State Finds Public Takeover Of NYAW Would Lower Rates

MERRICK, NY — A study released today by the New York Department of Public Service found that a municipal takeover of New York American Water was feasible, and could lead to significant savings for customers. However, it would could come at the cost of slightly increased taxes for others.

The study made two main recommendations to state lawmakers: to pass a law that would stop an upcoming rate increase on New York American Water customers, and to create a new public authority that would then purchase NYAW's assets. The new authority, which the report named the Nassau County Water Authority, could then run the water system itself, or contract out to other entities.

"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," Gov. Andrew Cuomo said in a release. "The study issued today shows how the dramatic tax burden locally is contributing to 30 to 50 percent of customer bills and provides stakeholders with a pathway to resolve this problem once and for all."

The immediate concern, the report said, is a rate increase of about 26 percent that is scheduled to go into effect for NYAW customers on May 1. As a private utility, NYAW has to pay taxes that public utilities don't. After it completed much-needed infrastructure improvements in 2017, the assessed values of the utility's assets increased. The rate increase was supposed to go into effect last year, but it was delayed to May 1.

The report recommends the state Legislature pass a bill that would eliminate the property taxes on water companies in Nassau County. The bill could phase the reduction in over a few years to minimize the impact on taxing entities in the area. This action is separate from municipalizing the utility, and could save NYAW ratepayers nearly $250 annually. According to the report, NYAW property taxes make up 38 to 60 percent of ratepayers' bills, depending on the area where they live.

This action could lead to slightly higher taxes (about $25 on average) for non-NYAW customers, the report says. However, the report says it could be mitigated by other actions in the Legislature.

The report also studied several scenarios surrounding the future of NYAW, including municipalizing the utility, and its sale to another private company. Liberty Utilities is currently in the process of buying NYAW, but that sale is on hold and is being reviewed by the Department of Public Service. Liberty filed a letter with the department earlier this month against municipalization.

If the tax break was passed and NYAW was acquired by Liberty, ratepayers would see a little more savings, the report said — about $300 annually. But the largest savings for ratepayers came from municipalizing the water service, which would save them about $433 annually on average.

Municipalizing the water service would require a public entity — like the proposed Nassau County Water Authority — purchasing New York American Water's assets, or acquiring them through eminent domain. Once that was done, the authority could either run the system itself or contract the work out to other entities.

A county-wide water authority could achieve better savings because of its size, the report says, and lead to the lowest costs for everyone.

"Gov. Cuomo's charge was simple: will public water — in whole or in part — lower rates without compromising safety or service for New York American Water's customers?" said Special Counsel for Ratepayer Protection Rory I. Lancman. "Our findings are that it will, under a variety of scenarios, coupled with the meaningful property tax reform the governor is also proposing. A new Nassau County Water Authority will give decision makers the vehicle to make an informed judgement on how best to act on the study's findings."

New York American Water, which has its Long Island office in Merrick, services customers in Merrick, North Merrick, Bellmore, North Bellmore, Wantagh, North Wantagh, Seaford, Sea Cliff, Glen Head, Glenwood Landing, and parts of Massapequa, Massapequa Park, Levittown, Hempstead, Oyster Bay, Old Brookville, Roslyn Harbor and Glen Cove.

You can find the full, 105-page report by clicking here.