Monday, June 07, 2010

Common questions/direct answers

Are the entire Trenton Water Works being sold?

NO. The only thing being sold would be water pipes in Ewing, Hamilton, Hopewell and Lawrence Townships along with some water towers and pumping stations.

Is the buyer a foreign company?

NO. New Jersey American Water Company (NJAWC), a subsidiary of American Water Works Company is the proposed buyer. American Water Works Company is the largest public water utility in America. It was at one time a subsidiary of RWE, a German Company, but was spun off in 2008.

Is it true that, as part of the sale, NJAWC will pay 60% of cost for water facility improvements in Trenton that benefit the outside system?

NO. According to the sales agreement between NJAWC and the City of Trenton Exhibit C includes the terms for a Capital Improvements Surcharge calculation.

The section establishes two factors that would be applied to the cost of capital improvements that benefit the townships.

The first factor would be based upon an agreed percentage assigned to the City and to the townships. This could be a 40% allocation for the City and a corresponding 60% allocation for the townships (NJAWC).

The second factor is based upon the amount of water the City customers use and the amount of water that township customers use (Demand Share Factor or DSF). Those percentages could also be 40% for the City and 60% for the townships.

To determine the amount that NJAWC would pay the City, the cost of the project, say $70 million dollars (the cost of the Filtration Plant project), would be multiplied by each factor. Applying the first factor of say 60% would give $42 million. Then applying the second factor would give $25.2 million. The $25.2 million would then be divided into annual payments that would also include the interest that the City is paying on the money it borrowed to finance the project. The annual payment would then be converted to a per thousand gallon surcharge to add to the base water rate. The figures would be recalculated every three years.

What this means is that NJAWC would pay $25.2 million for a benefit that is worth at least $42 million dollars. What that also means is that the City, actually its water customers, would have to make up the difference of $16.8 million over the life of the loan. (The actual amounts would be more over the life of the loan due to the interest charges.)

Applying the provisions of Exhibit C of the pending contract reveals that NJAWC will not pay 60% of the cost but only about 36% of the cost or less depending upon the factors.

VOTE NO on June 15th!

No comments: