Getting philosophical about water

In California it’s hard to stop writing about water once you start, and after I posted last week’s piece about water rates, more thoughts bubbled to the surface. (Sorry.)

For one, what about the fact that opponents of the rate increase persuaded about a quarter of the city’s property owners to file protests against the rates? Under Prop 218, if a majority of them had protested, the rate increases could not have gone into effect. What if the organizers of the “no” campaign had succeeded?

It’s frightening. The Water Division would have gone into deficit. What might have happened then? It’s like in Washington where people play politics with shutting down government. It’s nihilism.

By any measure, Santa Monica is a well-run municipality. Elected representatives have made responsible choices over the decades, particularly in connection with infrastructure and essential services, like water. Going back more than a century we have had a citizenry with admirable public spirit that has voted time and again to tax itself to pay for what the city (and schools) need. What’s with all this anger and spite? You’re telling me that because traffic is bad Santa Monicans don’t want to pay what it costs to keep their water running?

And no, it’s not about enabling development and yes, Council Member Sue Himmelrich was correct when she said that water was underpriced.

Another thing that I thought more about since last week is whether the City should borrow money, by issuing bonds, to pay for water system capital expenditures. This is a possibility that the City Council left open when it increased rates.

I support municipal borrowing for infrastructure, but debt is not always appropriate. It’s like with any enterprise. Borrowing makes sense when a city needs to make large expenditures, too large to be paid for with current income or accumulated savings, to build assets that will have a long lifespan. Santa Monica voters did the smart thing a century ago when they approved bonds to pay for buying water rights and for the initial building of the system, because they didn’t have the cash.

But that’s not the case now: the system is built and for the most part capital expenditures are needed only to maintain it. It’s not a good idea to borrow money for routine expenditures, and that includes maintenance. The current capital plan, according to a staff report to City Council from last June, is to spend about $3.5 million each year, about 11 percent of the Water Enterprise Fund, to replace aging water mains.

The City has about 250 miles of water mains. Some pipes, made of cast iron, go back to the 1920s. Old cast iron pipes not only might burst, but they also rust inside and that reduces water pressure and flow. Typically it costs $3.5 million to replace 9,000 linear feet of pipe, a little less than 2 miles, with pipes made of more advanced materials, such as ductile iron or polyvinyl chloride (PVC).

This pace may not be fast enough. Water mains may last a century, but replacing less than two miles per year will not recycle a 250-mile system in 100 years. As the pipes from the system’s big expansion in the 1920s hit the century mark, the Water Division may need to pick up the pace. But even so, it’s unlikely that the City will need to spend tens of millions of dollars at any one time. Is it going to make sense to borrow? We’ll have to see, but I doubt it.

Last week the City Council was considering rates for the next five years, and chose not to raise rates in years two through five by the 13 percent that Water Division staff had recommended. I agree with those council members who expressed caution about spending $6 million over five years on new water meters, money that makes up much of the difference between 13 percent and the 9 percent increase that council approved. I suspect, however, that the realities of maintenance will mean that higher rates will be required in the future.

Some opponents of the rate increases who want the city to borrow to pay for capital expenditures say that it’s not fair for them to have to pay for infrastructure that will be used by future generations. I discussed this argument in my last column, but the more I think about it the question raises philosophical issues. I have to ask: what are we doing here, in this city (and in this world), if not to leave it (or both) a better place?

When I moved to Santa Monica more than 30 years ago I received the benefit of all the investments prior generations had made not only in our water system, but also in streets, parks, schools, etc. It’s our turn.

And so what if we leave better public facilities for future generations? In my view, that’s something I’d be proud of, not resentful about.

Thanks for reading.

The pipes, the pipes, are calling: “Maintain us!”

I can’t guarantee that I heard every word uttered during Tuesday night’s City Council hearing on water rates, but two words that I didn’t hear were “deferred maintenance.” Too bad, because that’s what this is mostly about. Yes, we are doing good by using less water, and yes, that paradoxically causes a cash crunch for the Water Division that means we need to pay more for the water we do use. That loss in revenues, however, only accounts for a portion of the deficits the Water Division is facing.

The fundamental reason we need to raise water rates is that our system is aging and needs fixing. Even if we weren’t conserving water, rates would need to increase substantially to pay the costs of deferred maintenance.

The numbers are that with only rate increases equal to inflation (the baseline), the projected loss in revenue from 2013 levels over the next six years (through fiscal year 2020) is about $14.3 million. Over the same six years, the Water Division’s capital needs are projected at about $37 million. (The data comes from the Kennedy/Jenks “Water Rate and Revenue Plan” presented to City Council this month.) If you review the Water Division’s $37 million capital budget for fiscal years 2015 through 2020 (Table 4 in the Kennedy/Jenks report) you’ll see that relatively few bucks are for special projects, like a new booster pump station. Most of the expenditures are for maintenance, such as water main replacements and similar improvements, along with routine costs like vehicles and sidewalk repairs.

As has been typical with public infrastructure in America for the past 40 years, Santa Monica’s water system has been starved for maintenance because voters don’t want to pay for what they’re wearing out. Cast iron pipes are now nearing a century of use and need to be replaced. We shouldn’t be surprised. Santa Monica had a major water main break in 2002 and a serious sinkhole in 2007.

City of Santa Monica photo

City of Santa Monica photo

Unfortunately I wasn’t surprised, watching the video of Tuesday’s hearing, to hear members of my own Baby Boomer generation complain about having to pay more, and call for a bond issue to pay for this catch-up maintenance. They said it wasn’t fair that they might have to pay for a system that future generations would use. But then we boomers have never worried about getting a cheap ride on investments preceding generations paid for, without paying to maintain them and without making investments for the future. Hey, we’ve saddled the next generation with student loan debt; why not give them some water debt, too?

Speaking as one boomer, I don’t want my water rates to include interest on a bond for work that we can and should finance as we go if our rates include reasonable amounts for maintenance and replacement, and I’d like to invest reasonable amounts of money (piggybacking on state money that might be available, not to mention the settlement money the City receives from polluters) to increase our flow from wells and the reuse of gray water so that we can reduce the relatively costly (but still cheap!) water we buy from the MWD.

Of course, no one likes to pay more for anything, especially for something we all take for granted. The monthly increases are going to be trivial for a middle-class family (according to Table 8 in the Kennedy/Jenks report, the increase after five years will be about $11 per month for a typical single-family house, assuming a 20% reduction in usage and the 9% annual rate increases the City Council adopted), but certainly there are low-income people for whom even a small increase would be painful. The problem is, however, that you can’t build high-quality infrastructure if one requirement is that the actual cost must be affordable to people with the lowest incomes. You need to find another way to subsidize their water, or, even better, find a way to increase their incomes.

The rate increase naysayers did make some good points, however. One was that with everyone trying to reduce usage, both by investing on water-saving improvements and changing behaviors, it’s going to get harder in the future to respond to droughts by lowering consumption. This causes frustration from people who, after all, are doing the right thing. What it means, however, is that we’re going to need more investment, both public and private. In gray water systems, for instance. The good news is that if people make investments to reduce water usage, their usage will remain lower even when the drought is over, and they will not feel the full impact of higher rates.

Another point I agreed with, one made by Diana Gordon from the SMCLC and others, is that the City’s goal of achieving water self-sufficiency by 2020 is artificial and should not drive any policies. The goal is admirable for both ecological and financial reasons, but it is artificial not only because of the arbitrary date, but also because “self-sufficiency” is an artificial concept. What does self-sufficiency mean when much of the City’s “own” well water doesn’t lie under Santa Monica? Even to the extent it does, the water is part of a regional pool of groundwater that is replenished by regional surface water.

Santa Monica’s water needs and resources, now and in the future, are part and parcel of the water needs and resources of a still growing region. It’s artificial to think that Santa Monica could be self-sufficient in water or anything else.

Thanks for reading.