The Wantagh-Seaford Citizen, 2011 September 22, County Floats Plan to Privatize Cedar Creek Plant

County Floats Plan to Privatize Cedar Creek Plant
by Laura Schofer

Originally published in the 2011 October 21 edition of The Wantagh-Seaford Citizen.
Published online with kind permission from our friends at The Citizen.

A plan to privatize Nassau County’s sewage treatment plants – Cedar Creek and Bay Park – was presented to county legislators by the County’s Office of Management and Budget last week. The two sewage treatment plants, in Seaford and in East Rockaway process 80% of the county’s sewage.

Aerial View of the Cedar Creek Sewage Treatment Plant

The county “has engaged Morgan Stanley & Co. as a sell-side advisor to assist in evaluating a public–private partnership transaction involving the assets of the county’s sewer system,” states the county’s proposed fiscal 2012-2015 multi-year financial plan. The transaction to a private concern could reap the county as much as $135 million for 2012. This public-private transaction, called “the P3 Transaction,” may consist of a concession or lease as well as the possibility of a sale or transfer of the sewer system to a private concern.

According to documents, under the P3 Transaction, “the county would receive an up-front payment from a private investor as compensation for transferring operations of the sewer system to the investor. In return, the investor will collect all charges for the system usage as well as assume responsibility for all System operations, maintenance and capital expenditures. However, the county or a state entity will continue to ensure that all regulatory standards are met,” states the plan. “We want our own guys in here,” said Phil Franco, co-chairman of the Cedar Creek Oversight Committee. “If we privatize, we have no public control.”

At the October 11 meeting of the Cedar Creek Oversight Committee, residents garnered additional details about the county’s privatization plan. Mike Fassano, an assistant superintendent at Cedar Creek, told residents, “It is no secret the county is looking at different ways to operate. They did a request for qualifications and four to six [concerns] applied. Those applications were due last month. But there is no RFP [Request for Proposals] yet,” he said. County Legislator David Denenberg said “the issue of privatization came up years ago and people said ‘no.’ Having outside contractors in the plant alongside county workers is fine. Our fight has always been to have more workers for the day-to-day operation of the plant, but not this,” he said.

“We [the legislators] were not told that Morgan Stanley was engaged to investigate and begin a process to design a proposal to privatize. It’s not Cameron [Engineering, the private group that acts as consultant at Cedar Creek],” said Legislator Denenberg. He explained the county is not under any obligation to inform the legislators of its plans to conduct a study, as the contract to hire Morgan Stanley was for less than $50,000, the point at which the legislature must approve spending. “Why not a hearing? We ought to know. NIFA [Nassau Interim Finance Authority] told the county executive this out-and-out sale is a one-shot deal that will not balance the budget long term It is too speculative,” he said.

Resident Ralph Spagnolo, a retired county worker who spent his career working in the sewage treatment plants, said “the county will contract out anything they can get away with. But there are laws in place to protect the environment and the community. You couldn’t contract out certain services, including police and health [see letter on page five.] The county executive wants to contract out the whole county. If it comes about, then lets go back [and become part of] Queens. Why pay these taxes?”

The county defends its position in its multi-year plan, pointing to other “U.S. governments have successfully pursued similar P3 transactions. For example on July 26, 2010, the City of Indianapolis approved the $1.7 billion acquisition of the city’s waterworks and wastewater systems by Citizens Energy Group,” the plan states. The plan discusses the availability of “more than $250 billion in equity capital available for infrastructure investments.” But Mr. Franco raised concerns about the cost to taxpayers. “There could be a flush fee. If you make an investment like this you expect a profit on that investment,” he said.

Legislator Denenberg agreed. “There has to be a profit motive. It will cost us more. Look at what we pay for Aqua [referring to the private water company serving Wantagh and Seaford]. Public necessities should not be privatized,” he said. Mr. Denenberg and Mr. Spagnolo also raised the question as to why there is a need to privatize the plant as residents now pay a separate tax, for sewage. Residents in Wantagh and Seaford live is Sewer District Three. “The operating budget of the plant is what we pay in taxes. The cost is separate [from the rest of the county’s budget]. It doesn’t cost us money, so why are they proposing this,” asked Legislator Denenberg.