Jackson water-system deal may be worth up to $15M, consultant says

After completing an initial assessment of Jackson's water and wastewater systems, a consultant told the city's Board of Aldermen a deal with a third-party group could bring the city a total of $10 million to $15 million.

The city, which owns and operates its water system, occasionally is approached by outside entities seeking to buy or operate the system.

All steps so far have been speculative, and action eventually would have to go before Jackson voters, but one of the first steps in the city's information-gathering was to commission MI2 Operating Systems to look at the system and report what the city's options would be if it considered a municipal concession agreement.

In a presentation before the Jackson Board of Aldermen, Mike McKee, Paul McKee and Jim Riley of MI2 said such an agreement could be beneficial to the city.

A concession agreement, Paul McKee explained, is "a fancy word for a master lease" and a way to leverage the financial strength of the community.

In most cities, Mike McKee said, a concession agreement involves the concessionaire paying the city upfront and assumes the risk and responsibility of maintaining and operating the water system for 20 to 50 years, depending on the contract.

This typically frees up the city to focus on capital improvements elsewhere in the community, he said. And because the revenue generated by the average concession agreement is comparable to what a city would receive from an outright sale of the system, that likely would be millions of dollars for a system such as Jackson's, McKee said.

A concession agreement would mean the city would lose some degree of control over the system's operation, but a contract would include ways in which the city could monitor the concessionaire's performance. And if the concessionaire fails to hold up their end of the bargain, the city would have ways to cancel the agreement.

"The key factor is that the city maintains ownership of the assets," McKee said.

The most likely situation, he said, would be the city appoints an emissary from city hall to work with the concessionaire to oversee operations and maintain water quality, which city officials repeatedly have said is their top priority.

Rates would be set before the contract would be signed, McKee said, taking into account forecasts of rates for the duration of the agreement. Any potential contract would specify outcomes for utility staff during the transition. These are usually drawn up to stipulate equal or better compensation for workers, although sometimes reductions are possible, McKee said.

"But, I think in Jackson, the staffing does not leave much room for reduction," he said. "The city is pretty tightly staffed as it is."

Although MI2's assessment is speculative, it said a concession agreement could offer the city a great deal of benefits.

"We think it's a really good idea for a number of reasons, but it's incredibly complex," McKee said. "We think the city really has to step back and consider. ... And that's what the city is doing."

tgraef@semissourian.com

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