The Hoboken City Council okayed two important financial measures last night: a new Suez Water deal through 2034, as well as a preliminary $117 million budget that would slash $836,000 in spending – including $115,000 from the mayor’s office.
As city officials noted last month, the 15-year agreement with Suez will run from July 1st, 2019 through June 30th, 2034.
After details of the partnership include the city paying Suez a base fee of $1,990,000 per year to operate, maintain and manage Water System in accordance with new Best Management Practice.
Additionally, city will invest $2 million in “smart technology upgrades,” $700,000 will be set aside each year for maintenance costs and also allocated a minimum of $1.5 million annually in water system upgrades – based on a five-year average.
Officials also said that the Capital Improvement construction management fee will be 15 percent.
As far as debt is concerned, the city is expected to pay Suez approximately $1,045,000 per year to ultimately repay about $11.8 million in “estimated outstanding obligations.”
This led to a lengthy debate on the council led by 3rd Ward Councilman Michael Russo, who was clearly annoyed that this debt had not been addressed sooner.
“Where we under the assumption that because we weren’t presented with a bill, that we weren’t going to be billed for that?,” Russo questioned.
Joe Baumann, a partner at McManimon, Scotland and Baumann, LLC, responded that the number was known and negotiated into a financial package in 2017, which the council did not approve.
Nevertheless, Russo wasn’t willing to except such a succinct explanation.
“Why weren’t we budgeting for those increases over time?,” Russo asked.
“I think the perception was that it would be rolled up into negotiations in one fashion or another, so there wasn’t a need to budget it,” answered Dennis Enright, of NW Capital Markets.
“The bulk water costs, when you did the last amendment to the contract in 2001, the amendment said that if bulk water costs exceeded the current amount beginning in 2014 – it actually exceeded it before that, it started in 2007 – but in 2014 the city would be liable.”
Russo also said that under-budgeting for those costs forced the city to “negotiate from a point of weakness,” a point that Council President Jen Giattino and 4th Ward Councilman Ruben Ramos both seemed to agree with.
“We had an underfunded budget for three to four years, what was it supposed to be like?,” Ramos began before Baumann jumped in.
“That was part of the challenge. When we took over the negotiation, was first to figure out what we actually owed,” he explained.
Ramos then mentioned that perhaps the council should have approached this the way that they approach labor union contracts by where future salary increases are accounted for beforehand.
Additionally, 2nd Ward Councilwoman Tiffanie Fisher commended everyone who helped make this deal possible, rationalizing that the city couldn’t have hoped for a better outcome.
“Going forward, this is way better than anything we’ve seen: simply put, we’re going from getting seven percent net revenues to 60 percent of net revenues. This is a fully self-funding utility that will be able to cover all capital requirements of our system in perpetuity,” she began.
“It does not require a full staff. When we looked at Director [Ryan] Sharp of the parking utility, using it as a comparison, it doesn’t have staff like that, it doesn’t have operations like that. These are the repairs in our system.”
She continued that Suez will take care of the administrative responsibilities, such as collecting water bills from the city’s residents, while officials will work with them on make water system upgrades.
The measure passed unanimously (9-0), prompting a positive response from Mayor Ravi Bhalla.
“I want to express my thanks to the City Council for unanimous approval of our new water contract and public water utility. Hoboken will finally be able to make critical upgrades to our water infrastructure with multi-million dollar investments that have been lacking for decades,” he said in a statement.
“While we won’t be able to solve all water main breaks overnight, this puts us well on our way to significantly upgrading our water system with six times more investments than currently required.”
The vote on the initial budget, which calls for approximately $836,000 in cuts compared to the on presented from the administration, also brings the tax rate increase down to 1.3 percent from the initially proposed 2.8 percent.
The measure came to a vote with minimal discussion, other than clarifying the figures associated with spending cuts since the council initially considered eliminating a little over a million dollars in spending.
The first reading passed by a vote of 8-1, with only Councilwoman-at-Large Emily Jabbour voting no.
The current version of the budget would eliminate roughly $115,000 in spending from the mayor’s office, making it more than likely he would have to layoff one of his three staffers.
A city spokesman did not respond to a request for comment on the budget vote.