Water rates going up again

By Ron Leir 

Observer Correspondent 


To plug a deficit in its water utility account, the Town of Kearny proposes to hike water rates for local homes and businesses, starting Dec. 1.

The municipal governing body voted Oct. 19 to introduce an ordinance that would boost those rates, by 8% for residential users to 12% for local industries.

And, barring any major objections, the mayor and Town Council are expected to adopt the new rates at a public hearing slated for Nov. 12 at 7 p.m.

For an “average” single-family homeowner who pays about $50 every three months, that water bill figures to go to $54 per quarter, according to Mayor Alberto Santos. That would translate to $16 more per year.

Santos said the fiscal monitor the state assigned to Kearny as a condition for awarding the town $2.5 million in transitional aid for 2014 recommended pushing up the rates as a mechanism for the water utility to balance expenses with revenues.

Reinforcing the monitor’s proposal is a recommendation contained in the town’s 2013 audit – prepared by accountant Steven Wielkotz of the firm Ferraioli, Wielkotz, Cerullo & Cuva – to “take the necessary steps to ensure the water utility operating fund is self-liquidating and to fund the current year’s operating deficit.”

Given the recurring deficits in recent years, the town has been compelled to make up the gap with money from its municipal budget.

Data provided by town CFO Shuaib Firozvi shows that for the past five years, including 2014, the water utility will have been subsidized by the town. In 2011, the utility ended up $463,000 in the red and this year, it will show an imbalance of more than $900,000, he said.

The largest chunk of the utility’s expenses is the town’s contractual obligation to its water provider, the North Jersey District Water Supply Commission, of which Kearny is a member, along with 11 other municipalities and United Water of N.J.

In return for receiving 13 million gallons a day of water from the Wanaque Reservoir, Kearny is paying the NJDWSC an annual fee of $3,763,000. For 2013, the fee was $3,765,000 and for 2012, it was $3,821,000.

However, according to Santos, Kearny only consumes about half the amount of water it gets from the NJDWSC so when the utility sends out its water bills (under a contract with United Water), it invariably lags in revenues for lack of sufficient customers.

Part of the problem, Santos said, is that the town has to deal with an “historical legacy of many local industries that relied on an intensive use of water.” But with a number of those old plants no longer around, Kearny has struggled to find replacement water customers.

For a while, the utility was selling part of its water “surplus” to Nutley and Cedar Grove but when they discontinued using the water a few years ago, that alone accounted for a $500,000 loss of revenue, Firozvi said.

“We were in negotiations with Montclair as a potential water customer,” Firozvi said, “but that never materialized.”

The utility also has to meet other expenses, such as payroll for an engineer and a small staff, billing and collection services, water quality testing and maintenance of water lines. In recent years, the town has undertaken emergency repairs of leaks and breaks in lines and expensive upgrading of aging water mains.

Santos said the town is looking to find a way to renegotiate its contract with the NJDWSC to achieve some type of cost savings and is continuing to explore opportunities to snag other outside water customers.

The town last raised water rates in 2012.

Santos said the utility should receive new revenues from new residential and commercial developments now under way “but that’s still a couple of years away.”

For the record, here’s what the ordinance stipulates what the town proposes to charge residential, commercial and manufacturing water users:

“A rate of $2.43 per 100 cubic feet for use not exceeding 18,000 cubic feet.

A rate of $3.14 per 100 cubic feet for use in excess of 18,000 cubic [feet], but not exceeding 75,000 cubic feet. A rate of $3.64 per 100 cubic feet for use in excess of 75,000 cubic feet.

The minimum quarterly charge shall be $20.

Hydrant or standpipe use shall be charged $78.75 per use.”

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