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climate change costs not what they expected

Hi All 

You all know my interests span many areas, but I thought Paul Krugman’s latest was worth letting you all know about

 

 

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So I am reading an article in OneEarth, which is a publication of one of the environmental groups.  The pretext is the issues with the movement of hog farm operations into Iowa and the problems it is causing.  They note that the state has cut the regulatory enforcement budget and the number of inspectors while more incidents of contaminated water are found.  The contamination threatens the raw water supply of  downstream water utilities which must do more treatment and monitoring.  Sorry, I had to giggle because I have heard this story before. 

Going back about decade many will recall the “pfiesteria hysteria” as it was called in North Carolina.  The issue was that the Department of Environmental Management had found fish kills where the fish had these weird sores on their bodies, and then a number of people were diagnosed as being infected with the same condition, some of whom died.  The cause was this pfiesteria, which is a flesh-eating organism that enters the nervous system.  Crazy is one of the side effects but it mostly leads to death.  DEM determined that the organism thrived in waters with significant loading from nutrients that they could trace to…..  wait for it…. hog farms!! 

That was not the first time hog farms were implicated in water quality issues, but due to the significant, political influence of the industry, the transgressions were largely ignored due to a lack of enforcement personnel.  Actually when I was in North Carolina we had a hog farm upstream of our wastewater plant.  Periodically the DEM would test the waters downstream of our plant and find bacteria counts to high and they would want to tag us for the violation.  But we never had any indication of violations at our plant (which we tested daily and reported).  You can’t “make” nutrients appear out of thin air – they come from somewhere.  We told DEM that it was a hog farm that periodically dumped the manure pit n the river when it got full.  No treatment was going on.  Then hog farms exploded in North Carolina which led the pfiesteria event.  Finally the State decided enough was enough and imposed a lot of regulations on hog farms which magically …. moved to Iowa where there are no regulations in place.  I guess there is nothing like a good crisis that kills a few people to get past the political influence of the lobbyists (unless you are the NRA).

But here’s the problem for Iowa, which is what North Carolina found.  The regulations actually are in place.  The Clean Water Act prohibits the contribution of pollutants that will impair the quality of water bodies.  Clearly hog farm effluent clearly falls into this category, but the historical focus of the Clean water Act has been on wastewater treatment plants, and lately stormwater, but not agriculture, which is largely exempted in many, rural states.  Yet agriculture is and has always been a major contributor to water quality degradation in watershed for two reasons.  First they disturb the earth by plowing and planting, so rainfall leads to runoff of material (silt) into streams.  With that runoff is herbicides, pesticides, fertilizer (nutrients), and of course in animal husbandry or CAFO operations, bacteria and other pathogens.  Do not forget that the two most significant examples of water quality impacts on water utilities, Milwaukee and Walkerton, were both agricultural runoff problems.

Agricultural runoff impacts the downstream users which are typically developed areas which use the streams for water supply.  So agricultural practices move land based contaminants to the utility intake, which means more treatment cost to customers.  Sometimes these contaminants are a significant health risk.  It took a significant incident for North Carolina to act. The question is what will it take for Iowa to act, and once they do where do the hog farms go next? 

What needs to happen is that the hog farms develop the treatment systems needed to clean up their act.  It would be great for them to pay the cost but history says they won’t.  So maybe the political leadership needs to participate in that solution to maintain the employment base, and maybe utilities and other source water protection agencies, and there are many of them like the US Water Endowment, can help as well.  Politicians want jobs, while ratepayers do not want to pay all the costs.  A collaborative solution seems reasonable, so we will see what Iowa comes up with.  


As you are aware, I have several hobbies and interest, and economics is one of them.  Economics has theorists from many different viewpoints, and the commonality among them is that there is no “school of thought” that explains everything.  So new schools get developed to explain the current events, or old ones that were discredits are resuscitated, but unfortunately we too often neglect the past, or at least the examples of the past.  Too often the obvious gets ignored.  For example, we cave money because we know there will be ups and downs.  Individual do it, so why don’t governments?  We know that we will pay for a product we need.  Demand drives the price.  If more people want it, the price goes up.  Been that way for…. ever maybe?  So in my recent reading I came across several musing that keep getting talked about by political pundits, but may be they are not what they appear to be.  So let’s take a look at a couple of these that might just affect us….

 

Is supply side economics is a myth developed by corporate economists to argue for lower taxes.  The concept is to give tax breaks to encourage manufacturers and businesses to produce more product which will reduce costs.  You know this is patently false.  Try selling your reclaimed water at a discount (or give it away) when it is raining.  Demand drives the economy, not supply.  Every economics student learns this in economics 101.  The supply side economics school developed as a means to explain stagflation in the 1970s. The idea what to give tax cuts to those who invested, so they would invest more to make new products, which would trickle down to the rest of us.  Still doesn’t work.  Why?  What they ignored was that the US industrial sector had saturated the US economy with goods and could not grow without new sectors to sell to.  Hence the push on Nixon to open up China to foreign trade and investment.  But opening foreign markets was great, except they could not afford our products.  So we had to make the products there, increase local wages so they could buy the products, and still shipped products back at a cheaper cost that to build them in America.  The idea is not new – recall Henry Ford set up the assembly line to cuts costs to allow him to increase wages so his workers could buy his cars.  The obvious question is when we saturate China, then what?  Africa?  Then what?  The economy cannot grow faster than the increase in population.  So why does supply side economics keep getting traction?  Did we mention those tax cuts….

 

To the big fashion in Germany and the EU is austerity.  Austerity is an economic idea that never seems to die despite very limited success and many, many failures.  It sounds great – cut costs and balance the budget while cutting revenues (income).  Ok, so let’s see how that works in your household – you quit your middle class job and take a minimum wage job.  You cut your expenses.  Except you can’t sell your house without a loss (and you do not have the cash to make up the difference) and you need your car to get to your new job.  But austerity says that if you eat rice, beans, cereal and Ramen noodles, you will soon be far better off than you are now.  No one will suffer.   Do you believe it?  Do you wonder why the Greeks and Irish are not doing so well today and why people are restless?  They used to devalue their currency, but the Euro prevents this.  They do not have away out.  Meanwhile Iceland devalued currency, let the banks fail, took over the bank assets, and are doing much better.  Austerity was not the option…. Just saying…  And who suffers the most?  Not the high income folks.

 

Tax cuts stimulate the economy.  Sounds great.  But, from 1944 to 1963, the income tax rate on the highest earning bracket in 1960 was 90% over $200,000.  Yes 90%!   The economy was great.  The middle class was born.  House ownerships jumped.  Education was up.  The economy in the 1970s stagnated after we cut tax rates.  We cut the income tax rate in the 1980s, but raised other taxes, and things improved, but then declined.  The economy improved after the Bush tax hike in 1991. It did not improve after the Bush tax cuts in 2001.  Interesting in their book Presimetrics, Mike Kimel and Mike Kanell noted that higher taxes seem to correlate with a better economy.  Is it because investors can’t sell stock so easily when they made a profit so corporations can count of investments longer?  Or is it that the increase in revenues allows the federal government to invest in more research and development that further stimulates the economy?  Did we mention the tax cuts favor the wealthy?

 

The moral of the story is that utility managers cannot ignore the economic realities around them.  We cannot be trapped by the musings of people who have hidden agendas, which means that our understanding of the way things are must extend beyond the utility itself.  The economy, economics, monetary policy, tax policy, demographics and change are areas that utility managers need to be current on.  Engineers and managers often understand these issues easily (most are mathematical) but we tend to focus only in out areas.  We need to become educated.  Recall the earlier blog where I noted the city manager who realized later that the reason elected officials tended to bad alternatives was they were being lobbied to approve the poorer options because their clients could make money from it.  You know many ideas that will be lobbied to elected officials and business people in the future.  You need to become educated on these ideas and how they affect your utility.  You know that rates that are too low will not increase revenues.  You know you need to expand sales when possible, perhaps serving new areas, and making the investments for same.  You know that not spending money will only increase the risk of failure in the system.  You know that not increasing pay will disenfranchise employees.  Prepare for these assaults so you can lead your utility down the proper path. 


In the last blog I commented on the Donald Sterling, Thomas Sowell and Clive Bundy comments the week before. I wonder if letting the hate out just a way to keep us from looking at the bigger picture from a political (and maybe business) perspective? And should utilities we concerned? The answers may be yes, and yes an dhere is why. An August 2012 Pew Research Center report noted that only half of American households are middle-income, down from 61 percent in the 1970s. The shift was downward, not upward as the very rich (0.1%) control 58% of the wealth in the US. In addition, median middle-class income decreased by 5 percent in the last decade, while total wealth dropped 28 percent. The need for social programs, despite cutbacks and revisions to the welfare programs in the Clinton era, have increased – since 2000 Medicaid has increased from 34 million people to 54 million in 2011 and the Supplemental Nutrition Assistance Program (SNAP, or food stamps) from 17 million to 45 million in 2011. Keep in mind that income drives qualification for these services so it means that incomes are down for millions in America. The increase in people needing help is no surprise since there is an ongoing increase in the number of lower-wage service jobs like food preparation, retail and service industry, but the number of middle-class occupations, like teaching and construction, have declined. Since 2010, the State of Florida has added 400,000 jobs, impressive except that the vast majority are service and retail jobs that pay just above minimum wage. The job growth in low wage jobs does not replace the loss of middle income jobs which is why 47% of households did not earn enough to pay income tax in 2103. It is not because they don’t want to, it’s because they don’t get paid enough. And we have tens of millions of these low wage jobs that don’t pay enough for the recipients to pay taxes. Just the opposite of what some of the political discussion would have you believe.

The loss of wages is felt locally more than nationally. It means that local officials hear about costs more because water, sewer, power, etc competes for an ever larger portion of the shrinking paycheck. So we see more attention paid to affordability indexes, the ability to pay. The concept of affordability is to take your annual water and sewer bill and divide it by the average or median local income. The goal is water plus wastewater is under 3.5% of the median income. Keeping the percent low is great and easy when people are making more money, but creates a lot of difficulty when the incomes are static or dropping. An our costs are rising due to the increasing need to maintain and upgrade infrastructure that has been neglected since 1980 (the annual investment is under 1.4% for most of the US infrastructure for the last 30 years. We need to invest above 2.3% to keep up according to GAO).

When income drop, costs become more important, and local water and sewer costs are often easier targets to limit than groceries, rent, power, telephone, cable or other services that are not subject to local official votes. So it is in all of our interests to work with local officials, colleges, vocational schools, public schools et al. to attract or build a economy that features higher income jobs, to get everyone employed, and to provide training, infrastructure, outreach, health care and other help to establish a competent, highly skilled workforce in a community. That means that utilities must support the local efforts to effect social change in the community, to help meet the needs of residents not just with water, but with respect to the local economy as well. Does that mean we are actually agents for social change?


A week ago the new National Climate Assessment came out.  It basically says things we already expected – temperatures are warmer, there will be more droughts, less rainfall, less available water, more intense storms and sea level rise.  What the study did in its 800+ pages was outline examples of climate change phenomena that are already occurring including flooded streets in coastal areas, severe weather (Colorado, New Jersey), and changes in the arctic air currents that may be affecting northeastern and Midwestern winter storm frequency.  All things that those who have been around for a while and have been even minimally observant have already noticed for themselves.  What was also not surprising was the vitriol on the internet about how this assessment was a “fascist plot” perpetrated by a variety of people to impose some yet undetermined regulations on “patriotic Americans.”  And then Senator Marco Rubio comes out this week and says he does not believe it is possible for people to cause climate change.  No facts, just belief.  In Florida.  In Miami.  Wow…

Those who live in coastal areas, earn their living in agriculture, manage water utilities relying on water supplies, and drought planners know the truth.  Denying that the climate is changing simply ignores reality and delays the ability to respond to its impacts.  I realize that those impacts might be 20 or 40 or more years out, but planning is needed because we expect our infrastructure, factories, hoses and economies to last longer than that.  Science says change is occurring.  We can argue why and how fast, but the reality is that there is change and there are many people that will confront he need to adapt to the situation sooner than later (like us the Fort Lauderdale/Miami area!).  So why deny climate change?

As we noted in a prior blog, there are several reasons, but many involved business issues.  So follow the money. Let’s start with the Koch brothers.  The Koch brothers manage Koch Industries, the second largest privately owned company in the United States revenues exceeding $100 billion/year.  Many Americans have no idea who they are but they are billionaires who have made their living in the oil business – their father Fred C. Koch developed a new the method for the refining of heavy oil into gasoline.  They rely on oil to maintain their wealth and are politically active with conservative organizations including the Heritage Foundation and the Cato Institute, FreedomWorks and Americans for Prosperity, all organizations the dismiss any impact of man on climate change.  Why?  Well one of the tenets of dealing with climate change is to reduce carbon dioxide emissions which means less reliance on fossil fuels – oil.  Whoops – that would be a problem for the Koch brothers because if they say “sure climate change is a problem,” well then that would mean that their entire business model and their wealth is a contributor to climate change, which means they are the “bad guys.”  Can’t have that.  So following the money tells you that we can’t make our money with oil and support climate change.

Let’s look at the other side.  Those acknowledging climate change are fully supportive of renewables, which in theory will help climate change by reducing carbon dioxide.  But the concept of renewables though is fraught with the problem that few of these technologies are ripe for wide-scale implementation.  For example natural gas vehicles or natural gas/hybrids are doable, but where do you buy the natural gas for the vehicle?  The technology and distribution networks is 10 or more years out at best and of course if you are in the oil business, why would you be interested in installing the natural gas fuel pumps?  So technology and need do not match when you follow the money.

How about the Keystone pipeline that would bring oil and gas from these remote areas to refineries in Texas and the Gulf of Mexico states.  You can guess the Koch brothers are in favor of the pipeline as they will benefit.  So are most oil and gas entities.  There are many environmentalists and other opposed to the pipeline because of impacts on water supplies (and other issues).  But the railroads are making money by hailing oil and gas from Canada and the Dakotas.  Guess which side the railroads are on?  The pipeline would take business away from the railroads.  Follow the money. 

Let’s look at our industry.  In the utility business, there is a lot of money with the telephone, power, cable and other utilities.  These private entities, although regulated, make huge sums of money for their investors.  You can follow that money. 

So who supports water and sewer utilities?  We do!  We supply over 85% of Americans.  But why do we have so much trouble getting funding when 85% of people would benefit.  One would think that given how many people we support, we have the money, but we are primarily not-for-profit entities, so we don’t make money for anyone.  You can’t follow that money because there is no money.  That tells us more about the difficulties we have in securing funding that anything.    

Fixing it is a little bigger challenge because our representatives and constituents do not understand the financial investment they have in our industry.  Their public health and economies are linked to water and sewer.  Our services make these other enterprises doable but there is no direct monetary connection to facilitate lobbying on our behalf.  I am not sure how to fix this, but we need a better marketing strategy for our services.  That’s one thing we know.

 


Good Day!  There are over 350 people that receive this blog via WordPress, Linked and Facebook.  Thank you.  .

So I want to let you know about a project I am working on to develop some measures to identify leadership perceptions in the industry.  So we have created an online survey that I would like to have you participate in.  It should take no more than 10 minutes of your time, but will help us formulate a larger survey of the industry.  I would love to get 100 responses.  I will report the results.  Your help is appreciated.

Go To :  https://www.surveymonkey.com/s/6BFDMRQ


Last week was one heckuva week for societal problems related to race relations.  Seems like someone turned over a rock and the 1950s crawled out.  We started with Cliven Bundy, the Nevada rancher who has been using federal property (read our land) for grazing his cattle for 20 years without paying for it, said after the armed confrontation with federal officials, that “I wonder if Negros weren’t better off as slaves.”  But he says he is not a racist, but wow.  That’s right up there with Rush Limbaugh’s comments about Native Americans in his book 15 years ago. 

 Then we had newspaper columnist and right-wing wonk, Thomas Sowell, who is black, saying in a recent column that “you are poor because you don’t work.”  And it is your fault you don’t work.  In “higher income families, people work.”  So using that line of racist nonsense, given that minorities are disproportionately un- or under-employed, does Mr. Sowell really believe that it is really the choice of all of these people not to work?!  Could there be any other causal links like the lack of education, decaying infrastructure or the lack of local opportunities in their community that might just come into play? That’s like saying Detroit’s problem is not the lack of job opportunities, but the fact that no one wants to work in Detroit.  I think not.

The we have Donald Sterling, the owner of the Los Angeles Clippers NBA team, who was taped making racists comments, then received a lifetime ban and multi-million dollar fine for his comments about minorities, and then, instead of apologizing, states that he wishes he’d just paid the woman who taped him off.  Huh?   Of course it is not the first time for Mr. Sterling who lost a case several years ago over his practices of renting property in LA, so I guess we should have expected it.

Of course there are those who argue these folks were simply misunderstood.  Maybe Mr. Sowell was just pandering to his fan base, but what does that say about his fan base that he can write a column that purports that “you are poor because you don’t work” because you don’t want to work and no one says anything?  He clearly appears to be besmirching the inner city minority population, but as I noted in a prior blog, rural America is significantly worse off economically than urban America.  Rural America is where health care suffers, the lack of health insurance is pervasive, income are lower and unemployment higher.  There are poor across all races, and in all settings.  And given his fan base is includes a lot of poor, white, rural people who aren’t making a lot of money or who can’t find jobs, he’s talking about you!

The Bundy comments stem from his standoff with federal officials over many years of not paying for grazing (like the rest of us could get away with that!).  He and those that came armed to his defense are more indicative of a larger, far-right, anti-government sentiment around the country that has persisted for years.  The west has a number of these groups (recall Ruby Ridge, Waco, Black Hawk helicopter-ists, etc.) that are basically anarchists that disagree with America as it is today.    All white.  But of course as we have seen in the Sudan, Rwanda, the middle east and throughout history, hate can come from all races and religions. All harboring hatred of others not like them.  Understanding why is more difficult, but the commonality seems to be that they all have the perception that the others are somehow treated differently, which allows them to move up the economic ladder faster or allows them to “game the system.”  The perception, which may be completely false, persists because it somehow justifies the actions of these people.

So given the comments of the past week, are we back in the 1950s?  Or 1870s?  How are we here in 2014?  Prejudice and hate were not wiped away magically by civil rights legislation, integration, communication and education alone, but really, does this type of attitude have a place in today’s world? If so why?  Hate has created trouble in the world for thousands of years.  Hate is a problem because hate is a means to distract people from real problems or to force your problems on others.  But in truth, psychologists will tell you that in most cases, the Haters tend to hate themselves, which is something we all need to remember.  Hate is developed because you cannot control a situation or someone else gets something you want.  Therefore it is that someone else’s fault, not yours.  It is easier when race, sex, sexual orientation, religion or other factors represent the “somebody else,” but the reality is haters hate themselves first, then project their hate onto others.  They need help. Professional help. Counseling.  Many of them. Even whole societies. They need to go get help for themselves and the rest of us. 

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