Council moves forward on water plant lease

City Council approved a new 20-year lease agreement for a private operator to continue running the city’s water treatment plant, replacing the final two years on the original lease and continuing through 2036.

The ordinance (O-3-17) authorized the award of a services agreement to Suez Environmental Services to operate the city’s water facilities and infrastructure during its regular meeting on Monday night. There was no discussion or comment from the public or members of City Council.

The governing body introduced the ordinance in February shortly after a public hearing was held on a revised water plant lease.

Rahway Water Treatment PlanSuez, formerly called United Water, is the current operator of the Westfield Avenue facility dating back to 1999 when the city first entered into a lease agreement for the operation, management, maintenance and repair of the facility.

City Administrator Cherron Rountree appeared before the State Local Finance Board at its March 8 meeting (.pdf of transcript, Pages 129-133), along with the city’s auditor and special counsel, before the board gave its approval.

The current lease began in September 1999 and was to run until 2019 but this new agreement would go into effect May 15, overriding the final two years of the initial contract. As with the previous 20-year lease, the city retains ownership of the physical plant and the right to set water rates. Any surplus generated by the water utility can be channeled back to the city budget.

City Council also adopted an ordinance (O-11-17) on Monday night that set new water rates for the forseeable future (more details on that in an upcoming post). That measure passed without any comments from the public or members of the governing body as well.

The average residential water bill (based on 5,000 gallons per month/60,000 gallons per year) projects an increase from $348 to $384 this year, $474 by 2021 and $605 by 2026, according to the presentation. Water rates are scheduled to rise 6.7 percent in April, followed by projections of 5 percent over 2018-2026, according to the lease agreement.

Annual management fees to Suez for operating the facility will be $3.517 million in the first year and $3.998 million in the second before eclipsing $4 million in the third year, $5 million in Year 14, and reach $5.7 million Year 20.

More specifics about the agreement can be found in previous posts.