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“Or is running a local government like s business killing it?”

I had an interesting conversation at a conference recently.  The people I was talking to were advanced in their careers and the discussion moved toward the outlook on management in public settings. Once upon a time, most public works and utility managers were civil engineers, but often they were criticized because they were focused on the engineering aspects as opposed to the people aspects of the community.  Their focus was public health and making sure things operated correctly.  Most did whatever was needed to accomplish that.

This led to schools of public administration, which actually started educating some of those same engineers about management of large public organizations, organizational theory, human resource, accounting and planning  I did all that myself at UNC-Chapel Hill.  The goal was to understand finances, people, community outreach, the need to engage citizens and as well as public service.  The outcomes were providing good service.  That however tends to cost a little more than operations although there are opportunities to be a bit entrepreneurial.

So back to the people in the conversation.  They noted that sometime in the 1980s or early 1990s the MPAs were being replaced by MBAs as politicians were focusing on operating “like a business.”  Looking at the MBAs out there, the comment was that business schools do not focus on service, but profits to shareholders, and the training is to cut unproductive pieces that detract from the bottom line.   Hence investments do not get made if the payback is not immediate.  Service is not a priority unless it helps the bottom line.  In a monopoly (like a local government), there are no other option, so service becomes a lessor priority.

So it brought up an interesting, but unanswerable question for now: has the move to more business trained people in government created some of the ills we see?  The discussion included the following questions/observations (summarized here):

  1. Many water and sewer utilities are putting a lot of time and effort into customer service and outreach now after years of criticism for failing to communicate with customers. That appears symptomatic of the monopoly business model.
  2. Our investments in infrastructure decreased significantly after 1980, and many business people focus on payback – so if the investment does not payback quickly, they do not pursue them. How does that impact infrastructure investments which rarely pay back quickly (Note that I have heard this argument from several utility directors with business backgrounds in very recent years, so the comments are not unfounded).  It does beg the questions of whether the business focus compounds our current infrastructure problems.
  3. Likewise maintenance often gets cut as budgets are matched to revenues as opposed to revenues matched to costs, another business principle. Run to failure is a business model, not a public sector model. Utilities can increase rates and we note that phones, cable television, and computer access have all increased in costs at a far faster rate that water and sewer utilities.

Interestingly though was the one business piece that was missing:  Marketing the value of the product (which is different than customer service).  Marketing water seems foreign to the business manager in the public sector.  The question arising there is whether that is a political pressure as opposed to a forgotten part of the education.

I would love to hear some thoughts…

 

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WTPspiractorI have a question – what was the impact of the 2008 economic crisis on water and sewer infrastructure funding?  I have a hypothesis – the amount of monies transferred to non-water and sewer operations increased.  Is the hypothesis true?

The next question to answer is that if transfer monies increased, did they decrease once property values started to come back?  My hypothesis is no.

Finally what impact does this have on water and sewer infrastructure going forward?  I suspect that the answer is that we underfund infrastructure or justify the lack of funding through actuarial means (I actually had a utility director tell me that his pipes were designed to last 250 years.  Seriously.  Of course that is nonsense, but it is a means to keep your need for replacement funding down).

I have a student and we are working on these issues now.  We are going to gather data from several hundred utilities over the next six months, crunch 11 years of data and let’s find out.  If you or your clients are interested in adding your data to the mix, please send it to me.  I need 2005 -2015 expenditure info.  Also some operational data like ADF, MDF, miles of pipe, customers, treatment type and CCR. We will be publishing the results.   Should be interesting……


There is an interesting ethical issues that arises in this discussion also. Engineers are entrusted to protect the public health, safety and welfare. When there were few people, projects did not impact many so little thought was given to the “what could possible happen” question. We are still paying for that. When bad things happen, the precedent has unfortunately been set that somehow “the government” will resolve this. An old 1950s BOR director said he thought he was “a hero because he helped create more room for people” in the west with dams and water projects. He did accomplish that, except that while there were more people coming, the resources were never analyzed for sustainability, nor the impact it might have on the existing or potential future economic resources. But once the well runs dry, I think we just assumed that another solution would resolve any issue. But what is if doesn’t?

There are many water supply examples, where we have engineered solutions that have brought water or treated water to allow development. South Florida is a great example – we drained half a state. But no one asked if that development was good or appropriate – we drained off a lot of our water supply in the process and messed up the ecological system that provided a lot of the recharge. No one asked in the 1930 if this was a good idea.

Designing/building cities in the desert, designing systems that pump groundwater that does not recharge, or design systems that cannot be paid for by the community – we know what will happen at some point. Now that there are more people, conflicts become more likely and more frequent. Most times engineers are not asked to evaluate the unintended consequences of the projects they build. Only to build them to protect the public health safety and welfare while doing so, but from a specific vantage point.

So if you know a project will create a long-term consequence, what action should you take? So the question is whether there is a conflict between engineers meeting their obligations to the public and economic interests in such cases?  Or should we just build, build, build, with no consideration of the consequences?


As technology advances I have an observation, and a question that needs to be asked and answered.  And this could be a pretty interesting question.  Back in the day, say 100 or 150 years ago, there were not so many people.  Many activities occurred where there were few people and impacts on others were minimal.  In some cases ecological damage was significant, but we were not so worried about that because few people were impacted by that ecological damage.  In the 20th century, in urban locations, the impact of one’s activities on others became the basis for zoning laws – limiting what you could do with your property because certain activities negatively impacted others.  And we certainly had examples of this – Cuyahoga River burning for one.  Of course this phenomenon of zoning and similar restrictions was mostly an urban issue because there potential to impact others was more relevant in urban areas.  We also know that major advances in technology and human development tend to occur in population centers (think Detroit for cars, Pittsburgh and Cleveland for steel, Silicon Valley, etc.).  People with ideas tend to migrate to urban areas, increasing the number of people and the proximity to each other.  Universities, research institutions, and the like tend to grow up around these industries, further increasing the draw of talent to urban areas.  The observation is that urban areas tend to have more restrictions on what people do than rural areas.  So the question – do people consciously make the migration to urban areas realizing that the migration for the potential financial gain occur with the quid pro quo of curbing certain freedoms to do as you please?  Of does this artifact occur once they locate to the urban areas?  And is there a lack of understanding of the need to adjust certain activities understood by the rural community, or does it become yet another point of philosophical or political contention?  I have blogged previously about the difference between rural and urban populations and how that may affect the approach of utilities, but read a recent article that suggests that maybe urban citizens accept that financial gains potential of urban areas outweighs the need to limit certain abilities to do as you please to better the entire community.  They are motivated by potential financial opportunities that will increase their standing and options in the future.  So does that mean urban dwellers understand the financial tradeoff differently than rural users?  Or is it a preference issue.  And how does this translate to providing services like water to rural customers, who often appear to be more resistant to spending funds for improvements?  While in part their resistance may be that their incomes tend to be lower, but is their community benefit concern less – i.e. they value their ability to do as they please more than financial opportunities or the community good?  I have no answer, but suggest that this needs some further study since the implications may be significant as rural water systems start to approach their life cycle end.


Big week – water and otherwise.  Here are a couple discussion boards/blogs that might be of interest to follow as they evolve:

https://www.linkedin.com/grp/post/733277-6020246563895390212

http://onlinelibrary.wiley.com/doi/10.1002/2015WR017351/full?wol1URL=/doi/10.1002/2015WR017351/full&wol1URL=/doi/10.1002/2015WR017351/full&regionCode=US-FL&identityKey=58977fc5-ec07-41a1-b4d0-a91e903b5f5b&isReportingDone=true

And an ethical consideration to contemplate:

  • There is an interesting ethical issues that arises in this discussion also. Engineers are entrusted to protect the public health, safety and welfare. When there were few people, projects did not impact many so little thought was given to the “what could possible happen” question. We are still paying for that. Now that there are more people, conflicts become more likely and more frequent. Most times engineers are not asked to evaluate the unintended consequences of the projects they build. Only to build them to protect the public health safety and welfare while doing so, but from a specific vantage point. So if you know a project will create a long-term consequence, what action should you take? There are many water supply examples, where we have engineered solutions that have brought water or treated water to allow development. South Florida is a great example – we drained half a state. But no one asked if that development was good or appropriate – we drained off a lot of our water supply in the process and messed up the ecological system that provided a lot of the recharge. No one asked in the 1930 if this was a good idea. Designing/building cities in the desert, designing systems that pump groundwater that does not recharge, or design systems that cannot be paid for by the community – we know what will happen at some point. So the question is whether there is a conflict between engineers meeting their obligations to the public and economic interests in such cases?

    And finally, when considering the ethical issue:

    http://bizlifes.net/discovery/855-27-images-that-prove-that-we-are-in-danger-7-left-my-mouth-open.html


I am in the initial stages of a project to look at economy of scale, utility bench-markings, asset management and impacts of economic disruption on utility systems. I should note that I am looking for volunteers, so let me know. But an initial question is whether economy of scale still applies. We think it should but given the disparities across the US, does it. As a quick survey, I enlisted several volunteer utilities to provide me with some basic information that I sued to create some ratios. And then we discussed them. The baselines were accounts and cost per millions of gallons produced.  The graphics are shown below. Economy –of-scale is alive and well. That means if you have a small utility, you cannot expect to have the same costs/gallon, or the same rates, as your larger neighbors. If you do, you are probably shoring your maintenance or capital programs. That leads to bigger costs later. Instead of comparing yourself to your larger neighbors, see what happens when you compare yourself to cable and cellphones in your area. You may be surprised.

economy of scale MGY economy of scale cost per MGY


So I am training a group of public officials about utilities. Many have limited experience; others much more so. The interesting question that came up is how these officials should communicate with their customers. Interesting question and one that often receives little thoughts. So I thought their thoughts might be enlightening, keeping in mind that I have abbreviated some of them, and this was a discussion. Here are the thoughts they provided, in no particular order:

“Not the newspaper, most residents do not receive the newspaper anymore”

“Who are our customers and how do they communicate? Until you can answer that, you will not reach them. Ask them.”

“If 37% percent of your customers are direct deposit – should we send them direct mailings?” Response: “Yes! They will not think it is a bill and they might read it.”

“Most people discard bill stuffers without reading them . That wastes a lot of time and money.”

“We have a Facebook page, but we don’t just talk utilities. We talk about things that might interst them like strawberry shortcake recipes and current community events.”

“We use twitter and Facebook”

“We have a website, but we found the website was useless if we did not keep it current constantly. It takes effort and someone with that responsibility to accomplish that.”

“We use Facebook to get people interested, then use it to direct them to our website.”

“Every utility should have a public relations person that deals with media, and can brand your utility to the public.”

“Understand your demographics and then figure out how they communicate – phone, twitter, Facebook, on line, etc. Maybe all of these, interconnected. You can find local people who will do this for your professionally. The results are worth the investment.”

“Radio is useless, just like the paper. Avoid the television because they really only want to report the bad stuff.”

“Blogs tied to websites and Facebook are helpful.”

“Many venues are needed – make the message the same.”

“Ask the young people in your community – they will know how the reach the residents.”

“Don’t focus just on utility issues, add content on topics they might be interested in.”

“Public relations is as important as providing good service.   It is part of your job.”

“worth every dollar spent.”

Interesting isn’t it. I wonder if the mainstream media will take note? And I wonder how many utilities do not have these things and will consider it as a part of the coming budget cycle?

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