Hevesi blocking water system sale

Real Estate Weekly, August 2, 1995

New York City Comptroller Alan G. Hevesi re-asserted his opposition to Mayor Rudolph Giuliani's proposed sale of the water system recently at The New York Building Congress Breakfast forum. The proposed sale would raise $2.3 billion, with $1 billion going to capital projects over the next three years and the remainder paying off outstanding city bonds.

Among the factors Hevesi cited for blocking the transfer of title to the Water Board are: the threat to a precious asset; the possible loss of political leverage over the watershed; the need for control of water and sewage rates; and the lack of a guarantee that revenue would fund capital improvements.

"I don't believe you sell your most significant, precious assets for cash flow," Hevesi said. Transferring title is a "fiscal gimmick intended to avoid the (state-mandated) debt ceiling."

"I will never support any deal that uses capital funds for operating expenses. I don't think you mortgage your future for a cash infusion," Hevesi said. "You don't sell your house to pay off your credit card."

Loss of control over the water system and the watershed in upstate New York was another concern Hevesi raised about the sale. The Water Board is not a typical agency, Hevesi explained. It is a state agency designed to set water rates, but its board is appointed by New York City. Giving the water board title to the huge system, Hevesi warned, could give Governor George Pataki and the State Legislature an incentive to take control of the Water Board's appointees and re-define its powers.

Forfeiture of control, he said, would be harmful to New York because of an ongoing debate over the protection of the watershed in New York State. Watershed property surrounding the 19 reservoirs in upstate New York is currently owned by New York City and is designed to safeguard the City and Westchester's drinking water.

Hevesi said business and communal activity around the watershed, which comprises an area bigger than Rhode Island, must be regulated. If not, New York City will be forced to construct filtration plants which would cost $500 million every year for the foreseeable future.

The City cannot afford this expense, Hevesi said, because the funds would come "from the same capital pot, not new money." The alternative would be to raise water and sewer rates at least 45 percent. Giving up control of the watershed, therefore, could put New York's financial and environmental health solely in the hands of Governor Pataki and the State Legislature, Hevesi said.

The Giuliani administration vowed to fight the Comptroller in court to push the sale of the water system forward, accusing him of "not acting rationally.

Hevesi formally blocked the sale on July 26, calling the move potentially "devastating" to the city. The rejection of the sale, a cornerstone of the Mayor's financial plan, eliminates $1 billion currently earmarked for capital improvement projects.

Mayoral aides and City Councilmembers said hevesi's action endangers $200 million in much-needed school repairs that the sale was supposed to finance this year, among other projects. "Alan Hevesi is obviously playing politics here," said First Deputy Mayor Peter Powers, who had previously addressed the Building Congress in support of the sale. "He's not concerned about the children. He's not concerned about fixing the schools."

In response, Hevesi sent a letter to Giuliani proposing other ways to raise school repair money, such as delaying "non-essential projects" such as a planned statue honoring Duke Ellington and a proposed amateur sports complex in Brooklyn.

Powers said these alternatives would not save enough to pay the school repair bill.

Other Topics Addressed

Hevesi also discussed the Comptroller's office's commitment to settling cases concerning prevailing wage laws. Many contractors have been the target of complaints for the unlawful underpayment of workers in attempts to underbid legitimate contractors.

When he entered office in January of 1994, Hevesi said 560 suits were pending because his predecessor had not considered the issue to be important. In 1994 alone, another 465 cases were filed and another 400 are expected in 1995.

Of the more than 1,000 complaints, all but 300 have been resolved. The increased vigilance, Hevesi said, has resulted in revenue generation for New York City and better treatment for workers and legitimate contractors.

In response to Building Congress President Richard Anderson's question concerning the need for an independent capital needs assessment, Hevesi agreed that the government does not monitor its capital budget as well as the operating budget. As a result, some government officials have neglected badly-needed infrastructure investments in favor of short-term budgetary items.