The Environmental Protection Agency's Office of Inspector General has found the Mississippi State Department of Health has not issued Jackson millions in eligible loan forgiveness for water infrastructure funds.
As a result, the EPA will now provide MSDH with further education by June 30 on ways it can help Jackson and other eligible cities receive further loan repayment options.
On May 6, the EPA Office of Inspector General released results from a nearly two-year long audit report for MSDH, and in it, found the department had the opportunity to give Jackson flexible repayments for about $51.7 million in water infrastructure loans from the EPA but did not.
“(The Safe Drinking Water Act) provided different funding options for states to help disadvantaged communities better afford., including increased loan subsidies, extended loan terms, and reduced interest rates,” the reports reads. “However, the MSDH did not make these flexible loan and subsidy options available to disadvantaged communities, including Jackson, until after June 2021.”
That same report also held the city accountable for issues with the Jackson Water System, including staff shortages, people working longer than normal hours and a lack of management and oversight on key areas of the system in the years prior to the Jackson Water Crisis.
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"For example, a $2.7 million corrosion control system at O.B. Curtis funded by a Drinking Water State Revolving Fund, or DWSRF loan, repeatedly malfunctioned because of inconsistent maintenance, which resulted in increased water treatment costs," the report reads. "Various Jackson departments did not effectively communicate the water system’s capacity issues internally, which only served to exacerbate the problems facing O.B. Curtis and the city’s water system."
From 2015 to 2022, EPA gave MSDH $81 million in Drinking Water State Revolving Fund loans, which were then supposed to be designated to any of the more than 1,100 water systems in the state. State revolving funds are allocated to systems that are not in compliance with the Safe Drinking Water Act, and those funds must be spent in order to return the system to federal standards.
Those standards include up-to-date equipment, proper staffing, maintenance and oversight within that water system. Loans given to disadvantaged communities, such as Jackson, are also eligible to receive additional subsidies from MSDH from the EPA loans and other federal funds, as well as more lenient payment periods and interest rates.
The City of Jackson received DWSRF loans of $10.8 million in 2016 and $12.9 million in 2019 at a 1.95% interest rate for 20 and then 30 years, respectively, with $1 million total subsidized from them. The city also received $27.9 million in 2021 with a 20-year payment plan and $500,000 subsidized. Because Jackson is considered disadvantaged, it was eligible for up to 25% of its loans to be subsidized.
For all three of those loans, the city was actually eligible for a combined $12.8 million, compared to the $1.5 million it received in forgiveness for the $51.7 million in DWSRF loans.
The report states that because of the strict terms of the loan repayments, Jackson leaders were deterred from requesting more funds from MSDH while also failing to secure funds from other sources.
Those lack of funds and oversight eventually led to critical lapses in infrastructure, which left tens of thousands of people without proper drinking water after the water system failed due to area flooding in August 2022.
“Had the MSDH provided flexible loan options for disadvantaged communities in a timelier manner, Jackson may have decided earlier to request and use them to lower its financing costs to improve its water system,” the report reads. “Additionally, these funding options could help other disadvantaged communities in Mississippi better afford investing in their drinking water infrastructure.”
City Spokesperson Melissa Paynedid not respond to several calls seeking the city's response to the audit.
MSDH Director of External Affairs and Media Relations Greg Flynn in response to the audit said that any of the state's water systems that are eligible for more lenient repayment terms first needs to apply for them through MSDH's Local Governments and Rural Water Systems Improvements Board.
Flynn said the board actually granted the city's request for lenient repayment terms in 2022.
"Drinking Water State Revolving Fund loans are intended to provide funding opportunities for all of Mississippi’s over 1,100 public water systems," Flynn said. "If additional forgiveness is appropriate to any system’s needs, the avenue exists for that system to petition the Local Governments and Rural Water Systems Improvements Board for consideration of additional forgiveness."
Flynn declined to comment on how many water systems had received additional loan forgiveness, how many had been denied and how much MSDH has given to them in water infrastructure money.
Flynn said the department is ready to receive any assistance from EPA on how to properly run the program.
"While the DWSRF program and Local Governments and Rural Water Systems Improvements Board are proud of the positive impact of past and present loans, we welcome the opportunity to participate in training offered by our federal partners to ensure the maximum benefit to drinking water systems and public health in Mississippi," he said.
To see the full audit report, people can visit the EPA Office of Inspector General website.
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Grant McLaughlin covers state government for the Clarion Ledger. He can be reached at gmclaughlin@gannett.com or 972-571-2335.
