DALLAS — Reform of the New Orleans Sewerage and Water Board must be accomplished before utility rates are raised to support debt needed for system renewal projects, Mayor Mitch Landrieu said Monday.

"Repairing our city's infrastructure is essential and with it comes an opportunity to create thousands of jobs for New Orleanians," he said. "But in order to move forward on a rate increase, we must reform the Sewerage and Water Board."

The utility board adopted a capital outlook in late 2011 that includes more than $1 billion of utility revenue bonds to be issued over the next 10 years in addition to billions in federal and state funding.

The plan calls for the board to pay for its portion with up to $381 million of water revenue bonds, $349 million of sewer revenue bonds and $337 million of drainage bonds.

The current financing plan calls for annual 10% rate increases for eight years. The board's initial proposal called for the 80% increase to be accomplished over five years.

"The Sewerage and Water Board's mission is to provide safe drinking water and protect homes from flooding," Landrieu said. "As it currently stands, it is clear to me that it does not have what it needs in terms of infrastructure and funding to serve the city of New Orleans."

The rate hikes will fund a 10-year, $3.3 billion capital improvement program with more than 600 projects that can support 26,959 construction jobs, according to the mayor.

The infrastructure work would add 74 permanent jobs in 2013 and a total of 186 permanent jobs by 2020.

The system is currently losing 40% of the water before it reaches the customers. Landrieu said, adding that the city must act now before the system deteriorates further.

"This can has been kicked down the road by generations of New Orleanians and it has put the city in a very vulnerable place," he said.

"If we wait, we will risk a failure or the situation is going to get worse. It's not going to get better."

If the eight-year rate plan is enacted, the average residential water bill would go to $86.36 a month by 2020 from the current $52.50. Rate increases after that would be linked to the inflation rate.

Key to Landrieu's proposed reform is a reduction in the size of the utility's board to nine from the current 13 by removing three City Council members, one member appointed by the mayor, and shortening the term length to six years from nine.

Councilwoman Jackie Clarkson said she supported the removal of council members from the board.

"The council people don't belong on the Sewerage and Water Board," she said. "We don't have the expertise and we don't have the time."

The utility's debt is rated BB-plus by Standard & Poor's, BBB-minus by Fitch and Baa1 by Moody's Investors Service. Outstanding debt includes $34.6 million of water revenue bonds and $172 million of sewer revenue bonds.

The utility board was created by the state, so Landrieu's proposed changes to its makeup must be authorized by the Louisiana Legislature. Sen. J.P. Morrell and Rep. Walt Leger 3d said they would sponsor the reform bills at the 2013 session.

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