Summary
On February 5, 2015, New Jersey Governor Chris Christie signed into law the Water Infrastructure Protection Act to authorize municipalities to transfer water and wastewater assets to regulated utilities by sale or long-term lease if emergent conditions exist that threaten drinking water or the environment. The Act is intended to address the lack of financial resources and expertise to maintain aging utility infrastructure to meet tougher environmental regulations.
The Act sets forth procedural steps for a municipality to establish the existence of emergent conditions and for approval to proceed with a procurement for the sale or long term lease of utility assets. If a municipality determines that emergent conditions exist as defined in the Act, then it shall engage an independent financial advisor to report on the value of the system and the impact of a proposed transaction on ratepayers and to provide an estimate of the financial requirements necessary to address the emergent conditions and to operate and maintain the system.
After a public hearing and consideration of the financial report, a municipality shall by resolution certify that emergent conditions exist and that it intends to sell or lease utility assets. The resolution shall be submitted to New Jersey Department of Environmental Protection, the New Jersey Board of Public Utilities and the Director of the Division of Local Government Service in the New Jersey Department of County Affairs.
Upon approval of the emergent conditions by the Department of Environmental Protection, a municipality may proceed with a procurement for the sale or long-term lease of the water or wastewater system to a "capable private or public entity." Bid proposals must include, among other things:
(1) A description of the corrective measure to be undertaken to address and correct the emergent conditions;
(2) The expenditures for operation and maintenance of the system and the projected impact on customer rates;
(3) An analysis of any federal tax law issues that may arise from the sale or long-term lease; and
(4) A long-term capital improvement plan.
After an agreement on the proposed contract is reached by the municipality and the bidder, the municipality shall submit the proposed contract for approval to the Board of Public Utilities, and the proposed use of proceeds from the sale or lease for approval to the Director of the Division of Local Government Services.
The Act was subject to opposition, including by the New Jersey League of Municipalities, the New Jersey Business and Industry Association, the New Jersey Association of Environmental Authorities and the New Jersey Division of Rate Counsel. One reason for the opposition was the change to current law which required a public referendum in the municipality prior to any sale or transfer of the utility assets. The bill was signed by the Governor without comment, but proponents of the Act view it as an additional option to address a problem of lack of financial resources to maintain and upgrade aging facilities to meet tougher environmental regulations.
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