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Water rate freeze leaves many thirsty.

While the New York City's proposed two-year water and sewer rate freeze is being welcomed by the real estate industry, most owner reps and other officials called it merely a first - step" and urged further measures to relieve drained owners.

Like the so-called property tax freeze, this freeze is also a freeze on rate, and buildings can experience variations in usage and therefore higher or lower bills.

Water rate rises of several hundred percent over the last, decade and the implementation of water meters that rack up high usage in densely populated, lower-income housing, has brought criticism from many quarters. Even while acknowledging a surplus of more than $100 million in its coffers, the Water Board was ready to institute a 17.9 percent rate hike over the next two years if the city had not requested this election year rate freeze.

According to Elizabeth Holtzman's office, the water board overcharged New York City residents and $110 million of that money is to now go back to the people. The Rent Stabilization Association's president, John J. Gilbert III, put the amount of actual overcharge at $209 million.

The Water Board still must approve the proposals that have been included in the agenda for the public hearings on May 4 and a vote on May 11. Also included is an item that New York City Mayor David N. Dinkins and Comptroller Elizabeth Holtzman did not mention in their press announcements of the freeze. That item is a proposal to increase penalties for refusing to have a meter installed from 50 percent of the flat rate to 100 percent - basically doubling any flat rate bill.

What they did brag about was a cap program to limit residential water rates to payments of not more than $750 for a single-family home per year or the first apartment of a multi-family building and $500 each for the other units in a building.

Some low-income apartment owners have seen rates go as high as $900 per unit although the city average is $290. Caps would not apply, however, for commercial processes, irrigation or recreation so those with car washes, pools and lawns might face higher bills.

The transition program, which permitted owners to continue to be billed on a flat rate basis for up to three years, is proposed to be continued for an additional year and expire on June 30, 1994.

To participate, owners would have to agree to a water audit and take advantage of a $240 rebate per apartment for installing low-flow toilets and shower-heads in a program that would begin in the Bronx in September, once a vendor is chosen. A course, which has been described as a "how-to" for supers on fixing leaks and changing faucets, is also prescribed.

Additionally, the city has proposed to eliminate an industrial waste surcharge that would provide a savings of $2.6 million per year for 226 food processing and laundering facilities.

The freeze would be continued by an inflation-linked cap - projected at 5.5 percent per year - through fiscal 1997. This, however, is not on the Water Board's agenda.

Sen. Kemp Hannon, who is chairman of the New York State Senate Housing Committee, said if this is simply a freeze it "may well create more of a problem" because it does not address the underlying problem of water conservation. "That goal was needed to come into the Federal EPA program," he said.

Steven Spinola, president of the Real Estate Board of New York, said they welcome the freeze for the next two years since the water costs have escalated so dramatically and have put many buildings into jeopardy. "It's a nice concept to have a cap," he added, "but to say it's double what the current rate is isn't very reassuring."

Owner Robert C. Rosenberg, chairman of Rosenberg & Diamond, deemed the city's current proposals "well-intentioned" because otherwise, he said, they will end up taking the properties back.

Dan Margulies, executive director of the Community Housing Improvement Program (CHIP), noted that the original 50 percent penalty was thought high before the actual water bills came in. He doesn't believe anyone will be affected by the 100 percent penalty because the agreement to bring in those already metered back to flat rate billing for another year coupled with the extension to July 1, 1994 should cover "everyone. "

Gilbert said the caps are unrealistic. "The caps at that level are like putting a tourniquet on somebody that has already bled to death. Let's not forget the fact that at $290 per unit the water board had a $209 million surplus."

Margulies feels the year's extension gives the industry time to negotiate for a cap that will protect housing.

"We have to take it as progress and a challenge to deal with that $500 per unit number and bring it down," he said warning that everyone going onto meters on July 1, 1994 will create "havoc."

The city estimates, he said, that if everyone had a meter today, 21 percent of the buildings would have bills over $500 per dwelling unit.

Harold A. Lubell, a member of the Rent Guidelines Board and a partner in the law firm of Robinson Silverman Pearce Aronsohn & Berman, is spear-heading RSA's lawsuit against the city that claims it did not have the authority to order the installations of the meters to begin with. Of the new proposals, he said, "I don't know if he has that authority either," referring to the mayor. Rates are determined on the basis of what is needed to operate the system and to pay the interest on the bonds that have been floated and pay for improvements.

Domino Sugar Corporation's Vice President and General Counsel Robert Vorsanger, said as a sugar refiner, they use a lot of water. "We put hun-

Michael Lappin, president of the Community Preservation Corp., a lender to low-income housing, has been acting as a key voice in a group formed to discuss the water issues with the city. The key is to try to have something sensitive to the economics of multi-family housing but create some incentives to conserve water," he said.

While he suggested there might be some minimum bill as well as a hardship relief program - that he hoped would be easier to obtain than one under Rent Stabilization - Lappin said he sees no reason to penalize multi - family owners where the density would make the water usage out of their control.

A report at the Rent Guidelines Board stated that the biggest affect on water usage is density, Lubell said. He also does not expect or ask for a shift of burden toward the commercial user, merely a reconfiguration of the residential billing.

The coalition of numerous groups also suggested that the city meter its own facilities. Lappin's water group, which includes real estate industry reps as well as the New York Citizen Housing Conference, the Northwest Bronx Clerical Association and lenders, has been working with Deputy Mayor Barbara Fife and Commissioner Albert F. Appelton.

Lappin urged some kind of formal public oversight of the Water Board as well as the process and a more regular billing system.

"The erratic appearance of bills and the requirement that they be paid at once are a hardship," said Mary Ann Rothman, executive director of the Council of New York Cooperatives.
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Title Annotation:rate freeze on water and sewer rates by City of New York seen as insufficient economic assistance by building owners
Author:Weiss, Lois
Publication:Real Estate Weekly
Date:Apr 21, 1993
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