COUNTY SEEKS INVESTOR FOR OUR SEWAGE TREATMENT PLANTS

On May 17, 2012, NIFA member Leonard Steinman said outright,
“The sewer deal is dead.”

So why then, on June 18, 2012, did requests go out seeking an investor of Nassau County’s sewage treatment system?  It is being advertised as a “potentially high–revenue-generating infrastructure asset.”  Morgan Stanley pegged our sewer system as capable of earning as much as $120 million annually. 

This is the first piece of honest information that I’ve seen about this proposal yet.  Our sewer system is not going bankrupt as County Executive Ed Mangano has been leading us to believe.  Who would invest in a bankrupt system? 

The Nassau County Sewer and Stormwater Authority, which has title to the plants, up until a few years ago, operated with a $10 million annual surplus. The sewer district’s expenses run approximately $160 million annually.  It only takes in $117 million from our sewer taxes – so Mangano has been claiming that we are operating in a deficit.  However, there is over $20 million additional revenue coming into the sewer district from other sources, including revenue from treating sewage from Suffolk.  Further, there are millions of dollars in reserves that apparently the County Executive has been withdrawing annually to presumably help bridge the County’s budget gap, while creating the illusion of a gap in the sewer district.  Our sewage treatment system truly IS a high-revenue-generating infrastructure and that is why it is so attractive to an investor.  But if it’s profitable, why privatize?

United Water is a global company and claims to be able to operate our plants more efficiently than the county.  This administration pays out over $20 million a year to outside contractors to do the work that county workers used to do.  United Water would become the overall contractor so they would save $20 million right off the bat. But even if United Water could do a better job, why do we need an investor?

The real truth is that the County hopes to get $750 from an investor to basically refinance not only the Sewer Authority’s debt of $465 million, but about $300 million of the County’s $3 billion debt as well. Not one penny is going toward operating, maintaining or improving the plants.  That is why NIFA rejected Mangano’s proposal, saying that  the plan does not reduce debt, but passes the responsibility of the payment of $750 million debt from the County to the taxpayer. Our taxes will go up.  In fact, it will be written into the contact that our taxes will go up every year. The County Executive says that they will go up at the rate of the consumer price index.  But in the sewage treatment industry, the CPI increases approximately 7% per year.  Our taxes will double in ten years.  

"It's backdoor borrowing," said NIFA member George Marlin. 

"It's not a public-private partnership," said NIFA member Chris Wright. "It's a loan."

"To use such costly funds to pay down low-interest, tax-exempt county and sewer debt makes no sense," Marlin said. "This would be like drawing down the credit line on one's Visa card at 15 percent interest per year to pay down one's home mortgage, which has a 4 percent annual interest rate."

Further, the County promises to spend approximately $400 million in new equipment and improvements into the Cedar Creek and Bay Park
plants. This $400 million is the amount that remains unused out of the $700
million 5-year Capital Plan that was approved by the past administration.
Former County Executive Suozzi spent approximately $160 million in 2008 and
2009. Mangano spent approximately $70 million in the past two years. Funds were just bonded to pay for $35 million of improvements, leaving approximately $430 of still unused funds to date. What we believe the County is planning to do is take that $430 million and indirectly, through an investor, pay United Water to
implement those improvements within 10 years (instead of the 5-yearplan) and we will be paying the investor for these improvements for the next 50 years
through increased sewer rates.

No one denies that the sewage treatment plants have problems.
Upper management neglects overseeing operations at the plants. Millions of
dollars are awarded to outside contractors to do the work that county workers
used to do. County expenses on outside contractors have ballooned to
historically high levels—more than $22 million, according to recent county
projections.

Experienced sewer workers are being transferred to other county departments, leaving no one to manage and train employees. Preventive maintenance has been almost non-existent for years at the Bay Park and Cedar Creek Plants. The County is behind schedule in implementing the necessary improvements. The current administration has not allocated one penny in a capital plan to improve the plants.

As Mr. Mangano says “Doing Nothing is Not an Option.” We are developing a Blue Ribbon Plan to improve the condition and operation of the plants. It’s time to implement the badly needed improvements, instead of looking at our plants as the cash cow for the County’s fiscal woes.