The New Orleans Sewerage and Water Board last week adopted a capital improvement plan that calls for more than $3 billion of projects through 2021.
The work will require utility rates to double over the next five years. The plan includes $1.3 billion of work in 2012, financed mostly with $800 million in federal disaster relief funds.
A system analysis by Raftelis Financial Consultants Inc. in October said the effort to rebuild and repair New Orleans’ aging water and sewer infrastructure could require more than $1 billion of new revenue debt by 2020.
The long-term projects include replacing hundreds of miles of utility lines, renovating or replacing an old power plant, and major drainage improvements.
The Raftelis analysis said the utility does not have the revenue or funding in place to support the necessary work.
The plan calls for the board to pay for its portion with up to $381.1 million of water bonds over the next 10 years, along with $349 million of sewer revenue bonds and $337 million of drainage bonds. Federal and state agencies are expected to provide the rest of the money.
Debt would be sold between 2012 and 2020. The utility’s annual debt service in 2020 is estimated at $127 million.
Raftelis was hired by the board in November 2009 to develop a financial plan and rate study after the utility failed to meet debt service requirements on outstanding sewer revenue bonds.
Fitch Ratings and Standard & Poor’s assign a BBB-minus to the board’s $172 million of sewer revenue bonds and $34.6 million of water revenue debt. Moody’s Investors Service rates it Baa1.
The bill for an average residence could go up to $124 a month by 2016, from a current average of $52.50, according to the utility’s work plan. The bill for a mid-sized business is expected to average almost $6,000 a month, up from $2,956 currently. Rates would continue to go up through 2020, and a new fee for drainage projects would be added to all bills.
Marcia St. Martin, the executive director of the board, said public hearings on the proposed rate increases will take place in the first quarter of 2012. The capital program could be modified, she said, based on the rate adopted by commissioners.