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Egg Harbor City to sell water, sewer without referendum
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Egg Harbor City to sell water, sewer without referendum

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EGG HARBOR CITY — The city is the first to qualify under a new state law to sell its water and wastewater utility without a public referendum.

The goal is to more quickly lower water costs and increase ratables, while freeing the city from $40 million in infrastructure repair and replacement costs over the next 20 years, said City Engineer Ryan McGowan.

“It’s a very valuable asset — we would rather keep it for sure,” Mayor Lisa Jiampetti said of a $7 million water plant that opened in 2013, and its deep Pinelands wells.

It’s also one of just two water systems in the region that adds fluoride to its water for better dental health for kids. The other is the Atlantic City Municipal Utilities Authority.

But much of the infrastructure is old, city officials said.

“We have a lot of infrastructure problems,” Jiampetti said, “at least four water main breaks past year, and every time we have to bond for it. It’s quite pricey.”

The nail in the coffin to keeping the utility was another new state law, the Water Quality Accountability Act, which took effect last year and required the utility to put aside $377,000 a year for system maintenance, she said.

Single-family homeowners were hit with $160 in extra annual fees to meet that state mandate.

“Basically what that did was boost everyone’s quarterly water bills,” Jiampetti said.

The city hopes to lower residents water bills by selling to a larger entity that can spread out the cost of operating the system to more customers. The city system has just 1,200 customers, but is capable of serving many more.

The Water Infrastructure Protection Act, passed in 2015, provided for the sale of public water utilities under “emergent conditions,” McGowan said.

“It allows you to value the system differently,” McGowan said, and potentially get more money when it is sold by allowing the Board of Public Utilities to approve companies’ recouping a higher cost.

Three companies are interested in purchasing the city water utility, city officials said. The city will soon receive requests for proposal, McGowan said. The companies are New Jersey American, Aqua and the Carlyle Group/VICO Infrastructure Co. partnership.

The first two are existing water companies, while the third is a partnership that announced last year it had formed to invest in U.S. water infrastructure. The Carlyle Group is a global investment firm with $222 billion in assets, according to the company.

“We will select (a purchaser) on the basis of which will provide the best service and be most qualified,” McGowan said.

Then the city will negotiate a purchase price. If a price cannot be agreed on, the city will then go to the second company on the list, he said, until a good deal is reached.

In 2014, the city opened a new water treatment plant, funded by a $7 million federal financing package made up of both grants and loans.

“It was a very expensive endeavor but a very good investment,” Jiampetti said.

But the city owes more than $6 million on it. The city hopes to wipe out the utility’s debt with the sale, and have extra money for future expenses.

“We will also get the tax ratable,” Jiampetti said, to help the small city with its budget.

In early 2018, council unanimously authorized McGowan to prepare plans and specs for the sale of the Egg Harbor City Water and Sewer Utility.

Last February, McGowan suggested the city met two of five possible emergent conditions, which would allow it to proceed with the sale without referendum. He said there was a lack of historical investment and maintenance of the system, and a lack of financial ability for the utility system to meet current and future needs.

“Most of the system was built pre-1910 and in the 1930s,” McGowan said at the time. “You would have to replace 42% of the water system and 45% of the sewer system. That would amount to a $40 million outlay or $2 million a year for 20 years. It would double your current utility budget.”

The council passed a resolution for a declaration of emergent conditions, paving the way for the sale without referendum.

Contact: 609-272-7219

mpost@pressofac.com

Twitter @MichelleBPost

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Staff Writer

In my first job after college got paid to read the New York Times and summarize articles for an early online data base. First reporting job was with The Daily Record in Parsippany. I have also worked in nonprofits, and have been with The Press since 1990.

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