Audit Finds Questionable Budgeting Badly Underestimated Incoming Revenues Even As Rates Surged
An audit by City Comptroller John C. Liu of the New York
City water and sewer system found doubtful accounting and chronically
low forecasts of annual revenue, that may have led to increasingly high
water rates for New Yorkers. Comptroller Liu’s audit also found that
the Department of Environmental Protection (DEP) failed to collect $27
million in delinquent water and sewer bills.
Every
year the NYC Water Board and the NYC Municipal Finance Authority
(collectively NYW) forecast the amount of surplus revenue that the
DEP will collect from water bills, which will go to pay for its debt
obligations. Over the last four fiscal years, NYW issued extremely
conservative forecasts for their surpluses, which may have caused rates
to be set increasingly higher. When revenues
came in, however, the actual surpluses exceeded NYW’s estimates by 24
to 41 percent, in amounts that ranged from $71 million to $120 million
each year.
“The
results of this audit indicate that rising water rates may have soaked
New Yorkers more than necessary,” Comptroller Liu said. “DEP and
the Water Board need stronger accounting of their revenues so that they
can keep any rate increases to a minimum.”
Even
as NYW publicly underestimated its revenue from water bills, it put the
increasingly higher surpluses toward its projected debt obligations.
For example, in FY 2010 NYW allocated a surplus of $241.6 million
toward debt and in 2013, the allocated surplus increased to $451.8
million. NYW seems to have never considered whether the higher than
budgeted surplus revenue could have been used to limit
water rate increases.
The
audit also found the NYW failed to conduct proper oversight of DEP’s
billing and accounting and may have underestimated DEP’s ability to
collect past-due
accounts—a factor that can affect the rate-setting process.
DEP Failed to Collect Millions
DEP,
which processes and collects bills for NYW, failed to collect $15
million owed during Fiscal Year 2012. In addition, DEP failed to
collect an additional $27 million from private entities located on
City-owned and State-owned properties, and from Housing Development Fund
Corporation cooperatives as of June 30, 2012.
Background
The
New York City water and sewer system network includes more than 7,000
miles of pipes running from upstate New York to every building in
New York City. Until the mid-1980s,
the City funded operating expenses through its general fund and
financed
necessary capital investments by issuing the City’s general obligation
bonds. In 1984, the City obtained state approval to change the way its
water and sewer infrastructure was operated and funded and created the
New York City Municipal Water Finance Authority
and the New York City Water Board. The Authority issues bonds to
finance capital construction and infrastructure improvements. The Board
leases the system from the City and sets rates to ensure the system is
self-sustaining. The DEP operates the System and
handles billing and collection of water and sewer charges for NYW.
No comments:
Post a Comment