Trust that the Suffolk County Water Authority (SCWA) offers the best path forward for the West Neck Water system appears to be growing as completion of a long-term deal approaches.
From the WNW board chair to the Town Engineer, the word is SCWA’s 40-year operating agreement can bring major improvements to the 71-customer district that are beyond the Town’s capacity to provide.
Lisa Shaw, who heads the WNW board, said in a phone interview on Sunday that she’s come a long way in her estimation of SCWA.
“I might have started out as not a proponent of Suffolk County Water Authority,” she said. “I have since learned that my assumptions — my presumptions — were wrong.”
“The way it stands right now, we are not considering taking the district back and running it ourselves,” Shaw said. “It’s been demonstrated that that isn’t the most expedient way to go.”
Likewise, Town Engineer Joe Finora has told the Town Board the SCWA deal is the best option.
“Shelter Island Town does not have the resources to embark on any other path for WNW, nor does any other path offer comparable costs and long-term advantages as SCWA,” he said in an email Friday.
For its part, the SCWA board was expected to act on a resolution to extend the Monday, February 28 end date for its short-term commitment while its legal department works out details in the long-term agreement.
[Editor’s note: Town Attorney Stephen F. Kiely has confirmed that SCWA’s board has extended the short-term deal until the 40-year agreement is approved.]
“I think we’ll be able to get some confirmed language and a contract we can all agree with by the end of the week,” Shaw said Sunday.
SCWA’s proposed 40-year lease agreement
Following the retirement of the longtime water manager last summer, the Town hired SCWA to run the district for six months, intending to possibly engage the authority for the long term.
Toward that end, SCWA assessed WNW’s capital needs and determined about $1.7 million in infrastructure updates are required to bring the system into compliance with state and federal codes for public water districts, and its own operating standards.
Shaw said WNW had independently arrived at a lower figure — $1.2 million. But that plan involved a long-range piecemeal approach to improvements and didn’t include operator costs. It was understood, she said, that SCWA had “to come up to their level of comfort.”
The improvements — to be installed within five years — include a new well and distribution equipment. WNW customers are supposed to pay all district expenses under the 1995 Town resolution that formally established the system. The Town has agreed to seek grants to offset the capital investment, easing the impact on ratepayers.
“Looking at all the factors, even though it’s more costly to go with SCWA, it is the more beneficial step for the district to take,” Shaw said.
An independent public-benefit corporation operating under New York State’s Public Authorities Law, SCWA serves approximately 1.2 million Suffolk County residents. One of the largest water suppliers in the state, the not-for-profit authority was established in 1937. Here on Shelter Island, it already operates the Village of Dering Harbor water system.
SCWA’s proposed contract takes the form of a lease agreement because the Town retains ownership over WNW system (its wells, equipment, easements, etc.) but extends to SCWA leaseholder status for a limited time. SCWA will upgrade the system, but any changes become the Town’s property upon the termination of the agreement (with numerous conditions and caveats).
The two parties to the agreement are SCWA and the Town; the WNW board would retain its advisory-only capacity. While not a party to the contract, the WNW board contributed extensive feedback at recent meetings held to refine the agreement.
For many, SCWA symbolizes the world beyond our Island’s shores. As a result, the WNW discussions have focused on how to use the lease agreement to implement some control over SCWA for any future activities here on the Island.
What’s covered, and what’ll it cost?
The deal covers operations within the WNW district, allowing for customer expansion only inside the current boundary. So, for example, if a WNW customer legally subdivides a parcel, any new lots created would also become WNW customers.
WNW customers would pay a surcharge for 25 years to cover the costs of the initial improvements, in addition to their metered water expenses. Metered water costs will be according to a base rate that applies to Fire Island and Shelter Island, where SCWA says its underlying expenses per gallon of treated water delivered are higher than elsewhere, due to the relatively small size of the systems. The Town would retain a role in establishing specific rates for WNW customers — residential and commercial.
SCWA would absorb any future capital costs, sharing them across its full distribution network.
The proposed agreement includes options for either party — SCWA or the Town — to end the deal at any time, with conditions in place to ensure the Town reimburses SCWA for any un-amortized costs associated with its initial $1.7 million investment. (If the outlay is less, SCWA will adjust the surcharge accordingly.)
A rough estimate of the impact on billing showed residential customers’ average yearly costs rising from about $604 to $1,213 with SCWA and $1,515 with Town-financed upgrades. That is, residential customers would pay about twice what they do now to get the enhancements under SCWA, but two-and-a-half times as much under a Town-financed scheme.
In his email on Friday, Finora noted that the rough estimate didn’t account for numerous costs associated with creating a water department, including hiring personnel qualified to operate it. If the Town were to finance the upgrades and run the system, the likely overall costs to customers would be substantially higher.
Clause-by-clause analysis
“As the end date of the short-term contract approaches,” Finora said in the email, “it is critical that we maintain operations by a competent, qualified outfit, and not use this an opportunity for leverage to negotiate.”
He referred to quixotic efforts to insert contract language to give the Town more control over SCWA operations elsewhere on Shelter Island, now or in the future.
Shaw said she’d learned during a clause-by-clause review that SCWA is unlikely to give up powers it possesses stemming from its enabling legislation. But the WNW board “wants to get the best service not just for the district, but also for the Town.”
For example, Shaw sought to guarantee “Town approval” of SCWA actions both within and outside the WNW district. During a February 7 meeting, SCWA attorney Timothy J. Hopkins said the authority would not alter the agreement so as to diminish its powers outside the WNW boundaries.
SCWA has the exclusive authority within Suffolk County to develop water systems where they do not currently exist. While it generally works by invitation and with the cooperation of local authorities, it does not need the consent of a municipality when it sets up new water systems.
“We’re not going to subject ourselves to the approval of the Town of Shelter Island with respect to our entire water operations,” Hopkins said, adding SCWA would gladly notify the Town of actions within the WNW district.
One area of concern was SCWA’s siting of future wells. But Hopkins said the state Department of Environmental Conservation has a long-standing process to vet concerns relating to well permits. As a result, anyone with competing interests regarding the allocation of the state’s water resources — including the Town of Shelter Island — could air their objections.
To interconnect or not?
Hopkins also said SCWA wanted to retain a clause allowing it to interconnect the WNW system to another in the future. Enabling such connections is good public policy, he said.
“To restrict the ability to interconnect adjacent systems would be foolish from a public water supply perspective,” he said.
And, the Town Engineer pointed out that interconnection cuts both ways; it also provides WNW with capacity in case of emergency. “It’s a mutually beneficial connection,” Finora said.
“We all understand how beneficial interconnections are,” Shaw said. But she argued the clause was unnecessary because the only nearby public water system is run by the Shelter Island Heights Property Owners Corporation (SIHPOC), which does not want to interconnect.
“We don’t force people to do things,” Hopkins said. “But if they lost a well or two and we were adjacent and they needed water in an emergency, they’d want to interconnect. For operational purposes, it is the prudent thing to do.”
What’s more, SCWA may wish to interconnect with another system that it operates elsewhere on the Island in the 40-year time period covered by the agreement, Hopkins said. “We do that with almost all of our systems.”
Andrew Chapman is a Heights resident with a background in water policy. Both he and Shaw were appointed to the Town’s Water Advisory Committee in October, and he contributed significantly to the lease discussions. Chapman said issues like interconnection “go beyond” the WNW system’s immediate need for an operator.
“If the Town wants to look at this as ‘Step One’ of an Island-wide strategy, okay — fine,” he said at the February 7 meeting. But alternatively, the clause could be added later, if it becomes necessary. WNW board member Robert Lipsyte agreed, saying, “I’m not so paranoid to suggest that Suffolk County Water Authority is massed like Russia on the Ukrainian border looking for water,” but why go beyond the immediate needs of the WNW district?
SIHPOC General Manager Stella Lagudis said “an interconnect isn’t just a magic wand. Obviously, you’d have to do work in order to make that happen. If we’re going to be working on making that happen, we can cover it in a separate agreement, or a different agreement, or amend this agreement.”
SCWA won’t export water from Shelter Island
Shaw told Hopkins that WNW customers are also concerned about trucks filling up at hydrants (none exists now, but may in the future). She said SCWA allows permit holders to “open up a hydrant and take water from a district for another purpose other than providing water to the customers of that district.”
“That’s what we are trying to prevent from happening,” Shaw said.
Hopkins said SCWA encountered a similar concern from residents of Southold, where tanker trucks were filling up from hydrants to supply swimming pools — even pools on Shelter Island.
“We limited that to one location in the Town of Southold,” Hopkins said. “And that was so we could better monitor the scope of the withdrawal. We would agree that we wouldn’t allow any of that to happen within the West Neck Water district.”
Lagudis recalled incidents where tanker operators attempted to pump from Heights hydrants. Hopkins said SCWA has no authority over the Heights district but would notify its hydrant permit holders that no pumping is allowed at any Shelter Island hydrants.
SCWA CEO for Operations Joseph Pokorny was also on that Zoom call. He said a truck was stopped last summer while filling up at a Dering Harbor hydrant. He said SCWA had not adequately notified its permit holders that hydrants there are off-limits, but has since taken corrective measures.
Hopkins said SCWA would not permit the export of water from Shelter Island.
“The resources of the Town of Shelter Island are barely sufficient for the Town of Shelter Island,” Hopkins said. “So there’d be no plan to transfer water off the Town proper, either by tanker truck or other distribution methods.”
New Town Attorney weighs in
At a February 17 meeting, new Town Attorney Stephen F. Kiely was emphatic that further lease suggestions should focus solely on issues within the contract.
While it has “very, very broad powers,” in this specific case, SCWA may take charge of the Town-owned system only with Town Board consent. “So here, the Town must be a willing dance partner for the SCWA to lease the WNW supply system.”
Peter Grand, chair of the Town’s Water Advisory Committee said he took Kiely to mean: “Right now, we have the maximum negotiating leverage.”
“We do have some leverage,” Kiley said. “But you don’t want to cut off your nose to spite your face.”
Kiely cautioned WNW customers to temper their expectations. “This lease only deals with your district,” he said.
Shaw asked Kiely whether WNW could maintain its own rules and regulations or would SCWA’s rules and regulations supersede them. Kiely said it was unreasonable to expect SCWA to apply a separate set of rules and regulations to WNW, but now was the time to suggest a continuation of specific rules — such as water conservation measures.
However, Grand wondered aloud whether the Town should retain control over WNW and possibly have an advantage should SCWA later be called upon to provide service elsewhere on the Island.
Finora pointed out that the Town is at an immediate disadvantage as it needs an operator for the WNW system — right now.
In his email to the Town Board on Friday, Finora reiterated the point.
“Shelter Island Town does not have the resources to embark on any other path for WNW, nor does any other path offer comparable costs and long-term advantages as SCWA.”
No reprieve
At the February 17 meeting, Finora also rejected Grand’s suggestion that SIHPOC could step in to control the system while WNW worked out the preferred contract language. Finora said that “from a safety perspective and public health perspective, it’s bad practice to turn over infrastructure systems of this scale on such short term.”
What’s more, Finora said SCWA charges a higher rate for short-term operating agreements and has waived its $30,000 fee for the past six months in anticipation of securing a long-term deal.
In Friday’s email, he doubled down on this issue.
“Changing operators requires state and county approval, acceptance of all compliance obligations, and acceptance of all liability for system operation,” Finora said. “Ad-hoc operation will leave the Town vulnerable to tremendous liability, both from financial penalties as well as public health.”
A permissive referendum, now and then
While it seems the Town and SCWA are going to be “willing dance partners” and sign the 40-year lease, there’s a risk the agreement could be overturned in what’s known as a permissive referendum.
State law requires that when the operator of a public water system proposes significant changes to the district, customers have an opportunity to petition for a public vote. In this case, if the Town Board were to approve the SCWA lease, the Town Clerk would advertise that WNW customers have 30 days to petition for a public referendum.
The same mechanism applied when the Town first took over the system in 1994.
At that time, John Hallman volunteered to operate the system until the Town could set up a water district. The Town Board enacted a resolution to establish the district and borrow $8,000 in associated expenses (to be paid back by the 52 customers).
Until that summer, the system was run by its founder, William O. Payne, to share water in areas where mica in the soil made it difficult to locate wells. Payne, facing $30,000 in DEC fines for not having a permit, had been threatening for months to abandon the system then known as the West Neck Water Company.
SCWA expressed an interest in acquiring both the West Neck Water Company and the Heights water system (also operating at the time without a DEC permit). But in both cases, SCWA said would not do so unless invited by the Town Board. According to news reports, Town Board members — concerned about losing control of Island development — opposed the SCWA takeover of either system.
SIHPOC is a private company, and when a majority of its residents voted against the Heights SCWA proposal, the matter was closed.
However, the Town Board’s decision to establish the WNW district was subject to a permissive referendum. Then, as now, after the board adopted its resolution, the district customers could gather signatures demanding a vote.
With just one ‘vote’ per household, five percent of customers had to sign. Nevertheless, a sufficient number of customers signed the petition to force a public referendum held during the 1995 general election. In all, 764 voters supported establishing the district, and 350 voted against it.
Meantime, Hallman had been hired as the district water manager, and it was his retirement last July, that prompted the decision to seek SCWA’s expertise.
Different time, attitudes, and price tag
But all these years later, there’s a significant difference in attitudes among the WNW and Town boards.
“It’s been an educational process for me and for the board,” Shaw said Sunday. “We didn’t go into it wanting this to be the option. But pretty much all of us now agree that this is our only option.”
And no Town Board member has publicly opposed SCWA’s proposed 40-year lease agreement. Instead, they’ve been generally supportive of engaging SCWA, not only for the WNW system but to address burgeoning water problems in other neighborhoods.
Another major difference is the cost.
In 1995, the Town Board needed $8,000 to set up the new water district, and ratepayers would spend 10 years paying down a $59,000 bond. Today, the estimated capital improvements alone are $1.7 million, plus the ongoing costs of running the district in-house.
“We have always operated independently, and we’ve done a very good job,” Shaw said Sunday. “But we felt really stopped by not having a water operator — that being a very big obstacle to overcome.”
So what happens next?
If the Town Board enacts a resolution to accept SCWA’s 40-year operating agreement, and no one protests within the 30-day period, the lease will go into effect. Likewise, if enough WNW customers decide to protest, the Town holds a public referendum, and voters accept the SCWA agreement, the Town of Shelter Island will be out of the water business.
But, if voters reject it, the Town would have to find a short-term operator while forming an internal water department and hiring qualified personnel. According to Finora, the only alternative would be to “sell” the district to a private entity, assuming the Town could find one willing to take it on.
“The immediate needs of the system combined with the inability of the Town to meet those needs creates a situation where a rejected contract with SCWA will have a long-lasting, potentially irreparable impact to the customer base and even other Islanders,” Finora said in his email.
In a bizarre twist, if as a result of all these costly machinations WNW became a private entity, SCWA would then have the authority to simply take it over.
Not alone in water challenges
Shelter Island isn’t the only community facing water challenges.
“Water infrastructure replacement will be very expensive,” NYS Comptroller Thomas DiNapoli said in a 2017 report that’s proving prescient here. “Local governments face potential costs that are many times their current annual water budgets.”
“For local governments that have been making only minimal investments in their water systems, it may be difficult to quickly and effectively develop the oversight, planning, and financial capacity needed to deal with these problems.”
No option to disconnect
During lease negotiations, Shaw and others expressed concern that district ratepayers might dig their own wells instead when faced with higher costs. But as in the 90s, there is no option to disconnect from the WNW system.
Under state regulations, enforced locally by the Suffolk County Department of Health Services, construction of new wells is possible only where no public water supply is available. (See “Private Water System Standards” report on the county website for more details.)
“Dismantling the district is not an option,” Finora said in his email. State and county regulators “will not allow such action by a municipality.”
Be heard
“This is an Island-wide issue,” Shaw said. “People are asking questions that will project into the future. How will this affect Shelter Island?”
Shaw said she’s heard a wide-ranging spectrum of opinion. There are those who say: “Well, this is a great thing because it means that those people in those hard-pressed areas that are having trouble with water, can then have the benefit of having SCWA come in and establish a district in their part of the world.”
And the other side of the spectrum is: “Yes, but it can inadvertently encourage development.”
“When we entered into the conversation in July, I didn’t want to have an agreement with them,” Shaw said. “But as we’ve gone through this, it’s been an educational process for me personally, and I think for the [WNW] board. We’re not adversarial.”
Supervisor Gerry Siller said the Town Board will hear an update about the SCWA lease at the next work session, Tuesday, March 1 at 1 PM. Attend at Town Hall, or via Zoom. Find log-in details here.
You can see the latest version of the draft agreement on the Town’s West Neck Water page. The Town Attorney is still working on the draft, so it is subject to change.
