A national advocacy organization is warning that a highly flawed proposal to enter into a 30-year concession or asset sale of the Cumberland County sewer system would leave local families paying higher rates for decades.
Food & Water Watch — which is based in Washington, DC and has a New Jersey office — raised a host of concerns with the proposal in a recent memo to the Cumberland County Utility Authority Commissioners.
The proposed deal has sparked an intense controversy in the community over the past two months, leading CCUA executive director G. Steve Errickson to announce his resignation last month, saying that the frenzied push to secure a deal has “made it impossible for me to continue to do my job.”
The CCUA issued a Request for Qualifications (RFQ) to study monetization of the authority, shortly after receiving an unsolicited proposal from the private equity firm Bernhard Capital Partners. The rushed proposal would represent a major change in the financial structure of the CCUA — and one that could cost ratepayers millions of dollars over decades.
“Local residents have been shocked by this proposal, and rightly so. This is a recipe for decades of disaster,” said Food & Water Watch organizer Jocelyn Sawyer. “We already know what comes next under these kinds of privatization deals: Higher rates and a lower quality of service. Cumberland County should heed these warnings and listen to the residents who are alarmed by a rushed privatization scheme.”
As Food & Water Watch warned in its memo, the CCUA’s solicitation is heavily tilted in favor of privatization: “The first task under the scope of work explicitly requests responders to ‘design a program to allow the CCUA to leverage private sector expertise to plan, engineer, finance, construct, and operate water and wastewater infrastructure improvements.’”
In another highly unusual move, the solicitation essentially invites conflicts of interest from corporate interests that would be seeking the privatization contract itself, which “dangerously opens the door to allow a corporation or private equity firm to evaluate its own proposal for a 30-year concession deal or asset sale.”
A privatization scheme of the sort under consideration in Cumberland County is essentially an incredibly expensive loan. A company would offer upfront fees in exchange for decades of operating income — meaning that the homeowners and small businesses will be the ones to pay off the deal for decades to come in the form of rate hikes necessary to ensure the private equity firm’s profits.
Other communities have learned these lessons the hard way. Residents of the city of Bayonne have experienced diminished service and 50 percent rate hikes since a 2012 concession deal, with more years of pain to come. Middletown, Pennsylvania has tried without success to exit a lopsided concession deal that has even seen residents paying penalties for conserving their water usage.
“Considering this rushed proposal is moving forward without any justification of a needs assessment, we’re concerned that our community will be saddled with the same rate increases that other communities have suffered,” said Sandy Acevedo, a county resident and member of Cumberland County Sewer Rate Watch. “We’re urging our elected officials to act by recognizing the financial burden this will place on the entire CCUA residential and business communities, stop the RFQ.”