To the Editor:
On the ballot this fall is the decision whether Hopewell Borough should sell its water system to a private, for-profit company, New Jersey American Water Company (NJAW) for $6.4 million. With so much “information” online, numerous meetings, claims of disinformation, and the Borough correcting its numbers as of this week with ballots already having been sent to voters, I decided to review the document that decides what the parties are actually required to do—that is, the proposed contract.
With over 20 years of experience drafting, reviewing, negotiating, and litigating multi-million dollar contracts, I thought I would save you the time by reviewing the 117 page document for you. Below I outline but a few of the legal pitfalls in the proposed contract and why those pitfalls make this a bad deal for Hopewell Borough residents.
Here we go.
1. No guarantee for price decreases.
Frequently, NJAW and Borough Council have stated that “most” Borough residents will save approximately 36% on their water bills. But which residents and for how long? There is no guarantee in the proposed contract. That means it is not a guarantee. Once NJAW owns the water system, your bills could actually go up, and as long as the Board of Public Utilities approves these rate increases, neither you nor the Borough have any legal recourse. Speaking of the BPU, how is your electric bill right now? How much faith do you have in the responsiveness of a private corporation with a 21% annual profit margin and the BPU versus local officials? If NJAW was standing behind their claim of rate savings, it would be guaranteed in the contract, but it is not. So if and when your rates go up, too bad and so sad. You are out of luck.
2. No guarantee of $7 million capital improvements.
The Council has opted not to pursue $2.34 million in free money from the federal and state government to improve the water system. Instead, the Borough intends to sell the entire system to a private company with the expectation that NJAW will make the needed infrastructure improvements in the amount of $7 million. Those improvements would be capital improvements.
There is just one glaring problem. Not a single capital improvement is identified in the proposed agreement. I know what you are thinking – that cannot be. Oh, but it is. In the section of the agreement titled “Definitions,” you will not find one for “capital improvement” or any specifics on the purported “capital improvement plan.” None of the attachments to the draft agreement identify a single capital improvement that NJAW would be required to make, nor is there attached any supposed plan listing these capital improvements. What this means is that capital improvements are what NJAW says they are, and once they, and they alone, decide that they are done making capital improvements, NJAW is done–whether or not they have spent $7 million.
3. No oversight and no remedies.
Most troubling about the agreement is the lack of accountability. According to the proposed contract, NJAW decides what is a capital improvement, whether to make it, if the improvements are adequate, and how much to pay for that work. It also decides whether to decommission Wells 4 & 6, with no input from the Borough. Going forward, the Borough would have no say in how or what NJAW does concerning the water system improvements or the rates.
In selling, there is no requirement that the Borough forego oversight or the imposition of any restrictions. The Borough is choosing to. There are ways for the Borough to ensure what work will be done, how it will be done, how much it will cost, how much residents will pay in the future, and on and on and on . . . but none of those are in this agreement.
With no oversight and no mechanism of enforcement, the proposed contract is simply put, a bad one. Whether you are for the sale to NJAW or not, the contract for sale is just a bad deal. Contracts are supposed to make sure that the parties know their obligations and identify the available remedies if either party does not perform as agreed. Here, the Borough has no remedies as long as it receives its $6.4 million. After that, NJAW can raise rates, seal wells, not make capital improvements, and there will be virtually nothing that the Borough can do about it. In a deal, both parties provide something of value. That does not mean the Borough has to give everything away: after all, we are the one with the asset.
I am voting NO, because even if you are in favor of the sale, the contract the Borough has agreed to with NJAW gives away too much — more than you realize.
I know, I’ve read it.
Keith Hovey, JD, BSN
Hopewell Borough resident and practicing attorney
