20 Apr 2009

Give Rob Davis a Pulitzer

Rob Davis is pursuing the elected and bureaucratic officials of San Diego with a doggedness that deserves a prize for good citizenship (Prior posts).

In this article, he points out that San Diego officials have been more lazy than diligent in preparing for the drought that they are now racing to react to:
The city has also been delivering warnings about the potential for rationing. Mayor Sanders acknowledged the possibility as early as September 2007.

The city did not immediately begin drafting a strategy to address the threat, though. With former City Attorney Mike Aguirre calling for stricter water-use restrictions, Sanders and other city officials said in 2007 that they believed voluntary conservation would be sufficient. That approach has only netted a 5 percent decrease in city water use.

The Water Department secured City Council approval to establish water allocations for residents in November 2008. That allows the city to set a ceiling for use at each home and business -- and levy penalties for excessive consumption.

City officials continue asserting that they've chosen the fairest plan, while acknowledging they didn't choose better options. But they have dismissed those better options as unreasonable to implement in a short time, even though they've known about the potential for shortages since 2007.
Davis also points out the laziness with which officials have pursued other demand-reduction plans (such as setting rates based on water budgets)

In this follow-up, Davis reports on the City Council's attempt to get some sensible actions out of their water agency -- and the Mayor's and agency's irresponsible actions:
As Sanders and city water officials [mayor and agency...] have pitched their plan for citywide water cuts, they have repeatedly rejected increasing the price of water in order to effect conservation.

While some water districts in San Diego County are doing just that, city officials have said it wouldn't work. They've instead offered a plan that proposes to cut residents' water consumption based on their historic use. Those who've used the most will still be allowed to use the most -- regardless of whether they're doing so efficiently.

"All the literature I've read indicates that you'd have to double the price of water to get a 20 percent reduction in demand," Alex Ruiz, the water department's assistant director, said in a February interview. "I don't think that's where we need to be."

The city has not actually cited any specific studies or literature as justification, however. In a report to the City Council, the Water Department solely refers to studies -- with no backup materials or footnotes. Bill Harris, a Sanders spokesman, didn't return calls seeking specifics.

A San Diego County Water Authority analysis from 2000 does back up the city's stance. But a UCSD economist and a 2007 analysis by economists from Berkeley, Harvard and Yale suggest the city is understating price increases' effect on demand. The team's research found that doubling the price of water reduces demand 33 percent.

The research cites a meta-analysis of 124 estimates that put it higher: 38 percent in the short-term. The analysis concluded an even higher reduction in the long-run: 64 percent.

Richard Carson, a University of California, San Diego economist who didn't participate in the research, said most studies conclude that boosting rates cut demand more than the city estimated.

"You could find an estimate that low but it would not be the typical estimate," he said. "It would be a really pessimistic estimate."

The mayor and city water officials have said that increasing the cost of water wouldn't necessarily drive demand down. Citing unnamed industry research, the mayor's proposal to City Council claims that "some customers may be willing to pay whatever the rate would be for using the amount of water they wish."

Carson said that is a "nonsensical statement" with no basis in economics. At some price point, a gallon of water becomes so expensive that no one will buy it.

[snip]

City officials have also warned that increasing rates threatens to make water so expensive that the poor cannot afford it. But other agencies throughout the state have structured rates so they do not impact low-income households, which typically use less water. Irvine Ranch increased rates on its most wasteful customers. They pay 940 percent more for their wasteful use than the lowest users pay. Revenue collected from wasteful users subsidizes lower rates for the most efficient customers.

Carson called the city's argument a red herring and said well-reasoned price structures could actually help the poor. "The city is acting really stupid," he said.

"Any notion that raising the price is going to hurt the poor people has a complete lack of imagination on how you do your pricing structure," Carson said. "You want to make the poor people better off and lower their rate because they can't cut back."

The mayor's proposal offered another reason why a shift in pricing wouldn't work: Timing. A lengthy rates analysis would be needed, city water officials have said. Those officials have claimed that they only had six months to develop a strategy for handling mandatory cuts. They've known about the possibility, though, since at least September 2007.
I thought I was being harsh in calling for these guys to resign, but maybe I wasn't. They are behaving like the worst water buffaloes -- stubbornly sticking their heads in the sand in the face of better ideas from fellow managers and policy wonks...

Bottom Line: I sure hope that the voters of San Diego are paying attention to [VOTING ON!] the destruction that their Mayor and water agency are visiting upon them!

hattips to DW

2 comments:

  1. David -
    Are you aware of any empirical studies that have looked at water use in different income classes? Everybody always claims that poor people use less water so the implementation of inclining block rates spares them of the brunt of rate increases. But has anyone ever actually looked at how much water typical low income households use, compared to middle and upper income households?

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  2. Chris --

    I just read a REALLY good paper with VERY detailed data on water use. (It will show up here on Thursday.)

    They had census data on income that shows water use and income are positively correlated.

    I'd say that income had a causal effect on water use because people with more money can buy a bigger house with a bigger yard. That empirical result is supported in economic theory...

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