Archive for November, 2015

Spend first; evaluate later:  the mantra of many California politicians, including appointed bureaucrats – some charged with responsibilities that significantly affect our everyday lives.

As Ron Galperin’s recent audit of the city’s water conservation rebate programs illustrates, it is easy to sell a bill of goods to an unsuspecting public; in this case, under the guise of water conservation.

Who doesn’t want to save water?

For the record, my wife and I let our back lawn die and recently replaced it with hardscape and drought-resistant plants.  The rebate program was already winding down and, since we allowed the lawn to die, the project would not have qualified .

Several years before, we replaced the parkway section of the front lawn with similar plants – but that was before the rebate.

We are glad we did. Almost no water from our irrigation flows into the street.  And we like the look. We would do it again with or without a rebate.

Some of the savings goes to keeping our property’s trees adequately watered and healthy. By contrast, the city cut way back on watering the lawn at the local park.  The result not only converted play areas into dust bowls, but now the trees are dying.  Two were so weakened, they came down in the winds that ravaged the area the other week.

The fact of the matter is, many home and commercial property owners would have altered their landscaping or conserved to save money without a rebate – and many did.

According to the audit report, DWP spent $65 million in rebates over the last two years to save a half-gallon of water per person daily.  But Angelenos voluntarily saved 22 gallons per day at a cost to the utility of nothing.

Let’s give a pat on the back to the city and the DWP for emphasizing the severity of the drought, but higher water costs had much to do with the reduction in use.

Regardless of whether conservation resulted from rebates or cost-induced conservation, it all pales in comparison to the potential relief from capturing runoff – 10 billion gallons of it in a single storm.  Harnessing just a fraction of the volume throughout the year would not only be cost effective, but would make all other incentive programs a mere drop in the bucket by comparison.

The estimated cost of capturing an acre-foot of runoff amounts to $0.003 per gallon (326,000 gallons per acre-foot at a cost ranging from $600 to $1100 per acre-foot. I assumed $1,000 in my calculation).

The DWP is eyeing such a plan, but has allowed itself to be distracted by far less effective measures.

Turf removal rebates are expected to save 6.5 billion gallons over a useful life of 10 years, or 650 million annually. The total cost of the program was $18 million, which equates to $0.03 per gallon per year and $0.003 over the relatively short useful life of 10 years.

While the cost of turf rebates appears to be the same as the cost per gallon from controlling runoff, keep in mind that the latter produces benefits well beyond 10 years….meaning many billions of gallons more saved over time.

Understandably, economies of scale would be necessary to achieve  a low unit cost for runoff reclamation, which is why I applied the high end of the cost range to my calculations.  But even pilot programs to capture a portion of the copious flow to the ocean would put us on the path to tapping in to all of the water we will ever need. Just as a journey of a thousand miles starts with a single step, $65 million in rebate money would have amounted to quite a few steps towards the critical objective of capturing more runoff.

It makes sense to focus on the long-term, big savings than the feel-good measures, such as turf and other rebates that are destroying our urban forest and green space, replacing it with a landscape only Turf Terminators or Fred Flintstone could appreciate.

Galperin might be the most sensible official in the city.

As he stated in his letter accompanying the audit report: “If money is no object, turf replacement rebates are a relatively expedient way to save water, but, of course, money is an object.”

He went on to say,“Our city’s water conservation efforts aren’t just about reacting to the current crisis, but rather changing the way we think about water.”

That, my friends, is taking a long-range view of a long-term structural challenge. That’s the way it should be.

When it comes to expanding water resources, we must look beyond piecemeal, myopic programs; instead focus on strategies which deliver a reliable supply for generations. Let’s not waste money on quick fixes with limited returns.

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A guest commentary in the Los Angeles Daily News cut to the chase over the DWP’s disregard and disrespect of its customers.

Jamie Court, president of Consumer Watchdog, a national nonprofit interest group, took Mayor Garcetti and Ratepayer Advocate Fred Pickel to task for allowing the DWP’s practice of deception and resistance to reform to continue unabated, as evidenced by the mishandling of the billing system scandal and negligence in the handling of the controversial nonprofit trusts .

He did not go far enough. General Manager Marcie Edwards and her predecessors are equally complicit.

Let me focus on Garcetti and Pickel first.

The mayor made DWP reform the cornerstone of his campaign in 2013.  Was he merely leveraging off of Wendy Greuel’s overt cash and support from the utility’s union, or did he really intend to seek reforms?

Greuel would have been the best friend Brian D’Arcy ever had at City Hall (and he’s had his share).

It appears that Garcetti may rank near the top of D’Arcy’s Christmas card mailing list this Holiday season. Makes you wonder why he squandered so much money on Greuel when he could have had Garcetti for peanuts. That’s a question the union head’s members should ask. $2 million-plus pays for lots of goodies.

Let’s examine the progress Garcetti has made towards reform……

If I missed anything, let me know.

Aside from caving in on the union’s contract demands upon assuming office – the already well-compensated local did not have to make any of the sacrifices other city unions did in the face of the recession – he then failed to provide any measurable support to Ron Galperin’s quest to audit and end the blatant misappropriation of $40 million of ratepayers’ money.  The cash was used to fund highly questionable practices at two nonprofit trusts jointly controlled by IBEW Local 18 (D’Arcy) and DWP’s spineless management team, which included former GM Ron Nichols, who did not raise so much as a red flag about lack of controls and lavish spending. He, as much as anyone, was aware that the DWP’s own safety programs made the existence of the trusts unnecessary.

Garcetti folded like a cheap beach chair at a barbecue for the WWF when D’Arcy denied the seating of the mayor’s appointees to the boards of the trusts.  D’Arcy was fine with the new GM, Marcie Edwards, as a member. Subsequent events proved she was a wise choice to advocate his interests at the trusts.

Speaking of advocates and advocacy, what progress has Ratepayer Advocate Fred Pickel made towards facilitating reform at DWP?

Allow me to summarize…..

Want me to spell it out again?

To be fair, Pickel is not an administrator, nor does he have anything resembling executive power, but successful advocates do not need delegated authority from the top.

In a city such as ours, where many officials are bankrolled by special interests, an advocate will hit a brick wall when dealing with the establishment.  The only chance of success is to involve the public…and that takes inspirational outreach.  People need to be educated as to what is not working, in terms they can understand.

The only way to fight gross mismanagement in public administration is by reaching the hearts and minds of the stakeholders, ratepayers and residents in general.  In the case of the DWP, we are all affected whether or not we are a customer. Only the people can effect change, but they need to know why change is necessary. There also needs to be a critical mass reached.

I have no doubt Mr. Pickel has his heart in the right place, but he is not assertive. Not even close. If he is more concerned about losing his position, he has a moral obligation to step down and allow a true advocate to assume his role.

Pickel would be more effective as an adviser to an advocate who truly knows how to communicate with and engage the public and the media.

Now Edwards.

To date, none of her managers have been fired for their role in the disastrous implementation of the DWP’s billing system, despite the anxiety and woe it created…and still causes…among the ratepayers. No customers can assume they will be unaffected somewhere down the line. Some customers have been treated which disdain tantamount to abuse.

Edwards has glossed over this, not admitting she failed to order her direct reports to pursue disciplinary measures, including termination, against those who approved the system.  While Price Waterhouse Coopers deserves to pay heavy damages, any system, regardless of who developed it, must be fully tested and pass management’s expectations.

Failures at DWP will continue if there is no change in key, decision-making positions.

Edwards also sided with Bryan D’Arcy against the audit of the nonprofit trusts pursued by Controller Galperin.

Her progress reports concerning reforms at the nonprofit trusts are insipid, designed to suppress information about the lack of progress..

She does not represent the interests of the ratepayers, just management’s and City Hall’s status quo.

Until the public pushes back at the ballot box, little will change.

Garcetti, Edwards and, to an extent, Pickel are more interested in keeping their jobs.  It’s too much trouble for them to tackle reform. They choose to acquiesce to D’Arcy, the union and those who are beneficiaries of the deceitful entity known as the DWP.

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Time and again one hears High-Speed Rail proponents argue that since airports and highways receive government subsidies, why should we mind if HSR requires our support?

Aside from Proposition 1A’s provision barring taxpayer-funded operating subsidies, the argument that HSR is as deserving of government assistance as air and roads is specious.

The argument would bear some logic if commercial and private vehicle traffic through the San Joaquin Valley, particularly along routes 5 and 99, and airline travel were  intended to primarily serve  intrastate commuting between Northern and Southern California.

Airports in California serve far more than the travelers flying between the state’s cities.

The second busiest airline market in the US is the San Francisco – Los Angeles route at around 3.75 million passengers per year.  A large number for sure, but it pales in comparison to the number flying the third and fourth busiest routes – between LA and New York, and LA and Chicago. These two routes total 6.3 million.  Add in service to DC, Seattle, Atlanta, Denver and other hubs and the gap between intrastate and other markets widens even more. International travel turns the gap into a canyon.

Airports are gateways to the nation and the world.  CAHSR would connect cities where the bulk of the travel is not only discretionary, but travelers have far more flexibility with their itineraries within the current network, as imperfect as it may be.  You can adjust departure times far more easily between SF and LA than you can with trips to most of the nation and the world.

Highways funnel more than people.  Our economy depends heavily on trucks to deliver goods to the market.  While rail freight is the most efficient means of transporting goods, food and raw materials, trucks also connect rail yards to local stores, warehouses and individual residences.

A few years ago, Governor Brown equated the importance of the high-speed rail project to the construction of the transcontinental railroad in the second half of the Nineteenth Century. He may have been around back then for all we know.

This is an absurd apples and oranges analogy. Probably more like fruits and nuts, with the governor belonging to the latter category.

The transcontinental railroad facilitated commerce. Prior to its existence, the only practical way to ship goods between coasts was by sea through Cape Horn, a journey that took months and was perilous.

Within ten years after the golden spike was driven into the last tie in 1869, $50 million of goods were shipped from California to and from the east. That’s $50 million in 1879 dollars. Trade grew exponentially afterwards.

The bullet train is designed to move passengers, a very small segment of the transportation market. It will add little or nothing to commerce. If anything, there will be a high cost in relation to the limited environmental value, if any, the HSR Authority swears will lessen the effects of global warming .

I can accept the need for airport and roadway subsidies.  They promote commerce and  seamlessly connect large and small communities.  No inter-regional rail system would be able to deal with a mere fraction of the markets they serve, let alone delivering the products we need in our everyday lives.

And as I have stated in other articles, it is far more important to support rail/subway transportation systems within large metro areas that reduce local commuting traffic.

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A recent Los Angeles Times article warned that the California High Speed Rail system’s cost, already double its original estimate, is expected to increase by 31% to a total of $41 billion in its first leg from Merced to Burbank.  The overall project cost is expected to rise 5% to over $71 billion, but engineers acknowledge the cost of drilling through many miles of fault-permeated mountains to connect the San Joaquin Valley to the San Gabriel and San Fernando Valleys is a high-stakes gamble.

HSR officials and proponents were crying high-speed tears over the disclosures referenced in the Times story.

But no one is talking about what is really missing in the dueling assertions about the financial, practical and operational considerations of this controversial public works program – mainly, capital budgeting.

One of the premises of capital budgeting is the assumption that money does not grow on trees.  Any organization, whether government or private business, does not have unlimited resources   There are always investment alternatives to consider as well.  The object is to select the projects with the greatest return or value with a realistic assumption regarding risks.

The CA HSR system was approved by the voters in 2008 when it was packaged as Proposition 1A.

Propositions are the antithesis of capital budgeting.  Voters are not presented with competing alternatives, only the political whims of interest groups.

What would the investment alternatives be to HSR?

Any water project would come to mind, but that’s apples and oranges.  Water is an economic life or death issue for the state and cities.  Projects to increase storage and reclamation need to be compared to comparable, vital improvements.

HSR is not vital.  There are already working modes of transportation to move people between north and south.  Most inter-regional trips are discretionary. However, there are intra-regional transportation challenges that affect our average, everyday lives. Let’s say, commuting between the Valley and the Westside or mid-Wilshire; the South Bay and points north, and other cross-metro routes.

Los Angeles is not unique in this regard.  Every large urban region has a need to efficiently move millions of people every day who would otherwise continue to crawl along at less than 20 mph, as compared to less than 100,000 the California High Speed Rail Authority claims its trains would carry through the San Joaquin Valley when (or if) the system is built out by 2040.

The cost of reducing the strain and stress of wasted hours commuting locally will be high statewide, but $68 billion, which is the system’s optimistic cost projection the California High Speed Rail Authority clings to, could get us down the road considerably.  The benefits in terms of less gas consumption and pollution will be far greater than any HSR will generate, assuming there are measurable improvements. Cities cannot afford the cost alone. State funding will be necessary, not to mention federal funding. Of course, local governments could levy even more sales taxes on the residents far in excess of what is currently under consideration for Los Angeles alone.

Regardless of the source of funds, no one has a bottomless check book.

The voters were not given a choice in 2008. Far better if we had had options on the types of transportation systems.  I don’t think anyone would stand for a presidential election if there were just one candidate. But 1A was the equivalent of a North Korean plebiscite.

Even the initial $9.5 billion in general obligation bonds authorized under 1A could help get a subway through the Sepulveda Pass.

As it is, there will not be enough money to complete HSR beyond a critical mass.  The Madera to Bakersfield corridor might end up with the most expensive commuter rail system in the world on a per capita basis.

And the rest of us will still be stuck on the 10, the 101, the 405 and the other “the’s.”

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