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Jon Kaiman, outgoing NIFA chief, questions plan to lease Nassau sewers to investor

NIFA Chairman Jon Kaiman at his final board

NIFA Chairman Jon Kaiman at his final board meeting at the Long Island Marriott in Uniondale on Feb. 3, 2016. Credit: Newsday / J. Conrad Williams Jr.

The outgoing head of Nassau’s financial control board said he has lingering concerns over the county’s plan to lease its sprawling sewer system to a private investor in exchange for an upfront payment of hundreds of millions of dollars.

Jon Kaiman, who stepped down Monday as chairman of the Nassau Interim Finance Authority, wrote a letter last week to County Executive Edward Mangano describing his issues with a possible lease of the three county sewage treatment plants, 53 pumping stations and 3,000 miles of sewers. Day-to-day management of the system has already been contracted out to a private operator, Suez North America.

“I, myself, am not clear on how a private company can achieve significant savings on top of the savings already achieved through the use of a private company already overseeing operations through its own workforce,” Kaiman said.

Nassau last year hired consultants KPMG, pending NIFA approval, to determine lease risks and benefits and identify potential sewer investors.

But NIFA blocked the contract — which was to pay KPMG $270,000 over six months, and could have given the firm several million dollars more in commission if they secured $600 million to $800 million from an investor — saying it needed more details.

Mangano has argued that a private investor, with a lease of up to 50 years, could give Nassau upfront revenue to pay off debt and stabilize sewer rates.

Critics have called the plan “backdoor borrowing,” suggesting it may lead to higher rates than the county alone sets.

Kaiman noted in his letter that a private investor would probably want to ensure rates are high enough to not only fund sewer operations, but also ensure a return on its upfront cash payment to the county.

“The concern then becomes how does the county keep the private investors from overreaching by overcharging the residents in the years and years ahead,” Kaiman wrote.

A spokesman for Mangano declined to comment on Kaiman’s letter. The administration had pulled the KPMG deal from consideration by NIFA when the board last year hired its own consultant, Lamont Financial Services Corp., to study the lease issue.

That firm recently issued a report to NIFA that the board forwarded to Mangano on Monday.

Kaiman said Friday that the Lamont report suggests a way for Nassau to reissue bids for a financial adviser to map out a potential lease. NIFA staff declined to release the report.

Any new consulting contract will need to be considered by a NIFA board led by a new chairman. Kaiman is leaving to run for Congress as a Democrat.

At a NIFA meeting last week, board member John Buran said the Lamont report gives a sewer lease “a path forward.”

“But by no means does it mean this is a closed matter,” Buran said. “This is a very significant financial transaction and clearly NIFA must watch this as the transaction evolves.”

Board member Chris Wright said Friday that he saw no benefit in Nassau leasing assets to a private investor, an arrangement known as a public-private partnership, or “P3.”

“The universe of people who believe that a sewer deal would be in the best interests of the county is extremely limited,” Wright said.

He noted other municipalities’ efforts to privatize highway toll lanes and parking meters: “The universe of failed or underperforming ‘P3’ deals elsewhere in the region and the country is not.”

With Robert Brodsky


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