More than a dozen investment funds have expressed interest in financing a controversial deal to privatize Nassau County's sewer system, county officials said Thursday.
A total of 13 firms, which county officials declined to identify, responded to a formal query about their interest in participating in the deal, said Brian Nevin, spokesman for County Executive Edward Mangano. The deadline for responses was July 11.
The firms each agreed to pay Nassau at least $700 million, but Nevin otherwise declined to disclose the amount in the respective proposals.
Mangano has said he would use at least $750 million he hopes to get from the deal to pay down Nassau's $3 billion debt, with the rest going into the general fund.
Mangano, a Republican, wants to use the responses to broker a meeting between Morgan Stanley, the county's financial adviser on the sewer proposal, and the Nassau Interim Finance Authority, a state monitoring board in control of the county's finances. In May, NIFA rejected a contract to pay Morgan Stanley $5 million to manage the sewer deal, calling the arrangement "backdoor borrowing."
Several NIFA members said at the time that a financier likely would be unable to turn a profit under the county's economic model.
"While NIFA questioned the viability of the plan, the market clearly responded with confidence to County Executive Mangano's public-private partnership for Nassau's sewer system," Nevin said. "This RFI was issued so that additional information could be provided to NIFA on the achievability of a public-private partnership that helps pay off 25 percent of the county's debt and improve Nassau's sewer treatment plants. Clearly, the RFI demonstrates the viability of County Executive Mangano's plan."
The county's outreach to potential investors, called a Request for Information, is the first step in the process of finding a private investor for the sewer transaction. The county will next decide whether to release a more detailed Request for Proposals after hearing NIFA's opinion on the plan, Nevin said.
NIFA has rejected previous overtures from Mangano to discuss the sewer proposal.
"We have not received anything from the county regarding responses to their RFI and the views of respondents about the ability of the county to borrow $700 million or more through some type of structure involving the sewer system," said NIFA chairman Ronald Stack. "We would be happy to review any materials. If we then feel a meeting with the county is useful, we would request one."
Critics of the privatization plan said they were not surprised that investors were interested in the deal.
"It's a can't-miss investment that guarantees a return on their investment on the backs of taxpayers," said Legis. Dave Denenberg (D-Merrick).
Mangano's plan calls for New Jersey-based United Water to manage and operate the Bay Park and Cedar Creek plants, 53 sewage pumping stations and 3,000 miles of sewers. The investor would sign a 50-year lease with Nassau, providing the county with the capital to fund the transaction plus at least another $300 million for capital improvements to the plants over the next decade. The financier would pay United Water a base fee of $60 million -- an amount that would grow by 3 percent annually.
Mangano says the investor would be repaid through sewer fees paid by taxpayers and improvements that will make the treatment system more efficient.
Mangano has pledged to freeze sewer rates through 2015 and then cap them at the annual inflation rate -- which the proposal estimates to be 3 percent -- for the next 50 years.
The county currently bills residents and businesses for their sewer usage based on property value. The RFI disclosed that Nassau is considering moving to a model in which property owners would pay a portion of their bill based on sewage usage, with the remainder determined by assessment.
In their RFI responses, the investment firms indicated they would prefer to maintain the county's current billing structure, Nevin said.