Debts and Debt Solutions

Debt Management Newark Mayor Sharpe James is trying to sweeten his long-stalled plan to create a nonprofit agency to merge and then run the city's watershed and water utility operation by promising an additional $75 million payment to the city if certain financial projections are met.

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Debt Relief Solution The $75 million would be in addition to the planned $90 million lease payment that the new agency would pay to the city over three years and the $70 million in water and sewer bond debt that it would take over from the city.

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Debt Management Services The promise of more revenue -- from what James has termed the "Water Optimization Plan" -- comes in the form of amendments to the proposed lease and was recently submitted to members of the city council.

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Bad Credit Debt Consolidation The council is scheduled to introduce the proposal for a vote at Wednesday's 7 p.m. meeting.

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Credit Debt Solution "We would not have made the proposals if it were not likely to be a possibility," said Zinnerford Smith, head of the Newark Watershed and Development Corp., and a leading candidate to head the new agency.

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Consolidation Counseling Under the proposal, the Newark Watershed and Development Corp., which oversees watershed land in Morris, Sussex and Passaic counties, would reorganize as the Newark Infrastructure Management Corp., or NiMac. The new corporation would then run the watershed and water and sewer utilities, which have a combined 225 employees and a $79 million budget. The lease would last 40 years.

Credit Card Debt Water rates would increase 3 percent and sewer rates would increase 9.7 percent in the first year, according to the proposal. From 2004 to 2007, water and sewer charges would increase at least 3 percent annually.

Debt Free Solution During the first two years under the Newark Infrastructure Management Corp., no jobs would be eliminated. But in the third year, the agency would perform an organizational evaluation that could lead to job cuts. Under the terms of the city's contract with the agency, the city would be responsible for finding positions for displaced water and sewer workers.

Debt Negotiation Services Rahman Muhammad, head of the union that represents nonsupervisory employees in the water and sewer department, has come out in support of the plan. "If the mayor and council think this is best for our city, then we think this is best for the city," Muhammad said at a Nov. 26 public hearing on the proposal. "We just want to make sure employees are taken care of."

Debt Solution Company James has pushed the plan for two years as a way to provide money to phase in new tax assessments after Newark's first revaluation in 40 years takes affect. The mayor, who is also a state senator, sponsored enabling legislation that was signed by Gov. James E. McGreevey in August.

Debt Elimination Services Residents have expressed opposition to the proposal and a national consumer group with experience in analyzing water utility issues said the plan is a quick-fix financial solution that will create unnecessary debt while limiting public input about water rates. The amendments only exacerbate the problem, said Maj Fiil, a policy analyst for Public Citizen's Water for All Campaign in Washington, D.C.

Debt Reduction "Why does no one ask can this company pay for this?" Fiil said. "The citizens of Newark are eventually going to pay for this -- with interest."

Debt Solution Inc In order for the city to receive the additional $75 million, several conditions must be met:

Debt Settlement Services # A $2 million surplus must be maintained in two subsequent fiscal years following the contract;

Debt Relief # A financial consultant and engineer must certify that the payment will not interfere with the completion of capital projects or necessary repairs, and;

Christian Debt Solution # NiMac must determine that "rates will remain affordable and competitive in the foreseeable future." No guidelines have been established for this condition, meaning that even if the other stipulations are met, NiMac officials have ultimate discretion over whether the city will receive the additional money.

Counseling Credit Debt Several other lease amendments also promise to fatten the city's coffers. Among them:

Debt Consolidation Program # The new agency will pay property taxes on the watershed and pay the cost of property tax appeals. Last year, Newark paid $2.2 million in taxes on its watershed land.

Debt Reduction Solution Credit # Half of any discretionary money left after the city has received contractually agreed to payments, and bond and other obligations of the agency are met will be delivered to the city each year after an annual audit.

Debt Collection Services # NiMac will pay the city a previously agreed upon fee for office space and other city services the agency uses.

Credit Card Debt Solution # Rather than reimbursing the city on a quarterly basis for the salaries and benefits that will be paid to water employees, NiMac will pay the city at least 48 hours before it has to pay salary and benefits to employees.

Card Counseling Credit Debt # Five years after the contract, and on an annual basis thereafter, a representative from the city will review NiMac's performance and decide whether or not the city should exercise its right to terminate. If the city chooses to cancel its contract with NiMac, it will immediately have to pay all outstanding debt, which will be more than $200 million. That might be impossible given that the city is close to its bond limit.

Debt Help Hugh Jackson, also a policy analyst for Public Citizen's Water for All Campaign, said the promise of additional money means that the agency will be under tremendous pressure to raise money to meet its debt and that could mean raising rates or cutting services.

Com Debt Solution Atlanta recently walked away from a 20-year, $428 million water privatization plan with United Water after the deal failed to meet revenue projections, among other problems.

Christian Consolidation Debt Even though Newark's plan is touted as an alternative to privatization, analysts at Public Citizen's Water said the proposal is privatization in disguise and invites the same pressure for revenue production upon Newark's well-regarded watershed management system.

Debt Counseling "This not-for-profit entity is going to be saddled with some pretty huge debt and the pressure of that debt could prompt unwise workforce reductions, resistance to invest in infrastructure maintenance or other cost-cutting measures, a la Atlanta, that could harm water service and quality," Jackson said.

Debt Settlement Solution "This is the problem all over: They promise too much," Fiil said. "How realistic is it that they can pay this money back?"

Consolidation Debt Free Iowa Four of nine council members -- Bessie Walker, Donald Tucker, Luis Quintana and Hector Corchado -- have come out against the plan, which requires a two-thirds council vote.

Consumer Debt Consolidation Corchado said the amendments do not impress him. "Not quite yet," he said.

Consumer Debt Solution Tucker agreed. "My position on the water plan has not changed: It's a bad idea," he said. "This is the most valuable land in the state and it's owned by Newark. This plan is mortgaging our land for a short-term gain."

Debt Reduction Services Smith said he stands by the deal as being in the best interests of city taxpayers. "We stand ready to proceed with the project so residents can experience tax relief."

Debt Settlement By Jeffery C. Mays
Star-Ledger - 2/16/2003

Topic: Highlands

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