Nassau Legis. Howard Kopel broke ranks with fellow Republicans Monday, delaying approval of a contract to study a potential $1 billion lease of the county’s sprawling sewer system to a private investor.
The Nassau Legislature’s Rules Committee was set to vote Monday on a contract to pay Manhattan-based financial advisers KPMG as much as $887,568 over the next two years to analyze the financial implications of a sewer system lease.
But Kopel (R-Lawrence) said he was “skeptical” about the larger privatization effort and voted to table the contract. He questioned whether the county could run the system more cost effectively than a private investor and with less burden on ratepayers.
“I don’t think it will work out,” Kopel said of the lease. “I would love for it to work out . . . But I need to make sure there is a good reason for doing this.” Four of the seven committee members are Republicans; three are Democrats.
County Executive Edward Mangano has tried twice to hire an adviser to explore a lease of Nassau’s three sewage treatment plants, 53 pumping stations and 3,000 miles of sewers.
Those efforts were blocked by the Nassau Interim Finance Authority, the county’s state-appointed fiscal control board.
While Kopel voted for the earlier contracts, he called those votes “a mistake. I accepted it too quickly and did not do my due diligence.”
Kopel said the county, which is tax-exempt, can borrow money to repair the system at a lower rate than a private investor. And, echoing criticisms from Democratic lawmakers, Kopel said the only way an investor can make a profit is to increase sewer rates.
The administration has said a private investor could provide up to $1 billion upfront for the county to retire long-standing debt, largely for its sewer system. In exchange, the investor would operate the system for nearly 40 years, paying to make repairs while collecting revenue from user fees.
Mangano says an investor could keep rates lower than the county, which has struggled to pay for system improvements and maintain services, and that a lease would cap annual rate increases.
“Since 2011, the administration has sought to retain an expert to answer the very questions asked by Legislator Kopel,” said Mangano spokesman Brian Nevin. “It is in the best interest of taxpayers to analyze all alternatives to raising rates before making a final determination for the future capital and operational needs of the sewer fund.”
The contract would guarantee KPMG $197,925 during an initial phase to assess the impact of a lease on sewer rates, and if the county would be better off with the status quo.
If KPMG determines that a lease would benefit the county, it would assess interest from potential investors and review responses. If the firm concludes that the status quo is better, Nassau could walk away with no additional payments to the company, officials said.
Minority Leader Kevan Abrahams (D-Freeport), a rules committee member, said it’s a “foregone conclusion” that Mangano will move forward with the privatization. Abrahams called the KPMG contract a “waste of taxpayer money solely to provide cover for the administration’s ill- conceived sewer deal.”