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Solages Holds Sewer Privatization Venting Session

Nassau County still in search for private financier for sewage treatment plants

In what can probably be called a venting session, Third District Nassau County Legislator Carrié Solages (D-Elmont) held a community meeting at the Elmont Memorial Library on the proposed sewer privatization of Nassau County’s sewer treatment plants on May 15.

Solages, along with fellow Democratic Legislator Dave Denenberg (D-Merrick), chastised the county for failing to disclose contract particulars with consultant Morgan Stanley and recently announced New Jersey-based United Water (UW) as the county’s pick for the operation and maintenance of its sewage system. The two feel transparency is needed, especially in the wake of the Nassau County Legislature’s decision to close four of the county’s eight police precincts.

“We don’t have the contract for United Water,” Denenberg said. “Private monopoly on a public utility. How does that work? How did LILCO work for us?”

United Water Vice President Gary Albertson revealed the company was one of four considered to run the sewer system. Morgan Stanley handled the “request for qualifications” submitted by each perspective bidder. The requests detailed what each bidder felt qualified them to run the sewage treatment plants.

Morgan Stanley then selected three of the four (UW, Veolia and Severn Trent) and asked them to submit their “Request For Proposals,” which provided details of how each company would run the sewage treatment plants.  UW came out on top.  

“We were chosen and I think we can do the job,” Albertson said. “We’re confident we can handle this.”

Nassau County Executive Edward Mangano announced last week the proposal could net nearly $865 million and eliminate one-quarter of the municipality’s $3 billion debt, including $465 million owed by the county’s sewer authority. Mangano recently stated the sewer authority is headed toward bankruptcy in 2014.

“The deal is being pushed through the committees and needs legislature approval to go forward, and also has to be approved by NIFA,” Solages said. NIFA, or the Nassau County Interim Finance Authority, oversees the county’s finance affairs.

Mangano staffers declined to comment on the Elmont meeting, stating no one from the county executive’s office was invited. The county executive released a statement regarding the sewer treatment plant privatization to Anton Newspapers.

“This is the result of the sewer authority depleting cash reserves that we made available when 27 collection and three disposal districts were consolidated into a single authority,” the statement read. “While my administration has invested significant time and dollars into improving these plants, all must realize that more can and must be done to protect surrounding communities and waterways. We must never again allow these plants to rack up $1 million in DEC fines.”

The county still needs to select a financier for the deal between UW and the county. The deadline to find an investor is June 30. 2012. The mood at this community meeting was decidedly against United Water.

“I feel offended personally when I hear attacks about United Water and our reputation,” Albertson said. “We intend to protect that reputation.”

Since 2007, the county has allocated $700 million in sewage treatment plant infrastructure improvements. Until then, the sewer authority was operating with a $10 million annual surplus. Under this UW proposal, Nassau would maintain ownership of the system, which serves approximately 1 million customers, according to the county’s executive summary.

“One of the few things that attract developers, that attract businesses to Nassau County, is the low cost to waste water treatment and they’re giving it away without telling you anything,” Denenberg said. “You voted ‘no’ on the Nassau Coliseum [plan] and I can tell you I wanted that, but I couldn’t tell you the tax was being offset. Here, I can’t tell you what the cost of living increases that United Water is going to get in two years are.”

UW would take over operations and capital improvements of the county’s three sewage treatment plants: Wantagh/Seaford’s Cedar Creek Water Treatment Control Plant, Bay Park and Glen Cove sewage treatment plants. The company would man 53 sewage pumping stations and 3,000 miles of sewers for at least 20 years.

“Very few of these types of projects have succeeded here in the United States,” Solages stated, indicating that sewer bills could increase 15 percent each year if privatized, according to a study conducted by nonprofit Food & Water Watch. “The odds are very unlikely this process can succeed.”

UW made more than $700 million in revenue in 2011, according to Albertson. Furthermore, it seems like it would make sense for United Water, which has the monetary clout to serve as the financier and cut out any middlemen and back this, but it’s not the direction Morgan Stanley suggested. Albertson claimed no one asked UW to finance this.

“We need a private investor to raise the funds,” Solages said. “That’s the way the deal was brokered. That’s a question for Morgan Stanley.”

If the county legislature and the NIFA approve the deal, it would be the largest single financial deal in the county’s history. Nassau would enter into a long-term, public-private partnership with UW, a subsidiary of French water giant Suez Environnement (SE), one of the largest water services companies in the world, which acquired United Water in 2000 after it merged with General Waterworks Corporation.

“If United Water could run it so well, why can’t we?” Denenberg stated.

Bruce Blakeman, a former GOP county legislator who ran for U.S. Senate in 2010, thinks Denenberg is telling a tall tale, suggesting he left out key elements of the plan and questioned Solages’ thoughts on the project.

“Over the next ten years, the county of Nassau, to remain in compliance with federal regulations that Mr. Denenberg left out, it will cost the county $400 million to keep two of the three sewage plants in compliance,” Blakeman said.

If the sewage treatment plants are found out of compliance, the Environmental Protection Agency will slap the county with heavy fines and demand changes, according to Blakeman. The county spent approximately $12 million per year in improvements to sewage treatment plants since 2002.

Concerning sewer rates, UW would institute a hard cap for two years. After two years, a cap will ensue according to the consumer price index.