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A timeline of how Middletown and Suez entered water agreement

By Dan Miller

danmiller@pressandjournal.com

717-944-4628
Posted 2/7/18

An unsigned letter from Kodiak Property Management refers to a 50-year lease of Middletown’s water and sewer systems to United Water — now known as Suez — that borough council and …

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A timeline of how Middletown and Suez entered water agreement

Posted

An unsigned letter from Kodiak Property Management refers to a 50-year lease of Middletown’s water and sewer systems to United Water — now known as Suez — that borough council and the water and sewer authority approved entering into in September 2014.

The lease went into effect on Jan. 1, 2015. Borough council dissolved the water and sewer authority in 2016. As the 50-year deal is a lease, not a sale, the borough still owns the water and sewer systems. But Suez operates the systems.

In leasing the water and sewer systems, the borough received a $43 million up-front payment from then-United Water, backed by United Water’s private equity partner in the lease deal, KKR & Co.

United Water, owned by France-based Suez, rebranded itself as Suez in 2015.

The up-front payment allowed Middletown to pay off all its debt, including a crippling municipal pension debt, virtually overnight.

The lease deal also provided for Suez to start making annual payments to the borough of $725,000 beginning in 2016. The annual payments over time decrease to $590,000 and stay there for the rest of the 50 years.

The lease says that Suez cannot start increasing water and sewer rates in Middletown until 2019.

However, Suez starting in 2017 was able to impose a capital cost recovery charge, as a way of recouping money that Suez said it had spent in previous years to make improvements to the borough’s water and sewer systems, such as replacing old lines.

Suez tried to impose such a charge for the first time here in January 2017, but was blocked from doing so by borough council.

Instead, council had the borough and Suez reach a settlement whereby the borough covered the amount of money that Suez had sought to recoup from residents by imposing the charge in January 2017.

The settlement allows Suez to withhold up to half the amount of money it was supposed to pay the borough each year under terms of the lease.

It is not clear yet if Suez will seek another capital cost recovery charge for 2018, and what if anything council will do about it.