THE MISSISSIPPI LEGISLATURE

The Joint Committee on

Performance Evaluation and Expenditure Review

Report # 471

A Review of the Pearl River Valley Water Supply District

Executive Summary

Introduction

PEER analyzed the governance, authority, and responsibilities of the Pearl River Valley Water Supply District (PRVWSD), how demands on the district have changed over time, and whether the district has exercised due diligence in managing its resources. The review included analyses of accountability for the district’s resources, performance measurement, and contracting. The overall purpose was to identify areas for potential improvement in accountability systems and, where necessary, modification of law.

Background

The PRVWSD manages and controls the Ross Barnett Reservoir, a forty-five-mile-long body of water near Jackson that widens to 3.5 miles at its broadest point and includes 105 miles of shoreline. The district’s member counties are Hinds, Madison, Rankin, Scott, and Leake. The district’s project area is defined as the physical location of the reservoir, dam, and related facilities and includes an area of one-quarter mile from the shoreline of the reservoir at high water.

PRVWSD’s purposes include:

• providing a water supply for the City of Jackson and to the district’s residents;
• maintaining the reservoir dam and monitoring water quality;
• providing law enforcement patrol of the reservoir and its facilities;
• cooperating with other agencies to provide flood mitigation;
• managing over 12,400 acres of forest lands;
• leasing reservoir property for residential and commercial development; and,
• providing recreational opportunities.

The district’s fourteen-member board approves plans and projects for the district. The board uses a committee system and a staff of 101 to manage its business.

The district is a special fund agency that does not receive any state general funds. Its operations consist of both governmental and business type operations. The governmental operations, which encompass the management of the reservoir and district lands, are funded primarily though lease rentals (from residential and commercial leaseholders), campground fees, and timber sales.

The District’s Accountability to Residents

The PRVWSD Board of Directors is limited in the types of services that it can provide to residents by restrictions placed by the Hinds County Chancery Court in 1985. Due to the composition of the district’s board and the method by which board members are appointed, the district is insulated from addressing residents’ concerns and residents have a limited voice in the board’s decisionmaking processes. Also, the district does not require its divisions to report performance measurement data that could be used to set policy for the district and inform the residents of progress toward measurable goals.

Limits on the District’s Provision of Services to Residents

In 1982, complainants in the case of Hinds County v. Pearl River Valley Water Supply District objected to the district’s expenditure of public funds derived from the City of Jackson and the district’s five member counties to finance services to private residents leasing property from the district. The court’s final order in 1985 required the district to apply funds received from the ad valorem tax levied on the district’s member counties solely to pay the costs of the bonds issued for the reservoir. The order prevents the district from providing services such as police and fire protection to residents unless residents pay charges or assessments other than their ordinary annual lease payments.

The bonds for the construction of the reservoir were paid in 1992 and the district no longer collects tax revenue from member counties. The number of residents living on district property has grown to approximately 12,000 to 15,000 people, resulting in a greater demand for services than existed in 1982. However, under the confines of the court order, the board does not have an alternative to providing services to the community other than to charge a fee for each additional service.

Residents’ Representation on the District’s Board of Directors

Currently, the law provides for only one district resident to serve on the PRVWSD Board of Directors. While the district’s board is accountable to all member counties of the district, those residents living near the reservoir are more directly affected by the decisions of the board. However, there is little access to the decisionmaking process for those most affected by its outcome.

Method of Appointing Members of the Board of Directors

The process utilized to appoint members to the PRVWSD Board of Directors allows only limited input from residents of the district. Under the current appointment structure, a resident aggrieved by the board’s actions could petition the appointed membership or their appointing authorities, but would not necessarily find among these members a sufficient number of appointees who share similar interests regarding the needs of the reservoir’s residential community.

Terms of Office for Board Members

The district’s board members who are appointed by county boards of supervisors do not have clearly defined terms of office. This practice does not comply with state law, which sets terms of all officers not otherwise provided for in statute at four years. In the absence of a specified term of appointment, board members can serve for extended periods without the county board of supervisors determining whether the appointee is serving in the best interest of the county.

Lack of Performance Measure Reporting

The district does not require its divisions to report performance measurement data that could be used to set policy for the district and inform the residents of progress toward measurable goals. Although the district’s staff provides reports to the board on a periodic basis to inform the board of the staff’s activity and service delivery, most of the data provided to the board is descriptive and does not include analysis of how effective the district is in providing programs and services.

Limited Review of the District’s Expenditures

The PRVWSD Board of Directors has not exercised prudent stewardship of public funds because it:

• has approved expenditures of the district’s funds for items that may not benefit the entire district or the public;
• has not fulfilled its responsibility as an employer to address the taxability of an employee’s fringe benefits; and,
• does not have a policy limiting how often board members may be paid per diem and for what purposes.

Recent Renovations of the General Manager’s District-Owned Residence

Recent renovations of the General Manager’s district-owned house included $12,200 for ceramic and porcelain tile. The district also spent $925 for landscaping and household items such as flower pots and a tape measure.

When public entities renovate public property, they should ensure that renovation costs are reasonable and necessary. Residents of the PRVWSD might question whether renovations that include ceramic and porcelain tile at $17 per square foot or purchasing landscaping and household items (that should be the personal responsibility of the General Manager) constitute reasonable and necessary expenditures of public funds.

Unnecessary Travel Expenditures

The district could have avoided at least $3,700 in travel expenditures by requiring the General Manager to make more economical choices regarding mode of transportation and type of lodging for district business trips. This is money that could have been expended on district projects that would benefit the entire district, its residents, and the public.

Failure to Fulfill Its Responsibility as an Employer Regarding Taxability of Employee Benefits

The Pearl River Valley Water Supply District provides its General Manager with a compensation package that includes use of a district-owned house, a vehicle, and utilities (including telephone, electricity, natural gas, garbage service, and lawn care). The PRVWSD’s General Manager’s estimated FY 2005 compensation package totals $136,228. Under Internal Revenue Service regulations, these benefits must meet certain tests in order to be excluded from the individual’s taxable income.

Based on PEER’s interpretation of the Internal Revenue Code provisions and Treasury regulations, the housing that PRVWSD provides to the General Manager does not meet the tests set forth in 26 USC Section 119 to qualify as non-taxable housing. Because PEER believes that the value of the housing the district has provided to the General Manager is taxable and the district has not reported this amount as income or withheld taxes on this amount, the General Manager could be liable for unpaid taxes on unreported income and the district and General Manager could be subject to interest and penalties.

Also, based on PEER’s interpretation of Internal Revenue Code provisions and Treasury regulations, the vehicle that PRVWSD provides to the General Manager does not qualify as a non-personal use vehicle and would be a taxable fringe benefit under the Internal Revenue Code. Because PEER believes that the value of the vehicle the district has provided to the General Manager is taxable and the district has not reported this amount as income or withheld taxes on this amount, the General Manager could be liable for unpaid taxes on unreported income and the district and General Manager could be subject to interest and penalties.

Lack of a Policy Addressing Board Members’ Per Diem Payments

The district’s board does not have a policy addressing how often the board and committees will meet and for what purposes. In addition to regularly scheduled and special called meetings, members of the district’s board have made frequent visits to the district’s office or property for which they have been paid per diem. As a result, the district has incurred costs for per diem that might not have been necessary, expending residents’ funds that could have been used to benefit the district’s residents and the public.

The District’s Process for Developing the Lost Rabbit Property

The PRVWSD Board of Directors’ lack of a policy restricting consultants from participating in or competing for development contracts creates an appearance that the process by which persons and firms compete for development contracts is not open and competitive.

The Lost Rabbit property, approximately 260 acres located on the western shore of the reservoir in Madison County, is one of the few remaining large tracts of undeveloped district land near the Jackson metro area. For many years the district received inquiries from developers interested in the property as a residential development. The PRVWSD Board decided not to develop the property as residential, but as an Executive Learning Center.

After PRVWSD unsuccessfully attempted to develop the Lost Rabbit property as an Executive Learning Center, the board hired a consultant to acquire additional information regarding the proposed project and to meet with local college representatives regarding their potential involvement in developing the property as an Executive Learning Center. The district later abandoned its initial development plan and pursued development of the property as a traditional neighborhood development.

The consultant hired by the district became involved with The Neopolis Corporation, the firm ultimately selected by the district to develop Lost Rabbit. While PEER is not certain that the consultant used information obtained while working for the district to assist Neopolis in the preparation of its proposal, the possibility exists that such occurred. The PRVWSD Board did not have a policy in place that would require that the district’s contractors disclose any interests they might have in development firms or that they not become interested in any firm that might subsequently bid on matters that were the subjects of the contractor’s work at PRVWSD.

Recommendations

1. In view of impending development opportunities, the PRVWSD should study its district-wide needs and report to the Legislature and the PEER Committee how it intends to improve both facilities and services used by residents of the district and the general public. Considerations should include, but should not be limited to, expanded services to residents such as garbage collection and mosquito control, improvements to recreational facilities, and other infrastructure the district would consider a prudent investment. Such report should be completed as soon as possible but no later than December 1, 2005. The Legislature should study the recommendations and suggestions in the report and consider whether to expand the district’s statutory authority to direct additional expenditures in these areas. In the event that the Legislature does not consider the proposals to be prudent investments of resources, it should consider requiring that all district revenue and fund balances be deposited to the general fund of the state, and that the PRVWSD operate as a general fund agency.
2. The Mississippi Legislature should amend MISS. CODE ANN. Section 51-9-1 (1972) concerning the Pearl River Industrial Commission to require that the three names submitted by the board of supervisors to the Governor be the names of persons who reside on and are holders of residential leases from PRVWSD in Madison County. This would provide additional representation for residents of the district.
3. The Pearl River Valley Water Supply District should create and utilize an advisory board comprised of district residents. The board could include representatives of homeowners’ associations from neighborhoods located on district property. The advisory board could provide resident input to committees of the board of directors regarding district development and other key issues affecting residents.
4. The Legislature should amend MISS. CODE ANN. Section 51-9-107 (1972) to require that appointees of the boards of supervisors shall hold terms for four years.
5. The PRVWSD Board of Directors should require other divisions to follow the lead of the Parks and Recreation Division by reporting measures of performance and progress toward measurable goals. Program performance measures should demonstrate what the service outputs are, what the expected quality levels are for these outputs, and what productivity is expected from expended staff resources and funds.
6. In the future, when making improvements to district-owned residences, the PRVWSD should only expend funds for fixtures.
7. The PRVWSD should review its practice of providing the General Manager with both a vehicle and reimbursement for mileage and should provide only the most economical mode of transportation.
8. The PRVWSD should immediately begin reporting to the Internal Revenue Service and the State Tax Commission all of the General Manager’s taxable compensation as income and make appropriate withholdings for income tax and FICA.
9. The PRVWSD Board of Directors should adopt a policy restricting payment of per diem of board members to attending regular and special called meetings or for services rendered by individuals for activities that have been approved by the board as a whole.
10. The PRVWSD Board of Directors should refrain from working exclusively with one developer prior to public advertisement of a request for proposals for the lease of district property or from developing an RFP incorporating the proposal of a specific developer. The board should take steps including, but not limited to, openly advertising for developers or contacting multiple developers to whom the board can communicate its proposed vision for the use of a specific parcel of property. The district should advertise an RFP that is specific to the board’s vision for the use of the property, but that does not favor one developer.
11. To safeguard against appearances of impropriety, the PRVWSD Board of Directors should establish a policy requiring that its consultants disclose any interests they might have in development firms and further require that contractors agree not to become interested in any firm that may subsequently bid on any matters that were the subjects of the contractor’s work.

PEER Home Page         Full Text PDF (1,468K)