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Jersey City Public-Private Partnership for Operation, Maintenance, and Management of Municipal Water System

1998 NCPPP Project Award Winner
Project Location: Jersey City, New Jersey
Public Sector Partner: Jersey City Municipal Utilities Authority
Contact Name: Thomas Kane, Executive Director
Private Sector Partner: United Water
Contact Name: Joseph F. Macula, General Manager

Project Summary
On May 1, 1996, Jersey City entered into what was the largest public-private partnership for water services in the United States at that time. No other contract had outsourced the entire management, operation and maintenance of a municipal water utility, including the treatment plant, watershed, reservoirs, distribution system, customer service, billing and collections.

Jersey City’s water system serves 230,000 people and consists of two reservoirs containing a total of 11.3 billion gallons of water. The water is treated at an 80 million gallon per day conventional water treatment plant and travels through a 23-mile aqueduct. The distribution system consists of 275 miles of mains and there are approximately 3,500 hydrants and 32,000 meters.

The agreement established between Jersey City and United Water provided the City with an upfront concession fee of $2.5 million and was estimated to save the City $38.5 million over the five-year life of the contract. However, within the first two years of the contract alone, the City has already achieved savings of more than $23 million, clearly on track to exceed the original savings estimates. These savings are enabling the City to provide tax relief and infrastructure upgrades.

Operational improvements made to the system as a result of this public-private partnership will save the City at least $17.5 million and another $18.5 million will result from improvements to the billing, collection and customer service functions. Within the first nine months of operation under this agreement, the use of an advance billing system created $3 million in additional revenues for the City.

Decreased costs and improved performance were not the only goals of this partnership. Protection of the labor force and respect for every employee were key considerations for both Jersey City and United Water. A unique labor agreement with the City’s unions and the New Jersey department of Personnel guaranteed no layoffs as a result of this contract. Public employees were given the opportunity to work for United Water, transfer to another public sector job within the City, or, if eligible, elect to take early retirement.

Public and private forces also joined together to introduce the concept of “leasing” employees. Jersey City-working in concert with the New Jersey Department of Personnel and United Water-developed an arrangement enabling those employees who elected to work for United Water to be legally classified as public employees, retaining their current wages, benefits and public retirement plant, but actually working for the private vendor.

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