Residents sue over water rate increases

Posted

The environmental activist group Long Island Clean Air Water and Soil and a number of North and South Shore residents have taken their fight against New York American Water’s rates, which LICAWS described as “unreasonable and unjust,” to the state Supreme Court.

Because NYAW customers — in Bellmore, Merrick, Baldwin, Lynbrook, Glen Head, Seaford, Valley Stream and Wantagh — pay the company’s property taxes, their bills are sometimes 300 to 500 percent higher than customers in other communities who receive municipal water, according to a lawsuit filed on Sept. 14.

LICAWS and other ratepayers are asking that a judge annul the state Public Service Commission’s May decision allowing NYAW to increase rates significantly, and stop NYAW from collecting property taxes from its customers.

“We’re just tired of being the cash cow for not only the town and county, paying taxes no other residents pay, but also for NYAW, with their record profits coming out of our pockets,” LICAWS Co-founder Claudia Borecky said on Tuesday.

Over the past 10 years, NYAW has refunded $20 million in property taxes to its customers, but it still gives a percentage to shareholders and attorneys. According to the PSC, the company files tax grievances on behalf of customers in order to also be able to give back taxes to shareholders.

The portion of taxes given back to shareholders, rather than customers, is an “unjust and unreasonable profit windfall for NYAW,” according to the suit.

Another LICAWS co-founder, former County Legislator Dave Denenberg, said that the way NYAW’s property tax costs are passed on to customers is unconstitutional.

In May, however, the PSC ruled against LICAWS on a number of grounds, stating that the hearing was not the proper venue to argue against the constitutionality of NYAW’s tax and rate structures — and that ratepayers’ quarrel should be with local municipalities that set the taxes that NYAW is required to pay.

The PSC also pointed out in a statement that the rate increase it approved for NYAW was less than half of what the company sought.

According to NYAW President Carmen Tierno, roughly 70 percent of Oyster Bay residents’ water bills go toward the company’s $36 million in annual property taxes.

Tierno said that he understands his customers’ frustrations, and has attended several meetings with Sea Cliff customers and local lawmakers seeking a solution.

“I don’t like being a tax collector,” he said at an Aug. 9 meeting, “and I’ve been talking to many of the legislators in this room. We will do anything we can to help change that dynamic.”

This week, the Village of Sea Cliff filed its own suit against NYAW and the PSC.

According to attorney Teresa Butler, who represents LICAWS and NYAW’s South Shore customers, the arrangement between the PSC and the water company has created “a vicious cycle for ratepayers, wherein they pay NYAW’s property taxes as part of their rates, [and] NYAW initiates long, drawn-out and wholly controlled challenges for ‘over-assessments,’ resulting in refunds that are split between NYAW’s lawyers and shareholders, with only a portion going back to the ratepayer, who was the initial source of the property tax payments.”

LICAWS also alleges in its suit that planned infrastructure improvements, which figure significantly in NYAW’s rate increases, are often not undertaken. Butler noted that a new water tower in Wantagh and new piping were planned in a 2010 proposal, but were not implemented. “Instead, NYAW realized the full extent of its desired charge through implementation of other projects, which the PSC approved without public input or comment,” Butler wrote.

According to Tierno, however, the “main driver” of the rate increases approved by the PSC in May was the more than $150 million that had been invested in treatment and distribution facilities over the past five years. And NYAW has reduced its operating expenses by roughly $2.7 million over those five years, he said.

“We remain committed to making needed investments in our water treatment and delivery systems to better serve our customers, while continuing to control our operating costs to help manage the impact to customers’ bills,” Tierno said in a statement released after the PSC’s decision.

PSC spokesman James Denn said on Tuesday that the commission would not comment on the merits of the suit. Denn did say, however, that “the majority of the rate increase was due to local authorities approving tax levies on American Water, over which PSC has no control and is legally obligated to include in its rates.”

A judge has yet to be assigned to the suit. The next court appearance for both parties is set for Oct. 20.