Hoboken saves taxpayers $12 million in one year
History has been kind to the city of Hoboken, N.J. In 1846, it gave birth to the sport of baseball.
In 1915, it gave birth to the music industry’s chairman of the board–Frank Sinatra. And in 1995, the city spawned the concept of a public,private partnership for the operation of its water system.
The city operated its own water system for more than 100 years. But as the infrastructure of the municipal utility aged and regulations became more demanding, Hoboken found it was losing money to the tune of $800,000 a year. As Mayor Anthony Russo notes, “We would have needed a rate increase of 35 percent in 1995 just to break even.”
Faced with the prospect of raising water rates to cover the costs of operating the water utility, the city sought an alternative solution.
There were three ways to solve the problem: increase water rates drastically to bring water operations to the break-even point, invest heavily in capital improvements to update the water distribution system or sell the water system and turn it into a regulated utility. The water system, though, has long been viewed as a public asset, and Hoboken wanted to retain ownership.
The city negotiated a unique public-private partnership with United Water Resources, Harrington Park, N.J., one of the largest investor-owned water services companies in the United States. The initiative enabled Hoboken to:
* receive needed capital without selling water department assets;
* maintain control over water rates charged to residents;
* receive free installation of an automatic meter reading system; and
* gain the benefits of the utility’s professional management, both technical and operational, at the lowest possible cost.
Hoboken and the utility forged a 10-yea?public-private partnership agreement, which can be extended every 10 years, up to 40 years.
The utility paid the city $5.5 million for the right to operate the water department as a concession. The water company assumed all responsibility for operations, maintenance, administration, billing and collections.
While the success of the public-private partnership in Hoboken is only beginning to be realized, dramatic results have already been reported in Indianapolis.
The White River Environmental Partnership, which includes the water company’s alliance partners–Lyonnaise des Eaux and JMM Operational Services–along with the holding company, Indianapolis Water Co., has just completed the first year of a five-year contract to manage the city’s two wastewater plants.
The $14 million contract, the largest in the United States for contract operations of a public wastewater system, is expected to save taxpayers more than $65 million over the life of the agreement.
More than $12 million in savings, the first year’s goal, have already been achieved.