Water Watch NYC

Everything you need to know about water in NYC.


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Ten Ways to Save the DEP – #3: Stop Using the Water Board to Bypass Contract Bidding

Like every government agency, every so often the DEP needs to outsource some of its work. They need studies done to determine the efficiency of their procedures or they need construction done on new or existing facilities.

The fact that some of their work is outsourced actually should benefit the public. We don’t need the costs of training and maintaining additional DEP staff worked into our water/sewer rates. What we pay for water is already high enough. Let the DEP worry about being the best at distributing water to New York City and let them pay others to be the best at other things, like environmental impact studies and rate analysis studies.

Considering how often work is outsourced, it’s a good thing government agencies have a system in place to ensure that the outsourcing is executed fairly and efficiently. Whenever work needs to be outsourced the DEP puts out a Request for Proposals (RFP) and anyone interested responds in writing with what they can do to complete the work and how much they’ll charge to do it. The DEP now has to look at two things in each bid: 1) Can this company complete this job effectively? and 2) who will do it for the least amount of money?

After all, it is our money that these government agencies are throwing around. Following the rules above ensures that they’re not abusing that right.

If only this was how the DEP obtained their contracts. Steven Lawitts, Emily Lloyd and other past DEP commissioners found a way to bypass the contract bidding process and they milked it for all it was worth.

The purpose of the Water Board is to be a regulatory agency, constantly monitoring the DEP and keeping them in line. After all, the DEP’s capital budget is over $1 billion. Someone’s gotta make sure all that money is being used correctly. Ideally, as a regulatory agency, the Water Board should be watching everything the DEP does and telling them where they’ve overstepped their bounds. In actuality what the Water Board does is back up and support every action that the DEP takes.

Since the Water Board controls the DEP’s finances and blindly supports their every move, it stands to reason that all the DEP has to do is ask the Water Board for money for a specific project and the Water Board will hand it to them with a big smile on their faces. So instead of finding the company that will complete a job most effectively for the least amount of money, they just pick the company they want to work with and ask the Water Board to give them any amount of money they ask for without any regard for whether or not they’re the right people for the job.

This is how we got ourselves into the current Booz Allen Hamilton rate study mess. Years ago (under former DEP Commissioner Emily Lloyd), the DEP asked the Water Board to pay BAH to audit its customer service and collections procedures. BAH came back (after asking for more money and turning in their report after the deadline) and said that in order to maximize collections the DEP needed to perform a rate study. Then they got the DEP to hire them (without putting out an RFP) to perform that rate study. They released their results a couple of weeks ago and they are woefully lacking.

Let’s break down the string of failures here, shall we? Audit of customer service and collections procedures goes straight to BAH without an RFP – failure #1. BAH asks for more money (which they get) and turns in the report late – failure #2. BAH report’s only conclusion is that to increase collections BAH should be hired again for more money to perform a rate study – failure #3. Rate study goes straight to BAH without an RFP – failure #4. Rate study comes back with no analysis or conclusions – failure #5.

So where we started with a simple, minor problem–the DEP giving a small contract to BAH without letting others bid on it–now we have a major problem in that we’ve shelled out millions of dollars for a report with no conclusions or recommendations. The original contract may have been small but because of it we ended up with bad advice and a poorly run agency!

At a recent Water Board hearing, Chairman Alan Moss asked if one of these days newly appointed DEP Commissioner Caswell Holloway could be brought in on a hearing. Moss’s reasoning behind the request? He wanted to assure Holloway in person that the Water Board is behind the DEP 100%. Does that sound to you like the right attitude for a regulatory agency to have?

Maybe if the Water Board started actually auditing the DEP’s expenses and maybe if the DEP stopped using the Water Board to bypass contract bidding, there wouldn’t be so much wasteful spending with our money.

[CORRECTION - 3/3/10: The assertions above, that the Booz-Allen contracts were obtained without competition, are incorrect. The public records indicate that the Booz-Allen contracts were procured through a competitive Request for Proposal process. The Water Board's website posts the official minutes from past Water Board meetings. The minutes from the June 2008 meeting summarizes the competitive process the Water Board used to award the Booz-Allen contract.

We apologize to the DEP, Water Board and the public for the error .]


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Ten Ways to Save the DEP – #2: Introduce Stormwater Fees

Almost any effective CSO mitigation plan that the city can possibly come up with will involve the creation of large multi-billion dollar retaining tanks and force our water/sewer rates to skyrocket. So here comes our out of the box thinking: How can we mitigate the negative effects of CSO without spending billions of dollars restructuring our sewer system?

The Citizens Action Committee (CAC), made up of industry experts, recommended that the city use water and sewer rates to incentivize owners to retain water on site. Currently, New York property owners do not pay to dump stormwater but by levying such charges the city can effectively incentivize owners to retain water on site and eliminate CSO occurrences, as the CAC recommended. More importantly, the administrative costs to the city would be minuscule compared to the billions that would be spent building huge tanks. As a bonus, on site retention can also have other environmental benefits (for example, green roofs mitigate the effects of urban heat island).

In recognition of the above, the mayor’s PLANYC Sustainable Stormwater Management Plan 2008, Initiative 10 states:

The City’s current water rate structure is comprised of a charge for consumption of water and an additional 159 percent for all sewer, stormwater, and wastewater services. Because this rate structure fails to reflect the true costs of stormwater generation and can lead to distortions, the City is currently undertaking a yearlong study to consider improvements. The City is analyzing its current expenditures, reviewing the rate and credit programs of other municipal water systems, and estimating the impacts of alternative stormwater rate structures on ratepayers and revenues. This effort will be coordinated with other ongoing efforts to map impervious areas in the City and to overhaul the program for water bills.

The “yearlong study to consider improvements” that the plan refers to is Booz Allen Hamilton’s (BAH) rate study, the results of which were released last week. (You may remember BAH from many of the other studies they performed for the DEP in the past. They are, after all, the DEP’s favorite go-to accounting firm when using the Water Board to bypass the contract bidding process.) The first thing worth mentioning is that this “yearlong study” took more than a year. Shocker.

But that’s not as important as the results. So let’s look at the results. The DEP paid BAH over a million dollars to “[analyze] its current expenditures, [review] the rate and credit programs of other municipal water systems, and [estimate] the impacts of alternative stormwater rate structures on ratepayers and revenues.” I would have thought that BAH would calculate the administrative costs involved and the feasibility of enacting a stormwater fee. Then they would project the savings as a result of on site stormwater retention and avoidance of the creation of stormwater retention facilities. I expected graphs indicating the relationship between the different possible stormwater rates and expected consumer response. (If we charge 5% of the water rate we need $2 million to implement the program but it’ll take us 20 years to recover that two million. If we charge 30% of the water rate  we need $2 million to implement the program and we’ll recover the costs in less than a year. Something like that.) In short, how large (or small) a fee would you have to implement to start seeing a savings.

What BAH did instead was what every college student does when the deadline is up and they haven’t done any of their work. They reiterated the question. Don’t get me wrong–they did it well. They included five pages of meaningless charts (fancy, but meaningless) showing which cities use which rate structures. But they didn’t address the crux of the problem. There is nothing in the report about the effectiveness of such a program, what it would cost the DEP to implement it and how much can be saved by stormwater avoidance.

The only thing BAH actually put forth in their conclusions (slide 30 of this presentation) is the following: “New billing system must be in place in order to fully implement a City-wide stormwater rate structure and credit program.” It’s subtle. Did you catch it? It sounds to me like BAH’s pitch to sell the DEP a new rate program, one that would no doubt take another few years and another few million dollars.

In summary, we hope that the good people at the DEP and the Water Board go ahead with stormwater rates and are not put off by the BAH report. To quote the mayor’s office in Appendix K to the Sustainable Stormwater Management Plan, Environmental Entrepreneurs, a national community of over 850 prominent business leaders who believe in protecting the environment while building economic prosperity, had the following to say about stormwater rates:

We strongly urge the City to include in the Plan a firm commitment to restructure the water rates to implement a separate stormwater fee, varying based on the imperviousness of a site, as soon as possible. We understand that a rate restructuring study is now underway and urge that the consultants conducting that study be asked not whether a separate stormwater fee is practicable – because we know it is, based on the experience of many jurisdictions around the country – but rather how to implement such a fee structure in New York City as soon as possible.

Again, special thanks to the good folks at SWIM for fighting for this one. We’ve even heard DEP Deputy Commissioner of Environmental Planning and Analysis Angela Licata advocating for stormwater fees at a few Water Board hearings.


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Ten Ways to Save the DEP

One of the first actions of Mayor Bloomberg’s third term was to appoint Caswell F. Holloway as the new DEP Commissioner. Commissioner Holloway has his hands full. The Water Board is blaming conservation for projected double-digit increases in water/sewer rates. Environmental groups and the New York Times are focusing in on raw sewage in the Hudson River. Gas drilling is about to begin in the watershed and the Delaware Aqueduct may spring a leak at any time! Yet no one is proposing affordable  solutions. And so, in the coming weeks, WaterWatchNYC will be rolling out a list of “Ten Ways to Save the DEP,” ten steps that we think the DEP, the Water Board and the Mayor should take in order to save money and the environment.

Former DEP Commissioner Albert Appleton

Former DEP Commissioner Albert Appleton

This is not the first time that a Mayor or the  Water Board  faced daunting challenges.  Back when Mayor Dinkins appointed Albert Appleton as the DEP Commissioner in 1990, the agency was beset with  problems. NYC  was  coming out of a Stage III Emergency drought (little did we know that another drought was only a year and a half away), spending was out of control and water and sewer rates were rising at unprecedented levels (from Fiscal Year 1989 to the second half of Fiscal Year 1990, the combined water/sewer rate went up over 40%!). New Yorkers were clamoring  for additional sources of water. The federal government was pressuring NYC to begin filtering its drinking water and the environmental lobby was suing the city to build huge sewer treatment plants.

Commissioner Appleton approached each problem in a novel manner without significantly increasing the financial burden on New Yorkers by thinking outside the box. He did not take existing policy as a given. At every turn he challenged the status quo. In his own words: “Essentially what we did was change the department’s policy from one of building new facilities as needed and managing the existing system within the resources the budget bureau gave us, to a much more proactive, integrated financial-environmental infrastructure strategy.”

He questioned every solution proposed by the DEP’s engineering department and the federal government. When the federal government mandated that NYC start filtering our drinking water, Commissioner Appleton’s priority wasn’t the cheapest and most effective way of building and operating filtration plants. His priority was the cheapest and most effective way of improving the quality of our drinking water.

There is a subtle difference here, but that subtle difference is magnified when you examine the actual outcome. Appleton didn’t build a single water treatment facility. He purchased the land around our reservoirs and ensured that from the very first stages of our water delivery system, the water is clean. At a minimal cost, Commissioner Appleton eliminated the need for billions of dollars of spending.

Appleton’s solution to the drought was no less courageous.  Rather than spend tens of billions of dollars to build new reservoirs, the city spent only $250 million to replace over one million toilets. Now we have more water than we know what to do with. (As of this writing our reservoirs are at 93.6%, over 20% greater than normal.) NYC was told to spend billions and the commissioner said I’ll just prevent this from even becoming an issue and save money in the process.

I bring this up in my introduction because Commissioner Appleton and his approach to creative financial and environmental problem solving is a perfect example of what we need to see from the DEP. All the existing problems can be solved on the cheap by daring to think outside the box. We are currently facing many of the same problems that Appleton faced when he took office (out of control spending and consistent double digit rate increases just to name a few). If there’s one thing Commissioner Appleton has taught us it’s that whether the problem is financial or environmental, all it takes to be one step ahead is thinking outside the box and a little creative problem solving.

And by the way, when Appleton left office, the DEP was in the middle of a three-year freeze on water/sewer rate hikes. All is not lost.


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A Prediction

Now that New York City’s mayoral election is officially over (though, unofficially, it was over before it started), it is safe to discuss what we at WaterWatchNYC expect of the DEP and the Water Board in the near future.

We have already heard about how water consumption continues to drop drastically in NYC. If I remember correctly, at the last Water Board hearing it was announced the consumption is down another 6-7% so far this year. We’ve also heard a little bit about Booz Allen Hamilton’s preliminary findings in their water/sewer rate study and we know that they were the ones that suggested last year’s disastrous Theft of Service and Denial of Access penalties.

With this in mind, here is what we predict is going to go down at the next Water Board hearing: Because New Yorkers are using less water, the DEP has less money to work with.  Therefore, we can expect to see another double digit rate increase. However, because Booz Allen has made it their job to come up with ways of increasing the DEP’s revenue at the expense of us New Yorkers it is likely that the rate increase will be limited to a figure around 12%. While this sounds like good news, and while the DEP and Water Board will certainly present this as good news, the reality is that the only reason the rate increase will be able to stay that low is because we expect the DEP to implement (at the recommendation of Booz Allen, of course) new fees in addition to the rate increase. Look out for new connection fees and fixed service fees as well as serious increases in all existing fees.


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Lindsey Ganson Appointed Acting Water Board Treasurer

At a special meeting of the Water Board this morning, the Board members approved the appointment of Lindsey Ganson, Chief of Staff of the DEP, as Acting Treasurer of the Water Board. Ganson was hired as former DEP Commissioner Emily Lloyd’s Chief of Staff in early 2008. We wish her much luck and hope for much success in her new position.

As a side note, the Water Board also approved the DEP’s consulting contract with Appleseed regarding the “economic impact… of DEP’s operations and investments in the upstate watershed.” We’ve been critical of the DEP’s actions upstate in the past and we look forward to the results and findings of this report.


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William Kusterbeck No Longer Water Board Treasurer

As of late last week (UPDATE 9/9/09: effective the afternoon of Thursday, September 3), William Kusterbeck is longer the New York City Water Board Treasurer. Details surrounding his departure are, as of now, unknown. We will keep you posted as the story develops.

Mr. Kusterbeck has been treasurer since 1985 and worked for the DEP for six years before that. His positions in the DEP have included Director of Rates and Revenue and Director of the Office of Planning.

Regardless of the details surrounding his departure, we at WaterWatchNYC wish to commend Mr. Kusterbeck for his 30 years of service to our city. He oversaw cash-strapped budgets during droughts and worked hard to reel in the out of control spending of recent years. His dedication to serving the public will be sorely missed.


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Conservation or Economy?

At last Friday’s Water Board meeting, it was announced that the 6% drop in water consumption has increased to above 7%. While the DEP, Water Board and this blog have in the past attributed this reduction in water use to conservation, we would now like to explore the possibility that something else is going on here.

While we are sure that some of this reduction in consumption is due to conservation, the possibility was raised on Friday that more than just conservation may be at play here. As the economy continues to suffer and more and more businesses close their doors, it stands to reason that less water will be used. Therefore, it makes sense to say that this unprecedented drop in water consumption should not be entirely attributed to conservation, but some “credit” should go to the weak economy.

This makes the DEP’s job of predicting future water consumption extremely difficult. In the past, the DEP could safely predict an annual 1% drop in water consumption due to conservation. Now that the economic climate is affecting water consumption, the DEP must predict how much longer and to what degree consumption will continue to drop above and beyond the 1% per year figure. And when consumption starts picking up again, the DEP must predict how long it will take and how much consumption will increase.

In the past we have been hard on the DEP. I don’t mean to say that we won’t continue to be hard on them. Hopefully, our past and future criticism of the DEP will enable changes that benefit both New York residents and the DEP. But we do have to recognize that every now and then the DEP is thrown a curveball and we hope they continue to do their best to deal with those curveballs as they come.

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