With a vote scheduled Thursday that could double water rates in New Orleans by 2020, Sewerage & Water Board officials on Wednesday bowed to public pressure and spelled out how they plan to spend $582.7 million in extra money.
The New Orleans City Council appears likely to approve the rate increase, backed aggressively by Mayor Mitch Landrieu over the objections of Council President Stacy Head, who has called for a two-to-four-week delay to obtain more information.
The proposed rate hike would raise the average resident’s monthly bill from $52.50 today to $112.67 by 2020, the Sewerage & Water Board said Wednesday.
Ray Manning, president pro tempore of the Sewerage & Water Board, told Wednesday’s special hearing of the City Council that his agency felt compelled to provide specifics because of questions raised in the media.
The Lens and other news outlets have quoted Head and Janet Howard, president of the independent Bureau of Governmental Research, complaining repeatedly in recent days that Sewerage & Water Board officials have failed to explain how the agency would spend a 10 percent rate increase in each of the next eight years.
So getting the specifics on Wednesday represented a partial victory for Head, though her colleagues seemed likely to disregard her request for a deferral of the Thursday vote.
Here’s how S&WB officials said they would spend the $582.7 million through 2020:
>>$203.7 million would pay for construction projects. Of that figure, the agency would use half (or $100 million) to fix pipes, water pumps and filters. The agency would use the other $100 million to issue bonds to borrow $643 million over 20 years to finance an array of additional infrastructure projects. Thus leveraged, the $203.7 million would generate $743 million in spending for new projects.
>>Part of the $743 million would upgrade the agency’s two water purification plants, repair leaky sewage pipes and modernize the agency’s power plant, Joseph Becker, the Sewerage & Water general superintendent, said in an interview. The federal Environmental Protection Agency has demanded the sewage pipe upgrades. The East Bank plant that generates electricity to operate sewer, water and drainage systems has failed five times, most recently during Hurricane Isaac,
In all, S&WB officials have said they have a $3.3 billion construction backlog, a figure far in excess of the projected $743 million capital infusion.
“It’s the beginning,” Landrieu acknowledged to reporters, following a luncheon speech on Wednesday. “It’s the first year of a long-term problem.”
A further breakdown of the spending plan is as follows:
>>$242.1 million for the S&WB’s yearly operations and maintenance needs. Deputy director Robert Miller said the agency will need to hire more electricians, machinists, mechanics and other staff in order to fix small leaks (currently 1,200 per week) and replace old computers.
>>$54.6 million to pay off debts, including $21.8 million due to the city’s Department of Public Works and $20.9 million owed to people who have won claims against the agency.
>>$48.7 million to boost cash reserves, to qualify for an improved bond rating to borrow more money. The S&WB’s bond ratings are mostly junk status.
>>$33.6 million to offset a loss in funding from the Federal Emergency Management Administration.
Miller blamed the Sewerage & Water Board’s earlier failure to provide specifics on a shortage of “frontline staff.” He added, “We agree that detailed plans are needed.”
Left unclear, however, is how much of the new spending will reduce the 40 percent of purified water that leaks uselessly through old and damaged pipes.
S&WB officials released the numbers Wednesday afternoon, hours after the Bureau of Governmental Research issued a report saying, “The biggest weakness in the S&WB’s requests for rate increases is the lack of a plan for spending the additional … revenues. The lack of a well-conceived and articulated plan increases the potential for waste and inefficiency and raises the specter that the agency will merely plod along. Developing a clear spending plan should be a high priority for the S&WB.”
The BGR report compared New Orleans’ rates with those in three cities. Charleston, Cincinnati and Louisville pay higher rates than New Orleans today and, except for Louisville, would still have higher rates in 2020 after the 10 percent annual increments in New Orleans kick in fully, the report estimated.
The council will take up the Sewerage & Water Board rate increase beginning at 11 a.m. Thursday. Head is the only council member who has indicated that she would oppose the rate increase, for lack of specifics. (She has noted that she voted for a 2007 rate increase and favors at least a partial increase now.)
Council members Jackie Clarkson and Kristen Gisleson Palmer have indicated they will vote for the rate increase; council member Cynthia Hedge-Morrell said after Wednesday’s hearing that she likely will too. Political insiders and business leaders told The Lens they expect that council member Diana Bajoie, who was appointed to the council in June by Landrieu, will also support it.
Council members Ernest Charbonnet and Susan Guidry have not said publicly how they will vote.
Thursday’s meeting is the last for Bajoie and Charbonnet, interim appointees who will be replaced by the winners of the Saturday District B and District E races, respectively.
Earlier Wednesday, Landrieu gave an impassioned defense of the rate increase before 800 members of the New Orleans Chamber of Commerce at their annual luncheon. He said past city councils have repeatedly declined to approve necessary rate increases, to avoid angering residents.
“It is time to face the challenges before us,” Landrieu told the crowd. “It’s time to bite the bullet. Tomorrow is the day. It is the most important vote the Council will take in these four years.”
Meeting afterward with reporters, Landrieu denied the contention by political insiders that he wants the vote on Thursday because he can count on the support of Bajoie and Charbonnet.
But he said, “If it doesn’t happen tomorrow, it will be hard to pass.”
A sign of the stakes for Landrieu: Several leading members of the business community – attorney William Aaron Jr., who chairs the Chamber of Commerce; financier Suzanne Mestayer, who chairs the Business Council of New Orleans; and financier Octave Francis – said the mayor asked them to endorse the rate hike. The chamber and the Business Council announced their support for the rate hike on Tuesday.
Another power broker, Ron Forman, a former mayoral candidate who heads the Audubon Nature Institute, told The Lens that he favors the rate increase because it is needed.