Monthly Archives: October 2014

I have co-authored a new book for our senior design class sequence.  The book will be out in the early part of 2015.  Just in time for students to pick up a copy to help them with their capstone design class.  The book is titled Practical Concepts for Capstone Design Engineering and is published by JRoss Publishing.  We hope this will be useful for students, but it is not a book solely focused on the capstone class.  As this class was developed, the original intent was to construct it around the actual design process that consultants go through to deliver projects.  So the students start out with how to get work, the site selection, site planning and building planning processes, before they ever get to the design part.  That due diligence in necessary to insure that you have sorted out all the details that might impact your design.  As a result, we think that this may be a useful reference for professional, especially young professionals who want to know about site plans, floor plans, environmental site assessments, codes, green building, floor planning and communicating your vision.  Coming soon to

At some point in early 2015, the AWWA manual M63 on aquifer storage and recovery will also be out.  It is the first AWWA manual devoted to the subject. or AWWA bookstore for that one.



“If the assumption of all economists, government officials and investors is that the population must increase exponentially, what does that suggest for our future?” was a question asked a few days back.  Did you ponder this at all?  I suggest we should and here is why.  An exponential growth rate assumes a certain percent increase every year.  That means the increase in population is greater the farther out you go.  That doesn’t really make sense except perhaps at one point in Las Vegas (but not anymore).  The economy cannot really expand at a rate greater than the expansion of the population because there is no one to buy the goods or increase the demand, which is why increasing the US population is going to be viewed favorably by all politicians regardless what they say today.  House values do not increase faster than population increase unless they are in a bubble, nor does the stock market really (inflation adjusted).  Your water sales will not increase faster than your system’s population increase for any extended period of time either, so an assumption of ever increasing water sales is likely to be an overestimation sooner as opposed to later.  And then what – you have to raise rates, and keep raising rates to keep up because your demands are too low?

And what if your growth stagnates, or goes backwards as many did in 2009/2010?  That was a severe problem for most entities, causing layoffs and higher prices, pay cuts and deferral of needed improvements, mostly because no one had reserves because people thought the good times would roll on forever.  Layoffs, price hikes, pay cuts and deferral of needed improvements do help society (of course if you had lots of reserves, you weathered the recession without a problem, but too many did not).  Keep in mind the repair, replacement, and maintenance needs, along with ongoing deterioration, do not diminish with time or lack of new customers.  We have relied on new people to add money to solve old as well as new problems for many years.  What is the contingency if growth stops?

So a growth scenario makes us feel better and more confident when we borrow funds.  But if growth does not stop, where is the water to come from?  What are the resources that will be used faster?  Where does the power come from to treat the water or cool the houses?  And the cooling water to cool those power plants?  Even renewable resources are limited – most metals and oil have likely passed their peaks as far as production and water does not always fall consistently.  We have overstressed aquifers and over allocated surface waters, especially in the west.  So while growth makes us feel good financially, we need answers to the growth scenario despite the fact that we may have more funding.  Many resources are not limitless, but an exponential growth pattern ignores this.  Locally growth maybe less of an issue, but society wise?  Maybe a societal problem, or maybe we get into extreme completion with each other.  Some how that doesn’t look like a solution either

Ray Rice gets video-taped punching out his wife in an elevator in a casino.  Wes Welker gets videotaped at the Kentucky Derby looking like he has imbibed a bit too much.  We have couple students that, well, let’s just say those photos won’t help them get jobs.  And everyday people are You-tubed doing stupid things they wouldn’t want to get caught doing.  And hackers download photos of celebrities in various states of undress that they thought were secure.  We do not understand the Cloud and we do not understand all the wires that make the internet a useful and productive tool that houses the cloud.  The internet is a great information sharing tool, but almost anything is exchangeable.  To date the internet is open to all, but the wires are owned by corporations.  If you watched the 60 Minutes episode recently with Michael Lewis as he talked about Wall street brokers gaming the stock market by using internet cabling to accelerate their access to your data (his book is Flash Boys), you should not be surprise if corporations won’t want to restrict those tools that help them, including cables and satellites.  Jim Hightower in a recent Lowdown newsletter outlines the reasons we should be watching the mergers of the large entities like Time-Warner who own and therefore control the internet connections.  They can and will impose fees for access of certain types.  Instead of equal access, those who pay can and will receive preferential connections.  They also will get access to data.  Wall Street saw the benefit of using the wiring and cloud and data sharing to their advantage, even when it is your data, so certainly these media giants know all about it.  It makes sense form a business perspective.  It works against you, me and our local water and sewer utilities who do not have the luxury of being able to pay and pay for better access.  Keep it on your radar screens – at home and at work.  Keep in mind deregulation and merger of the airlines didn’t reduce air fares or make service necessarily better.

Once upon a time, people worked until they died.  But the longer people lived, the more infirmities impacted older people, and the concept of stopping work came into play.  So these folks labored all their lives, put some money away in a safe place, like a bank, where someone else would watch over an manage their money until they needed it.  Then one day, they found out that the banks have gambled and lost on real estate, and their money was gone.  There was no government to bail anyone out.  So the people had to try to go back to work, became beggars and destitute or died.  The government thought this was unfair to those older folks who had worked so hard, but through absolutely no fault of their own, had lost everything.  So the government decided that it would “tax” people a portion of their income, and put it into a retirement system.  People could retire at 65, and of course they were only expected to live another r3 or 4 years.  There were 16 people laying in for every person taking out.  And the government told the banks that they could not gamble with people’s hard earned savings, passed legislation and created an insurance pool to backstop losses by criminal or unethical activity.  All was good and the people were happy.

As time went on some things changed.  For one, people lived more than 3 or 4 years.  The population retirees increased, and the ratio dropped to 1:10 and then to 1:6 ration of retirees:workers, but the “tax” did not go up, but investments were made that increased the pool.  It was called good management.  The government also encouraged people to save money by deferring taxes, which they did, and the banks used it to make money.  All good as long as the investors gambled well.  They gambled so well, they were able to talk the government into undoing the anti-gambling rules from the past, so their pool to invest was twice as much.  And the markets grew and the portfolios grew and the people were happy.

And then it came to pass that the banks again gambled on real estates, and created complicated investment tools to hide the risk, but the risk was exposed and half the money was gone overnight.  And the retired were wondering about jobs again.  But there were no jobs.  And the employed now had fewer jobs.  So less people paid into the system.  And the people were sad.  And mad because they thought they were being protected from the gambling of the past.  They did not understand.

And the government could supply no answers because they had changed the rules and they knew the people would be unhappy, so the government felt there was no choice, so they borrowed money, and bailed out the banks.  And some people were happy.  And some people were concerned about all that debt.  And some people wondered why it was that history could repeat itself and put society at risk.  And some people asked why people who did bad things were not punished.

And none of these questions has been answered.  Good thing that these fairy tales don’t depict anything real right?

Some recent reading led me to the following items that seem to crop up when municipalities have fiscal problems that are not otherwise created by the economy or federal or state government decisions:

Assuming high returns of retained earnings (Orange County, CA)

  • Pension systems that are underfunded (Portland OR, and others)
  • Lack of appropriate financial advisors (many)
  • Assuming growth will be exponential
  • Failure to address deterioration of infrastructure (many)
  • Getting involved in complicated credit swaps and revenues tools involving borrowing (Detroit).
  • Declining use by customers that are economically stressed (many)

Food for thought… or caution.

I can’t wait to hike 4 days in the Rockies over 8000 ft.  I am hoping for cool weather, limited snow and 67 miles.  It will feel good not to strain my eyes looking at a computer screen.  Straining to look at a bull moose or elk or furry coyote will be a welcome change.  We all need these welcome respites.  Our lives are busy.  Pressure builds.  Everyone needs an escape.  I can hike four hours, see no one, hear no one, collect my thoughts, rest my brain, and get some exercise.  Will share the fall photos!!

Since 2010, the Federal Reserve Bank indicates that the wealthiest 10 percent of American have seen their income rise by 2%.  The Bottom 20% have seen their income DECLINE by 4 percent and the average for all families DECLINED 5%.  That tells me that the majority in the middle income brackets, decreased at a rate greater than the bottom 20%.  In other words more of us are moving down in economic standing, not up.  To make matters worse, the Federal Reserve Bank indicates that the top 3% actually had their incomes increase by 27.7% since 2010, meaning that the upper middle class people are falling back with the rest of us.  Quite the opposite of what our parents had hope for us.

Wages have not rebounded as many people had to take pay cuts or find new a career at lesser pay, which places all kinds of issues at risk – retirement age, retirement goals, college for the kids, investments, home ownership, etc.  All play a role in the economy of the country.  People spend less on eating out, new clothes and other things – generally more frugal, which means less demand for goods and services, and therefore less employment.  A vicious cycle that doesn’t help the economy.  We have already started to see real estate cool off as wages have not rebounded and people figure it is time to defer or get out.  Places like Miami and Las Vegas may remain warmer than say Cleveland or Detroit, but the Miami market has cooled in the past year.

Real losses in purchasing power goes back to the 1980s form the lower half of earners in the US.  And we argue about the minimum wage – which is the very bottom of the pile.  The failed concept of the Great Society was to try to get enough money in everyone’s pocket that the total purchasing power of the population would increase.  Did not work out that way, but the concept of increasing purchasing power of all has appeal.  Inflation goes up.  Purchasing power goes down.  The economy will stagnate if wages for the bottom 90% do not increase.  That makes official less likely to raise water and sewer rates to pay for those needed infrastructure upgrades.  Which will put more assets at risk of failure and stress operations budgets further.

A Ponzi scheme is an illegal program whereby investors are promised big return son investments in a short period of time, and where the underlying basis for this return is deliberately mis-stated.  We continually find people who perpetrate Ponzi schemes and when they are finally caught, they get put in jail.  For those unsure, a Ponzi scheme is defined as a scheme where the scheme operator says they will pay a high return to its investors from their original investment, but instead uses money from new capital paid to the operator by new investors rather than from profit earned by the operator.  Hence it is a flow through of money from people putting money in to people who are getting out.  To get returns on the investments for the earlier investors, the pool of new people must increase with time, so that there are always more people paying in that there were previously.  It that does not occur, then we have a problem.

What is a retirement system?  A retirement system is a form of deferred compensation used to attract and keep workers, by deferring a portion of their pay 10, 20 30 or 40 years from now.  It is part of the compensation to the employee.  With a retirement system, people pay into a program, where their money is invested.  A retirement system tends to rely on the fact that the number of people paying in increases exponentially so that the actual invested dollars are never touched, instead the new proceeds exceed the monies paid out.  For a pension, plan it assumes your invested dollars remain invested and profitable, and that the revenues from the new people in the system, exceed the monies paid to retirees.  What is the difference?  Well, the retirement system actually supposedly has assets while Ponzi scheme does not.  Otherwise, the systems work similarly – dollars paid in generally go out to others, and there is an assumption that the number or payees increases exponentially (a percentage every year).

So what happens to a pension plan when the number of employees decreases from 6.7 million to 4.4 million over 40 years?  Would you expect there to be a pension plan problem?  And if so why?  And who is at fault?  That is exactly what has happened to federal government employees since 1967.  And many states have seen reductions in the last 20 years as well.  So it is any wonder why these pension systems might be at risk?  The push to privatize services ensures that the basic assumption that the number of payees in a pension plan increases exponentially will be violated, which makes the pension plan vulnerable.  And ho is at fault.  I would suggest the people pushing privatization, who look only at short term consequences as opposed to long-term impacts.  Perhaps this needs to be part of any such discussion going forward.  Just a thought…

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