Public fix for private water

When thousands of Nassau County residents pay more of their water bill to cover the property taxes of their for-profit water provider than for the actual delivery of H2O, something is amiss.

That’s the case for many New York American Water customers, and absent quick governmental action the plight of those 124,000 customers will worsen dramatically. State lawmakers have an opportunity right now to take a bold step by creating a Nassau County Water Authority that can address the immediate problems and begin the long-term process of solving myriad water issues.

American Water customers in Nassau pay as much as triple what nearby customers served by municipal water authorities do, and on May 1 a stunning 26% rate hike is set to take effect. The clock is ticking even more loudly thanks to a $607 million deal for another private company, Liberty Water, to buy the system, a process the Public Service Commission halted while it studied the predicament. That study was completed this week.

About 4% of New Yorkers get water from for-profits, but Nassau has a unique four-class system that taxes different property types at vastly different levels. The result is a special franchise tax of about $30 million annually and other property taxes of $13.5 million on American Water’s system. That totals about $347 per American Water customer annually.

Selling drinking water for profit is bad policy, injecting a profit incentive into the handling of a vulnerable public resource. Paying property taxes via water bills is also bad policy. It’s regressive, and it means the taxes, unlike those paid by property owners, are not federally deductible.

And having 35-plus separate water providers in Nassau County? That’s bad policy, too, as the complicated, expensive dangers of pollution, saltwater intrusion and local shortages make expertise and economies of scale crucial to protecting our aquifer.

State Sen. James Gaughran, the former chairman of the Suffolk County Water Authority whose legislative district straddles both counties, is spearheading a fix via the state budget. The Suffolk authority is willing to operate American Water’s Nassau system for a municipal owner. But those taxes still need to be paid, so a key part of the plan is shifting that $30 million franchise fee to the county’s other utility providers, spreading it out over their huge customer bases. The newly created Nassau County Water Authority could then take over as the supplier if it purchases the bulk of the American Water system. The state enabling statute must also require that the Nassau County Legislature adopt a new countywide water district before the tax shift takes place to assure a municipalization of American Water’s Nassau assets and future consolidations won’t be stymied.

The time is now for state lawmakers to address the immediate problem of huge water bills for some Nassau residents while creating a path to move past the fractured collection of water providers that will be increasingly unable to meet future challenges.

— The editorial board