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New York City Comptroller William C. Thompson, Jr. this morning addressed members of the New York City Water Board, expressing deep concerns about a possible double-digit water rate increase – the third in the last three years.

“Simply stated, rising water and sewer rates are gouging New York City families and small businesses precisely at a time when they can least afford it,” Thompson said.

The Water Board approved an 11.5 percent increase in 2007 and a 14.5 percent one in 2008.  If the Board moves forward with last year’s projected 14 percent rate increase for FY 2010, an average single family homeowner’s rates will have risen from $571 to $913 in just four years – a whopping 60 percent increase, over five times the inflation rate.

This morning, Thompson offered five key recommendations to address escalating rates:

• The Water Board must complete and make public a promised million-dollar study of alternative rate structures. That study was intended to help the Water Board set rates this year.
  
  
• Excess rent now being paid by the Water Board to the City –to exceed $200 million by 2012 – should be rebated back to the water system to be used for pay-go capital spending and rate reductions.
  
  
• Governor David Paterson must support direct granting of all the federal stimulus money that is dedicated to clean water and drinking water projects in New York State – nearly $500 million.
  
  
• The City’s Department of Environmental Protection (DEP) should be required to cut its operating budget by 5%, as other City agencies have been required to do.
  
  
• We must ensure that the New York City water supply west of the Hudson River is protected from proposed gas drilling that could necessitate the construction of a $10 billion filtration plant.

Earlier this week, Thompson faulted DEP for failing to produce its study of the rate structure. Last May, the Water Board committed a million dollars of ratepayer money to review how other utilities across the country structure their rates and to examine ways to inject a greater degree of fairness into our system. Then-DEP Commissioner Lloyd promised that the Fiscal Year 2010 water and sewer rates would take into account the results of this study

“Even if you release it today, that is too late to affect the rate structure and rate levels this year,” Thompson said. “That is an outrageous breach of responsibility. The Board must produce this study so that we may take actions to avoid new rate increases next year.”

The Water Board leases the water and sewer infrastructure from the City. Rental payments are based on a formula that, until recently, reimbursed the City for water-related debt service on bonds issued before the Water Authority was created.  Since 2005, however, the formula has led to rental payments in excess of the underlying City expense.

Thompson charged that this formula is forcing water ratepayers to subsidize the City’s General Fund, because “excess rent” flows into that fund and is used as general revenue. In Fiscal Year 2009, such “excess rent” will total nearly $123 million, and this is predicted to swell to more than $200 million by Fiscal Year 2012.

Over the last two years, Thompson proposed rebating the “excess rent” back to the Water Board to offset the cost of running the water system. In Thompson’s plan, the “excess rent” would have been split equally for two purposes: ½ for pay-as-you-go capital spending, which reduces costs over the long term, and ½ for other water system expenses, which would lessen the need for rate increases.

Additionally, Thompson identified another source of revenue to prevent water rate increases: federal stimulus money. Under the terms of the stimulus bill, the New York State Revolving Fund will receive approximately $432 million for clean water projects and $82 million for drinking water projects. However, only half of that money currently is slated to be distributed in the form of direct grants or similar deep subsidies.

In a letter – available at www.comptroller.nyc.gov – Thompson asked the Governor to support direct grant allocation of all of this money because of the overwhelming needs of the water systems operating throughout the State, and the New York City Municipal Water Finance Authority in particular.

Thompson further said the DEP should reduce its operating budget by 5%. The DEP has been exempted from the same belt-tightening reductions required at other city agencies because it relies on water and sewer rates instead of tax revenue.

“In protecting our drinking water, we protect our ratepayers precisely at a time when they are feeling the squeeze of the current downturn,” Thompson said. “Our water system cannot continue with business-as-usual in the face of tremendous economic and environmental threats.”

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