State of Disrepair:: The Privatization of Our Waterways
Feb 05, 2016 02:49PM
By Ethan Stoetzer
When municipalities prepare for the year’s fiscal budgets, the primary goal among lawmakers is to provide all necessary services with as little increases in taxes as possible. But as budgets continue to rise and the pressures to stagnate taxes, a town is often forced to prioritize its assets.
For New Jersey, many municipalities have chosen to forgo upkeep on water and sewer infrastructures as ways to keep tax rates low.
According to a 2014 article in the Star-Ledger, 20 to 22 percent of all New Jersey drinking water is lost due to dilapidated waterways. The Environmental Protection Agency (EPA) has estimated that NJ water and sewer infrastructure would need approximately $41 billion in investments over the next 20 years, consistently, in order to address the problem.
The issue facing many municipalities is what happens when water and sewer infrastructure falls into a state of disrepair. With a resource as important as water, towns are often put into positions in which the only way to deal with it is to transfer ownership of the utility. While such a decision can appear to be necessary for the safety of the public, often times, bureaucracy takes hold, requiring public approval, bidding periods and ordinances with potential financial barriers.
This occurred in 2010 when Trenton propositioned the public to sell the water utility to try to revitalize its infrastructure. The $80 million sale to private industry was defeated by a margin of 4-1.
In January 2014, Governor Chris Christie signed the controversial Water Infrastructure Protection Act, eliminating the public vote required for waterway sales. This allows municipalities, whose systems fit the criteria of the law, to sell off the utility without public approval as a method to reverse the trend of dilapidated water systems.
The process of transferring ownership of the utility is more commonly referred to as “Water Privatization”.
“The biggest issue in water privatization is that the water is owned by private water companies,” says Lena Smith, South Jersey community organizer for Food and Water Watch. “By owning the system, it allows for (companies) to control water rates and control how water is managed.”
Food and Water Watch is a national organization that champions healthy food and access to clean water. According to site statistics, there’s a 64 percent average increase in water rates after a utility has been sold, equating to approximately $153 per year.
Additional reports illustrate water contamination on behalf of United Water Toms River (1996), a buyout on behalf of the North Brunswick municipality, after selling the utility. A New Jersey State Comptroller audit of United Water’s actions in Camden between 2004 and 2008 is also in the report. The audit found that between those years, 45 percent of the water in the municipality was lost due to dilapidated mains, along with questionable financial decisions.
“Water is an asset to a municipality,” Smith says. “To sell off an asset can leave the municipality finances in a weaker place. The profits are leaving.”
For the Borough of Haddonfield, a densely populated, historic South Jersey city, maintenance on water and sewers was something that had been avoided in an area where tax rates have always been an issue among constituents. Haddonfield Commissioner of Public Works John Moscatelli says that most of the borough’s waterways have been underground since before the 1900s.
“Just last year we had to replace an old water main,” Moscatelli says. “It was wooden, which dates back to around 1870.”
Moscatelli said that for the past eight years, the borough was investing its capital in repairing broken pipes, mains and sewer lines, but to no avail.
In November of last year, Haddonfield put its water systems to bid, following a trend that has taken root in a state with waterways in a critical state of disrepair. Fortunately for Haddonfield, New Jersey American Water thought the system was valuable enough to purchase, and after a referendum, was approved by a 2-1 majority in favor, says Moscatelli.
“I think it’s a valuable tool,” said Peter Eschbach, director of communications and external affairs for New Jersey American Water, on a municipality’s ability to sell the utility. “There’s a lot of politics involved because people don’t want their (taxes) raised, which puts limits on maintaining the waterways. Selling to private industry allows for a more secure and reliable system.”
Eschbach said that while the utility can be an asset to the municipality, if not properly maintained, it becomes an “exceptional” liability.
“It is a business,” Eschbach says. “We evaluate the infrastructure and there are additional parameters that weigh into it.”
Smith said that there are several avenues that a municipality can take before selling the utility, including grants and public loans, which are borrowed at a statistically lower rate than private loans. Eschbach says that those avenues work if a municipality is regularly maintaining its infrastructure.
“When you reach $50 million in repairs, it’s hard to convince taxpayers to pay that,” Eschbach says.
Whether or not the recent trend of privatization of water will lead to corporate monopoly of the water supply isn’t evident yet in reports and findings, but for Moscatelli, the response from Haddonfield has been pleasant. NJAW is currently replacing mains in the borough. All those that worked for the municipality were offered jobs at NJAW, and most either took the new positions or retired.