The Citizens Budget Commission, a fiscal watchdog group, said New York City will need to raise water rates by 68% through the year 2003 unless officials pursue several cost cutting measures.

The commission, in a wide ranging report published earlier this month, said the city must raise rates to maintain its vast water system. But, the commission said, the city can prevent a big increase by following the group's recommendations.

Specifically, the commission said that the city should revise its current plan for the disposal of sludge.

Instead of making "unnecessary capital investments" for the sludge disposal, the city should expand its use of private contractors that export the material, the commission said. This step would be "far more efficient than constructing new facilities," and would lower future water rates by 13%, the commission said.

Capital investments for the city's water system are financed through bond sales by the Water Finance Authority, while rates are set by the city Water Board. Last year, the water board froze rates, causing some water authority bondholders to voice concern over the security of their investments.

"It may be possible to freeze rates this year, but future increases are unavoidable and current policies will raise rates by 68% in less than a decade," commission president Raymond Horton said in a press release. "New measures are needed to keep water affordable in the city."

In their latest capital plan, city officials appear to be following some of the commission's advice. Commission officials acknowledged that the capital plan moves the city toward greater use of private contractors for sludge disposal, and proposes a reduction in capital expenses.

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