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Baltimore’s water department waits for revenue as customers wait for large bills after ransomware freezes system

Baltimore’s water department waits for revenue as customers wait for large bills after ransomware freezes system
Even though Baltimore’s public works department hasn’t issued water bills since a ransomware attack in May, director Rudy Chow said the agency has substantial reserves to cover its costs until it can charge customers for more than three months of service and start payments coming in again. (Kenneth K. Lam / Baltimore Sun)

Even though Baltimore’s public works department hasn’t issued water bills since a ransomware attack in May, director Rudy Chow said the agency has substantial reserves to cover its costs until it can charge customers for more than three months of service and start payments coming in again.

A spokesman for the Department of Public Works also said some vehicle purchases and other discretionary expenses have been postponed as part of a “cost containment” strategy.

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Chow said Thursday that the agency has been able to pay its own bills on time.

“Using the cash reserve is part of the normal management and financial strategy we deploy,” Chow said. “We’re not in crisis. We are managing. Are we business as usual? No, we’re not business as usual.”

The ransomware attack locked up city systems May 7, and few of the utility’s 400,000 customers in the city and Baltimore County received bills for water and sewer service in April. Bills for May and June haven’t gone out.

When those bills, plus July’s, finally arrive, a typical residential customer could be on the hook for about $400 — a sum officials acknowledge could be a hardship for some families.

“We’re not in crisis. We are managing. Are we business as usual? No, we’re not business as usual.”


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City leaders have urged people to set money aside and have given them the option of sending in estimated payments until the bills go out. It’s not clear how many people have been taking either step; public works officials said they didn’t know how many customers have made payments.

It’s more difficult for customers to make those payments because the agency’s online payment system has been down since the attack. Bills can be paid by mail or at the city’s Abel Wolman Building on Holliday Street.

A spokeswoman for Baltimore’s public housing agency, which is the largest sewer user and among the biggest water users in the city, said it was waiting to receive bills before making payments. BGE, another big customer, said it is also waiting to receive a bill.

Chow said he did not immediately know how much of the department’s estimated $500 million in annual water and sewer revenue had been delayed because bills hadn’t gone out, nor the status of the department’s reserve accounts. A spokesman for the mayor’s office said Thursday that it would take a couple of days to provide the figures.

Moody’s and S&P Global Ratings, which rate the public works department’s debts, reported the agency began the budget year that started July 1, 2018, with enough cash to last about nine months, even if no revenue came in at all.

Scott Garrigan, an analyst at S&P, said the amount of money the department typically has on hand is one of its strengths.

“Because of the liquidity they do have on hand, it is not an immediate credit issue,” Garrigan said.

The Department of Public Works has a $600 million annual budget and runs the water and sewer systems, as well as providing trash collection. Revenue and expenses for the water and sewer systems are kept separate from the rest of the budget.

The department can borrow money from the city’s general fund, but Chow said that’s not a step he has had to take.

“We are in sound shape," he said. “We are managing it. We are doing what we are supposed to do.”

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Chow called the decision to defer some discretionary expenditures an example of good management.

“We are in somewhat of unknown territory," he said. “It’s only prudent for managers to take safeguards.”

It remains unclear when bills will be issued again, but Chow said he hopes it will be soon. He stressed that the outstanding payments represent revenue that is delayed, not lost.

Garrigan said S&P will be watching to see how much revenue is lost because of the ransomware attack and what portion of the ransomware recovery costs the water funds might bear.

Moody’s issued a bulletin at the end of May saying the ransomware was unlikely to affect the city’s overall financial position, but called the cyberattack “credit negative because the city’s lack of investment in cybersecurity ... will likely result in significant out-of-pocket expenses, especially as management looks to purchase cybersecurity insurance.”

The public works department and Democratic Mayor Bernard C. “Jack” Young’s office are working on a strategy to communicate with the public about the upcoming higher-than-normal bills, but declined to share details. Lester Davis, a spokesman for Young, said information will be provided as part of a “comprehensive rollout.”

City Council members are bracing for complaints and questions about the bills. Stefanie Mavronis, a spokesman for Democratic Council President Brandon Scott, said his office is seeking to arrange a briefing by the public works department so council members have accurate information to share with residents.

Rianna Eckel, a organizer with the advocacy group Food and Water Watch, said she expects many households will be caught off guard by big bills and that the department needs to do more to spread information.

“It’s going to be really jarring for people to see these bills, and what will follow this wave of huge bills going out will be really chaotic for the department,” Eckel said. “I think it’s going to be really challenging for a lot of families.”

Chow said customers will have the option of enrolling in a payment plan and that staff will be available to help. The public works department currently offers two options: Either put nothing down and pay over six months or pay half the outstanding balance immediately and pay the rest over 12 months.

“We have always been sensitive about affordability,” Chow said.

The department has not been imposing late fees on charges that have accrued since the ransomware hit. Chow said the department will announce when late fees go back into effect.

The water billing system has been one of the most scrutinized parts of Baltimore’s government. In recent years, rates have risen dramatically, even as customers complained about inaccurate bills.

Public works officials say the higher rates are necessary to pay for updates to an aging system of pipes, sewers and plants. They started a program July 1 to help the poorest city customers by offering discounted bills.

In an effort to issue more accurate bills, the city switched to a monthly billing system in 2016, the culmination of a yearslong project to install new electronic water meters that automatically send readings to the public works department. And the city rolled out new billing software.

Jeffrey Raymond, a public works spokesman, said those meters are on a separate computer network and have collected and sent data as normal, so officials are confident they will be able to accurately assess customers’ usage once access to the billing system is restored.

“There’s a very high degree of confidence that the reads are accurate, that the data is being carried to us accurately,” Raymond said. “That part of it we’re pleased with.”

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City employee emails and the city’s electronic payments system for other bills have been restored in the weeks since the ransomware attack. Officials have not said precisely what is causing the delay in getting the water billing system back online.

“It’s been so long since we sent out bills that there’s a lot of testing and retesting and checking and making sure we’re sending out bills that are accurate and make sense for our customers," Raymond said.

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