May 5, 2008

Testimony by Public Advocate Betsy Gotbaum For New York City Water Board Hearing on Proposed Water Rate Increases
 

New Yorkers are about to get soaked by another water rate hike, but the city can shelter them from the storm. And it should.

The Independent Budget Office (IBO), at the request of my office, today issued a fiscal brief on the factors driving the frequent and large increases in the water rates. Comptroller Thompson has proposed sensible changes to avoid the steep rate hikes. The City should follow his recommendations.

The last hike in the water rate was less than 11 months ago. As the IBO’s brief points out, if the current proposed increase goes forward, rates will have increased 77% in the last 7 fiscal years. A further increase of 14% is anticipated for the following fiscal year, 2010, and another double digit increase for Fiscal Year 2011.

It seems unfair that an even larger increase lurks on the horizon despite the fact that we can spare taxpayers the burden.

As the Comptroller has pointed out, the Water Board is overpaying the city government to rent the water and sewer infrastructure owned by the City because of a flaw in the formula the City uses to calculate the rent. These funds, which the Comptroller calls ‘excess rent,’ go not directly back into the water and sewer infrastructure, but rather into the city’s general fund.

That’s like if one month you unwittingly send in an extra hundred dollars for your rent check and your landlord says, “Thanks,” and pockets the 100 bucks. Logically and rightly, he should of course put the money toward the following month’s rent.

The City is not forced to collect the excess rent. But as long as the City chooses to collect it, the Water Board is obligated to pass the cost onto New Yorkers. This is one of the main reasons The Water Board is yet again raising the water rate on everyday New Yorkers.

I understand that if the city does not collect the excess rent from the Water Board, it will seek to fill the gap in its budget through other means. But padding the general fund by hiking the water rate is an unfair system that disproportionately affects low-income New Yorkers. Residential water bills are a relatively fixed cost, and low-income households spend a higher percentage of their income to pay them. So a higher water rate is essentially a regressive tax hike that will be felt most by New Yorkers scraping by every month.

While we cannot avoid an increase altogether, we can avoid the unnecessarily steep hikes we are currently facing. As the IBO has pointed out, and the Comptroller has recommended, we can drop the rate from 14.5% for 2009 to 11.2% by eliminating the excess rent the city is charging the Water Board.

Let’s take this step not only because it is the common sense approach, but let’s take it because it will make things a little bit less difficult for low-income New York residents. And as we all know, during these tough times, for folks on the edge, a little bit can make a big difference.