A referendum is on the November 5 ballot in South Orange, asking residents to vote “yes” or “no” to allow South Orange Village to negotiate the sale of its water utility to New Jersey American Water. Read more here. Village Green invites voters to submit Letters to the Editors. See guidelines below.
Most folks, for understandable reasons, aren’t paying much attention to the water privatization ballot initiative. I have no personal interest in this other than as a South Orange resident and ratepayer, but I believe that it’s in our best interest as a community to vote NO on selling our water infrastructure to American Water and wanted to share why.
The most important thing to understand about this proposed privatization deal is how American Water and Wall Street see it: They’re not buying our infrastructure — they’re taking our infrastructure as a condition for buying the right to charge us fees and make profits off us literally forever.
Most of the public discussion I’ve seen on this topic doesn’t speak to some key factors:
- There’s no conspiracy here — it’s right out in the open: American Water is telling Wall Street explicitly that they will win big. The company that the mayor proposes to sell our water infrastructure to is a giant publicly-traded company, American Water. American Water makes about a billion dollars in *profits* for their Wall Street investors each year — on top of the tens of millions of dollars they pay annually to their top executives and board of directors. They have articulated their strategy very plainly to Wall Street: acquire municipal infrastructure on the back of promised upgrades in the short term, then jack up fees in the medium and long term. More profits mean more dividends for investors and millions in bonuses for executives. American Water makes their case for extracting profits from the rates we pay (forever!) very explicitly to Wall Street, if not in their campaign communications. Wall Street understands perfectly, and it believes them. Tens of millions of dollars will be paid every year to executives and the board to execute this strategy. All of that — including the money they spend lobbying for rate increases, and the money they spend to campaign for referenda here and elsewhere — is baked in, and Wall Street correctly expects that American Water will deliver them more and more profits.
- This is not a win-win for us and them. Privatization locks in American Water profits – and higher costs for us — forever. The deal promises to cap rate increase for five years, and then in years six to fifteen gradually increase rates to those paid by everyone else in the state who’s privatized their infrastructure. From year fifteen to year infinity all bets are off and fees will rise to feed profits (and more acquisitions). The mayor and the company say, “hey, it’s regulated by the state how much we can charge.” Yes, the governor appoints a Board of Public Utilities that has in the past been a revolving door of former political staffers and old college friends of governors. Here’s how that goes: just last month the board approved an almost $80 million increase in the fees American Water can charge its New Jersey customers. The best part: American Water requested approval to charge higher fees because of all the investments they’re making buying up municipal water systems! In other words, the board approved increasing the fees the company can charge … in order to help the company pay for buying the rights to charge more people fees and lock in profits forever.
- OK, so how will we get the upgrades we need, you ask? Upgrading infrastructure costs money, to be sure — but asking a publicly-traded company with ratcheting profit expectations from Wall Street to fund it will always cost more. The nonprofit Food & Water Watch puts it well: “Even if the company saves money on upgrades through loans and grants, it won’t pass on these savings to ratepayers, as the company charges the same rates statewide. Moreover, South Orange ratepayers will bear the cost of other system improvements across all of [American Water’s] acquisitions. Instead of selling its system, South Orange could pursue federal and state grants and low or zero-interest loans to fund the replacement of lead pipes. In fact, some of these are only available to publicly owned water systems. The system can then pass the savings from these grants and loans to the community by lowering rates.” Savings by American Water go to Wall Street, not ratepayers.
- Why is our mayor (who otherwise seems great) backing this? The campaign for YES being run by the company and the mayor likes to point out that the sale will pay off $19.7 million in municipal debt and guarantee $50 million in infrastructure investments over the next 11 years. The argument being made seems to be, “Hey, here’s a cash windfall for us, and on top of that they’ll do a bunch of upgrades to the system that are really expensive” with the subtext being that it would be hard to do the upgrades ourselves with our own access to grants and financing. There’s also a bit of “nothing to see here” hand-waving because we already have a vendor relationship with American Water and they’ve already bought up the infrastructure in some neighboring towns. But this privatization deal is a big structural windfall — forever! — for an increasingly powerful corporation, signed off on by politicians presumably looking for an expedient way to take a problem off their plate. The mayor said in a recent letter to residents: “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.” But that misses the point entirely — American Water doesn’t care about the aging infrastructure, and will only do as much as it legally must to improve it; the asset American Water wants to buy is the right to charge us fees and lock in profits. Whatever investment they commit to making will ultimately be paid for by ratepayers — with a healthy profit margin baked in.
- Privatization abdicates responsibility for a critical public good and forfeits our ability to hold anyone accountable for it. This deal takes South Orange residents out of the equation in any future questions about our water. Quality, sustainability, equity, and resilience will be permanently handed over to a for-profit entity subject to the extractive imperative and gambling whims of Wall Street. If it winds up not working out as the deal promoters say, voters have no recourse. And the loss of transparency by moving from public to private ownership will limit your ability to even know what’s not working out in the first place.
In short: this is a bad deal. South Orange residents should vote NO and send our elected officials back to the table to get a better, non-forever deal — or find another path forward.
Thanks for taking the time to read this, and please share with your friends and neighbors before they vote. Absentee ballots are already out there, and both corporate and village resources are being spent to promote the privatization deal.
Joe Rospars is a South Orange resident.
Letters to the Editors guidelines: Village Green publishes Letters to the Editors regarding local election issues. Publishing these letters is at the discretion of the editors. We do not publish letters attacking candidates or any person. We aim to publish as many letters as we receive; however, if there is a large volume of letters and they are received late in the cycle, we cannot guarantee that they will be posted. We fact-check all letters. Letters to the Editors can be submitted to villagegreennj@gmail.com. Please send as a Word or Google document, not as a PDF. Letter writers should provide their name and place of residence (town and state). The deadline for submitting a Letter to the Editors for the Fall 2024 election is Tuesday, October 29, at 5 p.m.
