South Orange Water Privatization Takes Big Step Forward

SOUTH ORANGE, NJ — One of the largest water companies in the nation is on the brink of adding to its growing footprint in New Jersey.

On Thursday, New Jersey American Water (NJAW) announced that it signed an agreement to purchase South Orange’s water system – which serves nearly 5,000 local customer connections – for $19.7 million.

Voters in South Orange paved the way for privatizing their water system in a referendum as part of the 2024 election, with 62 percent casting “yes” ballots. The public question saw both cheers and jeers prior to Election Day.

>> Read More: What To Know About South Orange’s Water Referendum

Supporters say that privatization help towns to dodge costly repairs, including the state-mandated replacement of lead service pipes. They say the sales won’t negatively impact water rates, adding that experienced companies are able to provide better service – with less of a headache for local municipalities.

Critics argue that selling water or sewer systems increases costs for homeowners and businesses over the long term, while selling off a “precious public resource” to a private company that is only interested in its own bottom line.

As part of its deal in South Orange, the company has agreed invest $50 million in infrastructure improvements within the first 10 years of ownership. Anticipated improvements to the system – which is more than 100-years-old in some areas – include the following:

• Identification and replacement of all utility-owned and customer-owned lead and galvanized steel service lines by 2031
• Replacing all four-inch water mains and associated fire hydrants
• Replacing the Crest Drive Standpipe
• Rehabilitating the Main Reservoir and the Newstead Watersphere

The agreement includes five years of “rate stabilization,” although it doesn’t make any assurances beyond that time frame. There would be no rate increase for the first two years after the sale. Water bills would go up 3 percent in the third, fourth and fifth years.

New Jersey American Water said it anticipates completing the acquisition in South Orange during the second half of 2025. The deal remains subject to approval by the New Jersey Board of Public Utilities.

A municipal task force was given the job of taking a look at the sale in 2022, and came up with a list of positives and negatives. Read the full report here.

Critics of the deal have included nonprofit advocacy group Food & Water Watch, which released a list of “Three Reasons Why Water Privatization Is a Bad Deal for South Orange.”

Supporters have included South Orange Mayor Sheena Collum, who recently reaffirmed her stance that the deal is good for the village.

“I am fully confident that the sale of our water system to New Jersey American Water is in the best interest of South Orange residents,” Collum said. “This is a positive step toward securing safe, reliable and affordable water for generations to come.”

New Jersey American Water is the largest water service provider in the state, serving nearly 2.9 million people in more than 190 communities. It is a wholly owned subsidiary of American Water, the largest publicly traded U.S. water and wastewater utility company.

PRIVATIZING WATER, SEWERS IN NEW JERSEY

South Orange wasn’t the only town in New Jersey that voted on privatization in the 2024 election.

Voters in Gloucester Township rejected a call to sell their sewer system – also to New Jersey American Water. Meanwhile, voters in Manalapan Township agreed to sell their water system to Veolia Water New Jersey. See Related: New Jersey Towns Are Taking Water, Sewer Privatization To The Polls

The three above towns aren’t the only ones in the Garden State to debate selling their water or sewer systems in the past few years.

New Jersey American Water acquired the 2,800-customer Bound Brook sewer system in 2022, the 2,900-customer Long Hill Township sewer system in 2020, and the 1,800-customer Mount Ephraim sewer system in 2019.

In November 2024, NJAW completed its acquisition of the wastewater collection system of the Borough of Manville for $6.5 million. The agreement to purchase the system was approved in a voter referendum in November 2023, which passed in a landslide fashion – with 83 percent of the voters approving the sale. Read More: Manville Sewer System Sold For $6.5 Million To NJ American Water

“The sale will allow us to pay off municipal debt, stabilize property taxes, and secure long-term, affordable rates for our residents,” Manville Mayor Richard Onderko said. “Most importantly, New Jersey American Water has the resources needed to invest in critical infrastructure improvements that will benefit Manville for years to come.”

Other recent talks include:

EGG HARBOR CITY – In June 2023, the company announced it completed its acquisition of the water and wastewater systems of Egg Harbor City for $21.8 million. The sale of these systems was estimated to serve about 3,000 customer connections. The deal with Egg Harbor City was the first in the state to be completed through the Water Infrastructure Protection Act of 2015, which permits the sale or lease of municipally owned water or wastewater systems under certain conditions. Under the agreement, New Jersey American Water agreed to invest $14 million in the first 10 years to make needed upgrades to the city’s water and wastewater systems, including $9 million in the first five years, while “keeping rates stable for customers.”

SOMERVILLE – In October 2023, the company announced that it completed its acquisition of the wastewater collection system of the Borough of Somerville for $7 million. The municipally owned system serves about 3,800 customers, most of whom already were already receiving service from New Jersey American Water. The agreement to purchase the system was approved in a voter referendum in November 2022, which passed with 75 percent of the voters approving the sale. As part of the agreement, NJAW committed to invest a minimum of $9.5 million in sewer system improvements over the next 10 years.

SALEM – In June 2024, the company announced that it completed its acquisition of the water and wastewater systems of the City of Salem for $18 million. The systems serve more than 2,300 water and 2,300 wastewater customers. The deal followed a voter referendum that took place in November 2023, which passed with more than 60 percent of voters approving the sale. As part of the agreement, New Jersey American Water agreed to invest more than $50 million in improvements over the first 10 years.

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