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Mangano hires KPMG to explore privatizing sewers

Nassau County Executive Edward Mangano discusses a new

Nassau County Executive Edward Mangano discusses a new sewer privatization plan on Wednesday, May 18, 2016 in Mineola. Credit: Howard Schnapp

A proposal to lease Nassau’s far-flung sewer system to a private investor could bring the county as much as $1 billion upfront and funnel system revenue to the company for nearly 40 years.

County Executive Edward Mangano, who has explored such a transaction since 2012, has again hired a financial adviser to study its feasibility, after previous attempts stalled.

The new contracts with Manhattan-based KPMG likely will be split into two — the study and then, if necessary, a negotiation of the large transaction — and still must be approved by county lawmakers and the county’s financial control board, the Nassau Interim Finance Authority.

Mangano has described the KPMG pacts, which could pay the adviser up to $3 million, as “due diligence” steps.

The firm would first evaluate the impact on county sewer rates under two scenarios: the decades-long system lease to the private investor and the “status quo.” If the county decides to move forward, KPMG would next help solicit investors and aid in the drafting of lease specifications.

A lease could net the county an upfront payment of between $650 million and $1 billion to retire long-standing sewer system debt, officials have said. The investor would recoup its money over the long term through usage fees paid by residents.

Mangano has said an investor may be able to operate the system at less cost than Nassau does— and thus do a better job of keeping down rates.

As part of a final lease agreement, Nassau likely would cap the level of annual rate increases under the investor, officials have said.

Robert Puentes, president of the Eno Center for Transportation, a Washington, D.C.-based think tank that focuses on public-private partnerships, said Nassau’s exploration of a sewer system lease could draw interest from many potential investors who see government utilities as a safe investment that produce reliable revenue.

“The fact is there is private money around to invest,” Puentes said. “They like infrastructure because it’s relatively predictable and is not going anywhere.”

Should a lease go through, the private investor would inherit Nassau’s 20-year contract with a private management company, Suez North America, to run the sewer system.

Nassau owns and maintains three sewage treatment plants, 53 pumping stations and 3,000 miles of sewers.

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