New York City's Hidden Water Tax May Cause 8% Increase in Bills

New Yorkers love to complain about taxes, including but not limited to property taxes, sales taxes and income taxes. Now all city residents — whether they live in co-ops or condos, rental buildings or single-family homes — may soon have a new tax to complain about: a hidden tax on water and sewer service that could cause their bills to spike by more than 8% this summer.

Mayor Eric Adams has announced a plan to resurrect a funding mechanism that calls for the city to charge its own Water Board more than $1.4 billion in rent over four years to lease its water and sewer systems from the city, according to budget documents reviewed by Rahul Jain, a New York State deputy comptroller, The New York Times reports. The city’s Department of Environmental Protection, in turn, is now proposing that the Water Board raise its rates for homeowners and landlords by 8.5% in July, according to a proposal released by the board.

The proposed rate increase — which, if approved, would be double last year’s rate hike and the highest in 14 years — would pay for only a portion of the rent charges. Some of the rest are likely to come from funds that typically finance capital upgrades to the water and sewer system, potentially leaving the city more vulnerable to critical breakdowns just as an unusually bad hurricane season is expected to unfold.

The funding gimmick had been used by New York City for decades, but was discarded in 2017 (only to make a temporary, partial reappearance during the COVID pandemic before it disappeared again). The mayor at the time, Bill de Blasio, said the city was “righting a wrong” — which would suggest that Adams is now attempting to wrong a right.

“It’s all legal, but legal doesn’t make it right,” says James Gennaro, the city councilman who leads the Committee on Environmental Protection. Gennaro, a Queens Democrat, described the funding mechanism as a “hidden tax” — a way to extract money from New Yorkers without raising property or sales taxes.

Experts note that water payments are a regressive tax, in that they are assessed on homeowners regardless of income, while renters see the payments passed down to them in the form of rent hikes.

“It’s robbing Peter to pay Paul,” says Eric Goldstein, the senior attorney and New York City environment director at the Natural Resources Defense Council. “The bottom line is this is coming at a time when the city’s water and sewer needs are large and growing.”