Wednesday, September 13, 2017

Mayor releases statement after City Council took no action on the Suez water contract last week

Official release:

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Wednesday September 13, 2017

City of Hoboken, NJ

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Community: Open Letter from Mayor Zimmer Regarding Water Infrastructure & Proposed Suez Agreement

Dear SmartyJones,

As perhaps everyone in Hoboken knows, the City's aging drinking water infrastructure is in desperate need of major investment. The City is upgrading the water mains along Washington Street and other priority areas, but much more funding will be needed to cover the extensive costs for city-wide upgrades. The City's proposed Suez agreement would fund investments every year. Taxpayers should not have to pay for all the costs of the upgrades to the system, and that is why reaching a fair agreement with Suez to provide much-needed funding was so important to me. Until the necessary infrastructure upgrades are done, unfortunately, our City will continue to be plagued by damaging, disruptive, and costly water main breaks.

Usually, costs of maintaining and upgrading a City's water system are fully covered by the system itself through the water ratepayers.  That way everybody who uses water shares in the cost proportionately, based on how much water they use.  For example, a car wash will pay proportionately more than a family of four, based on how much water each uses.

Unfortunately, in June 2001, during the transition from the Russo Administration to the Roberts Administration, Hoboken amended its 1994 Agreement with our water company in a way that imposes enormous unfair costs on Hoboken's taxpayers.

Unbelievably, that Amendment actually reduced the amount the water company was required to pay each year for repairs and upgrades from $550,000 per year to $350,000 per year (with the City responsible for any repair costs exceeding $350,000) for 23 years from 2001 to 2024. In addition, the agreement stated that starting in 2014, the water company is permitted to "pass through" the "excess" cost of water to the City to the extent it exceeds the water cost levels of 2011 (although the contract doesn't say when or how that "pass through" is supposed to occur).  Not a penny is provided to pay for our desperately needed capital improvements beyond the reduced amount for emergency repairs.

While the City did receive a one-time payment of $2.7 million, which it used to close a budget gap in 2002, the 2001 ten-year extension and Amendment actually COST the City over $17 million compared to simply leaving the pre-existing Agreement in place until scheduled termination, and then extending it 10 more years without any changes. This cost includes $4.6 million in lost maintenance investment ($200,000 less per year for 23 years) and the City's agreement to a "pass through" of bulk water costs for 10 years (costing an estimated $13 million through scheduled contract termination in 2024).

Even though that Amendment was entered into 17 years ago, it is far from ancient history. It still has seven years to run, and terminating it now would cost the City a termination fee of almost $5 million.

In order to address the problems caused by this onerous Amendment, my Administration has been working for 2 years to re-negotiate our water agreement. In June of this year, we reached a tentative agreement, subject to City Council approval, on the terms of a new agreement. The Agreement was presented to the City Council in early July, shortly after negotiations were completed. In hindsight, it might have been wiser to wait until after the November election, so that the City Council could consider it without the distraction of an upcoming contentious election. However, it is still my hope that before the end of the year, the City Council will take a vote so that we can move forward to resolve these critically important issues. The proposed agreement is a dramatic improvement over the existing agreement that would enable Hoboken to finally address decades of underinvestment in our infrastructure.

These are the highlights of the proposed re-negotiated Agreement:

1.  Approximately $40 million in benefits to the taxpayer, including over $30 million in new infrastructure investment (approximately $1.8 million per year, compared to $350,000 per year currently) and almost $10 million from the elimination of unfair costs (relating to excess emergency repair and bulk water costs) imposed under the 2001 Amendment that would otherwise have had to be paid (either by taxpayers or through a rate increase) before the contract expired in 2024.

2. Installation of "smart technology" that would enable detection and repair of small leaks before they become big ones.

3.  Extends the Agreement 10 years until 2034.

Unfortunately, a lot of misinformation has been circulated about this Agreement. For example, the $40 million benefit to taxpayers is NOT simply being shifted to ratepayers. The only rate increases included in the Agreement are 1.8% in the first year to pay for a $150,000 annual increase in the emergency repair budget, an additional 2% per year for years 1 through 6 to phase in the actual cost of bulk water, and annual CPI adjustments.

In addition, some Council members have suggested that instead of resolving the unfair costs described above through a re-negotiation of the 2001 Amendment that caused the problem, the City should have included these costs in past budgets and raised taxes to pay them in past years. I strongly disagree, as did the legal and accounting professionals on whose advice the City relied upon. The charges had not been billed and were not going to be billed until negotiations had been completed. Put simply, the amounts were not yet due and were not likely to ever become due as the result of a renegotiated agreement or the city's ability to pass the costs on to ratepayers.

Ultimately, it is important for residents to understand that the taxpayers of Hoboken should never have to shoulder the burden of the extremely unfair existing agreement that was passed in 2001 and currently extends until 2024. If the City Council approves the proposed agreement, then the City will be able to annually invest in its water main system and avoid these unfair excess bulk water and capital improvement costs. Holding the taxpayers responsible for these excess costs agreed to in 2001 is not necessary or appropriate now and was not necessary or appropriate over the past two years as some Council members have suggested. Prematurely taxing the people of Hoboken for a cost that was not yet payable and was likely never to be payable by the taxpayer would have been irresponsible and simply wrong.

The following documents provide additional information on this important issue:

Talking Ed Note: A full week after the City Council did not vote on the proposed amended Suez water contract, the Mayor's Office issued the above statement.

Some details are established such as the timing of the negotiations with Suez, the water vendor to the City of Hoboken. Other questions are outstanding such as when the exploding 2014 liability was discovered and who knew and may have acted sooner.

That the City Auditor stood before the council last week and stated he had no knowledge on the amount of the liability until the day prior is only one of the disturbing questions in this unfortunate situation. 

The letter from the Auditor was released to the City Council AT the meeting last Wednesday. It artfully states there was "no bill" for overage water usage "nor any correspondence."

It deftly avoids the matter of knowledge which was a conflicting matter among several mentioned at the meeting from a day, two months and a year.

So there Hoboken finds itself.

NJ ELEC admits it botched publishing the Zimmer campaign report

The Hudson County View published its story on the late appearance of the Zimmer campaign report.
NJ ELEC has admitted it inadvertently screwed up. From the story:

Talking Ed Note: The Zimmer campaign published the report as it has historically in the July reporting period. MSV published the complete NJ ELEC campaign report in an update yesterday to its Grist for the Mill column after the correction was made and the report published yesterday.

City Council President Jen Giattino Calls for Facts on Suez and Rebukes DeFusco

Official release:

City Council President Jen Giattino Calls for Facts on Suez and Rebukes DeFusco

There are inconsistent and misleading statements circulating concerning the events leading up to last week’s City Council meeting and the public discussion about the $8.3 million unfunded liability.  This is a serious governance issue for Hoboken and it's critical that we get the right facts and that we are all fully transparent with the public. 
The terms of the proposed Suez contract were given to me by the Administration at an Infrastructure Subcommittee meeting I attended the evening before they were sent out to the entire public and the rest of the City Council on July 12th .  Councilmembers Tiffanie Fisher and Ravi Bhalla were also in attendance at that meeting with Mayor Zimmer, Business Administrator Stephen Marks and City consultant Dennis Enright.  In that one hour meeting, we were presented with the terms for the first time and the focus of our questioning was whether Suez was going to continue to receive an excessive amount of our water revenues.  When asked at that meeting if the proposed terms were market terms, the City consultant replied that the proposed contract was above market, but declined to say how much above market. 
After Councilman DeFusco raised concerns at the August City Council meeting about Councilman Bhalla's potential conflict with Suez due to his employment, we moved the oversight of the proposed Suez contract from the Infrastructure Subcommittee, which Councilman Bhalla chaired, to the Finance and Revenue Subcommittee and Peter Cunningham, who is on that subcommittee joined us for a meeting on August 29.   It was at this meeting with Director Marks and Mr. Enright that we first were told of the nature of the $8.3 million liability, that it related to contractual expenses and costs that had been incurred in prior periods and that it was potentially unfunded and not disclosed. The following morning Councilwoman Fisher as Chair of the Finance and Revenue Subcommittee immediately acted and sent an email to Mayor Zimmer and Director Marks, cc’ing Councilmen Cunningham and me, calling for a meeting with the auditor and legal counsel to discuss the accounting, appropriation and disclosure requirements for the $8.3 million liability and whether they were properly followed.  Although a subcommittee meeting occurred on September 4th with Director Marks and members of Hoboken’s finance team, the Administration declined our request to have the auditor present and also our third request for the financial underwriting of the proposed contract.
It was only at the City Council meeting on September 5th that we were able to have a detailed discussion with the auditor and the financial consultant about the historical events and activities surrounding the $8.3 million liability.
Please see the email below that I sent to Councilman DeFusco requesting that he correct his statement and the allegations he made about me. Further I believe that Mayor Zimmer and Councilman Bhalla both need to disclose all of their knowledge and activities on this subject that occurred prior to the announcement of the proposed contract on July 12.  I reiterate that we will need to do further investigation into this matter so that we can make sure we are doing what is right for Hoboken residents.

Subject:  Regarding Your Statement on Suez

Dear Councilman DeFusco –

Although we share the sentiment that the administration was insufficiently transparent in the information it provided on the Suez contracts, I want to correct your version of the “hard facts” you sent to Hoboken residents.  They are misleading.

I cannot speak for what the Mayor or Councilman Ravi Bhalla knew or when they knew it, but as Councilwoman Tiffanie Fisher described in public at the City Council meeting on September 5th, it was not until the Finance Subcommittee meeting on Tuesday August 29th that we, along with Councilman Peter Cunningham, first became aware that the $8.3 million liability related to prior year costs and expenses that appear to not have been previously funded or disclosed.  It is also crucial to properly identify what is included in the subject liability as we look ahead – primarily bulk water charges reflecting increased rates and capital improvement costs in excess of Suez’s required contribution amounts; not just the latter as you inaccurately described in your letter.

There was an infrastructure subcommittee meeting chaired by Councilman Bhalla on July 11th which I attended along with Councilwoman Fisher, at which the Administration presented us with the terms of the proposed contract that they then circulated to the public the next morning.  At this meeting – which included Mayor Zimmer, Business Administrator Stephen Marks, and City consultant Dennis Enright – the focus of our questioning was meant to understand whether Suez was getting excessive profits under the new proposal.  The Mayor did not disclose the nature of the $8.3 million liability at that meeting.  It was only at the later subcommittee meeting on August 29th, a week before the council meeting, where we learned from Director Marks and Mr. Enright more about the characteristics of the liability.

This is a critical governance issue for Hoboken, and one that relies on getting the facts straight.  I am requesting that you correct your false allegations, put politics aside, and help set the record straight for the benefit of the Hoboken residents.


Jen Giattino

Suez, to be or not to be a contingent liability


Should it be listed or should it not? When is an anonymous blogger a credible "source" while the slings and arrows of City Hall remain silent?

That is one question among others connected to NJ state and municipal reporting requirements unanswered by the powers that be at City Hall.

While numerous commenters have been arguing this and other matters, there's been no official statement to these and other important questions surrounding the revelation Hoboken sits on a $8.35 million obligation owed to Suez, the water vendor to the City. It's been accumulating since 2014.

The breakdown of how it began connected to contractual elements of amendments years past is less important than how the growing debt was managed or rather, hidden.

MSV has exclusively obtained from non-governmental sources the CITY OF HOBOKEN, COUNTY OF HUDSON, NEW JERSEY GENERAL OBLIGATION BONDS, SERIES 2017

In no small irony, the official document states:
No dealer, broker, salesman or other person has been authorized to give any information or to make any representations other than as contained in this Official Statement. If given or made, such other information or representations must not be relied upon as having been authorized by the City or any underwriter. 

MSV has certainly seen its share of "other" persons unauthorized to give any information on this "official" statement. 

Why have we not seen an "official statement?" 

That's right, from City Hall. 

It's been a full week since the Hoboken City Council did not vote on the proposed contract extension offered by the Zimmer Administration. There's not been a single word of protest by any member of that nine member body. Not a single member of the legislative body after the August and September presentations by professionals inside and outside of the Administration wanted to sponsor and move forward.

That should give some pause. It's seen others offer a finality to an assessment direly incomplete. They'll understand why soon enough. The politics being played here is not borne of the City Council. It's an old time Soprano State play to cover up a problem for reasons at the moment uncertain.

Hoboken, there's a problem. 

See the document here and ask yourself is Suez a contingent liability or not? If it is, why is it not listed here? If not here, where is the liability reported by the City of Hoboken?

See B-67, Commitments and Contingent Liabilities

Who seized Suez?

Or rather, who is getting a seizure from Suez?

There's lots of questions, lots of posturing and boatloads of "anonymous" positions about to be abandoned in the face of revelations showing problems are what problems are when they are uncovered.

For some, speaking truth to power should be limited to their ideological desires, for others it's a prop to bludgeon against those who they wish to see put down.

The truth of anything requires getting at the truth.

Keep that in mind as the charges fly, countercharges swirl and ask yourself who exactly is trying to get answers and who is providing them or withholding them WaterGate style?

Then ask yourself why there are no answers coming from the locale one would typically expect?