No Real Victory on Water Yet

Opinion from Guest Blogger Gregory Lobo Jost:
While some think the deal struck between the City Council and DEP to hold off on the 18% mid-year increase on water rates is something of a victory, the situation is far from resolved. In exchange for taking the unprecedented mid-year increase off the table, the legislation introduced in the City Council yesterday would give DEP the authority to sell stand alone water liens. In the past, water liens could only be sold in a lien sale if there was also an outstanding tax lien. The council had been reluctant to authorize stand alone water liens in the past due to the many billing errors plaguing the water system. For now, the only victory than can be claimed is by DEP and the Water Board over the City Council.

Recent press on the issue continues to focus on the "deadbeats", especially Frank Lombardi of the Daily News who uses the term 9 times in his most recent article. To categorize every customer delinquent on their water bills with such language ignores the continued billing errors perpetuated by DEP, and the growing subprime foreclosure debacle where homeowners were not offered the best mortgage product they actually qualified for and were often the victims of fraud.

A decent victory on water rates will come when the focus of the debate moves from collections to DEP's ballooning expenditures. At a time when other City agencies are cutting their budgets by 2.5% across the board, DEP's capital costs continue to escalate without check, and the burden will continue to fall on rate payers.

The real victory will come when the entire way water rates are structured is changed. The current regressive-taxation system has rate payers footing the bill for capital costs and a rental payment to the City. While paying for the actual delivery of water as a utility makes sense, these other costs have nothing to do with the amount of water used in the City; in fact, DEP admits that as water use has dropped in the past 20 years due to conservation efforts, rates have had to increase to cover the gap.

Even more bizarre is that when water rates go up, DEP's collection rate goes down -- most likely since rates have gone up so dramatically (22%) in the past 18 months. DEP factors this into their equation for rate increases, meaning that when they need a 12% increase, they move to impose an 18% increase to cover the gap left by rate payers who will fall behind when their water bills go up so much.

For now, the next large increase will likely be postponed until July 2008. If the pressure doesn't change from focusing on collections to DEP's enormous expenditures, the effectiveness of the lien sales and shut-offs on collections will determine what the actual increase will be. With the mounting foreclosure crisis, this strategy will not prevent another large hike this coming year, and is no cause for victory.