Vote No on Privatization for the South Orange Water System

This article was written by Bernice Napach, a resident of South Orange, NJ.

As the Patch has reported, South Orange residents will be voting this Tuesday on a referendum that paves the way for the privatization of the town's water system. I recommend that residents vote No because if the referendum is approved, the sale will proceed despite statements by village officials that it only clears the way to finalize a sales agreement and is not the final deal. Why else hold a referendum?

I oppose the referendum for several reasons:

A sale of the water system to the New Jersey American Water Company (NJAW), cannot be reversed. It will be final.

Once our water system is sold, residents will have no direct say in how the water system operates and sets rates. NJAW, which is part of the larger, national American Water, will be in charge, with rates subject to review by the New Jersey Board of Public Utilities. The company is a publicly traded corporation (stock symbol: AWK) focused first on profits and its shareholders, unlike our incorporated village whose government officials have a responsibility to local residents.

American Water has been aggressively acquiring water systems around the country. Those systems as well as South Orange's must be upgraded to comply with new federal regulations that require the replacement of old lead pipes and galvanized pipes, which can corrode, leaking into drinking water. That means you, as a ratepayer in South Orange, will be paying not only for upgrading our local water system but myriad other systems around the country.

Alternatives to a Sale

There are alternatives to selling our water system, which should be explored. A municipal task force actually presented three alternatives to a sale though it voted 4:2 in favor of the latter. Those alternatives are:

--Contracting with another company to operate and maintain the water system

-- Having the town provide those services, which would requiring the hiring of about a dozen personnel

--A combination of the two plans above

It's not clear to me why none of those alternatives were approved by the Village Council.

Any alternative would require funding by the village to upgrade our water system rather than rely on NJAW to do it. The village could apply for federal grants, made available by the Bipartisan Infrastructure Law, which Congress passed in late 2021. New Jersey will receive $168 billion from the federal government to invest in clean water infrastructure, including $44 million earmarked for replacement of lead pipes. Other public funding may also be available.

The village could issue bonds to help finance the water system upgrade. South Orange has a strong AA debt rating from S&P, suggesting bonds could be issued at a reasonable rate, especially at a time when rates have been falling.

The village must replace leaded pipes within the next 10 years but it has only until July 2026 to find a new operator for its water system. Its contract with NJAW, which currently supplies Operations and Management services for our water utility will end after July 2026. Still, that's 18 months from now.

More Information is Needed

There are still many unanswered questions about a potential water system sale — questions which merit further review by the Village Council and village residents. The village did hold three public hearings on the potential water system sale, but those hearings were poorly publicized so many residents, like myself, didn't know where or when they were being held. (They are currently available, along with the task force report on the village website.)

No notices about the hearings were mailed or emailed to residents, but plenty of handouts from New Jersey American Water were stuffed into our mailboxes along with a more recent 12-inch by 15-inch flyer containing a letter from Mayor Sheena Collum favoring the sale. Village communications have clearly been one-sided. For an alternative point of view you can check out the website of Food & Water Watch and search for South Orange.

Among the questions remaining:
--How much are water rates likely to rise after the first five years after the sale when rates are capped (no increase for the first two years; a 3% increase in each of the following three years).
-- What has been the experience of New Jersey towns such as West Orange and Maplewood who have sold their water systems to NJAW, including their annual rate increases since their sales relative to pre-sale rates). South Orange resident Ben Vitale, who has been closely following the water privatization issue, says Maplewood residents pay 20% higher water rates than South Orange.
--Village officials say if the village continues to operate its water system, water rates will rise by 74% over five years, or almost 15% a year. How did they come by that number? What assumptions were built into that calculation?

South Orange residents deserve to know more about the potential sale of our water system before we approve authorization for the village to sell it to NJAW. We need more information, and there's time enough for the village to provide it. Vote No on Tuesday's referendum!