New Jersey is not the only place where communities are struggling to keep essential public water resources out of private hands.
On August 6, the Baltimore City Council unanimously approved a resolution, Bill 18-0271, to amend the city charter to prohibit the sale or lease of its water system. The amendment would declare the “inalienability” of sewer and water-supply systems and exempt those systems, and their “operations and uses” from charter provisions that otherwise authorize the “grant of franchises or rights relating to the operation or use of public property.”
Baltimore’s Law Department and Department of Public Works have already signed off on 18-0271, with the Department of Finance deferring to the DPW, but the ban is not a done deal because the charter revision requires voter approval. The City Council President waived rules to fast-track it so that it will go on the November ballot, provided that Mayor Catherine Pugh signs the resolution by August 13.
She is expected to do so. Not only did she propose the same move earlier this year but, following the Council vote, she tweeted: “I’m delighted that the City Council is supportive of my earlier efforts to safeguard Baltimore City’s water system and require that it is always operated in the best interests of those who rely on it, and for generations to come.”
Baltimore would be the first major city and possibly the first city of any size to take such a step to safeguard its water.
And it has good reason to do so.
Placing public water systems in private, corporate hands tends to be a bad idea for a number of reasons. It reduces accountability and transparency and often drives up cost. According to Food & Water Watch, privately owned water utilities tend to charge residential customers an average of 59% more than public systems do.
And a for-profit company is less likely to make sure that low-income and minority areas get an equal level of service.
Rianna Eckel, a Maryland organizer with Food & Water Watch, a national group that opposes water privatization, said loss of local control can result in “skyrocketing water bills, escalating water shutoff rates, downsizing public sector jobs, and deteriorating service quality.”
Food & Water Watch has also been active in New Jersey and in 2010, released a report, “Has Water Privatization Gone Too Far in New Jersey?”
New Jersey Law
New Jersey’s law allows municipalities to sell a public utility plant or system to a non-public entity upon adoption of an ordinance and approval by a majority of voters in a general election.
It also allows joint public-private operation of water supply and wastewater treatment systems. The Water Supply Public-Private Contracting Act (N.J.S.A. 58:26-19 et seq.), enacted in 1995, streamlined the process, set public notice and hearing requirements end mandated approval by two state agencies, the Board of Public Utilities and Local Finance Board.
Privatization got a big boost in 2015 when Governor Chris Christie signed into law the Water Infrastructure Protection Act, A-3628, P.L. 2015, c.18, which allows cities to bypass public approval in some circumstances.
It authorizes municipalities to sell their water assets or lease them long-term to a “capable” private or public entity, without the otherwise required referendum, if an “emergent condition” exists. Conditions that qualify as “emergent” include a “demonstrated lack of historical investment, repair, or sustainable maintenance,” “material damage” to the system’s infrastructure, inability to provide sufficient quantities of uncontaminated water and the system owner’s lack of “financial, technical, or managerial capacity to adequately address” such problems.
The law does not apply to Newark as the result of an amendment excluding cities with more than 270,000 people in the most recent 10-year census. Newark, with a population of 277,140 in the 2010 census, was the only city large enough to qualify for the exception.
The next largest city, Jersey City, with 247,597 people in 2010, has grown rapidly since then and the U.S. Census Population Estimates program calculated it at 270,753 as of 2017.
Jersey City’s water system, however, has been privatized for more than 20 years though a contractual arrangement between its Municipal Utilities Authority and the Suez Water Company (formerly United Water), to operate the system.
Suez, a French company that also has contracts with Hoboken, Bayonne, Rahway, Toms River. West Milford, and other NJ municipalities, has been lobbying to take over the Baltimore system.
An audit report released this past February by the NJ State Comptroller’s office found serious problems with the Jersey City MUA.
First, it kept raising rates between 2010 and 2015 despite an annual $12.5 million plus surplus. The annual water and sewer bill for a family of four using an average of 400 gallons per day, jumped from $1,150 in 2006 to $1,900 in 2015, a 65% increase, according to the report.
In addition, United Water/Suez failed to accurately bill and collect payments for water supplied to Jersey City and also to Hoboken, which buys water from Jersey City and also has a contract with Suez to operate its system. The report found approximately $575,000 in lost revenue for JCMUA: $490,00 for Jersey City users from April to August 2011and $84,000 for Hoboken users from September 2013 to August 2014.
The report further found that the JCMUA “failed to properly administer contracts and implement appropriate controls to ensure goods and services were procured and contracts were awarded in compliance with applicable laws and regulations.”
Standing Up for Public Control
NJ Appleseed has been involved in several initiative and referendum efforts aimed at blocking privatization of water systems in Newark and Atlantic City.
Starting in 2012, it helped with a successful petition for an ordinance to dissolve–the Newark Watershed Community Development Corporation (“NWCDC”), the quasi-public entity that maintained the City’s watershed property and operated the treatment plant–and to reconstitute the Newark Water Department.
More than half a dozen employees, contractors and consultants of the now defunct NWCDC have been convicted on federal charges for taking kickbacks and other forms of corruption. They include its former executive director, Linda Brashear, who was sentenced to eight years in prison.
In Atlantic City, whose deteriorating finances led to a state takeover of the City in fall 2016, NJ Appleseed worked with the local chapter of the NAACP to preserve the public right to a referendum on any attempt to sell or lease the water system. I wrote about the effort last December when the state monitor disavowed any plan to privatize.