Today the city's Department of Environmental Protection announced that it was proposing the “lowest water rate increase in nine years”—a hike of 3.35 percent that's “less than half the increase anticipated.”
But Queens Councilman Rory Lancman criticized the de Blasio administration for failing to end a “stealth tax” that the mayor, as public advocate and mayoral candidate, had advocated eliminating.
Lancman is talking about the rental payment, an artifact of post-fiscal crisis budget engineering in which the water system pays the city for using the infrastructure that city bonds have paid to build. The payment was initially linked to the debt service—in other words, the interest—that the city was paying on bonds related to the water system. Over time, those bonds got retired, but the payments from the water system continued, with the excess ending up in the city's general fund.
Why does that matter? It isn't that the city doesn't need the money. It's that taking it through water rates, which don't consider income and might even be regressive, is less fair to lower-income New Yorkers than getting that same dollar amount from, say, the city's progressive income tax.
Lancman is upset because the de Blasio administration is still taking excess rent from water rate payers. The DEP does propose refunding part of the rent payment, knocking it down from $220 million to around $183 million. But since the water system debt service costs the city only $31 million, the rent is still $152 million higher than it needs to be. According to Lancman, that covers the entire cost of the proposed rate hike: In other words, if the water system weren't paying excess rent to the city, no rate hike would be necessary.