A05878 Summary:

BILL NO    A05878 

SAME AS    Same as S 5699

SPONSOR    Abbate (MS)

COSPNSR    Brennan, Pheffer, Cymbrowitz, Lancman, Towns

MLTSPNSR   Brook-Krasny, Gianaris

Add S5-511, NYC Ad Cd

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.

A05878 Actions:

BILL NO    A05878 

02/23/2009 referred to cities
01/06/2010 referred to cities

A05878 Votes:

A05878 Memo:

 BILL NUMBER:  A5878

 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 SPECIFIC 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 pre-1984 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 ratepayers, includes a tax paid to the City's
general fund.

The City of New York Comptrollers Office analyzed this issue and
calculated the chronic increase in "rental payment" in excess rent in
future years. Figure 1. below illustrates the escalating rental
payment, and the rent in excess over water sewer related costs.

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.


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

 PRIOR LEGISLATIVE HISTORY :  A11382a of 2008.

 EFFECTIVE DATE : Immediately.