Wide Range of Critics Blast Democrats’ Water Privatization Bill

Christie Administration DEP and Infrastructure Trust AWOL

“Privatization, Deregulation, and Union Busting”

“Fundamentally Anti-Democratic”

Bill Being Fast Tracked – Vulture Capitalist Set to Acquire Local Public Water Systems

NJ American, private water company, Monmouth County water main break after Hurricane Irene. Source: Star Ledger

The Assembly State and Local Government Committee approved a controversial water privatization bill today, despite harsh opposition from an unusually broad array of interests (see this for background and links to the bills). The bill was amended to make it identical to the Senate version [S2412 2R].

The bill was opposed by the NJ Business and Industry Association, the BPU Ratepayer Advocate, the League of Municipalities, the Association of Environmental Authorities, the Communication Workers of America and industrial labor unions, environmentalists, NJ Working Families, women’s groups, public interest and consumer groups, and regular citizens.

The bill was approved by a 3-2 party line vote, with 2 Republicans opposing the bill because it didn’t go far enough in appeasing corporate interests because it includes a prevailing wage requirement (probably a negotiating ploy to set up a Conditional Veto by Gov. Christie to kill prevailing wage, knowing the Dems and R’s would then agree to concur with the CV and pass a really bad bill).

It was obvious that Assembly Democratic leadership did some disgraceful behind the scenes arm twisting, because 2 regular Committee members, Assemblymen Eustace (A NO vote) and Conaway were replaced by YES votes by Assemblyman Fuentes and freshwoman Assemblywoman Jimenez

Had Assemblyman Eustance been there, with the 2 R NO votes, the bill would not have had the votes to leave the Committee – no wonder he was replaced by leadership.

Chairwoman Stender’s support was so poorly justified – and her treatment of opponents so disrespectful –  it appeared that she too was following orders from leadership (ask  former Environmental Committee Chairman John McKeon what defying leadership that can result in).

Equally politically significant and revealing was who was NOT there and who did NOT testify.

Last June, the DEP and the NJ Environmental Infrastructure Trust testified at length before the Assembly Environment Committee about the DEP’s new Asset Management policy. Those organizations have the expertise and regulatory jurisdiction to finance and regulate the performance of water utilities.

The fact that they were nowhere to be seen on a bill of this significance strongly suggests the Gov. supports the bill and wants the Democrats to take the political heat for implementing his privatization agenda.

The bill would make radical changes to current law to promote privatization.

First, it would eliminate the current requirement that any privatization scheme be approved by voter referendum.

Critics called that fundamentally anti-democratic.

Second, the bill also would eliminate the current power of the BPU to review and determine if the sale of the public water system asset was “reasonable” and establish a rate of return on that “reasonable” investment.

(Under the bill, BPU can not review and must accept the sale price and then set a rate of return on investment based on that sale price. Ratepayer advocate fears this might lead to artificially high sales prices, so that the water companies could earn bigger profits. I disagree, and think the opposite will occur: public assets would be sold for pennies on the dollar and the private water companies would use thew cash cow higher water rates to generate huge profits, which would be far greater than the ROI of the asset sale price. The Vultures are buying the public system to generate cash profits, not as a real investment.)

When the bill’s supporters claim that current private water company rates are under BPU control and the bill would not change that and would protect consumers from rate increases, they are flat out lying about an essential feature of this bill. (See Senator Kyrillos’ quote for an example of that big lie):

State Sen. Joseph Kyrillos (R-Monmouth) told NJ Advance Media last month that sales will not happen “willy nilly” – and many other people in the Garden State already are already supplied by private companies.

“Many, many, many people in New Jersey have private water utilities,” the senator said. “And they pay a reasonable price that’s overseen by the BPU.”

BPU Ratepayer Advocate testified in direct contradiction to Senator Kyrillos’ claim today.

So the bill not only cuts the public out of the decision about whether to sell off a Town’s most critical asset, it effectively also deregulates those sales by eliminating a big part of BPU regulatory review.

As I testified, Towns will be desperate for the kind of one shot revenue that sale of the water system would provide.  An upfront cash payment of $10 million might stabilize property taxes for a few years, but water ratepayers would face sharply increasing water rates to pay for that.

It’s a typical shortsighted one shot revenue deal.

Towns also lack the finical sophistication and engineering expertise to properly assess the value of the water system – testimony today made that clear in talking about amortization, depreciation, and valuation methodologies that are far too complex for the typical local government to evaluate.

As a result, private water companies will act like Vultures, purchasing public assets paid for by taxpayers and ratepayers for decades, for pennies on the dollar.

But in the long run, water ratepayers will get hit with significant increases to pay for those short sighted decisions.

BTW, the bill does nothing to MANDATE that private water companies actually make necessary investments – read the provision about the “asset management” stuff very closely.

Additionally, as I noted, the amendments actually made the bill WORSE from the environmental perspsective by stripping out a provision regarding salt water intrusion and the DEP water supply master plan.

The title of the bill is “The Water Infrastructure Protection Act“. Orwell lives – should be the corporate profit protection act.

As I testified, if this bill were really about protecting and improving infrastructure, it would

1) mandate asset management, including a financial plan to generate revenues to finance preventive maintenance;

2) require capital investments to meet the asset management plan targets;

3) include a requirement to be consistent with the DEP Statewide Water Supply Master Plan Update;

4) include climate change and resilience policies adopted by the Obama Executive Order on adaptation to climate change; and

5) retain current voter approval requirements 

But there is nothing like that in the bill – it is purely about protecting the profits of private water companies and shutting the public out.

[End note: I had planned to open my testimony by alluding to the fact that yesterday was Human Rights Day and that water is a human right, not a commodity, and that it was immoral to allow private corporations to control a human right.

But Chairwoman warmed me to be brief before I even began and then 2 or 3 times interrupted me by asking me to finish, so I had just a few minutes, and no time to make these points.