The East Orange Water Commission, which also serves South Orange, is running low on its budget reserve. Fair Lawn-based auditor Dieter P. Lerch, CPA presented to the East Orange City Council at their Dec. 2 committee meeting here in City Hall. Lerch, acting on behalf of the City Clerk's office, gave a 10-minute summary of the EOWC's financial health before the full council and a gallery audience of eight.
"The Commission started Jan. 1, 2012 with a $5 million budget," said Lerch. "It is down to $1.5 million as of Dec. 31, 2012. $1.5 million is an almost dangerously low reserve for it to operate on."
Lerch, whose presentation included fielding questions from council members for five minutes, explained where the $3.5 million went to last year.
"About $1.7 million was lost to customer billing collection and tracking," said Lerch. "The rest went into litigation - of which I can't comment on."
The $1.8 million in litigation may include proceedings by the city and the commission against the Township of Livingston that led to a Jan. 31, 2013 New Jersey State Tax Court ruling in Livingston's favor. Some of that line item may have gone towards separate suits over billing and water quality by South Orange and the City of Newark going back to 2010.
The commission, however, has recently asked the council or a $1 million emergency to cover litigation since Jan. 1, 2013. It is to the understanding of "Local Talk" that part of the $1 million would go to pay the $402,000 fine that the State Department of Environmental Protection had assessed on March 6.
The DEP imposed the fine in response to a Feb. 13 state grand jury indictment on then-EOWC Executive Director Harry L. Mansmann and Assistant Director William Mowell. Mansmann and Mowell, who have since stepped down, are accused of falsifying contaminant levels on 2010-11 water quality reports.
The DEP and South Orange have since conducted separate water quality tests where contaminants have fallen to within state "safe" levels.
Lerch, who is the Orange Municipal Council's budget consultant and an auditor for Nutley Township, then explained why the water commissioners want to tap the council for $1 million.
"The commission has no power to issue bonds or execute capital expenditures," said Lerch. "It can only do so with the full faith and credit of the city and the council. It would otherwise have to consider raising rates, attract new customers and/or cut staff or expenses."
The Trenton-based tax court had ruled that Livingston can bill East Orange and/or EOWC for $2,403,063 in 2009-2010 property taxes. The commission has drawn from 18 wells from the East Orange Water Reserve in Livingston, Millburn and Florham Park since 1909 to serve 92,000 customers in East Orange and South Orange.
The East Orange Water Reserve includes a 95.66-acre lot that Livingston tried to put on the Oct. 29, 2010 auction block for delinquent 2009-10 property taxes. Livingston had recalculated EOWC's 40 property lots' value as part of its Sept. 1, 2009 township-wide reassessment.
The city and commission asserted that the reassessment should have excluded land purchased with state Green Acres funds. Mansmann testified that he received only eight reassessment notices at his office at 99 So. Grove St. in 2009.
The EOWC has meanwhile set its next meeting for 5 p.m. Dec. 10. An agenda, as of 4 p.m. Dec. 3, has not been posted on its web page.