NAUGATUCK — The borough is considering several options to treat its sewage beyond 2022.
That is when Naugatuck’s contract with Veolia Water, the private company that oversees the borough’s sewage treatment plant, will expire.
“Seven years seems like a long way away, but this is an operation that is going to take a couple of years to change, so we need to start thinking about it now,” Mayor Robert Mezzo said.
The 20-year contract with Veolia, which was signed 13 years ago, states the company will oversee day-to-day operations at the plant until Aug. 15, 2022. The contract has a profit-sharing agreement that states Naugatuck will receive a portion of the revenue Veolia brings in from treating merchant sludge. In this fiscal year, which ends June 30, Veolia will provide the borough with $2.1 million, which is $929,508 less than it did last year.
Naugatuck was not anticipating that loss and it affected the budget proposal for 2015-16.
Currently, the borough is involved in complex litigation with Veolia. Naugatuck filed a lawsuit in 2013 claiming that Veolia improperly calculated its revenue by deducting the cost of trucking in private sludge that it burns at the plant’s incinerator. Naugatuck claims that was not part of the revenue sharing plan.
Naugatuck picked up on the apparent miscalculation about four years ago. Borough officials anticipate Veolia’s miscalculations have cost Naugatuck about $7 million to date, and that by the end of the contract it would be as high as $20 million.
The borough is asking the court to intervene.
Veolia has denied Naugatuck’s claims and states that it has a different interpretation of the contract. The company has filed a counterclaim stating the borough did not pay insurance as it was supposed to under the contract. The company also claims there was a substantial change in the market caused its profit margin to shrink.
The two sides have met with a mediator but the case has not been solved. At this point, it appears the case may be headed to trial.
Borough attorney Edward “Ned” Fitzpatrick said Naugatuck’s claim speaks for itself and that he could not comment on pending litigation.
Karole Colangelo, vice president of communications for Veolia North America, said “the company is vested in providing safe, compliant and efficient wastewater treatment services and incinerator operations for the Borough of Naugatuck. And, we have done so for 14 years.”
“It is normal practice in public private partnerships for a city to review alternatives near the end of the partnership term to ensure the best value within the market,” she said. “We believe the Borough and ratepayers have received and continue to receive high value from our partnership — including investment, technical know-how and operational expertise which has maximized the effectiveness of the Borough’s infrastructure.”
The agreement with Veolia has not produced the kind of revenue that was initially anticipated when the contract was drafted.
Mezzo said municipally-run facilities are able to attract larger private customers at a lower rate.
“In a typical municipal sewage facility, they pass along the cost to the ratepayer, and they’ve been able to undercut the market for a lot of the private business that Veolia was anticipating and that the borough’s consultants anticipated would truck sludge to the Naugatuck plant when (the contract) was originally negotiated,” he said.
When the contract expires, Naugatuck is looking at possibly bringing a more traditional approach to treating wastewater.
“Obviously, we can’t shut off the pipes,” Mezzo said. “The water needs to go somewhere. But that doesn’t mean the borough has to be a party involved in ownership for the operation.”
For example, recently the city of New Haven took over ownership of Stratford’s sewage treatment plant.
Currently, all sewer charges for Naugatuck users are paid through the general budget. Most other communities have a separate sewer authority.
Any change to the process may entail implementing a sewer user fee in lieu of having it as part of the general budget. Mezzo has been opposed to this.