Essex County, New Jersey, aids Newark amid water crisis
Newark, New Jersey, would receive expedited funding to replace pipes that have caused elevated lead levels in drinking water under a new bonding agreement with Essex County.
Essex County Executive Joseph DiVincenzo announced Monday a plan to issue $120 million of refunding bonds on behalf of Newark to fund the complete replacement of lead pipes in the city’s water distribution system. The borrowing plan is expected to cut the time frame for replacing 18,000 Newark lead lines to between 24 and 30 months compared to a previous estimate of 10 years. Around 700 Newark properties have had their pipes replaced since March using funding provided by the state.
“I want this long-term solution to happen sooner rather than later,” said DiVincenzo during a joint press conference Monday with county, city and state officials. “This challenge was too important to ignore.”
The bond plan was formulated after the Environmental Protection Agency announced on Aug. 9 that two Newark homes had water that exceeded federal lead standards. The 280,000-population city then began distributing bottled water to residents in about 1,400 homes.
DiVincenzo said Essex County with its triple-A rating will help Newark achieve lower borrowing costs by saving between $15 million to $20 million in interest costs. The Essex County Improvement Authority would issue the bonds under the financing plan, which is still subject to approval from city and county officials.
Newark’s general obligation bonds are rated by Moody's Investors Service eight notches below its home county at Baa2 with a positive outlook. Moody’s Investors Service upgraded Newark one notch in February ahead of a $51.1 million GO sale citing the city’s improved fund balance levels and tax base growth from economic development projects.
“It is critical that we create a permanent solution to modernize Newark’s infrastructure and eliminate lead service lines to reduce the risk of lead in the water for all Newark families,” Mayor Ras J. Baraka said during Monday’s press conference. “Replacing the lead service lines is the only permanent way to address this issue.”
Baraka said a previous financing arrangement to tackle water improvements in which the city was to have bonded $75 million that was subsidized by the state would have involved affected homeowners paying 10% of the replacement costs. The $120 million infusion from the Essex County bonds will enable homeowners to share no burden for the repairs.
Essex County received a one-notch boost from Moody’s last year to triple-A thanks to healthy reserves and increasing tax revenue. The county, which had an estimated population of 808, 285 in 2017, is rated AA-plus by Fitch Ratings. It has received nine credit upgrades since falling to a near junk-level in 2002 while grappling with severe fiscal stress.
“This assistance would not have been possible, five, 10 or 15 years ago because of the financial pressure we were experiencing at the county level,” DiVincenzo said. “We are pleased to pass along these significant financial savings into Newark and help modernize its water system.”
Essex has sold about $847 million of bonds since 2009 including a $124.48 million negotiated GO deal Tuesday won by Mesirow Financial. Roughly 35% of Essex County's debt has been issued through the ECIA, according to Moody's.