Monetizing the Authority

by Albert B. Kelly, Mayor, City of Bridgeton

Last time I opined about the possibilities available to Cumberland County and its communities as a result of American Rescue Plan Act (ARPA) monies and what we might accomplish working together on infrastructure projects to better position us for the future. What I didn’t know at the time was that some of the leadership at the Cumberland County Utilities Authority (CCUA) was exploring alternatives with private equity firms interested in doing a deal with the CCUA to “monetize” their physical assets.

This was the primary focus of the CCUA’s May 20th Board meeting. As I understood the presentation made by Bernhardt Capital, this private equity firm would not own the physical assets of the Authority but would provide an upfront payment for a piece of the future revenue stream generated by the Authority. In providing the CCUA with a chunk of capital now investors would basically be making a bet on robust future revenues.

As with any discussions involving the private sector and public utilities there is great skepticism. When it comes to outright privatization, whether of a water or a sewer system, there’s a real fear that the end result will be a private company ensuring a return on their investment by raising rates, cutting services, or some combination of these. But outright privatization is not what we’re talking about here.

In this instance, the utility would continue to own and operate the system, but the upfront chunk of capital would mean that the investors would have a piece of the future. From an investor’s standpoint, that’s how it should work. But when the skepticism kicks in, the first question is who stands to make money off the deal. Certainly the attorneys followed by a few others, but regardless you know someone’s pushing because they’re making money on the deal.

Beyond that, the skepticism extends to any terms and conditions. If private investors are making a bet on our future, there are sure to be terms and conditions baked into the cake to ensure that their bet pays off. When you, your children and possibly your grandchildren are the ones who have to deliver on that bet, it matters a great deal as to how those terms and conditions play out.

I don’t know how much money we’re talking about when it comes to monetizing the physical assets of the CCUA, but it will likely be tens of millions of dollars. The idea is that accessing this chunk of capital now will allow the CCUA to make investments on behalf of its customers.

As it stands, some 70 percent of CCUA ratepayers are from the City of Bridgeton with the remaining 30 percent being in Upper Deerfield, Hopewell, and Fairfield townships. My point is that if the CCUA goes through with a deal, our communities should be the primary beneficiaries.

Finally, there may be merit to the idea of accessing capital (in addition to ARPA monies) that can allow the communities involved to upgrade existing infrastructure for current customers and expand service in these communities to new customers. But if this is how we decide to go, know that it would be a long-term private equity marriage for Bridgeton, Hopewell, Upper Deerfield, and Fairfield for many years to come so we better get it right because we only get one bite at this apple.

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Mayoral Musings