Nassau plan to generate revenue from sewers is a mess

At first glance, Nassau County Executive Edward Mangano's plan to raise $865 million with a quasi-sale of the county's deteriorating sewer system stinks like . . . stuff the sewer system treats.

Nassau County's finances are fundamentally out of balance, and fixing them -- since increasing taxes isn't viable in the most levy-burdened county in the nation -- means imposing harsh discipline on spending, short term and long term. This deal, instead, appears to be yet another one-shot bid to raise cash, just like the sale of leases on county-owned properties at Mitchel Field. As explained thus far, it would do nothing to alleviate structural problems with the budget. Even beyond that, though, the way the county has explained the structure of the deal so far, it doesn't make any sense.

Nassau has three treatment plants, 53 sewage pumping stations and 3,000 miles of sewers. Most of this infrastructure is in poor shape, has not been maintained or modernized properly and needs hundreds of millions of dollars worth of work. The system is also very environmentally sensitive, and the fact that it's run by the county means elected officials have to be at least somewhat responsive when residents complain of bad smells and pipes backing up, which they frequently do.

The pitch by the Mangano administration is that this financial maneuver will put (they hope) $400 million in the county's coffers and pay off $465 million in sewer system debt, by recruiting an investor to finance an $865-million loan, and a private operator to run the system. The new management is supposed to generate enough cash to make a profit and pay back the investor, all without raising sewer fees. The county would still control the rates, and says they won't be raised. But for that to be the case, the new operator also would have to generate enough cash to pay for those hundreds of millions of dollars in improvements.

This deal has been kicking around for a year or more, popping up in budget plans and long-term financial forecasts. Beyond not making sense, it doesn't seem like a move that the Nassau Interim Finance Authority, the state control board overseeing Nassau's finances, is likely to approve.

If Nassau owns the sewer system and has power over rates, and an investor lends the county money against those sewers, the money isn't really revenue. NIFA had to be dragged kicking and screaming late last year into allowing Mangano to borrow money to get through the next couple of years, approving it in return for a promise of $150 million in labor savings to be negotiated by Feb. 1. Only half of that $150 million has been identified so far.

Perhaps the most frustrating and frightening part of this proposal is that, if a private operator could run the sewer system so much better than the county that nearly $1 billion extra would be generated, then the county has been the most ineffective manager in the world. More details from Mangano would help, and a win in court that would enable the county to start collecting almost $40 million a year in sewer fees from nonprofit organizations could alter the situation. But as it stands, this deal is very unlikely to happen, and wouldn't give the county the real fixes it needs even if it did.