UPDATE 1-NY Nassau Mangano to revisit sewer privatization plan

Thu May 17, 2012 8:24pm EDT

By Joan Gralla

May 17 (Reuters) - New York's Nassau County Executive on Thursday vowed to revisit his plan to privatize the county's sewer and wastewater authority after a state control board rejected the contract for Morgan Stanley to serve as an advisor on the deal.

Republican Mangano had planned to privatize the sewer authority and use the money raised to cut the county's debt by 25 percent, to $2.25 billion from $3 billion.

However, the Nassau Interim Financial Authority, a state overseer that was created in 2000 to prevent Nassau from going bankrupt, rejected the Morgan Stanley contract. Its officials were not immediately available to comment.

"I have every intention of revisiting this debt reduction and sewer stabilization plan with (the) Nassau Interim Financial Authority," Mangano said in a statement

Some board officials have criticised the proposed sewer deal as a one-shot that would fail to solve the county's long-term gap between its revenue and spending. Democratic legislators, who are in the minority, also have opposed the transaction.

The Democratic Minority Leader, Kevan Abrahams, said the sewer deal was "dead."

"It was an unnecessary and unwanted proposal that would have saddled a generation of Nassau residents with more debt," he said.

Morgan Stanley declined comment.

Nassau, located on the western half of Long Island, is one of the nation's wealthiest counties but it must close a $310 million deficit this year in its $2.6 billion budget. Mangano has had previous clashes with the state control board.

United Water, a unit of Suez Environment Company SA , was chosen in early May to operate the sewer system, which county officials say will go bankrupt in 2014.

Mangano said the state control board had failed to understand public private partnerships, and defended his position that the proposed deal was not a borrowing.

"The Nassau Interim Finance Authority board is clearly confused about the potential public-private partnership for Nassau's sewage treatment plants - which are in a state of disrepair and face fiscal crisis," he said.

"The public-private partnership is not a loan or borrowing."

Separately, the control board approved the sale of $220 million of revenue anticipation notes, a source familiar with the matter said. The deal is expected to hit the market in June, and it will be negotiated, said the source, who requested anonymity.