The Bayonne Municipal Utilities Authority is seeking proposals for a company with the necessary license to run its operations.
“We’ve put out requests,” said City Business Administrator Steve Gallo, who also serves as executive director of the BMUA. “We want to see what’s out there.”
Costs of operations are rising for a number of reasons, but one of the key reasons for the possible privatizing of the operations is the need for licensed professionals, Gallo said.
“Many of the people who hold the licenses we need to run the authority are starting to retire,” Gallo said. “While we’ve convinced them to stay on, they are asking for more money when they do. Fewer are getting these licenses. So we thought we would look in this direction to see if this will work for us.”
“Most of the heavy industrial water users have left the city.” – Steve Gallo
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The Bayonne Municipal Utilities Authority is seeking proposals for a company with the necessary license to run the facility.
The MUA has two main functions that include providing residents, businesses and industry with water, and to handle the disposal of sewerage. This involves everything from installation of sewers and maintenance of water pipe lines to hooking up new clients. If the city decides to privatize, a vendor would come in to oversee operations.
“We would not lose our water rights,” Gallo said. “This is just about operations.”
Gallo said the operating deficit comes as a result of several key factors that include the rapidly changing nature of the City of Bayonne from an industrial city to one that is more service oriented and residential.
“Most of the heavy industrial water users have left the city,” Gallo said.
Over the last few years, this has forced city residential uses to make up the difference in revenue needed. While the MUA did raise fees by 46 percent four years ago, new changes since then have caused the MUA to lose expected revenue.
This started with a downturn in the real estate market, which made it impossible to rely on new development hook up fees as a dependable revenue source. The situation became even more problematic when the Bayonne Local Redevelopment Authority and the city last decided to abandon the plan to construct 6,000 to 7,000 new residential units on the former Military Ocean Terminal.
Anticipated water usage and $2,500 in hook up fees for 6,000 units at the former Military Ocean Terminal vanished with the change of plans – not to mention the $6 million in work the BMUA did already to install sewers and water service to the former base, adding to the BMUA’s overall $90 million plus debt. Gallo said as much as 40 percent of the BMUA’s annual budget goes toward paying interest payments on this debt – some of which was accrued as a result of the establishing of the MUA in 1997, when it took over operations from the city.
Operation expenses include suppliers for the water and sewerage systems, salary wages, tools, parts, energy costs, insurance, equipment, and other operational expenses.
The MUA doesn’t actually purchase water from its primary supplier, but is part owner of facilities elsewhere in the state, and thus the cost to Bayonne is based on Bayonne paying a share of these total operations. Sewage treatment costs have risen by 47 percent since 2004.
Last summer, Mayor Mark Smith ordered a review of BMUA operations.
“The MUA is having difficulty getting qualified, state-licensed employees to operate our water and sewer systems,” he said. “Several key employees are scheduled to retire this year, and it is not easy to hire qualified replacements. With their departures looming, I have asked the MUA to examine alternatives to operating the authority.”
Among the options included are forming a partnership with other water-sewerage authorities, dissolving the MUA, absorbing the MUA into one of the existing departments, or some combination of all of these.
Selling water is key to its revenue
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.
But there is hope on the horizon. If a privatization plan can be worked out to take over operations of the facility, significant portions of the annual budget will be absorbed by the new operator, such as salary and benefits.
The other significant hope is the new power plant, which is due to start operations in October. It is contracted to buy one million gallons of water a day from the MUA.
The power plant project will also pay as much as $1.3 million in taxes to the City of Bayonne. The project, which is designed to generate electrical power for shipment under New York Harbor to Brooklyn, will operate mostly on natural gas, and will be a mile from the nearest residence in Bayonne.
In an agreement forged last year, the company has decided to purchase its water from the MUA rather than the Passaic Valley Sewerage Authority. The MUA has surplus water, and the sale to the power plant could generate about $55 million in revenue to the city over the next 30 years.
Al Sullivan may be reached at asullivan@hudsonreporter.com.