South Orange water utility sale will be on ballot

By Andy Milone
Correspondent

South Orange is moving forward with a referendum on the sale of its water system to New Jersey American Water for $19.7 million.

The Village Council approved the ballot question for the upcoming general election in a 4-2 vote at a special virtual meeting Monday night. Councilman Bill Haskins and Councilwoman Karen Hartshorn-Hilton opposed authorizing the referendum on its second and final reading.

Passage by a majority, or more than 50% of voters, during the Nov. 5 general election would enable the council to consider finalizing the sales agreement.

There are initial beliefs and facts reportedly backing that privatization should be considered because of it being in the best financial interest of the municipality and that substantial rate hikes are looming if not pursued immediately. There are people who feel the opposite though.

The decision will ultimately come down to the electorate. Several councilmembers expressed their confidence in residents making an informed call on its future.
“I just think the voters will have enough information,” said Councilman Bobby Brown.

There are people who feel the move won’t be a boon and feel more research needs to be completed.

Hartshorn-Hilton feels the “forever vote” is not “in the best long-term financial interest of our residents” at this time.

I just think that there’s more work we can do at the council level before we take it to the voters,” she added.

If the sale were to reach the finish line, South Orange would give up ownership of the infrastructure for the first time in its history. But it has outsourced operations and maintenance for a few decades.

Currently, American Water – and before that, the East Orange Water Commission – is in charge of the infrastructure and has sold water to the village since 2017. The water and services equated to $3.76 million in costs in 2023, Administrator Julie Doran said.

Meanwhile, South Orange has a $5 million budget for water services, according to Doran. The village ultimately finances the capital improvements and foots the bill for regular operations and maintenance expenses.

The village’s water division has one part-time water administrator. That would dissolve if this sale were to go through. The company would inherit some 4,700 customers, according to Doran.

One spark for the conversation had been American Water informing South Orange that it would not operate and maintain its system after the current agreement expired in July 2026. No reason why was immediately available.

Ruben Rodriguez, American Water senior director of external affairs, did not respond to multiple calls for comment on the pending sale.

The other reason the sale is on the table is the potential cost, passed onto customers, to meet new state-mandated replacements for lead and galvanized lines. Parts of the village’s aging infrastructure also date back to the early 1900s and even before the turn of the century.

“If you recall, there is now a state law, that requires identification and replacement for all lead and galvanized lines and so that definitely piqued everybody’s interest of how we would do that, especially as a small water utility,” said Mayor Sheena Collum.

The sale price wouldn’t necessarily be a windfall for the village as it’s not allowed to be allocated to the general fund, said Doran during an interview. Instead, it’d go toward any outstanding debt incurred by the water system. Anything leftover would cover the debt for the village’s other capital improvements.

The future of the water utility has reportedly been an ongoing conversation for years and one that was studied for close to two years by a task force composed of residents, officials, and professionals. Consultant Remington & Vernick Engineers assisted.

“These improvements will be absorbed across New Jersey American’s entire rate base in New Jersey and this includes many newer, post-World War II communities with newer water systems and much lower incidents of lead and galvanized lines,” said Douglas Newman, who served on the 13-member taskforce and formerly served the village as mayor.

He also said the task force’s findings discovered that South Orange would need more operational and maintenance vendors in the future, as well as additional capacity in-house, or what equates to a dozen full-time employees.
There are critics of the move to privatize the water utility.

Some think it’s being rushed, but officials stress that this is the best time given that it’s a presidential election with a likely high voter turnout.

A spat is also unfolding with Food & Water Watch. The mayor says her village wants to partner with the environmental activists but is alleging the organization is putting out “misinformation” based on generics, not specifics related to South Orange’s situation.

Protestors, a few of whom spoke amongst the less than 10 who took the opportunity Monday night, are worried about privatization because of companies chasing bottom line over affordability.

“Privatization is the wrong solution for infrastructure in need of upgrade – often leaving communities with higher water bills, worst customer service and little control to fix the problems,” said Sam DiFalco, a New Jersey organizer with Food & Water Watch.

In the proposed sales agreement with American Water, it would be stipulated that the company spend $50 million on capital improvements to South Orange’s system over the next 10 years. Additionally, it’d be mandated that rates remain flat the first two years of control and then kept to 3% increases each of the following three years.

There are other purported perks to the sale. One is the available H2O grant program to help those in need pay their utility bills. But there are other aspects needing to be sorted out.

They relate to the municipal facilities’ consumption of water as well as “hydrant fees, which is also a new expense that would have been offset within our operating budget,” said Collum.

American Water was one of two companies to place a bid for the village’s water utility. Veolia offered $12.5 million, but that was considered to low, according to the mayor.

American Water already owns and operates the systems in nearby communities – West Orange, Irvington, Maplewood and Millburn – and apparently that’s paid dividends, according to Collum.

The New Jersey Board of Public Utilities has to offer “municipal consent” to transfers of municipal water and wastewater utilities to private firms and has reported six such transactions in Egg Harbor City, Salem City, Allendale, Somerville, Long Hill Township, Bound Brook.

Collum emphasized throughout the special meeting how the transaction is not a done deal. There will be town halls and other information disseminated in the weeks leading up to the election.

“What we’re doing tonight does not constitute a sale. What we’re doing tonight is saying we want to share the information we’ve been gathering over the past two years with all our stakeholders and then ultimately this will go to a referendum,” said Collum.

  New Jersey American Water, sale, South Orange, water utility