Nassau mulls private operator for sewers

Nassau County is poised to pick a private operator for its sprawling sewer system in a nearly $1 billion deal that would represent the largest and most complex financial transaction in county history.

The public-private partnership calls for Nassau, which began the year with a $310 million deficit, to hire a vendor to manage and maintain its three major wastewater treatment plants, 53 sewage pumping stations and roughly 3,000 miles of sewers. The system serves about 1 million customers.

The deal could generate $400 million in revenue for Nassau, budget documents show. The county also would receive $465 million to retire system debt.

Nassau will maintain ownership of the system and the contract will stipulate that the county will continue to set usage rates, Deputy County Executive Rob Walker said.

He said Nassau will not raise rates, though he did not indicate how long the guarantee will hold. "If the switch happened overnight, you wouldn't know anything had changed," he said.

But the county has disclosed only basic details about how it expects to get its revenues from the deal.

Bidding for investor

The Mangano administration says that after a separate bidding process, the county will select a private investor who will provide the county with the funds. The investor will then be repaid by the private operator. The operator, meanwhile, makes its profit through operating efficiencies that it institutes.

Walker said it was too early to discuss the financing in any more detail, but that officials are confident an investor will be found. Otherwise, there will be no deal.

Some lawmakers and civic activists also have expressed concern that the deal will lead to less government oversight of the treatment system and possible environmental problems. They question the wisdom of relinquishing control of one of the county's most vital assets for a one-shot budget fix. They also complain that they have not received enough details about the changeover.

"We should not be the incubator for privatizing a public necessity," said Nassau Legis. David Denenberg (D-Merrick), who also is skeptical of the county's promises not to raise sewer rates.

Hearings planned

Legis. Denise Ford (R-Long Beach) plans to hold hearings on the deal in May, but is not convinced change is needed.

"I am not a fan of the idea," said Ford, chairwoman of the Economic & Community Development and Labor Committee. "Once we hand the keys away, we may not be able to go back."

"We feel left in the dark," said Claudia Borecky, president of the North and Central Merrick Civic Association. The group belongs to the Nassau County Coalition of Civic Associations, which was formed to fight the sewer system changeover. "We are looking to find out answers."

County officials said last year that they planned to sell or lease the sewage system to a private operator that would charge customers a fee for service. But Walker said that idea is no longer under consideration. Currently, the average county homeowner pays $225 a year in sewer taxes, officials said.

Within 30 to 60 days, Nassau will choose from among three bidders: United Water of Harrington Park, N.J., which operates two of Indianapolis' wastewater treatment plants; Veolia Environment of Paris, a subsidiary of the firm running Nassau's bus system; and Severn Trent Services of Fort Washington, Pa., which has managed the Glen Cove Water Pollution Control Plant since 1992.

Transfer likely in 2013

A transfer of control of the treatment system, including at Glen Cove, Bay Park Sewage Treatment Plant and Cedar Creek Water Pollution Control Plant in Wantagh, is not expected until at least January 2013, Walker said.

Severn Trent spokesman Eric Risch said public-private partnerships are "fairly seamless" and residents rarely notice a difference. The operator, he said, gains a profit through bulk purchasing, cutting energy costs, shutting down obsolete equipment and other operating improvements.

Veolia spokesman Matt Demo said the company's proposal "aims to improve the environmental performance of the utility, and provides options for better performance, improved maintenance of the county's infrastructure assets."

United Water didn't respond to requests for comment.

The deal still must clear the legislature and the Nassau Interim Finance Authority, a state monitoring agency that controls the county's finances.

Nearing bankruptcy

Walker calls the changeover necessary because the county's Sewer and Storm Water Finance Authority will go broke in 2014.

"I inherited a bankrupt sewer district with facilities that were severely neglected for a decade," County Executive Edward Mangano said during last week's State of the County address. Former Democratic County Executive Thomas Suozzi, who was in office from 2002 through 2009, declined to comment.

Denenberg said Mangano has been slow to make needed plant improvements, including those for odor abatement and ammonia removal.

In 2007, the legislature authorized $700 million in capital improvements for the plants but only about half the money has been borrowed and spent, budget documents show. The county will finish repairs already under way but the new operator would need to complete the work, Walker said.

The roughly 260 county employees working at the plants will be offered jobs by a private operator, Walker said. But Jerry Laricchiuta, president of the Civil Service Employees Association, which represents plant workers, wants county workers to have the option of also transitioning to other public sector positions.

"This is not a simple agreement," Laricchiuta said. "It's one of the most important parts of our infrastructure.

Sewer system changeover

Nassau County is preparing to pick a private operator for its sprawling sewer system in a nearly $1 billion deal.

The system

Finances

The county has provided few details about how Nassau will be paid, other than to say that a private investor will make an upfront payment to the county. The investor then would be repaid by the system operator. The county would continue to set sewer rates and will not raise them. The

Nassau County Sewer and Storm Water Finance Authority, which currently operates the system, received $119,031,815 in revenues from residential tax assessments in 2011.

Supporters say

Critics say

Source: Nassau County; interviews