Bill Would Speed Up Sales, Leases of Water, Sewage Facilities to Private Buyers

Tom Johnson | December 12, 2014 | Energy & Environment
Legislation sparks heated debate in Assembly committee, divides expected allies into opponents

Assemblywoman Linder Stender (D-Union).
A bill that would allow distressed water-supply facilities and wastewater treatment plants owned by municipalities to be more rapidly sold or leased to private entities narrowly passed a legislative committee yesterday.

The legislation (A-3628) sparked heated discussion yesterday before the Assembly State and Local Government Committee, with proponents saying it would allow fiscally strapped towns to make needed improvements to their water systems while others argued that it could spike costs for customers once the facilities are owned by private water purveyors.

What was unusual about the debate was how split the business community, government officials, and industry officials were over the merits of the bill. Environmental groups and the state Division of Rate Counsel also opposed the measure.

The legislation is aimed at addressing a long-neglected issue of updating drinking-water supply systems and plants that treat sewage. By some projections, it could cost up to $40 billion to fix obsolete drinking-water plants and wastewater treatment facilities, some more than a century old.

To proponents of the bill, which passed a Senate committee earlier this fall, some communities without the resources to make those improvements will benefit from the changes.

“There are some out there that are in need of significant investments without the ability to do so,’’ said Andrew Hendry, president of the New Jersey Utilities Association, which represents investor-owned utilities that may be interested in buying up distressed local systems.

Gerald Keenan, executive vice president of the New Jersey Alliance for Action, agreed. “They (the municipalities) just don’t have the money,’’ he said, adding that the water companies have the resources to make the necessary improvements.

Assemblywoman Linder Stender (D-Union), the chairwoman of the committee, said the bill would “allow a pathway for municipalities to make these investments.’’

The argument raised by opponents of the bill is whether the acquisitions will raise bills to customers.

Division of Rate Counsel Director Stefanie Brand argued that the bill would strip away the state Board of Public Utilities’ authority to decide how much of the purchase price should be passed on to customers, including some costs of the transaction, which ought to be borne by shareholders instead.

“Investor-owned utilities won’t buy a system unless they think are going to make money from it,’’ Brand said.

“If the utility knows in advance that the entire purchase price will be recoverable from ratepayers, the incentive to submit or negotiate a prudent purchase price will be undermined,’’ Brand said in written testimony submitted to the committee.

Advocates argued that the BPU will still retain jurisdiction of how much rates could rise, if such acquisitions or leases go through.

The New Jersey League of Municipalities also opposed the bill, but a mayor from the New Jersey Conference of Mayors supported the legislation — an indication of how divisive the measure is among parties used to being on the same side of an issue.

While the New Jersey Chamber of Commerce backed the proposal, the New Jersey Business & Industry Association urged the bill be held.

Sarah Blum, a lobbyist for NJBIA, suggested that the state needs to develop a comprehensive plan for all infrastructure upgrades, not only one dealing with drinking-water supplies and sewage treatment plants.

“We need to have a comprehensive plan in place before we start allowing acquisition of these systems,’’ she said.

Others who opposed the bill objected to a provision that would allow a public referendum on an acquisition or a lease only after the municipality had approved, and only after a petition was filed with the community.

“We ought to let voters decide it,’’ said Adam Leibtag, president of Local 1036 of the Communications Workers of America.

The Association of Environmental Authorities also expressed concerns. Peggy Gallos, its executive director, said the bill makes no distinction between well-run public systems and others. “We don’t understand the rush to get this bill through,’’ she said.