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WHO OWNS OUR WATER?

STATE RIGHTS, PRIVATIZATION AND THE MULTINATIONALS

Here in the Garden State, the water is owned by the state, held in trust for the public. No doubt, this is no minor technicality for some homeowners with their own wells who just can't fathom why their lawn should go brown just because the state as a whole is in a drought.

While the state owns the water, the water utilities make a guaranteed rate of return selling us what we, through the state, already own. Now, it is true that the water purveyors have to pump, store, and treat the water before it comes out of our tap. But in New Jersey, from the day the state Legislature started granting private individuals charters to sell water, the state has been the supplier for the water companies and sometimes a kind of partner.

This patchwork public-private amalgam is entirely different from the truly municipally owned and operated New York City water system with its 21 reservoirs, holding 550 billion gallons of water set in a vast 2,000-square-mile watershed spread over several counties. Here in New Jersey, there are still municipally owned water companies. But increased water quality mandates from Washington, which can cost millions to meet, have made it increasingly more likely that the remaining municipal utilities will be bought out or forced to subcontract management of their day-to-day operations to one of the big boys.

Over the years, New Jersey's state government has helped finance hundreds of millions of dollars in tax-free bonds to build or expand reservoirs or construct interconnections for the private water companies, which ultimately facilitates their making a profit and consumers getting what they want. Of course, over time, the utilities pay off the bonds and everybody with a hand to play in the water monopoly game is happy.

In the 19th Century, these private utilities sprang up in the communities they served, invariably founded by well-connected civic leaders already on the boards of directors of other utilities, banks and charities. In just the last two years, however, multinational corporations based in Europe have bought private water companies serving more than 3 million -- over 40 percent of -- New Jersey residents.

The trend toward privatization of the world's potable water supply, increasingly under the control of just a handful of multinational corporations, has some observers worried about the loss of domestic control over such a primary strategic resource. One company alone, Suez Lyonaise of France, which owns the Harrington Park-based United Water Resources, already provides water for 1 billion people globally. For its part, the New Jersey-based subsidiary, United Water, contends the size of its parent company gives it a broader base of technical expertise.

A State of Drought Seven of New Jersey's 23 Regional Water Resources Planning Areas (shown in the larger map below) will be facing water deficits -- situations in which demand for water exceeds supply -- by the year 2010, the state Department of Environmental Protection warned in a 1996 report. These watersheds, located in southern and central New Jersey, include five riversheds -- the Mullica (18), Maurice (21), Toms (16), Metedeconk (15) and South Rivers (11) --the Camden Delaware tributaries (17), and the Cape May region (23). In addition, the DEP predicted that two watersheds serving northern New Jersey -- the Hackensack River (6) and the Lower Passaic/Rahway Rivers (5) -- would only avoid water deficits in 2010 under the "best-case scenario." The current drought and the lack of snowfall make long-range water deficits in those regions more likely.

THE RISE OF THE WATER

UTILITIES: FROM STATE CHARTERS TO STATE REGULATION

From its inception, the state has found itself in a perpetual cycle of demand for water outstripping supply. Water purveyors would rely on one river, only to have the very development their water made possible lead to the pollution of the source. Here, the legacy of New Jersey's municipal balkanization made cooperative ventures, irrespective of how worthwhile they might be in the long run, ever suspect.

Over the decades, water purveyors extended their reach farther and farther geographically, staying a half step ahead of the pollution that increased population would bring. These water supply projects could take decades and often were fought by local residents who resented the incursion into their way of life purportedly for the greater good.

According to historian Samuel Popper's book Newark, N.J.: 1870-1910, the state Legislature in 1800 took its first dip into the water business when it granted a group of investors a charter to form the Newark Aqueduct Company which "drew water from wells, springs and distant Branch Brook. The water was conveyed through wooden mains to homes and factories."

By 1800, reports Robert D. Carlisle in his book Water Ways, a profile of the Elizabethtown Water Company, Newark was one of 17 water systems in a nation not yet 25 years old.

Just a year earlier, the enterprising Aaron Burr had won a similar state charter in New York to create the Manhattan Company with the exclusive franchise to supply New York City with water. The company later evolved into the Chase Manhattan Bank. In 1832, a cholera outbreak killed 3,500 people in New York City; five years later, 4,000 New York City immigrants were undertaking the heavy construction involved in building a municipally owned, 5-square-mile reservoir that would be gravity fed to the city. It took five years to complete.

Back in New Jersey, in 1845 the Mount Holly Water Company opened for business using the Rancocas Creek. By1852, Jersey City was tapping into the Passaic River to fill its reservoir, and by 1854, the New Jersey Legislature had chartered the Elizabethtown Water Company. Wasting water was considered a serious crime punishable by a $500 fine and a half year in the county jail.

The nine original board members of the Elizabethtown Water Company were no doubt visionary risk takers. They included merchants, bankers, a physician and a lawyer who also served on the boards of the city's key civic organizations. The first board included Colonel John Kean, the great-grandfather of future Governor Thomas H. Kean.

The board's reputation was above reproach, yet it was connected politically in a direct way that would be considered a conflict of interest today: Four of the nine charter members sat on the Elizabeth City Council, and in 1867, the state Legislature passed a special bill permitting the City of Elizabeth to float a bond issue to benefit the water company's expansion plans.

In 1869, the Hackensack Water Company (the corporate precursor of United Water Resources) was founded in Bergen County's county seat and won approval from Trenton. The lack of water in Hackensack was all too evident, Adrian Leiby, the water company's official historian, noted. As late as 1873, an arsonist was able to torch three buildings in one night and the responding engine companies had no functioning public water line to draw upon. The fires spurred action.

By fall of the next year, everybody who was anybody was on the grandstand to celebrate the completion of a reservoir and the arrival of water pressure downtown on Hackensack's lower Main Street. "The company (Hackensack Water) had done what the town could not," a local paper reported.

But in just a few years, the great financial panic of 1873 ruined Charles Voorhis, a founder of the Hackensack Water Company who was a former judge and a confidante of President Abraham Lincoln. By 1880 the engineering company that had actually built the water system was left holding bonds it had taken as payment and took over the system.

In his history The Hackensack Water Company, Leiby writes that the water company really began to hit its stride in 1881 when the Stevens family of Hoboken, whose patriarch had invented the first locomotive, decided to put its considerable political and financial heft behind the Hackensack Water Company, delivering water to Hoboken.

But no sooner had Hoboken signed on than a drought that began in the summer and lasted into fall left portions of the Hackensack River dry. For the second time in just two years, the Hackensack Water Company was sold. The engineering company that had taken it over could not raise the money needed to make the improvements needed to keep up with the demands of an expanding service area.

The new company's board included Julian Kean, whose uncle was Elizabethtown's Colonel Kean; Edwin Stevens, whose father had founded Stevens Institute of Technology; and New York investor and philanthropist Robert deForest.

But as confident as the newspapers may have felt about the ability of the private sector to deliver what the state could not, the state Legislature thought there was a key role for the government to play. Without potable water, rural backwaters would be destined to remain cut off from the great prosperity sweeping a nation that was on the fast track to world power status.

So the Legislature established the first State Water Commission in 1882. While it was disbanded two years later, the Commission did first conceptualize the building of the Wanaque reservoir in Passaic's Ringwood. (It would not be until 1930 that the Wanaque would finally be on line.)

In 1885, the Hackensack Water Company responded to widespread complaints about "fishy" tasting water by injecting compressed air into the water at its New Milford facility. By the turn of the century, the Water Company was looking into what were then considered cutting-edge sand filters to reduce the presence of microscopic bacteria. The practice of filtering water in that way had started in European countries where population growth had compromised watersheds.

Over at the Elizabethtown Water Company, Chief Engineer Lambert Battin was expressing concerns over what his counterparts today would call non-point source pollution of his water source. "It is my conviction that the unpleasantness of our water is due to the large amount of earth...carried during heavy rainstorms from watershed into our mains to contaminate our water."

In 1902, the Hackensack Water Company found itself targeted by The Record of Hackensack, which undertook an investigation into how the water company maintained its facilities. On one outing, Leiby records, a reporter found not only dead eels, but a dead cat floating in one of Hackensack's water storage tanks.

Local and county health officials started to monitor the entire watershed for what were believed to be sources of possible contamination. Attention was focused on the proximity of outhouses to streams that fed the reservoir, and there was concern over the fact that runoff from the streets ran into the river that recharged the reservoir -- a practice that continues today. Outhouses could still be found throughout the region. The president of the Bergen County Medical Association, citing a report he had commissioned, charged that the water was not safe to drink without boiling it.

Getting water under a microscope helped make the link between water quality and pristine watersheds. By 1900 the New York City Board of Water Supply was pursuing land in the remote Catskills. (It would take 27 years to get all the land and infrastructure in place to bring the first drops of Catskills water to New Yorkers.)

Back across the Hudson, the Hackensack Water Company went about the task of expanding the Oradell Reservoir and in the spring of 1903 started building a new filtration plant.

The utility also decided to take the proactive watershed management step of acquiring the Spring Valley Water Company, a local water company just over the state line in Rockland County, N.Y. Hackensack's president at the time, Robert deForest, said the company had to make the move "in order to secure cooperation between the company and the Hackensack Company in protecting watershed from which both companies draw their source supply from pollution."

Finally, the state government also was trying to get a handle on the future with the creation of a State Water Supply Commission. This was the first time the state reserved for itself the power to do long-term planning, supervise the construction, and handle the day-to-day operation of the reservoirs it built.

This was the era of trust-buster President Theodore Roosevelt, and while the public counted on water, gas, electric and train service, it became increasingly skeptical about the interlocking directorates and trusts that owned them. But while other states challenged the robber barons, muckraking journalist Lincoln Steffens branded New Jersey the "traitor state" because it welcomed with open arms the trusts that would eventually evolve into holding corporations. Here the rosters of directors they shared linked banks, rails and utilities.

But even the "traitor state" had its limits. In the 1910 New Jersey gubernatorial election, Democratic candidate Woodrow Wilson ran and won on a Progressive platform that included giving real teeth to a Public Utilities Commission that had been established three years earlier merely as an advisory board.

Just a few years later, however, a 1915 bond issue to fund the state's attempt to buy a tract in Wharton for a reservoir was defeated at the polls. Not long after that, the State Water Supply Commission's functions were absorbed into the Department of Conversation and Economic Development. But the forces for coherent state-driven water supply planning were back the following year with legislation to create the North Jersey and South Jersey Water Supply Commissions. The North Jersey Water District took off and helped supply water to thirsty towns in a dozen counties including: Sussex, Warren, Hunterdon, Morris, Passaic, Somerset, Middlesex, Union, Essex, Hudson, Bergen and Monmouth. However, the concept of a similar coherent, non-investor-driven water authority for southern New Jersey never materialized.