Henifin’s Jackson Water Plan: Punish the Tax Base

The federal third-party administrator seeks to charge for water based on the value of the property instead of how much water is actually used. The proposal is a second property tax masquerading as a water bill.

Many in Mississippi looked at the federal government stepping in to address Jackson’s water woes as a miracle cure. The thought went that if the Feds could solve it, the City, and the State, might be off the hook. 

Certainly, Uncle Sam is bringing a lot of money to bear. Congress authorized $600 million in funding for Jackson’s water system in the end of year omnibus budget. There is an estimated $214 million in additional funds on the table. 

But federal printing press greenbacks come with strings. Or, in this case, with a Henifin. Attorney General Merrick Garland’s appointee as third-party administrator to run the City of Jackson’s water system, Ted Henifin, announced his big plan to fix decades of mismanagement last week. Henifin, his staff and consultants will clear nearly $3 million over a 12-month span for their work, including $400,000 in salary and expenses for Henifin himself. 

To his credit, the thirty-page report produced contains a detailed analysis of how we got here. The recommendation section, however, boils down to a single idea. 

Drum roll: Charge people and businesses for water based on the value of their property instead of how much water they actually use. If implemented, residential property owners will be charged up to $150/month for water. Businesses, up to $600/month. (In fairness, they also unveiled a cool new logo that misspells Jackson, but in that cool Jxn way). 

Water bills would not be tied to water consumption. Indeed, Henifin’s recommendation is to stop efforts to meter water altogether. Perhaps this suggestion comes in recognition that Jackson apparently cannot figure out how to do what every other town in America does to measure utility usage. But it is no less of a dramatic deviation from how utilities are normally priced. 

A unit of electricity or a unit of water tend to come at a fixed price per unit. The price is based on the cost of getting that unit from a power plant or treatment facility to your home. Use more, pay more. Use less, pay less. 

In an interview with the Associated Press, Mr. Henifin exposed a more ideological reason for his proposal:

We are fundamentally flawed in the United States in that we price water only to burden that lower end of the economic spectrum, and we don’t even attempt to get more revenue from the upper end. That’s because almost every state has some sort of equitable rate requirement in their statutes that says you can’t treat water customers differently.

The quote reveals a lot about the way he sees the world—that it is a fundamental flaw to charge people based on what they actually consume. Mr. Henifin apparently sees a model where you pay for what you use as some nefarious plot to burden lower income individuals. In reality, it is the fairest way to assess the value derived by a user from any commodity. 

He describes his approach as something more “equitable,” but charging one person more than another for the same unit of the same product is hardly equitable, if words still have meaning. Henifin’s proposal would disconnect the use of the product from its cost, and in so doing, create yet another progressive tax. His proposal is basically a second property tax masquerading as a water bill. If enacted, it would set a horrible precedent that no doubt would leach into other parts of the economy.  

But setting aside the philosophical divide on whether it is “flawed” or “inequitable” to expect people to pay for the things they use, there is a very practical consequence which the third-party administrator’s report acknowledges on the second page:

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.

Mr. Henifin explicitly recognizes that when people and businesses who can afford to move feel like they are getting piled upon, they move, creating a death spiral. After acknowledging it, he then proposes that the punishment should continue until morale improves. 

One would hope that the “Elon Musk of utilities,” as one local fawning paper described him, has a few more big ideas up his sleeve.