Assemblyman: Probe of N.Y. American Water ‘just the tip of the iceberg’

Accounting error may have led to higher rates


The New York State Department of Public Service announced on Dec. 27 that it is investigating New York American Water after the company did not disclose accurate property value assessments that would have lowered water bills for more than 4,000 customers in the Sea Cliff area.

On Dec. 7, NYAW informed the DPS that it had made “a significant accounting error related to the value of its property” in its Sea Cliff district in 2013, according to a news release. As a result, taxed properties in the district, including water towers and other infrastructure, were overvalued.

“While performing a comprehensive property tax review in an effort to identify opportunities to reduce the cost of its service, New York American Water identified an issue that impacted property taxes paid by the company on the North Shore of Nassau County,” NYAW President Carmen Tierno said in a statement.

The state Public Service Commission approved a rate increase last May for 120,000 NYAW customers on Long Island. Customers in Sea Cliff and Glen Head saw steep increases in their water bills, mostly in the form of surcharges. “The ratepayers received a regular tax increase with a retroactive increase from the property tax surcharges,” State Assemblyman Michael Montesano, a Republican from Glen Head, explained.

The purpose of the DPS’s investigation is to determine whether the company failed to inform the department about the inaccurate assessments before, or during, NYAW’s May 2017 rate increases, officials said.

“Ensuring that the rates we approve are just and reasonable is fundamental to what we do, and we need accurate information from the company to do that,” Department of Public Service CEO John B. Rhodes said in the release. “We will hold New York American Water accountable if it failed to disclose all of the financial information that we as regulators needed when we set the company’s rates [in May 2017].”

In the release, NYAW officials proposed to reduce ratepayers’ property tax payments by $1.7 million, which would lower an average Sea Cliff customer’s monthly water utility bill by 34 percent. The reduced bills were said to take effect this month.

Sea Cliff Mayor Edward Lieberman said, “I am pleased with the steps the state is taking to uncover what has transpired in an effect to benefit ratepayers in our community.”

Last October, the village included the Public Service Commission, which operates under the authority of the Department of Public Service, in a lawsuit against NYAW. Village Administrator Bruce Kennedy said he believes the investigation is a result of the suit.

“We appealed to the Office of Real Property Tax Services in 2014, after we reviewed the assessed value of New York American Water properties that year,” Kennedy said. The value of the company’s properties and assets in the village had jumped from over $10 million in 2013 to roughly $22.08 million in 2014, he added, with no “rhyme or reason.” That value is expected to drop to around $15 million this year.

After years of questioning the company’s assessments, Kennedy said he was glad the state is finally taking action.

Although Montesano was also pleased to hear the news, he said that the investigation would be “just the tip of the iceberg.” “We’re going to encourage the PSC to look at more issues,” he said.

Montesano added that an investigation into the company’s accountability would help the prospects of a bill he has proposed that would require the state comptroller to conduct audits of private water companies. “The PSC has auditing ability over New York American Water, but they only assess the information the utility gives them,” he said.

Community activists also supported the DPS’s decision to open an investigation, but said that this is only one battle in a long-fought war over water. “American Water’s failure to accurately report property value assessments to the PSC is a clear example of their pattern of dishonesty,” said Bill Mozer, of Glen Head. “Our community leaders will continue with efforts to ultimately condemn, take over American Water by eminent domain and operate their assets as a [public] water district.”

Agatha Nadel, of Glen Head, said that although she thought the investigation would be helpful, she and other ratepayers would not be satisfied until there is a public takeover of the company. “They realized that we weren’t going away, and they wanted to fess up to this and make it look like now they’re giving back to us,” Nadel said. “There’s still three more years of rate increases, and I’m sure if we didn’t yell and scream that this would continue.”

Despite reduced surcharges, ratepayers in the Sea Cliff district still pay at least five or six times higher rates than residents served by public water municipalities. Civic groups have demanded that local and state politicians order a government takeover of NYAW and replace it with a public municipality. A takeover would require either the state or the Town of Oyster Bay to issue a bond that would be paid off over the course of 30 years either by the state or residents.