Urban Returns

Legacy costs

Here's a thoughtful piece from Aaron Renn on an unintended consequence of the Clean Water Act.   EPA mandates are forcing Cleveland to spend $5  billion to overhaul its sewer system.   That's a lot of money for any city, but especially for a struggling rust-belt town.   Cleveland will be forced to raise water and sewer rates dramatically, and probably a bunch of other taxes, too.

Cleveland can't go anywhere, but its residents can.   (This is a city where the police and firefighters openly celebrated an Ohio Supreme Court ruling that allows them to move to the suburbs.)  Renn predicts -- accurately, I think -- that the higher taxes will speed up the depopulation of Cleveland as homeowners have one more reason to move to the suburbs.   In fact, the mandate will kick the city twice:   Cleveland must not only raise taxes, but it will lose money that it could have spent on other improvements that would have attracted suburbanites back to the city.

Cleveland needed to make dramatic improvements in water quality; after all, this is the city whose river famously caught fire in 1969 (which itself provided much of the momentum for the Clean Water Act).  But the Cuyahoga is now clean; residents fish from it, in fact.  Spending another $5 billion to get that last 10% improvement is a bad use of money when Cleveland has more pressing needs.  And it is counter-productive to drive residents to the suburbs to leave rotting infrastructure sitting unused in the central city.

Renn suggests that the federal government assume the cost of replacing ancient sewer systems.  That might be the only solution.  The federal government has no incentive to weigh costs and benefits accurately when it can simply issue a mandate.  And the moral hazard risk is smaller than one might think:  the city's main "crime" is being old enough to need a new sewer system.

Guarding against strategic behavior by a city is tricky anyway since, again, its residents can simply move when things get bad.  Rather than stick central cities with crippling legacy costs, it makes more sense for the federal government to issue reasonable regulations and pick up the tab for unforeseen costs.  

(Cross-posted at Austin Contrarian.  Comment there.)

Environmentalists should advocate water pricing, not conservation campaigns

Environment Texas is lobbying City Council to increase its water conservation budget by one-third.  We're in a severe drought, you know.  Just like we were last year.

We're also in a recession.  The city has no spare change lying around.  Why, it's even offering an on-line budget "simulator" so ordinary citizens can see first-hand the hard trade-offs the city must make.

If only there were a way to encourage deeper conservation during this parching drought while simultaneously protecting our city budget.  If only there were some way to make our good residents understand just how precious water is right now without another million-dollar advertising campaign by the city.

There is, of course.  Just raise the price.  I assure you -- no, I swear to you -- that there is a price that will bring water use down to the necessary level.  As a bonus, the city will garner more revenue that it can use to plug its budget gap.  As a bonus on the bonus, the city can dispense with its costly conservation and rebate programs and use that money to plug the budget gap.  And as a triple bonus, Austin's residents can get out from under the stringent water restrictions.  They will be able to water their yards when they want -- but they will use a lot less water, if they choose to water at all.

I understand the political opposition to raising prices, even if I despise it.  The suburban lawn-watering lobby is a powerful player in this town.  But I don't understand why environmentalists refuse to get on board.

I know that some of them do support price increases and some of them helped push through price increases last year.  But those price increases were not nearly high enough and, anyway, prices need to be flexible.  We should charge high prices during a drought and lower prices when water is plentiful.  I haven't seen any environmentalists pushing that pricing scheme.

But the real problem with the environmentalists' approach is their willingness to buy both boots and suspenders.  Even those who want to raise prices also want to impose watering restrictions and pay gobs of money for conservation programs.  If we price water right, these last two are unnecessary.  In fact, they are a dead-weight loss.  They make us collectively poorer without providing any corresponding cost-justified gain.

So why don't environmentalists support pure water pricing?  I think it is the kumbaya spirit that animates many environmental groups.  A kind of "we're all in this together" mentality.  And a tinge of moralizing, which makes them more comfortable with imposing a code of conduct like the city's watering restrictions and issuing solemn commandments such as, "Thou shalt not waste water."

I'm not mocking them.  Well, I sort of am, but I don't mean to be mean-spirited.   Environmentalists' collective action and earnest commitment are valuable commodities in a society that often seems determined to squander its natural resources as quickly as possible.  But communitarianism is very, very expensive.

(Cross-posted at Austin Contrarian.  Comment there.)