Utility Said to Owe Newark Millions

Two consultants yesterday told the Newark Municipal Council that the Passaic Valley Sewerage Commission has underpaid the city about half a million dollars a year for at least the last several years.

The consultants, Arnold Adjepong of Sankofa Public Works in Newark and Frank J. Mangravite of Public Works Management in Morris Plains, prepared a lengthy report regarding the amount of the utility’s so-called “pilot,” or payment in lieu of taxes. Public facilities, like the PVSC plant at Wilson and Doremus avenues in the industrial East Ward, generally are exempt from property taxes, but smaller  payments are made to the city government as compensation.

The 163-acre facility along the Passaic River treats sewage from 48 North Jersey communities. 

Adjepong said the utility -- the fifth largest of its kind in the nation, with 1.4 million customers -- paid Newark a pilot of $837,000 in 2011. The exact size of the payments stem from litigation dating back to the 1970s, following the acquisition by the PVSC of 70 acres of city land, Adjepong said. To settle the litigation, in 1979 the city and PVSC agreed on a payment schedule.

According to the consultants, however, since at least 2005, the utility should have been paying $500,000 a year more than it has been.

The consultants’ report was shared with the council but was not made public. The two consultants spoke only briefly before the council voted to go into closed session to discuss the matter further, citing the possibility of litigation.

City officials have been looking for ways to bolster the city’s tax and revenue base to close budget shortfalls that have opened up since the 2008 nationwide economic crisis. Council members have also spoken publicly about getting more money out of tax-exempt entities with a presence in the city, including the Port Authority of New York and New Jersey, which operates Port Newark and Newark Liberty International Airport.

Before entering closed session, the consultants said a growing amount of city land has become wholly or partly tax-exempt during the last several decades. In 1970, Mangravite said, 40 percent of properties were under “one form or other of tax exemption,” a figure that had risen to 75 percent by 2000. 

A spokesman for PVSC, Tom Pietrykoski, declined to comment on the matter because the utility had not yet received a copy of the consultants’ report. He also said that “to my knowledge” no one from the city had contacted PVSC about any issue over payments.