24 Aug WTP#4 – Economic Stimulus? Or Boondoggle for the Favored Few?

The Statesman article covering the city council’s approval of funds for work on Water Treatment Plant #4 reported that contractor groups and the Home Builders Association of Greater Austin touted the construction of WTP#4 as a “stimulus” project. The executive vice president of the Home Builders Association, was quoted, “The work force needs jobs, and the community needs the economic stimulus that comes with it.” Let’s examine this assertion.

Is robbing Peter to pay Paul a stimulus to the local economy? Or is it simply a wealth redistribution scheme that offers no net stimulus to the local economy? You see, unless the money to build WTP#4 is obtained from “the outside”, such as a federal grant, it is hard to see how expending those funds would provide a net stimulus to the local economy, because all that money would come out of the pockets of the ratepayers – all local citizens and businesses. Sure, the contractors and suppliers whose products and services are used to construct the plant would get a “stimulus”, but if a short-term stimulus for THEM comes at the expense of long-term costs to the rest of us, that sort of misses the point, doesn’t it?

In any case, how much of the money spent on the plant actually goes into stimulating the local economy is open to question. Consider these cost factors:

• Engineering. I’m told that Carrollo has the design contract. That firm has a local office, so some local people would no doubt be working on the plant, and their salaries may indeed have a multiplier effect in the local economy, but the overhead structure of the large national engineering firms may dictate that a considerable portion of their billings immediately exit the local economy, never to be seen here again. Montgomery Watson Harza will run the construction process. It does not have a local office. I’m told they would create a local staff of perhaps 20 persons. Would it hire local workers, who would spend their earnings largely in the local economy, or bring in employees from other locations, who would send their money out?

• Contractors. Would all of the construction contracts be awarded to locally based firms? Or again would much of what the contractors are paid immediately exit the local economy? There is no way to know that, because the construction contracts would be awarded subsequent to a competitive bidding process, and there is no way to restrict the bidders to locally based firms.

• Materials and products. The same holds for the materials and products used to build the plant. How much of the money paid for these materials and products would be directly sent out of the community, never to positively impact the local economy?

• Fuel. Large-scale works entail things like large-scale earth-moving, which consumes a lot of fuel. The money paid for that fuel would support some salaries in the community, no doubt, to run the fuel supply operation, but the vast majority of the money paid for fuel would immediately exit the local economy, draining it rather than stimulating it.

And what do we get for this? I scratched my head over the home builders stepping front and center to support providing work to large contracting firms. A connection is elusive – until you understand that the capacity provided by this infrastructure would be sold to home builders at a highly subsidized price. I don’t know what it is now, but the last time I heard, while I was on the Resource Management Commission in ’06, the amounts the city charges for water and wastewater hookups were about 40% of the full cost of providing the capacity. The rest is made up by – you guessed it – you and me, through our water bills. So of course the home builders want all of us to pony up to assure that capacity will be there for them. What we get then is to subsidize new development. I expect that’s not real high on many people’s priority list.

Fortunately – for us and the home builders – we can assure sufficient capacity continues to be available for many years to come without having to stimulate the few at the expense of the many. We can do this by maximizing water use efficiency, one project at a time. A rainwater catchment system. A building-scale or neighborhood-scale “waste” water reclamation and reuse system. Greatly enhancing irrigation efficiency, by imparting greater expertise and requiring more efficient equipment in all irrigation systems, in particular moving to highly efficient drip irrigation. For new projects at first, and incentivizing – perhaps eventually requiring – retrofits on existing homes and commercial buildings, if they wish to continue to maintain an irrigated landscape. Which highlights that changing to landscapes featuring far less thirsty native plants is another measure with great potential for cutting irrigation water use.

These measures – which I group under the term “deep conservation” – would not be dependent largely on how people act, as is much of the Water Utility’s self-described “aggressive” water conservation program. Rather, deep conservation is designed into the very fabric of each project. Done on a broad scale, these measures would impart ASSURED, SUSTAINABLE gains in water use efficiency, thus more or less permanently conserving water. So perhaps we should ask, how much deep conservation could we buy for the billion dollar cost of WTP#4?

Sustainable water savings from the most widely known part of the Water Utility’s program – watering restrictions – are far less assured. This is mostly a drought contingency plan, not a sustainable, permanent water conservation measure. It just calls on people to irrigate less often and presumes that – if they comply, which is not being enforced so far – this means they would use less water. That is by no means assured, since they could just water longer each time, and anyone can water with a hand-held hose without limit. And when the drought eases, the restrictions will ease, and water use may (will?) go back up.

The local economy would be well served too. Whatever money is spent on deep conservation projects would almost certainly create more local economic stimulus than would money spent on WTP#4. Deep conservation projects would be far more likely to create employment in locally based businesses. Tanks used in project-scale wastewater reclamation and reuse systems would be fabricated locally, equipment used in them would be vended through local supply houses, and the contractors who install such small-scale projects would be locally based. Design and installation of irrigation systems and landscape modifications would also be done by local firms. While money spent on materials and equipment may be just as likely to exit the local economy as money spent on big-ticket items for WTP#4, the process of vending these products would no doubt create many local jobs. Just one example – if the total volume of drip irrigation hose and associated equipment sold here goes through the roof, the companies who supply it would have to hire more people, and other companies would start selling it, probably expanding their operations as well. Thus, more of the money spent on deep conservation measures would flow to more of us.

So, while it is likely we would see a considerable net stimulus to the local economy from deep conservation projects, it’s hard to see that building WTP#4 can legitimately be called a stimulus to the local economy. Quite the contrary, it would be a drain on the local economy, and it would keep on draining, one water bill at a time.