Vegetarian to vegan changes things a lot (and is kind of pointless -- the amount of people who would probably have tried to go vegetarian is a lot higher than those who would try vegan ... the net gain to animals is probably to ask people to go vegetarian).

But the basic question is still there. I don't know what "paternalistically teasing a city of vulnerable people" means, but I can recognize the offering of a potential contract to be turned down or not. Presumably those who value being able to eat meat etc over paying their water bill will turn it down, and if there are people on the other side, they won't. You ignored my point: no one loses, assuming that PETA wasn't going to run around paying people's water bills to begin with.

In other words, I guess I have absolutely no problem with conditional assistance (although in this case, veganism is a somewhat ridiculous condition -- I maintain that vegetarianism would be a fine one).

EDIT: and being enraged by conditional assistance seems like something a rich liberal would say, though I know you aren't one. It's easy to be righteously angry, as I said above, when you've never had trouble paying your water bill.