Waist Deep in the Red: Looking at the Sewerage and Water Board’s Spending and Debt

One of the city’s iconic manhole covers (photo credit: pxhere.com)

At a series of talks last month, a spokesperson for the Sewerage and Water Board (SWB) task force revealed that the SWB will soon need to raise millions of dollars more to cover their outstanding debts and the cost of infrastructure development and maintenance. Millions more, I thought, my eyes now fixed to the man standing by the projector screen. Where on earth is that going to come from?

Twists and Turns

There are several counterintuitive splits within New Orleans SWB/drainage policy and power dynamics that are largely under the radar. As New Orleanians know, the SWB controls the city’s drinking water, its sewage systems and some of the drainage. The key word is some because the city-run Department of Public works (DPW) controls drainage pipes smaller than 36 inches in diameter, as well as the infamous catch basins. Confusingly, these smaller pipes eventually merge with the larger ones in the outflow channels, which direct the water to Lake Pontchartrain or the Mississippi River.

Furthermore, The SWB’s bonds, which account for part of the agency’s funding, are managed by the Board of Liquidation, City Debt, which “has exclusive control and direction of all matters related to the issuance and repayment of the City’s general obligation bonds”. The Board of Liquidation is involved with the management of the SWB, with two members of the Board of Liquidation in the 11-member executive wing of the SWB.

Policy within the SWB is also strangely appropriated. Water rates are set by City Council, but the SWB has the power to shut off water to those who do not pay. This a power that they have begun to use in earnest, over the objections of the City Council.

Furthermore, a large part of the funding for drainage comes from property taxes, which are also not controlled by the SWB itself.

Paying the Piper

The SWB finds itself today in dire financial straits. In late 2017, nola.com reported that the drainage fund was at such a low point that the fund was short 56 million dollars needed to fund infrastructure projects in 2018. As past funding was deferred, the report went, available funds went to emergency repairs rather than developing and maintaining critical infrastructure. As of one month ago, the drainage fund had zero cash on hand, as reported by The Advocate. This budget quagmire, as well as the split between DPW and the SWB are two of the reasons that the SWB task force has been given the mission by the State of Louisiana to “develop findings and recommendations regarding the best strategies and procedures for the management of the sewerage, water, and drainage facilities and services in the City of New Orleans”. The task force will present its findings to Mayor Cantrell and the City Council at the end of this month.

According to a Bureau of Government Research report from 2017, the SWB will need an additional 40 million dollars per year by 2019. Seven years later (2026) is the deadline that SWB must pay back the remaining balance of the 20-year bonds owed from Hurricane Katrina, from the Gulf Opportunity Tax Credit Bond Loans. The outstanding balance on those bonds, which the SWB is in the process of paying off as of, is about 47.7 million dollars November 30, 2018.

According to the BGR report, the additional $40 million needed to fund the SWB includes paying into a cost-sharing agreement with the South East Louisiana Urban Flood Control Program (SELA), which will total $8.8 million each year starting in 2022, but maintenance on these projects will also require ongoing funding, an estimated $1.3 million a year by 2026. More cash will be needed to maintain infrastructure like the canals that have been developed on the lakefront ($4.1 million/year), $4.1 million each year for routine maintenance, much of which has been repeatedly deferred, and at least $2 million a year to implement the ambitious ‘urban water plan’, which lays out many great ideas for implementing green infrastructure meant to lessen the load on the city’s drainage system, but has no designated funding source.

Some of the SWB’s liabilities come from outstanding debts, while others come from infrastructure that has depreciated in value over time. At a series of community meetings held in November, the SWB Task Force’s Tyler Antrup explained that one of the reasons that privatization is not on the table for the SWB is the state of its financial and physical assets. The Board is too deep in debt, and its parts are so old, that it is not attractive to a private-market buyer.

The people of New Orleans might ask themselves: would they want to own the Sewerage and Water Board?

Nola.com published an article reporting that 23,000 customers within Orleans Parish have “delinquent”—overdue—accounts, and the SWB has begun shutting off accounts that are more than 60 days overdue, with a balance of more than $50. However, the board itself is also overdue on payments—according to a report by WWLTV, the SWB owes over $7 million in settlements over various lawsuits dating back 20 years.

The Blue and the Green

It is the same story, it seems, over and over again—a critical lack of money. Though emergency repairs are obviously crucial to preserving the streets, canals and pumping systems—in essence, the substrate of New Orleans, long-term maintenance and capital improvements, including “green” infrastructure upgrades, are essential to New Orleans’ long-term survival. If New Orleans cannot figure out how to fund the SWB adequately, and if the SWB cannot implement sustainable and functional drainage in a cost-effective way, New Orleans will cease to exist.

As property taxes help fund a majority of the SWB system, it is important to examine how these do or do not function. In a 2011 report, the BGR estimated that 43 percent of the total property value of New Orleans’ land parcels do not pay into this system, meaning that updating this system could more than double the current revenues. However, many of the parcels that benefit from these exemptions are what City Councilman Jay Banks calls “sacred cows”: churches, schools, non-profits, and government buildings. Updated drainage taxes that reduce exemptions could supplement or supplant the current mill system are solutions that have been endorsed by the Bureau of Government Research, and this has also been put forth by the SWB Taskforce.

An updated drainage tax system could also allow for the creation of tax incentives for homeowners to install green infrastructures such as bioswales, retention ponds, rain barrels, and water gardens. It could also ease the cost for residents to remove impervious surfaces (concrete) from their property, which creates runoff that overwhelms the drainage system during rain events and hurricanes.

This updated tax system could be used to increase the overall funding base for the SWB drainage fund, which is desperately needed to introduce much-needed updates and continue work on current projects. Alarmingly, the Sewerage and Water Board’s drainage fund (which is held separately from the sewerage and drinking water funds) has been completely drawn down, leaving zero cash reserves, though an influx of cash is reportedly on the way, both from monthly bills and FEMA reimbursements.

However, this is not the only possibility for revenue. In November, Governor John Bel Edwards opposed using tourism tax dollars to support the Sewerage and Water Board. These revenues currently support the convention center and the Superdome. However,  these taxes may bring in as much as $166 million dollars annually (according to an estimate from the Washington Post) and have contributed to a $222 million dollar surplus for the convention center. The Superdome, meanwhile, is in the midst of yet another costly renovation.

There are, of course, other ways to raise money—taxing businesses with revenues over a certain threshold, or developers whose buildings will add to the total impervious surfaces in New Orleans. A solution to the SWB’s funding must be equitable, or it will not be a true solution at all.

As John Schwartz and Mark Schliefstein of the New York Times described Louisiana,

“In simplest terms…it comes down to a mismatch between limited resources and limitless amounts of water.”

Jesse Lu Baum is a queer writer and cartoonist originally from Brooklyn, New York. Her writing has been featured in publications such as Medium.com, The Jewish Daily Forward, The Mid-City Messenger and Preservation in Print. Aside from writing, she has also worked as a non-profit home repair person, a theater bartender, and a research assistant. If you liked this piece, you should check out Jesse’s other work here.

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