed.

He also described efforts to identify unbilled or unauthorized service (which he referred to as “stealing water”), saying crews sweep neighborhoods and remove meters from vacant properties or secure service where illegal connections are found; he estimated those cases in the low thousands.

What’s next: Hennepin urged local elected officials to support the rate plan so the judge could lift the injunction and state lenders could provide SRF loans. Without the near‑term rate adjustments and access to low‑cost borrowing, he warned the system will face growing service and financial risks.

The committee did not take formal action; members asked staff for follow‑up briefings on affordability programs, the dispute process, and lender conditions.