Archive

Tag Archives: Leadership

Part 2 Financing Infrastructure

May 19, 2015
borrowing for infrastructure, debt funding, Detroit, Economic Bubbles, engineering, finance, funding, Water Funding
Leave a comment

The true risk to the community of pipe damage is underestimated and the potential for economic disruption increases.  The question is how do we lead our customers to investing in their/our future?  That is the question as the next 20 years play out. Making useful assumptions about increases in demands, prices, inflation rates etc. are key to useful projections and long-term sustainability. Building too much or too little capacity for example can have disastrous consequences (to the ratepayers on the former, to the local economy for the latter).

Getting funding relies on economic strength, a problem of you are in a depressed area (Detroit) or a boom that could crash at any time (North Dakota).  P3 opportunities are available for cash strapped communities but they come with a cost.  Risk must be allocated fairly – the private community will not take on too much risk without increasing costs significantly. Loss of control is one of those risk conversion issues.  Extensive planning and feasibility analyses should be expected – far more scrutiny than most utilities are used to.  The economic strength of the community is important to private investors.

In a prior blog we talked about the boom towns of North Dakota.  Things were booming in 2013 but the downturn in oil prices may get ugly.  The need for more fracking wells may have decreased (at least temporarily) and the decrease in the oil and gas costs has cut into local revenues, so is this is the time to keep planning for the boom?  South Florida did this in the early 2000s – and well, that real estate boom put quite a dent in the economy and population estimates for 2020 and 2030.  The balloon popped and so did the economy.  South Florida had the resiliency to bounce back because of weather and proximity to South America.  We have seen the result to an industrial economy – where a community relies on industry, well industry can be fickle.  Ask Detroit.  Or Cleveland.  Or any number of other Rust Belt cities.  Now they have infrastructure, but much of it is underused.
So while the Plains states plan for the boom, the boom has settled in some places. Already the oil and gas industry has shed 100,000 jobs (many high salary).  Texas, Kansas, North Dakota and Oklahoma are facing financial challenges in 2015 due to funding losses.  Alaska is dipping into reserves.  But that doesn’t mean the results of the 2010-2014 boom are not continuing, or at least portions of them.  Frack water continues to be discharged to local wastewater systems, but the revenues to pay for the needed upgrades is lacking.  Effluent limits for nitrogen and TOC for some rivers have decreased as a result of constant increased loading to the streams (more flow increases total loads, so if flows remain the same, the concentrations must decrease to maintain total loading).  The costs to reduce ammonia, for example from 10 mg/l to 2 or 3 mg/L can be $1-2/1000 gallon – over 50% or more of the current cost for treatment.

So is it a surprise that some communities fight the boom times?  Booms create disruption and uncertainly, and a need for technology (and costs).  Maybe stability does matter, as it can contain costs and treatment requirements.  However the boom can help communities in financial distress.  Detroit and Flint would love a boom – both have the infrastructure in place to support it as opposed to rural communities in the Plains.  But that’s is a key – they already HAVE the infrastructure in place.  The Plains, well, do not.

There is a lot of older, underutilized infrastructure out there.  Detroit, Flint, Cleveland, Akron, Toledo and Philadelphia are among the older industrial cities that have stable populations – people that live there most of their lives, have a trained and educated workforce, and normally have lots of water and infrastructure, and lots of potential employees, all of which are underutilized and at risk due to economic losses. But the booms rarely go to older cities. How that is?  Is this a leadership issue?  Convenience?  Quick profits?  And how long will the boom last?  Is it a matter of lack of understanding or regulations that creates the boom?  A combination of factors?  A better PR program?

Remember we all play defense.  Industry does not.  Industry plays offense all the time.  The private sector mode is play offense.  Get the message out.  Frame the message.  Win the game.  Is winning the game at any cost the right answer?  For boomers it is.  What about the rest of us?

Infrastructure Funding Options

May 15, 2015
American Water Works Association, finance, funding, Leadership, Marketing water, Risk, Risk Management, Water Funding
Leave a comment

The US EPA estimates that there is a $500 billion need for infrastructure investment by 2025.  The American Water Works Association estimate $1 trillion.  Congress recently passes the Water infrastructure Finance and Innovation Act (WIFIA) at $40 million/year, rising to $100 million in 5 years, which is a drop in the bucket.  Peanuts.  We have so many issues with infrastructure in the US and Congress tosses a few scheckles at the problem and thinks it is solved.  The reality is that the federal government wants to get out of the water infrastructure funding business and shift all water infrastructure to the local level.  This is a long-standing trend, going back to the conversion of the federal water and sewer grant programs to loan programs.

The reality is that local officials need to make their utility system self-sustaining and operating like a utility business whereby revenues are generated to cover needed maintenance and long-term system reliability.  The adage that “we can’t afford it” simply ignores the fact that most communities cannot afford NOT to maintain their utility system since the economic and social health of the community relies on safe potable water and wastewater systems operating 24/7.  Too often decision are made by elected officials who’s vision is limited by future elections as opposed to long-term viability and reliability of the utility system and community.  This is why boom communities fall precipitously, often never recovering – the boom is simply not sustainable.  Long-term planning is a minimum of 20 years, well beyond the next election and often beyond the reign of current managers.  Decisions today absolutely affect tomorrow’s operators.  Dependency on water rates may be a barrier, but this ignores the fact that power, telephone, cable television, gas, and internet access are generally more expensive hat either water or sewer in virtually all communities.  We need water. Not so sure about cable tv or he internet.  Great to have, but needed to survive?

The growth in costs can lead to mergers where a utility cannot afford to go it alone – as the economy of scale of larger operations continues to play out in communities.  Several small plants cannot operate at the same cost as one larger plant.  As a result larger projects will increase – from 87 to over 336 between 2005 and 2014.

But these costs are generally plant costs – treatment and storage, not piping.  Distribution pipelines remain the least recognized issue for water utilities (collection pipelines for sewer are similarly situated).  The initial Clean Water Act and Safe Drinking Water acts did not focus on piping systems – only treatment and supply.  The national Council on Public Works concluded their first assessment grade for infrastructure in the 1980s – but piping was not discussed.  ACSCE’s first report card in 1998 did not express concern about piping system.  Yet piping continues to age, and expose communities to risk.  In many communities greater than 50% of their assets are buried pipes.  Tools for assessing the condition of buried pipes especially water distribution pipes is limited to breaks and taps.  As a result the true risk to the community of pipe damage is underestimated and the potential for economic disruption increases.  The question is how do we lead our customers to investing in their/our future?  That is the question as the next 20 years play out.  Many risk issues will be exposed.  The fact that there are not more issues is completely related to the excellent work done by the utility employees.  More to come….

A Computer Rant

May 6, 2015
communciations, Leadership
Leave a comment

I got hacked again this past week.  I had the week nicely structured to stay in my office and get lots of work done.  Things I had been trying to complete for the past couple week.  This is the second time I have been hacked with this computer and I have only owned it for 3 months.  So the first hack involved someone diverting my email for 6 hours.  I could not get it back, but I stopped the diversion (I think) with the help of ATT.  Who knows what information was transmitted other than a lots of what is really spam.

Ok, so then I start getting these phone calls from “Microsoft Windows” noting errors they are receiving from my computer.  Now most you recall that Microsoft used to ask if you wanted them to be notified of errors, but since everyone said yes, they now just do it automatically.  Mostly the “Microsoft Windows” guys left messages on my cell phone since that is the number registered with Microsoft.  I picked up the phone one time, but the “Microsoft Windows” guy could not tell me which of my computers was sending the messages (I have more than one).

But that did not stop the calls which have accelerated of late.  So I get another call that I answer (from a number in Washington state) from “Martin” with “Microsoft Windows”  who, without accessing my computer, knows over 9,000 errors had been sent, starting the day I bought the computer.  He also knows the software serial information, computer serial numbers, etc., all of which he can recite over the phone and ask me to check to verify he is with “Microsoft Windows” because otherwise he would not have that information.  And then he notes that because the 25 digit codes for Windows 8 is not visible, “Microsoft” will cause a key lock on my computer – a message that I again could verify without him accessing the computer.  And of course that’s how he tries to convince me he is calling from “Microsoft Windows.”

NOTE:  Miscrosoft DOES NOT Call you – it is a scam (see the internet).  So I have the hacker on the phone.  He emails me his info (of course he has my registered email like everything else), which I note says pcsync.org, not “Microsoft Windows.” I asked and I was suddenly disconnected.  And within the hour, the computer is locked.  Clearly the acceleration of calls was because the hackers knew about the key lock because they installed it and they want to get to the last minute.  Now Martin called back about 20 times in the next 2 hours trying get me, but the number he left is not valid (despite his website listing it). And of course he will fix the problem for $239 plus whatever else he can sell you.  That’s the hacker scam – create a problem than get you to pay to fix it.

And when it locks – the result is a window that asks for Startup password – which Microsoft will tell you, indicates you have been hacked.  Except, then Microsoft says they need the 25 digit code for the operating software to fix your computer.  “But you need to get that from Dell” even though Dell only loads the software – you need to register it with Microsoft to make it work.  So I called Dell, and the first person says sure they can give it to you, but the second “no they need to send CDs.”

OK they are both wrong.  With Windows 8.1 the code is not on your computer if pre-loaded.  And of course Dell does not give you a recovery disk when you buy it.  Dell knows about the code.  So does Microsoft.  So an hour plus wasted there with two good organizations who clearly do not communicate.  So I am shut out of the new computer and the email.

Good news though is that maybe 10 years ago I was advised by Gateway (the old cow computers) to use iyogi.com to fix a prior issue.  So 13 hours later and lots of time with Amit, we are sort of back up running.  And of course iyogi knows about the code issue that Dell and Microsoft mis-advised me on and told me the story above.  And yet we both wondered how pcsync.org (the hackers) was tracking my computer error messages to Microsoft from day 1?  Have they hacked Microsoft?  Dell?

And the next day one of my friends, in talking about this says – “Hey wait, I keep having pop-ups for pcsync on my computer also.”  And later in the day, another says the same thing –“ pcsync is on mine too.”  And neither has a Dell – but they do have Microsoft Windows 7 or later.  And makes me wonder, who is taking responsibility for protecting the consumers here?  Clearly the computer manufacturers do not take responsibility.  Maybe they can’t.  Microsoft doesn’t appear to either, so that leaves us . . . . . vulnerable.  Mr. Gates you have a great operating system, but this problem costs us lost productivity, money, time, irritation…even when you have all kinds of anti-maleware and anti-virals on your computer.  If the hackers can get in day 1, how do you stop that?  And apparently the maleware doesn’t see it (hint).

So the questions:

  • Does “Microsoft Windows” know about this?
  • If so, why have they not fixed it?
  • Do the computer manufacturers know this issue occurs?
  • Why have they not talked to Microsoft about it?
  • Why doesn’t the maleware address it?
  • How are they getting in?
  • Is Microsoft hacked – perhaps the biggest hack of all?
  • And why have the internet police addressed pcsync and their ilk? It is all over the internet!!!!!

Clearly the penalties for hacking are not nearly severe enough.  And from a law enforcement and cyber security perspective, we clearly lack the resources to protect individuals, so beware!

And if you see pcsync – call iyogi or someone who can help.  Quickly!!

Ability to pay?

April 28, 2015
finance, Leadership, management, Revenues, Water Funding, water sewer management
Leave a comment

So what does ability to pay really mean?  We hear this discussed by political pundits and local officials but few really understand what this means.  Likewise the “I’m on a fixed” budget argument pops up a lot, and it is hard to understand what this really means.

The ability to pay concept was developed many years ago by political scientists and economists looking at the allocation of costs to consumers for government services.  Property taxes are a logical place to start – higher value homes have more potential for loss, so their taxes were more (the percent was the same but because of their value the amount was higher).  For income taxes, those with higher incomes we deemed to have more disposable income and again more to lose, so the rates increased as income rose (we forget that until 1963 the highest income tax rate was 90%, and the economy was growing quickly!).  People with lower incomes had little disposable income because all their money went to food and housing.  Today the issue of affordability arises with water, sewer, taxes and storm water fees, as well as federal and state taxes.  The SRF and bonding agencies often look at 3.5% or 4.5% and the maximum water or water/wastewater cost as a percent of income, but few  utilities charge this much.  Few water and sewer utilities (combined) approach the cost for power per household, let along the cost of cable or cell phone use for all but the cheapest carriers.  Certainly water, sewer and storm water are essential service, but not so much cable, although there are those who will argue the point.  So somehow the ability to pay issue does not apply to private sector services, but does to essential services, especially when we all know we do not collect enough money to cover significant infrastructure needs on those public works systems?  That just does not make logical sense except in the political world.

Likewise the “fixed income” argument is often applied in tandem.  Fixed income is generally applied to retirees, but let’s not forget that 10% of those in poverty are retirees, but 18% of millionaires are over 65.  But don’t most people have a fixed income – their income is fixed by their employer.  They can change jobs but the argument that younger folks should change jobs if they want to earn more is like telling retirees to go back to work.  There is only so much we can do and only so much income to be earned because few control their income.

So on both counts, the ability to pay argument seems like an argument created to keep public service costs down and prevent the full cost application to many.  The squeaky wheel gets coddled, at the expense of society.  Somehow that is not fairness, and subjects us all to unnecessary risks.  The question is who is going to be the person/group to stand up and say enough?

Infrastructure is Broken

March 2, 2015
Economic Bubbles, economy, engineering, infrastructure, innovation, JObs, Leadership, local government, management, planning, politics, Responsibility, sustainability, utilities, Water Funding, What could possibly go wrong?
Leave a comment

ASCE came out with more bad news about infrastructure.  60 Minutes did a piece about deterioration of bridges. The magazine American City and County has published a couple articles about the risks of aging infrastructure.  Asset management is practiced by few governments, and even fewer small ones.  The public doesn’t want to foot the bill and lobbyists want taxes cut further.  Where does it end?

The infrastructure crisis is a political and business leadership crisis.  Or vacuum.  The economy of America and much of the developed world was built on advanced (for their time) infrastructure systems constructed by governments with a vision to the future.  Some of this infrastructure was repurposed (federal interstate system for example), but much of it has addressed critical issues that hampered our development.  For example, the lack of water severely inhibits many third world nations.  Even when they have water, it is unsafe to drink or use.  In America, at the turn of the 20th century 1:100,000 people DIED each summer from typhoid.  Just typhoid, not all the other waterborne disease options.  Many more were sick.  And the population was much smaller.  Talk about reduced productivity.  Now we have advanced water systems, disinfection practices that protect people and pipes, and few event get sick from contaminated water.  Those that do, become headlines.  You don’t want to be a headline.  Productivity is up.  But we expect good water and can’t see the pipes.

Sewer is an even better example.  People just don’t want to know.  Flush and it’s gone.  But the equipment, treatment and materials may be even more complex than the water system.  But few people get sick from sewage because of the systems we have built.  Now think about third world examples.  Or conditions you have seen in documentaries, the news or movies.  Being in sewage is not a great place to be.  Even the manhole thriving cockroaches agree..

Stormwater is probably the laggard here, in part because changes in development patterns have overwhelmed the old systems.  Miami Beach experienced this when redevelopment replaced small houses on permeable lots with large housed with mostly impermeable property.  Oops.  Meanwhile road and bridges have received a lot of funding – with much to do (see bridge that collapsed on I-75 in Cincinnati a few weeks back).  Most states fund transportation at a magnitude more than water and sewer.

What is the problem?  Local officials do not convey an understanding of these complex system to the public very well.  In part this may be because understanding the maintenance needs is difficult and highly variable.  And many do not fully comprehend the assets they have, their condition, life expectancy or technological needs.  No one knows when things will fails, so maintenance or replacement of some equipment or pipeline is always the thing cut in the budget, with no real understanding of the consequences.

The public does not see the asset, assumes it will have a long life, so is unconcerned until they are affected.  Then it is personal.  The public does not understood the impact or value that these assets have to society – they tend to be personal focused, not societal.  That is a leadership issue.  That leadership starts with vision and communication from those that understand the issue to the elected officials that need to advocate for their infrastructure.  Elected officials need to take ownership of infrastructure.  It is like your house – you need to upgrade and protect it constantly.  You do not let that roof leak keep leaking!  Elected officials that do not invest in infrastructure, are letting the roof leak.  Making is someone else’s problem for political expediency is not leadership.

Despite the infrastructure crisis, the good news is that construction of piping is increasing – both new and replacement.  Every so many months, the magazine Utility Contractor will note current trends and pipe seems to be going up.  That’s good but there is a long way to go.  Better news – the construction of buildings is increasing.  That could lead to more revenues.  In Florida, all of a sudden finding experienced construction workers is a problem.  Things are definitely better economically, but are we taking advantage to improve the local infrastructure, or is you economy simply an infrastructure disruption away from another fault?

Musings to Start February

February 15, 2015
communciations, engineering, Environment, groundwater, infrastructure, Leadership, Responsibility
Leave a comment

It’s February already!  Where has the year gone?  My apologies for a January without posts.  Things have been busy here and well, blogging got put on the back burner for me with the new semester starting and a new class to design.  But interesting kernels from January:

The World is Trying to Kill You – Dr. Neil deGrasse Tyson

If you have a 20% failure rate, does that make a speculative technology a waste of time?  Conversely if your success is 20% is it successful?   I think no and no.

Have you noticed that February is the month we have been getting the worst winter weather in the Midwest and northeast? Not December or January?  I used to shovel snow all January and wait for the February respite.

Killer whales are now a protected species.  What does that say about the killer whales as SeaWorld?

There is a honeybee crisis.  No really, a real one.  Not the Jerry Seinfeld movie.  But the lesson is the same.  No bees, no food.  We need to figure out how we are killing them.  No doubt when we find out it will come back on pesticides, herbicides, monocultures, some combination of the above.  Not a good thing for farming.

The bison are under attack again in Montana.  Maybe Mother Nature is trying to tell us something – buffalo want to roam to their winter grazing fields.   And no brucelliosis, the issue rancher bring up as to why the bison are bad, has still NEVER been transmitted from bison to cattle.  Bison are way better on the land since there hooves are much large and they do not compact the ground as much.  But they are not as stupid as cattle.  They know they can walk thought a barbed wire fence.  They are bison afterall!

A Utah rancher shot and killed Echo, the female wolf that made it to the Grand Canyon last summer and became a national story.  He thought she was a coyote.  Um, I think wolves are a little bit bigger than coyotes.  We have a man with a gun who can’t tell what he’s shooting.  What could possibly go wrong with that?

Then there is the bear hunt in Florida because people move closer to the woods and cannot figure out how to secure their garbage of close their garage doors.  Bears get killed.  People…..

IMG_6442

Miami Beach installed $40 million dollars in pumps last summer, with an expected $300 million for.  The nearshore nutrient concentrations increased dramatically (a factor of six), which could adversely impact beach quality, fishing and reefs.  Unintended consequences, but an issue was brought up as a potential concern.

WATCH YOUR DATA

October 20, 2014
economy, electronic data, finance, innovation, Leadership, local government, predators, Risk, Uncategorized
Leave a comment

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.

Financial Traps for local governments

October 13, 2014
Banking industry, debt funding, economy, finance, growth, Leadership, local government, management, politics, Revenues, sustainability, Uncategorized
Leave a comment

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.

Random Thoughts on Income from the newspaper.

October 8, 2014
Banking industry, Detroit, economy, Education, finance, income disparity, infrastructure, JObs, Leadership, local government, management, politics, Responsibility, Uncategorized, Wages
Leave a comment

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.