Flint warnings as Atlantic City may be forced into state takeover of water
The near-bankruptcy of the financially ailing resort town was caused in part by the failures of casinos such as those previously owned by Donald Trump
Atlantic City may be forced by New Jersey into an unprecedented state takeover of its water as the result of a bailout, something experts have warned has worrying echoes of the ongoing water crisis in Flint, Michigan, and could result in price hikes.
The near-bankruptcy of the financially ailing resort town was caused in part by the failures of casinos such as those previously owned by Republican presidential nominee Donald Trump.
Casino closures over the past five years opened a cavern in Atlantic Citys budget, as property values plummeted and tax revenues plunged. However, Governor Chris Christie now also chair of Trumps White House transition team refused earlier this year to allow Atlantic City to formally go bankrupt to shed or restructure debt.
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Instead, a harsh $73m bailout loan was signed by the city and state, which required Atlantic City to dissolve its independent water utility and hold the infrastructure as collateral for the bailout loan. Christie, a water privatization proponent, has said he would sell the citys assets if Atlantic City failed to meet its loan obligations, a promise that could result in a private company owning or leasing the citys infrastructure.
Separately, the Guardian can reveal that while two of Trumps Atlantic City casinos were under his control, the mogul failed to pay more than $146,000 in water bills between 2012 and 2014 until March this year.
Its highly unusual for the state to step in on a municipalitys finances at all, said Daniel J Van Abs, a Rutgers University professor and expert in water policy. The sort of deal that was established for Atlantic City is even more unusual, if you will. The notion that they should be required to privatize their utility I have not seen the state take that action previously.
Advocates of public water were blunt about the loans terms.
Its undemocratic and un-American, said Mary Grant, a water privatization expert at Food & Water Watch, an advocacy group that monitors corporate water takeover attempts.
The relationship to Flint is very compelling, Grant said. An emergency manager came in and made decisions about the water system against the wishes of the local elected officials, and that resulted in the Flint water crisis, because they put money before health and human lives.
Customers of private water companies routinely pay more for water, and under privatization the people of Atlantic City would lose democratic control of their water and rates, as the people of Flint did when an emergency manager made broad changes to the citys source water in 2014 that resulted in widespread lead contamination.
A change in source water is unlikely in Atlantic City, but residents would have little say in rates or improvements. Currently, a local board supervises Atlantic Citys water utility. If a private company took over, only the states public utility board, which has limited power, could intercede to mitigate hefty rate hikes.
In September, Atlantic City violated a key term of New Jerseys $73m loan by failing to dissolve its municipal utility authority, and this month it sailed past the most recent state-imposed deadlines. New Jerseys division of community affairs, which administers the loan, refused to comment.
While it remains unclear when and if the state might enforce the terms of the loan agreement, a 2014 law signed by Christie assured an easy transfer of Atlantic Citys water into private hands, and the governor has made his intentions clear.
I want it secured by every asset they have, so that if they dont pay it, I get to take the assets, sell them and pay you [the taxpayer] back, Christie said at a public appearance in August, according to the Press of Atlantic City.
They sent [the loan agreement] back all marked up, We want to change this, we want to change this, he said of Atlantic City lawmakers. Excuse me? Youre asking for $74m to stay alive, you should just say, Where do I sign? Thank you, sir.
Over the past few years, Christie has laid the groundwork for the lease or sale of New Jersey water utilities. The 2014 Water Infrastructure Protection Act eliminated the requirement for a public referendum when water infrastructure is sold or leased to a private company in emergent conditions. The law also eliminated the public utility boards review of rate hikes from water system purchases, an expert at the rate counsel of New Jersey said.
In other words, if Atlantic Citys water supply is purchased for $100m, a price repeatedly cited in public debate, corporate buyers could lawfully pass on that cost to ratepayers in increased water rates not just in Atlantic City, but anywhere across the state that the corporation owns water.
The bill suggests that costs get automatically passed to ratepayers, said Stefanie Brand, the director of the rate counsel of New Jersey, about the Water Infrastructure Protection Act, which passed into law. Though she said her organization would fight such an increase, she admitted it was unclear whether the rate counsel could triumph.
At least two of the largest private water companies in America have lobbied heavily in New Jersey: Suez North America, a French multinational corporation, and American Water.
New Jersey American Water, a subsidiary of American Water, spent $708,750 from 2011 to 2015 lobbying New Jersey lawmakers on utility business issues, according to state lobbying disclosures. Exactly which lawmakers were lobbied is not disclosed.
The company is already Atlantic Citys largest bulk water customer, purchasing around $1.7m in water each year, according to a public bond filing. The same bond filing detailed Trumps delinquent water bills, which the Atlantic City tax collectors office said were finally collected in March.
New Jersey American Water also hired the lobbying firm of Philip Norcross, the brother of one of south Jerseys most well-known power brokers, insurance executive George Norcross III.
Many in New Jersey politics consider George Norcross III the most powerful unelected leader in the state. The New Yorker described him as the most influential Democratic political boss in New Jersey, and a man who could unify south Jersey voting blocs across the state assembly and senate from his base in Camden, where he chairs the board of Cooper University Hospital. Governors, including Christie, have courted his favor.
Norcross was also invited to a February meeting at Christies governors mansion, where county and state officials went around and around and around, talking about taking over parts of Atlantic City for hours, Atlantic County chairman Frank Formica told the Press of Atlantic City.
Between 2011 and 2015, American Water increasingly gave more business to Philip Norcrosss lobbying firm, Optimus Partners, increasing the amount it spent from $54,000 annually in 2011 to $126,000 last year.
In 2016, Christies Economic Development Authority approved a $164m tax break for American Water to move its headquarters from Voorhees, New Jersey, to Camden, a 25-minute drive within state borders. The tax break was championed by another Norcross brother, US congressman Donald Norcross.
And although Trump frequently paints himself as a political outsider, he also has ties to Norcross, first reported by WNYC. Norcross attended Trumps third wedding and toured Florida real estate where Norcross eventually bought a home, about two miles from Trumps Mar-a-Lago resort.
Some lawmakers claimed Trumps ties to Norcross stopped state regulators from questioning the viability of Trumps indebted casinos when they were up for relicensing in 2003 casinos that would later fail and help pitch Atlantic City into its current predicament.
Water corporations have found advocates in federal New Jersey lawmakers as well. Democratic senators Robert Menendez and Cory Booker recently held a press conference in front of a Suez water treatment plant to promote a bill that would given corporate water investors tax breaks, citing Flint as justification for a law they said would improve Americas water infrastructure. Booker co-sponsored the bill last session; Menendez had previously introduced it in the Senate.
Although the city proposed a plan to keep the water utility under local control, by selling a downtown tract of land called Bader Field for $100m, it seems highly unlikely the state will accept the proposal, or that the utility could even find a loan to finance the deal. The utilitys credit rating was quickly downgraded after it became entangled in the citys financial woes.
The state of New Jerseys division of community affairs, which financed the $73m loan to Atlantic City, declined to comment.