Water rates rise by 46 percent BMUA blames changing nature of Bayonne

Bayonne residents are going to have to dig deeper into their pockets to pay for the 46 percent increase in water fees as the result of a vote taken by the Bayonne Municipal Utilities Authority on Oct. 23.

About 50 residents came to the meeting to raise their objections or to convey their concerns about the increase.

The increase comes as a result of several key factors that include the rapidly changing nature of the City of Bayonne from an industrial city to that is more service oriented and residential.

Steve Gallo, executive director of the BMUA, said the loss of industry has resulted in the city losing its largest consumers of water, forcing residents to make up the difference in revenue needed.

Although BMUA officials originally proposed raising fees by 60 percent, the increase was cut to 46 percent prior to the meeting. This means that water customers will pay $7.79 per 100 cubic feet of water instead of the current $5.35. An average customer uses about 5,000 gallons of water per month and would see the month bill increased by $16. The increased rate does not take effect until 2007.

The change would affect all water customers in the city.

Gallo said the new rate is not greatly different from rates paid in other Hudson County municipalities.

A change in philosophy

The rate increase represents an altered philosophy from the past when the BMUA anticipated non-recurring revenue such as hook up fees and such, as fiscally unsound.

The increase has become a political issue because several people believe the BMUA did not look at all options.

Leading the critics was Councilman Anthony Chiappone, who asked why the BMUA didn’t phase in the increases or look to a variety of other possible ways of raising revenue.

He said one way is for the BMUA to start an insurance program for residents that would provide relief when lines break.

While only about 10 breaks occur a year, the cost can be as high as $10,000, and Chiappone said other Utility authorities had implemented the program.

Although Gallo believed the idea was worth looking into, he said it would not likely help meet the need for revenue.

The state would likely prohibit the BMUA from using this as a revenue source, allowing the authority to take in only the amount that it expected to use for the repair programs.

Gallo said private utility companies have implemented such programs successfully, partly because they had no restrictions.

He also said the BMUA would be responsible for repairing private hook ups, and would either require the authority to use its own personnel or bid out for a private contractor.

Gallo said Jersey City tried to implement such a program and abandoned it for lack of interest.

While the BMUA is also increasing the cost of connection fees and other fees, these cannot offset the loss of revenue, Gallo said.

Nor will other suggestions Chiappone offered generate enough to make up the necessary deficit.

Chiappone, however, said even small efforts make a difference.

“I do not believe that the authority has done everything possible to avoid this rate increase,” Chiappone said.

Gallo and Chairman Sam Maggio said the BMUA had looked at every option and decided that the rates had to rise now, in order to get the authority on sound footing.

With a downturn in the real estate market, the BMUA cannot rely on new development hook up fees as a dependable revenue source since projects might not be approved or if approved may not get built in a timely fashion.

But such fees might be used to help reduce the $7 million deficit the BMUA has generated.

In his comments, resident Joseph O’Hara made a dire prediction about development in Bayonne, because statistics show a decline of 16 percent in new construction in the state.

“The building boom bubble has burst,” he said.

Is this really a tax increase in disguise?

Chiappone and others claim the water rate increase is really a stealth tax at a time when taxpayers already face potential tax increases by the municipal government, putting an ever increasing burden on the backs of senior citizens and other with fixed incomes.

Chiappone and recently elected Councilman Gary LaPelusa have become advocates of cutting spending in municipal spending and hoped to find alternatives to the increased water rates.

Gallo, however, said the BMUA has a relatively small staff and cannot cut to make up the revenue loss.

More than 80 percent of the BMUA annual expenses go to suppliers for the water and sewerage systems. The remaining 20 percent covers salary wages, tools, parts, energy costs, insurance, equipment and other operational expenses.

“The authority is presently understaffed,” Gallo said in a brief presentation. “Without the necessary revenues to meet our obligations, the Authority would be unable to pay our vendors. Our banking system is set up so that debt service is taken out of our revenue stream first. I would only be a short while before we couldn’t pay our bondholders and we would be in default. The city would have to raise taxes to pay our bondholders and the city’s bond rating would most likely be downgraded.”

The BMUA pays interest on $93 million debt, some of which was the result of its founding in 1987 when it took over operations from the city. A lot of the debt comes from filling federal and state mandated upgrades to the infrastructure and to prepare the former Military Ocean Terminal for development.

Refinancing was considered and rejected, partly because the BMUA refinanced a few years ago and interest rates have risen significantly since.

Maggio said refinancing would delay and increase the burden rate payers would have to pay.

“I’m determined to keep the authority from getting deeper in debt,” he said.

In the public comment portion, Leonard Kantor was concerned about the increasing debt of the authority.

Indeed, Gallo said 35 percent of the BMUA’s annual budget goes towards paying debt service

No advanced payments from developers

Chiappone asked why the BMUA did not get advances on future connection fees from developers to help delay or eliminate the increase, in a similar fashion to what the city is currently doing in order to balance the municipal budget.

Gallo said the authority couldn’t ask for advanced fees because developers have not yet been designated and projects not yet approved.

Resident Erin Jessen asked about how accurate water meters are. Gallo said a recent study showed those tested were over 99 percent accurate.

Resident Ted Zientek was also concerned about the impact of the increase on senior citizens and asked if the BMUA could give a discount to people on fixed incomes.

Also of concern was the fact that the BMUA charged a minimum fee based on the size of the water meter, whether or not a resident uses the minimum amount of water.

Gallo said a resident could get a smaller meter, which would reduce the minimum amount required.

When asked if bigger consumers got a break on the price, Gallo said every user pays the same rate.

Former Freeholder Barry Dugan said he was very concerned about the impact the increase will have on senior citizens and asked the BMUA to look at every option.

Rate is based on revenue needed

One very confusing issue involved the total amount of water the city uses and what impact this has on the rate.

Chiappone was under the impression rates were tied to the total amount of water the city is allocated through its agreements with water providers, so urged the BMUA to seek out waste, loss of water through the aqueducts and possible theft as a way of reducing the rate.

But Gallo said the BMUA doesn’t actually purchase water from its primary supplier, but is part owner of the facilities elsewhere in the state, and thus the cost to Bayonne is based on Bayonne paying a share of the facilities total operations. This along with sewage treatment charges accounts for 40 percent of the annual budget. Sewage treatment costs have rise by 47 percent since 2004.

The BMUA generates revenue to pay its costs by selling water. As larger water users cease to purchase, a greater part of the overall costs falls on the shoulder of the residents. This is the reason the rates are going up.


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