Water system troubles a troubled city

Introduction

CAMDEN, N.J. — Camden is the poorest city in the state of New Jersey, and one of the five poorest in the nation. It sits on the banks of the Delaware River, a mere shadow in the glittering Philadelphia limelight.

Camden was home for a time to 19th century poet Walt Whitman, and was once a bustling, industrial hub. But over time, business fled across the river to Philadelphia, taking with it more than one-third of Camden’s population.

Camden suffered through race riots in the 1960s and, in the 1970s, many city assets were sold in an effort to balance its budget. By the 1980s, a dwindling tax base and lack of economic development were exacerbated by a long line of mayors convicted for corruption and bribery.

All along, the city’s water suffered, too. Heavy metals and poisonous chemicals have been detected in the city’s wells since the 1970s. And some of the city’s water infrastructure dates back to the days of Whitman, who died in 1892.

Camden sits atop the Potomac-Raritan-Magothy aquifer, a shale-protected underground water bed that is fairly clean. In the Camden area, most contamination leaches down into wells before it reaches the deep aquifer. Magnesium, iron and lead — all which have fouled citizens’ water — comes from century-old pipes.

Consultants who worked on Camden’s 1999 privatization deal said that the pipes — some of which are still hollowed logs — regularly collapse. The old, city-run water department regularly lost records and often could not keep track of its own billing.

In the mid 1980s, the state Department of Environmental Protection ordered the city to reduce its use of the aquifer because it was siphoning water faster than nature could replenish it.

By 1993, the overdraft had grown so bad that the state required 70 communities in South Jersey to reduce significantly their use of the aquifer. Most of the communities had no other options, so they were required to purchase water from a private provider. That company, New Jersey American Co., a subsidiary of American Water Works Co., Inc., drew much of its water from the Delaware River.

Camden slipped through administrative cracks until a state administrative order forced the city to clean up its act. So, in 1996, the city hired a politically connected consulting firm to draft a study, which recommended the city raise rates by 26 percent over five years and spend about $88 million to fix the system that had been valued at roughly $8 million.

The city did not have the money, so the plan ground to a halt.

A few years later, the state threatened not to renew the city’s water allocation permit. Without the permit, there would be no water. With no alternative, Camden decided to contract the management of its beleaguered water system in 1998.

The city bypassed competitive bidding practices by using a legislative loophole to award a “professional services contract.” Under this broadly interpreted law, cities can contract with licensed professionals, including auditors, attorneys, and in this case, water companies, without going through a competitive bidding process.

The 20-year, $215 million contract went to US Water LLC, a subsidiary of Bechtel Group and United Utilities LLC.

There were no standards built into the contract, and no requirements for the company to upgrade infrastructure. The city was supposed to be responsible for that. Rates would remain stable at first.

Hundreds of angry Camden residents attended public meetings to protest the plan. A citizen group led by a councilman filed suit in Camden County Superior Court to stop the deal; the suit was later dismissed.

Despite the protests, the city council voted to approve the deal in September 1998.

The company agreed to pay the city $20 million for economic improvements. However, the city would have to pay that back over time – tacking on the estimated interest, Camden would pay US Water as much as $44 million.

In July 1999, then-Mayor Milton Milan had the city file for bankruptcy. Camden withdrew the application after New Jersey gave it a $15 million aid installment, which was withheld because the city would not permit the state oversight of its finances.

But that led US Water to back out of its commitment to loan $20 million to the city because, the company said, its bank withdrew support after Camden filed for bankruptcy.

Though the city never received its concession fee, US Water continued to run the city’s water system.

Milan was convicted on multiple counts in U.S. District Court in December 2000. He was found to have accepted a payoff from a Philadelphia mob boss, solicited home renovations and gifts from city vendors, laundered drug money and skimmed campaign contributions. Milan was sentenced to seven years in jail – the third Camden mayor in 20 years to go to prison.

During the investigation into Milan’s conduct, federal authorities questioned all seven council members on their role in the vote for the water contract. Several of them were called later before a grand jury.

The questions centered around a political action committee formed for the mayor in 1997 that received only four checks, all in April 1998. The donors were a Camden County law firm that represented the city in the privatization deal, a New Jersey engineering firm that did work for the county as it considered privatization as well, a local firm that consulted on the privatization deal, and a contractor who would have benefited from a similar deal that privatized the city’s sewer service.

The PAC contributed $20,000 in the May 1999 city council campaign.

City prosecutor Joseph Caruso served as treasurer of the political action committee. In January 2000, Caruso pleaded guilty in U.S. District Court to conspiracy charges. He admitted in court to helping Milan solicit campaign contributions in 1997, when Milan was elected.

The council members all denied that their votes were tied to campaign contributions.

Like Camden’s politics, its water system remained troubled. In September 2002, about two dozen schools were provided bottled water by the state after drinking fountains were shut off amid lead concerns. A coalition of community groups found high levels of lead in 21 schools between 1999 and 2002.

Rick Pfleiderer, a regional manager for United Water, which was acquired in August 2002 by Suez subsidiary United Water Resources Inc., said the lead comes from pipes inside the schools. Camden City is responsible for fixing the pipes, but Pfleiderer said he has offered the company’s assistance.

The state is working with the schools to fix the problem.

Pfleiderer also explained that the city still has 100-year-old lead pipes that supply water to homes. The city is slated to replace at least 3,000 of them this year, he said.

The company is responsible only for pipe under streets, he said, and so far, United Water has replaced just under 1,000 of them.