Monthly Archives: July 2010

See you next week. Hope you are enjoying your summer.

More on “beneficiaries pay”.  I hadn’t seen the Pacific Institute’s powerpoint presentation on the water bond when I wrote up my last two posts. I think it raises some of the same questions: how does the state want to pay for the next round of water infrastructure?  One of the questions the Pacific Institute raises is a little more leading:

Question: Should the public or project users pay to fix ecosystem damages caused by past projects? (slide eight.)

Rather answers itself when it is put that way, doesn’t it?  Except that:

1.  “Project users” don’t want to pay, and the political fight would be long.

2.  Depending how you define the project users, they may not have the wealth (even if we could extract it) to pay to undo the ecosystem damage the projects have done.  Could take that much money out of the farming sector (yes, because there’s a fair amount of wealth in it), and still have it be a farming sector (maybe not, because that wealth isn’t very liquid and is bound up in land prices and big harvestors)?  Maybe it isn’t important that it remain a farming sector, but that’s a much more loaded policy question than, should the people who broke our rivers pay for fixing them ?  Or are the “project users” the SoCal cities (or a combination of both, of course)?  Easy for people in Northern California to say, but at this point you’re talking about more than half the people in the state.  So the half the people in Northern California and the central coast especially don’t want to pay for project ecosystem damage?  They’re the ones who get to live near the prettified Delta and see the salmon swim by.  These questions get hard fast, all the more so when you realize that most everyone here was born into an existing system and didn’t make any decisions about whether to have the water projects we do.

I don’t know my own answers (although I’m strongly in favor of better budgeting processes, so it doesn’t cost us money just to collect and spend money).  Probably my own real answer is: “We should all pay for projects I like, and “beneficiaries pay” should be a roadblock for projects I don’t like.”

***

On re-reading, I’m not sure exactly what the two issues that Prof.  Bass wanted to discuss.  These questions:

How can the private beneficiaries be distinguished from the public ones?

How does a suburban developer in Palmdale get separated from the person he sold a house to ten years ago?

Or the larger themes of the post:

Who isn’t helped by the collective projects in the water bond? and

Isn’t the “pork” in the water bond also job-generating stimulus?

Since he is still reading the water blogs all the way from his vacation in India, I’ll take a stab at those questions.

How can the private beneficiaries be distinguished from the public ones?

I dunno, man.  You look at a specific project, try to track down some of the externalities (positive and negative), see whether the money creates value that mostly accrues to a private person or in a fashion that isn’t widely accessible even if technically public.  This is the wrangling part, and I can’t see how it can be done in the abstract.

How does a suburban developer in Palmdale get separated from the person he sold a house to ten years ago?

Holy shit, I love this question.  I might have to give it its own post, especially if I divert into the rant that is raging in my head.

Who isn’t helped by the collective projects in the water bond?

Well, you could do a lot of bean counting, and eventually come up with a county that got the shaft in this water bond.  They end up paying more in re-paying the bonds than they get back in their own “pork” project.  Or you could do lots of accounting and figure out that some district did quite well for itself, paying out less than the local project was worth.  Presumably every legislator thinks she is in that category, or at least that it turned money into a nicely visible project.  I think there’d be lots of money flowing around the state, and it is very difficult to put money values on the resulting projects, so an accounting attempt along those lines wouldn’t end up being useful.

I think some people would say: sure, in the water world it is all sort of a wash, but the whole world isn’t water.  I know, I know.  I can barely talk to those freakshows either; I back away from them while making reassuring cooing sounds in case they are dangerous.  But they say things like “schools” and “hospitals” would provide more societal value for the bond money we would spend on water infrastructure.  I have no way to evaluate their incomprehensible claims.

Isn’t the “pork” in the water bond also job-generating stimulus?

Presumably, since paying people to twiddle their thumbs would be job-generating stimulus.  Don’t know if I think this is the best and fastest job-generating stimulus.  It’d take a couple years to get those projects in the construction phase.  If job generation were my only priority, I’d pay for fuels reduction in the Sierras, or arundo eradication, which could be started up very fast.  But yeah.  Those projects would hire a lot of people around the state.

John Bass wrote a real interesting post raising questions about “beneficiaries pay”, which is essentially the concept that the direct beneficiaries of a project should be the ones to finance and pay for it.  He asks two questions, to which I’ll give my answers, probably not satisfactorily.    First, though, I want to muse on ‘beneficiaries pay’ a bit.  ‘Beneficiaries pay’ is pretty much the orthodoxy these days; the Sacramento Bee op-ed goes on to make the case for it:

California needs to invest in its water future, but it must make smart investments – and equitable ones. Before voters are asked to authorize more general fund debt on top of existing debt, the beneficiaries of water projects need to be identified and obligated to pay for their fair share.

And here’s Dr. Michael talking about it:

The most valuable water supply projects will still be constructed if the bond fails. Financially feasible projects will be appropriately paid for by the water users who benefit.

I hear the concept taken for granted in a number of venues and I hadn’t heard it questioned until my recent post and Prof. Bass’s linked post.  But I don’t think that “beneficiaries pay” should be so accepted that it is assumed to be the default.

• So far as I can tell, “beneficiaries pay” is a signal detection problem.  The two extremes are uninteresting cases.  If we were taxing everyone in the state to give the City of Beverly Hills a shiny new local reservoir behind marble gates, this would be conspicuously unjust, and we would be right to tell people in Beverly Hills to pay for their own damn reservoir if they want one and are going to keep us out.  Beneficiaries pay is a great idea!  At the other end of the spectrum, it would be unjust to tell an economically disadvantaged community to pony up for a expensive wetlands project for their wastewater that was going to be the key to cleansing the entire San Francisco Bay and growing beautiful migratory butterflies that land on the cheeks of small children in San Diego and give them kisses.  Beneficiaries (of the narrowly bracketed wetland project) pay is a terrible idea!

Beneficiary pays is not intrinsically great or terrible.  Rather, most cases are in the middle, and what you see is a lot of wrangling about whether any particular project is closer to the Beverly Hills example or is providing wider benefits that have gotten overlooked.  Rather than dispute the concept, most people are saying that their project happens to be just over some undefined threshold where, yeah, basically everyone should chip in for it.  But people believe in that threshold, and have different ideas about whether false positives (paying for too many Beverly Hills reservoirs) or false negatives (paying for too few wetlands in poor communities) are the real failures of the system.

• Environmentalists have gotten behind ‘beneficiaries pay’ because it is a good way to stop projects.  Want a new dam, farmers in the SJV?  Offer to pay for it first, and we’ll fight over it second.  It puts off a lot of fights when the people who want a project don’t even offer to pay for it.  When MWD offered to pay for the Peripheral Canal, it brought the project into the fighting stage. Since I’m hesitant about some types of projects, I do like that aspect of “beneficiaries pay”.  But I’m not hesitant about local watershed projects, so I’m listing arguments against it next.

• I don’t know what the opposite of “beneficiaries pay” is; “collectively pay”?  But I know this.  “Collectively pay” gets projects in the ground.  It works.  Basically the entire country’s wastewater treatment capacity was built in the ’50’s through 70’s with free federal moneys.  Cities that missed that round of federal hand-outs for their wastewater treatment plants often still don’t have a wastewater treatment plant; they are facing costs of hundreds of millions of dollars to put one in now.  They say their citizens can’t afford it, and there’s some truth to that.  Given that the next round of state water infrastructure management is going to be relatively expensive local projects everywhere in the state, maybe it will take a huge push of state monies to get those built.  Maybe bonds aren’t the cheapest way for the state to finance those.  If I thought the state were going to use cheaper financing mechanisms, like taxation or a water finance charge, I would support those over bonds.   If I think the alternative to bonds is doing very few of those local projects (and those only in rich communities who choose to tax themselves), then I’m for whatever funding mechanism gets those projects going.

• Finally, I think that given that the state needs to undertake local water infrastructure projects (unglamorous ones, like efficiency retrofits, and mountain meadow restoration, and putting tertiary treatment into sewage plants) throughout the state, and given that everyone is going to be arguing that their project generates butterflies that kiss us all, jesus fuck.  Do we really want to keep track of who subsidized what, and who came out slightly ahead, and which community was the slight loser?  Really?  Are we a state, a collective entity, or not?  Maybe that attitude is a luxury of a richer community, and is one of the things we lose as we become poorer and stingier with each other.

Seems to me, though, that some of the motivation behind “beneficiaries pay” is the conservative fear that somewhere, some community is getting a project they don’t deserve.  That maybe, somewhere in all this pork, it is unfair for the people of the state of California to pay for a dam removal in a well-off community.  One argument is that we all get some benefit from the dam removal.  But my argument is, so what?  So what if it is unfair?  Then what?  Will tornadoes come to punish us?  Will it rain frogs?  Will we go blind?  Besides the aggravation of unfairness, what bad thing will happen?  Again, I might be wrong.  We might genuinely be so poor that if we accidentally pay for a rich community’s dam removal, school children elsewhere will go without textbooks.  In that case, things are dire.  I understand that the state government is more than broke, mostly because of fucking Howard Jarvis a hopelessly tangled state budgeting process.  But I cannot believe that there is not enough wealth within the boundaries of the state to build the next round of water infrastructure projects (even if they don’t look like the gleaming canals of the last round).

The arguments for economists are different, and below the fold.  Prof. Bass, I didn’t even get to your questions, although I want to.

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Aquafornia put these up today, and I think they’re pretty representative of the anti-bond measure op-eds that have been appearing for the last many days.

From the Sac Bee:

Much has been written about how lawmakers cobbled together this $11.1 billion Christmas tree in the wee hours of Nov. 4. As lawmakers held out for more and more projects for the price of their vote, the tree became festooned with all kinds of ornaments. The cost of the bond package grew by nearly $2 billion.

The final package, approved as part of a sweeping set of reforms aimed at restoring the Sacramento-San Joaquin Deltaand improving water reliability, includes a little something for everyone. There is $20 million to help Siskiyou County with economic development; $100 million for watershed restoration in Lake Tahoe; $100 million for the San Vicente Reservoir in San Diego and more than $1 billion for unspecified projects – in other words, handshake deals.

Given the national backlash against self-serving “earmarks,” it is stunning that lawmakers and the governor thought they could get away with this. Yet the proverbial pork barrel is not the only reason this law should be repealed and revamped.

From the ChicoER:

The amount of money could make a difference, if it was in fact targeted to meeting the needs of the state. Instead, it’s dribbled out through several different conduits for projects that haven’t even been defined. It’s just dumping a bunch of cash out there for cities, counties, special districts, state agencies, nonprofits, conservancies, utilities and their armies of consultants to fight over.

If you were going to rationally solve the state’s water problems, you’d steer most of the money to fixing the delta and the rest to increasing water storage. But Proposition 18 allocates money to drought relief, “water supply reliability,” conservation and watershed protection, among other things.

My question for these newspaper editors is:  What do you think Integrated Regional Water Management is?  Maybe they don’t think anything about Integrated Regional Water Management, because who would, if you could be thinking about the World Cup instead.  But IRWM is DWR’s flagship program right now, and the wave of the future and the savior of us all.  (Actually, I have some doubts about it, but*.)  It emerged out of the 2005 Water Plan Update (as the only thing that no one hated); it is strongly backed by the legislature.

IRWM is California’s water policy right now, and these editorials tell me that people don’t really know what it is.  Because I promise you, IRWM is exactly things like watershed restoration, stormwater projects, local purple pipe infrastructure, and water conservation, splashed out in pieces all over the state.  If legislators gathered all those “pork” projects and bundled them into $2.5B for IRWM, would you approve of that, op-ed writers?  Because those projects are what look like the next best sources of water to the locals.  If they don’t get stand-alone money in a water bill, they’ll go to the top of the list in an IRWM Plan.  (Maybe you think that dispassionate bureaucrats should evaluate the projects as a field and be the ones to prioritize the projects in a grant funding round.  Eh.  Seems like letting the projects fight it out in a legislative frenzy is roughly the same.)

I know that op-ed writers want a pure, low entropy supply (like a big, beautiful, sparkly arching dam) to appear (with magic water to fill it), and we can fund that in one glorious purchase.  But those are gone.  We’re collecting the next best things now, the widely distributed local efficiency gains that we were rich enough to overlook before.  You can call it pork or you can call it IRWM.  But that’s our world now.  We don’t have to do those.  But if we don’t, we have to live within the recent drought years’ water supply and make life-style changes.

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This article by Mike Taugher of the Contra Costa Times is beautifully done.  When Fiorina asserts her campaign theme (the ESA is costing California tens of thousands of jobs), Taugher knows enough about the field to correct her and the record.

Fiorina said the Delta water crisis is a “huge piece of my platform,” in which she argues that an increase in water supply is essential to creating jobs.

But her attacks are not always accurate. Delta pumps were never turned off last year — they were dialed down but that was mostly because of dry conditions and not endangered species rules. And she has exaggerated the number of jobs lost.

Mr. Taugher’s article (at least) twice points out that Fiorina is exaggerating at best, lying at worst, about facts that she knows are inaccurate.  I’m very glad that we have a half dozen or so water reporters who are too knowledgeable to repeat campaign slogans as facts.  I hope the political reporters who cover the campaigns are as professional as our water reporters.