Cash-starved Nassau County has reached an agreement for a private company to operate its sewer system for at least 20 years -- a deal that will allow the county to save $22 million in annual interest payments, officials announced.
The proposed deal with New Jersey-based United Water would be the largest sewer privatization in the nation's history and would provide Nassau with at least $750 million from a third-party private investor who has yet to be named, County Executive Edward Mangano said.
The funds would go to reduce Nassau's $3 billion debt, including $465 million owed by the county's Sewer Authority.
The authority, which county officials have said will go bankrupt in 2014, then would cease to exist."This action will protect our taxpayers, our children, our bays and our oceans," Mangano said at a news conference.
Critics were skeptical of Mangano's promise to freeze sewer rates through 2015, and then cap them for the life of the deal at the rate of inflation.
"No one is investing $750 million unless they are expecting a handsome rate increase," said Legis. David Denenberg (D-Merrick).
Trish Kearney, a Bay Park Civic Association official and one of about 10 residents to protest the deal outside the legislative building in Mineola, said, "We firmly believe that the service rate will skyrocket."
Nassau is expected to sign a contract this summer with the financier, who in turn will contract with United Water. The company, the world's second largest private water systems operator, will manage the Bay Park and Cedar Creek sewage treatment plants, 53 sewage pumping stations and 3,000 miles of sewers. Severn Trent Services will continue to manage the county's Glen Cove plant for the next eight years.
Nassau will issue a separate request for proposals for a private investor to fund the deal, Mangano said. The county separated the contracts to spur investor competition, Deputy County Executive Rob Walker said.
United also will fund at least $400 million in capital improvements to the system over the next decade.
Company officials said Nassau's sewage treatment plants use outdated and energy-inefficient machinery. The company said it can save tens of millions of dollars annually through equipment and operational improvements.
"Over time, the . . . [system] has become more and more inefficient because of lack of investment, lack of long-term leadership and obsolete technology," said Patrick Cairo, United's senior vice president of corporate development. The company serves 600,000 residents in the tri-state region and has sewer deals in place in Indianapolis, Pontiac, Mich., and San Antonio, Texas.
The deal, which would begin by next year, must clear the GOP-controlled legislature and the Nassau Interim Finance Authority, a state monitoring board that controls the county's finances. Nassau this year is facing a projected deficit estimated as high as $100 million if no additional cost-cutting or revenue-boosting measures are taken.
Presiding Officer Peter J. Schmitt (R-Massapequa) said it "sounds like a good plan that would save taxpayers money." But Minority Leader Kevan Abrahams (D-Freeport) called the proposal a "Hail Mary pass designed to provide a short-term budget fix." The finance authority declined to comment.
The sewer system's 265 employees will be offered jobs at United at roughly the same salary and benefits, or employment elsewhere in the county, officials said. United does not expect to retain the entire workforce.
"My main concern is job preservation," Civil Service Employees Association head Jerry Laricchiuta said. "I do not want to lose another worker to layoffs." If Nassau kept sewer operations public, residents could face a 22 percent rate hike or a major reduction in plant improvements, Walker said.
The plan drew criticism from Sam Bernhardt, Long Island organizer for Food and Water Watch, a watchdog group opposed to sewer privatization efforts.
"This lease is akin to refinancing the county's debt with a higher interest rate and shifting the financial obligation to sewer customers who will pay through sewer assessment increases," he said. "Leasing the county's sewer system will be a lot like a cash-strapped consumer relying on a payday loan to make ends meet, and we've all seen how well that has worked out."
NASSAU SEWER PLAN: WHAT'S NEXT
Source: Nassau County; United Water