Control board rejects sewer privatization contract

Shortly before Nassau County Executive Edward Mangano hosted his third public hearing on a proposed public-private partnership for the county sewer system on May 17, the Nassau Interim Finance Authority rejected the county’s contract to pay financial adviser Morgan Stanley & Co. to assist with the deal.

Under the proposed contract, the county would pay Morgan Stanley $5 million, or .75 percent of the sewer deal, whichever was higher, as part of an arrangement to lease the county’s sewage-treatment plants to a third-party financier. The county would retain ownership of the plants, but they would be operated by New Jersey-based United Water Services Inc. NIFA members voted against the deal 5-0, with one abstention.

One member of the authority, George Marlin, described the sewer plan is an “ill-conceived, backdoor borrowing scheme.” “As for the county’s so-called ‘debt-reduction plan,’” Marlin said, “in my 35 years as an investment banker, I have never come across such an ill-conceived plan. It is an example of bad public finance and, if implemented, will give private-public partnerships a bad name.”

Mangano said that Morgan Stanley would have helped the county prepare a request for proposals in order to move forward with the transaction. “I did have an opportunity to review some of the comments that the members made …,” he said of NIFA’s decision, “and it is clear from their comments that they did not understand this transaction.”

NIFA member Christopher Wright countered that he and his colleagues had no problems understanding the proposal. “It’s been suggested to us that one of the problems NIFA has with the project is that we don’t understand it,” Wright said. “I would suggest to you that the problem we have with the projects is that we do understand it. It’s not a partnership.”

Mangano said that the authority’s decision would not derail the proposal to privatize the sewage plants. “We are going to try to get the correct facts to NIFA, and we’ll be talking with Morgan Stanley,” he said. “We are not of the opinion we should summarily dismiss this option.”