Funding Mechanism Could Speed Rebuilding of NJ’s Water Infrastructure

Scheme banks on FEMA funds to upgrade drinking water facilities, wastewater treatment plants

Financial help may be on the way to the more than 100 facilities that supply drinking water to residents or treat wastewater, all of which were severely damaged by Hurricane Sandy.

But it could be expensive.

In a unanimous bipartisan vote yesterday, the Senate Environment and Energy Committee approved a new funding mechanism to assist New Jersey’s water and wastewater treatment plants to make emergency repairs. The funds also would be used to make the facilities more resilient to extreme weather.

The temporary three-year program could run up to $5 billion. Lawmakers and state officials are counting on funds from the Federal Emergency Management Agency to bankroll most of the initiative.

In the short term, a relatively unknown state agency — the Environmental Infrastructure Trust — would funnel so-called bridge loans to local governments and institutions enabling them to get a jump on the needed work, with the expectation being that the loans would be repaid with federal dollars.

The bill aims to address one of the huge problems that the state faces in Sandy’s aftermath. New Jersey Department of Environmental Protection officials say the plants incurred an unexpected $2.6 billion in damages. It also underscores the severe financial distress the storm will have on the state’s recurring budgetary crisis.

“It’s a game-changer to funding infrastructure in the state,’’ said Sen. Bob Smith (D-Middlesex), the chairman of the committee and sponsor of the bill (S-2815). “This is all an effort to get New Jersey back on firm footing.’’

The Disaster Relief Emergency Financing program would supplement funds already doled out by the trust, which traditionally invests hundreds of millions of dollars annually to help make upgrades to the state’s wastewater treatment facilities.

The costs of upgrading those facilities are mind-boggling — even before Sandy. New Jersey needs to spend $45 billion over the next two decades to repair its drinking water infrastructure and sewage treatment plants, according to DEP officials. That means investing $8 billion in drinking water infrastructure and another $37 billion in wastewater treatment.

David Zimmer, executive director of the Environmental Infrastructure Trust, said the new disaster relief funding would not affect the financing of traditional projects given loans by the agency, which also leverages federal clean-water money to provide low-interest loans to upgrade wastewater plants and water supply facilities.
Indeed, in a separate vote, the committee approved $780 million in funding for other projects.

When Smith questioned why the trust should oversee the disaster relief program, Zimmer replied, “That’s what we do.’’ Over the past 26 years, the trust has financed more than 1,000 clean-water projects, totaling nearly $6 billion through its low-interest loan program, which can reduce projects costs by 25 percent to 30 percent.

To get the program off the ground, Zimmer said the trust would go to banks to get a credit line to offer bridge loans to municipalities. He said the trust hopes to have the program operational by the end of July. The state may start seeing federal money by September, Zimmer said.

By most accounts, Sandy underscored the vulnerabilities of New Jersey’s infrastructure. The Passaic Valley Sewerage Commission, the fifth-largest wastewater treatment plan in the nation, was completely flooded by the superstorm. As a result, hundreds of millions of gallons of raw sewage flowed into the state’s waterways.

The trust has been working with DEP officials to develop a plan for dealing with problems encountered by those plants, Zimmer said. “This is a top priority for them,’’ he said.

In April, DEP officials said at a hearing at their headquarters that they hoped to leverage the $570 million in federal recovery funds to provide up to $3 billion in improvements to both wastewater and drinking facilities.

Jeff Tittel, director of the New Jersey Sierra Club, did not question the need for the upgrades, but raised questions about provisos in the bill that would decide where to allocate money.

“We’re leaving a lot of discretion to the DEP commissioner,’’ Tittel told the committee. He also faulted the bill for failing to address problems caused by global warming. “Unless the state addresses climate change, we could be wasting a lot of money.’’