Council to vote on water agreement Wednesday

Suez would pay for more repairs, but residents will see rate increase
The city is currently plagued by water main breaks, broken pipes, and flooding. The city hopes to curtail this in part by entering into a new agreement with the city’s water provider, Suez Water, which will see roughly 1.8 million annually in capital investments. Residents will see a rate increase.
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The city is currently plagued by water main breaks, broken pipes, and flooding. The city hopes to curtail this in part by entering into a new agreement with the city’s water provider, Suez Water, which will see roughly 1.8 million annually in capital investments. Residents will see a rate increase.

The Hoboken City Council and the public will hear a presentation at Wednesday’s council meeting about the mayor’s new proposed agreement with Suez Water. It could provide the city with more funds for maintenance and repairs of the water system after several water main breaks have occurred in the last few years. It will also mean increased rates for residents.

The city’s current contract was signed in 1994 when the city sold to United Water (now Suez Water) giving them the right to profit from the system in exchange for their maintaining the system’s operations. The 30-year agreement included payments to the city of $13.2 million to close budget gaps through 2001.

The city no longer has a municipal utility authority because this contract privatized the operations and maintenance of the system.

Under this contract, set to expire in 2024, Suez Water is only obligated to provide $350,000 a year for improvements to the city’s water delivery system.

The system is more than a century old. The cast iron pipes become brittle as they age, making them more prone to breaks caused by pressure fluctuations, vibrations, or changes in temperature.

The city is currently contractually obligated to pay for any repairs that exceed the $350,000 annual maintenance allowance. The city must also pay for “bulk water” costs not covered by rate payers. According to Suez’s Manager of Communications and Community Relations Treva Spencer, “bulk water is the water purchased from Jersey City MUA that supplies the Hoboken Water System.”

The city has accrued a debt of roughly $10 million owed to SUEZ for repair costs and for excess water use over the years.

According to city spokesman Juan Melli “Suez buys bulk water for Hoboken from JCMUA, which increased the cost of the water in 2011. The existing contract that we are in states that increases in the bulk water cost can be passed on to the city as of 2014. The cost of the bulk water is about $1.3 million more per year than it was before.”

He added, “Under the existing contract, Hoboken taxpayers will be responsible for an estimated $19.3 million for bulk water costs and additional maintenance costs for the next seven years, resulting in a significant tax increase.” But under the new proposed agreement, the city would receive millions more — roughly $1.8 million annually until 2034 — as well as debt forgiveness. Suez, in turn, will get to raise the rates.

The proposed agreement offers a one-time 1.8 percent rate increase in 2018 and gradual rate increase of 2 percent per year for six years to reach true bulk water cost. Any future bulk water cost increases after those six years will be passed to ratepayers.

Hoboken property owners pay the water bill quarterly. Landlords can pass certain increases, including the water bill, to renters after getting permission from the city’s Rent Leveling & Stabilization Board.

“Under the proposed agreement, the city will receive over $27 million in economic benefit and the average residential ratepayer would pay an estimated total of $310 more for water over seven years than under the terms of the current contract that ends in 2024,” said Melli.

Breakdown of what the city gets

Under the new agreement the city could receive an estimated $1.8 million annually including: $117,600 in smart technology upgrades to help with early detection of leaks, $588,500 in emergency and general repair funds, $283,500 for a franchise fee, and $858,600 in Suez payments to the city to finance the NJEIT bond debt service for improvements.

The city could also receive a debt forgiveness of $5.2 million in excess bulk water costs from 2014 to 2017, $1.8 million for excess capital repairs, and an additional $3 million in bulk water savings by phasing in the increased cost of water over a six-year period instead of all at once.

According to Spencer, the smart technology upgrades could lower residents’ water bills by finding individual leaks faster, if they include Automated Meter Infrastructure. This will alert customers to when they are wasting water, and thus conserve it.

Suez will also make a $50,000 payment to the city per year as a monitoring fee, which Melli said would defray the salary costs for monitoring the agreement and managing the annual capital improvements to the water main system.

Rate increases

Melli said, “The new agreement includes a one-time 1.8 percent increase reflecting the increase in funding for general and emergency maintenance from $350,000 to $500,000 annually. It also includes annual increases of 2 percent for six years reflecting a phase-in of actual bulk water costs.”

Some residents have questioned whether Zimmer’s administration should enter into a new agreement now that she is not running for re-election in November. Perhaps, they say, she should instead allow the next administration to move forward with an agreement.

Councilman and mayoral candidate Michael DeFusco raised such concerns after the city announced the new agreement.

“I will continue to fight for the best interests of the people of Hoboken, as I always have, until the day I leave office. “ – Mayor Dawn Zimmer

“Mayor Zimmer has had nine years in office to reach this agreement, and announcing it now shortly before an election to succeed her as mayor is troubling, especially given that if approved this contact would be in effect for decades,’” wrote DeFusco in a statement. “The proposed agreement deserves serious scrutiny from both the council and the community to ensure that it’s the best possible deal for the city. It’s particularly concerning that the contract would include an annual rate increase of at least 2 percent, which would amount to yet another hidden tax on Hoboken residents that many will struggle to afford.” 

“Negotiations have been going on since 2014 and will result in $40 million of economic benefit for the city of Hoboken,” said Zimmer. “Postponing a positive result for political reasons would be irresponsible and a breach of fiduciary responsibility to Hoboken residents.  I am the mayor of Hoboken and will be until Dec. 31, 2017.  I will continue to fight for the best interests of the people of Hoboken, as I always have, until the day I leave office.  I will not permit political gamesmanship to damage the vital interests of our great city.” 

Marilyn Baer can be reached at Marilynb@hudsonreporter.com