The audit, released Wednesday, found that some homes received only estimated water bills for years at a time while others received no bills.
"It's hitting the fan in my district, and people are extremely upset because of the spiking of their bills," said City Councilwoman Mary Pat Clarke, who has been calling for reform of the Bureau of Water and Wastewater. "We were contacted by 200 people from Ednor Gardens-Lakeside last month alone."
The widespread billing problems in the water system, which serves more than 400,000 customers in Baltimore and Baltimore County, were detailed before the city's spending board Wednesday as city auditor Robert L. McCarty released his report.
In response, Department of Public Works officials said they are tripling the size of the staff that fields customer complaints. They also plan to revamp both the water meters and the billing system — but that will take three to four years, they said.
"There's no fixing the [billing] system that's in place right now," said Celeste Amato, a public works spokeswoman, explaining that the system is 40 years old.
McCarty said auditors began looking into the issue last year when a city resident alerted Comptroller Joan Pratt to many billing irregularities. McCarty declined to name the resident.
The audit examined water bills for 70,000 households over the past three years and found that 65,000 were likely overcharged and 53,000 of those showed no record of any adjustment.
Amato said public works officials completed their own review of the 70,000 households last month after receiving a preliminary copy of the audit.
Her agency determined that 21,400 city residents were due refunds totaling $3.4 million and that 17,000 county residents were due refunds totaling $888,000. Customers should see their refunds in their next bills, which come out quarterly, she said. "Everything has been processed at this point," she said.
The audit also found that nearly one-third of homes with new meters had not received any bills over a three-year period.
"There were no actual or estimated meter readings and related billings for numerous new accounts, in both Baltimore City and Baltimore County, for several years after the meters had been installed," McCarty wrote.
Of the 3,406 households that received new meters during 2008-2010, 1,066 did not receive bills, according to the audit. Amato said public works officials had not yet corrected the issue because auditors had not provided a list of the households that had not received bills.
She said the department recently began seeking proposals to overhaul the meters, a contract expected to be worth more than $100 million.
The department is in the process of hiring 15 temporary workers to answer calls about the water bills. There are currently just seven employees who handle complaints from the 411,000 city and county households who depend on the municipal water system, Amato said.
Additional workers have also been assigned to read the meters, she said.
Comptroller Pratt, whose office conducted the audit, questioned whether correcting the billing inaccuracies could lessen water bill increases for residents. The city has increased water and sewer rates by 9 percent over the past three years, and plans to continue doing so for two more years, to pay for federally mandated improvements to the sewer system.
Mayor Stephanie Rawlings-Blake said the billing errors were "barely a drop in the bucket" compared to the cost of modernizing the city's water treatment facilities and sewer lines to comply with consent decrees from the Environmental Protection Agency.
Rawlings-Blake said her administration has shown a "firm commitment" to fixing the water billing issues. The city will "make sure that our billing system has integrity and that we are using those resources efficiently and effectively," she said.
The audit, which looked at three years but focused on the fiscal year that ended in June 2010, found that more than 18,000 households dependent on the city water system had received at least four consecutive quarterly bills that were estimated — and some received only estimated bills for more than four years.
Moreover, 57 homes that were included in the city's tax sale due to unpaid water bills had bills that were based on estimates.
McCarty recommended that the water and wastewater employees take actual meter readings at the homes before sending them to the tax sale.
Councilwoman Clarke said she hoped some of the problems would have been eliminated following the passage last year of a bill she wrote that prevents the city from sending out bills on estimated costs.
She said her office has been deluged with complaints from residents of her North Baltimore district regarding inaccurate water bills.
Clarke said residents often receive alarming water bills, such as an elderly woman in Waverly who received a $6,000 bill for the home in which she lives alone. After public work employees checked the account, the bill was reduced to $134, Clarke said.
Clarke praised Rudolph S. Chow, who has served as the city's water and waste water chief for the past year, for his work to remedy the problem.
"It's just a daunting catch-up that Mr. Chow and his team are trying to do," she said.
Baltimore resident Linda Stewart, who has been tracking errant water bills for years, called the audit a "relief."
"I'm glad to see this is finally coming to light," she said. "People have lost their homes over this. It's kind of a relief that the city is finally admitting they have a problem. They kept sweeping it under the rug for years."
She said she emailed the city every day for months at a time after she discovered erroneous water bills on three of her properties.
"It's been frustrating," she said. "It's a major problem and no one was doing anything about it."