In 2013 and 2014, a tangle of water challenges in East Orange, New Jersey—a city located 12 miles east of New York of about 65,000 residents—came to a head. Two of the City’s Water Commissioners were indicted for falsifying water quality reports; the state regulator fined the Water Commission several hundred thousand dollars for water quality violations and misreporting; and there had been no rate increases for nearly 20 years causing a $25 million backlog of needed system repairs and improvements and a $4 million operating budget deficit.
Private utilities offered to buy the distressed system and bring it into compliance. East Orange’s Mayor declined, believing that continued, long-term public ownership of the water system was important for the health of the community. The water utility was also a vital source of good jobs with staff reflecting the community the utility served. To inform its decision, the City commissioned a market rate analysis that indicated that privatization would likely result in higher rates, even with the 80% increase the City planned to adopt to close the budget gap.
At the same time, the Mayor recognized that the City was in dire straits and would benefit from the technical expertise a private utility could offer. The solution was to retain public ownership of the water system, and overhaul of the Board of Commissioners to provide greater accountability and transparency in its processes, while bringing in Veolia on a limited contract basis to help the water system get back on its feet. The $1 million per year contract with Veolia set up a limited public-private partnership. The agreement included comprehensive planning for capital projects, improved customer service, and identification of efficiencies in operations, labor, and energy use. Fundamentally, the goal of the arrangement was to tap into Veolia’s expertise and strengthen and enhance the capacity of the City’s staff to be self-sufficient going forward. Almost a decade later, East Orange’s contract with Veolia has ended and the City both owns and operates its system. (See the Best Practices for Private Service Contracts section below for more resources.)
As of 2016, East Orange had approved a $23.4 million dollar bond to finance long-term capital improvements to the water system and had already completed a $5 million project to reduce volatile compounds in the water supply. By pairing continued public ownership with short-term private utility expertise, the City was able to turn the tide and move forward from past missteps.
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