Water problems in Jackson, Mississippi (the price is too low, and government failure is the reason why)

From Tyler Cowen.

"I am now reading quite a few analyses of the problem, and so few mention price!  Even when written by economists.  I find this article somewhat useful:

“We are a city with very high levels of poverty, and it’s difficult for us to raise the rates enough to do large scale replacement type projects and not make it unaffordable to live in the city of Jackson,” said former city councilman Melvin Priester Jr.

Yet the cost of Jackson’s poor quality water is still passed on to families who don’t trust the tap and purchase bottled water — which can cost a family of four $50-$100 a month — to drink instead.

The city raised water rates in 2013, but the Siemens deal penned the same year came with an onslaught of problems, including the installation of faulty water meters and meters that measured water in gallons instead of the correct cubic feet. This made any benefits of the rate increase virtually impossible to see.

The results have been nonsensical. Over the past several years, the city has mailed exorbitant bills to some customers and none to others. Sometimes, the charges weren’t based on how much water a household used and other times, city officials advised residents to “pay what they think they owe.” Past officials said the city lacked the manpower and expertise in the billing department to manually rectify the account issues with any speed.

In trying to protect people during the persistent billing blunders, the city has at times instituted no-shutoff policies, which demonstrate compassion but haven’t helped to compel payment.

Today, more than 8,000 customers, or nearly one-sixth of the city’s customer base, still aren’t receiving bills. Nearly 16,000 customers owe more than $100 or are more than 90 days past due, a city spokesperson told Mississippi Today. Jackson water customers owe a total of $90.3 million.

As a result, the city continues to miss out on tens of millions of water revenues. In 2016, when officials first uncovered the issue, the city’s actual water sewer collections during the previous year was a startling 32% less than projected — a roughly $26 million shortfall.

And most generally:

“The nature of local politics is that city governments will tend to neglect utilities until they break because they’re literally buried,” he said. “One of the things that is a perennial challenge for governments that operate water systems is that the quality of the water system is very hard for people to observe. But the price is very easy for them to observe.”

From WSJ here is some important background information:

Unlike bridges, roads and subway lines, clean drinking water isn’t primarily funded by taxes. More than 90% of the average utility’s revenues come directly from constituents’ water bills.

In other words, the price is too low, and government failure is the reason why.  A higher price is no fun for a relatively poor set of Jackson buyers, but the city’s per capita income is 22k or so, and plenty of countries in that income range have satisfactory water systems where you can shower without closing your mouth.  You just have to get the institutions and incentives right.  It is remarkable to me how few people in the public sphere are making theses relatively straightforward points."