Right now the big news in Trenton is that the Trenton Water Works deal that sells miles of pipelines, other infrastructure and a majority of the Trenton water utility’s captive consumers to New Jersey American Water Co. for $80 million could end up in the hands of the voters.
Some city officials compare selling water infrastructure outside the City of Trenton in Ewing, Hamilton, Hopewell, and Lawrence while continuing to sell water to customers there as a relationship akin to selling an old, maintenance-costly delivery truck, while continuing to hold a lucrative contract with outlying customers. If one listened to what Mayor Douglas H. Palmer and his administration officials have been saying about the deal, perhaps this is the impression of the whole deal that develops.
But, as usual, City of Trenton officials are engaging in a bit of truth-bending. In reality the deal is one that further compromises Trenton’s future revenue-generating capability and fiscal stability.
First of all, the outlying infrastructure currently up for sale is anything but old, especially in Hopewell.
In Hopewell, most was constructed after 1987, and nearly 90 percent of it was constructed by developers and handed over to the City of Trenton like some sort of birthday present, according to regulatory testimony available on the Hopewell Web site. There is some aging infrastructure in some township areas, but on the whole, that outlying system is in much better shape than what lies beneath the ground in Trenton.
The townships, having developed at a later time, tend to have newer, more modern infrastructure that is much less costly to maintain, according to utility employees.
“What we’re selling isn’t aging,” said a high-ranking utility employee during some fact-checking performed last year. “I have only done 10 repairs in Hopewell in 10 years.”
In fact, estimates considered by the Board of Public Utilities say that with all the developer-supplied infrastructure taken out, it appears that the real Trenton-bought and constructed infrastructure amounts to less than half the value of the deal – somewhere below $50 million. Even worse, testimony given to the BPU says that type of infrastructure actually belongs to the ratepayers, and is not even really Trenton’s to be selling.
The real aging and decaying infrastructure in Trenton will become the sole responsibility of ratepayers from the city in terms of maintenance and capital improvements, instead of the current situation, as a result of this deal.
Also at the core of the issue is the arrangement that calls for Trenton to sell water to New Jersey American’s newly acquired township customers for a period of 20 years, with a proposed charge of around $10 million a year, among other perks coming to the city.
That all sounds nice, but when one considers that a majority of the utility’s ratepayers live outside of Trenton, it becomes clear that the $10 million represents a significant downgrade as far as the water utility’s attractiveness as a revenue-generating asset is concerned.
The water utility has been making roughly $30 million a year as recently as 2008, and a majority of that – upwards of $16 to $18 million – is coming from the water rates paid by township customers making up more than 60 percent of the utility’s total customers. Take out that revenue and substitute the wholesale water deal and you get a utility that will have to cut roughly $6 to $8 million worth of costs simply to maintain CURRENT revenues.
Again, not good.
What the deal leaves the city with – Trenton’s ratepayer base – is also misleading.
The ranks of Trenton-dwelling ratepayers are filled with thousands of delinquent or non-existent accounts existing in a municipality experiencing all the effects of a shrinking population and urban decay. That ratepayer base was always augmented with the 45,000 or so more reliable township ratepayers, yet that will all end with a successful deal.
Utility employees say it remains to be seen whether Trenton will see anymore budget dollars coming from the outlying townships once the 20-year deal with New Jersey American Water is completed, considering the city’s partner is a company that already has connections with the township water infrastructure that would allow it to quickly pump water in from non-Trenton sources.
Arguments for the sale fail to take into account the fact that private developments generally have to perform their own water repairs, and the city only repairs piping or infrastructure between the main line and the curb. That fact means that much of the infrastructure in built-out portions of the townships costs the city nothing to maintain.
Also, merely controlling that infrastructure means that city receives several revenue streams that will disappear with the American Water deal. For instance, the city gets to charge all townships for the construction and maintenance of hydrants, and receives money from so-called ready-to-serve charges for each new customer.
Both the hydrant and ready-to-serve dollars will dry up with the proposed sale, and any future development in many of these thriving suburbs will also fall into the hands of New Jersey American Water, and not the City of Trenton.
All of this adds up to a deal that will simultaneously damage Trenton’s finances and further destroy the city’s relationship with bordering towns, all for a quick infusion of budget dollars that could very well disappear in the course of a year or two, when Mayor Palmer’s currently threatened tax increases will take on even larger proportions.
Hopefully someone puts a stop to it, for the sake of Trenton residents and our neighbors in Mercer County.