New Jersey allows for full rate recovery of water privatization costs
Augenstein | NJ Advance Media for NJ.com
Trenton voters were given the
opportunity to sell the city’s water system to a private company in
2010. The $80 million sale was defeated in a 4-to-1 landslide.
At Tuesday’s polls, hundreds of
voters in tiny Sussex Borough overwhelmingly rejected a similar sale of
their public system to private hands, while Haddonfield in Camden County
solidly approved selling its deteriorating system to New Jersey American
But such direct public mandate on
water and sewer sales may become a thing of the past, as a bill in the
Legislatures allowing public entities to fast-track selling water and
sewer systems that serve millions advances this fall.
The sponsors of the “Water
Infrastructure Protection Act” say it’s a way to get
desperately-needed investment into water systems that have been
neglected to the breaking point by government owners. The bill’s
opponents warn that it’s an attempt to turn private profits of public
infrastructure at the expense of taxpayers – who themselves will end
up paying for the purchase prices with each flush of the toilet.
“The legislature should reject this
transparent attempt by private water companies to fleece ratepayers
while cutting the public out of important decisions about the management
and ownership of their water resources,” said Jim Walsh, New Jersey
Director of Food & Water Watch, a non-profit watchdog which
advocates for public health.
“This bill removes important
consumer protections by accelerating the sales of publicly owned
systems, limiting voters involvement in the process, and forcing the
Board to go along with negotiated contracts that could potentially be
harmful for ratepayers,” said Stefanie Brand, the director of the
state’s Division of Rate Counsel. “We urge that this bill not be
voted out of committee.”
Currently, a public entity must put a
potential sale directly to the public in the form of a referendum. But
the bipartisan bill, sponsored by State Sen. Joe Kyrillos (R-Monmouth)
and State Sen. Paul Sarlo (D-Bergen), would put together a new process
by which a municipality could seek to designate its system as in
disrepair – and get approvals from both the Department of
Environmental Protection and the Board of Public Utilities to sell it
directly to a private company.
“In its own way, it’s as
important as the renewal of the Transportation Trust Fund,” said
Kyrillos. “It’s a big deal for the state in terms of environmental
problems, and economic growth.”
Any system within a combined-sewer
overflow, being within a critical water supply area, having a potential
for sodium intrusion, or being deficient in drinkability or pressure
could be put up for sale, according to the bill. Kyrillos could not give
an estimate of how many systems would fall into the categories, but the
overflows alone are present in 21 of the biggest New Jersey cities, and
the critical water areas extend in a curving arc through central and
southern New Jersey, according to DEP documents.
Critics contend those categories are
too broad. And it’s not just environmentalists who oppose the bill.
The New Jersey State League of Municipalities has lobbied against the
legislation, warning against its possible long-term effects. Bill
Dressel, the executive director of the group, contends that that a water
system is a local government’s “most valuable asset” – and
voters should have the direct say as to whether it is sold.
“It’s at the essence of local
government,” Dressel said. “The League is concerned about the
authorization of a sale of a water utility asset without voter
The state’s Division of Rate
Counsel, which represents ratepayers across New Jersey, blasted the bill
in written testimony as the bill was voted out of the senate budget and
appropriations committee in October. The cost of buying the systems will
be passed on with increased rates, said Brand, the division’s
“This bill … has the potential to
allow investor-owned utilities to run wild with bid prices in an effort
to submit the highest bid,” said Brand. “Meanwhile, ratepayers will
be required to pay for the full purchase price in rate, and will pay for
these higher bids.
“If the utility knows in advance
that the entire purchase price will be recoverable from ratepayers, it
will have no incentive to submit a reasonable bid or negotiate a
reasonable purchase price,’’ she added.
The bill could affect a majority of
the water systems in New Jersey. Publicly-owned water systems account
for 321 of the 593 community water system in the state, said Bob
Considine, a spokesman for the state Department of Environmental
Protection. The remaining private systems span a range from the massive
United Water and New Jersey American Water systems which each serve more
than half a million people, down to tiny water systems serving just a
few dozen mobile homes.
An Oct. 20 legislative financial
analysis of the bill cited that the federal Environmental Protection
Agency estimates that New Jersey’s water, wastewater and stormwater
infrastructure will need $41 billion investments over the next 20 years.
Kyrillos, the co-sponsor, counters
that any sales will not happen “willy nilly” – and many other
people in the Garden State already have taps and toilets supplied by
“Many, many, many people in New
Jersey have private water utilities,” the senator said. “And they
pay a reasonable price that’s overseen by the BPU.”
Sarlo, the other sponsor of the bill,
did not return a call.
Jeff Tittel, the director of the
Sierra Club’s New Jersey chapter, said the rejection of privatization
efforts in Trenton in 2010 and Newark in 2012 have led to the bill to
make it easier to get around public scrutiny.
“Many towns and public utilities
want to privatize water and sewer services for short term financial gain
which will mean long term problems for their residents,” Tittel said.
“This legislation is trying to silence residents since they know the
public is against these privatizations because with privatization we see
higher costs, worse services, and at times threats to public health and
Seth Augenstein can be reached at email@example.com.