Statement by

George J. Marlin

Director

Nassau Interim Finance Authority

 September 2, 2011

It is essential for Nassau taxpayers to understand that the County’s initiative to privatize the waste water system is not a slam-dunk.  There is no guarantee that a transaction can or will be finalized in 2012 or anytime thereafter or that the County will net the $375 million presently included in their 3-year fiscal plan.  That is why I support the NIFA resolution calling for contingencies amounting to $150 million of revenues acceptable under applicable GAAP treatment in their 2012 plan.

Before any privatization transaction could be completed, a number of major issues must be addressed.  They include the following:

1)   The County must determine if the state legislature and the Governor must approve changes in Title 10-D of the New York Public Authorities law that created the Nassau County Sewer and Storm Water Finance Authority.  I specifically refer the County to Section 1232-d, Paragraph 10 of the enabling legislation.

2)    The County must determine if a wastewater privatization agreement requires the approval of the New York Public Service Commission.

3)   The County must determine if their expectation of netting $375 million from a privatization of the County’s wastewater system is achievable.  Proceeds from a transaction must first be applied to defeasing approximately $465 million of Authority and County bonded debt and interest payments to the first call date.  Only remaining proceeds, if any, could be transferred to the County’s operating fund.  

4)    The County must determine if the County Legislature is willing to approve a privatization agreement containing terms that convey to private sector operators the authority to impose, to set and, if necessary, to increase residential and commercial usage fees.  Presently, the County imposes on recipients of wastewater services assessment levies that are listed on the annual General Tax Bill.

5)    The County must determine if the County Legislature is willing to approve a privatization agreement which gives for-profit operators the right to reduce significantly, or to eliminate entirely, the number of union employees at waste water facilities.

6)    The County must determine if the County Legislature is willing to approve the use of any net revenues realized from a privatization transaction as a “one shot” to help balance the County’s operating budget.  “One shots” do not eliminate structural deficits and excessive reliance on them is frowned upon by rating agencies and financial analysts.

The issues I raise are important ones.  It is my hope that the County expeditiously addresses them.

 The following appears in the August 26-September 1, 2011 issue of the Long Island Business News:

In the dog days of August, bureaucrats at the Port Authority of New York and New Jersey released an edict decreeing tolls on the six Hudson River crossings must be increased for the third time in 10 years, in this case by a whopping 50 percent. If they were to get their way, to drive over the George Washington Bridge or to pass through the Lincoln Tunnel would cost $12. Fortunately, the governors of New York and New Jersey, who have veto power over agency actions, said, “No way,” and imposed a more modest increase to fund what they called “the agency’s fiscal mismanagement.”

After becoming executive director of the Port Authority in 1995, I quickly learned agency careerists believed the region’s commuters should consider it an honor to pay increased tolls to fund the authority’s fiscal and construction follies that have included the JFK “Tunnel to Nowhere,” the failed fish port, failed industrial parks and a language school. I also learned resources had been squandered to support an overpaid, bloated bureaucracy whose main concern was preserving their power, perks and pensions. During my tenure, I proved bureaucrats were not indispensible by improving services after eliminating 15 percent of Port Authority jobs and seven of the 14 layers of management between the executive director and toll collectors.

Today, P.A. elites are at it again. They claim that even though they have a zero-growth operating budget, have kept the headcount flat and total authorized positions are the lowest since the 1995 downsizing, they still need a toll increase. Their reason: an unjustifiable projected increase of 5 million autos and trucks utilizing the crossings did not materialize.

This excuse is a classic red herring that draws attention from the real issue. To expect toll collections to grow at all, particularly during a recession, is absurd. The P.A. bridges and tunnels, which have been operating for over half a century, are considered “mature businesses” that have reached maximum traffic flows. Hence vehicle usage has been relatively flat for over a decade. The real reason for the toll increase is ever-increasing cost overruns in the redevelopment of the World Trade Center facilities.

The most outrageous cost-overrun boondoggle is the lower Manhattan PATH subway terminal known as the “Transportation Hub.” The original $1 billion cost of this work of art masquerading as a subway station that caters to a few New Jersey suburban commuters during rush hours (50,000 passengers per weekday versus midtown Penn Station’s 500,000), has jumped to $3.4 billion. It will wind up costing $200 million more than the new One World Trade Center. How ridiculous is that!

Bureaucrats responsible for this mess should be fired and P.A. board members, who obviously failed in their oversight duties, should do the honorable thing and resign.

Another reason why the authority needs more money: their flagrant misuse of call-in agreements to cover temporary staffing services and professional, technical and advisory services, a.k.a. consultants. To maintain the public façade that the agency’s employee headcount is down, the P.A. has had 1,858 service contracts and call-in agreements valued at $4.38 billion in effect during the period April 1, 2006 through July 30, 2009. A scathing report released in July by state Comptroller Tom DiNapoli, reveals that the P.A. did not have documentation to justify the need for new or renewed contracts to the tune of $1.18 billion. This is an unacceptable misuse of toll payers’ hard-earned money.

The Port Authority is dominated by an arrogant political bureaucracy that believes it is not accountable to the people or their elected officials. To tame the authority, Govs. Andrew Cuomo and Chris Christie should order their board members to clean house and hire management committed to applying the same fiscal cost-cutting methods the governors applied to their respective state budgets.

Check out George Marlin’s new book Narcissist Nation:  Reflections of a Blue-State Conservative.