New Jersey American Water finalizes acquisition of Salem city water and sewer systems

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An $18 million acquisition of the City of Salem, New Jersey’s water and wastewater systems was finalized this week.

The sale marks New Jersey American Water’s sixth purchase of a municipal water system over the last six years. The company is a subsidiary of the largest investor-owned water utility in the U.S.

Last year, 250 residents petitioned city officials for a referendum, arguing privatization might lead to increased water bills. Opponents also accused city officials of evading their responsibilities and using the sale to avoid accountability for the city’s $11 million debt.

However, 60% of voters decided last November that the company was better equipped than the city to offer clean drinking water.

“We take great pride in delivering to the people of Salem what we promised,” said Mark McDonough, president of New Jersey American Water. “And while it takes a little time to get our arms around an operation like this, we are fully confident that we are going to deliver a great solution, and improve the quality of life for all the citizens of Salem.”

In fewer than six years, water companies across New Jersey, Pennsylvania and Delaware have acquired more than two dozen water and sewer systems, as officials in small cities and towns struggle to fund the cost of repairing aging infrastructure and removing toxic PFAS chemicals.

McDonough said New Jersey American Water’s top priority in Salem is to address PFAS by installing a filtration system within 18 months. In 2023, the so-called “forever chemicals” were detected above state standards in one of Salem’s wells, which has since been shut down.

However, some Salem residents fear their water bills may increase in a city where the median annual household income is $26,000. Several states allow investor-owned utilities to consider the future value of a utility, pay above that price and then pass along those costs to consumers.

McDonough said there will be a two-year freeze on rate increases in Salem, and the company offers assistance to people struggling to pay their bills.

“Because we’re a large water operator statewide, we share the costs of capital across our entire footprint, and then, of course, our commercial customers on top of that,” he said. “So, we socialize those costs so that everybody’s bills are more affordable.”

Salem Mayor Jody Veler said American Water, which also hired six city utility workers, is better equipped than the city to improve Salem’s water infrastructure, meters and billing system.

She said the sale will not only help the city get out of debt but also help fund improvement projects. Veler said the city doesn’t currently know how the money from the sale will be spent, but that the city would like to prioritize increasing its public works staff.

“We have lots of vacant properties and lots that need to be maintained, and we need additional hands for that,” she said.

The company’s 2,300 new customers will receive correspondence from New Jersey American Water within the next week and are invited to an open house Saturday, July 13.