New Jersey lawmakers have an outline for a bond program to upgrade the state's aging drinking water system.

A state task force approved a 30-page report on Jan. 8 urging lawmakers to approve $400 million in state general obligation bonds for water infrastructure upgrades. The joint legislative panel also proposed recommendations to tackle long-neglected upgrades to more than 200 sewage treatment facilities throughout the Garden State.

“The crisis facing our drinking water infrastructure is a ticking time bomb,” said Assemblyman John McKeon, D-West Orange, who co-chaired the Joint Legislative Task Force on Drinking Water Infrastructure. “Much of this system is past its useful life and is breaking down due to decades of under-investment.”

A New Jersey Transit train passes in front of a water tower in North Brunswick, New Jersey, on Aug. 10, 2017.
A train passes a water tower in North Brunswick, N.J. A task force recommended the state borrow $400 million for water system improvements. Bloomberg News

The task force recommends that the state legislature establish a new grant program financed by the $400 million of borrowing that would target capital investments while also aiming to make water systems more efficient and cost-effective.

The panel urges that funding complement revenues from existing water rates, which would still be the catalyst for most infrastructure improvements. Additional legislation authorizing storm water utility fees and a wastewater system improvement charge could help raise other funding sources, the report says.

“I realize $400 million will not fix all the state's water infrastructure woes, and that spending more money is never easy, but it would be a start and it's a must," McKeon said. "The status quo is absolutely unacceptable."

New Jersey municipalities are in the midst of a water crisis, according to the task force, noting that the city of Hoboken averages 20 water main breaks a year. Hoboken, which has some pipes that were installed as far back as 1857, has faced increased costs to fix breaks because the city is responsible for repairs and capital improvements, the report says.

Jeff Tittel, director of the New Jersey Sierra Club, said that the state needs to invest far more than the $400 million in borrowing suggested in the report to truly get to the root of the problem. Tittel noted that north of $50 billion is needed in water-related improvements throughout the state including $8 billion alone for lead problems in urban areas. He said a $1 billion bond issue would be far more effective as a near-term solution rather than $400 million if the state decided to go with the debt route.

“A small bond issue would add more debt to a state already with low bond ratings and it would be really small given what is needed,” said Tittel. “It would be a drop in the bucket given the size of the problem.”

New Jersey GO bonds are the second lowest rated among the 50 U.S. states following 11 downgrades under former Gov. Chris Christie, driven largely by a severe unfunded pension burden. The Garden State has ratings of A3 from Moody’s Investors Service, A-minus from S&P Global Ratings and A from both Fitch Ratings and the Kroll Bond Rating Agency.

“Of course our taxpayers and the state Treasury are already burdened with heavy loads and commitments," State Sen. Linda Greenstein, D-Plainsboro Township, who co-chaired the task force with McKeon, stated during a Jan. 8 hearing on drinking water infrastructure. "But the costs of doing nothing will far outweigh the cost of preventive action in pure dollars as well as economic losses to rate payers and the cost of emergency repairs, estimated at 10 times the cost of a planned replacement."

Tittel said a pay-as-you-go model for water infrastructure would be ideal and lawmakers will need to think outside the box with funding strategies. He said public-private partnerships, water fees and taxes utilized in other states should all be explored given the state’s debt crisis and the challenge involved with getting voter approval for new borrowing.

“We have to look at some creative financing solutions,” he said. “The problem is going to get worse and more costly.”

The report noted that New Jersey’s investor-owned utilities also must tackle major infrastructure needs. The state’s largest utility, New Jersey American Water, estimates that more than half the installation of its 8,700 miles of pipeline took place between 1870 and 1960, with 15% between 100 and 140 years old. The utility also projects that in less than a decade the vast majority of pipes will have reached, or aged beyond, their reasonably expected life.

New Jersey American Water officials estimate it costs 10 times more for emergency repairs than conducting routine infrastructure upgrades. Donald Shields, American Water’s vice president of engineering, stressed that many older pipes are still in solid workable condition, but that proactively maintaining upkeep is crucial. He said the utility has recently invested $350 million annually for repairing 90 to 100 miles of pipes each year.

“As these assets decline we have to continue to invest,” said Shields. “The problem is not going away.”

The push for more New Jersey water funding is also designed to combat the threat of lead in drinking water. The Newark Public Schools reported elevated lead levels in early 2016 at 59 sampling locations across 30 school district buildings. This prompted new rules requiring every New Jersey public school to test its drinking water for lead, which determined problems throughout the state.

“Because it’s in schools and hospitals, that makes it a much bigger priority,” Greenstein said in a phone interview. “Many of the service lines need to be repaired.”

Greenstein said New Jersey's new governor, Phil Murphy, has not indicated whether he supports the bonding proposal or budgeting more for water system improvements.

She is hopeful that an upcoming meeting scheduled with Catherine McCabe, acting commissioner of the New Jersey Department of Environmental Protection, will bring the Murphy administration on board. The state will also explore federal funding for some of the planned water infrastructure improvements, Greenstein said.

"We know that President Trump has said he plans an infrastructure improvement plan for the country of at least $1 trillion," said Greenstein during the Jan. 8 hearing. "There is no more precious a resource than our drinking water, and we will definitely not be shy in seeking assistance from our Federal government."

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