City residents will see their water bills increase 13.25 percent – more than three times the four percent they expected – when they get their bills in January, Bayonne Municipal Utility Authority Executive Director Tim Boyle said on Dec. 8
The annual four-percent increase was part of the Bayonne Water Joint Venture contract worked out between the BMUA and United Water and investment firm Kohlberg, Kravis, Roberts & Co. during the administration of Mayor Mark Smith in late 2012.
The city was paid $150 million up front in the 40-year deal for United Water, now Suez, to take over the city’s water services and many of its utility operations. Bayonne used the payment to retire $130 million in outstanding debt the BMUA had built up. The deal also called for United Water to make millions of dollars of improvements to city infrastructure.
Also in the contract were anticipated revenue increases of $2 million for 2015 and $1 million for 2016, according to Boyle. The city will not reach those increased revenue predictions for those two years, and is still contractually bound to make up the difference; thus the increase, according to Boyle.
“This board had no input into this,” he said. “We’re stuck with an inherited contract – a 40-year contract.”
Recent revenue figures were $23.3 million for 2013 and $24.4 million for 2014, according to Boyle.
“For some reason they expected the revenue for 2015 to be $26.3 million, and $27.3 million for 2016,” he said. “There was no reason to anticipate a million-dollar revenue increase from one year to another. They certainly knew the $2 million revenue increase was a pie-in-the sky estimate.”
Stephen Gallo, BMUA executive director under Smith, said he couldn’t comment on why the city did not meet its revenue projections and about why there would be an increase higher than four percent.
“They certainly knew the $2 million revenue increase was a pie-in-the sky estimate.” – Tim Boyle
Smith speaks out
Smith said the anticipation of the $2 million revenue increase for 2015 and $1 million revenue increase for 2016 were arrived at “through a number of calculations and a number of different methods.”
He blamed the 13.25 percent increase not on misguided suppositions, but on the actions of the administration of Mayor James Davis. Smith said millions of dollars of surplus were left in a BMUA account June 30 of last year when he departed office after losing the mayoral runoff. “The money was set aside for water rate stabilization,” Smith said on Dec. 9. “Unfortunately, Mr. Boyle and the Davis administration emptied that account to a zero balance to fill budget gaps.”
The administration did move over about $11 million from the BMUA coffers last year when working on the municipal budget. But Davis administration officials said the money was used exactly for what it was intended: property tax relief.
Smith disagrees, saying that the fund was specifically set up for water rate stabilization, and that it should have gone toward avoiding the increase residents are now bracing for. He said the fact that the state allowed the city to use the $11 million in the municipal budget was merely because the city inquired if it could and the state said yes.
“They went down and asked the Local Finance Board in Trenton,” Smith said. “They said can we take the surplus and put it into city hall.”
Smith refutes the claim that the increase is anyone else’s fault other than those currently in office.
“The very premise that this is to be blamed on any previous administration is nonsense and they should look into the mirror,” he said.
Bridging the gap
Boyle said the one-year 13.25 percent water rate increase will go toward meeting the $3 million projection in increased revenues over the next two years. He said the large 2016 increase will get the city’s annual water bill hike back to four percent for the following year.
Boyle said residents’ water bills could have been raised by only nine percent in 2016, but then they also would have had to be raised another eight percent in 2017. So the quicker route to get back the four-percent increase level was chosen.
“What we did this year is to correct for both years,” he said.
Boyle said the increase would amount to an extra $3.87 a month for a minimum water user and about $12 a month for an average user.
Boyle said that the annual four-percent rate increase that the city will return to in 2017 is in line with what he said is the state average of five percent.
Joseph Passantino may be reached at JoePass@hudsonreporter.com.