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Infrastructure funding in the age of austerity – just don’t call it a “tax”

17 Jan 2017

As demands for municipal services increase, costs go up and tax revenues flatten or fall, what is a municipality to do?  Most Michigan politicians have decided that even to suggest more taxes is the kiss of death.  Everyone agrees Michigan’s roads need work.  The gas tax went up on January 1 and even that increase was widely viewed as an inadequate to fully improve our sub-par roads. Recently, a Michigan State study indicated that nationally, roughly 12% of households cannot afford the cost of water services and, if water rates rise to cover repair and upgrade expenses due to the aging of our systems and other factors, that unaffordability factor may go up to almost 36% in the next five years.

The Governor’s 2016 Infrastructure Commission, appointed in the wake of the Flint Water Crisis, reported that we need a modern infrastructure system to compete globally, to have economic prosperity, and to have healthy citizens and a healthy environment.  However, the Commission did not answer the all-important question of how to fund all of this work.  The Commission reports that Michigan lags behind every other state in the region in capital funding for infrastructure and that Michigan needs to spend $4 Billion more every year than it currently does just to align with an average state and the State’s needs.  This would be a 7% increase in spending.  The Commission did not address how Michigan should fund this shortfall.

The business group, Business Leaders for Michigan issued a report earlier this month. That Report reached the same conclusion and proposed that the State ramp up its spending and opened a door to creative and novel financing approaches including user fees which the Report indicated may be used to fund costs of “services, enhancements to increase the quality of life, and … administrative and regulatory processes.”  This report discusses such fundraising approaches as: fees per mile traveled (vs gasoline taxes); public-private partnerships; fees based on property value increase; fees which take into account all lifetime system costs; selling or leasing systems to raise funds for new infrastructure improvements; toll roads and other more “outside the box” approaches.

We have seen this before but not on a statewide approach such as when municipal governments try to fund environmental initiatives, such as stormwater management (required by federal law). The cities of Lansing, Jackson and Detroit all adopted stormwater “fees” based on the paved acreage of various properties within their jurisdiction.  Clearly, to the municipalities, this seems like a good idea – otherwise, why would they keep doing it? Reportedly, nine Michigan communities have created stormwater utilities to impose such charges (Adrian, Ann Arbor, Berkley, Chelsea, Harper Woods, Jackson, Marquette, New Baltimore, and St Clair Shores).

The Michigan Supreme Court established a three part test to distinguish between a fee and a tax: (1) “a user fee must serve a regulatory purpose rather than a revenue-raising purpose;” (2) “user fees must be proportionate to the necessary costs of the service;” and (3) “user fees must be voluntary.”  Bolt v Lansing, 459 Mich 152, 161-162 (1998)

Unfortunately for the municipalities, the Michigan Courts keep striking these fees down as illegal, hidden taxes.  In the case of Jackson County v City of Jackson, the plaintiffs challenged a stormwater management charge imposed by the Jackson City Council. The Court of Appeals ruled that the charge was a tax imposed in violation of §31 of the Headlee Amendment to the Michigan Constitution. The court held that the charge: (1) did not serve a regulatory purpose because it shifted funding of certain activities from the general fund to the charge; (2) was disproportionate to the benefits conferred upon the payor as there were no payor-specific benefits; and (3) was not voluntary because there was no way to avoid the charge by doing, or not doing, something.   The Court of Appeals cited Bolt v Lansing, which invalidated a similar stormwater charge on similar bases. Ultimately, both courts held these “charges” to be taxes subject to, and failing to meet, Headlee Amendment requirements.

Last year, the Michigan Legislature saw the introduction of a bill that would authorize such “fees,” regarding water and sewer, ostensibly to make them harder to defeat in Court under the Bolt test. The need is real and I am a big believer in top quality infrastructure which needs to be paid for.  My question is, with the 1978 Headlee Amendment that puts the size and cost of government in the hands of the taxpayers, and with a backdrop of fees rising beyond what some citizens can afford – can and should our Legislature try to pass this off by various “fees” without getting the voters’ approval as well as other “creative” solutions, some of which may cost the taxpayers less in the short run but more in the long run?  I’m all for the efficiencies in purchasing and scheduling that Governor Snyder has been pushing for but, as we watch more and more systems fail (like the recent Fraser sinkhole), it is clear that we cannot continue to push this off – if the citizens see that, they should be willing to pay for it. If these expenses get passed on in the form of fees which are not voted on and the citizenry gets hit with larger fees that they were not told about, who thinks that will play well at the voting booth?

What will 2017 Bring? Dramatic Change?

20 Dec 2016

edit_calendar_ssk_47433454In prior years, we knew that regulatory and environmental change was coming but we expected it to be slow and incremental.  With an unknown quantity like President Elect Trump, one thing is clear – no one really knows what may happen.  Here are a few possibilities:

1.  Coal/Cleaner Energy Generation – revitalizing the coal industry was part of Mr. Trump’s midwest stump speeches.  Will Mr. Trump be able to reverse Barack Obama’s Clean Power Plan? What about the Paris Climate Accord?  Certainly, his team is looking at both of those right now. The dispute in Michigan v. EPA, decided in June 2015, continues to rage.  In 2015, the US Supreme Court ruled that the EPA didn’t properly justify its rule governing mercury and toxic pollution (MATS) from power plants because it did not specifically address costs at the initial stage of the rulemaking process. In April, the EPA announced it was standing by its MATS rule and concluded that the benefits far outweighed the costs.  Petitioners continue to litigate whether the EPA properly evaluated costs.  Here in Michigan, new legislation has been passed (and is awaiting the Governor’s signature) intended to encourage additional investment in energy generation and transmission while balancing consumer choice and a greater percentage of renewable energy generation.  Will it work? At a reasonable cost?

2. Power Generation Subsidies/Oil/Gas Generation – Mr. Trump’s attacks on “crony capitalism” would seem to mean that he will stop financial incentives for solar and wind generation.  Will he also attack oil and natural gas supports in the tax code?  Will he open up ANWAR to oil/gas exploration?  Will he scale back attempts to regulate fracking?  This will be difficult in light of the December EPA Report  which concluded that fracking posed problems such as:  fracking water withdrawals compete with other water needs; spills of hydraulic fracturing fluids and chemicals or produced water may impair groundwater resources; injection of hydraulic fracturing fluids into wells may allow gases or liquids to move to groundwater resources; discharge of inadequately treated hydraulic fracturing wastewater to surface water resources; and contamination of groundwater due to disposal or storage of fracturing wastewater.

3. Pipelines – will Mr. Trump reverse the Obama administration’s dim view of oil and gas pipelines such as the Keystone XL and Dakota Access Pipelines?  How will this affect Michigan where public awareness of two 60+ year-old pipelines under the Mackinac Straits has galvanized both sides of the political spectrum into action.  In 2014, Michigan convened a pipeline task force which issued a report in 2015.  In September, 2015, the State entered into a written agreement with Enbridge to prevent the transport of heavy crude oil through the Straits Pipelines.  The task force also recommended that the pipelines be independently evaluated and that additional financial assurance be provided.  The State solicited Requests for Information and Proposals (RFPs) and Enbridge agreed to pay $3.6 Million for the evaluation of the Straits Pipelines.  An independent evaluation of alternatives to the Line 5 pipelines is also underway.  When those will be completed is not known.

4. Infrastructure – Mr. Trump campaigned on infrastructure (although to hear him tell it, that only encompasses airport quality), and Governor Snyder appointed a 21st Century Infrastructure Task Force which concluded that the State needed to be investing $4 Billion more than it was in infrastructure to address roads, bridges, internet, water, sewer and other infrastructure needs.  Given the recent nationally publicized Flint Water debacle, will Michigan find the intestinal fortitude to fully invest in infrastructure or will we continue to patch and delay?  Given the State’s recent fight against a federal judge’s order to deliver clean water, and Michigan legislators “default anti-tax setting,” the future does not bode well.

5. Brownfields – as previously reported, Michigan adopted legislation streamlining its brownfield funding laws and deferred action on Dan Gilbert’s “transformational” brownfield funding legislation.  Will that resurface in early 2017?  I expect it will.

6. Other issues – there are a number of other issues on the horizon including cleanup standards, the maturing of the Great Lakes Water Authority and its ability to deliver clean water and septic services at a reasonable price, Michigan’s effort to reimagine its solid waste program, water withdrawals and protection of the Great Lakes from invasive species and nutrients leading to algal blooms.

Protect the lakes – don’t flush your medicines – here’s how

24 Jun 2016

A few y13445475_10208142314013787_6103794917851915726_n (1)ears ago, the University of Michigan confirmed that it is a bad idea to put old medicines down the drain.  The State of Michigan agrees.  Here  is a link to the MDEQ’s website on this topic.  There have been concerns regarding the impacts of pharmaceuticals on wildlife, as most wastewater treatment plants are not designed or equipped to treat for medicines.

A few years ago, we had to rely on special programs to properly dispose of old medications,  but while recently helping my father-in-law, I learned that there are many more local drop off sites than before.  Here is one website that you can use to locate take-back locations. The Michigan State Police are now taking back medications at their 29 posts. The Oakland County Sheriff has launched Operation Medicine Cabinet with 33 locations across the County – these will accept all dry medicines.  If you have to put medications in the trash, here are instructions on how best to prepare them for disposal.

Why is flushing medicine a bad idea? The UM report talks about creating antibiotic resistant superbugs and there have been other reports about hormonal changes in fish, and finding traces of various prescription substances in drinking water (yes, what we flush can wind up in someone else’s drinking supply).

What I did on my summer vacation – Michigan’s water heritage

18 Sep 2015

eagleThis summer, Michigan’s Office of the Great Lakes (OGL) released its draft Water Strategy for the State of Michigan – and has been holding review sessions throughout the Summer to discuss it.  The Strategy discusses a number of ideas and sets goals including: protecting and restoring aquatic ecosystems, ensuring clean and safe waters, supporting water-based recreation, promoting water-based economies and investing in water infrastructure.

While there are many worthwhile goals and ideas, today, I’m going to focus on the goal of supporting water-based recreation.  Michigan is a water paradise with more boats than just about any other state, the longest freshwater coastline in the Country, nice beaches (see here) and you’re never more than 6 miles from a Great Lake, an inland lake or a river or stream.

As the summer drew to a close,my family spent a weekend in the quad cities area of Michigan and we spent a morning at the Shiawassee National Wildlife Refuge.  The Refuge contains more than 9,800 acres of marsh, bottomland hardwood forest, and grasslands.  It’s known locally as the Shiawassee Flats and includes a number of rivers which flow into the Shiawassee River which meets the Tittabawassee River to form the Saginaw River.

We spent our morning with Captain Wil Hufton of Johnny Panther Quests.  He runs an “eco-tour” business and took us up and down the Refuge and it was a lot of fun and very interesting. We saw hawks, egrets, herons and many other birds. The highlights were definitely seeing bald eagles in the wild as well as deer running along the river bank. Wil told us about the history of the area from the logging days through Michigan’s industrial era all the way to today. He educated us about changes in the river system and the challenges the system faces and has overcome.

Jon Allan, the  Director of the OGL, has spoken a lot about getting back in touch with our aquatic roots.  Now, I can see what he’s talking about.  I know my family enjoyed our eco-tour t and I would highly recommend taking a Johnny Panther eco-tour if you have plans to be in the Saginaw area some early morning or late evening.

 

What will be the top stories of 2015?

23 Jan 2015

edit_calendar_ssk_47433454Happy new year!  I know it’s almost February but as this is my first blog post of the year, I thought (particularly after hearing the State of the Union and the State of the State speeches)  I’d predict the big stories of 2015 in no particular order:

  • Wetland Rules – the EPA and the Army Corps of Engineers finally proposed rules in 2014  to address the fallout of the Rapanos case.  The proposal was met with a firestorm of disapproval, particularly from the farming world.  Will they ever finalize them?
  • Brownfield TIF Legislation – after all that work last year, will the Legislature take up streamlining this program and expanding it to allow Michigan to be even more competitive in redeveloping brownfields?
  • EPA Greenhouse Gas Rules vs. Congress – in September, 2013, EPA issued a proposal for carbon pollution from new power plants; in June  2014, EPA issued a proposal to cut carbon pollution from existing power plants – the GOP and coal and oil interests in Congress have fought this for some time.  Will the rules be adopted and enforced?  Will there be enough time for electricity generators to get alternative plans in place before being forced to shutter their oldest, least efficient and most polluting plants?
  • Keystone Pipeline – President Obama and Congress have been locked in a politically charged dispute over the Keystone XL pipeline for almost 3 years now – he seemed to indicate in the State of the Union that he’d veto legislation – will he?
  • Energy Policy – Governor Snyder has pushed for an energy policy, legislation is expected this year and the Governor recently mentioned an intention to develop a new energy agency that would make Michigan more competitive for business.  What that will entail in light of the likely changes due to federal regulations will be interesting to see – will Michigan upgrade or discard its renewable portfolio standard? Can Michigan reduce electrical cost while improving both reliability and environmental performance?
  • Water Policy – the Governor’s long-awaited great lakes policy is expected this year.
  • Pipelines – in addition to the Keystone pipeline, there has been a lot of interest in pipelines in, under and around the Great Lakes – could there be federal and state changes there?
  • Detroit’s Water Authority – it is supposed to morph into a regional authority – as I said previously, the easy part was getting to the agreement last year – will the hard work succeed or will it fail, causing major shockwaves for roughly half of the State’s population?

Water, water … recycling?

9 Dec 2014

6_weekWe here in Detroit  had far more rainfall this past summer than we usually get and between the long, cold winter and all the rain, our lake levels are nearing their normal levels.  Meanwhile, in the southwest, drought conditions continue to grow.  So much so that there’s a flurry of deeper well drilling in California. In Texas, some communities are installing mega-treatment and cycling water from their wastewater treatment plant back to their drinking water systems, under a trial permit.  San Diego’s Sea World announced it was using treated saltwater in its toilets.

I’ve blogged about so-called “toilet-to-tap” before.  At that point, it was more on the model of Orange County’s program – where treated water was discharged back into an aquifer from which drinking water was taken.  That program is a way of speeding up the water cycle we all learned about in elementary school.  Some call it “showers to flowers” and it is being expanded.  In Texas, it looks like they are taking a more direct approach.

At least one gentleman I know has decried this as dangerous due to the possibility of industrial and other contaminants finding their way into the public’s drinking water.  And, he’s right – there is a risk – but, as we have seen recently, there are risks to taking drinking water from a lake or river  which receive runoff and NPDES discharges.  Virtually all the water we see at the tap has been through a person’s body or has been impacted by some industrial or farming operation – it’s only a question of how much natural and professional treatment it receives prior to discharge, how long ago, how much dilution occurs and how much treatment before it’s put back into the drinking system.

The World Economic Forum has identified water as a key issue for the future.  There simply isn’t much freshwater on the planet as this video shows. As the video shows, some 80% of our water gets used for power generation and farming.  How we protect and conserve and, in some cases, recycle, this resource may be the story of the next 50 years.

Michigan Pipelines Under Review

29 Oct 2014

pipeline

Spills from pipelines were very newsy over the last couple of years.  There was the Kalamzoo River oil spill and a number elsewhere.  As with most things, eventually the public and news media tire of it and move on to something else.  A recent Indiana spill into Lake Michigan barely made any news.  Interestingly, this summer, the State of Michigan created a Michigan Petroleum Pipeline Task Force to review issues relating to pipelines transporting petroleum products around the State.  Despite federal jurisdiction by the  federal Pipeline and Hazardous Materials Safety Administration, the Task Force is looking at issues including:

  • Michigan’s emergency management preparedness for spills,
  • Coordination of permitting issues for pipeline upgrades and replacement, and
  • The creation of a state website to serve as an information clearinghouse for residents who have questions or concerns about pipelines.

The Task Force’s members are Co-Chairs: Dan Wyant, Michigan Department of Environmental Quality and Bill Schuette, Michigan Attorney General, and John Quackenbush,  Michigan Public Service Commission, Keith Creagh, Michigan Department of Natural Resources, Jon Allan, DEQ’s Office of the Great Lakes, Kirk Steudle, Michigan Department of Transportation and Col. Kriste Kibbey Etue, Michigan State Police.

As Michigan is looking at pipeline risks and preparedness, so should you.

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