RAHWAY — Although many people think water is free, it’s not. For Rahway residents, the cost of upgrades to the local water-treatment plant is going to run $16 million, although the average homeowner will see an increase of only $40 per year.
It’s never easy for a governing body to hear its water-treatment facility is not able to meet peak daily demand, or that it is going to cost millions to bring the system up to New Jersey Department of Environmental Protection standards. What does help is that the city can access half the money for this project interest-free, while floating bonds for the remainder.
Last week representatives from Hatch Mott MacDonald, an engineering firm, attended a city council meeting to explain exactly why the water system needs updating and how the city is in a better position than most when it comes to the cost of supplying water to residents.
Mark Tompak of Hatch Mott MacDonald said the city’s water filtration is antiquated and cannot consistently meet today’s standards. Although United Water operates the treatment plant in Rahway, the city owns the facility and is therefore responsible for any required improvements to its infrastructure. The engineering firm looked at three options available to the city, two of which would be considerably more expensive in the long run.
One option is for Rahway to look at “interconnections” with Middlesex Water Company and purchase water from it, although even using a nearby facility would require considerable work to bring this water supply to the city. Tompak explained that an express interconnection would cost $12 million, plus an additional $2 million for connections. Further, it was found that an interconnection would not meet the city’s peak water demands, and the cost to purchase water would exceed $5 million a year.
The second option would be to tap into groundwater through wells, although the only wells available were sealed off years ago. In 2004, United Water undertook an evaluation of the feasibility of using groundwater as a water supply, but found there were limited locations where new wells could be constructed. In addition, contamination of the groundwater would require treatment, making this option not feasible.
The only remaining option left for the city to consider is a treatment-plant upgrade. The addition of a new, membrane treatment system, Tompak said, is the most cost-effective option. This will satisfy current and anticipated future DEP regulations and address capacity issues that currently plague the city.
Based on current estimates, the total cost to construct the proposed membrane treatment plant comes to $16.6 million, which includes the cost of financing the project over 20 years. For this, Rahway is able to tap into the Drinking Water State Revolving Fund, a form of financing from the NJDEP that provides interest-free loans for municipal water-treatment improvements. However, the city can only borrow half, or approximately $8.1 million, of the funds actually needed. The remainder, or $8.5 million, will be financed through a market-rate interest loan.
Each year, the Rahway water utility generates about $5.6 million in revenue from residential customers. In order maintain the water utility on a self-liquidating basis, the city must generate $6.4 million annually, which it currently does not.
Dieper Lerch, the city auditor and financial advisor, explained how this expense relates to the average ratepayer in Rahway; he pointed out that because the city has reduced previous debt on the water-treatment facility to slightly more than $1 million, financing for the upgrades will not have a significant financial impact on local residents.
“The term utility means those who benefit from it should pay for it,” Lerch explained, adding that residents are being taxed on the assessed value of their property, not how much water they consume.
Previously, the money that residents paid for their water did not equal what it cost, so the outstanding debt came out of the city’s operating budget. That will no longer happen with the 10-percent increase in rates residents will experience.
“Actually this is really a minimal increase in rates,” the auditor noted, pointing out that Rahway residents pay the lowest water rates in the area.
“If the average resident is paying $108 a quarter for water now, that quarterly bill will increase to $118 a quarter,” Lerch said, or a $40 increase per year.
How does this compare with rates in surrounding towns? According to Lerch, nearby Clark and Linden pay $166 per quarter for their water, or $200 each year more than Rahway residents. On the other hand, residents in Woodbridge Township, which includes Iselin, Avenel, Colonia, Fords and others, pay $144 per quarter.
Council members had few questions about the new upgrades to the water-treatment plant; however, James Baker did ask about the impact on senior citizens. Lerch said seniors would receive a $5 discount each quarter on their bills, the same discount the city currently has in place.
The city council will hold a special public hearing on this issue Aug. 28 at 6:30 p.m. in Council Chambers.