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Suffolk County Water Authority proposes taking on system run by New York American Water

New York American Water in Merrick in 2018.

New York American Water in Merrick in 2018. Credit: Danielle Silverman

In a move that could cut customer bills, the Suffolk County Water Authority on Friday filed paperwork proposing that it operate or help operate a new Nassau County Water Authority that would take on the system currently run by embattled New York American Water.

It’s the latest and potentially most serious proposal by a public entity to take on the approximately 125,000 Nassau customers, from Lynbrook to Sea Cliff, who are currently served by Merrick-based New York American Water, which is attempting to sell itself.

The state Public Service Commission, even as it considers that potential $607 million sale to Liberty Utilities, has requested proposals from authorities and districts about a possible public takeover of the assets.

Suffolk County Water Authority’s six-page filing with the state Department of Public Service suggests the creation of a new Nassau County Water Authority, with a separate board and its own debt issued to pay for the acquisition. It proposes acquiring portions of American Water's Nassau system that other entities do not, or the entire Nassau system.

Other areas of Nassau are served by municipal water districts that generally offer lower rates than investor-owned New York American Water's.

At present, the Massapequa Water District has proposed taking on some 4,500 customers in the East Massapequa area, and Sea Cliff and Hempstead have both found an acquisition of customers in their regions "feasible," though Hempstead Town has balked at taking on the additional debt load.

Suffolk water officials weren’t available to discuss their proposal, but in a statement, SCWA chief executive Jeff Szabo said state officials had asked the authority to submit comments on the study "and we did so."

The new Nassau entity would enter a management/operating agreement with SCWA to manage the new territory, much as it does with some districts in Suffolk. If a price for the system can’t be agreed upon, the acquisition could involve an eminent domain filing, with the value of New York American Water assets ultimately determined in court.

Touting possible savings

The Suffolk authority "strongly suggested" that the new Nassau entity be exempt from paying property and other taxes, which would address issues of high customer bills that New York American Water had long complained about. Still, the Suffolk authority said, customers could see savings even if there were a so-called payment in lieu of taxes for a "transition" period included in customer bills.

But Suffolk’s water authority itself has been the subject of bitter complaints about soaring bills, and frustrations that the authority limits avenues to appeal its findings about those complaints. High-bill complaints jumped 35% last year over 2019.

New York American Water, a frequent target of ratepayers and lawmakers over high rates and water quality, has in the past said the Liberty acquisition is "in the best interest of our customers."

In a statement, New York American Water president Lynda DiMenna said eliminating the state franchise tax the company now pays would provide customers "real and immediate" relief, compared with "any speculative savings from a very costly and long eminent domain process" suggested in the SCWA proposal, which "will also take years and costs hundreds of millions of dollars."

State Sen. John Brooks (D-Seaford), who was among the first to propose a SCWA takeover of some sort, on Saturday called the possible takeover "an easy way out of all of this."

"Certainly, Suffolk County Water Authority has the track record," Brooks said. "They can do the job and that could allow for a fast transition. I’m very optimistic we may be able to move in that direction. It’s the best of both worlds; we have an agency that’s exceptionally capable of doing the work."

The Suffolk authority’s filing said if it entered a management agreement with the new Nassau authority, it could operate the Nassau system with an annual fee that could be in the range of $450 to $500 per customer per year.

State lawmakers would have to act

The State Legislature would have to enact a new law to facilitate creation of the Nassau authority. In the past, the Suffolk authority has said the legislature may also need to expand the authority’s service area to include Nassau.

Agatha Nadel, a Glen Head resident who has led a coalition of North Shore residents against New York American Water's proposed takeover and high rates, said she was in a "state of shock" Saturday after hearing about the Suffolk authority's proposal.

"What Suffolk County Water Authority proposed is so exciting as it is another avenue for all the American Water ratepayers to escape from privatization and receive affordable public water," she wrote in an email. "Remember, we are talking about providing water to such a small percentage of Nassau County residents who have suffered under this private water dictatorship for way too long. Helping us achieve this goal is the right thing to do — morally and ethically."

The SCWA, with more than $200 million in annual revenue and $1.7 billion in assets, has 400,000 active accounts serving some 1.2 million people. It pumped 73.2 billion gallons of water in 2019, has its own drinking water testing lab, and 585 full-time employees, 360 of them unionized. It has grown through the acquisition of more than 40 public and private water systems.

With David M. Schwartz

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