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State to study NYAW takeover

Governor: Special counsel to oversee proceeding

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Gov. Andrew Cuomo announced Feb. 3 that the state Department of Public Service will look into the feasibility of municipalizing New York American Water, the privately owned utility whose service and water bills have long been decried by Nassau County customers. Cuomo had originally announced legislation on Oct. 28 calling on the state to examine the feasibility of a public takeover of NYAW’s infrastructure in Nassau County.

The study will assess different avenues to reduce customer costs — which in some cases are nearly five times more than the price of municipally owned water — including a public takeover. The announcement comes after two independent feasibility studies, both conducted by Walden Environmental Engineering, determined that local ratepayers in NYAW’s Sea Cliff Water District and Town of Hempstead territories would see a reduction in their water bills through a public acquisition of the company.  

“For far too long, the 120,000 customers of New York American Water on Long Island have been plagued by exorbitantly high rates for water — this simply cannot continue,” Cuomo said in a news release. “New Yorkers deserve access to clean, safe and affordable water, and we are going to pursue every avenue to make that happen.”

Rory Lancman, special counsel for ratepayer protection, will oversee the study, which is set to be completed by April 1. The proceeding will include a series of virtual public hearings at which residents and elected officials can offer comment.

In an interview with the Herald, Lancman said the state’s study will consider whether municipalizing all or part of NYAW’s system would be feasible and more beneficial for ratepayers. This comes after advocates called on the DPS to reconsider a proposed sale of American Water Works’ New York operation to Liberty Utilities, another private entity, which was announced in November 2019. The department is currently reviewing the details of the $608 million deal.

“Our examination of the feasibility of converting American Water to municipal control is going to factor in the value of the assets that exist and, realistically, be cognizant of the role that ratepayers have played in making American Water a company that [Liberty] is willing to pay hundreds of millions of dollars for,” Lancman said.

Walden concluded that Sea Cliff ratepayers would see a savings between $430 and $492 a year if the the district acquired its portion of NYAW’s Nassau operation.

In a statement, NYAW President Lynda DiMenna said the issue of affordability depends on a special franchise tax — which accounts for a significant portion of customers’ bills, she said — not who manages the system. A public takeover, she said, is not “financially prudent.”

“A public takeover would lead to an increase in the debt service obligations of Long Island residents by hundreds of millions of dollars,” DiMenna said. “The best path forward for our customers is the elimination of that special franchise tax combined with completing the sale to Liberty Utilities.”

On the North Shore, Sea Cliff’s elected representatives, including State Sen. Jim Gaughran and Assemblymen Charles Lavine and Michael Montesano, have been vocal supporters of public water. Last July, a bill establishing the public North Shore Water District, authored by Gaughran, passed in the State Senate.

A companion bill was presented to the Assembly by Lavine around the same time but did not pass by the end of the year. New bills will be presented to the Senate and Assembly this year, and if they pass and are signed by Cuomo, an authority could be established by April.

Montesano said he wants to see the Assembly bill passed as soon as possible, with relatively few changes to Gaughran’s bill. He is concerned that the governor’s study could delay the establishment of a public water authority, he said, as Walden’s study should be enough to convince the state that public water is possible. If the Senate and Assembly bills were to pass, he said, a district could be created immediately, as opposed to having to wait until April.

Bruce Kennedy, Village of Sea Cliff administrator and president of the public water advocacy group North Shore Concerned Citizens, had questioned whether the state’s study would happen, since over three months had passed between Cuomo’s original Oct. 28 proposal and his announcement last week. Nonetheless, he said he is satisfied with the news.

“I’m very elated,” Kennedy said. “He had promised that he was going to this a while ago, and it became questionable whether he was going follow through or not, and I am more than happy that he has followed through on his word.”

Kennedy said he was also pleased to hear that Cuomo is questioning who owns NYAW’s Long Island infrastructure. Whenever there is a sale of Long Island’s private water infrastructure, he noted, it is ultimately the ratepayers who foot the bill. 

Walden’s study determined that it would cost less than $20 million for the public to acquire NYAW’s North Shore infrastructure. Kennedy said the governor’s study could confirm that ratepayers already own a large percentage of the infrastructure, so it could cost even less to take it over. He said he hopes Cuomo’s study helps the governor recognize the value and necessity of establishing a centralized municipal water district for all residents currently paying rates to NYAW for water, which he described as a “required part of life.”

NSCC Director Agatha Nadel said the news of the state’s study is “terrific,” especially considering how negative most news has been during the coronavirus pandemic. She is especially excited by the fact that the study is to begin immediately, she said, as opposed to being stuck in the legislative process.

Nadel said she was also pleased to see that Cuomo is questioning who owns NYAW’s infrastructure. Given the amount of money that ratepayers have paid NYAW over the years, she said, she would not be surprised to hear that they own a sizable portion of it.

“There are no words to accurately describe how thankful and grateful I am to Governor Cuomo for his sense of urgency and for all our elected officials who have worked with NSCC and the Village of Sea Cliff to get these things done,” Nadel said.

George Pombar, an NSCC member and president of the Glen Head-Glenwood Civic Council, said the association has been fighting for public water for over five years and that Cuomo’s announcement seems like a miracle. It seems as though the effort may finally be coming to a positive conclusion, he said.

“We’re thrilled,” Pombar said. “April 1 is right around the corner, so we are very, very happy to see it . . . We’re very hopeful that this is going to be the year.”