Sussex Borough gives water/sewer utility sale another look, as debt rises to $8.3 million

The Sussex Borough Council is once again looking at all options for its indebted sewer and water utility, and invited Aqua New Jersey to make a presentation about options for a sale.

Mayor Edward Meyer said sewer and water utilities are highly regulated and need an intense investment of capital. The borough continues to make all mandated upgrades and repairs to comply with constantly changing regulations, he said.

The borough is applying for all available grants to reduce expenses, but the utility’s capital expenses continue to rise. Grants do not cover all of a project’s expenses, forcing the borough to complete them.

To meet expenses, the borough raised water rates on Jan. 18.

The council was forced to raise rates because of an erosion of the utility’s fund balance that could have resulted in insolvency. Borough auditor Thomas Ferry had recommended an increase of 4 percent.

The borough’s sewer and utility debt also totals about $8.3 million.

Referendum vs. legislation

Larry Carson, president of Aqua New Jersey, presented the borough with two options for sale, one of which is the referendum process. The borough’s last water sale referendum in 2014 was defeated at the ballot box, 284-162.

Another avenue would be through the Water Infrastructure Protection Act, which authorizes certain owners of water or wastewater systems to enter into a long-term lease, or sell their assets to a private or public entity without a referendum in emergency conditions.

Carson laid out those five conditions for the council, which apply if the system:

● Has a critical water supply concern (this doesn’t apply in Sussex County);

● Does not comply with standards;

● Has a deficiency or a violation of maximum contaminant levels;

● Has lack of historical investment, repairs, or sustainable maintenance;

● Has an owner who lacks the financial, technical, or managerial capacity to address issues on a sustainable basis.

Meyer asked Carson what that would mean for water rates. He said his company would have to do a deep dive into the borough’s finances first.

Carson said Aqua has a two-rate structure, one for water and one for sewer, so everyone is on the same keel.

“There may be some economies of scale that we can find,” Carson said. “But again, we have to do a really deep dive into exactly what your cost structures are now, what the means and methods that you use to operate your system. Maybe we can cut costs somewhere that you might not be able to simply because we’re a larger entity.”

Meyer said the council will have further discussion about whether to move forward on a sale.