Nassau County Executive Edward Mangano is asking the county legislature to approve another $690,000 for a financial adviser studying a lease of the county’s sprawling sewer system to a private investor, saying the adviser’s findings suggest that a deal could help cap future rate increases.
The legislature’s Rules Committee is expected on Monday to consider a contract amendment with Manhattan-based KPMG, after the firm finished its $198,000 review of how a decades-long lease of Nassau’s three sewage treatment plants, 53 pumping stations and 3,000 miles of sewers may impact rates.
KPMG said the county’s history of using sewer system reserves to offset rate increases will leave them depleted by next year, setting up potential hikes in business and residential sewer bills of 11.8 percent in 2018 and 17.5 percent in 2019. Over 40 years, the status quo could require an average 4 percent annual increase, compared with a projected 3.4 percent under a private investor, a difference of as much as $147 million, officials said.
“Doing nothing, the county has to live with a major rate increase,” said Rob Walker, Mangano’s chief deputy.
A lease could provide Nassau from $750 million to $1 billion in upfront cash to retire debt. Though the legislature would still set rates, the investor would control the sewer system, including capital improvements and the contract the county has with a private company, Suez North America, for daily operations.
If the legislature approves the additional KPMG payments, the firm would help develop requests for qualifications from potential investors and help review responses. The process, which could take six months, would be a precursor to formal bids being solicited.
A spokesman for the legislature’s Republican majority said Friday that the contract was still under review.
Minority Leader Kevan Abrahams (D-Freeport) opposes a sewer lease, saying a private firm would prioritize a return on its investment over protecting ratepayers. The question of who will be the next county executive is even more of a reason to reject the new KPMG pact, Abrahams said.
Mangano, a Republican, is under federal indictment on corruption charges and has pleaded not guilty. The GOP has chosen former state Sen. Jack Martins to run for county executive.
Martins, as well as county Legis. Laura Curran (D-Baldwin) and county Comptroller George Maragos — the Democratic candidates — have said they oppose a sewer lease.
“The next county executive may end up taking all of this and throwing it away,” Abrahams said of the KPMG study. “We just don’t see a reason to fast-track this.”
Though a new administration may choose not to take a potential lease to the next step, Mangano’s finance deputy, Eric Naughton, defended the decision to have KPMG continue its work.
“There’s an urgency because the system is running out of money,” Naughton said.
Adam Barsky, chairman of the Nassau Interim Finance Authority, the county’s financial control board, said he was supportive of the study’s next steps as long as the administration didn’t try to complete a transaction by year’s end.
“If anything, this would be of value for the next administration to make their own decision,” he said.