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No savings in Nassau sewer district, despite privatization

Nassau County Executive Edward Mangano at the Republican

Nassau County Executive Edward Mangano at the Republican National Convention in Cleveland, Ohio, on Monday, July 18, 2016. Credit: Newsday/J. Conrad Williams Jr.

Nassau’s sewer and storm-water district saved no money during the first year the county’s sewer system was run by a private company, according to the county’s Office of Legislative Budget Review.

County Executive Edward Mangano’s administration, however, blames district costs unrelated to the private operator.

In a memo to lawmakers, the legislative budget office said district expenses were $2.1 million higher in 2015 than in 2014, the last year before Suez North America — then United Water — began managing Nassau’s three wastewater treatment plants, 53 pumping stations and 3,000 miles of sewers.

That increase came even after a $12 million payment from the company meant to guarantee savings to the county. The budget office found the payment could not offset a lower-than-expected number of public sewer system workers hired by the firm or moving to other county jobs.

“The first year of United Water operating the sewer system has been challenging, but sets a path in which savings can be garnered,” wrote Legislative Budget Review director Maurice Chalmers.

Aides to Mangano said Chalmers’ report failed to separate distinct costs in the combined sewer and storm-water district and account for sewer employees that moved to other departments late in 2015.

Storm-water-specific functions totaled $9.3 million in 2015, while the late-transfering workers accounted for $4.5 million in salaries and benefits, the administration said.

“The Office of Independent Budget Review is wrong, as a true apples-to-apples comparison indicates residents are paying $10 million less in labor costs and the remaining costs have been and remain a variable,” Mangano said in a statement. “Simply put, residents would have paid $10 million more without the public-private partnership which guarantees these savings.”

The county on Jan. 1, 2015, ceded sewer system management to Suez. It paid the firm $57.4 million in 2015, but Mangano has said the 20-year contract would result in annual net savings of at least $10 million.

Savings were largely to be generated by the sewer system’s nearly 300 workers either accepting jobs with the private operator or being transferred to other county job titles.

“The plan to reassign employees encountered difficulties,” Chalmers wrote in his recent report, describing civil service rules as hindering workers with certain titles from performing other duties.

A Suez spokesman declined to comment last week.

Nassau in 2014 incurred $78.8 million in sewer and storm-water district expenses. That grew to $92.9 million in 2015, or $80.9 million before Suez reimbursed the county $12 million for public employees who remained in the system.

Mangano aides argue that, after removing storm-water expenses — which they said were $7.2 million in 2014 and $9.3 million in 2015 — the sewer system cost $71.6 million to run in 2014 and $71.7 million in 2015, after Suez’s $12 million payment. After removing the salaries and benefits of workers who transferred to other jobs, sewer-specific costs were $67.1 million in 2015, a reduction from the year before, they said.

Chalmers’ report was issued as Mangano moves to hire a financial adviser to study a potential decadeslong lease of the system to a private investor. The transaction could provide Nassau with between $600 million and $1 billion in cash to retire sewer debt.

In exchange, an investor would recoup its cash through revenue from sewer usage fees — for which the county said they’d still control rates.

In the meantime, Chalmers questioned the impact a lease would have on the Suez contract, as the county strives to meet its savings goals.

“Embarking on another transaction while the United Water contract is in its infancy begs the question of the necessity to do so,” he wrote.


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