Public Advocate Bill de Blasio today assailed the latest 5.6 percent water rate hike as unjustified, and called on the Water Board and City Hall to release key documents that will definitively determine if revenue from the water system is being diverted to pad the City’s general budget. In a letter to the Water Board—which is appointed by the Mayor—de Blasio exposed how ever increasing water rates have been fueled in part by the Board’s excess “rent” payments to the City.

For years, those rent payments covered the cost of serving debt from water-related infrastructure—and nothing more. But since 2005, those payments have exceeded debt obligations by a total of $700 million, with that revenue instead flowing into the City’s general operating budget. Those excess payments have helped fuel a doubling of water rates since 2007. According to a policy brief issued by the Citizens Budget Commission, “the current basis for setting the rent is arbitrary and has been a contributing factor to rapidly rising prices in recent years.”

“When the Mayor says he hasn’t raised taxes, he’s really only talking about the taxes you can see. In truth, homeowners and businesses are getting socked again and again with hidden taxes like these water rate hikes,” said Public Advocate Bill de Blasio. “For decades, the water system only charged customers what it needed to cover its costs. But now, anyone who pays a water bill is sending more and more of their money into the City’s general budget. It’s wrong and it has to stop.”

“The cost of water has now become a challenge to the middle class. This rapid and steady increase in water bills continues to take a toll on the working class family with no relief on the horizon,” said Kathy Masi, President of Glendale Civic Association. “I am very disheartened to watch how the City continues to make it almost impossible to live in New York by the constant abuse of taxing. I applaud Mr. de Blasio’s efforts on behalf of the working class.”

According to research by the Office of the Public Advocate, the price of water per 100 cubic feet will have skyrocketed from $1.81 in 2007 to $3.57 if the current increase is approved—resulting in a doubling of the price of water since 2007. Part of that increase is the result of higher rent payments made by the Water Board to the City. The Board makes annual rent payments to pay down debt from water and sewer infrastructure projects undertaken by the City. For years, rent paid covered the service on that debt—and nothing more. But since 2005, annual rent has nearly doubled, from $109 million to $196 million in 2012—even though the cost of servicing old debt has actually declined significantly.

De Blasio demanded a full accounting of how additional revenue has been spent and any capital projects that could possibly justify the increased rent payments to the City. Read the Public Advocate’s letter to the Water Board:

April 16, 2013

Steven Lawitts
Executive Director
New York City Water Board
City of New York
59-17 Junction Boulevard, 8th Floor
Flushing, NY 11373

Dear Mr. Lawitts and New York City Water Board:

I am writing regarding the recent recommendation by the Water Board to the City of New York to increase water rates by 5.6 percent. Over the past seven years, the Water Board has paid significantly higher rent to the City of New York than is justified—and passed those costs on to customers through regular rate increases. Based on our analysis of financial records, were it not for these inflated payments, this year’s water rate increase and the dramatic hikes in years past could have been mitigated.

The price of water per 100 cubic feet has skyrocketed from $1.81 in 2007 to $3.39 in 2013, an 87 percent increase over seven years. This is an increasingly difficult burden for homeowners across the city. A 5.6 percent increase for next year’s rate would bring the price to $3.57, doubling the price of water since 2007, all while incomes around the city are stagnant for middle and working class families.

While I fully support the notion that the Water Board should raise enough revenue to fund investment in a fully-functioning water and sewer system, it should not raise additional revenue to pad the City’s general operating budget. Yet, it seems that this is precisely what has occurred since 2005 when the Water Board began paying more in rent than the City’s debt for building the water system required.

According to financial statements, the Water Board makes annual rent payments to the City of New York to pay down debt incurred for water and sewer infrastructure projects previously undertaken by the City. For years, rent paid by the Board equaled the service on that infrastructure debt. But since 2005, the rent paid to the City has exceeded the General Obligation debt by a total of $700 million—with that revenue instead flowing into the City’s general operating budget. Annual rent has nearly doubled, from $109 million in 2005 to $196 million in 2012—with those increases passed along to customers through higher water rates. The water system should not be used to generate money for the City’s general budget at the expense of home and business owners. Rent paid by the Water Board should be used only to cover costs associated with the water system, and not be used to balance the City’s budget.

These discrepancies between the system’s revenue and costs must be fully explained and brought to light. Pursuant to Article 6 of the New York Public Officers Law, I require you to provide my office with:
A detailed breakdown delineating how increased revenue from water rate hikes has been spent since 2007.
The debt costs of any water system-related capital projects not currently serviced by the Water Board, which would justify the $700 million in increased rent payments since 2005.
New York City’s homeowners continue to get squeezed with no end in sight—all to pad the City’s budget. It is time we relieved these burdens by ensuring that the water system’s revenue is used only to cover the system’s costs—and nothing more. Thank you for your prompt review and response to this matter.

Sincerely,

Bill de Blasio
Public Advocate for the City of New York

Abe Friedman, the CEO of All Care Management, a property management company based in Brooklyn NY, commended Public Advocate Bill DeBlasio – “as a property management firm we pay hundreds of thousands of dollars each year to NYC DEP, while people are struggling, the NYC DEP increases their rate each year, which is unbearable for struggling unit owners. I commend Mr DeBlasio on taking action on this issue”.

(YWN Desk – NYC)