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Jackson’s Water Crisis Comes After $90M Contract with Siemens to Overhaul System “Ended Up a Disaster”

StorySeptember 12, 2022
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Image Credit: Twitter: @mintamolly

We look at how corporate involvement in Jackson, Mississippi’s infrastructure helped set the stage for its water crisis, as tens of thousands of residents of the majority-Black city remain under a boil water advisory. The main water treatment plant was damaged after a flood in late August, and while water pressure has been restored to most homes, viral videos show undrinkable brown liquid coming out of many taps. Mississippi’s Governor Tate Reeves has said “privatization is on the table” for the state capital. This could lead to a repeat of problems stemming from a $90 million contract Jackson signed in 2010 with the German multinational conglomerate Siemens to overhaul the city’s water infrastructure and install new water meters meant to raise extra revenue and help the city reinvest in the system. “This contract ended up being a disaster,” says Judd Legum, who wrote about the Siemens deal for his independent political newsletter Popular Information. “There was essentially a lost decade where the system deteriorated further and there were really no substantial investments made, and that’s part of the reason why we see what’s going on today.”

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This is a rush transcript. Copy may not be in its final form.

AMY GOODMAN: This is Democracy Now! I’m Amy Goodman.

We end today’s show in Jackson, Mississippi, the majority-Black city where tens of thousands of residents who went for two to three weeks without water have now had their water restored in most cases. But in videos that have gone viral online, many say it’s brown water that’s coming out of their taps. Meanwhile, the capital city remains under a boil water notice as children return to school.

The latest water crisis stemmed from a flooded water treatment plant but has been decades in the making. As residents look for solutions, Mississippi’s Republican Governor Tate Reeves says, quote, “Privatization is on the table,” unquote. But privatizing Jackson’s water system may be part of what led to the crisis.

For more, we look at how Jackson contracted with the German multinational conglomerate Siemens in 2010 to overhaul the city’s water infrastructure and install new water meters for its billing system. The system turned out to be faulty. Siemens said it went, quote, “above and beyond its contractual obligations to help address the city’s well-known challenges, which are complex,” unquote. Reporter Judd Legum lays all of this out in his piece headlined “This multi-billion dollar corporation exacerbated the water crisis in Jackson, Mississippi.” It’s published in the independent newsletter Popular Information, dedicated to accountability journalism.

Judd Legum, welcome back to Democracy Now! We just have five minutes. Lay out what you found. Tell us about Siemens, and tell us about this brown water that is coming out of people’s faucets now.

JUDD LEGUM: Well, I think the brown water is a reflection of the, really, system that’s been deteriorating now for decades. The story that I reported tracked how, starting in 2010, Siemens came to the city of Jackson, who was already suffering under a very faulty water system at that time, and said, “We have a solution. You can pay us $90 million” — it’s the largest contract signed at that time in city history — “We will install these new automated water meters. This will not only pay for itself, but generate extra revenue, which you can invest back into the water system.”

They came to the city offering a solution, but this contract ended up being a disaster. Not only did it not meet their promises, the automated meters didn’t work really at all. Many people stopped getting bills. Those who got bills received ones that were far too high, and did not pay them. And so it created massive deficits, and ultimately led to a lawsuit that was filed by the city. And ultimately, they agreed to a settlement — Siemens agreed to a settlement. But in the interim, there was essentially a lost decade where the system deteriorated further and there were really no substantial investments made, and that’s part of the reason why we see what’s going on today, which is a boil water order, undrinkable water and probably more trouble in the months and years ahead.

AMY GOODMAN: And talk about the role of U.S. Consolidated, a company owned by former Mississippi state politician and lobbyist Tom Wallace.

JUDD LEGUM: Well, that, part of the issue with this contract was that Siemens had agreed to get a fairly high percentage — I believe it was 58% — of minority-owned businesses, but instead of finding qualified subcontractors to do this, the city alleged that it essentially partnered with shell companies who did no work, including this very highly connected former legislator who owns U.S. Consolidated, essentially would just act as a pass-through. They would buy the meters from one company, sell them to the city for a markup. Another company would install them. So, essentially, this one company, U.S. Consolidated, was paid $20 million for, according to the city’s lawsuit, essentially doing no work at all.

AMY GOODMAN: What happened to the $90 million from the settlement? Why is Jackson’s water system still such a disaster?

JUDD LEGUM: Well, a third of it went to the lawyers that filed the suit. And as I mentioned, there were large deficits that were created because of the inability to collect fees while these meters were in place. So, some of it had to go to fulfill those deficits. And then, although the cost of the contract was $90 million — Jackson obviously didn’t have $90 million that sitting around — they issued bonds. The total cost of those bonds were $200 million. And the issuance of those bonds requires them to maintain a reserve fund. So, between the lawyers, the deficit were created and the reserve fund, there was very little left, less than $10 million from this $90 million settlement, that Jackson had to reinvest in the water system.

AMY GOODMAN: And Siemens —

JUDD LEGUM: And at this — yeah.

AMY GOODMAN: Siemens saying, Judge — Siemens saying, Judd, that they went above and beyond their contractual obligations?

JUDD LEGUM: Well, that’s what they’re saying. Obviously, they agreed to pay $90 million, the full amount of the contract, so they must have — they acknowledged, at least implicitly there, that this didn’t go well. When I contacted Siemens looking for comments on what’s going on now, they said, due to the nature of the settlement, they couldn’t discuss it any further.

AMY GOODMAN: What’s next? And what has most shocked you in your research? We have 30 seconds.

JUDD LEGUM: Well, next they’re going to try to find the money to pay for this. So far, the state has been very reticent to do so. There is federal money coming in through the infrastructure bill last year, through the American Recovery Act, and it’s a matter of convincing the state to allow those funds to flow to Jackson. That would at least be a start in doing what’s now seen as up to $2 billion in improvements necessary to get clean water to the people of Jackson.

AMY GOODMAN: And Governor Reeves saying privatization is the answer?

JUDD LEGUM: Governor Reeves is now looking at privatization. And so, you know, we may see history repeating itself. We’ll have to see.

AMY GOODMAN: Judd Legum, founder of Popular Information. We will link to his new piece, “This multi-billion dollar corporation exacerbated the water crisis in Jackson, Mississippi.”

That does it for our show. Democracy Now! produced with Renée Feltz, Mike Burke, Deena Guzder, Messiah Rhodes. I’m Amy Goodman. Stay safe.

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