Is Water Too Cheap in Your City?

If the New York Water Board follows the latest recommendations by the NYC Department of Environmental Protection (DEP), apartment and single family residents in New York City will experience a 12.9 percent increase in water rates in 2011. (You can read the complete DEP 2011 water rate proposal here.) This will push the average annual water cost for a homeowner from $723 to $816 and an apartment resident’s bill from $470 to $531. Five to ten dollars a month may not seem like a budget-breaker, but if rates increased by this amount every year, they would more than double by 2016. With high unemployment and the wage deflation many face, these increases can be confounding to the average citizen. Public hearings are scheduled, but does the New York Water Board have legitimate reasons to ask the public for a raise?

New York, like many water utilities, combines water and sewer services attempting to coordinate the linkages.  It is also easier to capitalize on the consumer’s perception of water and tolerance for water rate increases, as there is certainly a strong resistance to increased sewer fees. However, our common disconnect ignores the obvious: our water consumption directly affects sewer usage.

The third arm of water management is stormwater treatment, often viewed by citizens as an irritating stepchild until there’s a flood or other water event.  Stormwater is an enduring problem in many communities because of topography and natural phenomena, but metropolitan areas compound the problem with huge expanses of impervious surface areas. Chicago has a terrific green roofs initiative that it hopes will help manage stormwater and break the heat island effect, but even its aggressive program lingers below 1000 rooftops after almost ten years.

Unmanaged stormwater is a major issue for commerce and resident safety, and it directly affects the quality of the waterways in an area. When stormwater is not harvested or managed properly and is allowed to blend with sewer flows, it becomes contaminated and as ‘black’ as any other blackwater. The sewer treatment facilities are often overwhelmed by this process, leading to overflows and releases of untreated water both intentional and unintentional.

Several factors – which are mirrored across the country - are contributing to New York City’s immediate need to raise rates. These include:

  • $19 billion in needed capital improvements
  • A 65% increase in debt service obligations between 2006 and 2010
  • A revenue decrease of 4%, and
  • Better conservation by citizens which has lowered usage by 5%

The capital improvements include ultraviolet treatment facilities to reduce parasites like giardia and cryptosporidia, the improvement of secondary wastewater treatment plants, retrofitting, tunnel additions and building new stormwater storage tanks. 69 percent of these improvements have been legally mandated to maintain the safety of the water through filtration, disinfection and treatment. These mandates alone will add 24 percent to the cost of water from 2002 through 2011.

Government’s job is to provide needed municipal services without concern for a profit, but many of us are cloudy on exactly what this means. Robbing Peter to pay Paul has been the modus operandi of most municipalities during the recession – and some even before -  but revenues and expenses are supposed to ensure that consumer costs for a necessity like water remain in balance. Clearly no entity with an aggressive capital improvements plan fueled by legal mandates – and without fat reserves – can absorb these kinds of upfront costs or the 65% increase in debt service these types of borrowings have generated. Any statistician must ask the obvious questions:

Is a 12.9 percent rate increase adequate when not only the amount of debt but the manner in which it is added is escalating out of control?

Are Americans going to face reality and accept that services and facilities – no matter who provides and manages them – cost a lot of money?

Are we going to depend on credit – no matter the ultimate cost – rather than saving, paying as we go and the communal sacrifices this sort of government/taxpayer partnership really requires?

I encourage you to comment below with your thoughts, criticisms and/or solutions.  Certainly we need some fresh thinking.

How are other major metropolitan areas managing their water services?  Houston’s combined water and sewer utility recently raised apartment dwellers’ blood pressure when a proposed increase for single-family homeowners was announced at 12.5 percent, but multifamily’s range was 30 to 50 percent in some cases.  Prior to the change, the Houston rates were slightly below the average of $773 (30 major cities) in water charges but the combined utility blew through reserves and has been drowning in red ink for the last several years. The proposed increase places Houston in the same expense category as Washington, D.C., San Jose, Columbus, Jacksonville and Austin, unless these cities also raise their water rates, a likely scenario.

Not surprisingly, there is quite a difference between the lowest and the most expensive water rates.  Here are some average annual rates:

$250 to $475 :      Memphis, Chicago, Denver, Phoenix

$700 to $800:      Charlotte, Lewisville, New York, Detroit, Los  Angeles

$1000 to $1200:    Boston, San Diego, San Francisco, Philadelphia

$1600 to $1700:    Seattle, Atlanta

Source: NYC Department of Environmental Protection, April 9, 2010

Water is just one of the environmental resources that must be properly managed.  States like Georgia and California are starting to understand that management of potable and non-potable water is critical, but these concerns have long been worldwide.  Half the world’s population already suffers from poor access to water, with 1.8 billion people (who consume an average of 20 litres a day) without water in their homes.  For comparison purposes, usage in the United Kingdom averages 150 liters or approximately 40 gallons a day.  On the water usage scale, the United States comes in at the top with an estimated 600 liters or approximately 159 gallons per day per person.  Putting aside our passion for statistical relevance, this figure truly boggles the mind.

As alternative energy production matures, our obsession with oil resources will fade, but let’s face it. Water resources are also finite. “Drill, baby, Drill” won’t solve our problems here as there is no more water to discover.  What we have is all we have and no matter how blessed America is with natural resources? Unless we respect our waterways and practice better stewardship, water will become our most pressing domestic and national security issue. The countries with the best water resources and the most effective management are destined to be the countries with the brightest futures. Certainly, our municipalities and our citizens can and should do better, no matter what effective water management costs.

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  1. Posted May 12, 2010 at 2:50 pm | Permalink

    Seattle has a strong stormwater run-off management program. I wonder if its high rates are tied to its philosophy about water management.

  2. Posted May 12, 2010 at 4:09 pm | Permalink

    I would imagine that is the case. Also, they get a lot of rain up there. If they didn’t have a good stormwater management policy, residents would be swimming to places most of the time. That said, even places that seem to receive plenty of rainfall will have to do more to improve stormwater management, including adding rainwater catchment systems. Thanks for taking the time to comment.

  3. Posted May 12, 2010 at 4:10 pm | Permalink

    I wouldn’t be surprised, Georgia. A look at how composting is handled is a case in point. Some municipalities make it mandatory – assuming people will comply. Others, like Seattle, charge people a small monthly fee – assuming people are more likely to compost their food waste if they are paying for it. In Washington state there is legislatively mandated storm-water management that is pretty comprehensive, which may be the main reason Seattle fees are high.

  4. Posted May 28, 2010 at 3:57 pm | Permalink

    Kind of ironic how the city that gets huge volumes of rainfall (Seattle) also has some of the highest costs for water. I wonder how warm states like Nevada and Arizona compare.

  5. Posted May 28, 2010 at 5:14 pm | Permalink

    I agree, there is some irony here, Jack, but one of the issues when you get lots of water is lots of stormwater too. The bigger issue is that different areas have different policies, different infrastructure needs, different generation equipment, plants, etc. Here is a link that compares the water rates and usage of 30 U.S. cities. To answer your question, Phoenix is relatively cheap in spite of the fact that water use (consumption) is high and rainfall is low. A family of four pays an average of $34.29 a month there, while in Boston, with high rainfall and low consumption, that same family would pay $65.47 for the same amount.

    Another big problem is that water utilities must move water, which can be an expensive process. Finally, revenues are based on gross sales. As Americans learn to conserve using low-flow fixtures and other water conservation techniques, this pushes rates up. Industry has also cut its fresh water use, often required to reprocess the water they use for reuse. Obviously one solution is to de-couple utility profits from sales volumes, but that is not so easily done. Also, many of the fixed costs of the water utilities are now in financing previous equipment and infrastructure through bond sales and other non-tax revenues. These were based on assuming that higher water volume sales would happen. It’s complicated, isn’t it? But we Americans are a smart bunch. We’ll come up with some great solutions – hopefully in the near future.

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