Archive

Tag Archives: finance

SUSTAINABILITY OF UTILITIES – PART 2

October 11, 2013
Environment, finance, funding, infrastructure, Leadership, local government, management, planning, politics, Risk Management, sanitary sewer, sustainability, Uncategorized, water sewer management
Leave a comment

SUSTAINABILITY OF UTILITIES – PART 2

Let’s take a look at some scenarios. Let’s assume you are a utility that serves 20,000 people (8000 customers), with 60 miles of water pipe, 60 miles of sewer pipe, 17 lift stations, and a water and wastewater plant.  Replacing this infrastructure might be valued at $90 million for pipe, $35 million for treatment plants, water supply and pumping equipment (current day dollars).  Let’s also assume that their annual budget is $11 million and the typical demands are 3 MGD yielding a monthly bill of $115/mo (water and sewer).

Let’s make some general assumptions like that the pipe infrastructure might last 100 years, but clearly the treatment and mechanical parts would mot.  They would need ongoing maintenance and replacement.  50 years is probably too long, but let’s go with it.  If the overall costs increase at 3% per year and money is set aside for repair and replacement. The utility will see fairly steady rates if the customer base grows 2-3% per year.  Ten years out, the budget will be $16 million.  Now for the scenarios.

If the customer base has grown at 3% per year, the customers will increase to almost 27,000.  More of an issue is what happens if that increase in demand (from 3 to over 3.4 MGD) needs to come from a new water source and requires new capacity.  Many utilities will use impact fees to offset this cost to current customers so as not to adversely impact current customers too severely .That’s the current assumption.  The result looks like this at 10 and 20 years:

 

Component

  

Value today

10 years

20 years

Customers

  

20000

26878

36122

 

Accounts

  

8000

10751

14449

 

Water  Pipe

60 mi

 $   45,000,000

 $     98,509,418

 $215,646,786

Sewer Pipe

60 mi

 $   45,000,000

 $     98,509,418

 $215,646,786

Treatment Plants and Pumping

3 MGD

 $   35,000,000

 $     76,618,436

 $167,725,278

Operations budget

  

 $     9,000,000

 $     16,255,001

 $  29,358,340

Capital Budget

  

 $     1,600,000

 $       3,502,557

 $    7,667,441

Debt

  

 $        400,000

 $         400,000

 $      400,000

Monthly Amount

  

 $              115

 $                156

 $             216

Increase per year

    

5%

5%

 
         

 

Assume 1% of pipe Replacement Costs +2% Plant

    

 

Assume operating budget inc 3%/yr but construction increases 5%/yr

  

 
                     

 

But what if the new treatment and supply are 50% more costly and impact fees assume the lower investment (typical)?  The cost for the budget and for the infrastructure replacement increases (with the delta from debt).  Cost are 50% higher:

 

Component

  

Value today

10 years

20 years

Customers

  

20000

26878

36122

Accounts

  

8000

10751

14449

Water  Pipe

60 mi

 $   45,000,000

 $     98,509,418

 $215,646,786

Sewer Pipe

60 mi

 $   45,000,000

 $     98,509,418

 $215,646,786

Treatment Plants and Pumping

3 MGD

 $   35,000,000

 $     92,289,117

 $202,029,937

Operations budget

  

 $     9,000,000

 $     23,731,487

 $  42,861,706

Capital Budget

  

 $     1,600,000

 $       3,815,971

 $    8,353,534

Debt

  

 $        400,000

 $       1,325,000

 $    2,825,000

Monthly Amount

  

 $              115

 $                224

 $             312

Increase per year

    

8%

7%

 

The normal assumptions are that growth will continue, but what if it does not?

 

What can be gleaned as a result of a non-growth or net decrease scenario?  How does sustainability get affected?  Let’s look at the no growth scenario.  In this light, rates will need to increase at least 5% per year to insure that the utility remains rate neutral.  If there is significant deferred maintenance, which is typical of may utilities, that cost will be added to the bill.  There are examples of utilities in Florida who finally caught up with deferred obligations which doubled their customers’ bill.  This scenario is doable, but the only real assumption changes that can be made are related to the lack of growth.  Deferring maintenance will once exacerbate the problem as there is not guarantee that growth will return.  Rate neutrality becomes a public relations issue, but not insurmountable.

 

Component

  

Value today

10 years

20 years

 

Customers

  

20000

20000

20000

Accounts

  

8000

8000

8000

Water  Pipe

60 mi

 $   45,000,000

 $     73,300,258

 $119,398,397

Sewer Pipe

60 mi

 $   45,000,000

 $     73,300,258

 $119,398,397

Treatment Plants and Pumping

3 MGD

 $   35,000,000

 $     57,011,312

 $  92,865,420

Operations budget

  

 $     9,000,000

 $     12,095,247

 $  16,255,001

Capital Budget

  

 $     1,600,000

 $       2,606,231

 $    4,245,276

Debt

  

 $        400,000

 $         400,000

 $      400,000

Monthly Amount

  

 $              115

 $                157

 $             218

Increase per year

    

5%

5%
               

Now let’s look at the decline issue.  If the population decreases by 25% over the ten year horizon, what does this say?  The costs will remain relatively constant, but the number of customers and demands for water will drive the rates up significantly. In ten years the rates could double in a community that is likely economically disadvantaged.  The higher rates may begin to discourage economic development, rate neutrality exacerbate the problem and may increase in costs for regulatory or deferred maintenance obligation becomes a significant issue:

 

Component

  

Value today

10 years

20 years

Customers

  

20000

16341

13352

 

Accounts

  

8000

6537

5341

 

Water  Pipe

60 mi

 $   45,000,000

 $     73,300,258

 $119,398,397

 

Sewer Pipe

60 mi

 $   45,000,000

 $     73,300,258

 $119,398,397

 

Treatment Plants and Pumping

3 MGD

 $   35,000,000

 $     57,011,312

 $  92,865,420

 

Operations budget

  

 $     9,000,000

 $     12,095,247

 $  16,255,001

 

Capital Budget

  

 $     1,600,000

 $       2,606,231

 $    4,245,276

 

Debt

  

 $        400,000

 $         400,000

 $      400,000

 

Monthly Amount

  

 $              115

 $                193

 $             326

 
     

7%

7%

 
         

 

Assume 1% of pipe Replacement Costs +2% Plant

    

 

Assume operating budget inc 3%/yr but construction increases 5%/yr

  

 
                         

 What can we glean from this?  Interestingly the failure to accumulate costs for growth, and the declining rate base end up with similar monthly costs.  Only by the no growth and collecting appropriate impact fees will costs be controlled, and even in that case, costs will double every 20 years or less.  The reality is that the failure to follow proper revenue collection protocols will severely limit the utility in future years.  High capital costs impact rates significantly.  Leaving it to some future commissioner to raise the rates is unfair to both the future decision-makers and customers.  It does not make you a leader either. 

SUSTAINABILITY OF UTILITIES – PART 1

October 8, 2013
engineering, finance, infrastructure, Leadership, local government, management, Marketing water, Risk Management, Uncategorized, water sewer management
Leave a comment

Pipe wears out.  Concrete deteriorates, Steel rusts.  Aluminum pits. Mines play out.  Wells run dry.  But we strive for sustainability.  How do these disparate facts coexist simultaneously?  And if they don’t, how does this impact our long term prospects for our utility systems and communities.  And how do the decisions impact our understanding of sustainability.

An AWWA publication from 2010 was a compendium of thoughts on the meaning of sustainability form the perspective of water utilities.  One of the findings of the publication was that the understanding of sustainability had more to do with the perspective of the person being asked about sustainability than an overall comprehension of the inter-relationships of the concept of sustainability among different sectors.  For water supply entities, the economic sustainability of the community is not really their primary concern.  Instead they focus more on impacts to customers.  But water is a driver for economic development in a community. 

The message is that water utilities may need to look at the broader picture of sustainability in their community and extend the definitions to a wider range because no one else is and the community is looking for leadership.  The first paragraph focuses on infrastructure issues, which are commonly ignored in dealing with the concept of sustainability, but they are the ones traditionally focused on water supply issues.  The utility needs to look at infrastructure and financial outlook as a part of an overall sustainability strategy. 

There are certain assumptions that we make on many of our systems, and perhaps we need to revisit some of these assumptions in light of potential future realities.  For example, what happens to communities that do not grow?  Our current assumptions generally assume that there will be an ongoing increase in population or water use that will drive increases in revenues without specific increases on customers.  However what if you are Detroit where the populations has dropped in half in the past 50 years.  How do we deal with aging infrastructure and demands for increased water quality and reliability while maintaining fees at affordable levels for customers?  This is a particular problem when there are economic disruptions that create a large group of disenfranchised people who become more economically disadvantaged than they might otherwise already be.  The competition for sustaining water rates, infrastructure condition and water supplies can be a difficult conundrum.

WATER SEWER GARBAGE FEES

October 4, 2013
economy, finance, funding, Leadership, local government, management, Uncategorized
2 Comments

A recent article in the South Florida SunSentinel newspaper raised an interesting question.  What they did was line up all the cities in the county and identify the total fees paid to the City by residents.  They took the tax rates, plus water, sewer, storm water, fire, garbage and any other fees.  The article raised an interesting question.  For example, Hollywood, West Park and Lauderdale Lakes had the highest cost per household – in excess of $3500/year.  The other end of the spectrum was Hillsboro Beach, Sea Ranch Lakes and Southwest Ranches, each under $2000/household.  Of note is that Southwest Ranches provides no water or sewer service (all wells and septic tanks on large lots), so a direct comparison is not really appropriate.  Property taxes were low, but fire fees were really high.  Sea Ranch Lakes is a tiny community with no sewer, so again, not really a good comparison.  Hillsboro Beach is among the wealthiest communities, but also tiny. 

 Most communities had total fees between $2100 and 3200/resident.  Why the difference? First, the value of property varies widely.  West Park and Lauderdale lakes have among the lowest values per household, so their taxes must be higher to provide the same level of service.  Hollywood, and Dania Beach (#4 on the list) had higher water, sewer and storm water costs.  While both have recent, ongoing infrastructure programs, both have large transfers from the water and sewer fund to the general fund, and in both cases the water and sewer customer base does not match the property tax base.  In Dania Beach’s case, the service area is half the City, so those residents are supporting the property tax funded services at a higher rate than their neighbors.  Hollywood struggled with major budget issues to used water and sewer funds to balance the budget.

The problem that this article did not address, but should have was that where water, sewer and storm water costs were high, what was driving this? Was in infrastructure investments that others simply have yet to make?  That’s ok and the fact that these utilities invested now may be more timing.  If the result is due to transfers to the general fund, that is an entirely different, and somewhat disconcerting problem.  First since the service areas are not the same. There is a fairness issue.  Some residents pay more for the same services.  It means the water and sewer system is not really an enterprise, with rates based on service costs.  Instead it is being used as a tax source.

WHO GETS FOOD STAMPS

September 30, 2013
Congress, economy, finance, food stamps, funding, Leadership, Uncategorized
Leave a comment

One of the more interesting issues in Congress the past years is the Farm Bill which did not pass the House.  The issue was too many food stamp recipients.  The program has doubled in the past 10 years and now 1 in 7 families depend on supplemental assistance.   But here is an interesting question – wouldn’t you assume that the states with the greatest percentage of people getting food stamps would be those states that voted for the Farm Bill.  That would be those Democratic states like California, Colorado, the New England States, Pennsylvania and New York?  Well interestingly enough, you would be wrong.  The state with the highest percentage of people receiving food stamps is Alabama, followed by New Mexico and Tennessee, which are red states.  In fact all of the southeastern states are in the upper two third, all exceeding 15% of households.  Yet their representatives voted against their constituents!  This should not be a surprise.  All of the “blue” states, except Washington and Oregon were below 15%.  Some were below 10%. 

So how does this affect water and sewer systems?  There is an ongoing effort at the EFC at UNC Chapel Hill and other areas regarding the concept of affordability of water and sewer services.  The concept is that costs in excess of 3.5 or 4.5 % of income may be burdensome on residents.  Effort is trying to come up with ideas to address low income ratepayers.  The loss of food stamps actually exacerbates this problem since most of these same ratepayers are the ones receiving food stamps.  The conflict between paying for food and water/sewer service increases, putting more low income residents at risk.  Congress is doing utilities no favors by disrupting embedded programs that people depend on.  We can debate whether the program, a transfer of funding from wealthier, blue states, to poorer, red states is a appropriate federal revenue transfer, but the reality is that the dependency has been created.  Compounding the problem is that employment is not nearly back to 2007 levels, and salaries for most of us have declined with respect to buying power over the past 30 years.  As a result, many residents, including many hardworking, employed residents, continue to struggle.  We should be concerned about the acts of Congress and remember some of our representatives may not be voting to help their constituents.  

COLORADO IS DRY, WELL NOT ANYMORE

September 16, 2013
Drought, economy, engineering, Flooding, infrastructure, Insurance, Leadership, management, stormwater, sustainability, Uncategorized
Leave a comment

I went to Colorado in July, and it was bone dry like I noted in a prior blog.  The trend was expected to continue, but then something happened.  It rained.  A lot. It’s been raining for almost a month.  Last week it was wet out there, really wet, devastatingly wet on the east side of Rocky Mountain National Park (Boulder, Estes Park, Longmont, Lyons). The rain has not really let up so mountain streams are over-running their banks, flooding streets, washing away bridges, damaging property and businesses.  Helicopter evaluation of the damage indicates that miles of roadways are badly damaged. Route 34/36, the primary eastern entrance to Rocky Mountain National Park may have 17 miles (of 20) damage pavement and foundation needing immediate repair.  Estes Park is cut off from the world and there was mud in the streets.  Rocky Mountain National Park is closed to allow access from Grand Lake for emergency vehicles, residents and supplies.  And eastern emergency route from Nederland is also available.  Tourism has halted in the peak of Fall tourist season.

How fortunes have changed, and continue to change.  Three years ago it was the west side of Colorado with 300 inches of snow that flooded downstream communities.  Three months ago was drought. Are these changes part of a larger issue, or a continuation of the status quo?  Hard to know, but certainly both events were far above any prior events experienced in the area.  The local infrastructure was not constructed to meet these conditions, so either the climate is changing, our models are wrong, or both.  We see the same issue playing out regularly around the world when the 100 year or 500 year storm event occurs and wreaks havoc on a community which does not have infrastructure planned for events like this.

 Expect NE Colorado to be a federal disaster area.  Expect billions to be spent on reconstruction of roadways.   But the larger question is whether the new, replacement infrastructure will survive a similar, or larger climate event in the future.  Will our infrastructure planning be short sighted or will it be adjusted accordingly?  The potential for us to protect infrastructure, and property is completely related to our ability to adjust to infrastructure needs and to minimize exposure to weather events.  Keep in mind our economy and way of life is directly related to our infrastructure condition.  But people want to live near rivers and streams, but rarely consider the real risk and consequences. 

How do we address these risks?  FEMA evaluates the probability of flooding to set flood insurance, but FEMA does not prevent construction in flood zones.  Where construction can occur is a state or local issue.  Of course, few local entities want to limit development in any way, so we keep putting people at risk.  Local officials, like those in Florida, keep pushing FEMA officials to reduce flood risks, despite evidence of increasing rainfall intensity that would increase flooding.  Florida is not alone.  No doubt Colorado officials have the same views.  We need to impress upon local officials the risks and encourage them to reduce risks to citizens.  It’s our tax money and insurance premiums they are raising.  But they are rarely held accountable.  Nor are non-elected officials.  Somehow, this needs to change.  We need leaders to stand up and draw the  line in the sand.

LOCAL REVENUES BLEAK? Part 2

August 30, 2013
economy, finance, funding, infrastructure, innovation, Leadership, management, politics, Uncategorized, Water Funding
Leave a comment

A new GAO report suggests that the short and long-term future for state and local revenues may be more difficult that currently anticipated, despite the economy recovering in many places.  My last blog outlined a number of the problems including that many public entities chose to reduce tax rates to balance the budget as opposed to restocking reserve funds.  When property values plummented and tourism and consumer buying diminished, the taxes related to all three plummented as well.  None have yet returned to their pre-2008 levels.  The failure to stockpile reserves caused many governments to spend down what limited reserves they had in the past 5 years as a means to avoid the hard and unpopular decision – raising taxes to collect the same revenues as before the mid-2000s cuts.  Now the lack of reserves creates an issue going forward – as costs increase faster than revenues, there are no reserves to tap into.  It is a problem that just keeps on giving. –

As I noted, I never like Chicken Little, because he never had a solution for the problem. There are solutions for local governments, some good and some bad.  Clearly local governments need to revisit the revenue production tools.  Taxes and fees will go up.  Taking more money from the utility, an all too popular decision in the past 5 or more years IS NOT THE ANSWER!  That just transfers the problem to the utility system and we already know that there are huge amounts of deferred maintenance and capital projects with utilities – $300 billion and counting at last count. The utility should be run as an enterprise, not as a cash cow to avoid hard political decisions.  Solutions for replacing those ARRA funds and federal grants for police are needed.  Just saying “We ran out of money so lay those people off” is not a solution.  What that is, is poor leadership and planning – a failure to develop the investment made by the feds to better the fiscal position of the community.  A lost opportunity.

There are many options.  And we can lay blame at the feet of elected officials, but it does not all belong there.  The citizens who elect those officials, are to blame.  Most elected officials react to citizenry, not the other way around.  And don’t forget the managers who bring bottom line business practice to local government management who recommend options. We’ve lost a generation of good government managers who understood the service aspect of government who have been banished in favor of the bottom line approach.  We need to change this as well. 

A more entrepreneurial spirit is needed.  I recall a prior entity I worked for where we proposed doing lab work in our certified water lab for other utilities.  That got shot down because it was “unfair to compete with the private sector for this work.”  Really?  That sounds like a private sector red herring.  They know they will lose business, and they can’t compete.  How is that in the spirit of capitalism? It cost less for other entities to have us do it?  A huge missed opportunity.  There are many.  If we want government to operate more like a business, we need accept the opportunities that come with it, not quash them. 

We need to market the community.  Not just give money away hoping to attract businesses that will locate for a short while.  That certainly has been a fiasco in Florida.  Other places as well I am sure.  No, we need to “sell ourselves.”  We need to marketing program to distinguish the community, its assets, its water and sewer reliability and quality, its people, education and opportunities.  It means spending money to invest in the community, not just spending money to fix a few roads and install some pavers, although they are good.  It’s also not just fixing up the distressed neighborhoods, but investing in the better ones as well. The most distressed City in America is quietly encouraging new artists and startup businesses to relocate to Detroit to take advantage of the availability of warehouses, cheap rents and a talented workforce.

We need to avoid the pitfalls of falling victim to reinforcing the past.  Florida’s economy is based on tourism, agriculture and building housing to attract retirees.  Weird business model.  Two of the three are highly susceptible to economic disruptions.  We are still recovering from 2008.  The economy also produces mostly minimum wage jobs, not the way to build a better tax base of encourage investment in education.  The state manufactures nothing, yet fails to take full advantage of what assets it might have to create industry.  As Sun-Sentinel writer Stephen Goldstein noted recently, why is it that south Florida has yet to take advantage of the private sector interest in investing in understanding age –related diseases?  Much of the local economy and the two local public universities are not positioned to take a leadership role?  Yet it is an easily marketed issue given the current population, assuming funds can be secured.  Public investment is needed, and of course that’s the rub.

We can market ourselves.  May communities have.  And most deserve better than their current lot in life.  Alexis de Tocqueville,” you get the government you deserve.”  I think we deserve better, and I think we can do better.  I think we can develop a better future and I think we can overcome challenges.  So maybe it is time for to us to change the perspective!

LOCAL REVENUES BLEAK? Part 1

August 27, 2013
economy, finance, funding, infrastructure, Leadership, management, Revenues, sustainability, Uncategorized, Water Funding
Leave a comment

A new GAO report suggests that the short and long-term future for state and local revenues may be more difficult that currently anticipated, despite the economy recovering in many places.  For most of the 1990s and the mid 2000s, many states and local governments operated with surpluses, or could have.  Many elected officials, like those in Florida (or Congress in 2001), chose to reduce tax rates to balance the budget as opposed to restocking reserve funds.  When property values plummented and tourism and consumer buying diminished, the taxes related to all three plummented as well.  None have yet returned to their pre-2008 levels.  In fact, the property values lag so badly, it may be 10-20 years in many jurisdictions before they return to their former selves.  In South Florida’s suddenly “hot” real estate market, local officials are raving about the 28% increase in property values in 2012/2013.  Sounds great until you realize that they need to increase 100% to return to pre-2008 levels.  Even in a hot market it may be over 5 years to recover.  So property values are not a short-term problem.  Some communities may never recover.  So much for saving for that rainy day.

It should be plain to all of us that the failure of those in power to stockpile reserves caused many governments to spend down what limited reserves they had in the past 5 years as a means to avoid the hard and unpopular decision – raising taxes to collect the same revenues as before the mid-2000s cuts.  Now the lack of reserves creates an issue going forward – as costs increase faster than revenues, there are no reserves to tap into.  It is a problem that just keeps on giving.  The failure to address the root cause – the failure to set revenues collections at an appropriate level and accumulate surpluses when you are lucky enough to get them.  Unfortunately the political discussion keeps going back to keeping costs down, but cuts in costs means cuts in services.  Sounds great to cut the Plantation trolley because of budget needs, but what about those citizens that rely on the trolley?  Or the businesses it serves.  Cutting Meals on Wheels which primarily serves shut-ins is a great idea in Broward County with a hue population of elderly that find it difficult to get out of the condo?  And does it really make much impact on the overall budget?  Not really.  There are cosmetic issues.  There a more symptomatic issue here?

GAO points to health care as a cost increasing faster than the rate of increase in revenues, but the latest data seems to indicate that the rate of growth may be less than projected by those opposed to the new Health Care laws.  Underfunded pensions are also a potential area of concern, but cutting employees is not the solution for that as outlined in a prior blog.  Cutting employees cuts the funding for pensions which guarantees future problems.  So that idea actually works against the goal of shoring up the problem.  So, no that is not the answer.  We are clearly paying for the sins of 15 years ago when we were awash with funds, but decided to cut or public “income.”  Who does that anyway?!?!

I never like Chicken Little, because he never had a solution for the problem.  Part 2 will outline some thoughts…

SEQUESTRATION HITS US ALL

July 23, 2013
Congress, infrastructure, Monitoring Water, planning, Sequestration, sustainability, USEPA, USGS, Water Funding, water sewer management, water supplies
Leave a comment

Sequestration is the word we are all using to explain the failure of the Congress to put together a budget with appropriate revenues and expenditures.  Congress can’t figure out how to reach a budget agreement, so the federal government set itself up for mandatory cuts in services. I had a recent grant sequestered, then cancelled.  It really could have helped a local community with long-term water supply and quality problems identify adaptation and mitigation strategies fo rites future.  Minor money for Washington, but a big deal down here.  Likewise I have spent the last 6 months on a subcommittee for USGS that is focusing on what could be cut from USGS.  That means less testing water quality, water levels in groundwater, stream gauges and less evaluation of results.  Most of the water issues USGS looks at crosses local and even state lines.  Since we all rely on water, this is at national concern.  Precisely when we need the information most, we may be getting less.  Expect to start seeing more sequestration issues. 

 

 

The problem is that the biggest expenses, social security and debt, cannot be cut without major backlash in the financial and voter markets.  So the cuts come from the smaller accounts – things like the federal share of state revolving funds, water research and water/wastewater programs.  The community and tribal assistance account was slashed $210 million while the environmental program budget was cut $135 million. While some may be cheering EPA cutbacks, the reality for water and wastewater users is less federal assistance to our industry.  That means more of the onus is on us, and on our customers.  The  unintended consequences of the failure of Congress to act….

PAY YOUR BILL

June 24, 2013
communciations, Development loans, economy, finance, funding, Leadership, management, Marketing water, sustainability
1 Comment

A recent Wall Street Journal article noted that 50 % or people have paid their utility (water, sewer, electric) bills late, but only 24.8% have paid the internet late, 39.5% the cable late and 44% the phone bill. Really? We are willing to pay water, sewer and electric late, but not the internet bill? This should be a wake-up call to water and sewer utility leaders nation-wide that we have a problem. Combined water and sewer bills across the United States average something around $50. True they are often higher in California, SE Florida, and some other areas, but they are also lower in many areas. Most of the time even in those high cost areas, the bill is under $100.

I have done a number of rate studies and I find that the cable bill, and the cell phone bills are almost always higher than the water+sewer bill locally, so why are people willing to pay our bill late, but not the others? Is it the perceived benevolence of local utilities, most of which are public entities? Is it a perception that water should be free so it is not important to pay the bill? Or is it the lack of marketing of an essential product by waterutilities? I have heard all these arguments, but I am thinking the latter may be more important. Most people know they need to pay the bill, and I don’t really know anyone who thinks water should be free in the US. People are used to cheap water, and costs are going up. Complaining to local elected officials often keeps rates artificially low, which means maintenance and replacement programs get deferred. That makes the utility more at risk to failure. EPA, GAO and others report regularly that we have been keeping rates low and deferring capital and maintenance for years to the tune of hundreds of billions of dollars. So what is wrong?

I suggest that as an industry, we have failed in marketing water. Treatment plants, piping and pump stations are out of the way, pipes are buried. No one sees them and people assume these faciliaites will work, but rarely ask how they work or how long they will work. They do not understand the complexity or the regulatory stringency of operating a utility. They do not understand that the number one priority is public health, and protecting the public health costs money. We have not made people understand this because we do not market our product. I have taught elected official classes where the elected officials tell me public dollars should not be spent on marketing, but they never say why when pressed. Rarely is marketing included in a budget. But if water and sewer is a business, isn’t marketing an important strategy to maintain that business?

Meanwhile we have a host of celebrities marketing cellphones, which are not required to survive. We have a host of glitzy cool advertisements for cable service options, but we don’t need cable to survive. The power companies send out glitzy stuffers in their bills that no one reads, but they do end up in the papers regularly. And power really helps us survive, but we could do without it (although it would be unpleasant). Our forefathers did. But no one ever survived without water. Maybe it is just too obvious. But maybe because it is so obvious, people are less conscious of it. We need to market better. As a private sector marketing manager would say – we have lost our market share!! We need to get it back.