Badger Meter CEO Richard Meeusen recently proposed that the city offer water free to firms that relocate to the area. The concept has been endorsed by the Milwaukee Journal Sentinel editorial board and Milwaukee Mayor Tom Barrett. According to the Wall Street Journal the city is preparing an application for the Wisconsin Public Service Commission that would offer reduced water rates for up to five years to businesses that bring in at least 25 jobs.
This is very bad idea based on a fundamental misunderstanding of economic principles.
Proponents of “wave districts” are right that Milwaukee has a competitive advantage in reliable water. It’s the result of the city’s location and years of public investment. Climate change is making Milwaukee’s water even more valuable as UWM economics professor and department chair, William L. Holahan, has documented in his paper, "Reliable Water Supply: Milwaukee's Comparative Advantage."
Milwaukee’s competitive advantage in water makes it attractive to businesses that need reliable sources of water such as bottling plants that are relocating from cities in the southeast and southwest that are plagued by water shortages.
But if Milwaukee truly has a competitive advantage in water reliability, there is no reason to reduce its price or give it away. No business firm would cut its price in response to increased competitive advantage. In fact, it is standard for business firms to raise their prices, not reduce them, when their competition is "drying up." Badger Meter certainly wouldn’t cut its prices if a major competitor went under. So why should the city of Milwaukee?
Rather than providing water hungry-firms with windfall profits by cutting the city’s nationally low water rates to zero, Milwaukee should use its competitive advantage in reliable water to attract water hungry-firms and invest the revenue generated through increased sales of water in other public goods that benefit all of the city’s citizens and businesses, like our schools, employment and training programs, parks, transportation and communications infrastructure, or in property tax relief.
The economic attractiveness of the city depends on its quality of life, its schools, parks, streets, public health, safety and tax rates among other things. Milwaukee badly needs revenue to invest in these attractors in no small part because shared revenue from the state has declined by almost 25% over the past decade.
The Milwaukee Water Works is an asset of the city, paid for by rate-payers, and its value must be maximized for the benefit of the city, its residents and employers. Proper pricing and investment of water revenue is a key to maximizing the value of the city’s competitive advantage in water reliability. Establishing “wave districts” will not contribute to this objective or enhance the city’s competitiveness.
Showing posts with label water. Show all posts
Showing posts with label water. Show all posts
Tuesday, December 1, 2009
Sunday, July 15, 2007
Regional Cooperation, Lake Michigan and the Great Lakes Basin
The enthusiastic embrace of regional cooperation by Southeastern Wisconsin's business and political elites has been as surprising as it was abrupt. Various explanations have been offered to explain this radical departure from generations of suburban/urban competition.
Now we know it was in the water!
To be precise it is the radium in Waukesha's water. Radium is carcinogenic so New Berlin and much of Waukesha want to get their hands on Lake Michigan's clean water.
If anyone doubted this, New Berlin Mayor Jack Chiovater's response to a recent Department of Natural Resource (DNR) ruling that New Berlin can begin negotiating with Milwaukee over access to Lake Michigan Water should erase all doubts. In reaction to the DNR's letter the Mayor said: "We applaud the DNR's decision today and look forward to working in the spirit of regional cooperation with Milwaukee."
The DNR letter came only a week after the Journal Sentinel editorial board had urged the department to support the New Berlin’s request to divert Lake Michigan water outside the Great Lakes Basin to meet its water needs.
Jim Rowen who has posted a wonderful series of articles on his blog about the Great Lakes, which constitute one sixth of the world’s fresh water supply, points out that this is not the DNR’s decision to make. Milwaukee cannot send water west of the subcontinental divide under current federal policy.
Before any Lake Michigan water is diverted the Wisconsin legislature needs to approve legislation supporting the Great Lakes Compact, an agreement between the eight Great Lakes states and two Canadian provinces, which clarifies the criteria for diverting water outside the basin. Among the proposed criteria is that communities requesting diversion must demonstrate that they are maximizing water conservation efforts and that they will return the water to the lake watershed.
The DNR letter doesn't change this reality.
The Compact's conservation standards present a problem for New Berlin since the city's Board of Appeals voted 4 to 1 to uphold a Plan Commission's approval of a new $55 million, 7 story, 405 room hotel and water park!
That’s right. I am not kidding you- a community that lacks an adequate supply of clean water recently approved a commercial development anchored by a water park.
Milwaukee’s west side alderman, Michael Murphy, recognized the absurdity of New Berlin's action saying: ”This project is exactly what we don’t need - Lake Michigan water diverted for-commercial entertainment usage that will add to sprawl that has gone unchecked in Waukesha County for years.”
Similar questions should be raised about the Pabst Farms 184 acre upscale regional shopping mall which includes 2 hotels and other housing and commercial developments in western Waukesha and Kenosha County.
Before we back the trucks up to Lake Michigan and begin hauling water out of the Great Lakes Basin we also need to ask who will pay for the infrastructure to send water to New Berlin and other water hungry communities, treat it and return it to the Lake. Currently, Milwaukee's water pipes are undersized and it lacks sufficient pumps to handle the additional demand.
The Journal treats this as a minor annoyance when it writes: "New Berlin is willing to help pay the capital costs....”
help pay???
If New Berlin is only helping, who are they helping cover the costs estimated at between $4 and $8 million?
Does the Journal expect the residents of Milwaukee to subsidize New Berlin's diversion of Lake Michigan water?
For decades the same leaders who have now drunk the regional cooperation Kool Aid rejected Milwaukee's requests to work together to address problems like high poverty rates, racial segregation, inadequate school funding, deindustrialization, the shortage of low and moderate income housing and the need for a modern, comprehensive mass transit system.
As development moved west, critics of sprawl were told that developers were simply responding to the housing preferences of homeowners who preferred a suburban lifestyle. People were voting with their dollars and the market was responding. When Milwaukee asked for help, suburban leaders response was "tough luck." Milwaukee's problems were the city's alone.
The real costs of Southeastern Wisconsin's suburban development were obscured during its early stages. Taxes were initially much much lower because new suburban developments require less infrastructure and social service investment than a mature, urban area like Milwaukee. Property values are also much higher. Sometimes, as in the case of the $20 million interchange needed for the Pabst Farms regional mall, developers ignored or hid the costs until after their project was approved.
But once a critical mass of population, housing and commercial development occurs, infrastructure costs including new roads, new schools and access to clean drinking water, as well as the need for expanded services such as police and fire protection, emerge.
Now that the real costs of sprawl are coming home to roost in the form of radium in Waukesha's water, is the plan, in the words of former Governor Thompson, "to stick it to Milwaukee" one more time?
Milwaukee borders one of the world's most valuable water resources. Our elected officials and citizenry must be responsible stewards of this resource. The first step is getting the legislature to sign the Great Lakes Compact. New Berlin's water park can wait!
Now we know it was in the water!
To be precise it is the radium in Waukesha's water. Radium is carcinogenic so New Berlin and much of Waukesha want to get their hands on Lake Michigan's clean water.
If anyone doubted this, New Berlin Mayor Jack Chiovater's response to a recent Department of Natural Resource (DNR) ruling that New Berlin can begin negotiating with Milwaukee over access to Lake Michigan Water should erase all doubts. In reaction to the DNR's letter the Mayor said: "We applaud the DNR's decision today and look forward to working in the spirit of regional cooperation with Milwaukee."
The DNR letter came only a week after the Journal Sentinel editorial board had urged the department to support the New Berlin’s request to divert Lake Michigan water outside the Great Lakes Basin to meet its water needs.
Jim Rowen who has posted a wonderful series of articles on his blog about the Great Lakes, which constitute one sixth of the world’s fresh water supply, points out that this is not the DNR’s decision to make. Milwaukee cannot send water west of the subcontinental divide under current federal policy.
Before any Lake Michigan water is diverted the Wisconsin legislature needs to approve legislation supporting the Great Lakes Compact, an agreement between the eight Great Lakes states and two Canadian provinces, which clarifies the criteria for diverting water outside the basin. Among the proposed criteria is that communities requesting diversion must demonstrate that they are maximizing water conservation efforts and that they will return the water to the lake watershed.
The DNR letter doesn't change this reality.
The Compact's conservation standards present a problem for New Berlin since the city's Board of Appeals voted 4 to 1 to uphold a Plan Commission's approval of a new $55 million, 7 story, 405 room hotel and water park!
That’s right. I am not kidding you- a community that lacks an adequate supply of clean water recently approved a commercial development anchored by a water park.
Milwaukee’s west side alderman, Michael Murphy, recognized the absurdity of New Berlin's action saying: ”This project is exactly what we don’t need - Lake Michigan water diverted for-commercial entertainment usage that will add to sprawl that has gone unchecked in Waukesha County for years.”
Similar questions should be raised about the Pabst Farms 184 acre upscale regional shopping mall which includes 2 hotels and other housing and commercial developments in western Waukesha and Kenosha County.
Before we back the trucks up to Lake Michigan and begin hauling water out of the Great Lakes Basin we also need to ask who will pay for the infrastructure to send water to New Berlin and other water hungry communities, treat it and return it to the Lake. Currently, Milwaukee's water pipes are undersized and it lacks sufficient pumps to handle the additional demand.
The Journal treats this as a minor annoyance when it writes: "New Berlin is willing to help pay the capital costs....”
help pay???
If New Berlin is only helping, who are they helping cover the costs estimated at between $4 and $8 million?
Does the Journal expect the residents of Milwaukee to subsidize New Berlin's diversion of Lake Michigan water?
For decades the same leaders who have now drunk the regional cooperation Kool Aid rejected Milwaukee's requests to work together to address problems like high poverty rates, racial segregation, inadequate school funding, deindustrialization, the shortage of low and moderate income housing and the need for a modern, comprehensive mass transit system.
As development moved west, critics of sprawl were told that developers were simply responding to the housing preferences of homeowners who preferred a suburban lifestyle. People were voting with their dollars and the market was responding. When Milwaukee asked for help, suburban leaders response was "tough luck." Milwaukee's problems were the city's alone.
The real costs of Southeastern Wisconsin's suburban development were obscured during its early stages. Taxes were initially much much lower because new suburban developments require less infrastructure and social service investment than a mature, urban area like Milwaukee. Property values are also much higher. Sometimes, as in the case of the $20 million interchange needed for the Pabst Farms regional mall, developers ignored or hid the costs until after their project was approved.
But once a critical mass of population, housing and commercial development occurs, infrastructure costs including new roads, new schools and access to clean drinking water, as well as the need for expanded services such as police and fire protection, emerge.
Now that the real costs of sprawl are coming home to roost in the form of radium in Waukesha's water, is the plan, in the words of former Governor Thompson, "to stick it to Milwaukee" one more time?
Milwaukee borders one of the world's most valuable water resources. Our elected officials and citizenry must be responsible stewards of this resource. The first step is getting the legislature to sign the Great Lakes Compact. New Berlin's water park can wait!
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