Water utility woes worrying officials


Kearny is re-thinking what to do about the future of its water utility after getting a taste of what it might cost for an outside company to run the system.

United Water, which has been overseeing the utility under an interim agreement at about $15,000 per month, initially approved by the town governing body in March after the departure of water superintendent Richard Ferraioli, recently submitted a proposal for a permanent management contract. The company is already getting about $344,000 a year to handle water meter-reading, billings and collections.

Town officials won’t say how much the vendor wants to manage the utility fulltime but Mayor Alberto Santos characterized the cost as “significant” and above the level that the town had anticipated spending.

Santos said it’s possible that the proposed fee could be negotiated down but, at the same time, he said the town is now “also exploring whether we can hire someone with a W-3 water purveyor’s license so that we’re not entirely dependent on an outside company for the operation of the utility.”

On the other hand, the mayor acknowledged, finding someone with the appropriate credential in New Jersey probably won’t be an easy task because there are so few candidates available.

Theodore Ferraioli, assistant water superintendent and Richard’s brother, had given the town a letter of resignation that was to take effect March 2, the day after Richard’s retirement, but as of last week, Theodore was still on the job.

Santos and council members met in closed session last Tuesday to discuss the town’s options but took no public action.

Would privatization of the utility be a possible scenario? Seems unlikely, given the town’s prior experience with that option.

When Santos first occupied the mayoralty in 2000, operation of the water system was a big controversy: the town had previously sold the system to the East Orange Water Commission, which, at the time, was attempting to become a regional operation. Under that agreement, the town was to sell the utility’s assets to the EOWC for $4 million.

Recalling that episode, Santos said he had opposed the move because “we lost control of our user rates and our ability to use or sell up to 12 million gallons a day of water.” Because of a formula that linked the water rates to inflation and capital improvements to the water system, property owners were dealt “one significant increase” in user rates during the EOWC’s tenure, the mayor recalled.

But by 2001, Santos said, the town managed to sever the transaction without yet having conveyed the $4 million which, he added, was intended as a “loan” to the town whose debt service was to be repaid through rate revenues.

In recent years, the utility has met with operational shortfalls which the town has filled with allocations from the municipal budget and, therefore, local taxpayers. “This year,” Santos said, “we estimated we needed $900,000 and for 2014, we needed about the same amount.”

Santos said that some money was lost due to inaccurate measurements of water usage from remote meters.

Additionally, between $700,000 and $800,000 in revenues received through the sale of surplus water were lost when Nutley and Cedar Grove discontinued purchase agreements after those communities secured other sources of water.

Kearny was negotiating with Montclair as a possible water customer but that potential deal fell through, Santos said. “We’re exploring other opportunities to generate new customers in consultation with United Water,” he said.

And there have been a steady stream of water main ruptures and leaks from aging pipes prompting emergency repairs that have been a drain on the utility’s reserves.

“Nobody wants to lose our water utility,” said Councilman Jonathan Giordano, who sits on the council water committee, “but we can’t find someone with the appropriate operator’s credential.”

In the meantime, he said, the town should consider “rolling together DPW and the Water Department and giving someone a key to shut off a valve so we don’t have a situation where water is gushing out [from a broken main] and we have to wait for United Water to come and fix it. Or maybe make the Fire Department responsible.”

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