E.B. council sets utility dissolution in motion

Officials say May approval could bring savings of $500K just for balance of 2010


Township officials have taken the first few steps in a lengthy process to dissolve the East Brunswick Sewerage Authority (EBSA).

Mayor David Stahl presented a tentative update on the proposal to eliminate the EBSA at the April 12 Township Council meeting to accompany three ordinances and a resolution that would initiate the dissolution process. A public hearing on the ordinances has been set for May 24. The council unanimously approved the resolution, which authorized the township to apply to the state Local Finance Board for approval of the dissolution.

“This is just the beginning of a very lengthy process,” Stahl said. “This could take six weeks or even longer to play out, depending on how smoothly the process goes.”

The ordinances, if adopted, would dissolve the authority, pay its creditors, assume its services and finances, and amend the municipal code.

However, the council’s first course of action was to approve the resolution. Township Chief Financial Officer Lou Neely said the resolution had to be approved in order for the application to be filed with the state by April 21. The Local Finance Board will need to review and approve the application at its next meeting in May. While the application is pending, the township would also need to demonstrate to the state that the dissolution is worthwhile and would generate cost savings, Neely said.

If the state board does not approve the application, he said, the ordinance hearings would then be canceled and the township would need to appeal to the state for further consideration.

However, if the application is approved, the public hearing dates would remain in place. Officials may be able to achieve significant savings by acting quickly and taking advantage of the township’s 0.5 percent interest rate. The current interest rate of the EBSA is 4.5 percent.

“There’s significant savings when you approach the capital market. The authority issues revenue bonds, but the township issues general obligation bonds, which are secure and well-received in the marketplace,” Neely said. “We would save immediately. If this is pushed off, we would miss the June date when that first payment is due and miss out on a 0.5 percent interest rate.”

In addition to outlining the technical aspects of the dissolution, Stahl detailed the reasons for such a move, and the impact it will have on the community.

The EBSA, which is governed by a fivemember board of commissioners, was created in 1956 under state statutes to provide for the collection and disposal for residential and commercial sewage, and is a participant in the Middlesex County Utilities Authority (MCUA). However, Stahl said the municipality has undergone ample change since the EBSA’s inception, and such an independent group is no longer needed.

“The rationale for such an authority no longer exists. There comes a time when we need to re-examine the need for such a body,” he said.

The primary reason for considering the dissolution of the authority, however, is the significant savings associated with the township’s assumption of the operation. Stahl had previously estimated savings of around $300,000, but said it is more likely the township will realize about $500,000 just for the balance of 2010.

“The genesis of this is that we’re always looking for ways to save residents money. Whether in the form of taxes or fees, we’re trying to financially impact residents as little as possible,” he said.

The mayor said the significant savings is partially the result of the consolidation of functions through the elimination of outside professional positions, such as engineers, lawyers and auditors. These positions would be replaced by the township’s in-house professionals.

Stahl noted that if the authority is dissolved, there would be no “co-mingling” of funds with the water utility, and no money assumed from the EBSA would be used to balance the township’s operating budget. He also said that there would be no major changes in service, and that the township would maintain solid sewer rates.

“Nothing will change. The exceptional service will remain the same, except we won’t have to raise rates,” he said.

But many EBSA employees disagree with Stahl’s course of action.

“It’s a shame. We try to have a heart, try to do the right thing, and we’re getting penalized for it,” said employee Tony Riccobono. He said the EBSA board consistently looks for ways to save money, but constant increases implemented by the MCUA make it difficult to continue finding ways to reduce. He said township officials have not explored the impact of the dissolution enough, and encouraged the council to look into it further.

EBSA Commissioner Steve Phillips also urged the Township Council to thoroughly look at the feasibility of the dissolution and determine whether such a move is worthwhile.

“I believe it’s important to look at it, and if it makes sense, then I understand,” Phillips said. “But please allow the authority to take part in it. I don’t think anyone has gotten the whole story just yet. We haven’t had the opportunity to sit and go over it. Let us be a part of the process.”

However, Stahl said that he has previously met with EBSA officials on several occasions, and that a thorough feasibility study has been done and was being made available to the public as of April 13.

“We’ve done a very thorough feasibility study. It’s not fair to say we haven’t done our homework,” Stahl said. “I have the utmost respect for the volunteers and workers at the authority, but I learned as a businessman, you either change with the times or find yourself in a bad situation.”

Councilwoman Camille Ferraro noted that EBSA employees are invested in the authority, and said that officials should take their time to review all the necessary information before making a decision.

“What they’re requesting is an open discussion— they have a lot invested in this. I hope we have enough time to share information with them, because that’s their livelihood,” she said. “There’s no need to rush judgment on this. Let’s give them time and courtesy.”

The full EBSA dissolution feasibility report is available at the mayor’s office for interested parties. The decision of the finance board regarding the dissolution application should be made by mid-May