As Rates Soar, Vacca Asks Why the City Is ‘Holding’ Water Money

City Councilman Jimmy Vacca wants to know why the Department of Environmental Protection is keeping tens of millions of dollars in discretionary “holding code” accounts while the city is preparing to raise water rates by 14 percent.

According to a May 2008 report from the Independent Budget Office, the DEP put away $59.3 million into holding codes in 2008 and $94 million in 2009.

At a hearing last week about the pending rate hike, Vacca asked acting DEP commissioner Steve Lawitts about the held money. He wasn't pleased with the response.

“When I questioned the commissioner, based on my knowledge of this, I questioned him on the stand, I asked him, ‘Why isn’t it transparent,’ and, ‘Why do you have holding codes,’ and, ‘Where did the money go? ‘What was it used for?’” Vacca recalled. “He had no answer.”

Water rates are set by the city’s Water Board, which is mandated to make sure the revenue generated from this, and from sewer rates, cover the cost of operating the DEP.

If there’s enough excess money to be stashed away in a holding code, it should be used to offset the rate increase, Vacca argued.

“My motive is to try to identify money that can be used to get rid of this rate increase,” he said. “I found a holding code without an explanation as to where the money was going.”

He also said, “I didn’t think that holding codes were allowed in agencies. If it is a holding code, what are you holding it for?”

A DEP spokeswoman, Mercedes Padilla emailed to say, “DEP works with OMB during the course of the year to monitor and allocate funds out of holding codes for designated purposes. Most of the time they are used to fund new programs or volatile components of the budget, such as aspects of the environmental health and safety program, chemicals and upstate taxes. The $90 million was a snapshot in time, there is now approximately $40 million in holding codes. This is not surplus money that can be used to reduce the rate.”

While hardly a decisive political issue in isolation, anecdotal evidence suggests that the city's rising water rates may be a particularly sensitive topic this year. At an otherwise unremarkable mayoral-campaign appearance in front of club Democrats recently, Comptroller Bill Thompson received a sustained round of applause when he mentioned the need to do something about high water charges.

The use of holding codes was criticized last year when the
City Council used it to hold money in their budget
that had publicly been designated for made-up organizations. The Council budget process is now under investigation by city and federal officials.