Editor’s Log: City Courage

The Houston City Council, bowing to the inevitable, recently voted to phase in sewer and water rate increases over three years by as much as 30 percent. That means an average single-family household will see their typical rate climb from $47 to $60 per month by 2013.

Typical local news coverage bemoaned that now Houston will have rates “at a higher level than many major U.S. municipalities.” What an idiotic non-statement. Houston will also still have rates lower than many U.S. municipalities. When considering all the countless, critical reasons a healthy and effective sewer/water system is imperative for municipalities, having rates among the cheapest in the nation is not something to be proud of when the result is an inadequate system that is dangerous to the health and prosperity of said municipality.

Also buried in newspaper, online and broadcast news (if even mentioned) was the fact that Houston has been subsidizing the water and sewer department for . . . well, nobody can remember just how many decades the city has been subsidizing the department. In 2010, the sewer/water funding shortfall is expected to exceed $100 million, all to be made up by taxpayer dollars.

Three council members voted against the plan. One of them apparently was trying to score empathy points with constituents when he said: “The amount of the increase in this environment is very unfortunate and unfair.” I agree – it is unfair. It’s also unfair – and borderline criminal — that previous city councils/mayors were short-sighted to the point they failed to realize that multi-million dollar subsidies of the city’s sewer/water department was unsustainable. They were, in effect, punishing future Houstonians.

To the 11 city council members and mayor who did decide to meet the issue head-on and do something about it, thank you for your courage and foresight. Of course, the city is in the middle of battling a $140 million budget shortfall for fiscal 2011 that doesn’t include the water/sewer department. They have no choice but to face the tough choices being forced upon them.

In all fairness, Houston did have an escalator built into their user fees, but it was poorly conceived and rarely reflected actual costs increases. In the future, the city will tie in annual rate increases to the producer price index, which in theory more closely follows actual cost increases to the water and sewer system.

Does all this sound somewhat familiar? Could this be a similar scenario being played out in your hometown, large or small? City governments must continue to muster the courage and insight necessary to make the tough decisions to secure the health of their communities.

Ripple effect
When the Charles Machine Works (Ditch Witch) pulled a market coup with the acquisition of Earth Tool Corporation (Hammerhead), it essentially severed a long-term symbiotic relationship between Hammerhead and Vermeer Manufacturing.

Hammerhead was owned and operated as an independent company, having a marketing agreement with Vermeer and supplying product to Vermeer dealers. But with Ditch Witch, Hammerhead becomes a wholly owned subsidiary.

The immediate impact is that Ditch Witch suddenly moves from barely a blip on rehabilitation market radar screens to a major player in the pipebursting industry. Further, they are now a strong number two supplier in the piercing tool market, and Hammerhead will also provide Ditch Witch with a presence in the pipe ramming market. Hammerhead has also been making HDD tooling/drill bits for Vermeer rigs, but Ditch Witch has its own line of tooling so it is unclear how they will utilize the Hammerhead tools.

Apparently, Hammerhead is still obligated to meet supply and support needs for Vermeer dealers for some time. But Ditch Witch dealers will also start selling Hammerhead product immediately. Of course, such an arrangement is untenable for Vermeer, and the company will move away from that arrangement as soon as possible, if not immediately.

How Ditch Witch capitalizes on their expanded market capabilities remains to be seen. But they have placed themselves in an excellent position to grow their presence immediately in new and existing markets while charting a course for robust growth.

Vermeer is now struggling to minimize market impacts and regain the trust of irritated dealers. The good news for Vermeer is that there are market options available to reestablish their strengths. How they facilitate this new market dynamic will define the company for the next generation.

Of course, the winner in all this could be TT Technologies, the number one producer of pipebursting equipment and piercing tools for the U.S. market. They have the opportunity to solidify their leadership position.

The ultimate question remains: Who will seize the day?

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