Month: July 2017

Implications of Southeast Michigan’s 2045 Forecast

Demographic and socio-economic trends discussed in the Southeast Michigan Council of Governments’ (SEMCOG) 2045 Regional Forecast will necessitate some lifestyle changes in the greater Detroit, Michigan region. The biggest of these trends is the aging of the population and the lack of incoming young people. These trends will create a labor shortage that can impact a regional economy.

One in four people in Southeast Michigan will be over age 65 by 2045. The same will be true in Singapore except they will reach those numbers by 2030. In Singapore, the plan for aging workers is to keep them working. They’ve launched a $2.2 billion program with many initiatives, including subsidizing retraining skills and allowing an employee beyond the retirement age of 62 to work until age 67. Accommodating an older employee involves some creative solutions, e.g., part-time or flexible hours, larger font sizes, and smaller-sized deliveries that are easier for older folks to handle.

The U.S. economy will also see some shifts as industry adapts to an older population. SEMCOG’s 2045 Forecast noted increases in health care and related industries. Another not-so-obvious increase is expected in the home remodeling industry, as baby boomers choose to “age in place.” Home renovations from this age group are expected to account for nearly one-third of all remodeling dollars by 2025, according to a report from the Joint Center for Housing Studies. I was in China recently, where an article by my former college advisor went viral. It was about how she remodeled her parents’ home to help them age in place. It dealt with a range of issues, including not only removing physical barriers to increase accessibility, but also improving line-of-sight, lighting, sound, as well as designing storage and furniture details.

Speaking of aging in place, the City of Auburn Hills, Michigan, has taken a proactive approach to this concept. With input from the community, they know that many older residents enjoy city events, parks, and plan to stay in Auburn Hills as they age. To address potential barriers, the city created an Age-Friendly 2015 Action Plan. According to Mayor Kevin McDaniel, the plan “is the start of our journey to creating a city that will be ideal for residents of all ages for years to come. It will serve as a guide as we continue to commit to improving our citizens’ and visitors’ access to our community.”

While local governments are already planning for an aging community, they are also adjusting to fewer school-age students and figuring out what to do with school buildings no longer needed. In Dearborn Heights, Michigan, Berwyn Elementary School is now Berwyn Senior Recreation Center. Built in 1958, Dearborn Heights began leasing the building from the Crestwood School District in 1979. Housing 20 classrooms, a large multipurpose room, and a kitchen, the facility is now used for classes, special events, health programs, meetings, and the Wayne County Nutrition Program. The city purchased the building from the Crestwood School District in 1997 and renamed it the Berwyn Senior Recreation Center in 2015. Similar things may happen in your community, as the U.S. senior population is forecast to grow dramatically in the next 30 years (see figure below).

U.S. Senior Population, Aged 65 and Over, 2010-2045

Source: SEMCOG 2045 Forecast, 2017.

A version of this blog originally appeared as a sidebar to a longer article in the Spring 2017 issue of Semscope, SEMCOG’s quarterly magazine. 

Interested in knowing how SEMCOG’s data impacts local governments and residents in Southeast Michigan? Then, you’ll want to read Xuan’s blog posts. Other posts by Xuan Liu.

Dr. Xuan Liu is the Research Manager for Southeast Michigan Council of Governments (SEMCOG). He oversees data analysis on demographics, socio-economics, land use, and transportation at SEMCOG. He is also specialized in modeling land use and transportation relations. He received his Ph.D. from University of Michigan.

To Sell or Not to Sell? Small Local Governments Look at Privatizing their Public Water Systems

According to Environmental Protection Agency (EPA) estimates, the United States needs over $600 billion for water infrastructure improvements over the next 20 years. The American Society of Civil Engineers has given the United States a “D” grade on their Drinking Water Infrastructure Report Card, citing the older age of many of the country’s pipelines, the large number of water main breaks, and the likelihood of contamination, especially in smaller water systems.

On Monday The Washington Post highlighted that the idea of water privatization has left small and mid-size communities, many of which are already struggling with budget deficits, with a tough choice. Should these local governments continue to manage and maintain their own public water systems? Or is selling their water system to a private corporation a more reasonable option?

Federal Funding or Lack Thereof

It is unclear how much help towns will receive from the federal government for water infrastructure projects. On the campaign trail, Donald Trump promised “crystal clear, crystal clean” drinking water, and his administration included water infrastructure in their 10-year, $1 trillion infrastructure promise. What is not clear is how much of the $1 trillion will be allocated for water infrastructure, particularly when it will be competing with highly-visible projects that improve roads, bridges, tunnels, and railroads. The administration also proposed budget cuts that eliminate a nearly $500 million Water and Wastewater loan and grant program that helps rural communities, along with a slew of EPA programs that would cripple or eliminate water cleanup initiatives.

State Revolving Funds

Another consideration are State Revolving Funds, which were recently increased by less than half a percent. These funds allow states to fund a variety of water infrastructure and water quality projects. With all of the work that’s needed to carry out projects such as wastewater treatment, storm water, and water reuse, the State Revolving Funds budget (which is the lowest it has been in real terms since 1997) will not be able to meet the needs of local government water projects. And rural communities may find themselves without funding. This will leave states and local governments with most of the project bills. This is why the idea of selling public water systems has been so appealing for smaller towns and cities.

Several states have passed legislation that allows towns to sell their water systems at “fair market value” rather than current value, passing the costs of repairs, maintenance, and billing to the new owner. It’s no wonder that 48 water and sewer facilities were purchased in 2015, 53 in 2016, and 23 so far in 2017.

Early Adoption by the Numbers

The pros to selling public water systems may be apparent, but cities that have sold off their water systems might advise otherwise. For example, water service rates can skyrocket as the costs of maintenance and repair are passed to consumers by the private company that purchased the public water system. The New York Times analyzed three recent long-term water or sewer services contracts, and all three cities experienced rate increases that rose more quickly than comparable towns. For one of those cities, Santa Paula, California, the water service rates doubled. In another report published by the Public Citizen think tank, Pekin, Illinois experienced a rate increase of 204% over the 18 years since its water system was privatized. The Food and Water Watch group also reported that privately owned water systems cost the average household 59% more than homes that get their water from public systems. These rate increases can severely impact low-income households that struggle to pay utility bills at current rates.

Since water companies respond to shareholders rather than public needs, many complain about a lower quality of service. Other potential risks reported by the Pacific Institute include cherry-picking service areas, negative impacts on ecosystems and downstream water users, lack of incentive for water conservation, and ignoring the need to confront the long-term health problems associated with exposure to low levels of certain pollutants.

Legal Considerations

Nor is it easy for local governments to buy back their water systems. There are multiple examples of towns that had to fight in court to regain control of the local water system. Even if small cities and towns do win, it ends up being very costly. Mooresville, Indiana took American Water to court to buy back its system, but the court-approved price of $20.3 million was entirely too much for the small town to pay. Their water system remains privately owned. Fort Wayne, Indiana paid a whopping $67 million to get their water system back after a long 13-year process. Missoula, Montana won its legal battle, but is now faced with a $88.6 million bill and exorbitant legal fees.

When it comes to selling public water systems to private companies, local governments should weigh heavily their options. On the plus side, water privatization can seem like a saving grace for communities that are struggling with the cost to maintain their water infrastructure and are facing large budget deficits. Issues of increased water service hikes, service quality, and potentially costly buybacks are significant downsides to these deals. Regardless of the decision a local government chooses, they should first assess all the short-term and long-term impacts on their community.