Hoboken Considering Deal With Suez To Renegotiate Water Contract

HOBOKEN, NJ — There’s a deal on the table with Suez Water before the Hoboken City Council that will have a huge impact on the future of the city’s aging and crumbling water system.

According to city administrators, Suez is seeking to renegotiate its water service contract with Hoboken, which currently extends until 2024. The renegotiated contract would reportedly add another 10 years to the life of the contract and provide more than $31 million in infrastructure investments and a total of over $40 million in benefits to the city.

In addition, the renegotiated agreement will forgive $10 million owed by the city to Suez under the terms of the existing agreement for excess repair and bulk water costs, administrators say.

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The office of Mayor Dawn Zimmer released the following statement about the proposal on Wednesday:

“If the new agreement is not approved, the city will remain under the terms of the existing agreement, which ends in 2024. Under those terms, Suez will be required to make only $350,000 per year in emergency repairs for the next seven years, while the City of Hoboken would continue to be responsible for all repair costs over $350,000 annually. The city would receive no funds for the needed modernization of the water main system. In addition, the city would be responsible for the approximately $10 million that would be forgiven in the renegotiated agreement for excess bulk water and repair costs.”

The new contract would allow Suez to “gradually increase rates” in order to “bring the cost of water into line with the actual increase in cost since 2014 and absorb a rate shock.” Suez would be allowed to increase rates to absorb this cost over six years by 2 % per year, at which time the increases would end.

Any future increases in the cost of bulk water would be passed on to ratepayers as they occur, according to the agreement. If water usage drops below 95 % of current levels, Suez can increase rates to the “breakeven point,” an amount that produces the same revenue as 95 % net of the cost of bulk water, or be compensated through a Rate Stabilization Fund.

In addition, Suez would apply a one-time rate increase equal to 1.8 % in 2018 to “fund the increased maintenance budget level.”

The potential deal requires City Council approval to move forward. A memorandum of understanding agreement is expected to be presented to the council at the City Council meeting on Aug. 2, administrators said.

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“Our aging water system is in need of expensive capital upgrades, yet the $350,000 provided annually by our existing water agreement from 1994 is not even enough for emergency repairs,” Zimmer said. “Our proposed agreement would provide on average over $1.8 million per year for capital investments. The city has already begun the process to invest $12 million in water main improvements, and this agreement will allow us to make the investments we need to modernize our water system.”

However, Councilman Mike DeFusco, who is running for mayor in November, offered a dissenting opinion about the proposed deal.

"Mayor Zimmer has had nine years in office to reach this agreement and announcing it now shortly before an election to succeed her as mayor is troubling, especially given that if approved this contact would be in effect for decades,” DeFusco said.

“The proposed agreement deserves serious scrutiny from both the council and the community to ensure that it's the best possible deal for the city,” DeFusco continued. “It's particularly concerning that the contract would include an annual rate increase of at least 2 percent, which would amount to yet another hidden tax on Hoboken residents that many will struggle to afford."

• View a presentation highlighting the terms of the agreement: www.hobokennj.gov/docs/suez/Suez-Agreement-Presentation.pdf
• View the memorandum of understanding and term sheet: www.hobokennj.gov/docs/suez/Suez-MOU.pdf
• View a memo from Mayor Zimmer to the City Council regarding the agreement: www.hobokennj.gov/docs/suez/Letter-Zimmer-Council-7-11-17.pdf.

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