Concluding Remarks
Sewerage Rate Increase
The case for the sewerage rate increase appears to be fairly straightforward and
compelling. The Board has few, if any, real options on this matter. Failure to raise
sewerage rates could put the Board and the City in noncompliance with the Consent Decree
signed with EPA and/or default on existing bonds. The user fee approach is fair, legally
tested, and easily administered. The only question on the sewerage fee proposal appears to
be if the entire rate increase (38 percent) needs to be approved at one time or if the
steps could be approved each year while the City Council monitors compliance with the
Consent Decree.
New Drainage Fee
The case for the new drainage fee is more problematic. State law clearly provides that
any drainage fee of this type requires that citizens have an opportunity to vote on the
proposition before the new fee could be collected. In conformance to the state law, a
similar drainage fee to the one now proposed was placed before the voters in 1985 and
defeated.The Sewerage and Water Board now contends that the City Council, under the Home
Rule Charter , has the regulatory authority to set and revise fees without a vote of the
people.
Even though the Sewerage and Water Board contends the City Council has the authority to
approve the new drainage fee, Board officials have stated that if the City Council
approves the fee, they will immediately file a friendly lawsuit to test the legality of
the drainage fee and the Council’s ability to impose such a fee without a vote of the
people.
The desirability of a new fee should be contemplated apart from the legal issue, which
can not be resolved without a court ruling. The decision on whether to support the
drainage fee should be based on the documentation of the need for the improvements and an
analysis of costs and benefits to New Orleans residents and businesses. The City Council's
decision will rest primarily on the level of additional flood protection people are
willing to fund. Once the Council makes a decision on how much money is needed, the legal
issue of who has the authority to levy such a fee will need to be resolved by the courts
Because the proposed drainage fee is based on anticipated runoff and the size and
classification of one’s property, there will undoubtedly be complaints about the
fairness of the fee from customers occupying large properties. Large tract properties in
New Orleans East and Algiers may be disadvantaged, particularly with no “cap” on
the fee as currently proposed. There are, however, significantly lower rates proposed for
vacant and partially drained property. But as with the sewerage and water service charges,
a fee tied to the protection offered may be a fairer means of paying for protection from
flood damage than a property tax. With only property tax revenue funding drainage
services, many homeowners and others exempt from the property tax pay nothing.
As with the sewerage fee, the Council has options: to impose the drainage fee to a
lesser extent than requested, or reserve the right to permit increases by a separate
ordinance each year instead of doing the multiple steps in one ordinance. If the amount of
federal funds to be provided is cut back over the next few years, and the City chooses not
to proceed with the drainage projects on its own, that decision could reduce the need for
funds.
In the case of both ordinances before the City Council, BGR is only pointing out
options available, not advocating any specific approach.
If the legal issue is not resolved in the Board’s favor, the Council would also
have the option to pass the new drainage fee subject to voter approval, as was done in
1985.
Clarify Water Rates
Finally, BGR believes the Board has been less than forthcoming regarding the almost
certain need for water rate increases in the near future. The consulting engineer’s
October 1998 letter to the Board recommended water rate increases, totaling 39 percent
over four years as necessary to meet water revenue requirements. The Board considers the
recommendations as based on a “worse case” scenario of possible new
Environmental Protection Agency requirements. The release in December 1998 of the new
regulations indicated to the Board that almost half the anticipated new treatment plant
construction may not be necessary. The Board, nevertheless, should provide the public with
information on any projected water rate increase so that citizens can fully evaluate the
fiscal impact of potential rate increases for water, sewerage and drainage. The Board
should also provide more specific information to the public about the size and timing of
rate increases that are necessary to prevent default on outstanding bonds. |
