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New York Considers Water District Takeover In Nassau County

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New York is recommending a full public takeover of a Nassau County water distributor to decrease the cost of water for residents.

According to a study conducted by the state Department of Public Service, the municipalization of the New York American Water Authority, an investor-owned utility which has 124,000 customers in Nassau County, would be “both feasible and, under a variety of scenarios, in the public interest.”

The study recommends that the state Legislature establish a Nassau County Water Authority, a quasi-public agency, and buy New York American for $800 million, which includes the cost of transitions and possible expansions.

"Customers of New York American Water have been unduly burdened with exorbitant rates for the water they use on a daily basis, driven largely by costs having nothing to do with the provision of water," Governor Andrew Cuomo said in a statement.

The new water authority would either be run independently or by contract with another operator, according to the study.

The Suffolk County Water Authority has filed a proposal to assist with the operations. On top of their primary water district in central Suffolk County, they also operate six other public water systems and are the highest-rated public utility authority in the state in terms of bonds by Fitch Ratings.

“Clearly a problem exists in Nassau County,” Jeffrey Szabo, the authority’s chief operating officer, said last week before the release of the study. “A problem exists from a cost perspective for the residents that are presently served by New York American. And if we can provide some guidance or some expertise and provide safe, affordable drinking water in some fashion, we’re here to help.”

The study recommends that the process of the state acquisition start as soon as possible, as the New York American’s rates are scheduled to increase on May 1. The public takeover would save customers an average of $433 a year at most with more than half of those savings from making the company tax exempt.

Only 4% of New Yorkers get their services from investor-owned utilities, who do not have the same tax exemptions as those owned by governments. The lack of tax exemptions put more burden on customers, who often have to offset the company’s taxes through their utility bill. These taxes account for between 38% and 60% of New York American customer’s water bills, according to the study.

State Senator Jim Gaughran has long called for a public takeover. He previously sponsored legislation to create a North Shore Water Authority, modeled after the Suffolk County water authority.

"For years New York American Water has exploited Nassau County residents for the most basic of services — water,” Gaughran said. “That's why I'm fighting to once and for all get rid of American Water and offer a public water service. Put simply, access to water is a basic human right."

The study also recommends a phased reduction or elimination of local property taxes on Nassau County’s private water companies to take the burden off their customers. The state would supplement the lost tax revenue with increased taxes on other utilities in the district.

The study also proposed several alternatives to the purchasing of New York American, including being dissolved and acquired by the surrounding water districts; a hybrid local-state acquisition and ownership; or just instituting the tax reduction without dissolving the private utility company.

New York American is in the process of being sold to Liberty Utilities. The state Public Service Commission denied the company’s first acquisition request for $608 million last October 25. The state said the transaction did not meet the public interest standard requirement.