Does Delaying Decisions on Infrastructure Help Us?

May 21, 2013
Development loans, economy, Environment, funding, infrastructure, innovation, Insurance, Leadership, management, sea level rise, stormwater, sustainability, Tidal flooding, Uncategorized
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If you live on an island, and your groundwater table is tidal, what should your datum be for storm water planning purposes?  Average tide?  High tide?  Seasonal high tide?  If you are the local official with this problem, what do you do, realizing that the difference from mean tide and seasonal high tide (when most flooding occurs) is 1.5 feet?  Realizing that property and infrastructure is at much higher risk for periodic inundation, does the failure to address the problem indicate a lack of willingness, understanding, hope or leadership?  We see all four responses among local officials, but the “head in the sand” mode is the most curious.  It’s tough challenges that often define leaders.  With sea level rise, there is time to plan, construct infrastructure in stages, arrange funding, and lengthen the life of infrastructure and property.  Meanwhile, those insurers, banks and the public we talked about in a prior blog wait and watch.

Congratulations Graduates

May 15, 2013
communciations, economy, graduation, Uncategorized
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The first of May is traditionally been graduation month for college students.  We went through our 6 ceremonies 10 days ago at FAU.  It is and should be a day of celebration for the students and their families.  It’s there day.  Congratulations to all graduates!!  Best of luck to all!   The good news is that the economy is picking up.  Pretty much all of our student have jobs in engineering, and employers are calling, looking for engineering interns and graduates.  Good news because clearly the business community sees a growth period ahead.  They are planning for construction.  Governments may be planning capital projects.  The stock market is up, so maybe those 401k plans have finally come back up north.  Housing values are improving in some areas, so maybe we will see that sea of retirements that’s been expected for a number of years.  With an economy based on attracting retirees, it’s been a while coming.

Planning for Change (like sea level rise)

May 1, 2013
Banking industry, Climate, Development loans, Environment, groundwater, infrastructure, Insurance, Leadership, planning, sanitary sewer, sea level rise, stormwater, sustainability, Uncategorized
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After my last post, I was asked about sea level rise and how to get started with the issue in a very “red” area as it was characterized.  I have come to the conclusion that the insurance industry will make sea level rise real for politicians in those places where it is impermissible for bureaucrats to discuss it.  Here’s why.  Say you have a house in a low lying area that is vulnerable to sea level rise and/or storm surge.  One is permanent, the other temporal, but in both cases are potentially catastrophic if you live in this house.  You bought the house, got a loan for 80 or 90% of its value and then got insurance for it.  Now the insurance is there to insure that if your house gets swept away or damaged, there will be enough money to pay off your loan.  That’ s what many people miss.  Insurance is for the bank, no you, which is why your loan documents require that you get and hold insurance while you have the house.  After your loan is paid off, there is no such requirement.

Now let’s say we are out 20 years.   You have enjoyed your house but have decided to sell it.  Now the banks will value it and are willing to loan say 80% of its value.  They of course assume that the house will increase in value with time so even if you make no improvements, if they have to foreclose on it they will get their money back (a major part of the problem with the financial crisis of 2008 was they banks could not get their money out of the properties).   Even if it doesn’t, as your loan is paid down, their risk decreases.   The loan documents require that you get insurance to cover your costs.

So far so good, but what happens when the insurers will not give you insurance for the full value of the property?  In Florida the State creates Citizen’s to deal with the fact that private, commercial insurers saw too much risk in coastal areas and refused to issue policies.  Now the State and Citizen’s have the risk.  Fine, but that isn’t dealing with the same issue – if the insurer think the value of the property will decrease, or the risk increases a lot, they will not issue policies. Or they will revise policies to say they will pay once – but will not insure you for rebuilding.  You may think this will not happen, but Citizen’s is already discussing this option.  Hence if you lose your house, they will pay you (so you can pay the bank, and then you are on your own.  Now the bank may be willing to offer you a distressed property as an options (Welcome to Detroit), but that won’t be in the same risk zone.

Take this further, let’s say Citizen’s for example says we will pay full value if you lose the house but will not insure a rebuild?  That means they probably will not give insurance to the guy who wants to buy our house in 20 years.  How much is your house worth now?  Probably nothing, which means now the bank will be looking at your insurance coverage and say – whoa – if the house is not worth anything on a resale, that means they may not get paid when you sell your house if you sell if before it is paid off (the norm)!!  That is an unacceptable risk, and they need a solution.  Of course if your house suddenly has no value, it means local governments get no revenue for taxes (good for you, but bad for providing essential services like storm water.  You may not believe this discussion is happening, but it is.

So here’s what I think happens.  I think the banks figure this out and start looking at vulnerability as a part of loans.  I think they start thinking about what the value in 20 or 30 years might be and if they can get their loan monies back out of property.  That will slow property values.  I think the insurance industry does the same, and working with banks will further set the prices acceptable for vulnerable property.  They are not good investments. If you own such property, you may get insurance in the short-term, but long-term your house value may decrease.  At some point, your house will have no resale value, unless……

BUT there iis a big caveat to all this.  Coastal areas are high value markets.  Lots of activity and lots of investment opportunities.  It all depends on what is being done to protect those properties, and depending on the federal governments to bail out private property is unrealistic.  It is a local issues, so I also think the banks and insurance industry will start looking at what local governments are doing to protect investments in private property.  Do they have a sea level rise adaptation plan?  Are the storm water systems updated/upgrades/maintained?  Are roads, water supplies and sewer systems capable of functioning under the changed condition?   Is there a 50 or 100 year vision on how the community adapt to nature?  If yes, there is comfort that investments are protected.  If everyone’s head is buried in denial…..Detroit’s calling.  U-haul anyone?

PS  No disrespect to Detroit, my father’s hometown and the home to many of my current and departed family.  For those who do not know, Detroit is high, has access to lots of water, sewer, roads, power and lots of land at reasonable cost, along with a jobs and manufacturing history.  Perfect opportunity, one not lost on our ancestors.

How Long should the Leadership vision be?

April 29, 2013
Climate, Environment, finance, groundwater, infrastructure, Leadership, management, planning, sustainability, Uncategorized, water sewer management, water supplies
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We do 5, 10 and 20 year plans for infrastructure.  But how long do we expect to this infrastructure to last?  For example, how many roads only last 10 or 20 years?  Most roads only seem to grow with time.  Ancient Roman roads are the basis for many current roads.  We keep adding roads – few are ever abandoned. They simply do not go away.   So a 5, 10 or 20 year planning period makes little sense.

Roads are not the only limit.  The WPA-era water mains are approaching 80 years old, and still providing good service, and our Clean Water Act-era sewer improvements are approaching 40.  Sewer lines are similarly situated.  Many water plants are over 70; we celebrate 100 years on many.  Again, planning for only 20 years makes little sense in the context of the larger length of time.

More interesting, we rarely borrow money to pay for these projects for less than 20, 30 or 40 years.  So our infrastructure outlives our plans and our borrowing.  Often permits are less that the borrowing for infrastructure, which can cause stranded capacity in plants that may never be used.  Miami-Dade County has such a situation – they are not alone.

Let’s look at this in the context of groundwater withdrawals.  There are areas across the US where groundwater levels have fallen. They have fallen because of human activity to pump them for crops and water use.  Colorado has a 100 year management plan in the Denver basin which is basically make the water last 100 years.  Then what?  Texas has shorter plans.  The eastern Carolina drained parts of the Black Creek already, so this is not a theoretical western state issue only.  How do we address this?

Or let’s go back to Miami-Dade County the outer banks of North Carolina, historical downtown Charleston, SC, and many other venues where sea level rise could impact water, sewer, storm water and roadway infrastructure. As we redevelop those area, should plans look at the true life of those assets (100 years) vs. the 20 year plan?

Both issues involve the sustainability of infrastructure systems, which means the ability to adapt them to changing future conditions.  We have known for 10-15 years that stationarity is no longer accepted for future projections.  But we need leadership to move the infrastructure planning to the future changing conditions.

Wise Idea?

April 27, 2013
Uncategorized
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The Broward County Public School system has discussed the idea that instead of giving students a zero for not turning in assignments, that they receive a 50% so as not to unfairly penalized them.  What are your thoughts?

 

 

ONE Water?

April 25, 2013
Leadership, management, Marketing water, Uncategorized
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One.  That’s the mantra.  I started blogging a year ago with the statement that “It’s all one water.”  And that is true, regardless of the form it may be in (raw, waste, storm, reclaimed, gray, industrial, etc).  But I may have used too many words.  Dan  Pink notes in his newest book “To Sell is Human” that one of the recent trends is to try to get  your  message to one word.  Obama did this with “Change” in 2008 and “Forward” in 2012.  Others have noted that branding to one word is in vogue with private companies as well.  So what about the water industry? So what about water?  Maybe we simply need to say “One.”  It is all one.  We can treat any water quality to meet whatever your need may be.  So why differentiate the water source? There are many water associations out there for a variety of reasons including unhappiness with another associated (so they creates a breakaway group).  But how does this help the water industry?   There are too many water associations that are way too specialized in what they do.  Differentiating them create silos, silos that make you think water is different.  But we know it is not.  It’s all one.  So for example, the America Water Works Association is the oldest of the water industry associations and is the only one that sets standards for the industry.  It has long created manuals of practice that have been updated numerous times by industry professionals.  And water purveyors must treat all types of water to deliver healthy, safe water to your household, and they do, and have for over 100 years.  Tap water is as safe or safer than any other option.  So what would happen if AWWA were to reassert its leadership role with a new mantra that pulls the industry together.  What if they tried “One”?

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