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Friday, April 27, 2007

NYC's Water Woes

Also published on the Drum Major Institute Blog

11.5% in July; 11.5% next year; 11.4% the year after that; and 11.3% in 2010. Compounded annually, the 54% increase in water and sewer rates in New York City that the Water Board is projecting over the next four years will mean more maxed-out homeowners going into foreclosure, more affordable housing managers struggling to keep their buildings afloat, and (since all costs trickle down) higher rents for the millions of rent stabilized tenants, many who already pay half of their income on rent.

Why the large increases? According to the Water Board (appointed by Mayor Bloomberg) there are three main reasons: $23 billion in capital costs (about half of which are state or federally mandated) that are paid out of rates; the plethora of billing errors that prevent the Department of Environmental Protection (DEP) from enforcing collections resulting in more than $600 million in unpaid water bills; and the simple fact that water usage is down (they still need to collect a certain amount, so the more water we conserve, the more they’ll charge us for it!).

Add to this the fact that DEP will pay the City $135.9 million this year (and $154.8 million next year) in rent for use of land and infrastructure to deliver the water to City residents. So rate payers (and eventually tenants) pay more and more to DEP to pay the City rent to make sure we have a good chunk of that $4.4 billion dollar surplus the Mayor announced the other day. Does this make sense?

And don’t forget about the cost overruns at the water filtration plant being built on Bronx parkland, where the low-bid contractor has backed out because they know they can’t build it for what they had estimated. Rate payers (and eventually renters) will pay for the heavy federal fines being laid on the City each day a contractor is not in place – the amount is already over a million dollars. For the low-income neighborhood residents who already have to deal with the blasting, loss of parkland, and massive construction in their backyard, this is just another slap in the face.

So, enough about the reasons behind the rate increases; what is this really going to mean for low income households throughout the City? Most residents don’t think twice about water rates since owners pay them. But when the Rent Guidelines Board decides how much to raise rents each year for rent stabilized tenants, one of the main factors they look at is the rise in operating costs for owners. There’s no doubt that this four-year 54% increase in water (69% if you include last years 9.4% hike) will eventually get paid by renters in the coming years in a City where affordable rents are harder and harder to come by.

For owners and managers of affordable housing, the rate hikes mean an even more desperate struggle to reduce other operating costs to keep rents low while staying out of the red. As for new affordable housing projects, increased amounts of City subsidy will be necessary to defray these rising operating costs. Again, does this make sense?

And those who may be affected the most are the low, moderate and even middle income homeowners who are already dealing with volatile fuel costs, high insurance rates, and resetting interest rates on their ARMs (not to mention the victims of predatory lending). The percent of conventional homeowners (those living in a house) in New York City who pay more than 60% of their income on housing costs has jumped from 15.9% in 2002 to a staggering 19.2% in 2005. For these nearly one-fifth of all New York conventional homeowners, the projected water rate hikes could mean the difference between making their mortgage payments and going into foreclosure. How does this fit in with the City's foreclosure prevention work?

The hearings the Water Board has been holding in the five boroughs will not change any of the rate increases, and the press coverage on the overall situation and projected increases has been nonexistent. A real plan of action is to call on the City to convene a Water Summit with appropriate City leadership (including Bloomberg and/or Doctoroff) and nonprofit, real estate and lending community representatives to examine alternatives to this series of excessive rate hikes. The summit should tie into the Mayor’s 2030 planning and focus on environmentally friendly ways to reduce costs for rate payers. These should include looking to reduce capital costs or shifting them away from rate payers, and re-examining DEP’s rental payment to the City. Financial incentives for building owners who install gray water systems and green roofs should also be instituted, along with less costly incentives that can be utilized by homeowners, such as installing street trees, storm water tanks, porous pavement, and rain water harvesting systems.

If the City is really serious about preserving affordability, it needs to take water into account.

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