Trenton cuts deal on water pipelines
Council asked to OK sale for $100 million

Wednesday, December 05, 2007

BY KEVIN SHEA AND RYAN TRACY STAFF WRITERS

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TRENTON -- Mayor Douglas H. Palmer asked the city council last night to approve the $100 million sale of the pipelines that carry water from the Trenton Water Works to suburban towns.

The city wants to sell the suburban infrastructure of its water utility to the New Jersey American Water Co., and in a related deal, enter into a 20-year plan to sell bulk water to the same company for its distribution to Hamilton, Ewing, Lawrence and Hopewell townships.

Palmer said the need to upgrade the city's water utility over the next 10 years, as well as refocusing the city's water retail on its own residents, are the main goals behind the proposed sale.

The sale could potentially result in a change in rates for residents in the four suburban towns, according to Richard Krawczun, Lawrence Township business manager.

"We were not told what would happen with the rates" when Palmer met with officials from the neighboring townships yesterday to inform them of the sale, Krawczun said.

"Certainly New Jersey American Water is paying ... for a distribution system and (the company) is certainly going to want to charge rates in order to get a return on that investment."

The deal would allow New Jersey American to purchase the water from Trenton and charge a fee to water users in the surrounding townships.

Palmer said the city's interest in providing water is about the natural resource it is, not the pipe it flows through.

"Our rights and access to the Delaware River water supply are priceless assets," Palmer said. "By focusing our service on our own residents and customers, we will make the best use of this priceless asset -- and we will not saddle Trenton residents with the costly aspects of the infrastructure outside the city."

The 20-year bulk water deal will allow the city to re-examine water pricing in the future, in light of expected increases in the value of water, Palmer said.

Palmer then told a story of a Monmouth Street woman who called his office during a cold snap last winter and complained that she did not have water service. The woman, Palmer said, was told that a water crew was unavailable because they were in the township working on water main breaks there.

The suburban infrastructure comprises 464 miles of water mains and pipes, pump stations in Ewing, Lawrence, Hamilton and Hopewell and five water towers. Palmer said that 39,000 of the utility's 61,000 customers live in the other four towns.

City Business Administrator Jane Feigenbaum added that 62 percent of the utility's debt service -- $48 million -- is related to the suburban system the city wants to sell and the money from the sale will reduce a portion of that debt.

In essence, Feigenbaum said, the city will get out of the suburban water business and sell New Jersey American the water to provide those customers, while the company would also maintain those pipes and equipment.

"It is not typical for a municipality to own a larger water utility with infrastructure and capacity in excess of what it needs for its own residents," Palmer said. The deal has been under way for two years, he said.

The deal is subject to approval from the state Board of Public Utilities.

West Ward Councilwoman Annette Lartigue was the only member to raise concern, and said she wanted a "fact sheet" from the administration outlining the specific financial pros and cons of the deal.

Earlier this year, officials in the suburban townships asked Trenton officials to be part of the negotiations for the sale, but Palmer refused, saying the towns would have the opportunity to review the terms of the sale during the BPU approval process.

Now that negotiations appear to be complete, Krawczun said he expects to receive documents he had previously requested, including New Jersey American's contract and a report on "the physical assessment of the distribution system."

"The mayor has agreed that this process going forward will be transparent," Krawczun said.