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Civic group pushes for public takeover of water company

Ratepayers in the Sea Cliff water district saw their bills soar last year. New York American Water says overly high property taxes are to blame.

Agatha Nadel of Glen Head speaks at the

Agatha Nadel of Glen Head speaks at the North Shore Concerned Citizens group meeting in Glen Head on April 17. Photo Credit: Raychel Brightman

A newly formed group in Glen Head has been toiling behind the scenes, pushing for a public takeover of a private water company after residents saw their water bills soar last summer.

The activists formed the North Shore Concerned Citizens, a nonprofit whose primary purpose is to jettison New York American Water. The private company supplies water to about 4,500 customers in the Sea Cliff District, which includes the Village of Sea Cliff, Glen Head, Glenwood Landing and the Village of Brookville.

The group wants to replace the for-profit utility with a municipal one that would aim to lower rates and offer better services.

Customers of New York American Water waged public protests last year over skyrocketing costs that saw some customers’ bills more than double. A confluence of factors drove up the water bills, but the biggest had to do with property taxes the utility must pay, which a company spokesman said represent half or more of ratepayers’ bills.

In December, the water company notified the state Public Service Commission that it had made a “significant accounting” mistake that led to its properties being over-assessed, an error that is under review by the state.

On Friday, New York American sued Nassau County and others alleging that the company had been overtaxed.

Another rate increase went into effect April 1.

“It seems that the best way to go is to have us create a water authority to take over the assets,” Lloyd Nadel of Glen Head told the group’s executive members at meeting earlier this month. The group and its board of directors are made up of civic leaders, including lawyers, a banker, an engineer and a marketing professional.

A new water authority could buy New York American’s assets through a negotiated purchase or through condemnation, Nadel said, and raise the money for the takeover through the sale of bonds.

Steven Warshaw, a Realtor, urged members of the executive board to move quickly to form the water authority to demonstrate the group’s serious intention. “We’re not messing around,” Warshaw said.

Some members of the group said they met with the commissioner of the Jericho Water District to explore their options, including a possible merger. Others lobbied local and state politicians, including state Sen. Carl Marcellino (R-Syosset), who supports a public takeover of the private company.

Marcellino has introduced three pieces of legislation to address the high water bills, including one that directs the PSC, a state agency that regulates utilities, to conduct a study looking at the feasibility and costs of Jericho Water District serving New York American’s customers.

Peter Logan, superintendent of the Jericho Water District, said the district is “neutral” on whether a merger makes sense and is waiting to see what happens with Marcellino’s legislation. He stressed that neither the study nor a potential purchase of the Sea Cliff water infrastructure would be paid for by customers of the Jericho Water District.

One utility watchdog said the process can be challenging to navigate.

“I think the concern that you have by and large is, can it be done without taking on a crippling load of debt?” said Richard Berkley, executive director of the Public Utility Law Project, a watchdog group that was a party to the New York American Water rate case last year.

He described the prospect of a public buyout of the system as similar to the Long Island Power Authority’s 1998 purchase of the Long Island Lighting Co. but in “a small package.”

LIPA was left with billions in debt, some of which remains on the books, but the end game was closure of a controversial nuclear power plant and state control over a much-criticized, investor-owned utility.

“While you might be able to run it cheaply, if you have too much debt you’re not going to be able to lower the rates,” Berkley said. But he noted the prospect of merging with the Jericho Water District could hold promise, given their geographical proximity and the prospect for economies of scale.

It’s not just the potential debt that could be a problem. Berkley said careful review of the company’s assets and finances will have to examine how much or whether the infrastructure has been modernized and how much it will cost any new owner to update it.

Perhaps more fundamentally, it’s unknown if New York American Water would even consider such a sale — or if the PSC would approve it.

A spokesman for New York American said the company had no comment on the idea.

PSC spokesman James Denn said the agency has worked to foster industry consolidation.

The goal, he said, is to “improve the ability of small water companies to provide quality water service, make compliance with current and future regulations easier, moderate potential rate increases and improve water conservation efforts.”

Municipalities are tax-exempt and can “generally raise capital at a lower cost than private for-profit entities,” the agency said.

But there are hurdles, including recruiting and developing operational expertise, the loss of the tax base for the municipality, and raising funds to make the purchase.

New York American, based in Merrick, is a subsidiary of American Water, the nation’s largest investor-owned water and wastewater services company. New York American provides water services to about 122,500 customers in Nassau County.

Members of the North Shore Concerned Citizens are keenly aware of the enormity of the undertaking and recognize that this is a yearslong battle, but they believe the best way to cut their water bills in the long run is to get rid of the for-profit water corporation.

“Take the profit motive out of supplying a basic of need, which is water,” said North Shore Concerned Citizens president Bruce Kennedy.

Consolidating water companies, by the numbers

17: Small water companies acquired in past five years.

9: Companies acquired by large, privately owned water companies.

8: Companies that were transfered to public ownership.

Consolidation has narrowed the ranks of PSC-regulated private water companies from about 450 in 1994 to 230 now.

Source: New York State Department of Public Service

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