Nassau, Morgan Stanley in $5M sewer deal
Nassau County plans to sign a contract with Morgan Stanley & Co. that will pay the global financial services firm at least $5 million in a plan to privatize the county's sewage treatment system, administration officials said.
The deal, agreed to last week, comes as Nassau prepares to select a private operator within the next month to manage and maintain its three major wastewater treatment plants, 53 sewage pumping stations and roughly 3,000 miles of sewers.
County documents show the public-private partnership proposed by GOP County Executive Edward Mangano could net Nassau $865 million -- more than half to be used to retire debt on the system. Morgan Stanley will broker the deal with a private operator and an investor who will fund the transaction. Nassau also is hiring a special counsel to handle legal services.
The new contract would pay Morgan Stanley an "advisory" fee of $200,000 for the first two quarters, followed by payments of $100,000 for every subsequent quarter, according to the contract, obtained this week by Newsday. In total, Deputy County Executive Tim Sullivan said he expects the county to pay the firm between $500,000 and $700,000 in advisory fees.
Once a deal is reached, Morgan Stanley would receive a minimum of $5 million or 0.75 percent of the total value of the transaction -- a slight reduction from an earlier version of the contract. If the transaction reached $865 million, Morgan Stanley's share would be $6.48 million. The advisory fees, however, would be deducted from that final fee, Sullivan said.
If a deal is not reached, Nassau would be on the hook only for the advisory fees, he said.
The county legislature's GOP-controlled Rules Committee is to vote on the contract Monday.
Democrats plan to vote against the deal. "This is another fool's errand by the Mangano administration and a complete waste of vital taxpayer dollars," said Minority Leader Kevan Abrahams (D-Freeport).
A Republican spokeswoman said it's unclear whether the caucus will vote for the contract.
The contract also must be cleared by the Nassau Interim Finance Authority, a state watchdog that has expressed skepticism about the sewer plan.
NIFA and Morgan Stanley declined to comment. Nassau originally hired Morgan Stanley in August for $24,750 to review its sewer assets and to vet the private operators bidding to run the system. The county tried to extend that contract last year. But after receiving legislative approval, NIFA raised concerns about the price tag and the parameters of the initial bidding process. The contract was withdrawn and rebid by the county.
This time, five bids were received and Morgan Stanley was selected based on price and experience, Sullivan said.
But Legis. David Denenberg (D-Merrick), a critic of the proposal, suggested county officials "knew who they were awarding the contract to all along. All NIFA did was delay the inevitable."