Pre-RFP Alert: Rahway to Consider Water Utility Sale Tonight

With the formal introduction of Resolution AR-55-25, the City of Rahway has taken its clearest step yet toward exiting the water business, declaring it “advisable” to sell a municipally owned utility that has been under public control for more than 140 years. The resolution authorizes the city to solicit bids through a Request for Bids (RFB), opening what could become a competitive auction for a core piece of regional infrastructure.

The move reflects a convergence of pressures familiar to aging municipal systems nationwide: deteriorating assets, tightening regulatory standards, and balance-sheet strain. Rahway’s water utility is now carrying net debt equivalent to nearly 83.8% of annual revenue, a leverage level that has sharpened concerns about the city’s ability to finance long-term capital needs while absorbing operational risk.

Guardrails on Privatization

The City Council, however, has framed the sale less as a liquidation than as a conditional transfer. Embedded in the resolution is a non-negotiable set of consumer protections—effectively a ratepayer bill of rights—that any buyer must accept as a prerequisite to ownership.

Among the mandates: a 10-year rate stabilization commitment, preservation of senior citizen discount programs for existing participants, guaranteed water service to all municipal and Board of Education facilities, and the full assumption of infrastructure liabilities. That includes responsibility for lead service line replacement and coordination with roadway paving—cost centers that have historically fallen on the public balance sheet.

Aging Assets, Rising Standards

Beyond financial metrics, the physical condition of the system looms large. Rahway is in the midst of New Jersey’s Water Quality Assurance Initiative, which requires utilities to identify and replace lead infrastructure. While 472 lead service lines have already been confirmed, more than 8,000 additional lines remain of unknown material, creating a compliance backlog that could translate into tens of millions of dollars in capital spending.

The system is also confronting the next wave of regulation: emerging contaminants. Recent testing identified PFAS concentrations exceeding health-based guidance levels, triggering the need for advanced treatment solutions such as granular activated carbon or ion exchange. The city has already paid consultants to scope these upgrades—costs that underscore the growing mismatch between municipal resources and regulatory expectations.

Likely Bidders Take Shape

As the RFB hits the market, industry attention is coalescing around two familiar names.

The incumbent operator, Veolia, already runs Rahway’s system under contract. With deep institutional knowledge of the 4-million-gallon-per-day treatment plant and distribution network—and a lean staffing model of roughly 0.12 full-time employees per 1,000 connections—Veolia could offer operational continuity and a low-friction transition.

Challenging from the regional flank is Middlesex Water Company, Rahway’s wholesale water supplier and one of New Jersey’s most aggressive utility investors. Middlesex recently won approval for a rate increase tied to its $136 million “Water for Tomorrow” capital program, which includes a new ozone treatment facility and extensive pipeline upgrades. Its balance sheet has been further bolstered by a $64.2 million settlement with 3M over environmental contamination, funds earmarked to offset customer rates and infrastructure costs.

That financial strength, however, comes with political risk. Middlesex’s most recent base rate case resulted in a 16% increase for residential customers—an outcome Rahway voters are likely to scrutinize closely.

The Voters Decide

Despite the administrative momentum, the transaction remains provisional. Under New Jersey’s Municipal Utility Law (N.J.S.A. 40:62-5), the sale of a publicly owned water system cannot be finalized without voter approval. A majority of Rahway’s electorate must affirm the deal at the next general election.

For now, the RFB marks only the opening chapter. What follows will be a public campaign pitting the promise of private-sector capital and regulatory insulation against the symbolic and practical value of municipal ownership—leaving residents to decide whether control of the tap is worth the rising cost of keeping it public.