Top campaign advisers for Mayor Dean Trantalis (D-Hapless) guided an entourage of water company and investment bankers through Fort Lauderdale City Hall this week. As REDBROWARD exposed last week, two key Trantalis advisers, Eric Johnson and James Blake MacDiarmid, are registered lobbyists for Suez/Fort Lauderdale Water. This New Jersey-based company is the latest contestant in a non-public sweepstakes to rebuild the Fiveash Water Treatment Plant in Fort Lauderdale.
Official lobbyist records show MacDiarmid and Johnson met with Mayor Dean Trantalis and Commissioner Ben Sorensen on Monday February 24, 2020. The lobbyists met with Trantalis while work crews and the local media gathered at George English park as raw sewage flooded the area. On Tuesday February 25, 2020, MacDiarmid and Johnson met with Commissioner Heather Moraitis and Commissioner Steven Glassman, a former television game show contestants.
MacDiarmid and Johnson did not come alone. Also meeting with Mayor Trantalis and the Commissioners were Kevin Chandler and Gary Albertson of Suez, Cav Walters and Travers Garvin of Kohlberg Kravis Roberts (KKR) and John John Joyner of Water Capital Partners LLC.
Kohlberg Kravis Roberts (KKR) is a “leading global investment firm that manages multiple alternative asset classes, including private equity, energy, infrastructure, real estate and credit, with strategic partners that manage hedge funds.” According to its website, Water Capital Partners LLC is a “company formed to source and develop water sector infrastructure investments for affiliates of Kohlberg Kravis Roberts & Co. (KKR), one of the world’s oldest, largest and most respected private equity firms.”
As REDBROWARD shared last week, leaders of a Pennsylvania city regrets entering into a public private partnership (P3) with Suez.
MIDDLETOWN WATER BLUES
In March 2018, residents of Middletown, Pennsylvania discovered an 11.5% surcharge added to their water bills. “The change is not a rate hike. It is a surcharge to make up for water usage in the last three years that fell below a target in the 50-year lease with Suez.”
Middletown Council President Damon Suglia said the council in 2014 “really put this town in a long-term bind” with the lease. “Suez knew those numbers (regarding water usage) were not realistic for us to reach in a town of our size,” Suglia said. “The borough is landlocked” and cannot grow beyond its current borders.
“Because we made an upfront payment and our investors invested in that upfront payment, there has to be a level of confidence that there is going to be adequate revenues to support the debt service and the recovery of that investment,” Kevin Chandler, vice president of Suez’s North Division told the Press & Journal.
Last year, Middletown leaders voted to stop Suez plans to complete more infrastructure work. The Press And Journal covered the unanimous vote by the Middletown Council:
Middletown Borough Council at the end of its Sept. 17 meeting voted 6-0 to reject a 5-year plan for capital improvements to the borough’s water and sewer systems proposed by Suez.
“The public’s health and well-being are being jeopardized” by council’s action, Suez and the Middletown Water Joint Venture told the Press & Journal in a statement provided following council’s decision to reject the plan.
The plan called for Suez spending close to $17 million from 2019 to 2023, mostly for annual replacing of water and sewer lines but also to rehabilitate and recoat all three above-ground water storage tanks that serve the system.
For every $1 million Suez spends on capital improvements, water and sewer bills for Middletown residents would go up by 1 percent to 1.25 percent, Don Correll, CEO of Water Capital Partners LLC, told council during a presentation on the plan at the start of the Sept. 17 meeting.
Water Capital Partners and Suez are part of Middletown Water Joint Venture, the entity created in 2014 after council and the former borough authority approved leasing the town’s water and sewer systems to the joint venture for 50 years. The lease became effective on Jan. 1, 2015.
The lease allows Suez to recoup the cost of major capital improvements by adding a surcharge to water and sewer bills.
The surcharge is on top of a rate increase that Suez is allowed to impose every year of the lease, starting in 2019.
For 2019 through 2033, the annual increase is 2.5 percent plus the rate of inflation. For 2034 through the end of the lease, the yearly increase is 2 percent plus the annual index for inflation.
Even with adding the surcharge to recoup capital improvements of about $2 million a year, the annual rate increase will still be “within” the national average of water and sewer rate increases of from 5 to 6 percent a year, according to an annual survey done by the American Water Works Association, Daniel Sugarman, managing director of Water Capital Partners, told council.
But Correll and Sugarman both acknowledged that the surcharge and annual rate increase would be on top of the 11.5 percent surcharge that Suez imposed on water and sewer bills in April 2018, to recoup what Suez says is a water sales shortfall that occurred in the Middletown system in the first three years of the lease.
That 11.5 percent surcharge — which has increased water and sewer bills by about $72 a year, according to Suez — isn’t supposed to come off of residents’ bills until the end of 2020.
At that point, under terms of the lease, the 11.5 percent surcharge could be replaced with another surcharge, depending on whether there is another water sales shortfall from 2018 through 2020, and how much of a shortfall there is.
It’s all too much for residents of a town where the average annual income is $43,000, Mayor James H. Curry III told representatives of the joint venture after they presented the 5-year plan.
Curry spoke of reaching “a breaking point” where Middletown residents can no longer afford to pay their water bills, leading to Suez devoting increased resources to chase down more and more bills that are uncollectible.
He asked Correll what percentage of monthly bills are late or not being paid.
Correll estimated uncollected bills at 3 percent, which he said is “pretty much an industry standard.” He didn’t know what percentage of bills are delinquent.
Suez spokeswoman Ghilianie Soto in a follow-up email to the Press & Journal said that 99.7 percent of bills sent out for August 2019 had been collected.
“I see this as a living breathing example of a Catch-22,” Curry said during the meeting. “If they can’t afford this they will start using less water. If they use less water you will hit them with the water shortfall” charge.
The mayor called on Suez to “taper” out the capital improvement plan, so impacts of the plan are more gradual on residents.
Suez and the joint venture also got an earful during the meeting from residents, including Crystal McGuire, who brought copies of her water bill and said that her average bill is $252 a month.
“I don’t know where you guys live but I’m going to tell you you’re going to force me out of my house. You’ve done it in New Jersey, I’ve seen it, you’re going to do it here. You are going to force me to sell,” McGuire said, directing her comments to Correll and Sugarman. “I don’t want to leave Middletown but this right here, this usage, this bill is going to force me to move.”
But according to the follow-up email from Soto, the average residential bill in Middletown for August 2019 was $137.99.
During the meeting, Councilor Robert Reid and Middletown Fire Chief Kenton Whitebread Jr. both challenged Suez’ assertions that for reasons of fire protection up to 44 percent of water lines in the borough that are 2 or 4 inches in diameter must be replaced with lines at least 6 inches in diameter.
“We’ve been putting out fires for years with the piping that we have. Now all of a sudden we have to increase the size of the piping?” Reid asked. “It’s going to cost the ratepayers more money to put in new piping for something that I would say we are dealing with right now.”
The borough in a letter sent to the joint venture after the meeting detailed several reasons for council rejecting the plan.
Among them, the borough contended that the budgeted amounts for underground infrastructure improvements “have roughly doubled” since the last proposed 5-year plan that the joint venture had submitted in February.
The letter said that the plan does not provide the borough with enough information, such as specifying where in Middletown water lines are to be replaced, which could cause replacement costs to “vary” from the estimates provided by the joint venture, according to the borough.
The borough also said it does not believe it is “necessary or appropriate” that all three storage tanks be completed before the end of 2021. The borough also contended the cost of the tank projects is not subject to being recouped by the surcharge under the lease.
Suez has said that not addressing the tanks could lead to increased corrosion resulting in shell metal loss, reduced water quality, and more sediment building up on the floor of the tanks.
In a statement provided to the Press & Journal reacting to rejection of the plan, Suez and the joint venture said that “this is not about spending money for the sole purpose of doing projects.”
“The public’s health and well-being are being jeopardized by the borough council’s refusal to recognize that capital investment is needed to address the aging infrastructure. The (joint venture) showed actual photos of water pipe conditions, as well as tank deterioration that if left uncorrected, has the potential to risk the supply of safe drinking water delivered to Middletown residents,” the joint venture said in the statement.
The joint venture also notes that in return for the borough agreeing to the lease in 2014, the joint venture made an upfront payment of $43 million to the borough for the borough to retire debt. The joint venture also pledged to make additional payments to the borough totaling more than $45 million over the life of the lease.
Is Suez-controlled water utilities something beneficial to Fort Lauderdale residents?
If Suez gets a fifty year lease from Mayor Dean Trantalis will the same increases start here? Who holds Suez accountable?
Can voters trust Suez?
Can voters trust Mayor Dean Trantalis?