The Price Of Free Money

I read recently that a bipartisan group of lawmakers is proposing to raise about $10 billion a year for the rehabilitation of sewer and water systems. The funding sources?

Increased taxes, of course, to come from sewer and water’s biggest industrial users. The money would be funneled into an industry trust fund. The essentials of the idea aren’t new; trade associations have been suggesting variations on that theme for several years now.

It’s an intriguing idea, sure to be opposed by manufacturers most impacted by the new taxes, such as bottled water, pharmaceuticals, detergents, toiletries, cooking oils, etc. Frankly, I don’t have much sympathy for the bottled water industry – one of the greatest rip-offs in marketing history.

The trust fund concept has proven successful, to a limited degree, in the transportation industry and is worth exploring for sewer/water. However, it really doesn’t matter which industries are taxed, ultimately that cost would be passed along to consumers and adding taxes to our frail economy right now seems irresponsible, even irrational.

But beyond the increased tax burden, I’m also concerned about the message this sends to city councils and mayors: Big Brother to the rescue once again. Part of the underground infrastructure funding mess we’re suffering now had its roots with the formation of the Clean Water Act and the initiation of the State Revolving Loan Fund. The sudden availability of cheap Federal funds or matching grants led many municipal governments to keep user fees artificially depressed, so much so that water/sewer rates often can’t even support operations. As funding has decreased from these programs – which was the plan all along – cities found themselves with inadequate local funding to address their needs.

If the infrastructure “trust” program were to be established, federal funding levels would be increased four to 5 times current levels. I fear city councils would once again abandon realistic user fees and other local financing options in lieu of turning to Uncle Sam to provide major funding as needed. The sad part is it doesn’t matter where the money comes from, you and I are still going to pay for it. The difference is that with a trust fund, we’ll be paying for programs in cities other than our own. Of course, city councils would look like good financial stewards by not raising sewer/water rates to keep up with costs and inflation.

My home city of Houston is a great example of often misguided perceptions of the importance of the underground infrastructure. In the late 90s, then-Mayor Lee Brown diverted money from a fund which technically was earmarked for storm sewer improvements, to improve parks in certain sections of the city. Did the parks need drastic upgrades and improvement? Certainly. Did the storm sewers have money to spare? Absolutely not.

The parks program left a city, already susceptible to flooding, short of additional storm sewer funding. In 2001, Tropical Storm Allison dumped up to 40 inches of rain over Houston, resulting in severe flooding in downtown Houston. Redesign and rebuild efforts started in a financial hole as the stormwater fund was depleted – but Houston had some nice parks.

Parks are great. Over the years, my family and I have very much enjoyed public parks and recreation. But city councils and mayors raiding essential services to pay for city beautification and parks just because it appeals to a political support base is not the answer.

Most senior public works employees understand the dilemma but are relatively powerless to overturn bad public policy at the city council, mayoral or even state levels.

Still, an infrastructure trust could be a good idea, but only if monies are made available to those municipalities who have put forth sincere efforts to address their needs locally and user fees reflect actual operational costs. There would have to be funding protocols in place – that’s the only long-term solution for cities to meet their current and growth demands. Cities must step up first and rely on federal funding second. Those are the type of responsible local governments that we can gladly support through an extra four cents per water bottle.

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