A review of nearly 20 years of audits from the City of Jackson yielded concerning results, State Auditor Shad White said Monday in a news release.
White, a Republican, said that statute prevents him from directly auditing cities, but that he is allowed to review the audits cities have conducted on their own, and in doing so for Jackson he found a “dangerous financial situation,” with much of the danger centering around the city’s water system.
“While my office is legally prohibited from auditing cities, cities like Jackson are audited by private CPA firms,” White said. “We can, however, analyze the results of city audits. Our analysis of Jackson’s audits shows serious and fundamental financial issues that have to be straightened out. Every concerned taxpayer should be reading this report.”
In a statement released Monday afternoon, Jackson Mayor Chokwe Antar Lumumba said the findings of the report come as no surprise to him or his administration.
“The trends seen in the State Auditor’s analysis of Jackson’s audit are nothing new. In fact, these are trends that this administration has long since recognized and continues to address on a daily basis,” Lumumba said. “Though we’ve never seen the State Auditor address the media regarding any other city’s audit, we appreciate that his ‘findings’ mirror what we’ve been saying for years.”
In the release, White highlighted seven findings.
First, the report found that despite the city’s population shrinking over the last 20 years, its revenue has increased. Second, the city’s spending has outpaced that increase. Third, fewer individuals are paying property taxes, the cities largest source of revenue. Fourth, there has been an “explosion in unpaid water bills.” Fifth, in many cases the city is not attempting to collect those unpaid water bills. Sixth, the city is using general funds and leftover money from a settlement with Siemen’s over faulty water meters to prop up its water system. And finally, despite the loss of population since 2003, there has been “a large increase” in active water connections.
The full report goes into more detail on each of those points, including the Siemen’s settlement.
In 2020, shortly after the settlement was reached, the City used $17 million from the settlement to fund the overall deficit in its water system, and not exclusively on meter improvements. The $89.9 million from the settlement, reached in February of 2020, had been more than cut in half by the end of that fiscal year, once that $17 million and nearly $30 million in attorneys fees had been taken out, according to the report.
Then, in fiscal year 2021, the City spent $25,510,852 in settlement money to purchase or repair equipment and paid $23,098.574 in principal and interest for its debt.
By the end of that year, the City had spent 71% of the settlement, not including the amount taken for legal fees, according to the report. Audit information for last fiscal year, 2022, has was not included in the report.
“If this trend continued in FY 2022, the entire settlement is now depleted,” the report reads.
Lumumba also touched on the financial state of the water system and Siemen’s, which the City entered into a contract with before he was mayor. The settlement was negotiated during his term.
“The City’s finances were further stretched by the decision to hire Siemens Industry, Inc. That endeavor led directly to a water billing crisis that we are still recovering from. We were able to recoup some of the money from that contract, but as we’ve said before, it’s not enough,” Lumumba said. “The Auditor’s analysis also does not take into account the $600 million in federal funds that Jackson was able to secure to address issues around the city’s water infrastructure.”
In the release, White said it is important for Jackson to turn around its current financial trajectory.
“Jackson is our state’s capital, and we cannot have a strong state without a strong capital,” White said. “Cities in other Southern states, like Atlanta in Georgia or Birmingham in Alabama, are growing fast and fueling the economies of their states. Jackson can generate growth for Mississippi, but not until it gets its fiscal house in order.”
Lumumba said his administration has “aggressively fought against” increasing the burden on residents despite increasing costs.
“We appreciate the Auditor taking the time to review our finances. Though nothing new was uncovered, we understand that our city has a long way to go before we are financially sound,” Lumumba said.
