By ANTHONY DePALMA
Published: May 2, 2007
Two city councilmen who oppose a planned 11.5 percent increase in the city’s water and sewer rates announced a proposal yesterday that they said could raise rates no more than 1 percent and keep a lid on future increases for years to come.
At a news conference yesterday, the two council members, James F. Gennaro, the chairman of the Environmental Protection Committee, and David I. Weprin, the chairman of the Finance Committee, said water rates were higher than they needed to be because of an outdated system of rental payments that enriches the city at the expense of ratepayers. Of the proposed 11.5 percent increase, they said, 8 percentage points can be attributed to the rising cost of the rental payment.
Under the current system, the New York City Water Board, a semiautonomous agency, makes an annual rental payment to the city for use of the water system, including all the reservoirs, aqueducts, water mains and pipes from the upstate watershed to Staten Island. This year the payment came to $136 million.
When the board was established, in the mid-1980s, the rental payment was set at the amount of the debt service on existing water system debt, or 15 percent of any new debts, whichever was higher. Over the last few years, the capital construction budget for the water system has ballooned and the rental payment is now pegged to an amount equal to 15 percent of the board’s annual debt obligation. Next year, the rental payment will rise to $155 million. By 2011, it will increase to $231 million and keep rising.
Mr. Gennaro and Mr. Weprin argued that there no longer is a rationale for maintaining the rental payment.
“It is unconscionable for them to perpetuate this lease payment situation, which is escalating out of sight,” Mr. Gennaro said. “It is no more than a transfer of money from water ratepayers to the general city fund,” he added. “There are much more progressive ways for the city to raise general revenues if it needs them, which at this time it does not.”
The councilmen said that they would press the water board to simply refuse to make the rental payment when the board meets on May 14 to vote on the proposed rate increase. Such a move, they said, could cut the increase to 3.5 percent. But some city officials said it is unclear whether legislation might be required to alter the current arrangement.
Steven W. Lawitts, executive director of the water board and first deputy commissioner of the city’s Department of Environmental Protection, said in an interview that about half the current rental payment actually goes to pay debt service on outstanding general obligation bonds that predate creation of the board.
He said that the lease would last in perpetuity. The amount of pre-1986 debt is declining and will eventually disappear. When that happens, Mr. Lawitts said, ratepayers will have to pay all debt obligations. Then none of the rental payment will be used to pay off debts, but will instead go into the general treasury.
Mr. Gennaro and Mr. Weprin also said that if, in addition to changing the rental arrangement, the board aggressively pursued homeowners who persistently refused to pay their water bills, the increase could be reduced to 1 percent or less.