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I worked for a while in rural North Carolina.  I confronted two issues there that are instructive. The first was that many people did not value education because for the most part they expected to do menial labor activities on farms or in construction.  They figured they did not need much education. That was the adults!!  Kids in such situations have little hope of succeeding academically when their parents do not value education, and in some cases may either ridicule their efforts or at least be un-supportive of same.  The second was the idea that the “guys” who could not work anywhere but needed a job should get a job with the “city.”  Wow, I’d like to hope we are past both of these, but the Census statistics clearly show we are not on the education part at least.  Census data indicates that when you look at educational spending, per capita income, graduation rates and unemployment rates, the bottom 10 states are:

North Carolina

Tennessee

South Carolina

Nevada

Kentucky

Alabama

Mississippi

West Virginia

Louisiana

Arkansas

All but Nevada (#35) are in the bottom 12 in spending per student and the academic achievement of their students appears to indicate the efforts are inadequate.  For the most part these are largely rural southern states, so my experiences 25 years ago may be no different now. Kids see low wages, higher unemployment and figure what does education get them?, so it perpetuates the myth of their parents. Or maybe it is not a myth afterall?  Interesting these are primarily the states with the highest number of students in poverty, lead my Mississippi’s whopping 71%.  All are over 50%. All among the states with highest rates of food stamp recipients.  So the kids are living the low income expectations.

Where I currently am I periodically interact with inner-city kids. No surprise, there is a similar mindset – the kids see their future as minimum wage jobs that require no skills, or the expectation that the violence of their surroundings will catch up to them (crime, welfare, etc).  None of their expectations require education (although it is surprising how sophisticated their understanding of all of these issues are), so many do not pursue learning with vigor after 10 or 12 years old. Skipping school, suspensions, lower scores and grades are common.  Too many parents do not encourage their kids and the mindset creates deterioration of urban schools. Periodically I have students who are actively trying to escape the stereotypes, but they will confirm that school is not a priority for far too many  inner city kids.  No surprise they learn this from their parents who are often underemployed or lack good employment because they never obtained the education needed to escape the neighborhood. 

In both cases the problem is lack of employment expectations. The kids look around them and figure they have no hope of escaping the minimum wage, limited skill jobs. Unfortunately our job resurgence indicates that these are the jobs we are producing the most on far too many areas.  In the past 2 years, the State of Florida suggests that 90% of the jobs created are minimum wages jobs.  The local casinos are advertising for hundreds of jobs – as waiters, kitchen help, maintenance, etc. most starting at or just above minimum wage rate.  The hospitality industry is full or low wage, limited skill jobs. So is agriculture in rural areas. The problem is the message sent to kids?  Education is not rewarded, so why bother.

So what does this have to do with utilities?  Utilities are everywhere and inn every community. Education affects utilities because as technology grows, we need better job skills from workers.  Gone are the days of hiring people to dig ditches that may not need to read, write or do math.  We are computerizing everything.  As a result all of our jobs, regardless how much labor may be involved, need skills.  Utility field people are the face of the utility.  We need qualified, employees to can represent the utility well, not uneducated, ignorant people who can’t answer questions or who cannot communicate with the public about what they are doing.  The question is how to solve this problem especially in rural areas where education may not be valued. 

First, we need to get into the schools.  Not colleges, but middle schools.  That is where many students appear to be lost.  They get to be 16 and drop out.  Hanging out, not working, gangs, crime, drug cultures, etc all appear to be “easier” than going to school and then working to earn a living.  We need to create value in all of our jobs.  Certainly not all jobs need a college education, but  a high school diploma with basic abilities to read, write, do math and communicate to the public are needed to create value for us. We need to impress on rural communities and inner city kids that we provide desirable jobs and encourage them toward us.  That may mean internships, student efforts in schools, tours, and lots of interaction with teachers.  It takes time, but may be worth our while on many levels.  

Happy 91st Pop! It’s been 2.5 years since you were last with us, but it’s funny how many things popped (no pun intended) up today that connect to you. Clearly you are still watching what goes on. We had a family summer cottage located 8 miles east of Grayling Michigan. So today I came across an old book entitled the Old AuSable written in 1963 by Hazen Miller, a U of M doctor (you were a U of M aerospace engineer) who wrote about the area back in the day (1870s to 1920s), just before your father purchased property along the AuSable River. It mentions the great grandfather of my dad’s summer playmates, one of whom just died last summer - his obit came up in my email today. Reminded me of many places I went as a kid. Funny it also reminded me of some of the old “names” that are now being lost to time, but created what exists today. It also helped with some perspective on a proposal I have been working on regarding water supplies and quality. The grayling fish disappeared by 1912 as a result of hanged on water quality (warming and silt), human impacts of logging on the fish and the introduction of other species. My proposal looks at impacts of human activity on SE Florida, especially as it relates to sea level rise and the need to capture additional soil storage capacity through infiltration trenches. The water cannot be discharged to tide due to Human-induced nutrient and roadway pollutants of the potential exists to impact fish populations. So we are looking at moving the infiltrated water to water plants in the future. We can treat the water there, cost effectively while solving another problem – diminishing water supplies for urban populations. This would diminish our need to deal with desalination and the disposal of concentrate, another proposal. Funny how sometimes it all comes together….Good times back then and up there. Making progress today. Thanks and keep on watching out for us!!


I recent Wall Street Journal article outlined where growth is likely to be coming.  Of no surprise, Arizona, Las Vegas, Central Valley, San Antonio, Dallas, Houston, Denver, Albuquerque, Boise, Pensacola, Tallahassee, Raleigh, Atlanta, and the Washington DC area.  Only one of those areas is has water much water availability.  It means that all of these communities are in areas that are water limited.  We already know that Texas, Las Vegas and Arizona have lots of water problems.  Most of these areas have had issues in the past as well, and will have more in the future. 

Low growth areas:  Detroit, Cleveland, Chicago, Buffalo, Cincinnati, Omaha, and a variety of areas with plenty of water, but old infrastructure and limited funding.  So the big questions is how do we redirect development to areas with plenty of water as opposed to allowing development in areas where we know that there will be serious water supply consequences in the future?  It’s a leadership issue, but local officials and states are so in need to the growth we have discussed in prior blogs, that the long-term realities of water supply limits overrides the short term need to show growth in the communities to delay tax increases, water increases and the like.  But is delays the inevitable, with potentially serious future impacts.

 


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. 


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.


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.


I love stories about sewage in print.  As a water/wastewater guy, it is amusing to see sewer stories in the local papers and national news when they are about the “oddities” of operations.  One recent article talked about the impact of “flushable items” that should not go down the toilet.  “Flushable” wipes was the offender this time, but past discussion involved tampons, diapers and paper towels.  The reality is that NONE of these items should ever go down the toilet.  Those paper toilet seat covers are questionable as well.  Let’s see why. 

Sewer agencies have a very different view of what is flushable that tampon manufacturers, diaper manufacturers, paper towel and now flushable wipe makers.  Sewer agencies are responsible to insure that waste moves down the gravity pipes and through the lift station pumps without creating backups in the system.  The majority of material in a sewer system is water.  Followed by chopped up solids.  The design of the toilet involved two separate concepts.  One is simply creating the opportunity for a syphon to move waste when flushed but holding water when not.  It is a gravity principle based on partial pressures.  Simple stuff.  But toilets also tend to “chop up” material when the flushing action occurs.  The flush is violent and thin toilet paper and the soft solids in the toilet are easily shredded and blended into the water.  Think about your blender.  Soft stuff gets chopped up.  Enough mixing, it is all liquid.  As a result there is very limited opportunity for either thin toilet paper or most solids to plug up a toilet. 

But people don’t like thin toilet paper.  So we have manufactures making toilet paper with cotton fibers in it to make the paper soft.  And people like the “high quality” paper towels that upscale restaurants use.  Unfortunately too many people use those high end paper towels on the toilet seat, so down they go.  Wipes are reinforced paper also.  Fibers make them strong enough to, well wipe.  Tampons are notorious as absorbant fibers.  The key in each case is the fibers.  Fibers are not chopped up during a flush because the toilet flush is not designed to shed cloth.  As a result two things happen.  First, the fibers then to stay together as a mass.  Grease and other materials in the sewer system will stick to eh fibers making an even larger glob of material.  A recent YouTube photos showed a 15 ton grease ball in a large sewer system.  Grease and fiberous materials in the sewer system – you don’t want that to plug up your interceptor.

The other problem is lift stations.  The pumps at lift stations are designed to pass a 2.5 in ball, but not a bunch of strings.  As a result the fibers get stretched out, and wind around the pump impeller rendering it useless.  Or the material may mat in the impeller preventing the pump from pumping water.  One of the most common lift station problems is fiberous material winding around impeller shafts that burn out pumps.  Pumps cost thousands of dollars to repair or replace, so this is money from the ratepayers’ pockets.  One of my clients had the restaurant problem.  The lift station impellers would completely clog every 3 days.  The lift station would nearly overflow before the pumps were removed, the guys would open up the pump, and dig out the material.  Obviously fiberous paper and there were only two connections to the lift station.  The City ended up installing a $160,000 grinder system to grind up this material because the restaurant was unwilling to change their practice.  The major offender was women using the paper towels as seat covers.  The lines inside were a mess as well. 

The moral of the story is that toilet paper, water and body waste goes down the sewer.  Not napkins, feminine hygiene products, baby wipes or any fiberous paper material that feels soft, but won’t deteriorate, regardless what the manufacturer claims on the box.  These material do not degrade, the only create costly repairs, inconvenient and costly backups and a host of other problems for downstream users and the utility.  Put this material in the proper trash can. 

And see where else can you talk about this stuff, except when talking about sewage?


Why are health care costs increasing so fast?  Did you ever wonder about that?  We keep hearing about how health care costs, Medicare, Medicare, Obamacare are going to bankrupt us, but why is that?  Why are the cots going up so fast?  It is an important challenge for local officials and utilities who generally pay the health insurance costs for their workers.  There is more to the story that we are not being told.

One problem that get identified quickly is that only 80% of the population is included in the health care system.  Many who are not are “healthy” young people who don’t demand the services.  The concept of the health care bill was to solve this problem by spreading the costs of health care across the entire population using private and public providers.  First, I think there are way more unhealthy  people included in the 20% than we realize because the political dialogue keeps focusing on the few that want to live off the grid – I feel great so I don’t need insurance.  That guy is part of the problem.  That guy gets into a car accident, gets taken to a public hospital, gets treated, gets a bill for $26,000 to fix his broken leg, refuses to pay anything, and the taxpayers get stuck with the bill.  My solution to that guy is if you don’t want to pay for health insurance, bring cash.  Otherwise, “no soup for you!” to paraphrase a famous Seinfeld episode.  Of course my doctor, nurse and therapy friends think that’s a little cold hearted. 

The next argument is the cost of doctors, therapists and nurses.  Okay, I know a bunch of them, and that’s not where the money goes.  These people have lost money in the past 10 years.  Many are going form full-time to part-time employments as Medicare, Medicaid and health insurance bureaucrats decide services are no longer needed.  They will tell you the major change in their lives is paperwork….hold that thought for a moment.

The cost of drugs comes up.  Medicare and Medicare are the largest purchasers of pharmaceuticals in the world.  So in other works, they set the lowest price by supposedly bidding the “contracts” for services. Only there is often only one provider, so exactly how does that work?   Sounds like we don’t get a good deal there, which is why the arguments for importing Canadian drugs or drugs from Mexico keeps popping up.  They get a better deal than we do and most of these are supposedly AMERICAN companies.  No home town discount (I guess I know where free agent baseball players get the idea).   And my medical friends confirm this as an issue.  Check out the comments from Mr. Falloon at Life Extension (www.lef.org) for discussion. 

So let’s go back to the paperwork discussion.  Once upon a time doctors simply sent a little paperwork to the health insurance company or the federal government and said you needed some service.  And the insurance company processed the bill for the services.  The cost was paid by insurance premiums collected by the insurance company.  Everyone was happy.  But then someone at an insurance company said, “wait we could make more money if we asked more questions and paid less for these services.  It would help our bottom line.”  So you hear the complaint that the folks at the insurance companies are deciding whether you need that procedure or not.  And contractors decide if someone needs Medicare or Medicaid services, not the government, not your doctor, your nurse or your therapist.  Not any person that knows you, but some unseen, private sector bureaucrat who’s goal is to minimize the amount of your premium spent on services so they can enhance their bottom line.  And apparently they are very effective because the health insurance industry is very lucrative.  So maybe we have stumbled onto something here.  Maybe the cost of medical coverage is more related to drugs and bureaucracy (and it is not government bureaucracy!!) than the actual cost of services.  Maybe the old system, even if there was some fraud in it, wasn’t nearly as bad as it was made out to be.  It reminds me of one of the 4 laws of City management I developed years ago:  Never give elected officials a bad alternative – it becomes a magnet.  It always worked (hence a law).  I didn’t learn why until years later when I realized, that the worst option was the one all the lobbyists lobbied for even at the local level.  It was the option where they could make the most money “fixing


School is back in session.  It is a great opportunity to see what kind of great things we can learn this year.  We can learn from the students as much as they learn from us.  Working with college students, in bridging that connection between my real world clients and my students keeps me engaged and allows me to act as a conduit of information between the two sectors.  That conduit potentially includes jobs for students and technology for clients.  It is remarkable how much the skills sets of the students have changes and increased in certain areas in five years, let alone 10.  I remind them that 5 years after they graduate, the skill set of the next group will be far ahead of theirs. Get your license and keep learning and staying up to date with technology.  It is far too easy to get behind and it is surprising how many graduates figure they are done with learning when the graduate.  Far from it.  The advances and changes in the industry move so quickly.  All my students are doing 3 dimensional projects versus cad drawings 5 years ago.  And those cad drawings were so far above the cad drawings of ten years ago.  All three groups are ahead of a lot of engineering firms with respect to technology.  And there accompanying utilities as well.  My students make great interns for GIS – it comes naturally to them.  My older friends?  Well, let’s say there is a bit of a learning curve.  As we try to be more efficient, training and skill development become continuous exercises.  It is obvious when you compare skill sets of recent, current or older graduates.  Of course skill sets may not translate to knowledge, for there is no substitute for field experience, especially in the water and engineering fields.  The reality is often much different than you expect, for a variety of reasons.  How you adapt means experience.  It is why the older crowd and the younger crowd need each other and need those communication avenues.  I find that my teaching keeps you engaged in the changes in technology, viewpoints and the new generation while maintaining the relationships with the real world