Unexpected Barriers to Green Infrastructure Use in Cleveland and Milwaukee

Green infrastructure has generated excitement in recent years as a cost effective way to address flooding and water quality problems while making communities more attractive to live in. Previous studies have found the lack of interest or awareness of new technologies to be a major hindrance to implementation. But according to a new study (Keeley, Koburger, Dolowitz, Medearis, Nickel, and Shuster, 2013) funded by the U.S. EPA, awareness is actually quite high among practitioners, and hindrances to wider implementation arise rather from an outdated regulatory structure, a disconnect between larger and more local goals, and difficulties in how to arrange responsibility for maintaining projects.

The study gets its information from those working on the ground, with a limited survey of practitioners. The practitioners work in either Milwaukee or Cleveland, two cities that are spending substantial money on reducing combined sewer overflows (CSOs) and have also made notable commitments to green infrastructure. Cleveland is spending $3 billion in 25 years to reduce combined sewer overflows, this includes $42 million to be spent on green infrastructure. Milwaukee’s Deep Tunnel and auxiliary projects have reduced CSOs from 50-80 per year to an average of 2.5 per year but the utility has turned to green infrastructure since 2000 as an auxiliary approach.

They are also two cities which have seen significant declines in their industrial base and thus face significant financial difficulties. Cleveland has 6% of its land covered by vacant lots, a statistic that is repeated in many other Rust-Belt cities.

A lack of awareness or experience was not a barrier to implementation among practitioners as found in earlier studies. Interviewees noted that many young hires are eager to implement green infrastructure. Rather, interviewees pointed to a misalignment between new technologies and an outdated regulatory structure. This structure, combined with aging and degraded water infrastructure and inconsistency and ambiguity in policy and guidelines, has proved to be a major barrier to compliance with federal water quality standards and wider implementation of green infrastructure. The structure increases perceptions that green infrastructure carries more legal risk than conventional options.

Another significant finding was the disconnect between stakeholders looking to advance goals at a very local level (i.e. a specific block or neighborhood) and municipal level officials who are often trying to meet federal water quality requirements. The potential common ground between these groups is a major selling point for green infrastructure, as an attractive little park can revitalize a community while improving water quality. But in practice this isn’t happening, as it takes a lot of time for municipal officials to find enough small scale projects to meet their federal requirements and many community level groups lack the technical sophistication to assist municipalities in locating and designing these projects. Inability to work out who is responsible for maintaining projects once they are in the ground is a further barrier.

A further interesting finding of the study is that even when CSOs have been reduced substantially, those that still do occur create negative PR, and make expenditures difficult for public officials to justify. Other difficulties with the public arise from ongoing differences in perceptions in the public of what fixing infrastructure problems should cost versus what the problems do cost cost and a lack of awareness of the role of impervious cover and poorly maintained private laterals in public clean water problems.

The study offers some solutions to these problems and points to ways forward such as formalized regional problems such as (Cleveland’s) Sweet Water which can allow local knowledge to be applied to problems that need to be coordinated at a regional scale.

The Emscher Region and Berlin: Lessons in Stormwater Management

In its efforts to promote green infrastructure, EPA has funded papers to promote international dialogue and learning on the issue. Two of them have been recently published and I’m going to provide summaries on both of them to give a quick overview for the benefit of my own understanding and hopefully to spur some interest from ridiculously busy professionals in the field.

The papers start by recognizing the wide promulgation of low impact practices Germany has achieved in the last 40 years for stormwater management. The series of papers then studies similar cases there and in the U.S., and builds a framework to allow lessons from Germany to be adapted to the specific conditions present in the U.S.

The first paper of the series, The German Experience in Managing Stormwater with Green Infrastructure by Nickel et. al., is based around the cases of the Emscher Region in Western Germany and Berlin. Both cases share similarities to areas in the upper Midwestern United States that have experienced loss of population and industrial base and are trying to transition to a post-industrial economy while tackling water quality problems with seriously constrained budgets. The below is a very rough sketch of the cases laid out by the authors.

The Emscher Region has serious water quality problems due to legacy pollution from the regions heavy industrial base and coal mining as well as flooding problems from unmanaged stormwater from development. Public leaders have begun an effort to cope with these problems by restoring natural surface hydrology. The effort began with pilot and grant programs to build support for green practices which were then followed by a comprehensive strategy to link up small projects with regional goals. Public leaders had a financial incentive to make the strategy work as an analysis showed that a 15% reduction of impervious cover would allow for the dimensions of the sewer system to be reduced, resulting in a savings of €270 million (approximately $350 million). The estimated costs in green infrastructure investments to achieve these savings are €250 million.

Regional stakeholders were able to agree to reductions of 1% in impervious cover per year in order to achieve the 15% reduction by 2020. As of 2010, stakeholders were slightly behind the goal but have plans to achieve a 7.5% reduction of impervious cover by 2013.

Berlin, my home come September, has had a rather unique relationship with its water resources. For a good portion of the last century Western Berlin was an island and had to depend on groundwater from within its city limits. The political situation also created a demand for green recreational spaces within the city, placing a further emphasis on self sufficiency, an emphasis that was maintained even when it was no longer necessary.

Berlin’s municipal resources were strained with the fall of the Wall as predicted population growth did not materialize and revenues dropped from the loss of water intensive industries. Under these conditions the city looked for cost effective green infrastructure practices to meet its goals. Where the city could afford to, it provided direct subsidies to reduce impervious cover and increase green space and compulsory guidelines were introduced for public buildings. On top of the highest stormwater fees in Germany, Berlin has also introduced the Green Area Ratio, a planning requirement for private developers which afforded them significant flexibility in meeting municipal environmental goals by awarding them points for various practices. For example, a fully impervious surface will be awarded 0 points while vegetation connected to the soil will be awarded 1 point and a green roof will be awarded .7 points. The flexibility embodied in the practice has received positive feedback from architects and the practice has now been incorporated in Washington, D.C. and Seattle.


The authors believe both Berlin and the Emscher region demonstrate the importance of integrated environmental planning. They do a good job laying out all the different components that need to be in place for this to happen effectively. Stakeholder groups need a chance to iron out competing priorities so that benefits can be optimized and costs minimized. Usually this process has to be guided by determined public leadership. Strong and clear communication between stakeholders is also particularly crucial so that implementation of decentralized practices is effectively coordinated and extensive guidelines on best management practices is crucial. Framework policies that allow decentralized stakeholders to adjust to local conditions while still advancing common goals are also important and the authors emphasize the Emscher regions goal of 15% reduction in impervious cover in 15 years as exemplary. I would like to add that the Green Area Ratio is also a good example of such a policy even though it does not provide as clear a vision of overarching management goals. Finally proper incentives and fees are all necessary to signal various groups of the direction they should move in.

Thatcher and Water Utility Privatization: Part II

Alright, I’m a little late getting this one up. Had to travel to Southern California and surf/sail/drink with friends and then up to Sonoma for some urgent wine and beer tasting. At this rate I’m going to be spoiled to do anything productive, ever. But I promised my loyal readers a post on privatization of the water sector in Thatcher’s England, so here it is…

To begin, no definitive summary of the impacts of these policies floated to the top of my literature searches. I didn’t look for much more than an hour but from what I saw on Google Scholar, Google, and the sources cited on Wikipedia the controversies of those years are still with us today. The literature was all a bit dated as well. So as any mealy mouthed journalist would, I grabbed an article for and against.

The “pro” article I used is a policy note on Water Privatization and Regulation in England and Wales by Caroline van den Berg the Lead Water Economist at the World Bank. The “against” a briefing on UK Water Privatization by Emanuele Lobina and David Hall, research fellows at the University of Greenwich.

The articles don’t disagree on the basic facts but rather which facts they emphasize in their interpretations. Even the pro-privatization van den Berg piece notes some problems, however, so the fervent supporters should take pause before using “privatization” as a buzzword that will fix all that ails the U.S. water sector.

Van den Berg lays out quite nicely the history of the U.K.’s privatization in which the 10 Regional Water Authorities (created by consolidation in the 70s) were sold off by the government. The government tried to overcome the natural monopoly problem I mentioned in my earlier post by creating an economic regulator, OFWAT, which sets price caps for five-year periods based on projected utility operating and capital costs, inflation, performance standards, efficiency, and service levels. OFWAT was given substantial discretion and independence so it would be immune to political interference.

Now, the government didn’t make any money on selling the Regional Water Authorities. In fact it lost £1.3 billion on the sale which was intended to be favorable to shareholders and included substantial forgiveness of debt acquired under public management.  This was seen as necessary as it was such a new policy and such large investments were necessary. Van den Berg sees the major investments from the private sector in the years following privatization as a major success for the policy. There were £17 billion in investments in water infrastructure in the six years following privatization as opposed to  £9.3 billion in the years before.

She notes that there were some problems with private sector incentives. Some large projects were gold plated to take advantage of the fact that rates were set on a “rate of return” basis, private utilities were unlikely to pay the high upfront costs of installing water meters as they were not highly concerned with water conservation, and utilities transferred costs from unregulated to regulated subsidiaries to game the system and get higher rates. The final, and most politically sensitive issue, is that rates went up substantially, 28% from 1989-1997, resulting in affordability problems and service cutoffs. At the same time water companies were hugely profitable. Van den Berg believes that this problem could have been fixed if the operator had lowered the price caps sufficiently to force the private utilities to lower their operating costs. She sees these problems as resolvable if the regulator has proper information and evaluation methods.

As the issue of substantially rising rates combined with high company profitability is a political flash point, Lobina and Hall devote substantial space to discussing it. They cite water and sewage fees as rising 36% and 42% respectively from 1988-1998 as pre-tax profits rose by 142% in the first eight years of privatization and directors’ pay rose 50-200% in the first seven years. Overall, profits by U.K. companies were 3 to 4 times as high as profits at water companies in France, Spain, Sweden, or Hungary. Lobina and Hall found that the companies in the U.K. gamed the system by projecting high operating and high costs to get the regulator to set higher rates then later finding “efficiencies” to avoid these costs and thus increase profits.

Despite these high profits, a Parliamentary committee found that there was serious underinvestment in underground infrastructure as sewers were unrealistically projected to last for 280 to 1000 years. The companies have also become increasingly indebted through a string of failed attempts to diversify beyond the regulated business. The public, disgusted with what they perceive to be greedy businesses has been less willing to do their part. A call by a public utility for reduced use due to drought in 1976 resulted in a 25% reduction of water used, a similar call by a private company in 1996 led to no reduction at all.

Overall, Britain’s sudden and full privatization of the water sector under Thatcher left room for improvement but informed people can still disagree on whether privatization was a mistake or whether further reforms were simply needed. Perhaps the most interesting fact is that U.K. companies had profits 3-4 times as high as those in other European countries, suggesting that we should look elsewhere for models of privatization. Indeed, German utilities have been able to maintain affordable user rates, high quality underground infrastructure, while the use of private utilities has gradually increased. In fact, I recently saw a paper suggesting that Britain was 30 years behind Germany in the water sector. Maybe we shouldn’t be looking to the U.K. for any lessons, public or private.

 

Thatcher and Water Utility Privatization: Part I

As I was on the road last week I’m very late by Internet standards to the topic of Thatcher’s death. As Prime Minister, one of her major initiatives was water utility privatization. Her legacy on this matter remains controversial to this day.

I’m not going to make a definitive statement on whether her initiatives were on the whole good or bad. I am skeptical that such a statement is possible and would advise against fully trusting anyone who believes it is. Privatization is always a politically controversial issue particularly when it involves such fundamental public needs as water. And is likely to rise in salience again with the start of negotiations of a U.S.-E.U. Free Trade Agreement later this year. Furthermore there is a lot of confusion around this topic, and many times ideology is mixed up with economic science, predictably muddling political discourse. Because of this muddling, I’ll focus this post on the economic theory surrounding privatization by parsing the economic scientific arguments from a free market ideology. In a second post, I’ll take a brief look at Thatcher’s specific policies as a case study of privatization.

The basic theoretical argument for free markets is fairly simple. People look after their economic self interest. In doing this some people will supply goods and services that others demand and sell these goods and services at a profit. Those demanding the goods and services will look for the best price they can find, and so where there are multiple suppliers there will competition on price as the suppliers try to maximize their profits by undercutting others on price to sell more units. At the end of the day, some price is found by which supply roughly equals demand and just about all the goods and services are sold to willing buyers. This last bit is the empirical bit, and one should remember that when all kinds of fantastical claims are being made for and against markets.

This simple picture of markets quickly disappears when we talk about the water sector as we have what is termed a “natural monopoly.” It is too costly to build multiple water supply and sewer networks so consumers are going to be stuck dealing with one supplier. This gives the supplier substantial power over the consumers, and the supplier can abuse this power like any monopolist and charge consumers  “monopoly rents” (which basically means it charges them through the nose).

As we cannot very well ask people to go without water, in many cases we have it managed publicly to tame any kind of profit motive. But what if we believe that our public utility is being run inefficiently? For example, it is not using up to date asset management practices (which is very common in the U.S.). Or one sees that public rate setting boards are artificially depressing rates for political reasons and thus preventing it from making capital investments? Well one may seek to privatize it.

But even if one does privatize it, because of the natural monopoly problem, there needs to be some regulatory control of rates. And thus we’re still stuck with one of the problems that a public utility struggles with: how to set appropriate rates. And we have a new one: even if the private utility is incentivized to minimize costs, it has to make a profit. So the public is going to lose some of those efficiency gains to shareholders.

The “public versus private” debate in the water sector is not a world for panaceas. The choices are hard and imperfect, and often unsatisfactory as we’ve already strayed quite far from the economic ideal. In fact, I think it is a mistake to frame the debate as “public versus private,” terms which are politically loaded, in part due to Ms. Thatcher. The terms “organization versus market” (Simon 1996) are good for sidestepping this ideological mess. Because anyone who has had a problem with the DMV or a cable company can tell you, human organizations are going to lead to frustrations whether they are run for the public interest or for a profit motive. If we really want to improve our organizations we have to look at where markets are good at disciplining them, and where we have to look for other means.

Water Issues Across the U.S.: A Grossly Unscientific Survey

When one has been immersed in an issue for a few years it is hard not to think about it everywhere one goes. And so it was that I thought about water issues everywhere I visited during my recent U.S. road trip. While the survey of issues is far short of scientific,  I do think it captures something of the diversity of water challenges facing our nation.

Raleigh, NC: As NC has developed, sediment and pathogens from stormwater have threatened drinking water supplies and shellfish beds. They have taken some action, but I’m not sure how serious. For sure, they’re not as serious about water quality as they are about highways, their highways are wonderful.

Atlanta, GA: Water shortages and really bad aging water infrastructure issues. Here was a city with severe water shortages that was losing around 40% of its drinking water due to leaky pipes. Apparently it is now taking its water issues seriously which is why it now has water and sewer bills nearly seven times those of Chicago (according to Wikipedia). I’ve heard a couple of stories about how they mustered the political will to raise rates. One was a successful campaign to be the “water mayor.” The other was that EPA threatened to arrest the rate setting board if they didn’t increase rates.

New Orleans, LA: The land underneath the redevelopment project at right stood under about eight feet of water during Hurricane Katrina. The project was in the Saint Bernard Parish which was one of the last to flood and was believed to be safe until the levees failed, catching many unfortunates by surprise. New levees are under construction to protect the redeveloped area.

Austin, TX: They have a pretty river walk. I don’t know any more than that.

Santa Fe, NM: Very little water and, based on my previous post, don’t seem to be doing a lot about it.

Golden, CO: Has first rights to the water coming out of the mountains so has loads of water even though Denver (which is downstream) is restricting lawn watering to two days a week. Coors uses this water to make watery beer.

Moab, UT: Colorado river water, while intensely fought over, is gross to drink. Smart rock climbers use a spring from the surrounding rocks to fill their water bottles.

Las Vegas, NV: Not a lot of water but intense codes in place to keep down consumption. Apparently the visible lack of water in nearby Hoover Dam has been a strong visual messenger for more serious measures.

And that’s sort of the theme of the West into CA. This theme leant credence to the oft repeated (apocryphal) quote from Mark Twain: “Whiskey is for drinking, and water is for fighting over.”

Please let me know anything I missed. Or shoot an email to chris [at] whiskeyatwater.com.

Cute Room, Unserious Water Policy

As many of you know I’m currently driving from DC to CA. My wife and I stopped in at the adorable Pueblo Bonito in Santa Fe, NM. Look how cute it is.

Kiva Photo

They give you wood for the fireplace every night. We are in a desert however, so the City of Santa Fe has taken the forceful measure of requiring a sign to be posted in every room to tell the inhabitant to save water!

Ordinance

But in the bathroom, traditional high flow toilet and shower head. I can’t believe they’re that serious.

High Flow toiletHigh Flow Shower

 

And we haven’t seen any recycling in GA, TX, or NM. One forgets how behind much of this country is when it comes to resource conservation.