Nassau sewer lease deal has plenty of questions

September 7, 2016 By Joye Brown   joye.brown@newsday.com

Nassau County Executive Edward Mangano discusses county sewer privatization plan on May 18, 2016 in Mineola. (Credit: Howard Schnapp)

Nassau lawmakers are poised to consider hiring a financial adviser to examine the pros and cons of leasing the county’s sewer system to a private, for-profit investor.

It’s a big deal, one that ultimately could net Nassau almost a billion dollars upfront — more than enough money to retire debt and carry Nassau to the unfamiliar realm of balanced budgets.

Or at least that’s part of the anticipated promise.

Still, there’s another part of the equation, one that, thus far, has had little public examination.

Yes, the investor would pay Nassau.

But the investor ultimately would get repaid for its investment, too. That would come from user fees. How high would they be, and who would provide oversight? Would the investor have to seek permission from the county to raise rates, or have request vetted by, say, the state Public Service Commission?

Would rates be locked in for years, possibly artificially — only to result in big boosts down the line to cover true costs?

So far, the public has gotten no answers, although County Executive Edward Mangano did offer a few in an interview Wednesday.

But such questions are worth vetting publicly from the beginning of the process, since it will fall to lawmakers to get the ball rolling.

On Sunday, a Newsday report by Paul LaRocco noted mixed results with three other Nassau public-private partnerships, which is a polite way of stating that there’ve been a few glitches along the way.

Take Nassau’s contract with Armor Correctional Health Services.

On a spreadsheet, the contract to turn jail inmate health care over to a private, for-profit concern — which has saved Nassau about $5 million a year compared with what the county paid Nassau University Medical Center to provide medical care for inmates — looks good.

But the county, and Armor, are being sued in federal court by the families of four inmates who died at the East Meadow jail since Armor took over medical care in 2011.

This year alone, six inmates have died at the facility. State Attorney General Eric T. Schneiderman sued Armor in July alleging that the company — which denies the allegations — has provided “woefully and dangerously inadequate health services” while continuing to collect public money.

Mangano said the deal nonetheless worked for Nassau because health care ended up being cheaper, and because an indemnity clause in the contract will limit the county’s liability in lawsuits arising from health care-related claims.

Then, there’s the contract with Transdev to manage Nassau’s bus service.

Again, on paper, things started out looking good, with $6 million in savings initially. But the county, to limit NICE bus’s chronic budget shortfalls, has raised its contribution since 2012 to keep NICE from shutting down bus routes.

As a result, Nassau now pays out almost as much as it did before the service went private in 2021. Mangano said that’s still a bargain since the sum is significantly less than the county’s former partner, the Metropolitan Transportation Authority, was seeking to collect.

And before we get back to sewers, let’s consider two more deals: The private firm that built a state-of-the-art ice rink in Eisenhower Park — only to default, which, for a time, left the facility’s fate more in the hands of a bankruptcy judge than the county; and the contract to remake Nassau coliseum, which was passed — with no review from Mangano or county lawmakers — from one vendor to another.

Mangano said that both worked out well, because the ice rink now has a new operator and the Coliseum — slowly, judging from a few drive-bys — is being overhauled.

Nonetheless, such problems merit consideration as Mangano seeks legislative approval to explore the possibility of leasing Nassau’s sewer system to an investor. As it is, the county already has a private manager, Suez North America, for the system — in a deal that, so far, has netted less savings than officials had predicted.

As for how an investor would be repaid, Mangano said that would come through user fees — which, he said, initially could be frozen, and then capped for the term of a deal.

“It depends on whether the idea is feasible, first, and then on how the contract would be done,” Mangano said.

Which is why, as the proposal moves forward, such questions need to get asked, and answered.

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