Hi all. Here is another radio show I did last week talking about my company Public Utility Management and Planning Services Inc. and water sustainability. Take a listen. Let me know what you think. Thanks
Fred
Are Pensions Really Broke?
Nearly 10 years ago it was predicted that the water industry would experience a large exodus of experienced workers. It did not happen; likely it was only delayed by the 2008 financial crisis. If that is the case, will there be an acceleration of retirements in the next few years? If so, what are the plans the plans for knowledge capture? GIS, work orders, MMIS, and other programs will help, but capture is important as the next “generation” of employees will not have the advantage of years of experience in finding valves, and pipes, etc. We need to plan ahead for the knowledge capture issue, develop training for newer employees and figure a means to access lost knowledge in the future. Capture is a big issue, but what we hear more of is the potential for a drain on our resources for funding these retirements? The news is full of stories of dire consequences of retirement defaults coming for the public sector. Keep in mind many utilities are publically owned and these employees are part of the public retirement systems. Is this real or a political position for another agenda? Do we need to be worried?
Interestingly it depends on whether you were looking before 2008 or after. This picture was very different. Even in my state of Florida, the pension system was fully funded before 2008, dropped just after, but has returned to near full funding as a result of the improvement in investment returns. Most of these systems rely on investment returns so changes can cause the system solvency to change rapidly over short periods of time. Looking only at a short instant in time belies the long-term truth and it is the longer view we need to look at. Good thing Wall Street normally goes up, but the impact of poor investment strategies by a limited few (2008) has significant impacts across society in everyone’s pension programs. Look at all the 401k programs – those incurred crushing blows just as pension programs did. So yes there may be problems, but many of these pension systems are not nearly as strapped as you would be led to believe in part because they have always relied on people continuing to pay into the system. Hence they always have cash flow, unlike personal accounts.
The long-term view or the impact on personal accounts doesn’t faze the “fixers” who have many ideas to “fix” the pension problem. One of the concepts championed is to change enrollment to a 401k vs a fixed benefit system. Another camp suggests privatizing. But both radically change the long-term solvency of vested employees and here’s why. Under the current concept for public retirement systems, your employer and often you, pay matching amounts into the system. According to a study done some years back in Florida, over 80% of people who get public sector jobs do not stay long enough to become vested in the system. That means that while they get their contributions back, the retirement system keeps the match, reducing long term costs to the public. All full time employees pay into the system. Retirement systems rely on cash flow from current employees for payouts to retirees, thereby protecting the invested funds and allowing the system to “weather” periodic financial difficulties. That’s why the system solvency will based on what is happening on the stock market. The system is designed to grow at a given rate, so if you reduce the people paying in, you accelerate the use of invested dollars because the cash flow diminishes. In many respects that is what happened to some of the industrial pension systems –automation and outsourcing jobs overseas cut down the payees so much that the pension system could not sustain itself. So it’s relatively easy to demonstrate that both cutting jobs through privatizing and 401k type programs accelerate the crisis and will create future burdens on the taxpaying public. These two solutions sound great, but are simply unsound.
There are other ways to mess up retirement systems. The federal workforce has decreased from 6.6 million in the late 1960s to 4.5 million today. Clearly the reduction in employees contributing will have an impact on significant federal pensions. Florida and many other states, with the windfalls on the late 1990s, reduced vesting from 10 years to 5 or 6. That means that a greater percent of people will become vested, which means more future obligations. That’s not a solution for solvency. Florida’s legislature changed the contributions from only the government entity paying (a total of 10.4%) and required employees to contribute. The employee match is their money and they get it back with interest, meaning only 7./4% remains in the system. If experience with social security and other states is an indication, both shares will have to increase so that their combined total will be in the 13-14% range. How did hat save anyone money?
So what’s the solution? Two things. First, the initial way these pension plans were set up were actuarially sound. They should be revisited for contribution amounts, vesting period and expected return rates on investments (one of social security’s issues is that they own so many Treasury bonds that pay under 2% that it is hard to get a valuable rate of return). This is a project for experts, not policians to consider and evaluate. The big issue though is age for retirement. I know this is not popular, but let’s talk social security here as an example. The text of the 1935 Social Security Act says that benefits were to be granted at age 65 (Section 202). However the average age that people live to was 60 for men and 64 for women, meaning the average person NEVER collected social security. Now it is 76 and 81, which means they collect for 12 to 15 years, tremendous difference in the obligations. We all appreciate good medicine and most look forward to retirement, but keep in mind it comes with a price. Since 50 is the new 30, we probably will all probably can be working longer.
Water and sewer workers like police and fire, are vital to thriving communities. So, let’s act with caution when looking at fiscal impacts that may come to utilities in the future. Since many of these folks have, and have worked hard to secure a retirement package, it will need to be funded. But we must act judiciously when making changes to the current program. Cut off payees – and ratepayers will make up the difference. Change the type of program, and the potential for major losses occurs.
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.
Hi All.
This is a radio show I did this week. One of 4 I have scheduled. It talks about me and my company, outlook, thoughts. Take a listen. Let me know what you think!
Fred
Planning is a process utilized by utilities in order to reach a vision of the utility as defined by the customers or the governing board, or to meet certain demands for service projected to be required in the future. Understanding and managing the utility’s assets provides important information related to the ongoing future direction of the utility system. However, the only method to develop that future direction is through the planning process. Planning should be undertaken on a regular basis by all enterprises in an effort to anticipate in to anticipate needs, clarify organizational goals, provide direction for the organization to pursue and to communicate each of these to the public. With water and wastewater utility systems, it is imperative to have ongoing planning activities, as many necessary improvements and programs take months or years to implement and/or complete. Without a short and long-term plan to accomplish future needs, the utility will suffer errors in direction, build unnecessary or inadequate infrastructure and pursue programs that later are found to provide the wrong information, level of service or type of treatment.
Planning can provide for a number of long-term benefits – improvements in ISO ratings to lower fire insurance rates, renewal of improvements as monies become available, rate stability and most importantly – a “vision” for the utility. In creating any plan for a utility system, efforts to understand the operating environment in which the utility operates must be undertaken. Second, the needs of the utility must be defined – generally from growth projections and analyses of current infrastructure condition from repair records or specific investigations. By funneling this information into the planning process, the result of the effort should be a set of clear goals and objectives needs to be defined (Figure 8.1). However, the types of goals and objectives may vary depending on the type of plan developed. There are 4 types of plans that may result from the planning process.
Any utility planning effort should start with a description (and understanding) of the local environment (built and otherwise). An understanding of the environment from which water is drawn or to be discharged is important. Both water quality and available quantity, whether surface or ground water, are profoundly affected by demand. A reduced demand for surface water helps prevent degradation of the quality of the resource in times of low precipitation. Reduction in the pumping of ground water improves the aquifer’s ability to withstand salt water infiltration, potential surface contamination, upconing of poorer quality water, contamination by septic tank leachate, underground storage tank leakage, and leaching hazardous wastes and other pollutants from the surface. Over-pumping ground water leads denuding the aquifer or to contamination of large sections of the aquifer. Planning for is necessary for surface water systems. Therefore, source water protection must be a part of any water planning efforts, including the appropriate application sites and treatment needs for reuse and residuals.
So let’s toss sea level rise into the mix. What happens when sea level rise inundates coastal areas with saltwater and increase freshwater heads inland? How do we fix that problem and should be plan for it. Clearly master planning should include this threat (as applicable), just as any regulatory issue, water limitation, disposal limit or change in business practices should be considered. One means to reduce the impact of sea level induced groundwater levels is infiltration galleries that may operate 24/7. These systems are commonly used to dispose of storm water (french drains or exfiltration trenches) but what happens if the flow is reversed? Water will flow easily into the system, just as it does for riverbank filtration. The water must be disposed of, with limited options, but let’s toss a crazy idea out there – could it be your new water supply? Just asking, but such a system would not be unprecedented worldwide, only in the coastal communities of the US.
Regardless of the causes, southeast Florida, with a population of 5.6 million (one-third of the State’s population), is among the most vulnerable areas in the world for climate change due its coastal proximity and low elevation (OECD, 2008; Murley et al. 2008), so assessing sea level rise (SLR) scenarios is needed to accurately project vulnerable infrastructure (Heimlich and Bloetscher, 2011). We know that sea level has been rising for over 100 years in Florida (Bloetscher, 2010, 2011; IPCC, 2007). Various studies (Bindoff et al., 2007; Domingues et al., 2008; Edwards, 2007; Gregory, 2008; Vermeer and Rahmstorf, 2009; Jevrejeva, Moore and Grinsted, 2010; Heimlich, et al. 2009) indicate large uncertainty in projections of sea level rise by 2100. Gregory et al. (2012) note the last two decades, the global rate of SLR has been larger than the 20th-century time-mean, and Church et al. (2011) suggested further that the cause was increased rates of thermal expansion, glacier mass loss, and ice discharge from both ice-sheets. Gregory et al. (2012) suggested that there may also be increasing contributions to global SLR from the effects of groundwater depletion, reservoir impoundment and loss of storage capacity in surface waters due to siltation. The loss of groundwater, mainly from confined aquifers, is troubling, and currently completely unknown. The contribution of carbon dioxide, commonly occurring in deep groundwater is also unknown. To gauge the risk to property in southeast Florida, Southeast Florida Regional Climate Compact and Florida Atlantic University reviewed twelve different projections of SLR and its timing. The consensus was 3” to 7” by 2030 and 9” to 24” by 2060. From the literature review and analysis, it was concluded that approximately 3 ft. of sea level rise by 2100 would a suitable scenario and time frame to illustrate the methodology presented in this article. To allow flexibility in the analysis due to the range of increases within the different time periods, an approach that uses incremental increases of 1, 2, and 3 feet of SLR was considered for risk scenarios. An issue normally ignored in sea level rise projections is groundwater. The importance of the groundwater table in the model is that it is responsible for determining the soil storage capacity. Soil is composed of solids, water, and air (voids). Soil storage capacity depends on physical and chemical properties, water content of the soil, and depth to the water table or confining unit (Gregory et al 1999). As the rain infiltrates the soil, unsaturated pores quickly fill up, effectively raising the water table (Gregory et al 1999). For example efforts, a groundwater surface elevation map was derived based well site information available from the USGS (http://groundwaterwatch.usgs.gov) that had a minimum of 35 years of continuous data. Using GIS, an inundation model was created in GIS by subtracting the groundwater surface model from the digital elevation model with the difference in elevation being the soil storage capacity. The photo shows the evolution of these features as applied to a section of northwestern Miami-Dade County. What this indicates it that the impact of sea level rise on low-lying inland areas may be far different that the projections using the bathtub models. It also means that wellfields, sewer mains, roadways and storm water systems will be affected far more quickly than projected from bathtub models. The method used here suggested that the estimated may be off by a factor of two of three.
Municipal drinking water is strictly regulated by the USEPA. We spend a lot of time testing our water, producing reports, and providing our customers with information on our results. The results show it works, because the number of incidents of contaminated water are few, and rarely affect larger utility systems. We are so good at providing water that the public expects their water to be safe, yet the buy bottled water? Wait, huh? Bottled water? Bottled water is not regulated by the USEPA and is not subject to the same requirements as potable water. There are less than three full time people at FDA inspecting bottled water facilities, versus thousands reviewing public water supplies. Water utilities run millions of analyses per year and must publish the results. So why do they buy bottled water when our water is safe?
Keep in mind that in many areas of the world, the bottled water industries move in and compete for the same supplies as we currently use. North Florida is rife with arguments over flows to springs as are other areas. Some of the water is simply repackaged tap water. So in addition to competing for our customers, they are competing with the sustainability of our drinking water supplies. Then there are the hundreds of thousands of bottles that end up in landfills. More impact on sustainability. At the same time, bottled water is more costly that gasoline, which everyone complains about, but that does not stop the purchases? So what’s up?
Marketing that’s what. We don’t market water. I noted in an earlier blog that we simply don’t market our product, which has allowed others to compete for the same dollars. Customers complain about rate hikes, (averaging about 5% per year for the past 10 years according to the new AWWA study), yet they happily pay over $4/gallons for many of the popular bottled waters, more and more cable channels, fancy phones, etc. Not that any of these commercial products are per se bad, but none are required for survival like water.
Interestingly when we do market, it reaps positive results. New York and San Francisco have seen the wisdom of marketing for year. They ship New York tap water to Florida to make Brooklyn style bagel because Florida Water doesn’t taste the same. DC Water changed its name, and began a marketing campaign that changed public perception of the utility and has allowed it to start dealing with its infrastructure backlog. Some of their ideas include branding the water, and having restaurants serve it in marked glasses, paid for by the utility. Signs on drinking fountains, in schools and even sales of tap water in stores are options some utilities have started. But the key is started. Marketing takes dollars, to reap benefits. Who knows, maybe tap water is the next bottled water….
Many of you will remember in the 1980s there was a book called Megatrends by John Naisbett, and a later update called Megatrends 2000 and a host of other megatrend documents. The concept was to look for global or national trends that might impact out future. I recalled this while I was reading an article from Forbes and Public Works magazines recently talking about the future, and development of megaregions. They project 11 megaregions in the US that will develop by 2050. Most are in process already and are familiar: 1) Pacific Northwest (Vancouver to Portland), 2) Bay Delta, 3) Southern California, 4) Front range (Cheyenne to Albuquerque, 5) Phoenix/Tucson, 6) Texas Triangle (Houston-Dallas-San Antonio, 7) Gulf Coast (Houston to Mobile), 8) Florida (I-4/I95), 9) Piedmont (Atlanta to Raleigh), 10) Northeast (Washington DC to Boston), and 11) southern Great Lakes (the old “Rust Belt”). If you are looking for economic growth, all signs point to these 11 region. Most are located along interstates which makes transportation by truck easier. Several have port access and most rail. The projection is for more people to move from the rural areas to these regions, and for the influx of immigrants to likewise migrate here. But an issue not noted as a part of these projection is that only three of them are not water limited, and those three include the two oldest regions: Rust Belt stats and the northeast where there is water. In addition, three of these areas are characterized by potential adverse climate impacts (Pacific Northwest, Texas, and Front Range) that will adversely impact their future water availability. In all but the historical cases, embedded power availability is lacking, creating competing interests with the water industry. So where is the planning and forecasting models for 2050 and beyond for these regions? Some jurisdictions have seen attacks on traditional planning activities as unduly limiting development, implement specific agendas, and other nefarious reasons. Florida scrapped most of its growth management/concurrency requirements in this vein. After all, why should you insure there is water in order to issue development permits right? That might limit development! Why not manage an aquifer for 100 years, to insure a 100 year supply, not to insure the supply remains available indefinitely. Both short term goals conflict with the theory of constraints which says that any system is limited in achieving its goals by a very small number of constraints; kinda the old idiom “a chain is no stronger than its weakest link.” The concept requires the application and investigation of the situation in enough detail to gain an understanding of the constraints and to construct an optimized solution. Keep in mind that often maximizing certain goals, will cause others to suffer. A familiar example, you can have construction occur fast and with high value, but not at a low price. You can achieve certain reliability of water supplies, and improve economics, but you need to understand other impacts. Too often planners focus on meeting the goals of the client, while ignoring competing goals, which ultimately leads to greater costs down the line. As these megaregions are well on their way to development, we need to begin the process (a bit late, but better late than never) to understand the limitations each region will face with respect to water supplies and how those water supplies impact competing economies. Failure to do so could create constraints within the regions that restrict their growth and economic potential.
This question has been asked a couple times on on-line discussion groups. It usually results in a short list of answers. In the last post, I outlined the number one answer – getting a handle on failing infrastructure. The next issue has to do with water supplies. You hear the argument that we need to get people to respect that drinking water as a limited resource, develop where water supplies are plentiful as opposed to arid regions that are water poor and protecting water sources instead of rendering it unusable in the process of using it. People (and their jobs) are moving to “more favorable” (read: warmer, more arid) climates, so people are now actually trying to grow rice and develop golf courses in the deserts of the Southwest US and complaining about “drought” conditions. The sustainability of groundwater supplies is often noted as a problem because much of the west relies on groundwater for agricultural irrigation. Having a 50 or 100 year management plan for an aquifer, which is how to insure there is water to last 50 or 100 years, is shortsighted, even though it doesn’t sound like it. Long term these areas could run out of water which will create significant economic impacts to these communities. More professionals should be involved in this discussion: regional growth planners; federal and state funders that offer ‘incentives’ to businesses to relocate their workers; city and county governments that accept these ‘incentives’ to beef up their budgets.
But just as cities market their community to developers and industry, it is interesting that marketing services is another issue. I had a conversation where an elected official said it was inappropriate for government to market. Yet the bottled water industry does, power companies do, and cell phone companies do. Utilities ignore the people that put fliers on houses asking our residents to take a sample of their water, and then attacking the quality of our drinking water by explaining that having calcium and chlorine in the water is bad, should have been addressed long ago. Of course calcium and chlorine are in the water! Chlorine disinfects the water and then keeps the distribution system clean (especially an issue in warmer climates with TOC in the water). Our public is uneducated and we have been out-marketed for scare dollars for 40 years. That is an elected official, but also a water official problem.
This question has been asked a couple times on on-line discussion groups. It usually results in a short list of answers. The number one answer is usually getting a handle on failing infrastructure. The US built fantastic infrastructure systems that allowed our economy to grow and use to be productive, but like all tools and equipment, it degrades, or wears out with time. In addition, newer infrastructure is more efficient and works better. In many ways we are victims of our own success. People have grown used to the fact that water is abundant, cheap, and safe. Open the tap and here it comes. Flush the toilet and there it goes, without a thought as to what is involved to produce, treat and distribute potable water as well as to collect, treat, and discharge wastewater. Looking to the future, we should take education as one of our challenges. Our economy and out way of life requires access to high quality water and waste water. So this will continue to be critical. But utilities have not been proactive in explaining the condition of buried infrastructure in particular, and need more data. The same goes for roadways and many buildings.
Cities are sitting on crumbling systems that have suffered from lack of adequate funding to consistently maintain and upgrade. In part this is because some believe that clean drinking water is a right instead of a privilege to be paid for. We gladly pay hundreds of dollars per month for cable television and cell phones, but scream at the costs for water delivered to out tap. The discussion usually continues along the lines of utilities are funding at less than half the level needed to meet the 30 year demands while relying on the federal government, which is trying to get out of funding for infrastructure for local utilities. Utilities are a local issue which is some ways makes this easier. Our local leaders to send help with the education (after we educate them), send less money going to the general funds and more retained by utilities.
Perhaps where we have failed is in educating the public. Public agencies are almost always reactive, as opposed to pro-active, which is why we continuously end up in defensive positions and at the lower end of the spending priorities. So we keep deferring needed maintenance. The life cycle analysis concepts used in business would help. A 20 year old truck, pump, backhoe, etc just aren’t cost effective to operate and maintain. We are not very successful at getting this point across.
Money is an issue, and will always be, but the fact that local officials are not stressed about infrastructure is in part because utility personnel are very good at our jobs, minimizing disruptions and keeping the public safe. We are not “squeaky wheels” and we don’t market our product at all. Afterall, is cable or your phone really more valuable that water and sewer?
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