Since its inception in 1988 as the Tri-City Sewerage Authority, the NHSA has undertaken a broad array of important, and sometimes, ground-breaking initiatives. We built and environmentally friendly wastewater treatment plant, one of the first in New Jersey to produce fertilizers for farms and gardens. We were the first sewerage authority in the state to privatize operations. Over the Years, we have successfully complied with all federal mandates and, as a result, have enabled development to go forward on the waterfront for the first time in decades. We completed the first regionalization of sewerage system in New Jersey when we merged our original Hoboken, Weehawken, Union City operations with that of West New York which now, for the first time in its history, operates in compliance with all environmental regulations.

     The Authority has accomplished all of this, while at the same time keeping a sharp eye on the bottom line. Our administrative and operations costs have always been among the lowest of any sewerage authority of comparable size in the state. This cost-efficient approach to business enabled us to keep rates extrememly stable, with no rate increases whatsoever from 1990 through 1999, despite significant, unavoidable increases in debt service each year.

     As we begin 2001, the Authoriry is faced with several critical challenges: our debt service payments continue to rise each year, consuming nearly 85% of our budget; our aging and, in some areas, pre-Civil War infrastructure desperately needs a massive, $20 million renewal program; the Federal Government's mandate to build a Combined Sewer Overflow (CSO) solution will require some $40 million.

     Keeping a tight control on costs, as we have always done and will continue to do, is not enough to meet these challenges of the next five years. Nor can the burden of these costs be born by the ratepayers alone. For that reason, we have undertaken a comprehensive financial program which includes several elements:

• The restructuring of our debt service
• The issuing of bonds for infrastructure repair and maintainance
• A lease-lease-back of certain assets
• The pursuit of Federal and State grant monies
• NJ Transit support for infrastructure

     As you see from our top story on the Homepage, the Authority, with support from our federal and state representatives, has successfully obtained $4.4 million in grant monies. These funds will offset a small portion of the monies needed to design and construct new sewer outfalls along the Hudson River from Newark Street in Hoboken to West New York. The CSO program, mandated by Washington, will help prevent floatables and solids from reaching our waterways, thereby further preserving the environment of the Hudson River.

     At the same time, we were able to save ratepayers over $13 million through an agreement with New Jersey Transit in connection with the construction of the Hudson-Bergen Light Rail System. NJT has agreed to bear the cost of moving sewer outfalls and replacing sewers in return for providing the light rail with a needed "right of way." This project should go a long way to alleviating flooding in southwestern Hoboken.

     Although the challenges that the Authority faces over the next several years may require modest rate increases, any such increases will be kept to an absolute minimum. I am confident that the Authority can do so, given our track record for cost-effectiveness and the implementation of a pre-emptive comprehensive financial program. Our ratepayers may rest assured that the Authority will continue to operate its business on the principles of sound corporate management and service to our customers.