N.Y.C. Water Rates Hiked

The New York City Water Board voted to raise rates by 12.9% on Friday, the city’s third double-digit rate increase in as many years.

The increase was slightly less than the 14% formally proposed last month by acting city Department of Environmental Protection commissioner Steven Lawitts. The vote triggered an immediate critique by city comptroller and mayoral candidate William Thompson Jr., who called the increase “outrageous.”

The DEP operates the water system while the New York City Municipal Water Finance Authority finances a capital plan projected to total $17.48 billion from the current fiscal year through 2019. Water fees back the bonds.

The board raises rates to meet expenses, which includes MWFA debt service, operations, and a rental payment to the city. The board leases the water and sewer system from the city. A portion of the rental payments go to the city to pay for debt service on general obligation debt incurred for water and sewer projects before the authority was created in 1985.

According to information provide by the MWFA last year, the city plans to use roughly a third of that rental payment — expected to be $198 million in fiscal 2010 — to pay GO debt service.

Thompson criticized the practice of collecting rental payments in excess of water-related city expenses. He said excess payments will total $106 million in fiscal 2009 and are expected to rise to more than $200 million by fiscal 2013. He called for the city to rebate the excess rent back to the Water Board to reduce the need for rate increases and to reduce borrowing by doing more pay-as-you go capital spending.

Projected water revenue is down for the system by $117 million to $2.42 billion for the current fiscal year, primarily due to reduced consumption, the DEP says. The board is expected to raise rates by 12% next year, according to an MWFA official statement for a recent bond offering.

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