‘Everything is on the table’ — including rate hikes — as S&WB looks to improve operations

By Jessica Williams

January 10, 2019

Since his first few weeks on the job as executive director of the Sewerage & Water Board, Ghassan Korban has sought to warm New Orleanians to the idea that the floundering agency needs more of their money.

It’s apparently time to make that request official.

Barring some unforeseen windfall, the S&WB will move by the end of this year to secure as much as $100 million more annually to fund a massive, long-deferred overhaul of its ancient water, sewer and drainage infrastructure, Korban said Thursday.

The agency is considering asking the City Council to extend the eight years of increases in water and sewer rates that were supposed to end next year, a step that would not require voter approval.

It could also call for the imposition of new stormwater fees for its drainage system — a step long encouraged by some observers and one that could require approval by voters.

In an editorial board meeting Thursday with The Advocate, Korban and other top agency officials cast the various moves as critical to a city where the can has repeatedly been kicked down the road on needed infrastructure improvements. They said the agency has reached a point where that approach is no longer feasible.

“It’s very difficult to ask for money,” Korban said. As a result, “people shy away from it … and do the best they can with what they have. That only works for so long.”

However, one City Council member said the idea of steeper fees and rates would be a tough sell politically, particularly for an agency that has been plagued in recent years by everything from repeated boil-water advisories and power problems to staffing struggles and thousands of incorrect bills.

“I’ve said this both publicly and privately, that the Sewerage & Water Board needs to restore some level of faith in its operations before you can turn around and ask people for money,” said Joe Giarrusso, who heads the council’s Public Works Committee. “And at the same time, you need to present them with a solid plan of how the money will be spent.”

Korban, who came to the S&WB in early September from Milwaukee, said a new master plan for the agency will be issued within two years, but that some components of the plan could be released before others. A study of the agency’s rates, for example, is due by year’s end.

The discussion of the S&WB’s finances comes as Mayor LaToya Cantrell continues to call on local hospitality, tourism and sports agencies to divert some of about $200 million in annual tax revenue they receive to the S&WB, as part of her promise to exhaust every existing revenue source before asking voters to pay more for city priorities.

Such a move would require a change in state law, and some members of the Legislature and Gov. John Bel Edwards have rejected the idea outright.

Still, discussions of the S&WB’s finances in public meetings have taken on an increasingly bleak tone. Absent more money from tourism and sports leaders or from some other source, it appears the board is ready to advocate for rate hikes and new fees as a last resort.

Korban said the agency’s three systems — water, drainage and sewage — have been underfunded for decades.

For example, half of its 1,500 miles of water mains, or the main lines in its water supply system, are more than a century old, he said. The other half are only slightly younger, and only five miles of mains have been replaced in the past 25 years. “That’s unheard of” in other cities, he said.

And the $2 billion that the agency and the city received from FEMA after Hurricane Katrina to repair cracked pipes and crumbling roads paled in comparison to the $9 billion needed to fully replace pipes and streets, officials have said. Generally, federal grants for damage from Katrina paid to restore the S&WB’s infrastructure back to pre-storm conditions but not to replace it entirely.

The agency has had the benefit of eight years of annual increases to residents’ sewer and water bills, a move the City Council approved in 2012 as a way to pay for things like operations and maintenance, outstanding debt and meeting the S&WB’s requirements under a federal consent decree to fix leaks in the sewer system.

The increases have more than doubled what residents paid in 2012 and will generate $583 million overall by 2020. Korban is now considering asking the council to extend the rate hikes past that date.

He said stormwater management fees to better fund the city’s drainage system, a concept officials have debated in the past, is a “sensible approach” consistent with national standards. Those fees would supplement the 4.46-mill tax for drainage that voters renewed in 2016.

Nonprofits, religious organizations and educational institutions are exempt from that tax; the Bureau of Governmental Research has said they would not be exempt from the fees.

The agency may also be suffering from past poor decision-making, such as its insistence on relying on its own antiquated standard of power to run its pumps and turbines. Korban instead favors using Entergy’s more modern power standard.

He acknowledged that asking for more money is “very difficult” but insisted that “everything is on the table,” including rate hikes, loans and bond proceeds as the agency seeks to fix its hobbled operation.

As for Cantrell’s lobbying for a diversion of hotel taxes, Giarrusso said he looked forward to hearing more about that and other ideas during a Public Works Committee meeting next week.

But he dismissed the idea of more rate hikes, particularly amid news that two S&WB employees were asleep on the job during the events that led up to a November boil-water advisory.

“I can’t and won’t go to the public at this point asking either for a drainage fee or an increase in hikes to sewer and water (rates), given where we are,” Giarrusso said.

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