County Exec Edward Mangano is proposing a plan to privatize Nassau County’s three sewage treatment plants to create some sort of public/private partnership that will help the county to pay is current bills and also ease its heavy financial debt load.
There has been much confusion over what is actually involved. George Marlin, director of the Nassau County Interim Finance Authority, has heavily criticized the plan as expensive back-door borrowing to refinance outstanding debt. The county exec has stated the plan does not involve new borrowing, but hardly anyone has a clear idea of what is being planned.
In the past two weeks Mangano gave some of the details of the plan at meetings with residents at the Cedar Creek and Bay Park sewage treatment plants.
According to reports, Mangano is seeking a leasing deal in which one or more outside parties would lease the target facilities for the purpose of operating the plants and collecting most or all of the revenues generated.
The county would remain the owner of the plants during the 50-year lease term.
For the privilege of obtaining the lease, the outside investor would pay the county a fee of $750 million to $850 million and provide $300 million to $400 million for badly needed capital improvements. The present employees would remain and sewer charges would be frozen through 2015 with increases limited thereafter.
Would this kind of deal be attractive to any investor and would it serve the county’s interest? At first glance, it is hard to see how the present financial condition of Nassau County’s sewer plants could support the type of deal being discussed.
The County Sewer Authority collects some $120 million in revenues from property owners who use the county system. At present these revenues are not even sufficient to sustain operations beyond the next few years, let alone provide for needed capital improvements. And these revenues seem far too low to generate the returns needed to permit prospective outside interests to recover their money and earn a satisfactory return.
While some cost saving will result from capital improvements, it is likely that sewer charges would have to rise substantially. At the same time, with weak economic conditions both at home and abroad, there may be some investors out there who would accept a low rate of return if the risks are also very low.
Whether or not this deal would help soften the county’s severe fiscal problems over the long run will depend on the answers to many questions concerning the county’s obligations, the degree and reliability of oversight and the extent of safeguards in the agreement, to name a few.
While Great Neck does not depend on county sewage services, we are not totally immune from the county’s financial ailments.
Leon Korobow
Great Neck
