Property owners are going to need more liquid assets if the city Department of Environmental Protection’s biggest water rate hike in nearly a decade is approved this summer.
An April proposal by the DEP would raise water rates 4.9%. That would translate to monthly bills that are bigger by about $4 on average for single-family homes and $3 per unit for multi-family buildings. The public is being invited to weigh in on the changes this week.
A few bucks might not make a difference for some households, but could be significant for others, especially multifamily property owners. The increase could also compound unprecedented debts for those already struggling with their water bills and other ballooning expenses.
Yet the DEP is also facing costs made higher by inflation with less revenue to pay, due to those behind on bills and decreased water usage as a result of the pandemic.
They’re banking on the increase in rates — and reauthorization to sell off customer water debt — to shore up funds, which are used to keep the tap water clean, treat wastewater and manage stormwater.
The New York City Water Board will vote on the rates in June, and the public will be able to voice their feedback at hearings on Wednesday and Thursday.
The impact of the potential water rate will affect different property owners in different ways.
When Cristina Gonzalez became a first-time homeowner about a year ago, she was pleasantly surprised to find her water bills were manageable. For her two-story, one-family home in St. George on Staten Island, the bills have come to about $30 a month, she estimated. Her bill would likely go up about $1.50.
She said she’s not worried about the increase she might face if the Water Board approves the rate hike.
“We should all be more cognizant of our water usage and making sure that we don’t use that much even if it is affordable for us as individuals, and thinking about what that ultimately does for the environment,” said Gonzalez, 39, a political consultant. “I do cut back with that in mind, not so much with the cost of it in mind.”
Meanwhile, consumer advocates warn that New York City’s water isn’t necessarily affordable even if it’s cheaper than water in some other large American cities.
A Lower Manhattan building water tower, May 20, 2022.
“What really matters is how are the people that live in the city doing financially?” said Richard Berkley, executive director of the Public Utility Law Project. “The city is still at an extremely high rate of unemployment compared to the rest of New York State, compared to other major cities in the country.”
While there were no rate increases in 2017, 2018 and 2021, the proposed rate increase of 4.9% represents the largest hike since 2014, when rates jumped 5.6%. And those hikes are relatively small: since 2002, the biggest water rate increase was over 14%, in 2009.
Geoffrey Mazel, legal advisor for the Presidents Co-op and Condo Council, a group that represents over 100,000 residents, argued that while homeowners were hit with larger increases back then, it was a time of lower inflation and lower overall costs, compared to the present insurance rates, real estate taxes, construction costs and energy bills.
“For a lot of moderate, sort of working class and middle-income class co-ops… everything’s catching up,” Mazel said. “People can’t absorb this. It’s tough times and it’s getting worse.”
Co-ops and condos use part of their maintenance fees to pay for an entire property’s water bill.
Ann Korchak, board president of Small Property Owners of New York and owner of two 10-unit rental buildings on the Upper West Side, feels a hike would just be another strain on her wallet.
“It’s just one more expense that’s making it harder,” Korchak told THE CITY. During the pandemic, she noticed her tenants used more water because they stayed home more.
“My younger tenants — who maybe would go exercise in the morning and shower at the gym and then go to their office — they’re not doing that sort of thing anymore,” she said.
Jay Martin, executive director of the Community Housing Improvement Program, which mostly represents owners of rent-regulated buildings, argued that the possibly higher rates show the importance of the Rent Guidelines Board’s recent proposed limited rent increase on regulated leases, which will go to a final vote next month.
“These are input costs that property owners have to absorb. In a rent stabilized system, when we have no real control over our ability to increase rents to accommodate these increasing costs,” he said. “Something’s got to give.”
Balanced against the affordability concerns is the urgent need to invest in the city’s aging water system in order to maintain and improve it — especially in the face of climate change.
Weather experts warn of greater volumes of precipitation, causing more flooding and water contamination in the near future, as well as shifts in upstate watersheds that provide the city’s drinking water.
“There’s billions of dollars worth of infrastructure that needs to be updated,” said Mike Dulong, a senior attorney for Riverkeeper, the nonprofit dedicated to the Hudson, and member of the SWIM Coalition.
The DEP is in the middle of a three-year study on how water rate structures could change to become more affordable and equitable for customers.
Right now, customers pay based on the water they use, rather than for how much stormwater is discharged. That means large stores with massive parking lots and traditional rooftops might not pay as much as an apartment building, even though the store would likely create more runoff that the city must treat.
A different structure with a separate stormwater charge could incentivize the creation of green roofs, reuse of water on site and other mechanisms that help manage stormwater, prevent flooding and mitigate pollution.
A new rate structure might also encourage customers to conserve water out of the tap more, addressing what Citizens Budget Commission Deputy Research Director Ana Champeny calls the “counterintuitive” nature of how the city sets its water rates.
Because DEP revenues depend on water usage, “The less water you use, the more they have to charge [everybody] per gallon because many of the costs are fixed,” she said.
The study is scheduled to come out in 2023.
DEP projects its proposal will increase revenue from $3.5 billion in fiscal year 2022 to $3.7 billion in fiscal year 2023, which will pay for debt service as well as the costs of maintaining and operating the city’s vast water system — both in the boroughs and upstate — and cover associated capital costs.
The DEP delivers over a billion gallons of drinking water, treats 1.3 billion gallons of wastewater and maintains more than 7,400 miles of sewer pipes each day.
DEP’s proposed capital budget is, at $10.12 billion, the third largest in the city after the departments of education and transportation. Those costs cover mechanisms to control water pollution, maintaining and building sewers and projects to improve stormwater drainage — extra important given the flooding experienced during Hurricane Ida in the fall and for the system to be able to handle the increasingly extreme weather predicted due to climate change .
The proposal also includes continuing $30 million worth of affordability programs.
Where pandemic trends pushed water usage down citywide, residential usage, which accounts for 80% of revenue, is back up to pre-COVID levels, DEP officials said. But non-residential usage hasn’t quite rebounded. In total, customers consumed about 690 million gallons of water per day in Fiscal Year 2022, compared to nearly 712 million gallons per day in Fiscal Year 2019.
And customers owe $778 million worth of water payments, according to DEP figures.
“We think many of those were temporary situations so hopefully as the economy recovers those individuals will also be able to get back on their feet and be able to make their payments again,” said Joe Murin, DEP’s chief financial officer, during a Water Board meeting in April.
The DEP hopes to recover the money owed by sending out delinquency notices — which had stopped during the pandemic’s utility shut-off moratorium — and through a lien sale, a controversial system for collecting unpaid property and water debts.
The city’s last lien sale was in December 2021, although it excluded debts for water and sewer bills. Authorization for the contentious practice expired in February and there’s been no movement on it since.
At the April meeting, Murin said, “The administration is working to have it reauthorized with the Council. Those negotiations are ongoing.”
But a City Council spokesperson denied that, and the DEP’s Ted Timbers later told THE CITY that Murin misspoke at the hearing.
Mayor Eric Adams and City Council Speaker Adrienne Adams have both previously came out in opposition to the sale, in which private investors buy liens from the city.
Councilmember Pierina Sanchez, who chairs the Council’s Committee on Housing and Buildings and has been vocal about the need for lien sale reform, told THE CITY there have only been on conversation in the “very early stages” about possible lien sale reforms among certain Council members and advocates from the Abolish the Tax Lien Sale Coalition.
“We gotta keep talking about it and come to the right solution for the city,” Sanchez said.
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