Latest / Make Water Work Podcast / Glenn Barnes: Unlocking Water Infrastructure Funding | Make Water Work 029

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Glenn Barnes: Unlocking Water Infrastructure Funding | Make Water Work 029 · Make Water Work Podcast

0:00
The rates in small communities
0:04
really should be significantly more than
0:07
the rates in large cities. It's
0:10
economies of scale. We don't have enough
0:11
people to spread the cost out over, but
0:14
there's a minimum cost of running a
0:15
water utility or a wastewater utility,
0:18
especially on the infrastructure side.
0:20
But I think what we end up finding is
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that a lot of these small communities,
0:24
they do enough to stay in compliance.
0:27
The people who work there are wonderful
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and and they can manage to do a lot with
0:31
a little. And I don't want to speak
0:32
disparagingly of them in any way, shape,
0:34
or form. They're real heroes in their
0:36
communities. They're keeping the utility
0:40
like just going and and they're all one
0:43
natural disaster or public health crisis
0:46
away from a really big problem. Welcome
0:49
to the Make Water Work podcast, where we
0:52
dive into the people, ideas, and
0:54
innovation shaping the future of water.
0:57
I'm your host, Isaac Pellerin, and
0:59
alongside my co-host, Megan Glover, the
1:02
founder of 120 Water, we bring you
1:04
insights from hundreds of incredible
1:06
conversations we've had over the past 9
1:09
years with inspiring and energizing
1:12
leaders in the water industry. Each
1:14
week, we share those stories and
1:16
conversations with entrepreneurs,
1:18
community champions, and innovators who
1:20
are making water work for everyone.
1:24
Whether you're a water professional, a
1:25
curious innovator, or simply passionate
1:28
about our most precious resource, this
1:30
podcast is for you. Let's get started.
1:36
Well, hello everyone and welcome to this
1:38
week's episode of the Make Water Work
1:40
podcast where Isaac and I are speaking
1:42
to the water professionals that are
1:44
innovating and making water work every
1:46
single day. So, who are we celebrating
1:48
today, Isaac?
1:49
>> You know, today we get to talk to
1:51
someone who I've known for quite a while
1:52
and both of us have known for quite a
1:54
while. His name is Glenn Barnes and
1:55
Glenn really works at the intersection
1:58
of affordability. How do utilities
2:01
update their critical infrastructure
2:04
while still maintaining the uh
2:07
importance of affordability for um for
2:09
communities? Um and so it's a big topic.
2:12
It's a big problem. We're always talking
2:14
to utilities and regulators and states
2:18
about how do you fund this? Um and it's
2:21
not easy. So you need people who know
2:23
how to navigate the challenges of uh of
2:27
funding. um because this is mission
2:29
critical. So um Glenn, we are so excited
2:33
to welcome you to this podcast and um
2:36
yeah, welcome.
2:38
>> Well, thank you so much for having me.
2:39
I'm delighted to be here.
2:41
>> Yeah, we've as we've done um this
2:44
podcast and as we've uh navigated inter
2:48
uh interacting with folks all across the
2:50
water industry, we've never run into
2:52
anyone who didn't have a story about how
2:55
water found them. And so we love
2:57
starting this podcast just asking how
2:59
did water find you?
3:02
>> And I think it's I think it's really a
3:04
good question of how it found me because
3:05
I think that's more accurate than saying
3:07
I found it. Uh as I think is true for
3:10
many people. When I was an
3:12
undergraduate, I was an English major
3:14
and I was convinced that I wanted to be
3:17
a a literature professor like you know
3:20
the tweed jacket and pipe and whole nine
3:23
yards and uh was ready to go and get my
3:26
PhD but decided I just wanted a year off
3:29
uh before I I continued on with my
3:32
studies and I started working for an
3:33
environmental nonprofit. Had nothing to
3:36
do with water. it was uh more lobbying
3:38
and policy work and I was working around
3:41
energy and public health and really
3:44
enjoyed the work. So I stayed a second
3:47
year and then a third year and a fourth
3:48
year and eventually after seven years of
3:52
doing that kind of work and I was
3:54
largely on the development side so
3:56
fundraising side for these uh various
3:58
organizations
4:00
I thought you know I'd like to run a
4:01
nonprofit someday but I don't really
4:03
know how to do that. that my literature
4:05
degree didn't entirely prepare me for
4:07
that. So, I decided to get a master of
4:09
public administration degree. And when I
4:12
got to grad school, they said, "Well, we
4:14
need to give you a research
4:15
assistantship, and you have
4:17
environmental backgrounds, so we're
4:19
going to put you with this group called
4:20
the Environmental Finance Center." And
4:23
they uh are a group that does quite a
4:26
lot of work with water. And I started
4:29
there as a graduate student. that turned
4:32
into a full-time gig that I stayed with
4:35
for 12 years uh before leaving and and
4:39
founding Water Finance Assistance back
4:41
in 2019.
4:43
And initially within that group, they
4:46
did water, wastewater, storm water,
4:48
wetlands, energy, air quality. I was
4:51
doing almost everything but water.
4:54
Everybody else was heavily water
4:56
focused. I was more in the other
4:58
environmental areas. But in 2012, the
5:01
Environmental Finance Center Network
5:03
applied for some EPA funding to do a
5:05
training and technical assistance
5:07
program for small communities. And they
5:10
took a look at this project and said,
5:12
"Well, this is going to be a lot of
5:13
training and a lot of travel, and Glenn,
5:16
you like traveling and giving workshops,
5:17
so you should lead this project
5:19
nationally." And so I got tapped to do
5:21
that, even though I had the least water
5:23
experience in the office. We ended up
5:25
winning the funding and I ran that
5:27
program with uh my wonderful colleague
5:29
Heather Himlberger from the Southwest
5:31
Environmental Finance Center for many
5:33
years and that's really where I got
5:35
deeply into water.
5:38
>> Well, thank you. Uh thank you. I'm so
5:40
glad water found you, Glenn, because you
5:42
are literally on the forefront helping
5:44
communities um oftentimes of uh maybe
5:47
some of the greatest need find uh
5:49
financing either within their their own
5:52
rate base and optimizing that, but also
5:54
kind of external sources. So for those
5:57
um listening who may not understand how
6:00
how funding works or uh the gap that
6:03
potentially our water industry is facing
6:06
right now, can you just do a state of of
6:08
water funding 101 uh for the for the
6:11
audience?
6:13
>> Yeah, absolutely. And I and I think
6:15
that's a really great question because
6:16
it's important to understand the funding
6:19
model that water and wastewater have,
6:22
especially when they're run by
6:23
governments because we tend to think
6:26
that if something is run by the
6:27
government, it's paid for by taxes. But
6:30
in fact, that's not the case with water
6:32
and wastewater. So they are what are
6:33
known as enterprise funds. And that
6:36
means that they are responsible for
6:38
generating their own revenue to cover
6:41
their own expenses. And typically that
6:45
is done through charging customers for
6:48
the water that they receive. And then
6:49
there are some other well yeah if you're
6:52
connecting a new customer that's going
6:54
to be a little bit of source of revenue.
6:56
If you're selling water to another
6:57
community that might be another source
6:59
of revenue but by and large the money
7:02
that utilities get come from their
7:05
customer base.
7:07
>> Now that's the ideal model. The reality
7:11
is that when the Safe Drinking Water Act
7:13
and Clean Water Act were passed in the
7:15
1970s,
7:17
the federal government had a number of
7:20
grant programs to help communities get
7:23
up to speed on these new federal
7:25
regulations. And so this big expense
7:28
that water and wastewater have of paying
7:30
for all of the pipes and treatment
7:33
plants and tanks and towers and pumps
7:36
and motors that they have, they
7:38
basically got a check from the federal
7:39
government. paid for by taxpayers around
7:42
the country to put in that
7:44
infrastructure and they did not have to
7:46
pay that money back.
7:48
Then as communities have expanded and
7:52
many communities in the United States
7:54
have expanded,
7:56
they would say, "Okay, we're putting in
7:59
100 new homes uh in town and we're going
8:03
to ask the developer to actually pay to
8:07
extend the water and wastewater
8:08
infrastructure into that community."
8:10
Mhm.
8:11
>> So the developer pays for that and then
8:13
essentially rolls that cost into the
8:18
price of the homes that are being sold.
8:21
>> Yeah.
8:21
>> So we're paying rates to water
8:24
utilities, but we're also in the past
8:27
paid for some of the infrastructure
8:28
through our federal tax dollars and then
8:30
also some of us have paid for the water
8:32
infrastructure through our mortgages
8:34
without even realizing it. Mhm.
8:37
>> Well, we're now to a point that those
8:39
federal grants are are largely long
8:42
gone. They've been replaced by low
8:44
interest loans, which is still a a cost
8:46
savings to utilities. And that
8:50
development in communities is only
8:52
paying for the new water lines.
8:55
>> Well, all this infrastructure that went
8:56
in in the 1970s
8:58
>> is reaching a point where it needs to be
9:00
replaced.
9:01
>> Yeah. And so for the first time, we're
9:04
at a point where we as water consumers
9:08
are actually going to start to pay for
9:11
the entire cost of the utility to
9:13
actually become a true enterprise fund.
9:17
And what that has meant unfortunately is
9:19
that water rates that have been really
9:21
been artificially low for decades are
9:24
now climbing much more rapidly than they
9:26
have in the past and in fact are often
9:30
climbing higher or faster than the rates
9:33
of other utilities.
9:34
>> Yeah.
9:36
>> You know, it's so interesting. I um I
9:39
remember when we bought our first house
9:42
uh in in Indianapolis and we were still
9:44
on a septic system and I remember our
9:47
corridor was going to be connected to
9:49
the municipal sewer system all the time
9:52
we were there and I mean we were we were
9:54
making nothing at any you know we were
9:56
just get you know starting our careers.
9:57
We had no money but everyone in our
9:59
neighborhood kept kept saying make sure
10:01
you budget for it because it's going to
10:02
cost about $5,000 to connect to your
10:05
municipal sewer system. And I remember
10:07
thinking, wait, hold on a minute. I have
10:09
to come out of pocket to connect to the
10:10
sewer system that then I have to start
10:12
paying for. Like, how how does this
10:14
work? Isn't this a, you know, isn't this
10:16
just a municipal service, Glenn, that um
10:20
I'm entitled to once I'm connected to
10:22
it? Uh how often do you hear that? And
10:24
and you know, how much of that do you
10:26
think is, you know, education or, you
10:29
know, so on and so forth?
10:31
>> Yeah, I I I hear it a lot. I think, you
10:33
know, I know all these nitty-gritty
10:35
details because I literally have a
10:37
master's degree in how to run local
10:39
governments. And I think there's people
10:42
within that program that didn't don't
10:44
necessarily understand these nuances as
10:46
well.
10:47
>> But I think, Megan, that the truth is we
10:50
chose to make water and wastewater a
10:54
utility. Hm.
10:56
>> We could have also chosen to make it a
10:58
public service like police and fire that
11:01
is paid for out of taxes, but we did not
11:04
make that choice. We have chosen to make
11:06
it something that is is customer
11:09
supported and fee supported.
11:11
>> Yeah. And I think there's a lot of
11:12
arguments as to why that's the right way
11:14
to do things. Because if I'm very frugal
11:18
with my water use and somebody else is
11:20
very wasteful, it seems fair that I
11:23
should pay less than than they do. But
11:28
people, yeah, they they don't
11:29
necessarily understand the difference
11:32
between, say, public schools and public
11:35
safety and public water supply. They
11:38
they just get this bill, right? And as
11:41
you said, when there is a capital
11:43
improvement to be done, and that's often
11:45
the most expensive part of running a
11:47
utility is replacing these multi-million
11:50
dollar assets, which by the way are
11:52
still multi-million dollars if your
11:54
community is 150 people, right?
11:57
>> Let alone a large city.
11:59
>> You know, in Indianapolis, you can
12:00
spread the cost out over a a large
12:03
number of customers. Phoenix, it's the
12:06
same thing. But I work in really tiny
12:09
communities that have, you know, a
12:11
hundred connections and if they have a
12:14
$2 million piece of infrastructure to
12:17
put in there, that's going to be really
12:18
expensive, even if they're getting a
12:20
long-term loan uh to pay for that cost.
12:24
Whereas, again, 50 years ago, a
12:26
community of that size probably just got
12:28
a check to go out and buy the the
12:31
infrastructure and then they didn't have
12:32
to worry about paying it back.
12:34
>> Yeah, it's fascinating. It's such an
12:35
interesting distinction too that you
12:37
made because I I think even for myself
12:41
what I'm learning in this very moment is
12:44
just that I like
12:47
I do have a mindset that it's a public
12:51
good public service just like fire
12:54
department just like police department.
12:56
It's um it's such an uh it's such a
13:00
tough mindset to say that when I live
13:02
somewhere,
13:03
>> my community has these services and that
13:05
just comes from my taxes. Um
13:08
>> and um
13:10
>> yeah, so it it's understanding I'm
13:12
having an aha moment. Sorry.
13:15
>> Coming back. No, no, but it's just like
13:17
that that's such a difficult paradigm
13:21
shift to make in the mind of the public
13:22
to say, "Oh, this is different than
13:25
these other things." So the reactions to
13:29
rates uh increasing or um those kind of
13:34
things kind of make sense that um that's
13:36
like I didn't see that coming. Why why
13:38
does why doesn't it work the way
13:41
everything else works?
13:43
>> And yet at the same time I think in you
13:45
know in our modern society you need
13:48
electricity to be able to to survive and
13:51
thrive. You need some type of heating
13:53
source. Uh really I think internet is is
13:57
becoming more of a necessity than a nice
14:00
to have and I think we certainly saw
14:02
that with with COVID and schools for
14:04
example moving online and so there you
14:07
know there are plenty of other examples
14:09
of utility services that we need. Um now
14:14
you're going to die more quickly without
14:16
water than any of those others. That's
14:18
definitely true. But I think that it's
14:23
not there are other parts of our society
14:26
where there are things that we really
14:27
need to function that are set up this
14:29
way in in utilities. And I think unlike
14:32
those other examples of electricity and
14:35
natural gas or heating oil or internet,
14:39
by and large, more people are served by
14:42
a government-owned utility in the United
14:44
States, whereas the other utility
14:46
services tend to be privately owned.
14:48
Now, of course, we do a privately owned
14:49
water utilities as well.
14:53
>> Yeah. So, so Glenn, you you mentioned
14:56
we've got um so we think about uh how
14:59
the utility pays its bills and produces
15:03
um its product, which is clean and
15:05
reliable drinking and and waste water
15:07
and sewer services, right? Um we have
15:09
the rate base. You you keep talking
15:11
about these loans, right? So maybe
15:13
describe for us um where are the sources
15:16
of these loans and is the are the monies
15:21
readily available? What's the barrier to
15:23
access these loans? Um is it enough?
15:26
Unpack the the loans that you're kind of
15:28
speaking of for a minute to kind of uh
15:30
help us understand um the accessibility
15:33
of of capital in in our water space.
15:37
>> Absolutely. So, a utility,
15:41
if it needs to borrow money to say put
15:44
in a piece of infrastructure that's
15:46
going to cost a couple million dollars,
15:47
they could walk down the street to a
15:49
bank in the community just like you or I
15:52
could if we need to make an improvement
15:53
on our house or or start a business and
15:57
fill out the paperwork and take out a
15:59
loan. That happens very rarely, but it
16:01
could happen.
16:03
>> Larger communities will also go to the
16:06
bond market. So, they will look to get a
16:09
group of investors to loan them money
16:11
with a guaranteed rate of return on on
16:14
those dollars. But that's something that
16:16
small to medium-sized communities are
16:19
often not going to be able to access the
16:21
the bond market very easily. That's a
16:23
very complicated, long, expensive
16:26
process that I understand about this
16:28
much of. So, I won't go into much detail
16:31
other than to say typically you're going
16:33
to be talking about your larger cities
16:35
are are dealing with the bond market.
16:38
For most communities, if they need to
16:40
borrow money, they're going to look at a
16:42
government uh sponsored program. And so
16:46
probably the two largest ones to to talk
16:49
about are um on the one hand the clean
16:53
water and drinking water state revolving
16:55
funds
16:56
>> and then on the other hand uh a loan
16:58
program offered by the US department of
17:00
agriculture. So let me start with the
17:02
state revolving funds or sometimes our
17:04
you know our acronym happy industry
17:07
calls it the SRF programs. So what
17:10
happens with these programs is the
17:12
federal government every year allocates
17:15
a chunk of money to their state
17:18
partners, territorial partners as well,
17:20
but state partners to then seed a
17:25
revolving loan fund. So that money is
17:27
loaned out then to communities for water
17:29
infrastructure. And each state has a
17:32
scoring criteria that they look at. You
17:34
bring them an application that says, "We
17:36
need to build a water tower and here's
17:39
why." And they'll score that application
17:41
and the top scorers get the loans. And
17:43
then as that money is repaid to the
17:46
state, the state then takes those
17:49
repayments and loans that money out to
17:52
the next borrower in need.
17:54
>> Yeah.
17:55
>> So they're meant to be set up as self-
17:58
sustaining programs, but they do get an
18:00
infusion of federal money every year.
18:03
>> Well,
18:04
So far, they've been getting a federal
18:06
infusion every year. That's not a
18:08
guarantee.
18:09
>> Yeah.
18:10
>> Then for smaller communities, the US
18:14
Department of Agriculture, USDA, the
18:16
same USDA, by the way, that does beef
18:18
inspection and all that kind of thing.
18:20
We think of them, they're like the stake
18:22
people, right?
18:23
>> Well, they're really about community and
18:26
economic development in rural America.
18:29
Mhm.
18:29
>> And so if you're under 10,000 people
18:32
served, you are eligible to apply for
18:35
funding from USDA. And the advantage of
18:38
that is that that is a program that is
18:40
specifically targeting those smaller
18:42
communities that sometimes would have a
18:44
more difficult time competing for the
18:47
state revolving fund loans. Now, the two
18:50
big exciting things that have been
18:52
happening in the last couple of years,
18:53
one is the bipartisan infrastructure law
18:57
or the in uh infrastructure investment
18:59
and job acts IIGA or bill in our acronym
19:03
heavy industry again, which are both
19:05
terrible. Um, this basically just dumped
19:09
a ton of extra money into these programs
19:13
as well as created some special pots of
19:15
money for lead service line replacement
19:17
and for POS.
19:20
So that has brought extra dollars to the
19:23
table which is exciting.
19:24
>> Mhm. But then on the other hand, as um
19:29
Congress for about a 10-year period
19:32
stopped doing what are known as earmarks
19:35
or congressionally directed spending or
19:38
pork if you would prefer. Uh but
19:41
essentially where a member of Congress
19:43
is going to say, "I'm going to write a
19:46
law that says this town in my district
19:48
is going to get $2 million for a water
19:50
project." Well, a couple years ago, they
19:52
brought that back. And you know, this is
19:55
the the grease that makes Congress work.
19:58
I don't think we're always happy to hear
20:00
that, but like Congress works better
20:02
when you can trade somebody a project in
20:04
their district for their vote on
20:06
something, and that's just the way it
20:08
is.
20:09
>> Um, but this congressionally directed
20:12
spending is essentially a grant that
20:14
does not have to be repaid. And people
20:16
in the water sector thought, "This is
20:18
great, right? We're going to get some
20:19
projects paid for." The problem is that
20:24
Congress deducts the amount of that
20:27
earmark from that pot of money it gives
20:31
to the states for the state revolving
20:32
fund every year. And now instead of
20:35
going with the state's criteria of
20:38
whether a project is worthy or not, it
20:42
often comes down to is this particular
20:45
community wellconnected with their
20:47
member of Congress.
20:48
>> Yes. And so that all of a sudden creates
20:52
a funding gap. So one of my questions is
20:56
like what are the other in the work that
20:59
you do like what what are the other
21:01
funding sources that communities then
21:03
turn to to try to
21:05
>> make up when they're like if SRF is
21:08
already earmarked and spoken for
21:11
>> but there are still needs like how do
21:13
they navigate that type of um financing
21:16
situation?
21:17
This is a big problem and and you talk
21:20
about the funding gap. So every couple
21:21
of years EPA assesses the amount of
21:25
capital projects needed over the next 20
21:27
years in the water sector and in the
21:29
wastewater sector. It's hundreds of
21:33
billions of dollars, maybe even
21:35
trillions of dollars at this point. I
21:37
don't remember the number off the top of
21:38
my head, but the bipartisan
21:41
infrastructure law, the largest
21:42
infrastructure bill we've seen in our
21:44
lifetimes, was, forgive the pun, a drop
21:47
in the bucket compared to this 20-year
21:49
need. And so I I often think what's
21:53
happening is
21:56
some of these communities are trying to
21:58
find another source of money. Maybe they
22:01
are trying to go to the bond market.
22:02
Some states are are coming up with their
22:04
own dollars to supplement the federal
22:06
money or they're helping
22:09
smaller communities by aggregating
22:11
projects into a single bond offering.
22:13
You see a lot of creativeness, but the
22:15
biggest thing that's happening is
22:17
they're delaying doing projects,
22:18
>> right?
22:18
>> Yeah.
22:19
>> And the problem with that
22:22
is number one, it's always cheaper to
22:26
replace an asset proactively than
22:29
reactively. So if you know that this
22:31
tank is vital for providing service to
22:34
your community, you really want to
22:36
replace it before it has a complete
22:39
failure or your whole community might be
22:41
facing no water or a you know if it's a
22:44
treatment plant, say a dangerous
22:46
situation with the water,
22:49
>> it's never a good idea to delay. You're
22:51
threatening public health, but most
22:53
likely that project will now be more
22:55
expensive in a couple of years when the
22:57
money is available. So, I I know y'all
23:00
had uh my buddy George Hawkins on uh on
23:03
this series already. George and I were
23:05
at a conference together maybe about
23:07
five years ago, and I remember his quote
23:09
was something like, you know, the
23:11
bipartisan infrastructure law is more
23:14
money than we have ever seen, but it is
23:17
not enough. And I think that level of
23:22
investment either needs to keep coming
23:25
or utilities are going to have to start
23:28
to use these private lending options
23:30
more than they have in the past.
23:32
>> I have I've been developing a hypothesis
23:35
because you mentioned that the EPA looks
23:38
at and estimates what it would cost to
23:42
update our infrastructure. I think
23:44
they're doing that with inadequate data.
23:47
like I don't know that they have a
23:48
really um robust standardized way of
23:53
assessing the criticality of assets,
23:56
what it costs to replace. I think that I
23:58
think I think the fidelity of that data
24:00
could get a um a lot better. And I've
24:03
been wondering if there's a um a play in
24:07
the next
24:09
one or two election cycles to really
24:11
make a push for another infrastructure
24:14
bill that's more addressing criticality
24:17
of assets more than it is water quality.
24:20
Like so much in the last one was around
24:22
lead and POS and water quality.
24:25
>> Um I'm curious from your perspective
24:27
like how the criticality of assets, the
24:30
asset management plans. um how do those
24:32
look for communities and um I guess I'm
24:36
looking for your reaction on like does
24:38
that check out? It's a working theory,
24:40
but um yeah,
24:42
>> there's there's two issues here, Isaac.
24:44
So the the first is I think you're
24:46
right. You know, the the way that EPA
24:49
does this is a a survey. And there are
24:52
ways, you know, I remember from my my
24:54
graduate school days that you can come
24:57
up with a representative sample of
25:00
utilities and you can extrapolate out
25:02
from there. But you are extrapolating.
25:04
You're not literally asking every
25:06
community what do you need. The problem
25:09
is if you were to do that, the answer
25:12
that most communities would give because
25:15
most utilities are small utilities is we
25:18
don't know.
25:20
>> Yep. because they're not doing asset
25:23
management. They don't have a good grasp
25:25
on that and they are being unfortunately
25:27
more reactive when when disasters happen
25:30
to replacing infrastructure. So I think
25:33
you're 100% right that we don't have the
25:35
data that we need nor do I think the
25:36
data that we need actually even exist.
25:39
Um that's number one. And then number
25:42
two is
25:44
I do think that investing in
25:47
infrastructure
25:49
is something that most people feel like
25:52
is a role that government can play. You
25:55
know, this was a bipartisan
25:57
infrastructure law and it had a lot of
26:00
popular support on both sides of the
26:03
aisle and there were, you know, even
26:06
folks who voted against the bill were
26:09
then happy once it passed to champion
26:14
projects in their own districts and and
26:16
areas and go out and be a cheerleader
26:19
for the bill. And you know, you can be a
26:21
little cynical about the political
26:23
process one way or the other, but it was
26:24
obvious the bill was going to pass.
26:26
>> Sure.
26:27
>> And I think that
26:29
>> there's a lot of things that people
26:31
disagree with that government should be
26:33
involved in. But I think this is one of
26:35
the things that people understand would
26:38
be a value that government can add to
26:41
our lives at a federal or state level,
26:43
not just at a local level. And also I
26:46
feel like people get a sense that
26:47
unfortunately as a country we we may be
26:49
slipping behind other countries in terms
26:51
of the infrastructure that we have and
26:54
it has not in my mind we haven't seen a
26:57
significant impact on the economy of
26:59
that. We're still the largest economy in
27:01
the world but there may reach a point
27:04
where failing infrastructure is going to
27:06
start to limit our ability to be
27:09
economically competitive. And I think if
27:11
that happens,
27:13
you know, you're going to see the the
27:15
floodgates open in terms of some of the
27:17
federal investment.
27:18
>> And I think there's also that there's
27:20
some um in my opinion, change management
27:23
needs to happen about how to even
27:25
operate a water utility. I mean, Isaac,
27:27
we say all the time that the majority of
27:29
our water systems have three or fewer
27:31
employees. And while we've just been
27:33
talking about how utilities are in the
27:35
business of producing water, those
27:37
employees are also in the business of
27:39
serving their municipality. you know,
27:40
going to their parks, taking care of
27:42
their community community assets, not
27:44
just not just their so I feel like until
27:47
we as an industry and communities start
27:50
to optimize these water systems like
27:53
businesses and understand what
27:55
investment looks like, what what um
27:58
positive investment looks like in your
28:01
community and in your water system
28:02
versus I'm going to take this million
28:04
dollar check, give it to my engineering
28:06
buddy, you know, let him overengineer
28:09
whatever ever assets I presumably need
28:12
and then go back to the well and be in
28:13
the same you know situation 10 years
28:15
from now like we need to be in the
28:17
business of building resilient
28:18
communities and I definitely think
28:19
there's like an education layer of what
28:21
does that mean to operate a utility in
28:23
this day and age and I I I don't know I
28:26
mean I I think it's a multi-prong
28:27
approach faceted approach but I do think
28:30
you know we need to understand what that
28:31
layer looks like if we're going to start
28:33
advocating for um a substantial amount
28:36
of funding um coming coming to
28:38
>> and there's an aspect of helping people
28:40
like understand the cost of not doing
28:44
something. And I think kind of one of
28:47
the points that you were making earlier
28:50
was hitting on like we almost need a
28:54
handful more of disasters when it comes
28:57
to asset failure to mo to start
29:00
motivating the next
29:02
>> the cost of of understanding. And I I
29:05
think that one of the
29:09
One of the things in the bipartisan
29:11
infrastructure law or IIGA, I think
29:14
there was a mentality that a lot of that
29:16
funding got sucked up by larger
29:18
communities and and I think an asset
29:23
data
29:25
um platformbased funding model would
29:28
show that it's more ubiquitous and more
29:31
um that would actually go to help
29:34
communities of all sizes, particularly
29:36
rural water. Um,
29:37
>> yeah, let's yeah, we'll give you this,
29:39
but let's help you be more predictive
29:41
and smart about tracking your assets
29:43
over time and the likelihood of failure
29:46
versus, oh no, now we're in a
29:47
catastrophe scenario and it's going to
29:49
cost us 10 times as much to fix.
29:50
>> And being able to be realistic about
29:52
rate cases. I think that's part of it is
29:54
like understanding what should what
29:56
should we set rates to be. That way we
29:58
can actually say what do we need
30:00
supplemented? Um, but again, I'm I'm
30:02
saying a lot, assuming a lot. Tell me
30:05
where I'm wrong. um or tell me your
30:07
perspective on that.
30:09
>> My perspective is we have far too many
30:12
water utilities in the United States.
30:15
And you know these very very small
30:17
towns, there's a lot of small town
30:20
pride. They don't want to give up
30:22
control over the water. They're afraid
30:24
if they give up control over the water
30:26
supply and they want to grow,
30:30
they're not going to have the water they
30:31
need to grow. So they they hold on to
30:35
these utilities and and frankly those
30:39
construction grants in the 1970s and
30:41
early 1980s basically allowed these
30:45
communities that could not sustain
30:46
themselves as utilities to exist as a
30:50
utility because somebody paid for all
30:52
the really expensive stuff. So I I feel
30:55
like as a country,
30:57
>> great point.
30:58
>> If we want to continue to have thousands
31:02
upon thousands of of small town water
31:05
utilities, we have to commit to to
31:09
understand, yeah, if they have 150
31:11
connections, they can't take out a loan
31:13
for $4 million. It's just going to be
31:16
too much on top of their day-to-day
31:17
operations. So we need to find a way to
31:20
consolidate systems or and I I get dirty
31:24
looks when I say this, privatize some of
31:27
the systems, go to this like private,
31:29
you know, uh aggregator model that um
31:33
there are multiple of these larger
31:35
investorown utilities that they
31:37
basically buy up a bunch of systems and
31:39
operate them as a single utility entity
31:41
even though they're not physically tied
31:43
together. or we need to commit to saying
31:46
yes, we're going to continue to pump
31:48
grant dollars into these communities.
31:50
Right now, we're kind of doing the worst
31:52
of both worlds. We're we're, you know,
31:54
creating something where these
31:57
communities either have to take out a
31:59
loan that they may not be able to afford
32:01
or even access or to delay a necessary
32:05
capital improvement, but then not
32:07
insisting when they take out that money
32:10
necessarily that they look at a regional
32:12
solution that would be more financially
32:14
viable o over the long run. And so
32:19
the rates in small communities
32:22
really should be significantly more than
32:26
the rates in large cities because we
32:29
don't have it's economies of scale. We
32:31
don't have enough people to spread the
32:33
cost out over. But there's a minimum
32:35
cost of running a water utility or a
32:37
wastewater utility, especially on the
32:39
infrastructure side. But I think what we
32:42
end up finding is that a lot of these
32:43
small communities, they do enough to
32:46
stay in compliance. The people who work
32:48
there are wonderful and and they can
32:50
manage to do a lot with a little. And I
32:52
don't want to speak disparagingly of
32:54
them in any way, shape, or form. They're
32:56
real heroes in their communities, but
32:59
they're keeping the utility like just
33:02
going,
33:03
>> right? and and they're all one natural
33:06
disaster or public health crisis away
33:09
from a really big
33:10
>> lot of single points of failure,
33:12
>> right?
33:13
>> For
33:15
Yeah. Well, and and um you know, we
33:18
we've had others on on the podcast as
33:21
well, you know, speaking to
33:23
regionalization and um commercialization
33:26
and or privatization and
33:28
regionalization. And there's something
33:30
there's a notion that I've I've heard
33:31
more consistently and I don't know if
33:32
it's because we've talked about it on
33:34
the podcast or maybe it's just coming up
33:36
in practice where maybe not the entirety
33:39
of the utility is consolidated but
33:42
operational pieces. So you know if I'm
33:44
in a region with a shared uh you know
33:47
water source and you know chemistry
33:50
profile or so on so forth it may make
33:52
sense or you know rate base it may make
33:55
sense to consolidate rate base
33:57
operations but yet leave certain spokes
34:00
of the utility intact so not to lose you
34:03
know full control to a private entity or
34:07
um you know third party. What is your
34:08
take on on that uh strategy, Glenn? And
34:11
and where do you do you think that have
34:13
that has any legs um to stand on?
34:16
>> I I think we see a lot of this already
34:19
happening, you know, at small
34:21
communities
34:22
>> sometimes are contracting with
34:24
operators. So, one operator may end up
34:26
serving three or four communities. Let's
34:29
say they're, you know, like they have
34:31
their own business and they go around,
34:33
>> they're being contracted out. That is in
34:36
some ways a form of regionalization.
34:38
Even those individual utilities don't
34:40
have a relationship with each other.
34:41
They all have a relationship with the
34:43
same contract operator. We do see that
34:46
kind of shared sources or shared
34:48
infrastructure. I think there's a lot of
34:51
models that could work. I don't I don't
34:52
want to be I'm being a little glib here,
34:54
you know, but I I do think that um
34:58
there's been research like Manny
35:00
Teodoro, who's a great thought leader in
35:02
our sector, has said, you know, if a
35:04
community if a utility is serving under
35:07
20,000 people, it's going to really
35:08
struggle to be financially viable. You
35:11
know, that's one measurement. There are
35:12
others have come up with other numbers.
35:15
But again, in the long term, can a
35:19
community of of three or 400 people be
35:22
viable without grants? I think it would
35:25
be very very difficult. And I I think
35:28
though we're nervous to talk about
35:32
consolidation and we're nervous to talk
35:34
about um pushing consolidation,
35:40
not even forcing it, but even pushing
35:42
it, you know, in in some cases because
35:45
it does feel like, well, these are
35:47
independent small communities and people
35:49
have a lot of identity in that community
35:51
and they don't want a a state or federal
35:54
government coming in and saying you have
35:56
to give up a piece of that but I don't
35:58
know that the decisions are always made
36:01
with either public health or good
36:03
business sense as the top priority.
36:06
Yeah.
36:06
>> Yeah. Gosh, this is very
36:08
thoughtprovoking.
36:09
>> It is. And it it is that that
36:11
delineation between
36:13
um making pushes for what just makes
36:17
sense and also um ensuring it's not it's
36:22
not received as a personal attack. Like
36:24
it's it's not
36:25
>> it's not that you're inadequate, it's
36:28
that the system is not set up to be
36:31
sustainable
36:31
>> to help you succeed. Yeah.
36:33
>> Yeah. Yeah. Yeah.
36:34
>> Oh, this is wonderful. Well, um you
36:36
know, I think uh we definitely want to
36:38
know let people know, Glenn, where they
36:40
can find you um both uh if they need
36:43
your assistance, but also just generally
36:45
where you are. But first, I there's got
36:47
to be a story to that giraffe that that
36:49
I I'm staring at and have been staring
36:51
at for the last 30 minutes.
36:55
Yes, there is of course a story about
36:58
the wicker giraffe and um and thank you
37:01
for asking that. So when I my wife and I
37:05
bought this house that we're living in
37:07
now for uh almost 20 years ago, it'll be
37:09
20 years this summer. And uh I think our
37:13
respective families were quite excited
37:15
that we had become homeowners because
37:18
this was an opportunity for them to
37:20
offload the things of our childhood that
37:23
we were that they were holding on to at
37:25
their homes. And so uh my in-laws came
37:28
down uh with some of my wife's things
37:32
and they brought this giraffe um which
37:34
I'm not convinced was one of her things,
37:37
but they thought that we would like it.
37:38
And so it sat in the corner of this
37:41
guest room for many years. And then uh
37:45
in the early days of the pandemic when
37:47
we started doing everything by video
37:49
call, you know, Zoom and and Teams, uh
37:52
Tara suggested to me that I stick the
37:54
giraffe behind me and just not say
37:56
anything about it and just leave it
37:58
there. So I did. And uh it ironically
38:03
has become a little bit of our our
38:05
trademark of having this this
38:06
mid-century wicker giraffe uh standing
38:09
sitting behind me. So a couple of years
38:12
ago, I started uh working with
38:16
uh a wonderful colleague who's now our
38:18
associate director, Allora Arnett, but
38:20
she initially was part-time with us
38:22
while she was still working for a water
38:24
utility. And I had said to Allora, you
38:28
know, if you become full-time, I'm going
38:31
to get you one of these giraffes. And so
38:34
when she uh became our associate
38:37
director almost two years ago, I said,
38:38
"Okay, I've made a promise that I'm
38:41
going to get a giraffe. Now I have to
38:43
find one." Well, I mean, these were like
38:46
mid 20th century made, so I had to
38:50
search high and low, but finally found
38:52
one and had it shipped to her. And I I
38:56
texted her and I said, "Okay, you're
38:57
going to get a delivery today. You know,
38:59
make sure you're there for it." And um
39:03
she just texted me back after it
39:06
arrived. And just said, "I cannot stop
39:08
laughing at this thing." and picture of
39:11
like her her little daughter who was was
39:14
very young at the time, not even a year,
39:15
like on the back of the giraffe. So,
39:18
>> yeah. So, we we've got our we've got our
39:19
little wicker giraffe here. And uh you
39:21
can also see, by the way, over my other
39:23
shoulder is our CEO is uh sleeping on
39:26
the bed.
39:28
>> Yes.
39:29
>> Oh, I love it. It's a good disarming way
39:31
to start any conversation about water f
39:33
water finance. And hey, let's talk about
39:35
water rates.
39:37
>> But first, but first,
39:38
>> have you met my little friend? First, a
39:40
mid-century wicker giraffe. And it's
39:42
actually a planter
39:43
>> is is what it really is. There's a space
39:45
in the back where you would put a a a
39:47
potted plant.
39:48
>> Oh, that's amazing.
39:50
>> Oh, that is amazing.
39:51
>> Yeah. Yeah. That's awesome. So, where
39:52
where can people find more of you,
39:54
follow your work, uh know where you're
39:57
traveling next to? I think you're
39:59
traveling in the next next two months.
40:01
You're on the road um speaking and doing
40:04
a lot of work. So, where can people find
40:06
you? Our website waterfinanceass
40:09
assistance.com has information about all
40:11
the services that we provide. I mean we
40:14
obviously work with utilities on money
40:17
problems. That's a a big deal as we've
40:19
been talking about today. Uh we also
40:23
through URA work with utility on people
40:26
problems. So she's a former HR director
40:29
and customer service director for
40:30
utilities. And really I think those are
40:33
the two big areas that um I've seen a
40:36
lot of need on and as somebody who is
40:38
not a technical expert or areas where I
40:41
feel like we can make a difference in
40:42
the water sector. So our website has a
40:45
good explanation of of the types of work
40:48
that we can do as well as updates on
40:50
some of our current projects. Um we've
40:52
been doing a lot on making good charts
40:54
and graphs and explaining all this
40:56
complicated analyses to people. So
40:58
that's a whole other conversation we
41:00
could have that I think is is great. Uh
41:03
and then beyond that, I'm uh pretty
41:05
active on LinkedIn and so uh anybody
41:07
who's listening, if you don't uh follow
41:10
me or not connected with me on LinkedIn,
41:12
please reach out. Would love to connect
41:13
with you. And I'm posting pretty
41:15
regularly on there about our work and
41:18
and our travels, but also the um some
41:22
information about water finance that is
41:25
in the news around the country. I love
41:27
it.
41:28
>> Well, thank you so much. Um, yeah, this
41:31
has been so great. And thank you to
41:32
everyone who tuned in to this
41:34
conversation. We love getting to have
41:37
conversations like this with folks like
41:40
Glenn. And so, if you've enjoyed this
41:41
episode, please like, share, follow,
41:44
comment, let us know who you would love
41:47
to hear from, someone who makes water
41:48
work. And we'll see you next time.
41:51
Thanks for listening to the Make Water
41:53
Work podcast. If you enjoyed today's
41:55
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41:58
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42:00
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42:02
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42:07
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42:09
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