Private school tuition. Brunch for executives' wives. Thousands of dollars for golf balls. These are not country club member expenses. An I-Team investigation has found they are bills paid for by one of the region's biggest private water companies –- United Water.
The I-Team uncovered the expenses after regulators at the New York State Public Service Commission launched an investigation into the finances of United Water New York, a regulated utility that serves more than 70,000 customers in Rockland County and is a subsidiary of United Water. The inquiry follows the abrupt departure of the subsidiary's general manager.
Last month, United Water New York disclosed to regulators the company’s quarterly financial statements had been "materially misstated since September of 2010" resulting in $2.9 million that had to be written off. The utility said rate-payers were not affected.
Prompted by the disclosure of those financial irregularities, the I-Team examined a series of 2012 United Water invoices and found the utility paid about $80,000 in private school tuition for the children of executives and about $16,000 a month to rent a home for CEO Bertrand Camus. The company also spent a total of around $6,000 between two bills for golf balls that year.
Last summer, the utility asked for a 28.9 percent rate increase. New York utility regulators denied most of the rate request -– approving a rate increase of 13.3 percent, the statutory minimum. During hearings on the rate request, regulators challenged about $57,000 in expenses submitted by United Water New York to pay for “holiday parties, award events, gifts, etc." Regulators also criticized money spent on a "wives breakfast" and on "alcohol" for social events.
“The rate-payer shouldn’t be billed for alcohol. They shouldn’t be billed for private school tuition. They shouldn’t be billed for golf balls for social events where executives get together,” said John Tormey, a citizen lawyer who has filed motions demanding a full forensic audit of United Water.
In a written response to questions from the PSC last year, United Water representative Thomas Lippai defended asking rate-payers to pay the costs for certain employee rewards and perks, calling them “nominal payments that provide more benefits than cost" in an effort to "recognize employees that have demonstrated the Company’s values."
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Rich Henning, a spokesman for the utility, said expenses like private school tuition and rental payments for executives are not paid for by United Water New York –- and thus were never charged to water customers.
Instead, United Water has an unregulated subsidiary called United Water Management and Services, which pays for many fringe benefits and perks, Henning said. He also stressed that the state denied many expenses the company sought to put on the shoulders of rate-payers.
"The state has reviewed issues regarding our water rates and water supply and made decisions based on the reasonableness of our costs,” Henning said.
Henning stressed that United Water New York has made major investments in water delivery totaling $175 million over the last eight years, including improving underground infrastructure, upgrades at water treatment facilities and the addition of backup power generators at several facilities.
Because United Water New York is a regulated monopoly provider of water, New York governs how much profit the company makes. However, United Water Management and Services is under no such regulation. Last year, Allison Esposito, one of the accountants reviewing United Water’s expenses on behalf of New York State, expressed concern that "management and Services fees charged to United Water New York increased 13 percent from 2011 to 2012 and 15 percent from 2012 to 2013."
Inflation increased just about 2 percent per year over that time.
Martyn Ryan, of the Rockland County Sierra Club, said it is difficult for regulators to separate expenses directly associated with the delivery of water -- which should be paid for by customers -- from perks, benefits and management services that should be paid for by shareholders.
"Those services are outside the regulated zone and while they are going up and up and up, the rate payer sees no benefit,” Ryan said.
Henning said the utility has agreed to conduct an audit of all of its management and services charges in cooperation with state regulators. The utility has also hired accounting firm PriceWaterhouseCoopers to examine how misstated revenue made it into financial statements going back to 2010. Asked about last month's departure of United Water New York's general manager, Henning called it a personnel matter.
