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Wastewater Reuse Part 2

March 11, 2016
indirect potable reuse, infrastructure, innovation, Leadership, local government, management, Marketing water, Monitoring Water, Responsibility, sanitary sewer, sustainability, water sewer management, water supplies
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In the last blog I showed what reclaimed wastewater could do for an ecosystem.  Very cool.  But what about for drinking water.  I actually was involved in an indirect potable reuse project several years ago.  The concept was to take wastewater, filter it with sand filters, filter it with microfiltration, reverse osmosis and then hydrogen peroxide and ultraviolet light.  This is what they do in Orange County California when they recharge groundwater, and have been for over 30 years.  Epidemiological studies in the 1990s indicated no increased incidence of disease when that water was withdrawn from the aquifer, and then treated in a drinking water plant before distribution.  So our project was similar – recharge to the Biscayne aquifer in south Florida.   It worked for us.  Total phosphorous was below 10 ppb, TDS was less than 3 mg/L (<1 after RO), and we were able to show 3 log removal of endocrine disruption compounds an d pharmaceuticals.  It worked well.  This is a concept in practice in California.  And will be at some point in south Florida since only the Biscayne aquifer provides sustainable water supplies.  Here is what our system looked like.

IMG_3100

sand filters

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microfiltration

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Reverse osmosis

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ultraviolet/peroxide

This is also the same basic concept Big Springs Texas uses for their direct potable program, demonstrating that the technology is present to treat the water.  A means for continuous monitoring is lacking, but Orange County demonstrates that for indirect potable reuse projects, a well operated plant will not risk the public health.  This is how we do it safely.

 

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Affordability of Services

February 16, 2016
debt funding, decision-making, economy, engineering, finance, funding, growth, infrastructure, Leadership, local government, reserves, Revenues, Uncategorized
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IMG_7385One of the issues I always include in rate studies is a comparison of water rates with other basic services.  Water always comes in at the bottom.  But that works when everyone has access and uses those services.  Several years ago a study indicated that cable tv was in 87-91 % of home.  At the time I was one of the missing percentage, so I thought it was interesting.  However, post the 2008 recession, and in certain communities, this may be a misplace comparison.  A recent study by Emmanuel Saez and Gabriel Zucman notes that the top 0.1% have assets that are worth the same as the bottom 90% of the population!  Yes, you read that correctly.  Occupy Wall Street had it wrong.  It’s not the 1% it is the 0.1%.  This is what things were like in the 1920s, just before the Great Depression.  The picture improved after the implementation of tax policies (the top tax rate until 1964 was 90% – yes you read that right – 90%).  Then the tax rate was slowly reduced to deal with inflation.  The picture continued to improve until supply side economics was introduced in the early 1980s when the disparity started to rise again (see their figure below), tripling since the late 1970s (you recall the idea was give wealthy people more money and they would invest it in jobs that would increase employment opportunities and good jobs for all, or something like that).  Supply side economics did not/does not work (jobs went overseas), and easy credit borrowing and education costs have contributed to the loss of asset value for the middle class as they strove to meet job skills requirements for better jobs.  In addition wages have stagnated or fallen while the 0.1% has seen their incomes rise.  The problem has been exacerbated since 2008 as they report no recovery in the wealth of the middle class and the poor.  So going back to my first observation – what gets cut from their budget, especially the poor and those of fixed pensions?  Food?  Medicine?  Health care?  My buddy Mario (86 year old), still works because he can’t pay his bills on social security.  And he does not live extravagantly.  So do they forego cable and cell phones?  If so the comparison to these costs in rate studies does not comport any longer.  It places at risk people more at risk.  And since, rural communities have a lower income and education rate than urban areas, how much more at risk are they?  This is sure to prove more interesting in the coming years.  Hopefully with some tools we are developing, these smaller communities can be helped toward financial and asset sustainability.  But it may require some tough decisions today.

Income percent

 

Water Quality and Watersheds – What Could Possibly go Wrong?

February 9, 2016
coal ash, Leadership, local government, management, mining, pollution, Risk, Risk Management, Sediments in Water, surface waters, sustainability, Uncategorized, water quality, water supplies
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before+and+after+animas

In the last blog we talked about a side issue: ecosystems, bison, wolves, coyotes and the Everglades, which seem very distant form our day-to-day water jobs, but really are not.  So let’s ask another, even more relevant issue that strikes close to home.  Why is it that it is a good idea to store coal ash, mine tailings, untreated mine waste, garbage, and other materials next to rivers?  We see this over and over again, so someone must think this is brilliant.   It cost Duke Energy $100 million for the 39,000 tons of coal ash and 24 MG of wastewater spilled into the Dan River near Eden NC in 2014. In West Virginia, Patriot Coal spilled 100,000 gallons of coal slurry into Fields Creek in 2014, blackening the creek and impacting thousands of water supply intakes.  Fines to come.  Being a banner year for spills, again in West Virginia, methylcyclohexamethanol was released from a Freedom Industries facility into the Elk River in 2014, contaminating the water supply for 300,000 residents.   Fines to come, lawsuits filed.  But that’s not all.  In 2008, an ash dike ruptured at an 84-acre solid waste containment area, spilling material into the Emory River in Kingston TN at the TVA Kingston Fossil Plant.  And in 2015, in the Animas River in western Colorado, water tainted with heavy metal gushed from the abandoned Gold King mining site pond into the nearby Animas River, turning it a yellow for dozens of miles crossing state lines.

Five easy-to-find examples that impacted a lot of people, but it does not address the obvious question – WHY are these sites next to rivers?  Why isn’t this material moved to more appropriate locations?  It should never be stored on site, next to water that is someone else’s drinking water supply.  USEPA and state regulators “regulate” these sites but regulation is a form of tacit approval for them to be located there.  Washington politicians are reluctant to take on these interests, to require removal and to pursue the owners of defunct operations (the mine for example), but in failing to turn the regulators loose to address these problems, it puts our customers at risk.  It is popular in some sectors to complain about environmental laws (see the Presidential elections and Congress), but clearly they are putting private interests and industry before the public interest.  I am thinking we need to let the regulators do their job and require these materials to be removed immediately to safe disposal.  That would help all of us.

Economics – Are things Really Better?

February 3, 2016
debt funding, decision-making, economy, engineering, finance, infrastructure, Krugman, Leadership, local government, management, planning, politics, public relations, Reserve Funding, reserves, Responsibility, Revenues, sanitary sewer, social vunerability, sustainability, Uncategorized, utilities, Wages
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My cousin  once asked me what I thought about deciding on who to vote for for President might be best done when evaluating how well your 401K or investments did.  Kind of an amusing thought.  In that vein the decisions might be very different than they were.  Clearly your 401k did with with Clinton.  The economy was flat for George W. Bush, and the end of his term was the Great Recession.  Reagan’s first term was flat.  We all know about George H.W. Bush.  Interesting thoughts.  Not so good.  So what about the last 8 years?   But is raises a more interesting issue.  So don’t get me wrong, this blog is not intended to lobby for any candidate (and Obama can’t run), but it is interesting to look at the last 8 years.  They have been difficult.   The economy responded slowly.  Wages did not rebound quickly.  But in comparison to 2008 are we better off?

The question has relevance for utilities because if our customers are better off, that gives us more latitude to do the things we need – build reserves (so we have funds for the next recession), repair/replace infrastructure (because unlike fine wine, it is not improving with age), improve technology (the 1990s are long gone), etc., all things that politicians have suppressed to comport with the challenges faced by constituents who have been un- or under-employed since 2008.

Economist Paul Krugman makes an interesting case in a recent op-ed in the New York times:  (http://krugman.blogs.nytimes.com/2016/01/13/yes-he-did/?module=BlogPost-Title&version=Blog%20Main&contentCollection=Opinion&action=Click&pgtype=Blogs&region=Body).  Basically he summarizes the figure below which shows that unemployment is back to pre-2008 levels, and income is back to that point.  Some income increase would have been good, but this basically tracks with the Bush and Reagan years for income growth – flat.  So the question now is in comparison to 2008 are we worse off that we were?  And if not, can we convince leaders to move forward to meet our needs?  Can we start funding some of the infrastructure backlog?  Can we modernize?  Can we create “smarter networks?”  Can we adjust incomes to prevent more losses of good employees?  Can we improve/update equipment?  All issues we should contemplate in the coming budget.

Krugman Income percent

 

Marketing and the Utility

June 9, 2015
local government, Marketing water, politics, public relations, Responsibility, sanitary sewer, Uncategorized
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So I am training a group of public officials about utilities. Many have limited experience; others much more so. The interesting question that came up is how these officials should communicate with their customers. Interesting question and one that often receives little thoughts. So I thought their thoughts might be enlightening, keeping in mind that I have abbreviated some of them, and this was a discussion. Here are the thoughts they provided, in no particular order:

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

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

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

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

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

“We use twitter and Facebook”

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

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

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

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

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

“Blogs tied to websites and Facebook are helpful.”

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

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

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

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

“worth every dollar spent.”

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

Indirect potable reuse in our future?

May 11, 2015
communciations, direct potable reuse, Education, engineering, Holistic Water Planning, indirect potable reuse, Marketing water, Monitoring Water, rivers, surface waters, Water Funding, water quality, water sewer management, water supplies, Water treatment
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A past project I was involved  with involved a look at the feasibility of using wastewater to recharge the Biscayne aquifer In the vicinity of a utility’s potable water supply wells.  The utility was feeling the effects of restrictions on added water supplies, while their wastewater basically unused.  So they wanted a test to see if the wastewater could be cleaned up enough to pump it in the ground for recovery downstream, with the intent of getting added allocations of raw water.  Assuming the water quality issues could be resolved, the increased recovery would solve a number of water resource issues for them, and the cost was not nearly as high as some thought.

So we tested and using sand filters, microfiltration, reverse osmosis, peroxide and ultraviolet light, we were successful in meeting all regulatory criteria for water quality.  The water produced was basically pure water – not constituents in it, and therefore it exceeded all drinking water standards.  We demonstrated that technologically the water CAN be cleaned up.  The only issue is insurance that the treatment will always work – hence multiple barriers and the ground.  This was an indirect potable reuse project and ended because of the 2008 recession and the inability to of current water supply rules to deal with the in/out recovery issues.

The indirect reuse part was the pumping of the water into the ground for later withdrawal as raw water to feed a water treatment plant, as opposed to piping it directly to the head of their water plant.   But recovery of the water can be a challenge and there is a risk that a portion of the injected water is lost.  In severely water limited environments, loss of the supply may not be an acceptable outcome.  Places like Wichita Falls, Texas have instead pursued more aggressive projects that skip the pumping to the ground and go straight into the water plant as raw water.  Technologically the water CAN be treated so it is safe to drink.  The water plant is simply more treatment (added barriers).  So, with direct potable projects, monitoring water quality on a continuous basis maybe the greatest operational challenge, but technologically there is no problem as we demonstrated in our project.

The problem is the public.  You can hear it already – we are drinking “pee” or “poop water” or “drinking toilet water.”  The public relations tasks is a much bigger challenge because those opposed to indirect and direct potable projects can easily make scary public statements.   Overcoming the public relations issue is a problem, but what utilities often fail to convey is that many surface waters are a consolidations of a series of waste flows – agriculture, wastewater plants, etc. by the time they reach the downstream water intake.  Upstream wastewater plants discharge to downstream users.   But the public does not see the connection between upstream discharges and downstream intakes even where laws are in effect that actually require the return of wastewater to support streamflow.  So are rivers not also indirect reuse projects? In truth we have been doing indirect potable reuse for, well ever.

We have relied on conventional water plants for 100+ years to treat surface waters to make the water drinkable.  The problem is we have never educated the public on what the raw waters sources were, and how effective treatment is.  Rather we let the political pundits and others discuss concerns with chemicals like fluoride and chlorine being added to the water as opposed the change in water quality created by treatment plants and the benefits gained by disinfectants.  That message is lost today.  We also ignore the fact that the number one greatest health improvement practice in the 20th century was the introduction of chlorine to water.  Greater than all other medical and vaccine advances (although penicillin and polio vaccines might be a distant second and third above others).   Somehow that fact gets lost in the clutter.

Already the Water Reuse Association and Water Research Foundations have funded 26 projects on direct potable reuse.  Communicating risk is one of the projects.  The reason is to get in front of the issues.  You see, playing defense in football is great and you can sometimes win championships with a good defense (maybe a historically great one, but even they gamble).  Defense does not work that way in public relations.  Offense usually wins. Defenses often crumble or take years to grab hold.

The failure of utilities to play offense, and the failure of elected officials particularly support playing offense is part of the reason we struggle for funds to make upgrades in infrastructure, to perform enough maintenance or to gather sufficient reserves to protect the enterprise today.  And it remains a barrier to tomorrow.   Leadership is what is missing.  It struck me that when looking at leaders, what made them leaders was their ability to facilitate change.  Hence President Obama’s campaign slogan.  But talking about change and making real changes are a little more challenging (as he has seen).  You cannot lead without a good offense, one that conveys the message to the public and one that gets buy-in.  With direct and indirect potable reuse, the water industry has not changed the perception of “toilet water.”  That needs to change.  We need to be frank with our customers.  Their water IS SAFE to drink.  They do not need filters, RO systems, softeners, etc., or buy bottled water, when connected to potable water supplies (private wells, maybe).  We CAN treat wastewater to make it safe, and the technology tis available to make it potable.  . The value they pay for water is low.  Yet in all cases, others, have made in-roads to counter to the industry.  That happened because we play defense.

Misconcepted?

December 18, 2014
communciations, Education, Leadership, local government, management, politics
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There is a recent iPos MORI study that evaluated the perception and reality of issues in 14 western, industrialized countries to determine how well the perception of the populace matched reality.  The US was one of those surveyed.  No surprise, most Americans’ perception is very different than reality because the news and politics get in the way of the facts.  The study found for example that Americans perceived that teenage birth rates were 24 % of girls vs the real number of 3%, that 32% of the population is immigrants vs 13% actual, and that the majority of people perceiving welfare were black vs. the reality of 39% (38% are white and 15% Hispanic).  The states with the largest number of welfare recipients are in the northeast, which are also the states that received the smallest amount of federal funding per capita.  Talk about misperceptions.

While other countries have similar misperceptions, perpetuating misconceptions is part of the extreme discourse in Congress and among different constituencies. When we perceive the issues incorrectly and our elected officials do nothing to improve that perception?  What does that say about them?  No wonder we cannot get infrastructure to the top of our funding needs?  They perceive if you get water, can drive on it or flush it away, things must be fine?

Sea Level Rise Planning Part 2

June 26, 2014
Climate, communciations, economy, engineering, Environment, Flooding, infrastructure, innovation, Leadership, local government, management, planning, politics, Risk, Risk Management, sea level rise, stormwater, Uncategorized, utilities, water sewer management
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In the last blog we discussed 10 planning steps for sea level rises.  When planning 50-100 years other factors can come into play as well.  As a result, to allow flexibility in the analysis due to the range of increases within the different time periods, an approach that uses incremental increases of 1, 2, and 3 feet of SLR is suggested.  Hence infrastructure is built to meet milestones, not arbitrary dates lessening the potential for stranded assets.. The increments can work as threshold values in planning considerations in terms of allowing planners the ability to know ahead of time where the next set of vulnerable areas will be to allow a for proactive response approach that can be matched to the observed future sea levels.

But prior to developing infrastructure plans, the local community needs to define an acceptable level of service (LOS) for the community. A level service would indicate how often it is acceptable for flooding to occur in a community on an annual basis.  1% is 4 days per years and for a place like Miami Beach, this is nearly 2 ft NAVD88, well above the mean high tide.  The failure to establish an acceptable LOS is often the cause of failure or loss of confidence in a plan at a later point in time.  The effects of SLR of the level of service should be used to update the mapping to demonstrate how the level of service changes, so that a long-term LOS can be defined and used for near-term planning.

With the LOS known, the vulnerability assessment is developed using a GIS based map of topography and the groundwater levels associated with wet and dry season water levels.  LiDAR is a useful tool that may be available at very high resolution in coastal areas.  Topographic maps must be “ground-truthed” by tying it to local benchmarks and transportation plans.  USGS groundwater and NOAA tidal data from local monitoring stations to correlate with the groundwater information. Based on the results of these efforts, the GIS-based mapping will provide areas of likely flooding.

GIS map should be updated with layers of information for water mains, sewer mains, canals, catch basins, weirs and stormwater facilities.  Updating with critical infrastructure will provide a view of vulnerability of critical infrastructure that will be funded by the public sector. Ultimately policy makers will need more information to prioritize the needed improvements.  For example, a major goal may be to reduce Economic Vulnerability.  This means identifying where economic activity occurs and potential jobs.  At-risk populations, valuable property (tax base) and emergency response may be drivers, which means data from other sources should be added.

The next step is to analyze vulnerability spatially, by overlaying development priorities with expected climate change on GIS maps to identify hotspots where adaptation activities should be focused. This effort includes identification of the critical data gaps which, when filled, will enable more precise identification of at risk infrastructure and predictions of impacts on physical infrastructure and on communities. The final deliverable will include descriptions of the recommended concepts including schematics, cost estimates, and implementation plan.

So why go through all this.  Let’s go back to the beginning.  It has to do with community confidence in its leaders.  Resident look at whether their property will be protected.  Businesses look at long-term viability when making decisions about relocating enterprises.  The insurance industry, which has traditionally been focused on a one year vision of risk, is beginning to discuss long-term risks and not insuring property rebuild is risk-prone areas.  That will affect how bankers look at lending practices, which likely will decrease property values.  Hence it is in the community’s interests to develop a planning framework to adapt to sea level rise and protect vulnerable infrastructure through a long-term plan.  Plan or….

FOLLOW THE MONEY

May 16, 2014
Climate, communciations, economy, energy, engineering, Environment, finance, fracking, funding, infrastructure, management, renewable power, Revenues, Uncategorized, utilities, Water Funding
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A week ago the new National Climate Assessment came out.  It basically says things we already expected – temperatures are warmer, there will be more droughts, less rainfall, less available water, more intense storms and sea level rise.  What the study did in its 800+ pages was outline examples of climate change phenomena that are already occurring including flooded streets in coastal areas, severe weather (Colorado, New Jersey), and changes in the arctic air currents that may be affecting northeastern and Midwestern winter storm frequency.  All things that those who have been around for a while and have been even minimally observant have already noticed for themselves.  What was also not surprising was the vitriol on the internet about how this assessment was a “fascist plot” perpetrated by a variety of people to impose some yet undetermined regulations on “patriotic Americans.”  And then Senator Marco Rubio comes out this week and says he does not believe it is possible for people to cause climate change.  No facts, just belief.  In Florida.  In Miami.  Wow…

Those who live in coastal areas, earn their living in agriculture, manage water utilities relying on water supplies, and drought planners know the truth.  Denying that the climate is changing simply ignores reality and delays the ability to respond to its impacts.  I realize that those impacts might be 20 or 40 or more years out, but planning is needed because we expect our infrastructure, factories, hoses and economies to last longer than that.  Science says change is occurring.  We can argue why and how fast, but the reality is that there is change and there are many people that will confront he need to adapt to the situation sooner than later (like us the Fort Lauderdale/Miami area!).  So why deny climate change?

As we noted in a prior blog, there are several reasons, but many involved business issues.  So follow the money. Let’s start with the Koch brothers.  The Koch brothers manage Koch Industries, the second largest privately owned company in the United States revenues exceeding $100 billion/year.  Many Americans have no idea who they are but they are billionaires who have made their living in the oil business – their father Fred C. Koch developed a new the method for the refining of heavy oil into gasoline.  They rely on oil to maintain their wealth and are politically active with conservative organizations including the Heritage Foundation and the Cato Institute, FreedomWorks and Americans for Prosperity, all organizations the dismiss any impact of man on climate change.  Why?  Well one of the tenets of dealing with climate change is to reduce carbon dioxide emissions which means less reliance on fossil fuels – oil.  Whoops – that would be a problem for the Koch brothers because if they say “sure climate change is a problem,” well then that would mean that their entire business model and their wealth is a contributor to climate change, which means they are the “bad guys.”  Can’t have that.  So following the money tells you that we can’t make our money with oil and support climate change.

Let’s look at the other side.  Those acknowledging climate change are fully supportive of renewables, which in theory will help climate change by reducing carbon dioxide.  But the concept of renewables though is fraught with the problem that few of these technologies are ripe for wide-scale implementation.  For example natural gas vehicles or natural gas/hybrids are doable, but where do you buy the natural gas for the vehicle?  The technology and distribution networks is 10 or more years out at best and of course if you are in the oil business, why would you be interested in installing the natural gas fuel pumps?  So technology and need do not match when you follow the money.

How about the Keystone pipeline that would bring oil and gas from these remote areas to refineries in Texas and the Gulf of Mexico states.  You can guess the Koch brothers are in favor of the pipeline as they will benefit.  So are most oil and gas entities.  There are many environmentalists and other opposed to the pipeline because of impacts on water supplies (and other issues).  But the railroads are making money by hailing oil and gas from Canada and the Dakotas.  Guess which side the railroads are on?  The pipeline would take business away from the railroads.  Follow the money. 

Let’s look at our industry.  In the utility business, there is a lot of money with the telephone, power, cable and other utilities.  These private entities, although regulated, make huge sums of money for their investors.  You can follow that money. 

So who supports water and sewer utilities?  We do!  We supply over 85% of Americans.  But why do we have so much trouble getting funding when 85% of people would benefit.  One would think that given how many people we support, we have the money, but we are primarily not-for-profit entities, so we don’t make money for anyone.  You can’t follow that money because there is no money.  That tells us more about the difficulties we have in securing funding that anything.    

Fixing it is a little bigger challenge because our representatives and constituents do not understand the financial investment they have in our industry.  Their public health and economies are linked to water and sewer.  Our services make these other enterprises doable but there is no direct monetary connection to facilitate lobbying on our behalf.  I am not sure how to fix this, but we need a better marketing strategy for our services.  That’s one thing we know.

 

Planning for Bubbles

March 6, 2014
Banking industry, Economic Bubbles, economy, finance, funding, infrastructure, Krugman, Leadership, local government, management, planning, politics, Reserve Funding, Revenues, Risk, Surpluses, Uncategorized, utilities, Water Funding
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We have talked about reserves, the need for them, reasons why they are neglected and how to establish appropriate numbers (an area where more research is needed).  Reserves are an issue when the economy tanks.  We all recall the problem in 2008, but this is where utilities need to look beyond just their system to see what might be coming.  2008 was a problem that we should have seen coming, or at least planned for, but did not.  But it means that we need to look at the national and local economic picture and understand a little about events beyond our reach that can affect us.  Utilities and governments generally do not do this well. 

In 2005-2007, it was very clear we had a property bubble going on.  There was discussion on the news, financial channels, Wall Street Journal and even columns by economist like Paul Krugman.  A few of us may have taken advantage of the bubble through prudent real estate sales, but many did not.  Likewise, few utilities or governments planned for its inevitable fall.  After the crunch hit, those who owed the least amount of money, had savings and had stable incomes fared better than those who did not.  Same for governments.  Unfortunately most Americans and most governments fell into the “did not” category. 

So let’s look at a couple issues.  First, we knew there was a bubble and should know that all bubbles pop.  We had the tech stock bubble in the late 1990s.  People on Wall Street knew that the investments had turned to real estate and bankers where busy loaning money out with no interest for two years, no money down, adjustable rate mortgages and the like.  If you owned a computer you were inundated with Countryside and various other folks trying to loan you money.  Or buy your house and pay you an annuity if you were older. 

The reason that these “opportunities” were so prevalent was to help speculators who expected to own the property for short periods of time, or help those who might not have the means to buy time to get the means to support the payments.  All the subsequent financial instruments discussed in books like “Too Big to Fail” come from tools used by bankers to disperse the risk associated with speculators and the risky.  It made money for bankers and investment houses (remember they are private businesses beholden to their private stockholders). 

Like all bubbles, we get caught up in the money being made by speculators (and yes if you invest in the stock market you are speculating).  We try to grab onto the rising instruments to get ahead, but we forget that especially with real estate, the growth overall rate across the nation could only grow at the rate of population growth.  It is basic supply and demand. 

For governments, revenues rise, especially during real estate bubbles.  Some bubbles last for years, which creates a distorted view of the future.  In south Florida, there was a lot of buzz concerning water supply projections and arguments between regulatory staff and utilities over water supplies that were projected 20 years in the future, based on demand projections from 2000-2005.  When the dust settled in 22011, most of those issued disappeared because virtually all projections were substantially revised downward.  And most revenue growth projections were likewise revised downward and capacity needs delayed.  Planning 20 years out is historically inaccurate because the global economy can impact local growth.

Of course these new projections are incorrect as well.  Because the test period was 2005-2010 or 2000- 2010, the growth is stunted.  So they are likely underestimating demand and revenues.  Uncertainty with time means that the accuracy of projection decreases with time.  As a result, simply relying on past projection methods increases risk that of significant deviations.

I do an exercise n class where I give students three sets of projections.  10 years apart, for 50 years.  I tell them nothing else.  The examples are The State of Nevada, Cleveland, and Collier County, FL.  All are in the past (Cleveland is 1910-1950) There is absolutely no easy method that can project the growth in either Collier County or the State of Nevada, or that Cleveland’s population will drop in half. We could do the same with Detroit and never project that decrease either.  But when you tell them where the population are and what year, the wheels start to turn.  They realize that economics is a major issue.  While Nevada and Collier grew from 1960-2000, the rate of change is likely to be very different in 2010 to 2020 due to the 2008 recession. 

Tracking economic activity is a utility responsibility.  We need to know what is really happening, and understand bubbles.  We need to recognize that when property values and housing number increase fast, it will be short term.  Plan for savings and reserves.  Figure out what your recovery period might be.  We need to understand our economic base.  For example try this out and see what your conclusion is.  Florida’s economy is based on three major industries: agriculture, tourism and housing.  What could possibly go wrong with that model?  Well if we have an economic problem nationally, 2 of 3 take major hits because people outside the state do not travel to Florida and retirements get put off.  The economy gets hit hard and recovery is slow.  We have experienced that exact phenomenon from 2009 to date.  And many of those jobs are low wage positions which means the people who struggle most get hit hardest.  Storm events can impact the state.  Bit hits to all three, and agriculture is also a low wage industry.  It is a precarious economic model that sets itself up for potential fluctuations.  We need to plan for this.  It is our responsibility, utility staff and decision-makers to plan and prepare for the next big event.  

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