Mayor Zohran Mamdani is continuing a part of his predecessor’s budgeting legacy: using New Yorkers’ water bills as a piggy bank for the city budget.
The Mamdani administration is following a pattern set under former Mayor Eric Adams by calling for the collection of $313 million in charges imposed on the Water Board to lease the city’s water and sewer system. Those fees get passed along to property owners as part of the rates they pay for water they use.
City lawmakers and environmental advocates roundly criticized the move, known as the “rental payment” from the board to the city government, which came to light during a City Council budget hearing Thursday.
Councilmember James Gennaro (D-Queens), chairperson of the council’s environmental protection and waterfronts committee, called the rental payment a “scourge” and said it “really has got to go.”
The cost of covering the rental payment drives up water bills for New Yorkers — and because some of what customers pay gets routed to the city instead of the city’s environmental agency, it pulls funds away from investments into the water system itself, or from initiatives to make the city more resilient to flooding.
“You think when you write out your checks, my constituents, that you’re paying for water and sewer,” Gennaro said. “Guess what? That’s not that case. A lot of it, hundreds of millions of dollars, are going to fund other operations of the city. That is like the most regressive tax I can think of.”
Critics have described the water-rental payment as a backdoor, or hidden, property tax.
City Hall did not respond to a request for comment.
The choice to continue the rental payment comes as officials try to find solutions for a very crunched budget. The city is facing a $5.4 billion budget gap that Mamdani has threatened to close by raising property taxes by 9.5% across the board — unless Gov. Kathy Hochul agrees to raise taxes on wealthy individuals and corporations.
Much of the Department of Environmental Protection’s revenue comes from water and sewer bills — but the water-rental payment doesn’t go to the agency and is instead diverted into the city’s general fund.
Mayor Bill de Blasio largely stopped asking for the payment in 2016. The city charged the Water Board — a group of mayoral appointees who set water and sewer rates — a rental payment only twice between then and 2024, when Adams revived the charge.
Under Adams, the Office of Budget and Management included over $1.3 billion worth of rental payments to be paid by the Water Board to the city between Fiscal Year 2024 and Fiscal Year 2028.
In 2024, the Water Board approved the biggest water rate hike in 15 years: an 8.5% increase. The rental payment that year was one of the largest drivers of the hike. The following year, the Water Board signed off on a 3.7% bump.
The Water Board will decide on the next water and sewer rate hike in the spring, following a series of public hearings.
Daniel Zarrilli, a member of the Water Board, said he would prefer the city not request the rental payment. But if the city requests it: “I strongly encourage the city to invest it into stormwater and coastal resiliency needs,” he said.
The Department of Environmental Protection in 2024 estimated it would cost $30 billion over three decades to significantly improve resiliency in areas of the city most vulnerable to flooding from heavy rains. In that time, New York City may receive as much 14% more rain each year because of climate change, according to estimates by the New York City Panel on Climate Change.
Alia Soomro, deputy director for New York City policy at the New York League of Conservation Voters, argued the rental payment diverted funds away from DEP’s resiliency work.
“This is a very poor policy decision, especially given the urgency of the climate crisis,” she said. “Capital funding for water infrastructure is urgently needed to address critical stormwater flooding, support coastal resiliency and improve water quality, etcetera.”
DEP’s ability to take in money is also compromised to another extent this year, as Mamdani’s administration won’t move forward with the lien sale while it reviews alternatives ways of collecting on unpaid property tax and water bills.
DEP Commissioner Lisa Garcia emphasized the pause on the lien sale was temporary and the department could move forward in the meantime.
“We have other mechanisms to work with people to pay their bills,” she said.
