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Nassau lawmakers back contract to study private sewer lease

From left, Eric Naughton, Conal Denion, and Steve

From left, Eric Naughton, Conal Denion, and Steve Conkling of the Nassau County Executive's office, discuss a study Monday on the feasibility of privatizing the county's sewer system. Credit: Steve Pfost

Nassau lawmakers voted along party lines Monday to approve a revised contract with a Manhattan-based financial adviser to study a potential $1 billion lease of the county’s sewer system to a private investor.

The GOP-controlled Rules Committee voted 4-3 to pay KPMG nearly $198,000 for the first phase of the contract — assessing the impact of a lease on sewer rates and determining if the county would be better off maintaining control of the system.

If KPMG recommends privatizing the system, the firm could be paid nearly $700,000 more over the next two years to assess interest from investors and execute a lease agreement. The legislature would need to approve those payments.

Lawmakers earlier this month objected to a version of the contract that would have authorized as much as $887,568 in upfront payments to KPMG.

Eric Naughton, Nassau’s deputy county executive for finance, said without a leasing agreement the county’s sewage system will have a $28.7 million deficit by 2018. To close that hole, Naughton said the county would need to hike rates by nearly 25 percent, costing ratepayers nearly $70 in 2018 and more in later years.

Naughton said a concessionaire would also increase rates — with the annual amount capped by the county — but ratepayers would pay less over the long run because of operational and maintenance improvements performed by the investor.

“There will be a transparent and stable rate setting process,” Naughton said.

The KPMG contract is the third attempt by County Executive Edward Mangano to explore a lease of Nassau’s three sewage treatment plants, 53 pumping stations and 3,000 miles of sewers. The two earlier contracts were blocked by the Nassau Interim Finance Authority, the county’s state appointed fiscal control board. NIFA has indicated it would support the county’s hiring of a financial adviser.

The administration, which has struggled to pay for system improvements, has said a private investor could provide up to $1 billion upfront for the county to retire long-standing debt, largely for its sewer system. In exchange, the investor would operate the system for 40 years, paying for repairs while collecting revenue from user fees.

Legis. Howard Kopel (R-Lawrence) broke ranks with fellow Republicans earlier this month, voting to table the KPMG contract after raising questions about the deal’s price tag. On Monday, Kopel said the administration had addressed his concerns and he voted in favor of the contract.

“We ought to go ahead and find out if this thing is real,” Kopel said.

The Committee’s three Democratic members remained unconvinced and voted against the deal.

Legis. Delia DeRiggi-Whitton (D-Glen Cove) said KPMG has an incentive to recommend moving forward with a leasing agreement to ensure additional payment under the contract.

“There seems to be a real conflict of interest,” she said. “I want an objective decision from the company.”

Naughton said the county is not required to accept KPMG’s recommendation and the legislature would need to approve a contract with a private investor.

Also Monday, minority Democrats approved $1.3 million in bonding for local fire department radios and computer systems but continued to block funding for more than three dozen other capital projects. They include roadway repairs, bridge painting, traffic signal expansion and asbestos abatement.

Democrats have refused to provide the 13th vote needed for borrowing until County Executive Edward Mangano agreed to create an independent inspector general for contracting. Mangano and majority Republicans contend an inspector general is not needed as procurement oversight is now provided by the county’s commissioner of investigations.


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