Provides for the city of New York to provide for payment of certain amounts to the local water fund in the custody of the New York city water board

Title of bill

An act to amend the administrative code of the city of New York, in relation to rental payments from the New York city water board

Purpose

To limit rental payments from the New York City Water Board to the debt service.

Summary of provisions

This bill amends the administrative code of the City of New York to add a new section 5-511 which provides that the City of New York would be limited to receiving a rental payment for the water supply system from the New York City Water Board in excess of the funds needed to service the outstanding debt issued for the construction of such facilities.

Justification

This bill amends the administrative code of the City of New York as it relates to the Water Authority and its Board. The amendment would limit the City of New York from receiving any funds as a "rental payment" in excess of those needed to service outstanding debt for construction related to necessary water facilities. There are concerns that the rental payments are being used to fund non-related obligations in excess of the original debt obligations assumed by the Water Board with the lease of the water and sewer system. The bill stipulates that after such outstanding financial obligations have been met the excess, left over sum of money retained from the rental payment will be used as a rebate for water and sewer account holders.

The requirement for a "rental payment" began in 1985, when water system was reorganized as a distinct entity - the Municipal Water Finance Authority - and taken off the City's books but bound together by a lease. The City then was the owner, with the Water Finance Authority "renting" the entire system including aqueducts, sewage plants, and water pipes. This relationship enables the Water Authority to raise revenue from the system it has "rented", and to issue bonds, as it does now.

Originally, the "rent" equaled the debt service on the City's bonds that had paid for pre1984 water projects. The new "renter" of the water system agreed to pay the outstanding debts of the system being rented, but the lease provided that the "rent" would not always equal debt payments on those old water bonds. The "rental payment" changed in 2005 when the City invoked a provision of the lease agreement that required the Water Board to pay an increased rental payment equal to 15 percent of the interest and principal paid by the Water Board on all outstanding Water Authority bonds. Now, as the water system's capital spending (Water Authority bonding) and debt service rises, its "rent" to the City rises too. The result is that 7% of this year's expenses, payable by rate payers, includes a tax paid to the City's general fund.

This bill would insure that such rental payment is directed at defeasance of the outstanding debt service, which was pending prior to the rental agreement with the City. The legislation would help to insure that water rates are tied to operation, maintenance, and new construction for the water system. The bill will also provide for a rebate to water and sewer account holders. It prevents the inclusion

of unwarranted costs within the rental payments to NYC from the Water Board, and attempt to stifle escalating water rates.

Legislative history

A.11382A of 2008.

Fiscal implications

This bill would result in decreases in the water bills in New York City.

Effective date

Immediately.