The Jersey City Municipal Utilities Authority (JCMUA) supplies the township with bulk wholesale water and in turn, the township, unlike most bordering municipalities, runs its own water and sewer utility.

"We are absolutely going to take a look at why that took effect and why that happened," said Mayor Richard DiLascio. "We are absolutely paying our bills, paying them on time and we are going to go into what the strategy was, is that the reason for having very low tax rates...not paying the bills? It's not acceptable under this administration, we pay our bills."

The dollar amount struck in the settlement comes at a time when the township has just introduced a budget and is reminiscent of another local town that had an unforeseen one-time charge that would significantly alter the budget process. In Rutherford, officials were just forced to scramble to come up with approximately $500,000 for accumulated sick time and vacation time of the retiring police chief and a captain.

DiLascio said he was first apprised of the situation with the authority soon after he and the current administration were elected to office in 2005. Since, the township has been in court acquiring testimonies, professional opinions and documents to ascertain if in fact the township was liable to pay the bills the authority alleged were never addressed.

"It was a very embarrassing time for me after having only been elected and sworn in for two weeks and having to hear from the Jersey City Utilities Authority that in fact we were not paying our bills, extremely embarrassing," said DiLascio. "Now, we’re paying for a bill that was incurred by a prior administration and we are settling all this stuff out."

The JCMUA did not return a phone call to discuss where the discrepancies in billing were that took place in the four-year period. A 2004 audit on the authority’s water utility, however, tells how unexpected charges began popping up in the township. Much of which came to be due to under-billing on behalf of the JCMUA.

According to the audit, which was commissioned in 2004 and granted to RGL Forensic Accountants and Consultants to analyze billing operations, it found that the authority had under-billed Lyndhurst $127,000 in 2003 for bulk water.

The problem began about 10 years ago when it was determined that bulk meters serving the township were not reading the correct amounts compared to the township’s water usage. The JCMUA then embarked on a meter replacement initiative that wasn’t up and running until 2004 and while doing that, the township was given estimated bills. The result left the township with an over $1 million charge by 2005 in adjustments to the estimated bills and accrued interest on those bills.

The audit found that Lyndhurst wasn’t the only victim to the authority’s billing processes. One of the recommendations in the 48-page report is that four years of under-billing two other entities that the JCMUA supplies, United NJ and United Hoboken, demanded an immediate explanation.

"Four years of bulk water deliveries were reviewed in compiling this report, finding discrepancies in four of the four years summing to a large underpayment. [It] demands a prompt and detailed explanation of the causes of United NJ and United Hoboken underpayments and absent believable explanations, further serious consequences should ensue," reads the audit report.

As struck in last month’s introduction of the township’s 2008 municipal, the $555,000 JCMUA back pay would come from an anticipated out of cap waiver filed by the township with the state. The township had to pay the JCMUA $375,000 up-front by Dec. 30 and the rest comes through $10,000 annual payments. Surplus and additional tax revenue from Avalon Bay and the new Lyndhurst Towne Center that will be applied to next year’s budget will help absorb the costs.

DiLascio said the settlement was not a total loss for the township as it has enabled them to negotiate at the same time the settlement was struck better service and focused attention from the JCMUA on any deficiencies in the township’s water utility. DiLascio said the township itself has also been working on upgrading the utility itself.

"This board also corrected a number of other problems by installing another water pit in an area that didn’t have one before and by taking on buying new software and updating the guns that we’ve been reading with," he said. "We’re putting this utility back where it needs to be and I can’t even tell you how many areas are being addressed that at the same time as this problem were problematic."

The township’s finance commissioner, Joseph Abruscato, said the total amount the JCMUA delinquencies could have exposed the township to was approximately $1.16 million. DiLascio said, however, that the authority waived an 18-percent accrued interest charge as part of the deal.