Former Mayor Mark Smith responds to criticism of Bayonne water contract

[ad_1]

Mayor Mark Smith

×

Mayor Mark Smith

Former Bayonne Mayor Mark Smith has issued a response to calls by Board of Education Trustee Jodi Casais to have the New Jersey Board of Public Utilities (NJBPU) investigate the city’s water contract with Suez Water.

The water contract

Smith started out by saying the contract was approved by NJBPU before being adopted by the city. Under an agreement made by his administration’s in 2012, the city gave up its management of the local water-sewer utility, and turned it over to United Water and its private investment partner, Kohlberg Kravis Roberts (KKR), for a 40-year period . After the deal was made, United Water was renamed Suez Water, and KKR was succeeded by another investment company.

Under the terms of the agreement, the private investment firm was guaranteed a profit of 11 percent each year. Also under that deal made by the Smith administration, the private companies were guaranteed annual rate increases of from a range of 3.75 to 4 percent.

Per the agreement, Suez Water is required to provide annual maintenance and repairs to the Bayonne water-sewer system up to $500,000 per year. If additional funds are required for maintenance and repairs, the private companies are required to incur the cost upfront, but must be paid back by the municipality with water-sewer revenues within twelve months. If existing revenues are not sufficient, utility rates must be raised to fund the private entities.

Casais has spoken out in the past regarding the city’s current water contract and the concurrent increasing bills. She has started multiple online petitionsurging the city to dump the current contract after years of sharp increases.

In May of 2021, former Director of Municipal Services Tim Boyle told Casais and others that the city is bound to the contract and that the only way out of it would be to pay hundreds of millions to buy out the contract. A review by outside legal counsel at Rainone, Coughlin, and Michello confirmed that the city would have to pay over $300 million to cover the cost of the life of the contract.

And recently, Suez Water has been acquired by Veolia, the water company involved in litigation for its role in the Flint water crisis. While the city still owns the water-sewer utility, the new outside water company has taken over the management of the Bayonne water-sewer system from Suez.

Responding to the calls for a probe

In response to Casais, Mayor James Davis has shifted the burden of the blame to the Smith Administration. He added that the city cannot afford to buy out the current water contract, now between the city and Veolia, but that he was open to any viable alternative to the current contract.

Suez Water spokesperson Chris Halleron said that “a significant investment was made in Bayonne’s water infrastructure due to the agreement that brought Suez to the city.” Halleron touted the upgrades Suez has made to the city’s sewer and water infrastructure.

And City Council President Sharon Ashe-Nadrowski, who is running for mayor against Davis, was quick to sign the petition. Ashe-Nadrowski announced that residents can sign the petition at her campaign headquarters at at 895 Broadway and also noted that the petition can be signed online at forms.gle/hyPNeJuiNcfbcH8A7.

Amid the talk about the water contract penned under his administration, Smith has broken his silence.

“I read with great interest, the recent statements by Bayonne School Board Trustee Jodi Casais about the decade old contract with KKR and United Water, to manage and operate the City of Bayonne’s Water and Sewer Utilities,” Smith wrote in a statement sent to the Bayonne Community News on Feb. 11. “Mrs. Casais should first be aware that the entire transaction was reviewed and approved by the New Jersey Board of Public Utilities on October 23, 2012 under Docket #WM1208777.”

Smith said the city’s Water Utility was in debt, and that the contract helped pay off that debt and more.

“At that time, the Bayonne Water Utility had been saddled with heavy debt from past attempts to deal with Bayonne’s huge structural tax deficit,” Smith said. “By pursuing this contract with KKR/United Water, we were able to ensure continuing professional management of our water and sewer utilities and most importantly, we were able to pay off almost 50 percent of all the combined Municipal Utility Authority (MUA), City and Local Redevelopment Authority debt. When I left office in 2014, the Bayonne Utility Authority had a $25,000,000 surplus. The joint venture also included an escalating fund to ensure for proper oversight of the operations of the utility by experienced appropriate officials, resulting in competency and efficiency.”

Revenue kept rates stable

Smith said that his administration kept water rates stable by utilizing revenue streams.

“The city had contracted with the North Jersey District Water Supply Commission to market and sell excess water, annually, thus providing a steady revenue stream to Bayonne,” Smith said. “It is unclear if this has ever been done under the present Mayor and Council.”

In addition to selling excess water, Smith said the city had a policy in place where redevelopers pay connection fees for each new dwelling unit. With all the redevelopment, Smith argued that there should be millions in connection fees to keep rates stable.

“Bayonne has had both water and sewer connection fees in place for many years prior to my administration,” Smith said. “These are fees paid by developers, which are substantial and collectible for each and every new dwelling unit constructed. With the number of units approved for construction since I left office, the utility should be awash in millions of dollars in connection fees to mitigate any impact of any proposed rate increase. It should be confirmed that these fees are, and have been collected since my leaving office in 2014, and if so, where has that money been spent.”

Smith recognized the joint venture was not a perfect solution when executed, but said it was necessary.

“It relied upon careful, thoughtful and continuing oversight by municipal government to ensure each of the parties was holding up their end of the agreement,” Smith said. “Today, as a city we should be focused on renewing that oversight to ensure 100 percent compliance, and on maintaining our revenue from water/sewer connection fees.”

Additionally, Smith again denied the allegations that the contract was signed “in some backroom.”

“The fact of the matter is that this transaction was spoken about by myself at numerous governmental and community events,” Smith said. “It was discussed in open public forums, and open public meetings. Perhaps there are boards serving our city today that comport business in that fashion, “the backroom”. My administration was honest, open and forthcoming, and decisions were made with one goal in mind, making our city a better one for our future.”

‘Show us the money’

Smith directed Casais to call on city officials to address the aforementioned revenue sources that were used in the past to keep water rates stable.

“I believe, now that Mrs. Casais has the facts of the issue, she should call upon our present Mayor, James Davis and our City Council President Sharon Ashe Nadrowski, to show us the money,” Smith said.

For updates on this and other stories, check www.hudsonreporter.com and follow us on Twitter @hudson_reporter. Daniel Israel can be reached at [email protected].

[ad_2]