In 1993, city Mayor Rudolph Giuliani instituted a range of cuts for social and environmental services. In May 1995, Mayor Giuliani announced his intention to sell off the entire water system to the New York City Water Board. Under the proposed deal, the city would receive $2.3 billion from the Water Board in exchange for the ownership of the entire water and sewer system. However, this attempt to find a short-term solution to the city’s growing budget deficit was blocked by the city comptroller and infamous former politician Alan Hevesi. Comptroller Hevesi rejected the idea of selling city infrastructure in order to reduce the current budget deficit as a ‘fiscal gimmick’ with detrimental long-term consequences for New York City (New York Times, 1995). Longer term, the loss of the water and sewer system would have accelerated the erosion of the city’s control of its watershed by making it easier for a New York State governor to change the composition of the city’s Water Board in favor of up-state development interests (the seven members are appointed by the city’s mayor). This would make the need for water filtration more likely in the Catskill-Delaware system, which would cost tens of billions of dollars (New York Times, 1995).
“The proposed sale is a centerpiece of the budget Mr. Giuliani and the City Council approved earlier this month. The Republican Mayor unveiled the plan in April as a way to generate cash to pay for capital construction projects that would otherwise have to be cut because the city faces a state limit on the amount of money it can borrow and had no other cash to spare.
The proposal would raise $2.3 billion by selling the city’s water assets — its reservoirs, water tunnels, sewers and sewage treatment plants — to the New York City Water Board, a public authority created by state law 11 years ago to run the system. The board would pay for the assets by borrowing money through its own bond sales — the sales Mr. Hevesi said he would not allow.Mr. Hevesi also said the sale threatened to erode the city’s control over the upstate watershed that is the source of its drinking water — at a time when the city is negotiating with the state to find ways to avert a Federal order to build a multibillion-dollar filtration system.”
— From “Mayor Blocked On Bid to Sell Water System” by Steven Lee Myers for The New York Times, published June 28, 1995.) Link.
“WATER BOARD MEMBERS REPLACED Mayor Rudolph W. Giuliani has replaced a majority of the members of the New York City Water Board in recent weeks, not long after several members of the board raised questions about his plan to sell the city’s water system to the board to raise money. The Mayor’s move may indicate that he hopes to proceed with the sale despite opposition from environmentalists and several public officials.”
— From “Metro Digest,” in the New York Times, July 7, 1995. Link.
“Making good on an earlier threat, Mayor Rudolph W. Giuliani and the City Council have filed suit against City Comptroller Alan G. Hevesi, seeking to force him to approve their plans to sell the city’s water system to a quasi-public agency.
Mr. Hevesi’s signature, however, was needed before the water board could issue and sell the bonds needed to finance the purchase. But in June he announced that he would not approve the bond sale, saying it represented the kind of gimmickry that led to the fiscal crisis of the 1970’s.”
— From “Giuliani Sues City Comptroller Over Sale of Water System” by David Firestone for The New York Times, published November 21, 1995.
“Mayor Rudolph W. Giuliani lost his two-year battle with City Comptroller Alan G. Hevesi over the future of the city’s water and sewer system yesterday when the state’s highest court ruled that the Mayor’s plan to raise $2.3 billion by selling the system was illegal.
Mr. Hevesi charged that if the sale had gone through, the city might have lost control of the water system to the state. He noted that the state established the board and authority but gave the city control. If the board had bought the system, the state might have moved to take over the board itself, Mr. Hevesi said. Mr. Hevesi also said that the sale would have put pressure on the board to seek big increases in water rates, in an effort to pay for the $2.3 billion in debt that it had assumed. Mr. Hevesi said that over the life of those bonds, water rate payers would have had to pay $7 billion in principal and interest to retire the $2.3 billion in bonds.”
“This was the granddaddy of all fiscal gimmicks,” Mr. Hevesi said.”
— From “Court Kills Plan to Sell Water System” by Clifford J. Levy for The New York Times, published March 21, 1997.