Allows DEP to authorize reformation assessment of certain water and wastewater treatment and conveyance systems.

S3955

SENATE, No. 3955

STATE OF NEW JERSEY

222nd LEGISLATURE

�

INTRODUCED MARCH 19, 2026

Sponsored by:

Senator� LINDA R. GREENSTEIN

District 14 (Mercer and Middlesex)

SYNOPSIS

���� Allows DEP to authorize reformation assessment of
certain water and wastewater treatment and conveyance systems.

CURRENT VERSION OF TEXT

���� As introduced.

��

An Act
concerning certain water and wastewater treatment and
conveyance systems and amending P.L.2015, c.18.

����
Be It
Enacted
by the Senate and General Assembly of
the State of New Jersey:

���� 1.��� Section 2 of P.L.2015,
c.18 (C.58:30-2) is amended to read as follows:

���� 2.��� The Legislature finds
and declares that:

���� a.���� The maintenance and
operation of water and wastewater
treatment and
conveyance systems
is vital to ensuring the protection of water quality and
clean drinking water in New Jersey;

���� b.��� There are public water
and wastewater systems in the State that present serious risks to the integrity
of drinking water and the environment because of issues such as aging
infrastructure systems, the deterioration of the physical assets of the
systems, or damage to infrastructure so severe that it is beyond
[
governmental
]

the system�s

capacity to restore;

���� c.���� Under the appropriate
circumstances, the transfer of these threatened water and wastewater assets to
a capable private or public entity with the financial resources and expertise
to improve management, operation, and continued maintenance of the assets could
help ensure the protection of drinking water
and the environment
; and

���� d.��� It is in the public
interest that public entities have the option to
reform,
transfer,
lease, or sell water or wastewater assets if there exist emergent conditions
that threaten drinking water or the environment.

(cf: P.L.2015, c.18, s.2)

���� 2.��� Section 3
of P.L.2015, c.18 (C.58:30-3) is amended to read as
follows:

���� 3.��� As used in this act
[
,
]

:

���� "Board" means the
Board of Public Utilities.

���� "Capable private or
public entity" means any private or public water system owner who, at the
time of submitting a proposal to long-term lease or purchase public water or
wastewater assets, currently (1) owns a system serving no less than the number
of residential and commercial accounts as the system which the entity is
proposing to lease or purchase, and (2) is not a significant noncomplier, as
defined pursuant to section 3 of P.L.1977, c.7 (C.58:10A-3), is not currently
the subject of a formal enforcement action initiated by the New Jersey
Department of Environmental Protection to address a material violation by the
entity which has not been corrected over a reasonable period of time given the
specific situation, or is not substantially out of compliance with an
administrative consent order, settlement agreement, stipulation of settlement
or judicial consent order entered into with the department.

���� "Department" means
the Department of Environmental Protection.

���� "Director" means the
Director of the Division of Local Government Services in the Department of
Community Affairs.

���� "Governing body"
means a "governing body" as defined in section 3 of the "New
Jersey Wastewater Treatment Public-Private Contracting Act," P.L.1995,
c.216 (C.58:27-19 through C.58:27-27).

���� "Licensed engineer"
means a professional engineer licensed pursuant to P.L.1938, c.342 (C.45:8-27
et seq.).

���� "Long-term lease"
means a lease of longer than 30 years under which the municipal owner seeks to
transfer ownership of the system at the end of the lease term.

���� "Owner" means any
municipality, except a municipality that is a city of the first class with a
population of 270,000 or more according to the latest federal decennial census,
that owns water or wastewater assets.� Municipalities constituting a joint
meeting, and the joint meeting itself shall not be considered an owner for the
purposes of this definition.

����
�Reformation
assessment� means an independent evaluation of a system that analyzes the
present condition, performance, and administration of water or wastewater
assets and identifies alternative pathways for reforming system ownership,
governance, management, operations, maintenance, and finances
for the purpose of enabling the system to: (1) correct
emergent conditions, (2) promote durable financial, technical, and managerial
capacity, (3) sustain long-term reliability, and (4) comply with applicable
State and federal laws and regulations concerning the protection of public
health, safety, and the environment.

���� "Registered
apprenticeship program" means an apprenticeship program registered with
and approved by the United States Department of Labor and which provides to
each trainee combined classroom and on-the-job training under the direct and
close supervision of a highly skilled worker in an occupation recognized as an
apprenticeable trade, and which meets the program performance standards of
enrollment and graduation under 29 C.F.R. s.29.6.

���� "System" means the
plants, structures, and other real and personal property of an owner that is,
or is to be, acquired, constructed, or operated for the purpose of processing
water or wastewater, including sewage, for distribution or treatment.

���� "Water or wastewater
assets" means any system along with any other related buildings,
equipment, or other infrastructure.

(cf:� P.L.2015, c.18, s.3.)

���� 3.���
Section
4 of P.L.2015, c.18 (C.58:30-4) is amended to read as follows:

���� 4.���
a.
If an owner
determines that emergent conditions exist, the owner may long-term lease or
sell its water or wastewater assets to a capable private or public entity
pursuant to the provisions of sections 5 through 9 of P.L.2015, c.18 (C.58:30-5
through C.58:30-9).� An owner may so long-term lease or sell its water or
wastewater assets without any referendum except as may be required pursuant to
subsection g. of section 5 of P.L.2015, c.18 (C.58:30-5).

����
b.
If
the department determines that emergent conditions exist
, the department
may, subject to available appropriations, retain the services of independent
professionals to undertake a reformation assessment of the affected system. �
A reformation assessment shall be conducted by a neutral
professional services firm with water sector expertise and shall include: (1) a
valuation that appraises existing system assets and liabilities, considering
reasonably anticipated service obligations, regulatory requirements, and
corresponding capital needs, and (2) a comparative analysis of alternative
forms of system governance, which shall include, but may not be limited to,
alternatives to the existing system ownership structure, organizational
framework, operations and maintenance paradigm, asset management program, and
fiscal strategy.
�In comparing alternative forms of system governance, a
reformation assessment may evaluate the role of shared municipal services,
system consolidation, sale, long-term lease, or the establishment of a joint
meeting, municipal or regional utility authority, public-private partnership,
or other entity as authorized by law. �A reformation assessment shall not be
limited to an evaluation of the potential sale or long-term lease of water or
wastewater assets to a capable private or public entity.

(cf:� P.L.2015, c.18, s.4)

���� 4.���
Section
5 of P.L.2015, c.18 (C.58:30-5) is amended to read as follows:

���� 5.� a.
[
The
]

A

determination that emergent conditions exist
[
shall
]

may
be
made by
: (1) a system owner, by
certification of the mayor, the mayor's
designee of the municipality, and a licensed engineer; or
(2) the
department, through certification of the director of the Division of Water
Supply
.

���� b.��� Emergent conditions
shall exist if at least one of the following conditions is met:

���� (1)�� The system is located in
an area designated by the Department of Environmental Protection as an Area of
Critical Water Supply Concern I or II, or any future designation or newly added
area of critical water supply concern;

���� (2)�� The owner of the system
is a significant noncomplier, as defined pursuant to section 3 of P.L.1977, c.7
(C.58:10A-3), has been the subject of a formal enforcement action initiated by
the department, or is substantially out of compliance with an administrative
consent order, settlement agreement, stipulation of settlement, or judicial
consent order entered into with the department; or

���� (3)�� There is a present
deficiency or violation of maximum contaminant levels established pursuant to
the "Safe Drinking Water Act," P.L.1977, c.224 (C.58:12A-1 et seq.),
concerning the availability or potability of water, or concerning the provision
of water at adequate volume or pressure, or distribution or treatment of
wastewater;

���� (4)�� There is a demonstrated
lack of historical investment, repair, or sustainable maintenance as determined
by the department, or material damage to the infrastructure of the system; or

���� (5)�� The system owner lacks
the financial, technical, or managerial capacity to adequately address any of
the foregoing on a sustainable basis or own and operate the system in a way
that supports economic activity in the municipality on a sustainable basis

���� c.���� Should
[
the owner
determine that
]

one or more emergent conditions contained in subsection b. of this section
[
exists
]

exist: (1)

the department may authorize a reformation assessment
and shall complete the assessment and a written report of the assessment�s
findings no later than 12 months upon providing written notice to the owner.
The owner shall cooperate with the department and any independent
professional the department has contracted with to complete the reformation
assessment in a timely manner
by: (a) facilitating interviews of system
personnel, (b) inspecting water or wastewater assets, (c) reviewing all
records, books, documents, materials, data, and information systems, or (d)
taking any other action as may be deemed necessary by the department.
Within 10 days of the report�s completion, the department
shall make the report available for public review on its Internet website and
shall transmit copies of the report to the owner, the board, and the director
.
The department�s determination that emergent conditions exist pursuant to
subsection b. of this section, the performance of a reformation assessment
pursuant to this subsection, or the issuance of a reformation assessment report
pursuant to this subsection, shall not constitute a final agency action of the
department;
and
(2) as determined by the owner, who certifies
that
it is necessary to take steps to effectuate the sale or long-term lease of its
water or wastewater assets to a capable private or public entity pursuant to
this act to address
[
these
]

the

emergent conditions and to operate and maintain the system, the owner shall
through the utilization of applicable public procurement laws of the State of
New Jersey retain the services of an independent financial advisor to review,
analyze and report on the value of the system and the short and long term
impacts to rate-payers of the cash-flow structure of the proposed transaction
and to provide an estimate as to the financial requirements necessary to
address the emergent conditions and to operate and maintain the system.� Upon
completion of the analysis and review, the independent financial advisor shall
transmit its report to the owner.� Within 10 days of the approval of the report
by the owner, the owner shall transmit copies to the board, the director, and
the department and shall make the report available for public review.

���� d.��� After the independent
financial advisor has completed its analysis of the financial aspects of the
proposed transaction and has presented its report to the owner, a public
hearing on the
owner�s
proposed emergent condition certification shall
be held.� The owner shall provide notice of the public hearing no less than 30
days prior to the date of the hearing.� The notice shall prominently state the
findings upon which the
owner�s
certification of emergent conditions is
based, a summary of the findings by the independent financial advisor and that
the certification is in anticipation of a proposed long-term lease or sale of
water or wastewater assets to a capable private or public entity.� Notice of
the public hearing shall be published on the official Internet website of the
municipality and at least once in one or more newspapers circulating in the
municipality.� Notice of the public hearing shall be published on the official
Internet website of the county and at least once in one or more newspapers
circulating in the county.� If an applicable official website does not exist,
notice of the public hearing shall be published on the official Internet
website of the Department of Community Affairs.

���� e.���� After the public
hearing and after giving due consideration to the findings of the independent
financial advisor, the governing body of the owner shall, by resolution adopted
by at least two-thirds of its authorized membership, certify that one or more emergent
conditions exist and that the owner intends to sell or long-term lease its
water or wastewater assets to a capable private or public entity to address
these emergent conditions and to operate and maintain the system.� Within five
days of the adoption of the resolution, the governing body of the owner shall
transmit a true copy of the resolution, to the department, the board, and the
director.� Within 30 days of receipt of the resolution by the department, the
department shall approve or reject the owner's emergent conditions
certification as contained in the resolution.

���� f.���� Upon receipt of the
department�s

approval of the
owner�s
emergent conditions certification
[
by the
Department of Environmental Protection
]
,
the owner shall publish notice of the approval if the owner chooses to proceed
with the sale or long-term lease of its water or wastewater assets to a capable
private or public entity.� The notice shall prominently state that the
certification is in anticipation of a long-term lease or sale of water or
wastewater assets to a capable private or public entity.� Notice of the
approval shall be published on the official Internet website of the
municipality and at least once in one or more newspapers circulating in the
municipality, and shall prominently state that a petition may be filed within
45 days after the publication of such notice to require a referendum before a
resolution authorizing the long-term lease or sale of water or wastewater
assets may take effect.� If an applicable official website does not exist,
notice of the approval shall be published on the official Internet website of
the Department of Community Affairs.

���� g.��� A petition may be filed
with the municipal clerk, no later than 45 days after the notice of the
approval of the
owner�s
emergent conditions certification is published,
protesting the lease or sale of water or wastewater assets without a public
referendum. If the petition is signed by a number of legal voters of the
municipality equal to at least 15% of the total votes cast in the municipality
at the last election at which members of the General Assembly were elected, a
resolution to lease or sell water or wastewater assets shall not take effect
unless the lease or sale of such assets is approved pursuant to R.S.40:62-4 and
R.S.40:62-5.� If a petition is not filed pursuant to this subsection, a
resolution to lease or sell water or wastewater assets shall not be subject to
a public referendum.

����
h.���
Within 120 days of the owner�s receipt of a reformation
assessment report from the department, the owner shall propose a responsive
reformation plan and hold a public hearing.
The
owner shall provide notice of the public hearing no less than 30 days prior to
the date of the hearing. The notice shall prominently state the findings upon
which the department�s certification of emergent conditions is based, a summary
of the findings of the reformation assessment, and a summary of the owner�s
proposed reformation plan.
�Notice of the public hearing shall be published
on the official Internet website of the municipality and at least once in one
or more newspapers circulating in the municipality. �Notice of the public
hearing shall be published on the official Internet website of the county and
at least once in one or more newspapers circulating in the county. �If an
applicable official website does not exist, notice of the public hearing shall
be published on the official Internet website of the Department of Community
Affairs.

(cf: P.L.2015, c.18, s.5.)

���� 5. Section 6 of P.L.2015, c.18
(C.58:30-6) is amended to read as follows:

���� 6. a. A request for
qualifications from a capable private or public entity wishing to be considered
for the long-term lease or sale of the owner's system shall be advertised after
the
owner�s
emergent conditions certification pursuant to subsection e.
of section 5 of P.L.2015, c.18 (C.58:30-5), but no less than 30 days prior to
the date on which responses to the request are due.� The advertisement of the
request for qualifications shall be published on the official Internet website
of the municipality and at least once in one or more newspapers circulating in
the municipality.� An owner shall also publish the advertisement of the request
for qualifications at least once in one or more newspapers with Statewide
circulation.� If an applicable official website does not exist, the
advertisement of the request for qualifications shall be published on the
official Internet website of the Department of Community Affairs.

���� b.��� After an
owner�s

emergent conditions certification is made pursuant to subsection e. of section
5 of P.L.2015, c.18 (C.58:30-5), the owner shall determine the qualified
respondents.� The owner shall issue a request for proposals to each qualified
respondent no less than 14 days prior to the date established for submission of
the proposals.� The request for proposals shall include relevant technical
submissions, documents, and criteria including but not limited to a description
of the facilities and the debt related thereto and the evaluation criteria to
be used in the selection of the designated respondent.� The proposals shall
include and shall be evaluated by, at a minimum, the following:

���� (1)�� the documented
deficiencies of the owner's system upon which the
owner�s
emergent
conditions certification is based and a description of the corrective measures
to be undertaken by the respondent to address and correct the identified
emergent conditions;

���� (2)�� a description of the
financial, managerial, and technical capabilities of the respondent to operate
and maintain the system in compliance with all applicable State and federal
laws and regulations, as well as a description of all the respondent's outstanding
and pending violations of the "Pollution Prevention Act," P.L.1991,
c.235 (C.13:1D-35 et seq.); P.L.1942, c.308 (C.58:11-9.1 et seq.); "The
Realty Improvement Sewerage and Facilities Act (1954)," P.L.1954, c.199
(C.58:11-23 et seq.); and the "Safe Drinking Water Act," P.L.1977,
c.224 (C.58:12A-1 et seq.);

���� (3)�� an analysis of the
relevant expenditures associated with such activities and the projected impact
on customer rates;

���� (4)�� an analysis of any
Internal Revenue Code or other tax code issues that may arise from the
long-term lease or sale of a publicly funded water or wastewater asset, as well
as any potential short-term or long-term costs arising there from;

���� (5)�� a long-term capital
improvement or asset management plan; and

���� (6)�� any other pertinent
information required of or deemed appropriate by the owner.

���� c.���� Upon a review of the
proposals submitted by qualified respondents, the governing body of an owner
shall, by resolution adopted by at least two-thirds of its authorized
membership, designate one qualified respondent, whose proposal the governing
body finds to be the most advantageous to the public, taking into consideration
the evaluation criteria set forth in the request for proposals and as specified
under subsection b. of this section.� The resolution shall include a detailed
summary of the governing body's findings that the proposal of the designated
respondent is most advantageous to the public.� The summary shall be published
in accordance with the notification requirements of section 5 of P.L.2015, c.18
(C.58:30-5).

(cf: P.L.2015, c.18, s.6.)

���� 6. This act shall take effect
immediately.

STATEMENT

���� This bill would permit the
Department of Environmental Protection (DEP) to authorize a reformation
assessment of a water or wastewater treatment and conveyance system if the DEP
determines that emergent conditions exist. A reformation assessment is defined
by the bill as an independent evaluation of a system that analyzes the present
condition, performance, and administration of water or wastewater assets and
identifies alternative pathways for reforming system ownership, governance,
management, operations, maintenance, and finances for the purpose of enabling
the system to: (1) correct emergent conditions, (2) promote durable financial,
technical, and managerial capacity, (3) sustain long-term reliability, and (4)
comply with applicable State and federal laws and regulations concerning the
protection of public health, safety, and the environment.

���� A reformation assessment would
be conducted by a neutral professional services firm with qualifying water
sector expertise and would include: (1) a valuation that appraises existing
system assets and liabilities, considering reasonably anticipated service
obligations, regulatory requirements, and corresponding capital needs, and (2)
a comparative analysis of alternative forms of system governance, which would
include, but may not be limited to, alternatives to the existing system
ownership structure, organizational framework, operations and maintenance
paradigm, asset management program, and fiscal strategy.�

���� The DEP would be required to
complete the assessment and a written report of the assessment�s findings no
later than 12 months upon providing written notice to the owner of the water or
wastewater treatment and conveyance system.� The owner would be required to
cooperate with the department and any independent professional the DEP has
contracted with to complete the reformation assessment in a timely manner.
Within 10 days of the report�s completion, the DEP would be required to make
the report available for public review on its Internet website and is required
to transmit copies of the report to the owner, the board, and the director.

���� Within 120 days of the owner�s
receipt of a reformation assessment report from the DEP, the owner would be
required to propose a responsive reformation plan and hold a public hearing.
The owner would be required to provide notice of the public hearing no less
than 30 days prior to the date of the hearing.� The notice would prominently
state the findings upon which the DEP�s certification of emergent conditions is
based, a summary of the findings of the reformation assessment, and a summary
of the owner�s proposed reformation plan.