If we just would use global cost accounting …

I was chatting with a friend awhile back, and he asked me what projects I was working on. I told him about a meeting I’d just had with some folks proposing to develop a piece of land near Bulverde, just northwest of San Antonio, an area in which water supply is a critical issue. My reason for talking with these folks was to offer a sustainable water management concept to serve their development, entailing the strategies we have been discussing in this blog:

  • maximizing rainwater harvesting for both water supply and as a component of stormwater management;
  • a decentralized concept “waste” water system focusing on practically maximizing the resource value of this water, mainly for irrigation supply, but in this case perhaps also for toilet flush water supply in the commercial and institutional buildings planned for this project; and
  • an LID/green infrastructure stormwater management system that would hold much of the increased runoff caused by development on the land rather than “efficiently” draining it “away”.

The developers’ major focus in this particular meeting was the wastewater system. They wanted to understand the fiscal implications of pursuing the decentralized concept strategy vs. connecting to an area-wide conventional wastewater system, which would entail a 13,000-foot line to be extended to this property (and, I presume, one or more lift stations, given the topography of this area). But they also seemed very leery of the “hassle factor” of dealing with the Texas Commission on Environmental Quality (TCEQ) to permit a stand-alone decentralized concept system for their development. They perceived this permitting process would not be as “clean” and “easy” of an institutional process as “simply” joining the existing conventional centralized system. So the impression I got was that the cost implications would have to lean rather starkly in favor of the decentralized concept strategy if they were going to even investigate what permitting and running it may entail.

And this is where the tale becomes rather frustrating. As I related to my friend, one of the guys did a “back of the envelope” calculation of the cost of the 13,000-foot connection to the conventional system, which came out to be very similar to the rough ballpark cost I’d offered for the decentralized concept strategy, given the number of connections they were projecting. It was unclear if his estimate included anything but the connection line. It appeared not because he was just multiplying a cost per foot figure – offered by an engineer connected to the conventional wastewater system, I presume – times the length of the line.

As I told my friend, I began to identify costs we would need to include if we were to arrive at an “apples to apples” comparison with the decentralized concept strategy. That approach serves up a complete wastewater system – collection, treatment and reuse – while that 13,000-foot line by itself is only a partial collection system, not including all the internal collection lines (and lift stations, if needed) within the development. It also does not include connection fees, the buy-in to the centralized treatment plant capacity and any system improvements needed between the point of connection of this project to the centralized collection system and the treatment plant. That charge would likely accrue not to these developers, but to the builders, as each building or neighborhood connects to the centralized system.

Then I noted to my friend – I was really on my soapbox now – that their accounting also totally ignored the value of the water resource embodied in the “waste” water. And the eventual cost of upgrading/expanding the area’s water supply system, driven by the need to provide all the irrigation (and toilet flushing?) water for this project – and by extension for many other projects in this fast developing area – if all that “waste” water were dumped down the drain instead of reused to defray those demands. Both the costs of upgrading the water system facilities and of accessing new water supply to run through them – which in this area gets us into that whole issue of raiding remote aquifers that we’ve looked at in a previous post.

Then too, being a distributed system, it may be quite practical to install the decentralized concept system in phases, matched to the level of imminent development. So a considerable portion of the ultimate total cost of that whole system might be put off till later, saving the “time value” of the money not expended up front to get the development started. Unlikely the developers will factor those savings into their decision.

All in all, I told my friend, from a global perspective, there are a lot of cost factors that “should” be considered to get to that “apples to apples” comparison. But it is to be expected that at least some of them will not be considered as these developers make their fiscal comparison. And that is because folks don’t look to a global cost accounting when making those decisions, rather they only look at the costs that they would directly bear themselves, fairly immediately. Thus these guys’ preoccupation with that 13,000-foot extension, to the apparent exclusion of those other cost factors, as that’s the very visible immediate cost they’d bear to be able to actuate their development.

There’s also the “hassle factor” beyond the TCEQ permitting process. These developers are very leery of having to set up an entity that would handle on-going operations, maintenance and compliance monitoring of a stand-alone decentralized concept system. They most definitely would not want to be involved in running any such operation themselves; indeed, few if any developers would be. That is not their business, and they quite understandably don’t want to be bogged down in it.

A solution to that problem would be for the owner-operator of the area-wide centralized system, the Guadalupe-Blanco River Authority (GBRA), to become the owner-operator of distributed systems within this area. What GBRA is actually selling is a service, not a connection to a specific type of system. That just happens to be the manner in which they are presently organized. GBRA could just as well obtain revenue from operating and maintaining distributed systems. This concept has in fact been posed to them a few times, dating back a couple decades. But GBRA appears stuck in its mental model, always has been and apparently still remains so invested in its current business model, operating the centralized system, that it will not entertain whether it would be more globally cost efficient to provide that service by other means. This too warps the perspective of the developers, who perceive that under the centralized plan they can “just” install their collection lines, pay their fees, and then they are out of the wastewater business. While if they go with the decentralized concept strategy, no matter how much more globally cost efficient it may be, they would have to take on duties they’d rather not get into – organizing, if not actively running, a wastewater system.

This situation facing these developers and that wastewater system operator is a ubiquitous problem in our society. As I’ve noted on this blog in another context, “Society has not figured out how to send to those who incur the first costs the signal sent by the global life-cycle costs. The result is that choices are made which may well serve the short-term interests of those who bear those first costs but poorly serve the long-term best interests of society.” That may be exactly the outcome here.

As was noted in “Motherless in Bee Cave”, everyone is invested in their “deal of the moment”, focused on what they perceive best serves their bottom lines in the short term. So we have this situation where society would be paying more to degrade the cause of sustainable water than, if it followed the lead of global cost accounting, it could be paying to bolster sustainable water, saving money while saving water. How we can “get around” all these deals of the moment and make those global evaluations the basis for decisions on water management is a mystery. One of many this society must solve if it is to remain sustainable.

 

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2 Comments on “If we just would use global cost accounting …”

  1. Paul Lawrence Says:

    Once again, you have demonstrated a clear understanding of the challenge facing these developers as an opportunity to employ a decentralized approach. You’ve accurately detailed the cost competitiveness of your approach in the near term while demonstrating the superior long-term cost savings. Additionally, you hinted at the many facets of certain water savings. Ergo; this begs the question; why would an intelligent, critical thinking individual not choose the decentralized approach?

    Therein lies the crux of the true challenge. How do you get decision makers to overcome their inhibitions as related to this decentralized approach? I fear that this is a chain of decisions that must all be made in favor of the perceived ‘risky and troublesome’ decentralized approach. Like it or not, developers, as a class, are a risk-averse bunch. The facts are on your side, while the stereotypical characterizations of the challenges of employing a decentralized approach are not. You have identified most of the hurdles preventing the developers from choosing the superior decentralized approach. Now comes the hard part. How do you change these long-held perceptions of the individuals and institutions who are feeding the developers their misconceptions? Again, the developers always rely on the most conservative experts available to assess the potential risk of their various alternatives.

    I’m afraid that expecting this superior approach to go mainstream anytime soon is a bridge too far. At this point, I believe that getting a water conserving entity to work with a respected educational institution to develop a government backed pilot project represents one viable step towards acceptance. The other approach demands that you work step by step, institution by institution to prove to each of them the undeniable superiority of the decentralized approach. Such that, when asked for their assessment by the developers, they will assure the developers that the risks are not greater with the decentralized approach and, in fact, the decentralized approach has a significantly better up-side.

    • waterbloguer Says:

      Thank you for that thoughtful, incisive comment, Paul. Indeed, it is not just actual risk but perception of risk that drives developers, and indeed all the actors in such dramas — their engineers, the financial folks, the whole regulatory system, and actors such as GBRA — to hew to the party line. As for that approach suggested in your last paragraph, if only any such opportunity were available. I had harbored hopes that the Meadows Center might be a place where this could happen ever since running the TWDB-funded rainwater harvesting project for them, but it’s been made pretty clear their priorities lie elsewhere. If you have any ideas of who to approach on that, I’m all ears. Thanks again.


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