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Study: Hempstead acquisition of NYAW ‘feasible’

Advocates want findings released

Posted

A study conducted by Walden Environmental Engineering has determined that New York American Water ratepayers in the Town of Hempstead would see savings between $70 and $383 a year if the town acquired a portion of the private utility’s Nassau operation, which was proven to be “feasible,” according to Newsday.

The Herald requested a copy of the study from the town, but had not received it by press time on Tuesday.

Walden’s findings contradict a Dec. 31 letter from the town’s water commissioner to the state Public Service Commission, NYAW’s regulatory arm. In it, Commissioner John Reinhardt wrote that such savings would be “diminutive” compared to the almost $500 million cost to acquire the system. The study concluded that the acquisition would cost closer to $465 million.

NYAW services roughly 113,000 households in the Town of Hempstead.

Reinhardt explained to the Herald that Walden used three different methodologies to conduct its study, which determined a range of valuations of NYAW’s Nassau operation based on comparative sale ($420.4 million), asset cost ($540 million) and income methods ($598.1 million). “The $465 million is the weighted valuation of those three,” he said, “which falls far short . . . of the actual selling price of the company at this point in the Liberty transaction.”

The town hired Walden to conduct the study last August after advocates called on the PSC to consider alternatives to American Water Works’ proposed sale of its New York operations to Liberty Utilities, another private entity. The $608 million deal, announced in November 2019, stipulates a statewide acquisition of the company’s assets by the Canada-based utility. 

Although Walden’s study has been filed with the PSC, it is not on the state agency’s publicly facing filings for the case, Newsday reported. Claudia Borecky, the co-director of Long Island Clean Air Water and Soil, a Merrick-based advocacy group, said she requested a copy of the study from the town back in October, when it was set to be completed, but has yet to receive it.

“Our research showed that there would definitely be a savings” for customers under a public takeover, Borecky said. “That’s why we wanted to see what Hempstead came up with, but they don’t want to admit that it will save us money.”

CAWS Co-Director Dave Denenberg was able to assess the Walden study, but declined to disclose his source. He said that even if the acquisition required a 30-year payment in lieu of taxes, or PILOT, agreement, based on Walden’s numbers, “every ratepayer would save.”

But Reinhardt’s letter tells a different story. “While a municipal takeover without . . . PILOTS would reduce water bills,” he wrote, “it would not result in a net cost reduction to customers as they would absorb these costs in their own property tax bills.”

NYAW President Lynda DiMenna said that while the company is still evaluating the results of Walden’s study, it believed the Liberty deal is still the best option for local ratepayers. “The fastest way to achieving more affordable water service   . . . is to address the special franchise tax that is unfairly levied on our customers, which makes up a significant portion of our customers’ bills,” DiMenna said in statement.

Legislation to eliminate those franchise taxes was introduced in the State Senate last year by Sen. Todd Kaminsky, a Democrat from Long Beach, and co-sponsored by Sen. John Brooks, a Democrat from Seaford.

Although Brooks has yet to see Walden’s study, he questioned the veracity of the findings. “One of the unknowns is who owns the assets of New York American Water,” he said. “If we, the ratepayers, own it, that changes the cost study dramatically.”

Brooks said he would write to the PSC this week, requesting that it determine ownership of NYAW’s assets, which he believes is the utility’s ratepayers. Referring to the company, he said, “They can never say they paid for anything — they made a profit on everything.”

Reinhardt said that a public acquisition of NYAW’s Hempstead operation would require a much larger entity. In his letter, he demanded “state involvement.”

“The big issue is the difference between feasibility and prudency,” he told the Herald. “Dollar for dollar, [the acquisition] may show a cash wash, but based on residents’ complaints through the years, there is obviously a need to continue to create improvements to the system. Even with local control, the town would have to use cash savings to drive improvements, which don’t come for free.”