Next steps eyed for public water authorities in parts of Nassau

Now that the state has approved two new authorities for public water for parts of New York American Water’s Nassau service area, the complex task of creating these new entities, valuing the assets and completing the takeovers can begin in earnest.

Liberty Utilities, which last year proposed the $607 million buyout of the territory, in a state settlement reached this week agreed to negotiate in good faith with the proposed spinoffs but said it believes it still will be the "best option" for customers.

It’s now up to the two water authorities, one for the South Shore and one for the north, to appoint directors, agree on a sale price and decide on debt mechanisms to pay for transactions that could amount to tens or hundreds of millions of dollars. While only former American Water customers who are switched to new ownership will pay those debt costs, municipalities behind the moves say customers will save hundreds of dollars or more per year.

The prospect of public water for these Nassau customers, while closer than ever, is not certain, however. While past studies have shown public water to be cheaper, hard numbers crunching still must be done to make sure the savings are substantial enough to offset new debt to make the spinoffs feasible. New and existing water authority and district boards would have to approve the transactions, with the state overseeing their work.

On Wednesday, Gov. Kathy Hochul signed two bills creating the authorities, which resulted from years of customer anger over New York American Water’s rate increases and customer service. The state Department of Public Service on the same day released a joint proposal setting out the terms for approving the company’s sale to Liberty Utilities of Canada.

The deal includes $23.5 million in funds to lower rates up to 10% next year and calls on Liberty to enter good faith negotiations for the sale of parts of the system. The agreement was signed by the Massapequa Water District, Sea Cliff Village and North Shore Concerned Citizens, each of which has expressed an interest in a public takeover of parts of American Water’s 123,000 Nassau-customer service area.

"The road is paved — we just need to get down it now," said Stan Carey, superintendent of the Massapequa Water District, which wants a chunk of the territory.

The Massapequa district may be furthest along in its ambition to take on 5,359 customers and infrastructure in American Water’s East Massapequa service area. It’s already valued the assets at $21.6 million and has interconnection pipes into the system that could make the transition easier. The district's buyout, if completed, would save average American Water customers around $300 a year, though it depends on water use and home value, Carey said.

Massapequa can forge ahead with a deal with or without the new authorities, Carey said, noting, "We made that part of the agreement." If all works out as planned, the district would borrow $26 million, including costs for the transaction, system upgrades and interconnections. He said a deal could be done in a eight months to a year, well within the 465 days laid out in the agreement.

"We’re ready, waiting for the sale to be completed and we’re looking to be at the table with them to start good faith negotiations," Carey said.

For the North Shore, the prospect of public water is just as eagerly awaited, but additional steps are needed. Bruce Kennedy, president of the North Shore Concerned Citizens group, who as mayor of Sea Cliff first launched scrutiny into American Water’s finances five years ago, said the group and local governments have a "tremendous amount of work" ahead of them. It will be aided by $1 million in funding from Sen. Jim Gaughran’s bill to fund the new North Shore Water Authority.

"I don’t see any big challenges," said Kennedy. "I just see a lot of work, but it will be worthwhile work. This is a legacy project."

The Village of Sea Cliff, where Kennedy is administrator, has conducted a feasibility study for the company’s North Shore assets that he said were valued at $19 million. He anticipates the need for a 20- to 40-year bond to pay for the assets and for the ability of the new tax-exempt authority to show "significant savings" to its 4,500 ratepayers.

The North Shore group has opened discussions with other water districts to potentially take on management of the system, including the Jericho Water District and the City of Glen Cove, Kennedy said.

The biggest challenge may lie ahead for the new South Shore Water Authority, which would address the largest American Water service territory — from East Rockaway to Wantagh. Those 113,000 customers will have to move forward with uncertain support from Hempstead Town, whose leaders have said the debt load of acquiring the service territory is too burdensome.

James Sweeney, Liberty’s East-Region president, in written responses to Newsday’s questions, said the company was moving forward with the state-negotiated sale settlement even if it means many territories could be spun off publicly because it believes Liberty will be the "best and most immediate" solution for customers.

"We understand there is very strong interest to municipalize portions of the system and we will work with all entities in good faith," he said. "However, we know that given the opportunity, we will prove the best option for Long Island customers and look forward to building strong community relationships like we have in other communities."

But some of the most ardent supporters of public water in Nassau, including former legislator Dave Denenberg, say they won’t let the opportunity for public water pass without a big fight. Long Island Clean Air, Water & Soil, an activist group that has challenged private ownership of the system, didn’t sign on to the state settlement because it believes the prices set for each portion of the system only work to Liberty’s advantage, group co-director Denenberg said.

"Haven’t those assets already been paid for by the ratepayers after decades of surcharges?" he said, articulating the group’s stance in objecting the state settlement. "By putting a value on the system, it’s almost a statement saying the company owns the assets that the customers have paid for."

Denenberg said he hopes the Town of Hempstead, which has the power in the new law to appoint board directors of the new authority, with the Nassau Legislature, "comes to its senses and says, We have the largest [water] district in the county now, let’s get the state financial assistance and create another district," maintained by the town’s existing water utility.

A Hempstead spokesman said supervisor Don Clavin and Hochul "are working collaboratively to secure funding for the establishment of the South Shore Water Authority."

By Mark Harrington

mark.harrington@newsday.comMHarringtonNews

Mark Harrington, a Newsday reporter since 1999, covers energy, wineries, Indian affairs and fisheries.