Scathing new report calls for overhaul of Sewerage & Water Board’s structure

By Michael Isaac Stein

May 17, 2023

In a scathing new report, New Orleans watchdog group the Bureau of Governmental Research called for a complete overhaul of the governance structure of the New Orleans Sewerage & Water Board.

The report, released Wednesday (May 17), blames the Sewerage & Water Board’s unique governing structure for the agency’s myriad problems in recent years, including failing flood protection, recurring boil-water advisories and skyrocketing costs for ratepayers — combined with a long-troubled billing system that has left many residents facing sudden, unexplained spikes in their monthly bills.

“The structure is inefficient, ineffective and ultimately to blame for many of the infrastructure problems New Orleanians experience,” BGR President and CEO Rebecca Mowbray said in a press release.

The New Orleans Sewerage & Water Board, as the report describes it, is an odd mix between an independent, state-created agency and a municipal water department controlled by city government. Its enabling legislation and the laws that it operates under were passed by the Louisiana state Legislature. But the New Orleans mayor serves as the board’s president, and the New Orleans City Council controls billing rates and taxes that fund the agency.

“The result is a complicated web of competing interests and weak accountability that works against long-term performance,” Mowbray said.

The state control makes it difficult for the agency and local leaders to implement changes, the report says, and the involvement of the council means that crucial financial decisions are subject to political pressure, resulting in funding delays that lead to “reactive, crisis-driven” rate hikes.

The report laid out two potential redesigns of the current system. The first and “easier” option would be a set of reforms to the existing Sewerage & Water Board.

The second option would be harder to fulfill but would solve more of the current problems: replace the Sewerage & Water Board with a city-created water department.

But the report says that doesn’t necessarily make option two better. Disbanding the Sewerage & Water Board would be extremely complicated, both practically and politically. And it isn’t necessarily a silver bullet, since success will depend on a well-run city administration, which is never a guarantee.

“Creating a municipal utility would be a complicated process and raises additional considerations, such as the City’s competency,” the report says.

BGR said the city could choose either option, but that the status quo is unsustainable.

“Inaction poses unacceptable risks to vital infrastructure systems,” the report says, noting that government groups, mayors and independent reports have been calling for a system overhaul for decades.

Unusual structure for managing water, drainage

The BGR report compared drainage operations in New Orleans to 51 other “peer cities.” Of those, New Orleans was the only one that splits responsibility for the drainage system between multiple public bodies — the Sewerage & Water Board, which is responsible for the major elements of the drainage system, and the city’s Department of Public Works, which is responsible for the “minor” elements of the system, including catch basins and smaller pipes.

The Sewerage & Water Board was once responsible for the entire drainage system, but that changed in 1992 when New Orleans residents voted against renewing a tax that allowed the Sewerage & Water Board to manage the “minor” part of the system. Ever since then, the Department of Public Works has had to take over that responsibility.

“SWB and DPW have struggled to effectively coordinate their work for decades,” the report says. “Failure to adopt adequate mechanisms to promote coordination has contributed to inefficiencies, provided opportunities for the S&WB and Public Works to blame the other for poor performance, and diminished public confidence in both.”

But consolidated drainage under the Sewerage & Water Board wouldn’t fix all our problems, the report says. The agency simply “doesn’t work effectively because it marries key features of a stand-alone utility with those of a municipal utility.”

For the most part, the report found, municipal water services tend to be organized as city departments or as stand-alone agencies.

The report looked at 75 peer cities and found that the water utilities in the majority of them, 59, were city departments. Four had privatized services. And 12, including New Orleans, had a public agency separate from city government.

But the report notes that New Orleans is strange, and that the Sewerage & Water Board has elements of both a municipal department and a stand-alone agency due to the unusual way it’s overseen.

A city department or a standalone state agency?

The BGR report says that the fact that the Sewerage & Water Board is a state agency controlled by the state legislature presents an inherent problem in that the city’s water systems are in.

“It is impossible to address most S&WB problems without making a trip to Baton Rouge,” the report says. “S&WB is governed by more than 80 Louisiana laws, giving state legislators – who often have little or no connection to New Orleans – substantial control over local water utility issues.”

The report notes that despite state control, there is no designated state agency in charge of regulating the Sewerage & Water Board, and that trying to get changes through the legislature can be a time-consuming process that delays or even prevents necessary changes.

On the local level, the Sewerage & Water Board is governed by an 11-member board made up of nine citizens, a City Council member and the current mayor of New Orleans, who acts as president of the board.

The report says the mayor’s leadership on the board may prevent it from acting like a true standalone agency that makes its decisions separately from the central city government.

“The mayor’s prominent role as president of the S&WB’s board of directors can blur the lines of accountability by creating uncertainty in the public’s mind as to whether the mayor or the board should be accountable for the utility’s performance,” the report says. “The presence of the city’s most powerful elected official can also discourage the free-flowing exchange of ideas on the board, limiting the board’s effectiveness.”

To make things more complicated, the New Orleans City Council also plays a role in governing the Sewerage & Water Board. The council is in charge of approving rate increases and new bond issuances for the agency. But the report notes the council has no formal process to consider rate increases, and that those decisions can often be led by political considerations — like not wanting to raise rates before an election — rather than based on the agency’s needs.

“[The council] has faced political pressure from constituents to keep rates and taxes low,” the report says. “Past councils have delayed or killed proposals to increase water and sewer rates because of political concerns despite the systems’ needs. This practice has resulted in historical underfunding, contributing to today’s deteriorated infrastructure.”

The report notesd that currently, the council’s oversight and authority over the Sewerage & Water Board isn’t very effective. As a result, the report says, that the agency’s rates remained inadequately low for too long before they were drastically increased over the last decade. The report notes that ratepayers today are paying seven times more than they were 50 years ago when adjusted for inflation.

The report doesn’t compare New Orleans’ rates to other cities or imply that they are higher than they should be. But it says that pushing off rate increases has created “unfair distribution of S&WB costs across generations of ratepayers,” meaning that current residents are carrying unfairly high costs compared to their parents’ generation.

In an interview, Mowbray said it was impossible to know whether rates would be lower today if the Sewerage & Water Board’s governance had been different. She also said that given New Orleans’ unique needs, it’s hard to compare bills or performance to other cities.

Still, she said she believes there is a good chance that the historic failure to properly manage and fund the whole system is forcing us to spend more now.

“If we had better overall maintenance, it’s totally possible rates wouldn’t have to be so high right now,” Mowbray told Verite.

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