Water Watch NYC

Everything you need to know about water in NYC.

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Another 14% Rate Increase… and That’s Not All!

On Friday (April 3, 2009) the Water Board held its once-yearly meeting to discuss the upcoming year’s rate schedule. Here are the highlights:

  1. The DEP asked for a 14% rate increase, which would take the cost of water and sewer combined to nearly $7 per hundred cubic feet. Remember, this comes after last year’s 14.5% percent increase and 2007’s 11.5% increase, when we were assured by the DEP that 11.5% would be sufficient for the next two years (2008 and 2009). Clearly, that didn’t happen.
  2. Frontage was not discussed at all. You may remember that the Water Board initially told us that this year would be the last year for frontage. Then they extended it for one year only. By not mentioning it this year, they’ve essentially kept the extension in place another year. A source close to the situation tells me that they plan on extending it at least another two years after that.
  3. They finally put a number on their proposal to penalize New Yorkers who do not allow access to their meters. If this plan makes it into next year’s rate schedule, building owners who don’t allow DEP inspectors to read their meters will be charged, depending on the size of the water main, anywhere from $3,198 to $1,598,930 per year. And that is not a typo.
  4. One nice thing that was mentioned at the meeting was that they are attributing a 6% reduction in consumption over the last year to the efforts of conservationists. Of course, they also use this statistic to justify the magnitude of the rate increase.

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Why the City Loves Frontage

Frontage billing is the enemy of anyone who cares about conservation or the environment. Charging people a fixed amount for water, regardless of how much of it they use, encourages waste and an indifference to the need to conserve. With this in mind, why is the city reinstating frontage billing?

There are two basic reasons why the city prefers frontage billing:

  1. Frontage bills are easier to collect – For buildings with a mortgage, the bank usually pays frontage bills. They know how much to pay, they know when to pay and they don’t want to be caught in a situation where a building owner that they loaned money to has a loan sold for overdue water charges. With metered billing, the amount varies from bill to bill and the city has to chase after property owners in order to ensure payment.
  2. Frontage bills go out once a year – The city sends frontage bills annually, as opposed to metered bills which go out quarterly. This means that the more buildings there are on frontage, the more money the city has to work with at the start of every fiscal year and the less money they have to wait for down the road.

This reliance on frontage billing despite its incongruence with the city’s necessary conservation goals is a perfect example of the current administration’s love of short-sighted financial quick fixes instead of long term financial goals that will, in the long-run, reduce the operating cost of the DEP.


Rate Hikes, Liens and Service Termination

The debate over further DEP rate hikes rages on. Today, the New York City Council gathered for a hearing to discuss water bill delinquencies and collection strategies targeting delinquent customers.

The meeting was jointly chaired by Democrats David Weprin of the Finance Committee and James Gennaro of the Environmental Protection Committee. The bulk of the meeting was spent hearing from NYC DEP Commissioner Emily Lloyd and NYC Office of Management and Budget Director Mark Page.

After about a half hour of pleasantries and thinly guised praises of the work performed by the DEP since they took over the responsibility of water bill collecting from the Department of Finance, Lloyd immediately got defensive about the DEP’s proposals that the City Council is trying their damnedest to reject.

The first of these proposals is an additional 11.5-18.5% rate increase in water/sewer bills. (The exact rate of the increase is unknown at this point. The numbers being thrown around most at today’s meeting were 11.5%, 18% and 18.5%.) Like Water Watch NYC, the city council is against the implementation of these new rate increases.

According to the DEP’s consultant, Booz Allen Hamilton, the DEP should have the right to levy stand-alone lien sales and terminate service. (To view the complete Booz Allen report, click here. To download it, right-click and select “Save Link As….” Either way, be aware that it’s 111 pages long.) The DEP insists it must raise rates unless it is permitted to terminate service and sell liens.

Water Watch NYC sees these continuous rate hikes as unfair posturing by the DEP, political arm-twisting to try and get the city legislators to comply with their other demands. Clearly, New Yorkers can’t afford these soaring water and sewer rates and when they begin to impress this opinion on the city council, the DEP believes that the city council will have no choice but to allow stand-alone lien sales and the Water Board will have no choice but to allow service termination.

Which begs the question: What’s wrong with service termination and stand-alone lien sales? The problem with service termination is that it doesn’t actually penalize the perpetrators. The vast majority of buildings in New York City are inhabited by parties other than the owner. This means that tenants who are paying their rent will lose their water service because their landlords didn’t pay his water bill.

Additionally, the logistics of service terminations are a nightmare. Turning off city water mains is a process much more complicated than turning off other utilities like gas and electric. Imagine a scenario where the DEP sends representatives to turn off an apartment building’s water. As soon as they get there, the owner sees that they’re serious and he runs down to pay his bill. A few hours later, DEP representatives have to go through the process all over again just to turn the water back on. Part of this process would be inspecting every single apartment in the building to make sure no water fixtures are on so that water doesn’t start gushing as soon as water service is restored.

But even besides these complications, politicians still don’t want the DEP to have the power to terminate service. When the newspapers begin reporting on all of the families who can no longer live in their homes without water the elected officials are the ones that get blamed.

As for the ability to sell liens against water bill non-payment, there really is no downside. So why is the city council so resistant to permitting the DEP this power? The answer is pretty simple. The DEP is a mess. The city council has been asking the DEP to clean up their act for years and the DEP has been reluctant to comply. Sure, they’ve lowered the wait time on customer service phone calls considerably, but they refuse to allow the formation of any kind of oversight committee to supervise their procedures.

Water Watch NYC estimates that nearly 10% of all water bills are inaccurate. The current procedure that’s in place to dispute these bills is severely lacking. The DEP doesn’t accept any evidence that their bills, reads or estimates are incorrect and regards the information offered by their employees as infallible.

For years the city council has asked the DEP to set up an independent body to which people can present their cases of unjust water bills and be judged fairly based on evidence as in any court of law. Because the DEP has refused to censure itself, the city council has refused its request for lien sales.

Of course the DEP responds that part of its cleaning up its act would be to collect delinquent accounts, for which they need to be able to sell liens. The city council responds that there are plenty of other steps that the DEP can take to clean up their act before they can sell liens. And the bickering continues from there.

Meanwhile, while lien sales and service terminations are not yet implemented, the DEP still sees it fit to penalize plenty of upstanding citizens by raising rates as much as 30% for everyone, regardless of whether they’ve paid their water bills or not.

If your council member was present at the meeting you may want to call him or her to commend them for attending the meeting and/or to voice your opinion on the matter.

The following council members were present at the meeting: Gale Brewer (Democrat, Manhattan’s 6th district), Leroy Comrie (Democrat, Queens’ 27th district), Bill de Blasio (Democrat, Brooklyn’s 39th district), Mathieu Eugene (Democrat, Brooklyn’s 40th district), Lewis Fidler (Democrat, Brooklyn’s 46th district), James Gennaro (Democrat, Queens’ 24th district), Vincent Gentile (Democrat, Brooklyn’s 43rd district), Alan Gerson (Democrat, Manhattan’s 1st district), Robert Jackson (Democrat, Manhattan’s 7th district), Oliver Koppell (Democrat, The Bronx’s 11th district), Melissa Mark Viverito (Democrat, Manhattan’s 8th district), Michael McMahon (Democrat, Staten Island’s 49th district), James Oddo (Republican, Brooklyn and Staten Island’s 50th district), Domenic Recchia (Democrat, Brooklyn’s 47th district), Helen Sears (Democrat, Queens’ 25th district), James Vacca (Democrat, The Bronx’s 13th district), Peter Vallone (Democrat, Queens’ 22nd district), David Weprin (Democrat, Queens’ 23rd district).

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Soaked by the 11.5% DEP Rate Hike?

Real estate professionals and homeowners in New York City are abuzz over the 11.5% increase in DEP water and sewage rates officially confirmed on May 14, 2007 and scheduled to go into effect on July 1, 2007. The increase – NYC’s highest since the whopping 18.4% hike of 1992 – applies to both metered and frontage-based charges. With Mayor Bloomberg’s full support, additional 11.5% DEP rate hikes are also planned for 2008 and 2009.

At this cadence the compounded three-year increase will be a stratospheric 38%, an upward trajectory that dwarfs the 800% rise in DEP rates since 1980; in fact, annual rate hikes of 11.5% over another 27-year stretch would result in a compounded rate increase north of 2100%!

Given the serious water and sewage challenges currently facing the City, there’s little reason to expect the upward spiral to stop anytime soon. NYC real estate operators and homeowners would do well to ask themselves a few questions:

  • How does the City justify these rate increases?
  • Is my DEP rate plan the most appropriate and economical for my property?
  • What can I do to conserve water and ensure against DEP overcharges?

The NYC Water Board’s most recent public information report states that the city’s water system operations and maintenance costs will increase by $105 million over the upcoming fiscal year (2008). This increase budgets $72 million in “non-discretionary” spending that includes $58 million for employee wage and benefit increases and $14 million for wastewater treatment cost increases. The remaining $33 million is earmarked for DEP initiatives called “discretionary,” for which the city has specified no precise cash allocations.

Strangely, some of the discretionary increases (“filtration avoidance determination,” maintenance contracts and revenue enhancement programs) already have sizeable budget allocations within the DEP’s New Current Capital Program (“NCCP”). With Mayor Bloomberg’s support, the NCCP foresees new DEP spending of $23.3 billion over the eleven years from current fiscal 2007 through fiscal 2017.

The Water Board’s report explains that $23.3 billion is needed to “ensure delivery of high quality drinking water throughout the city” and treat sewage to “ensure the quality of New York City’s harbor waters.” Of the $23.3 billion, about $12.3 billion is earmarked for projects specified in the report. That leaves over $10 billion of the NCCP funds unallocated or deemed unfit for public disclosure. Hopefully the mayor will soon deem that New Yorkers have the right to know what will be done with that $10 billion.

Of the $12.3 billion in specific projects described in the Water Board’s report, the following projects, which are not necessarily the most expensive ones, seem most likely to raise eyebrows:

  • $3.0 billion to protect upstate NYC watersheds, including $600 million to buy land surrounding watershed property, in return for a 10-year moratorium on federal requirements to construct new filtration facilities (at an undisclosed cost). This begs the question of why “filtration avoidance determination” should get any of next year’s $33 million in new DEP discretionary financing.
  • $772 million for a Dependability/Alternative Sources Program (“DASP”) targeting maintenance and repair of the Catskill and Delaware water tunnels which transport 90% of DEP water to NYC from the upstate watershed. The Delaware water tunnel must be repaired soon because it’s leaking. It is hoped that $239 million in exploratory construction work and all the other DASP activities will enable specification of an adequate fix. If so, the tunnel, which delivers about 45% of DEP water to NYC, will be shut for repairs in accordance with a Master Plan of which a draft is due this year. It is a critical DASP goal to determine how the DEP will meet NYC needs with 45% of its current capacity offline. Though the $772 million will provide no tangible solution, it will hopefully provide a sound basis on which to implement one. Meanwhile, let’s hope the Catskill tunnel remains functional while the Delaware tunnel is shut down.

In addition to enlightening the public about the $10 billion in unallocated NCCP funds, Mayor Bloomberg should clarify another issue related to ongoing DEP rate hikes: The variable annual rent that NYC charges the DEP for use of its property. The rental amount is independent of real estate value fluctuations, but proportional to the value of the bonds issued each year by the NYC Water Board. As the DEP’s rent will go up 13.9% ($18.9 million) in fiscal 2008, the 11.5% rate hike will more than offset the added expense. It would still be good to clarify why NYC determines the DEP’s rent in such a strange way, and it’s also the public’s right to know how NYC intends to use the extra $18.9 million.

As Mayor Bloomberg recently observed in defense of the DEP rate hikes on John Gambling’s radio show, about 12% of NYC property owners consistently fail to pay their DEP bills. Others illegally leech DEP services and receive no DEP bills at all. But it’s unthinkable that the DEP would randomly whack certain property owners with humongous “compensatory” overcharges, isn’t it? The mayor could do well to consider the impact that notorious DEP bill inaccuracies have on people’s willingness to pay. Though DEP bill accuracy has improved in recent years, nearly 10% of today’s DEP bills are still inaccurate, and Ashokan’s records show it’s hardly uncommon for large NYC buildings to get hit repeatedly year after year with substantial DEP overcharges.

In sum, NYC real estate operators and homeowners would benefit from more transparency in DEP financial affairs, and should take some simple precautions to protect their interests in the face of rampant DEP bill inaccuracies and rising rates:

  • Conservation: avoid wastage, promptly repair leaks, and install low-consumption plumbing fixtures, thereby minimizing DEP charges and helping to maintain water reserves and protect the environment.
  • Make sure your DEP rate plan is the most economical one that your property qualifies for (metered vs. commercial frontage vs. multi-family frontage).
  • Verify the accuracy of all DEP bills, and get them audited when in doubt.