Could computers and data bases be the key to reducing a city's ecological footprint? This Times article provides details about the inability of New York City's government to have a record keeping system to keep straight who is using how much water. If consumers anticipate that they won't be billed for resource consumption, then this is effectively a price of zero and demand curves do slope down!

Here's a counter-factual for you. If New York City had a credible enforcement mechanism for making consumers face positive prices for water consumption, how much would water consumption per-capita decline by? While many environmentalists focus on population growth and income growth as the key drivers of resource consumption, people would be more likely to economize on consumption if they faced a positive price for consumption.

Greg Mankiw and others have celebrated the Pigou Club but this article highlights the challenges in actually implementing a pricing scheme to make people for scarce natural resources. An irony here. If New York City privatized its water supply, I bet that a for profit company would do a better job keeping straight who consumed how much because they would lose profit if they were giving consumers a "free lunch" of a water transfer without requiring a payment. Starbucks doesn't offer free coffee.


New York Times
December 12, 2006
Water Bills Are So Flawed City Can’t Collect Millions
By ANTHONY DePALMA and JO CRAVEN McGINTY

For years, New York City has failed to collect on millions of dollars in overdue water bills because its records are so riddled with factual errors and outdated information that pursuing deadbeats and delinquents has become virtually impossible.

An examination of the city’s water records by The New York Times revealed that, at least on paper, tens of thousands of property owners have not paid a penny for water in at least two years. Officials insist that debtors collectively owe hundreds of millions for water they used but never paid for.

But whether they are true deadbeats or customers with legitimate disputes, all debtors enjoy a virtual immunity because the city, unlike Boston or Los Angeles, will not use aggressive collection methods like service suspension because its records are so unreliable.

The city’s records show a family that owns more than two dozen properties in Brooklyn and Queens owes more than $1 million in water charges. The family blames it on broken meters and misunderstandings and has managed to make no payments in at least two years.

The owners of a 10-unit condominium building on East 50th Street, a few blocks from the Waldorf-Astoria, simply stopped paying their water bills about two and a half years ago. The city says they now owe more than $16,175. The owners say the meter readings are inaccurate. The city just keeps sending overdue notices.

Two doors away, the United Nations Mission of the Republic of Niger has ignored every water bill it has received since 1998 for its elegant town house, accumulating a debt of nearly $120,000, including penalties. It ignored repeated calls for comment. Eight other foreign missions on the Upper East Side are also in debt, and collectively owe the city about $230,000.

Joseph Mannino, the owner of a small building on Staten Island has a water bill of more than $260,000, which represents some 200 years of water use.

“There’s no way I could have used that much,” he said.

What efforts the city has made to collect on thousands of water debts have been made all the more difficult by a broken record-keeping system that even city officials cannot make sense of. Meters that were installed were never read. Buildings that were demolished over the years continued to receive bills. And water use that would have taken a century to run up was billed to one customer in a single year.

Deputy Mayor Daniel L. Doctoroff said in an interview that the city could not be proud of a billing and collection system with such “long standing and deeply ingrained” problems. Yet only in the past year have city officials begun examining ways to overhaul the system. They hope to install a $200 million automated meter-reading system, but that will not be in place until 2010.

The city’s records of just how much it is owed — $230 million on debts more than two years old and $400 million accumulated in the last two years — are really just estimates. The actual debts may be less, or more. But while city officials insist the debts are substantial and real, no one believes they will be collected any time soon.

The records — which the city provided only after it was sued by The Times under the Freedom of Information Law — showed that more than 21,000 water accounts have been in arrears for at least two years, with more than 4,650 of those accounts delinquent for a decade or longer.

One consequence of the faulty system is that New Yorkers who do pay their water bills are bearing the burden of those who do not. In July, the city raised water rates by 9.4 percent, far more than had been projected. While higher insurance and financing costs contributed to the increase, the city Department of Environmental Protection, which runs the system, explained that “by far the biggest problem that is causing this proposed increase are the deadbeat homeowners who don’t pay their water bills.”

Since being appointed commissioner of the department in early 2005, Emily Lloyd has tried to straighten out the collection system, starting with determining who owes the city money and why.

“It’s very arduous to go back and figure out why they haven’t paid,” she said. “Did they just decide that nobody’s ever going to do anything so they don’t pay, or did they have a dispute, get really angry, and just decide that they’re not going to pay?”

Ms. Lloyd, arguing that the department needs tougher enforcement tools, has asked the City Council for authority to put delinquent properties into lien sales, which would force owners to clear up their bills or risk losing their buildings.

But Councilman James F. Gennaro of Queens, chairman of the Environmental Committee, which will review the department’s bill collecting performance at a hearing tomorrow, says that is not likely to happen when the billing and collection system is so troubled.

“There is reluctance on the part of the Council to give the department bigger guns to go after delinquent water users,” he said, “unless we can be sure those guns can be reliably aimed.”

Small Properties, Big Debts

The list of late accounts, not surprisingly, included some of the city’s most troubled buildings and a number of its most troublesome landlords.

Among the single largest residential water debtors is 265 Realty Associates, a company linked to Yaakov Goldfeder, whose dilapidated 71-unit building in Brooklyn is $670,423 in arrears. Mr. Goldfeder, who also owes more than $7 million in property taxes and penalties on the building, did not respond to several telephone calls. In June he told The Daily News that he no longer owns the building.

The family of the late Fred Stark, according to the records, owes more than $1 million in water bills, including late fees, on 28 residential and commercial properties in Brooklyn and Queens. The city has long tried, with limited success, to get the Starks to either sell or redevelop those buildings. A lawyer representing the Stark family blamed broken meters and billing disputes.

While those big properties attract the most attention, smaller properties with big debts provide the most chilling insight into a billing system in disarray.

Mr. Mannino’s modest three-story brick building on Bay Street on Staten Island has a water bill exceeding $260,000, several times more than he paid for the building in a private sale in 1997. He agreed to assume the previous owner’s $4,000 water bill, but within two years the bill had soared to $60,000. The debt kept growing, even though the building contained only two apartments and a beauty supply store. The current average residential water bill in the city is less than $600 a year.

“They’re running the system like Romper Room,” Mr. Mannino said. Officials said he might have had a leaking toilet that he was not aware of and did not repair.

The check of computer records found many anomalies among the largest accumulated debts. The building listed at 209 Seigel Street in Brooklyn has a debt of $171,879. But the Rev. Frank Amato, pastor of Our Lady of the Rosary of Pompeii Roman Catholic church on the same block, said the building was torn down more than 16 years ago to make way for a town house development.

After this was pointed out to city water officials, they removed the building’s debt from their records.

There was no such quick resolution for the husk of a building at 641 Classon Avenue, Brooklyn, which has a listed water debt of $251,381 even though the windows are long gone and no one has lived there for years. Efforts to contact the owner were unsuccessful. Water officials said they had received no payment for the last 16 years, but they still expect to collect on the outstanding debt before the building can be sold.

The city also continues to send overdue notices to the buildings once owned by the Central Railroad of New Jersey on a Hudson River pier. That railroad went bankrupt in 1976.

The largest debts are often the result of estimated bills, accrued over a long period, instead of metered readings. That appears to be what happened to Steve Marovic, who bought a four-family building at 411 Grand Street in Brooklyn in 1995.

Mr. Marovic said the building had no water meter when he bought it. About three years ago, he said he received a summons for not having a meter. He put one in, but no one ever came to read the meter. The city said Mr. Marovic has not made any payments since 1995. His debt now exceeds $145,000, including late charges, far greater than the amount of water the building might have used. City officials now say the bill will be adjusted, but insist that Mr. Marovic owes a substantial amount.

They also are reviewing the water debt on the apartment building in Washington Heights, Manhattan, owned by Teresa Alfonso, an 82-year old widow. A family friend, Emilio Rodriguez, manages the five-story, 13-unit building at 598 West 178th Street for her. He said he receives several bills a month indicating that the debt has grown to more than $157,688, and that no payment has been made since at least 1995. Officials said the problem worsened when the building went from flat fees to metered billing four years ago. The flat fee had been incorrectly calculated because the city undercounted the number of apartments and stores in the building, then retroactively charged Mrs. Alfonso for the difference. When meters were finally installed new disputes arose over the readings.

“It’s a disgrace,” Mrs. Alfonso said.

Joseph F. Singleton Jr., deputy commissioner in charge of customer services, acknowledged that Mrs. Alfonso’s account “has got to be reworked from top to bottom.”

Bills for Horse Troughs

The system’s billing failures go back to the 1980s when New York moved to metered water bills, long after most other cities. For much of its history, the city charged building owners only a flat fee for water, a fee so low that many New Yorkers believed water was free.

After the fiscal crisis of the 1970s, the entire water system — the largest municipal system in the country — was pulled out of the general city budget to protect it from future fiscal shocks. But the installation of thousands of water meters in the 1980s was followed by allegations of fraud and complaints of grossly inaccurate readings. The billing problems were compounded when the city’s Department of Finance turned over responsibility for water billing to the Department of Environmental Protection in 1995. At that time, several accounts had been delinquent for 40 years, and the oldest dated to 1933.

Today, 96 percent of the 826,000 individual water accounts in the city have meters, which are supposed to be read every three months. Yet some of the flat fees — called frontage fees because they were originally based on the width of a building — still exist.

To this day, the water board’s yearly rate schedule is so antiquated that it includes a list of fees for 19th century uses: filling steamboats, sidewalk horse troughs and milk depots. City officials could not explain why they were still there.

Since 1999, the city has had the legal right to suspend water service to residential accounts that were delinquent for more than two years. But it alone among big cities has never turned off the taps to a residence, though its rates are among the lowest of major cities.

In Boston, the city will suspend service if an account is more than 60 days delinquent and the bill exceeds $250. But it will do so only from April to November.

In Chicago, tenants in apartment buildings have the right to send their rent to the city if a landlord fails to pay water bills. If fewer than half the tenants do so, the city reserves the right to shut off the water.

In Los Angeles, where water is especially scarce, authorities suspend service after a payment is 72 days late. It orders about 155 shutoffs a day, said Kim Hughes, a spokeswoman for the city’s water system. About 115 of those customers come in to pay within 24 hours, she said.

Disagreeing Over a Solution

Last year New York toyed with the idea of terminating service to delinquent well-to-do customers, but Ms. Lloyd, the commissioner of the department that oversees the water system, said she was uncomfortable with that approach. And she did not embrace the idea of shutting off water to an entire apartment building because the landlord had not paid.

Instead, last spring she asked the City Council for greater authority to use lien sales as a way of forcing habitual delinquents to pay. Right now, the city can get a lien for an overdue residential water bill only when owners are also behind in property taxes.

But David I. Weprin, chairman of the Council’s Finance Committee, refuses to give her that authority. He said he has heard too many water bill horror stories from his constituents, and once his own water bill more than doubled in three months. Eventually, an inquiry found an underground leak, and his bill was adjusted.

“They still have not cleaned up their act when it comes to their billing,” Mr. Weprin said.

City officials began an effort last year that they hoped would bring in $50 million a year in overdue bills. But this spring they reported that only $15 million had been collected toward that goal.

The environmental agency is in the process of signing a contract with the international consulting firm Booz Allen Hamilton to help upgrade its collection practices.

Officials hope that improved customer service, like shorter waiting times at telephone centers, will keep the $400 million in short term debts from turning into long-term problems.

The department also plans to piggyback on the new wireless emergency notification system being installed around the city so that meters can be read automatically.

Officials reject the idea of an amnesty but they are considering ways to allow delinquent debtors to establish a reliable water use and payment record for a year. That record would then be used retroactively to determine past usage.

Under almost any scenario, the city will have to triage hundreds of thousands of water accounts.

“We’re going to have to find a way to go through those pretty much one by one,” Ms. Lloyd said. “If we don’t want to be tied up in lawsuits forever we need to look at where there have been disputes and decide how strong our case is and whether we feel that is something where we can prevail.”