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AGENCY TESTIMONY
IBO testimony on NYC water rates and rental payments
3:12:13
ยท
3 min
Brian Cain from the New York City Independent Budget Office (IBO) testifies about their research on how the city sets water rates and bills property owners. He explains the history and current practice of the city requesting rental payments from the water board, which indirectly leads to additional costs for property owners and renters.
- The rental payment, originally intended to pay off pre-existing water system debt, now serves as a mechanism to move revenue from the water system to the city's general fund.
- The Adams administration plans to charge the maximum annual rental payment of over $300 million each year from 2026 through 2029.
- These rental payments lead to higher water bill rate increases, directly affecting property owners and indirectly impacting residents of rental, condo, and co-op apartment buildings.
Brian Cain
3:12:13
Good afternoon chair Ressler.
3:12:15
I'm Brian Kane, assistant director of housing environment and infrastructure at the New York City independent budget office or IBO.
3:12:23
IBO is an independent non partisan city agency that conducts fiscal and policy research for the city.
3:12:29
I'm joined here today by my colleague Jordan Page, our lead environmental analyst.
3:12:34
In October 2024, IBO published a report examining how the city sets water rates and bills property owners.
3:12:40
Our research found that the city's practice of requesting rental payments from the water board indirectly leads to additional costs for property owners and renters.
3:12:49
We also found that the original justification for this payment is no longer applicable raising the question of whether the rental payment should continue.
3:12:57
In the nineteen eighties, water bill revenue was removed from the general fund and moved to the control of the water board to be used exclusively for water system maintenance, operations and the debt service on new water finance authority bonds.
3:13:09
This agreement granted the water board permission to use the city's water and sewer system, however the city retained the right to request an annual payment to pay off pre existing debt related to the water system which was still held by the city.
3:13:22
This pre existing debt was fully paid off in 02/2005.
3:13:25
Since 02/2005, the rental payment has simply been a mechanism to move revenue from the water system to the city's general fund as a source of additional revenue.
3:13:34
City's Once in the general fund there is no requirement to use it on the city's water system.
3:13:39
The rental payment can be spent at the discretion of the administration on any mayoral priority.
3:13:46
In recent years the city's request for the payment has varied.
3:13:49
Referring to city fiscal years here, every year from 1985 at the very beginning through 2015, mayoral administrations requested the full rental payment.
3:13:57
In 2016 when the city saw particularly strong revenue collections, the de Blasio administration decided to pause the rental payment requesting a partial payment in 2016 and no payment for the next three years.
3:14:08
When the city faced financial uncertainties during the pandemic in 2020 and 2021, the de Blasio administration requested partial payments.
3:14:15
Under the Adams administration there were no payments in 2022 and '23.
3:14:19
The rental payments were resumed midway through 2024, at that time the Adams administration requested a partial rental payment of a hundred and $45,000,000 about half of the maximum citing financial pressure on the city's budget due to rising costs of caring for asylum seekers.
3:14:33
However, IBO's revenue and expense forecast painted a less dire financial picture than the administration's.
3:14:40
The Adams administration plans to charge the maximum annual rental payment from 2026 through 2029 at over $300,000,000 each year.
3:14:47
Since IBO last testified in October the projections for 2026 and '27 each decreased by about $10,000,000 and the projection for 2029 was added with the preliminary budget.
3:14:59
Rates set by the water board must cover the cost of maintenance, operations and the rental payment when it's requested.
3:15:05
The 2025 water bill rate increase was approximately three percentage points higher due to the administration requesting a rental payment from the water board.
3:15:14
These rate increases are seen directly by property owners when they receive their water bill.
3:15:18
Rate increases also indirectly impact residents of rental condo and co op apartment buildings because water bill increases may be partially or wholly passed on to residents.
3:15:29
In conclusion, the city paid off its debt related to the water system in 02/2005 so all rental payments since then have been unrestricted contributions to the general fund.
3:15:37
Whether or not the city requests the rental payment creates uncertainty in the water board's rate setting process each year and can increase costs for city residents.
3:15:46
Thank you for this opportunity to testify.
3:15:48
We welcome any questions.