The great majority of America’s 50,000 community water systems are owned by local governments. A number of factors, however, are making private ownership and operation more attractive, and about 50 systems a year are being purchased by investor-owned private companies.
Egg Harbor City is the latest to find itself favoring a sale of its water/sewer system. The reasons are typical.
Nationwide, U.S. water systems need to spend about $1 trillion on infrastructure in the next couple of decades. The city faces spending its share, about $40 million, on required repair and replacement of the utility’s infrastructure. Most of the system was built before 1910 or during the 1930s, and water-main breaks already are much too common.
A new state law requires the city to put aside $377,000 for maintenance, which resulted in an extra $160 annual charge for single-family homeowners. The city is also saddled with $6 million in debt from a new water plant that opened in 2013.
If the city’s elected officials passed these costs along to residents in the form of higher water and sewer bills, and maybe higher municipal taxes too, they almost certainly would feel the wrath of residents already suffering in high-tax New Jersey.
Instead, officials hope selling the water and sewer utility might fetch enough money to pay off the debt and provide a reserve for future expenses. And the privately held utility would go on the property tax rolls, becoming a ratable generating annual revenue for the city.
A water and sewer corporation probably would run the utility more efficiently, with the flexibility to hire qualified employees without overpaying for them. It is also more likely to keep up with maintenance.
The downside of selling the public’s utility is also as clear as drinking water.
Decisions about water quality, distribution and conservation would shift from the city to the company and its state regulators. The company would be allowed to make a profit, which would be included in ratepayer bills. Unlike companies, towns can borrow tax-free for utility capital projects. And the cost of infrastructure repairs and replacement would still be borne by customers of the water and sewer system through their monthly bills.
Egg Harbor City probably would get a good price for its system, since it includes very valuable deep water wells in the pinelands. That might help for a while.
The advantages to the local government are clear. The choice for customers between a public or private water/sewer system looks like a wash. They might pay a little more under a private system than they would if it remained public, but that would be offset to some degree by the increased tax revenue to local government.
Egg Harbor City is planning to make the sale without a public referendum. It became the first municipality in the state allowed to do so because past investment and maintenance have been inadequate and its finances aren’t able to meet current and future obligations.
Residents can still let their officials know their views on selling the utility, and perhaps could still force a vote on it. They shouldn’t deceive themselves, however. Either way they’ll pay more because water and sewerage in general are getting more expensive and because Egg Harbor City and its customers have put off investing in their system for so many years.
If it’s any comfort, many customers of public systems will face similar choices in the years ahead.