In Gloucester Township, New Jersey American Water is spending big to try and convince local voters to sell their sewer system. The corporation is offering an eye-watering $143 million to buy it, and the Township Council voted to approve the deal in July. But while NJ American Water dangles a $143-million carrot in front of elected officials, residents deserve to know the true consequences of the deal.

Water and sewer privatization — selling public water and sewer systems to private companies — is never a good idea. It raises water rates and snatches away local, democratic control over precious public resources. On top of all that, the Gloucester deal is especially shady. 

Luckily, Township residents have the final say on whether the deal goes through. This November, Gloucester voters can cast their ballot to either approve or reject NJ American Water’s proposal. Here are four things residents need to know ahead of the vote:

1. There’s Something Fishy About This Deal…

Once you look closer, the details of the proposed NJ American Water deal immediately send alarm bells ringing. For one, Gloucester Mayor David Mayer works for NJ American Water as its Director of Government Relations. Filings from the NJ Election Law Enforcement Commission show he is a registered lobbyist for the company.

He also works with the firm Optimus Partners, run by Phil Norcross. (Norcross and his brother, Democratic party boss George Norcross, were recently indicted under RICO — a.k.a., racketeering — charges.)

In May, Mayer and other township representatives met with the state local finance board to dissolve the municipal utility authority. Gloucester residents who attended the meeting asked if they were dissolving the authority to sell the system. Mayer testified to the board that there was no intention to sell.

But just a few months later, the township put out a request for proposals from potential buyers. The request turned out two proposals — water company Aqua wanted to buy the system for $52 million, while NJ American Water proposed $143 million. 

Outrageously, NJ American Water’s deal proposes raising rates higher than the limit specified in the request for proposals, which should have immediately disqualified it. It also proposes $90 million worth of infrastructure upgrades when the Township has only identified $21 million in needs. 

This spending is totally unnecessary — except to boost NJ American Water’s profits. Private water and sewer companies are allowed to recover the costs of infrastructure expenses from their customers. That means that money could be extracted from residents through higher sewer rates.

2. Privatization Leads to Higher Costs and Higher Bills

Even without suspicious proposal terms, sewer privatizations usually lead to higher bills. Nationwide, private sewer companies typically charge 63% more for their services than public sewer systems. The largest two private companies in the state charge 2 to 3.5 more than Gloucester Township for the average household’s sewer service. That can add up to hundreds of dollars a year.

One major reason: the 10% profit that corporations earn on their investments. This is an automatic markup on the cost of every project and acquisition, and on top of it all, the companies can pass on the cost of their income and property taxes to customers by raising rates. (In August, the state’s Board of Public Utilities allowed NJ American Water to hike customer rates by nearly $80 million, including an after-tax return on equity¹A return on equity is the profit that a company makes on its ownership stake in its utility assets. Under state regulation, private utilities charge customers higher bills to make that profit, recover their debts, and cover their taxes and operating costs. of 9.6%.) 

NJ American Water has promised to freeze rates for two years, but it can’t actually keep that promise — the final decision rests with the Board of Public Utilities. And even if the Board allows the freeze, the bill will eventually come due. NJ American Water’s proposal explicitly includes a 9% hike from the third to fifth year after the sale, and rates could continue to rise after that.

3. Private Companies Put Profit Over People

Clean water and sanitation are human rights, and everyone should be able to afford access to these essential resources. But private companies like NJ American Water don’t have access or human rights top of mind. Their number one priority is profit. Besides higher costs, this can have a variety of negative consequences for a community.

It can result in clashes with local policy and government, including on economic development and sustainability projects. There is no incentive for private companies to cooperate with neighbors or local governments to protect drinking water resources and watersheds or ensure equity and sustainability of water and sewer services.

Private companies may also cherry-pick which areas they provide service in or where they invest on projects to avoid serving low-income communities where they won’t make as much money. When profit is the priority, low-income residents can come last, as they are more likely to struggle to pay their bills. 

4. Privatization Takes Away Local Control and Democracy

Publicly owned utilities provide residents with democratic control over their water and sanitation. Handing them over to a private company limits public accountability and prevents residents from demanding changes to systems that don’t serve them.

With public ownership, residents can visit their elected officials and share problems they’re seeing. If the officials don’t respond, the community can vote them out of office. However, privatization entirely eliminates these options. Residents don’t have a vote in the corporate boardroom. 

Moreover, privatization usually leads to a loss of transparency, as companies restrict public access to information. This transparency is key for communities to understand potential problems in their water systems and push for change.

Ultimately, the people who run public water systems are public servants; they serve the people. But water corporations are first and foremost accountable to their stockholders. 

We Can Stop NJ American Water’s Sewer Privatization Deal

Privatization is often proposed as a one-time fix for utilities struggling with aging infrastructure and underfunding. Not only is this a false solution — it poses a problem Gloucester doesn’t even have. The sewer system itself is well-run and in the black.

Even if the system did need more resources, there are plenty of other options that would still keep it in public hands, like partnerships with other municipalities and federal and state grants and loans. Such options would also ensure that the savings are passed on to residents through lower water rates, not to the pockets of corporate shareholders.

Given all this, it’s abundantly clear — NJ American Water’s proposal would be a terrible deal for the residents of Gloucester Township. This November, we can make sure Gloucester Township’s sewer services remain affordable and publicly owned by voting against the NJ American Water deal.

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