At the end of last month, as expected, Egg Harbor City sold its water and sewer utility to the largest operator in the state, New Jersey American Water.
N.J. American provides water and wastewater services to residents in about 200 municipalities in the state. It agreed to pay Egg Harbor City $21.8 million for its utility.
Just as important, the company pledged to spend $14 million on essential upgrades to the water/sewer system in the next 10 years.
The inability of the city to handle the costs of the repair and replacement of the utility’s infrastructure was a main factor in the sale. Last year the state required the city to put aside $377,000 for maintenance, which added a $160 annual surcharge for homeowners. In January, the state and Egg Harbor City agreed the municipality didn’t have the resources to replace the aging system, most of it more than a century old.
That contributed to Egg Harbor City qualifying to be the first municipality in the state to sell its utility without first getting public approval in a referendum. A change in the law enabled municipalities to skip the vote if investment and maintenance have been inadequate and finances aren’t able to meet their obligations.
Lack of maintenance and investment in water infrastructure is a major national problem, with an estimated $1 trillion in spending needed in the next 20 years. The burden on municipalities leads about 50 community water systems a year to be sold to investor-owned companies.
The city plans to use some of the money from the sale to pay off debt, such as the $6 million it owes for the new water plant it built in 2013. That’s among the utility properties, which become taxable once sold, adding to city revenue.
Besides performing the needed maintenance and upgrades, N.J. American Water will connect the Egg Harbor City utility with its regional system, making service more dependable.
Utility customers will pay more eventually, as the company covers its costs and a reasonable profit. Consumers and businesses would pay more either way, so whether the privatization is worthwhile to them is a complex calculation of its effect on municipal taxes, water and sewer bills, and quality of service.
New Jersey American Water already has many customers in South Jersey, including in municipalities that could afford their own water utility if they wanted one. Now those in Egg Harbor City are among them, and we hope they find the change is, on balance, advantageous for them.