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How to Keep Federal and State Economic Issues from Trickling Down to Local Funding

December 8, 2012
communciations, funding, infrastructure, Leadership, management, Marketing water, planning, water sewer management
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One of the ongoing discussions at all levels of government is the lack of funding for many programs as a result of economic difficulties in 2008.  Economic difficulties are nothing new.  We had economic downturns in late 1970s/early 1980s, 1991-1992, 1999-2000, and 2008-2009 as examples, and we have often incurred the same issues.  Unfortunately it appears to the general public that we make many of the same mistakes over and over.  From a federal level we hear the argument about the need for tax cuts to spur spending in the private sector, while Keynesian economists who suggest greater expenditures by government to pull us out of economic difficulty.  Both arguments have their points, but how opposites can solve the same problem is difficult for the public to see.  Perhaps a little understanding of the economic sector and analogies to our personal lives and the water industry would help us.

From the perspective of an ongoing growing economy, the goal would be to have the consistently increased gross product, growing at a reasonable rate, just as it seems reasonable for our salaries to rise at or above inflation rates and our ability to “bank” water for those growth spurts are common pursuits.  From a national perspective, you know you are doing well when your economy grows just over the rate of population growth.  When it grows a lot faster, economists worry about overheating.  These high growth rates have occurred as recently as 1996-1999 and 2002-2007, but are often associated with economic “bubbles” which means that a specific sector seems to be growing really faster, creating a demand for investments that further drive up the perceived value.  The benefit to utilities and governments for these growth spurts was that revenues generally grew faster than the costs.

 

Of course bubbles are speculative, and at some point investors realize the value is not there and stop investing.  The sector collapses wreaking havoc on the economy, resulting in the economy not growing at a rate exceeding the population growth.  In these cases, the revenues to fund those services people expect, grow slower than population or may even decline as they did in 2008-2009.  Government has not been able to deal with these changes well, but from a personal perspective, these ups and downs are common in peoples’ lives, and we try to deal with them by putting money away in the proverbial “savings for a rainy day.”  Businesses have historically tried to do this as well and utilities try to secure water sources for the same reasons.  However, many governments have not, and it is worth trying to understand why not, the impact it has today and how to resolve the issue going forward.

Two things appear to drive the issue, and they are related to the two schools of thoughts on economics.  First there is a tendency to spend at the level of your revenues.  People, companies and governments all do this.  So in good times, our expenses often rise to match revenues, partly for catch-up purposes, but partly simply because there is more disposable income.  When revenues greatly exceed expenditures, there can be a tendency by utilities and governments to reduce their revenues by cutting rates reducing taxes and the proverbial thought that “people can better manage money than government.” We saw this in 2001 after the federal government finally balanced the budget and started creating surpluses (that could have been used to pay off some of the accumulated debt, but that’s an entirely different story).  Many states saw the same phenomenon (Florida is an excellent example).  However this thought process is akin to a person who goes to his or her boss and asks them to reduce their salary because they are accumulating too much money.  No person ever does this.  Instead we bank that money for the “rainy” day.   So does it make sense for government to cut their revenues in the surplus times?

Consider that down times follow surplus times.  If revenues are reduced during times of plenty, there is no savings for that “rainy” day.  As a result the current path leads to a tendency to suggest cuts in expenses in down times, but this actually exacerbates the economic problem.  Income decreases and because demand is down, prices fall (basic supply and demand).  As expenses decrease, the economy contracts, which means even more people are affected – it can be a vicious circle.  Economic disruption creates a negative impact on government revenues, sometimes disproportionately.  So by reducing revenues in the surplus times, actually compounds the impact of economic downturns, by eliminating the potential for expenditures from savings, requiring spending from borrowing.

At the federal level, we hear the tax cuts versus more spending argument, but neither addresses what individuals have long known – we need to bank surpluses, not ask for pay cuts or extensively borrow in lean times.  The concept of Keynesians is that government should make up the difference between the private and public sector spending to maintain the level of spending in the total economy, but Keynes did not say that is should all come from borrowing.  There is an implicit assumption that some of this should come from savings, just like it does for individuals.  Heavy borrowing can complicate future revenues by increasing future revenues needs, the other side of the argument.  Trying to make up for revenue shortfalls increasing rates and fees when the funds of people and corporations are limited, compounds their problem.  The economy may grow to make up for those cuts, but that is a speculative argument.  The results of austerity is evident in Spain, Greece, Italy and Ireland where their economies continue to contract, not improve.  That solution clearly does not work.  That’s like asking for a pay cut and reducing your expenses significantly – you don’t live better and those depending on you  don’t either. Cutting revenues while increasing expenses creates the worst of both worlds and makes future concerns even more of a problem.  The federal conundrum is, well, a conundrum.  Not sure what the solutions are there, but there are no easy choices and few of us have much control of input.

But locally ourselves and our utility systems, are completely under our control.  A modification to the paradigm of economic needs or our utilities for the future of our system is needed.  We should rethink our economic vision for the next cycle to mimic what many people attempt to do.  We need to figure out what our revenues need to be, and plan long-term for maintaining a given revenue flow.  There will be up and down times, but we can plan for these.  We should create policies that denote that revenues in excess of expenditures should be banked for that “rainy day.”  We should control the urge to expand expenses in the good times.  We should then use those banked revenues for the future.  Then when the next economic downturn hits, we have banked revenues that can be used to maintain the level of service to our customers.  We should have a policy on this as well.   The benefit to utilities is that the investment in lean times often comes at a reduced cost (demand is down so prices fall), while providing an economic stimulus locally (more jobs).  The City of Dania Beach’s nanofiltration plant had this benefit – 70 cents on the dollar costs, plus a grant.  100 jobs created.  Policies on generating surpluses and spending them in lean times on projects like this would seem to make things easier for everyone in the future, but to follow such a trek requires leadership, policies, and self control within the organization.

The question is where is that leadership coming from to make these decisions and to resist political expediency?

The Benefit of Conferences

December 4, 2012
communciations, infrastructure, Leadership, management, Marketing water, water sewer management
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I am currently at the Florida Section of AWWA’s annual conference.  One of the discussion items has been the need to increase the number of people attending the conference (and conferences in general), and in particular, the number of young people attending.  Most of the people attending conferences are older management personnel, who bring a wealth of knowledge and experience.  However budget constraints is a constant issue that limits attendance by younger personnel.  This lack of expenses ties with the lack of understanding of the benefits that these get togethers can have.

Conferences mimic civilization.  The reason should be obvious.  As civilization has growth, the advancements in our technology, means and methods have occurred in cities where many people can gather in one place, meet, discuss issues, and arrive at solutions based on others experience, something that cannot be done in rural areas.   Conferences are intended to achieve a similar goal as – bring people with common interests and problems together to discus their issues and find new ideas to improve service delivery.  As a result, there are three basic things that happen at these conferences:  talking to vendors who have products that might help the utility or meet certain needs, sitting in on technical sessions, and talking with other utility and engineering personnel that about common problems.  All have great potential for ideas to help utilities.  A good discussion can yield a solution or idea that can solve an ongoing issue.  How others approach the problem may shed light on how your utility can accomplish this.  What we need to do is make officials in charge of budgets understand that the savings of just one good idea can easily exceed the cost of attendance.

Unfortunately the germination and growth of these ideas is rarely conveyed to the officials who have control of the budget or attributed to attendance at conferences.  Conveying this data is a form of marketing the benefits of learning new things that we often miss.  Same issue with civil engineers who do not do a good job conveying to the public what they accomplish (and I am one).  Most civil engineering projects are simply taken for granted, especially water and sewer projects.  We need to do a better job of marketing these benefits.  The movement of the industry forward relies on it.

Creating Expectations

November 7, 2012
communciations, finance, funding, infrastructure, Leadership, management, Marketing water, planning, sustainability, water sewer management, water supplies
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We hear the moniker about getting the most out of your employees and staff.  Business books will talk about accountability, as will politicians, but creating accountability requires a first step on the art of management.  In any organization there needs to be a vision of where the organization wants to be in 5, 10 or 20 years.  Then there needs to be  a team of managers who buy into the vision, and implement it by securing employees who can implement it.  But it does not stop there.  You need to set  expectations.  Sounds, easy, but it is one of the issues professional employees especially complain about.  Assigning work tasks and saying “get it done” is not an expectation.  That’s a command.  Commands work in the military, but not so much in private practice.  The command and control types are notoriously difficult to work with, especially in professional and/or creative environments.  Micro-managers fall into this same mode.  The creative/professionals are intelligent and are looking for freedom to solve problems, usually more effectively that they can be told.  Instead, what needs to be done is to create a set of expectations of what will be accomplished and timelines.  Let the creative types and professionals figure out how. Provide them with the resources they need.  If employees understand the expectations, and are given the ability to accomplish the goals, accomplishing them becomes an end in itself – that becomes the goal and their satisfaction.  But does it work?  Well, yes.  I have been in organizations where the stars aligned to have a small group of manager who created and bought into a vision. We set expectations and let people accomplish them.  Always faster, always less cost, and always effectively.  A degree of recognition follows them. The group was easy to spot because they were accomplishing things (I should note that this does come with the price of jealousy among those who prefer to sit on the sidelines and can create some degree of subterfuge there which requires a strong leader to deal with that problem).  Students work the same way – set expectations of the delivery and allow them to develop the methods to solve the problem.  It is easy to see who the good engineers are, and who perhaps will be less successful.

Even easier are city and county managers, general managers and the like.  New officials come into office and six month later they are complaining that the staff and manager don’t communicate with them.  First response is to give them more information, which compounds the problem.  Still not communicating.  Every manager has one of these stories. The problem is that the new folks never revised the expectations from the past.  As a result everyone operates on the last set of expectations, until new ones are established.  If that never happens, well, the conflict escalates.  Someone has to take the leadership role, which creates a quandary with governing boards like the ones utilities commonly deal with because these folks are generally not educated in the intricacies of the operation of the utility, and rarely have any management experience.  They simply do not understand how to set reasonable expectations, to identify what is important to them and what is not, how to delegate, etc.  Until a sitdown discussion of expectations of both manager and the board is developed, the potential for friction will exist.  Some managers are good at recognizing and making adaptation, but most governing bodies are not.  This is why it is important to develop education programs that will encourage the community, which often has better connections to the governing members than staff.  So as utilities, our infrastructure is vital to the long-term development of our communities and to the public health and productivity of our residents.  So how do we make governing bodies understand the need to invest in utility infrastructure when emergencies are not happening?  Realizing we are all busy, we need to keep in mind that outreach is a key to creating that coalition of leadership in the community to advance the utility agenda.  Again a leadership issue and the need to engage the community, something we all too often forget to do.

Construction industry says it’s looking up? What does that say for utilities?

October 27, 2012
communciations, finance, funding, infrastructure, Leadership, management, Marketing water, sustainability, water sewer management
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The most recent discussions in trade journals, on-line and within the industry is that construction starts have begun to trend upward, a good sign that the economy is moving forward.  Since 2008 when the market crashed just after the election as a result of 2005/2006 packaged loan deals (read The Big Short by Michael Lewis if you really want to understand what happened, but be prepared to be irritated that no one has yet to go to jail), the stock market has crept steadily upward.  The problem is that the returns on investments have not trickled down to the majority of Americans except in low wage jobs (no wonder people can’t pay their mortgage and the IRS collects no income taxes from so many people).  But the tide does seem to be turning according to the construction journals.  In part we can thank low interest rates, but more perhaps more importantly it seems that much of the excess housing and commercial space may be decreasing so investors and owners that are looking to a spurt in economic growth in the coming years.  We see rising house prices in hard hit areas like south Florida.  With luck that will translate to jobs (maybe even decent wage jobs), increased tax revenues for local governments, and increased water revenues form of new or redeveloped users.  While the trend may not hold everywhere, the fact that the construction industry is talking about increases in new starts in the coming year, is a clear sign of things to come.  But are we ready?  That’s the big question.

Down here where I live, the 2007-2009 period was one where utilities ere struggling to find water supplies, with many investing in expensive alternative supplies.  Then reality struck and the 2020 demands are more like 2030 or 2040 demands.  The impetus for investment went away (it did not help that the burden was on the current ratepayers).  Those who invested in the 2008-2011 period got the benefit of much lower construction costs (typically about 70% of 2007 costs), but many sat on the sidelines as a result of political demands not to increase rates on current residents, resulting in lots of deferred maintenance.  While few utilities invested on growth related infrastructure, how many invested on replacement and rehabilitation at the lower costs?  Unfortunately, catching up on the backlog did not happen for many of us, which is why ASCE’s annual report card for water and sewer infrastructure continues to show very low grades (D- in 2009 for water and wastewater, a grade that has not improved).  As a result the legacy of the 2008 recession is that an opportunity to improve the condition of our infrastructure while creating local jobs was lost.  Now we will play catch up at higher prices, and higher interest rates (0.25% since June).

So where is the failure?  We complain about leadership at the federal level, but leadership starts at home (to use a cliché).  Local officials were not persuaded by utility personnel to invest in their future.  Aren’t these the same officials that often move to state and then the federal level?  Our failure to persuade them is an indication that our marketing approach to built consensus is not working.  Our ability to coalesce the community to improve itself is lacking, which readily translate to elected officials.  We can cast the blame upon them, but it starts much earlier than the time they make decisions.  In difficult economic times, we need a better approach to selling our product and the need to maintain the systems that deliver our product.  We need our customer to demand the improvements to protect their health.  People just don’t understand the link.  Water is there, so all is good.  When I flush it goes away.  No problem.  But what separates the US form the Third World is our infrastructure, especially our water and power infrastructure.  Maintaining our place in the world requires that we continuously upgrade and maintain this infrastructure.  That means planning ahead, building reserves, and taking advantage of economic conditions favorable to getting the most for our money.  How many of us missed this last opportunity?  We should be looking in the mirror and asking why…

 

PS  Today would be my Dad’s 90th.  We miss you!!

Engaging the Community – Going Beyond the Cheap Steps

October 8, 2012
communciations, Leadership, management, Marketing water, sustainability
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In a prior blog, I raised the question about marketing your water to your community.  The issue resulted from a comment that public dollars should not be spent on advertising.  There were several comments about this and we perhaps need to explore that option further.  One question raised was “how do we engage our community?”  There are a variety of ways to engage the community, but most utilities pursue only superficial, and inexpensive solutions, if pursued at all.  The typical solutions include speaker’s bureaus, mailers, flyers, notes on water bills, the consumer confidence report, press releases, presentations at commission meetings and water conservation efforts.  But how well do these work?  Certainly every utility should pursue many if not all of these options.  Getting positive information out to the community is needed, but does it change the perception of the community toward the utility?  Hard to say, but if that is the goal, you may be surprised how limited the impact of these efforts may be.  For one thing, most mailers, etc are viewed as junk mail so are not read by the customers.  Likewise most people do not pay attention to commission meetings, or read the paper (assuming the paper publishes the press release).  So many of these well intended, and time consuming efforts may be create limited engagement.  More proactive and maybe time consuming efforts are often needed to create an impact.

So what might work better?  If trying to change perception of the utility, more hands-on engagement may be needed.  It may mean reaching targeted audiences that can change current or long-term perceptions.  This can occur in a number of ways.  Here are a few:

  • School competitions for water conservation, hydrant painting, model water tanks – the concept here is to provide fun to elementary and middle school kids while encouraging them to learn about a given topic.  Normally involves teachers and parents, which enhances the message and spreads the “word.”  There are state and national competitions that students can participate in as well.  Utility management support is required, as and some resources and some devotion of time from staff to coordinate efforts among students and teachers.  But it puts the utility in front of an impressionable audience and provides a learning opportunity very different from the normal classroom.  How would that not be memorable?
  • Middle school programs with utility staff – the concept here is to encourage utility staff to communicate directly with middle school kids about what they do.  The key is to get younger kids interested in pursuing jobs in the field.  One of the ongoing issues in the utility industry is “graying,” and the potential for almost 50% of the workforce to retire in the near future.  Getting students to change their careers in college is too late.  Often high school is as well.  Middle school kids have rarely given much thought to their careers.  What better way to recruit that to put the utility in front of kids and get them thinking about going into the water field.?
  • Tours of facilities for school kids – most students learn visually, so tours of the facility are useful to create interest and enhance learning. Security is an issue, but they are kids.  It is always useful to know what goes on with water and wastewater. And it’s normally a positive, out of the classroom experience.  What kid doesn’t like a field trip?
  • Summer internships for high school students – this is another effort to engage and educate students, while perhaps setting the stage for a future employee who understands what win needed to do the work.  Teachers and parents are required to be part of the process – otherwise who recommends the students ad how do they get to work?  It helps if this is coupled with earlier introductions to the utility, so kids have become interested in the career prior to the job opportunities.  Think about the kid who learns about and tours the utility in middle school, knowing internships might be available in a couple years.
  • Partner with local universities on research issues – The focus is universities, not trade schools or community colleges, because universities do research and this capacity is often underutilized in the business work.  In part this is because their mission is misunderstood – they teach students to think as opposed to technical skills, which means things might take a little longer.  But universities have lots of technical resources, literature and skills that can be useful to utility systems.  Often the cost is less than consultants, and the access to data and knowledge is usually beyond that of consultants as well.  The utility needs to find the right person to connect with for small projects as some university folks avoid small projects, but many engineering professors welcome the opportunities.  Also many universities are public entities, which means bid laws may not apply for public agencies.  That makes it easier….
  • Sponsoring research projects for graduate students – graduate students need projects to complete their thesis.  They need real data and utility projects and research are generally beneficial.  And they need jobs so research is like an extended interview.  Professors are looking for research to collaborate on.  Utilities often need testing of pilot projects before design is initiated or completed.  As a result, utility sponsored research is a win-win for everyone.
  • Offering paid internships for undergraduate students – college students need money to pay tuition and experience to get a job.  The utility can engage and educate students, while perhaps setting the stage for a future employee if they do the job well.  Internships are extended interviews to gauge student skills.  And universities can help recommend good students.  Another win-win.
  • College scholarships – scholarships recognize good students, while creating the potential to attract future talent.  AWWA has found that most students who receive scholarships in from the water industry, stay in the field.
  • Co-hosting conferences – many conferences are looking for sponsors, money and locations.  Local conferences normally get some press, which helps the water profession.  Another win-win.
  • Hosting training programs- like conference, training is something all engineers, finance people, and operations and field personnel need.  Like conferences, many training programs are looking for sponsors, money and locations.
  • Participation in activities like Habitat for Humanity – utilities have tools and skilled labor.  They can help with community based activities.  Management needs to be engaged and show leadership for such projects to be successful, but there can be no losers in activities like this.
  • Awards – Apply for them.  They are noteworthy, and publishable!
  • Newspaper advertisements about events or accolades – some elected officials are opposed to self-laudatory commentary or marketing.  But in the competitive environment we operate in, we need to maximize revenue opportunities.

There are more, how many utilities actually engage in these efforts.  Money is often used as a reason not to, but if long-term engagement is what is desired, perhaps spending limited dollars to pursued these options could present a positive benefit:cost ratio to the utility.  That would make it worthwhile.

Defining Leadership

October 4, 2012
communciations, Leadership, management, Marketing water, sustainability
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Defining leadership is like identifying ethics – it is easier to identify what is not leadership than what is.  In fact Scott Adams titled one of his Dilbert books “Don’t Step in the Leadership,” as a quip to indicate the difficulty in defining what is leadership.  One of the problems is that leadership cannot exist if there are no people following the direction.  Hence a leader of one is not a leader.

 

There is good and bad leadership.  Lemmings are an example of the bad leadership.  That’s what your mother was talking about when she asked you if you’d jump off a bridge to be like the other kids.  No, what we want is positive direction, with a long-term improvement to conditions or reduction is the severity of a risk or problem.  As a result is if often easier to measure results after the fact – it’s what we leave behind that defines leadership.  Hard to tell when leadership is happening now.

Elected officials are often pointed to as leaders, but we could spend pages discussing the fallacy of that argument.  For elected officials it is often circumstances that define their leadership skills:  Lincoln in the Civil War, FDR with the Great Depression and World War II, Washington refusing to be named king are examples of leadership.  Congress today, not so much.

Likewise we have business leaders, but mostly they are making money for their stockholders; few are making a big difference to use today.  The latter is why we all know Steve Jobs, Bill Gates, Paul Allen, Mark Zuckerberg, Henry Ford, Thomas Edison and Harvey Firestone – they all made a difference in our lives and how we live.  But who is the CEO of Goldman Sachs?  See you probably don’t know and that’s the problem.  The impact on your life is missing.

Hollywood puts up leaders.  Ok I like Clint Eastwood, but aside from some great movies he’s made or directed, I don’t really have much reason to follow him personally.  Mostly we know a lot about what we don’t want, see the  Kardashians.  Music is similar – not much leadership there despite some great, and potentially insightful tunes (thanks Ronnie van Zant, Hughie Thomasson and Danny Joe Brown, RIP all).  No, leadership is not defined in the entertainment industry.

Leadership is defined by leaders, which is the problem since leadership it is how leaders approach situations.  It is what leaders envision that causes others to buy into their vision and cooperate toward achieving their goals.  It is how they approach a challenge and coalesce resources to resolve it, regardless how big the issue may be.  It is how they carry the torch, while supporting their staff which does the work.  It is how they guide as opposed to direct employees.  It is how they share accolades with the staff and accept the blame for failure, as opposed to the opposite.  All good, but most times leadership is hard to see when it is happening.  Ultimately, leaders are defined by what they leave behind – does the organization or product survive their departure, or not?  The goals of Lincoln and FDR survived their passing.

So what is leadership and how do we apply it to the water industry?  Well I’m not sure we are any closer to a definition of leadership, but maybe we have a better idea what to look for.  Clearly leaders in the water industry will be the ones trying to create a long-term vision that will be expected to survive their time in the field.  They will argue for sustainable use of water and the necessity to cooperate and communicate with other users to reach optimal solutions to over-allocation issues.  They will test new technologies as solutions to old problems.  They will implement “outrageous” concepts like indirect potable reuse and develop cooperative efforts with other industries to get to solutions like using water and wastewater sites to generate distributed power,  things most don’t consider cost effective or proper today.  They will participate in research efforts and outreach to the public and the youth.  And they will empower and train their staff.  Ok, maybe not all these things, but look around, where are the leaders in your utility?

We need to talk more about this subject….

 

 

Marketing Water – Why Don’t we do this?!

September 12, 2012
communciations, finance, funding, infrastructure, management, Marketing water, sustainability, water sewer management, water supplies
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A comment I heard recently from an elected official was that it was inappropriate to use public dollars for their water agency to market their water product.  Interesting, and it suggests a major barrier to the development of local utility systems.  The cell phone companies, cable television, bottled water companies and security agencies all market constantly to our customers.  Virtually all of them charge more for their service than we do for water and wastewater.  The costs for all have increased faster than water and sewer.  But try surviving in the desert with only cable tv and no water.

Utilities compete with every other vendor for the same dollars.  They want our customers to value their products more.  They want our customers to divert dollars to them, so they need to increase the value of their products in the minds of our customers.  This is what marketing is all about.  If you cannot show the value of your product, the value diminishes in comparison to other products.  So while the needs for water and sewer systems increase, we see more of our customers’ dollars go elsewhere and the accompanying  demands to control our rates.

Water and wastewater systems must market their product.  Clean healthy water is available to virtually everyone.  People expect their faucet will turn on and provide good quality water, and that the toilet will flush.  They take it for granted, yet much of the world does not enjoy the same quality of consistency in service.  Water service is a commodity, and comes with a cost.

We say we want to operate the utility like a business, and many systems are run this way.  Most charge based on usage (or should).  But we fail to pursue one of the basic tenets of running a business:  marketing our product.  The annual CCR is not a marketing tool.  Water bills can convey messages, but they do not really function as marketing either.  Water conservation programs can help, but here the message is use less, not the benefit of the product.  We simply do not market water.  It is why the bottle water industry continues to grow, despite the fact that public water systems offer water at least as safe and healthy as bottled water, subject to more regulatory oversight, at a fraction of the cost.

So given that utilities, the majority of which are owned by local governments, are operated like a business, why shouldn’t we spend money on marketing the benefits of clean, safe water?  Why not market the benefits of 24/7 service?  Why not highlight the efforts of dedicated employees that ensure the system operates 24/7?  Why not raise consciousness of the water commodity to increase its value in the public’s eye?  The only reason not to market is the benefit competing services.  That does not benefit the public good, nor support the need to recover the costs of service and repair and replacement needs of the system.

Creating a marketing plan, or branding program for your utility is a major undertaking.  DC Water spent year re-branding their system to raise consciousness.  Creating marketing programs to engender success requires multi-media outlets, consistent messages, and vision.  It requires that employees and elected officials be on the same page with their customers.  We need to understand customer expectations of the service to raise value in their minds.  If marketing can sell pet rocks, we can market the value of water.  It is in our best interests to do so.

Communication, like water is a need

September 9, 2012
communciations, Environment, finance, funding, infrastructure, management, Marketing water, sustainability, water sewer management, water supplies
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Water management is a fundamental need for the development of civilizations. Always has been.  If you have any question about this, ask yourself what differentiates the developed world from the undeveloped.  Water supply, sewage management and flood control rank 1-3 among the differences.  Safe drinking water and good sanitation go back beyond the Romans, and is a necessity to insure that the populace, and those performing work are productive as opposed to sick all the time.  At present there are agencies that operate to manage water supplies and drainage, and a few that do both.  Mostly these are regional agencies, which belies the need for local decision making to respond to local conditions.

An example – in 2007/2008 the State of Florida was in the midst of “sever drought.”  The water management agencies spent considerable time and political capital working on water conservation strategies, limiting utility withdrawals, cutting permit allocations and demanding conversions to alternative supplies in the future.  The southern half of the state was hard hit.  Utility customers cut their demands significantly.  Unfortunately the customers’ reward was surcharges to make up lost revenues to overcome large operating shortfalls and potential defaults on borrowing documents.  The short-term implementation was designed regionally, but had significant local consequences that were not considered.

But more interesting was the actual “drought” conditions.  It seems that the hard hit areas were in the central part of the state, not the southeastern coast.   The central part of the state, including the Everglades had received about 60% of the average rainfall, but along the coast, the two year shortage averaged less than 10%, and most residents realized that their rainfall accumulations were not as severe as inland.  Since most of the southeast coast’s water supplies were local, not based on the central part, the local question rose, “why were the water conservation measures required of these utilities and residents? and  Why was this not a locally driven issue?”

The case highlights the fact that while most water resource planning efforts are regional, the impacts occur locally, and often local impacts are not fully considered.   Credibility of the utilities is critical for emergencies or difficult situations.  During this condition, a survey of coastal utility customers found that the customers were better informed on rainfall totals than the regional information provided, which undercut the credibility the local utilities were trying to build with their customers, which impacts future needs for cooperation at the local level.  Something about crying wolf…

Changing Attitudes about Government Infrastructure?

July 17, 2012
Environment, finance, funding, infrastructure, management, Uncategorized, water sewer management
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A recent comment on the blog posts reminded me of this discussion of a community on the beach that was populated by mostly retired executives from Chicago, Cleveland, Toronto, Louisville, Indianapolis and Detroit.  This was the 1970s and 1980s.  The community was wealthy, and had very low taxes.  It’s water and sewer rates were similarly low, while the community was starting to grow fairly quickly.    The mayor was on of these retired CEOs.  He was asked what helped his community be so successful.  His answer was simple:  they had a vision for the community that they all agreed on – a retiree utopia of beach, golf and dining.  They wanted to hire the best and brightest younger people to manage their community, hoping they would bring with them new ideas to improve efficiency.  They were willing to pay people at the 25th percentile to bring them to an out-of-the-way community, where medians and yards were heavily landscaped, where beach access was granted to all, where taxes remained low and housing values continued to rise, with the expectation that the community would continue to prosper.  Their experience had taught them to hire the best and brightest to increase their productivity and introduce new ideas.  By all measures, the strategy was successful.

But all good things come to an end.  By the mid 1990s, most of these old CEO had departed, replaced by newer people.  While many were also executives, there were more of them, and their focus was changing.  They were retiring from companies where profits were far more short-term and the politics were different.  They did not have the same experience in hiring people, and they did not see the need to pay higher salaries to attract employees. Unlike the prior generation, they wanted their kids close-by, which meant that there needed to be lower cost housing because most of their children were not making CEO salaries.  This also meant more services, and higher costs.  Cost control because the them, and cuts to government, to keep the low taxes low, became the norm.  So where were all those “best and brightest” hired 10-15 years earlier?  Gone.  When the attack on government workers started, who was the first to leave?  Those who were easiest to employ elsewhere of course, which does not help the professionalism of government.  It’s like another community where the Mayor said that the town was needed to provide employment for the otherwise unemployable!  Really?

This attitude does not help our industry at a time when reinvestment needs are in the hundreds of billions of dollars in the US alone.  Public investment has been billions because government was the solution for many needs of society, because it could not cost effectively or fairly be delivered by the private sector.  It’s like owning a multi-billion house and deciding not to fix the roof!  The leak can only get worse and delay the (much higher) cost of repairs to the next person.  So what about our infrastructure?  Who pays those costs?

And of course thisis all true….

Why aren’t We Paying the Cost for water and Sewer?

July 8, 2012
Environment, finance, funding, infrastructure, management, water sewer management
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It is budget season again which means the annual battle for water and sewer rates.  The costs for power and chemicals go up every year, and billions of dollars of deferred maintenance obligations exist.  So why is it that utilities find it so hard to get the revenues needed to update and operate?  The easy answer is politicians, but the issue is more complicated than that.

 

Much of the growth and expansion of the US and Canadian economies can be traced to the development of water, sewer, storm water and transportation infrastructure.  Without water, and associated wastewater disposal, the public health suffers, people get sick, and are less productive than if they are healthy (and you don’t need transportation then).  The lack of clean water is a major barrier to growth and development in many parts of the world.  So going back over 100 years, the federal government saw the benefit of improving drinking water quality.  Utilities responded, building filtration and disinfection facilities which were so successful that we are still reaping the benefits of those improvements.  Many central cities began expanding their systems as a means to provide service to surrounding communities.

Development of regulations relating to metals in water occurred in the 1940s, and developed through the 1962.  The Safe Drinking Water Act reaffirmed many of these standards, and of course added new ones as new constituents.  Over 90 percent of the US population has access to safe, potable drinking water on a 24/7 basis.

Unfortunately we do too good a job and have for 100 years.  People take safe water and sewer for granted.  Regulation or not, people assume it’s all good (the bottled water folks aside (see Peter Gleick’s new book).

 

The solution?  Marketing.  Local governments, their employees, their systems and their solutions are all kept under wraps.  No one actively markets the benefits of utilities?  Why not?  Why don’t we use our CCRs, monthly newsletters, meetings, and community involvement to market ourselves.  True most of us in the industry are not great marketers and we see so many other issues it is not a priority.  The private sector sees the benefits of marketing, but utilities often see the lack of active marketing in the attitudes of our elected officials, who do not often understand the value of the service.  IF people value your product they will pay for it.  The difficulty that many utilities have in getting rate increases to update and improve their inrastructure is an indication of failure to understand the value of the product.  That’s a marketing failure!  I once had an elected official tell me marketing was not something the public sector should do.  I asked why.  There was no answer, but he acknowledged it would help.  So we need to make marketing our efforts, and products.  So who’s got some great ideas out there to market?  Who has some great success stories we can all use?