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A New Jersey bid to privatize water


If approved by Gov. Christie, bill would give municipalities with aging pipes right to sell systems to private companies

A bill that would allow New Jersey municipalities to sell their public water utilities to private, for-profit corporations without putting the measure to voters is awaiting Gov. Chris Christie’s signature.

Until now, any municipality in New Jersey that sought to sell off its water system to a private bidder had to hold a public vote. But a bill passed with bipartisan support by the state’s Senate last week would allow municipalities with aging and deteriorating water systems to put their systems up for sale without holding a referendum.

While supporters of the bill say privatizing water systems could save municipalities money, it allows companies to factor the purchase price of the systems into the rates they charge customers, meaning taxpayers could ultimately be on the hook for the sale of their water systems.

Many New Jersey municipalities have turned to privatization as a way to get quick cash infusions for their deteriorating water systems. According to the Environmental Protection Agency, the state would need $41 billion over the next 20 years to repair its water, stormwater and wastewater systems.

“We’re an old, industrial state, and water infrastructure was built a long, long time ago,” said Lawrence Hajna, a spokesman for the state’s Department of Environmental Protection, which has not taken a position on the bill. “We’ve spent billions on upgrading, but there’s still a lot more to do.”

If the bill is enacted, New Jersey would join several other states, including Illinois, Pennsylvania and California, where ballot measures are not required to sell water systems to private developers.

“This is sort of a solution looking for a problem, because the option to privatize is already there. You just have to go to the voters,” said Mike Cerra, the director of government affairs at the New Jersey State League of Municipalities, an association and lobbying group for the state’s 565 local governments. “For much smaller things, you have to go to the voters. When you consider that water is one of the most valuable assets a municipality has, then [the sale of a water system] should go to the citizens too.”

The bill comes after years of sales of water systems in New Jersey to private companies.

About 300 of New Jersey’s municipalities, accounting for about 45 percent of the state’s population, have privately run water systems, according to the New Jersey Utilities Association, a trade group. In November voters in Camden approved the sale of their water system to New Jersey American Water, a subsidiary of American Water, one of the largest private water companies in the U.S. The state far outpaces the U.S. in water privatization; overall, only 13 percent of Americans are served by private systems.

But even as more and more New Jersey cities, towns and boroughs turn to privatization, some have resoundingly rejected it. In 2010, Trenton voters rebuffed the sale of their water system 4 to 1. In November hundreds of voters in Sussex Borough also overwhelmingly rejected privatization. Still, Food and Water Watch, a nonprofit group based in Washington, D.C., has said, “New Jersey is one of the most receptive states to water privatization.”

Nationwide, the privatization of water system is significantly more controversial. According to Food and Water Watch, the number of privately owned systems decreased 16 percent from 2007 to 2011, a reflection of some municipalities taking back control of their water systems.

Activists don’t disagree that more needs to be spent on the state’s water infrastructure, but they say that should be the responsibility of the state, not private companies. Christie cut $85 million from the Department of Environmental Protection’s 2014 budget, limiting the amount the agency can spend on water infrastructure improvement projects. And he has offered property tax rebates and tax caps that critics say starve the state’s infrastructure budget.

A representative for Christie did not respond to multiple requests for comment.

Some experts, like Rutgers environmental studies professor Daniel Van Abs, believe there’s simply not enough political will in most New Jersey municipalities to raise water rates to sufficient levels to fund infrastructure repairs.

That, activists say, has cornered municipalities into needing to turn to private investment. Since companies can charge taxpayers for the purchase of the water systems, there’s little chance their services will cost less than public utilities do, according to Stefanie Brand, the director of the New Jersey Division of Rate Counsel, a state agency that advocates for utility customers.

A report from Corporate Accountability International found that privatization of water supplies was often followed by rate increases. In Bayonne, New Jersey, a 2012 contract with United Water led to an 8.5 percent rate increase in the first year, according to the nonprofit. And a 2010 report from Food and Water Watch found that customers in New Jersey municipalities with private water systems paid on average 64 percent more than others in the state.

The bill does offer some protections for public water systems: It would require municipalities to prove that their system is deteriorating before it could be put up for sale. But anti-privatization activists say the criteria for what’s considered deteriorating is so broad that virtually every municipality’s system would qualify. Among the conditions that could trigger a sale are if the system has a combined sewer overflow, a system that releases stormwater and sewage into rivers and other bodies of water when the system is overloaded (most big cities a use this system) and if the groundwater has a potential for sodium contamination or “any other intrusion that would negatively impact the system.”

The bill’s stipulates that a public ballot measure could be forced if activists against privatization gather enough signatures to equal 15 percent of a municipality’s voting population during the state’s last General Assembly elections.

Privatization advocates say there’s still enough time — 45 days from the time of the announcement of a sale — for the public to become informed and organize against a sale if they choose to.

“We’d argue that they still have a significant amount of input, and with a wider breadth of information to act on [under this bill],” said Andrew Hendry, the president of the New Jersey Utilities Commission. He pointed out that private water systems in the state account for only 2 percent of state Safe Drinking Water Act violations, which he said proves privatization is a responsible way forward for New Jersey towns.

But for anti-privatization activists, those statistics don’t prove that private systems are better as much as they prove that public systems are in desperate need of more public funding.

“We absolutely need to invest in our water system, but this doesn’t actually address that issue,” said Jim Walsh, the mid-Atlantic director for Food and Water Watch. “It just trades the option of low-interest municipal debt for high-interest equity markets. Wall Street gets rich in the process of our pipes being fixed.”

9 Comments on "A New Jersey bid to privatize water"

  1. Rodster on Mon, 29th Dec 2014 7:19 am 

    Any home purchased in Cape Coral, FL “MUST” convert from well to City water at the cost of the home owner which is a percentage based on the value of the property. Which gets into the tens of thousands range.

    If you have a functioning well for water or septic tank the City comes in and caps both so you can’t use it. This is the problem with the above law of privatizing life’s basic requirements because in order to maintain BAU the Govt and local municipalities force you into their BAU system. Without the freedom to choose the system collapses if enough people say I want the freedom to choose.

  2. penury on Mon, 29th Dec 2014 9:18 am 

    This movement has been going on for years. How many roads have been “privatized”? How many bridges have been “sold” to private companies? How many municipal waste treatment facilities have been “sold” to private firms? In some areas people are not allowed to catch and store rain water. Try and think of a service provided by local government which has not been sold to private (profit making) concerns. Rodster, your point is well taken but, this system is nation wide. Refusal results in Emminent Domain being used by the government the taxpayer always loses.

  3. peakyeast on Mon, 29th Dec 2014 9:47 am 

    We have similar problems here in Denmark.

    EU has decided that all houses and farms out in the country must be connected to public sewage and water supply.

    They do write that if the cost of doing this is very high compared to be ecological benefits then it can be avoided.

    However, not even one danish county has actually calculated, examined or otherwise determined who can be outside the public service. But many people – especially elderly people has gone to prison because of not being able to pay the government imposed expenses. Also a hoard of other people are losing their family and housing because their real-estate value has dropped and they have no possibility of loaning the money to pay for the installations. However, the counties – make the installations – no matter.

    It is so disgusting and beyond comprehension.

    Even more disgusting is it since people has payed all sorts of taxes for waste water removal, emptying of septic tanks and so on – taxes that historically has been used to extend and repair the public water and sewage systems. But they have, of course, spent and allocated the money for something else in the meantime.

    I can truly say that when they come to me – it is going to be an extreme expense for the county. A lot of machinery is going to break down beyond repair. Perhaps they will even lose an excavator or two – so I can pay for the installation with their money.

  4. ghung on Mon, 29th Dec 2014 10:03 am 

    Bolivia had a revolt over this issue, and as powers-that-be continue to privatize the commons, I expect the masses will take up their pitchforks, as peakyeast alludes to. Privatizing municipal systems hasn’t worked in many areas (e.g. Atlanta).

    Best to live where these things are unlikely to happen. Even the telecoms don’t like having to service the area I live in. Privatizing water here would be a lose/lose situation all around. Small communities tend to be more democratic, since we all know where the powers-that-be live, while city/urban/suburban govts don’t have to worry so much about pissing their neighbors off.

  5. JuanP on Mon, 29th Dec 2014 10:15 am 

    Air is next guys!

  6. Apneaman on Mon, 29th Dec 2014 11:03 am 

    This is what American and some other western companies have been doing to the global south for decades. With tax payer funded militarizes backing it up. Just the threat was often enough or the CIA trained death squads. Now foreign policy has come home to roost. It’s the only way to maintain corporate profits and it gets governments off the hook for the responsibilities we actually elected them to look after. Taxation without representation…..sounds familiar.

  7. Kenz00 on Mon, 29th Dec 2014 4:58 pm 

    Beware of RepubliCON give aways to the top 1%….

  8. Dave Thompson on Mon, 29th Dec 2014 6:13 pm 

    The corporate privatization/takeover of anything and everything in the public sector, with a potential profit, is now what is left. Using public monies for private gains will sell us all down the river as the plutocrats steamroll the populace further with the “big gov’t bad, private sector takeover good” mantra. Corporate America knows what is best, the language of more, for the owners, by the owners and of the owners.

  9. Kenz00 on Mon, 29th Dec 2014 7:00 pm 

    The RepubliCON mouth piece of right wing radio and Faux Noise are funded by the fossil fuel industry and the top 1%……….

    They are like Robin Hood in reverse……. take from the poor and give to the rich…….

    All those old white voters have been sold snake oil by Faux Noise for the benefit of the top 1%. They have been convinced to vote against their own best interests and the interests of their children.

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