NORTH BRUNSWICK – North Brunswick Township is approaching the end of its 20-year contract with American Water and is seeking a new municipal water operator.
A decision faced by many small and mid-sized municipalities in New Jersey with aging water systems is whether they should sell their municipal water system to a for-profit corporation.
The idea has appeal as it can provide the municipality with a one-time revenue windfall. But the move may pass the burden to customers who will be paying the price in higher rates for years to come, according to information provided by Business Administrator Justine Progebin.
That is in part because state regulatory agencies allow private operators to earn a profit. Selling the infrastructure is essentially a permanent shift, she said.
North Brunswick officials have decided the township will not sell, privatizing the township’s most essential public service, she said. The biggest issue with privatizing is that the township would lose control of the operation, the ability to set stable and affordable rates and ensure infrastructure is maintained.
“Nobody cares more about our municipality’s utility infrastructure than those who represent the community,” Progebin said.
In 2002, the township entered into a 20-year agreement with American Water Enterprises, LLC, for the operation, management, maintenance and repair of the water system, which includes the water treatment plant that was constructed in the 1960s.
The plant, which is approved to draw 8.8MGD (million gallons per day) from the Delaware and Raritan Canal, currently treats an average of 5MGD to 7MGD based on season, which services more than 11,000 residential, commercial and business customers, Progebin said.
By the end of the 20-year contract, North Brunswick anticipates spending $39.7 million under the terms of the contract for operating the system, plus reimbursement for pass-through costs for maintenance and repair items, and expenses not addressed under the terms of the original contract, Progebin said.
That contract will expire between Sept. 30 and Oct. 1, Township Attorney Ron Gordon said during the Jan. 31 Township Council meeting.
Therefore, the township would need to send out Requests for Quotations (RFQ) and Requests for Proposals (RFP) to enter into a new private-public partnership for the repair, operation and maintenance agreement.
That decision was approved during the Feb. 7 council meeting.
American Water has since left the business of maintaining municipal water systems. As the nation’s largest private water utility, its focus would be to purchase the system. That said, the company has been a reliable partner to work with and North Brunswick would welcome a proposal from American Water for a new 20-year contract, Progebin said.
As it stands today, American Water has provided no indication to municipal officials of a continued interest in maintaining the system, Progebin said.
The new 20-year contract will see some changes. In 2018, the township carved “billing and customer service” out of the contract with American Water. This was in response to engagement from residents sharing a common theme of frustration with the process administered by a private company, Progebin said.
In addition, the community undertook a community-wide meter replacement project in 2019.
“Having a customer service and billing team prepared and committed to our community was an absolute for the success of the program, which was largely completed in 2021, after delays from the COVID-19 pandemic. The mayor and council have received positive feedback with this change, and as such, have not included these services under the new contract,” Progebin said.
The scope of services to be delivered under the new contract were drafted with an approach to maintain consistency and assure a smooth and seamless transition to the new operator. Foremost is the water treatment process at the water treatment facility, located in Franklin Township, where raw water is drawn from the Delaware and Raritan Canal.
Gordon said the goal is to have the new operator in place so the township can transition away from American Water “seamlessly.”
“Members of the public won’t be able to tell, that’s our goal,” the township attorney said.
Gordon said township representatives have been in negotiations with representatives from American Water about a memorandum of agreement to transition current employees from American Water to the new operator.
“We can mandate that a new operator provide employment to the existing workers under the same benefits and salary,” he said.
The employees would have to fall under the municipal umbrella first and then transition to the new operator once an agreement is in place, he said.
Therefore, North Brunswick would have to authorize a memorandum of agreement for provisions to transition the employees; amend the township’s salary ordinance to create the positions and authorize payments for a short-term period; and amend the salary ordinance to encompass the positions.
Municipal officials have been in amicable negotiations with American Water to bring up to nine American Water employees over to the township as municipal staff for the remainder of the contract, including Pete Peterson as the system’s manager, and Anthony Cappa as the chief water plant operator, Progebin said.
Councilman Ralph Andrews said that council members, Gordon, representatives from CME Associates and Progebin have been reviewing the 166-page document.
“Hopefully we get adequate response to our RFPs and information requests,” Andrews said.
“As it stands, North Brunswick has taken the first step in putting out a solicitation for proposals from qualified vendors looking to serve our community. Municipal officials look forward to receiving responses by April, going through the selection process and having a new contract in place before the agreement with American Water ends in late September,” Progebin said.
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