South Orange Mayor Sheena Collum mailed the following letter to residents ahead of the last of three town halls related to a referendum on the November 5 ballot regarding the potential sale of the township water utility. The town hall takes place on Wednesday, October 9, at 7 p.m., in-person at the Baird Community Center, 5 Mead Street, 3rd Floor. Read more of Village Green’s reporting on the referendum here.
Neighbors,
As you have hopefully seen by now, the South Orange Village Council adopted Ordinance #2024-15 to advance the sale of the Village’s water system – subject to a public referendum/vote currently occurring as part of the General Election ballot. The question reads as follows:
Shall South Orange Village, in the County of Essex, New Jersey, be authorized to sell its water distribution and transmission system (commonly known as the “System”) to New Jersey American Water Company Inc. for the sum of $19,700,000?” __ Yes / __ No
I am encouraging you to vote yes.
This recommendation is supported by our Water Utility Administrator, Village Administrator, Village Engineer, Chief Financial Officer, Purchasing Agent, Village Attorney, and Water Utility Task Force Chairman.
Our collective endorsement is thoughtfully informed by an extensive and exhaustive 2+ year process consisting of analyzing new state regulations (unfunded mandates), evaluating engineering reports, creating staffing models to support our system into the future adequately, and developing a clear financial analysis of impacts on ratepayers in the immediate, short, and long term to retain our system or sell our system to a regulated private entity.
After receiving bids, it was clear that New Jersey American Water is in a stronger position than we are to own and manage our water utility—offering better service, faster improvements, and lower costs than the Village can provide.
An overview of the New Jersey American Water (NJAW) deal is as follows:
- $19.7M purchase price (the next highest bidder was Veolia at $12.5M).
- $50M in infrastructure upgrades in ten years, $35M to occur in the initial five.
- Lead and galvanized line replacements for the utility side and customer side.
- Rate predictability for five years (0%, 0%, 3%, 3%, 3%), and then in years 6-15, the rates will gradually phase into NJAW statewide rates (which are regulated by the New Jersey Board of Public Utilities).
- For low-income residents who qualify for the H20 Help to Others Program, there is a tiered discount of 15-60% on service and water charges.
If voters approve this measure, the Village will be able to eliminate all Water Utility debt and a portion of general obligation debt. Lead line replacements and priorities in our current Capital Improvement Plan will also begin immediately.
As for the alternative, if voters don’t approve the sale, we will immediately begin staffing up our Water Utility and authorizing bonds for the necessary infrastructure work. Our financial advisors, working with our Chief Financial Officer and Water Administrator, estimate that to retain our system – properly staff it, and implement our Capital Improvement Plan – our rates will need to increase by roughly 74% in the next five years, excluding any service charges the Council will need to consider for meters and customer-side lead line replacement.
This comes down to whether South Orange wants to tackle our challenges ahead with the existing rate base of approximately 4,600 water customers or with NJAW, which has a rate base of 668,000 water customers, including owning and operating +the water systems for Maplewood, Millburn, West Orange, and Irvington.
It’s also worth noting that South Orange has no water supply and purchases its water through a bulk service agreement with NJAW. Our water comes from the Canoe Brook Reservoir in Millburn. This discussion would be different if we had a water supply and treatment facility in town because we would own an asset. In this instance, we own an aging distribution system that continues to depreciate and is a liability.
To learn more, please visit SouthOrange.org, where you can access presentations and reports, including town hall meetings on this topic recorded for your convenience. I also encourage you to join us at our next meeting, where you can learn more and ask questions:
South Orange Water Utility Sale Forum
Baird Community Center
Wednesday, October 9 at 7:00 PM
Thank you again for your consideration in evaluating this critical topic.
Always in partnership,
Sheena Collum
Mayor
RELATED:
- South Orange to Host 1st of 3 Town Halls on Water Utility Referendum Sept. 11
- Sale of South Orange Water Utility Will Be on November Ballot
- South Orange Voters Could Decide Fate of Water Utility: To Sell or Not to Sell?
- South Orange Receives $20M Bid for Water Utility
- Task Force Will Consider Sale of South Orange Water Utility
- As Township Considers Future of Water Utility, South Orange Intro’s Bond for $500K
- South Orange Looks to Appoint Howard Levison Water Utility Administrator
