Monday, January 17, 2011

Oasis Part 3: Liquidity

Oasis Part 3: Liquidity

The Newlands Act of 1905 largely dictated public works projects for the 20 western states and later Texas all the way into the 1980s. Named after Francis G. Newlands from Nevada, the act laid out projects ranging in scope from the tiny dam that is holding up Hunter Creek to the monster marvel of human ingenuity and force—Hoover Dam. The act also laid down the ground rules for how water rights were to be distributed, in 1944 the Orr Ditch Decree finalized these rights in the Truckee Meadows. These water rights are set in stone, evaluated and sold off to different entities for public and private usage. In the Truckee River system those water rights total approximately 500,000 acre feet of water. An acre foot is how much water there would be if an acre of land were covered by a foot of water. A typical household uses between one quarter and one half acre foot of water annually. In Reno, because there have been few laws restricting water usage, the typical household uses a half acre foot annually. In places where conservation is enforced like Phoenix a typical household uses about one quarter acre foot per year.

The majority of that usage, the water that disappears and is never seen from again, goes to watering lawns and wasting water on non-native gardens that have little resemblance to the native flora. The biggest culprit is lawns. Lawns use enormous amounts of water and whatever run off there is will not flow back to the Truckee. Either it will soak into the water table—a minimal recharge to the system—or more likely it will evaporate rapidly—only to precipitate somewhere in Utah or Colorado. In fact, a household can use drastically less water if it reduces its non-system water usage. The majority of water that a house uses is indoor, and as long as there is city water and sewer, what goes in comes right back out. Conserving water through shorter showers or flushing once a week doesn't really address water.

The water that can't be reclaimed is the only water that is lost. Lawns, septic systems, car washes, and pools are big examples. It's important to remember this when debating water. Outdoor water usages account for the majority of water lost in the Truckee Meadows.

Starting in the mid 1970s, Reno embarked upon a glorious boom period. For years, Washoe County was one of the fastest growing in the nation. As Reno, Sparks, and the unincorporated Washoe County expanded, it became apparent that many things would have to change to sustain the community. The first change was a state mandated regional plan to coordinate growth. The second change was the creation of the Truckee Meadows Water Authority (TMWA) a public utility to manage water rights in the region. The region, as defined by the state, was Washoe County. That meant that the surrounding counties in two states were exempt from the provisions of the Regional Plan—there was nothing regional about it.

Washoe County continued to grow, mostly large scale developments. The growth started to feed off the growth. During construction, a huge amount of water is used for dust suppression. On large scale developments such as the many that cover Reno, construction crews will clear a whole site meant for 100 to 6000 homes and use large water trucks to suppress the dust. This requires huge amounts of water; especially in the summer. By the time a water truck has made a pass over an area to suppress dust, the site will have already dried up. The summer months, when construction peaks, are the worst. The construction companies are forced to perpetually have a water truck going just to comply with air quality ordinances.

The perpetual usage of water in a meaningless attempt to keep dust from occurring in a desert paralleled another product of the Reno boom. The growth in Reno was largely construction; people moved to Reno for construction and constructed homes so more people could move in. It was building off of building; growth from growth. That wasn't much of a problem for most people until the bottom fell out of the housing market in 2007.

In a city running on growth sustainable industry tends to take a backseat to the action. Who cares about water when there are 50,000 acre feet left for allocation? Besides, if there is ever a problem with TMWA's supply the county can import water from Honey Lake or buy rights from the Green Wave farmers in Churchill county. It's important to note that the Green Wave is Churchill County High School's mascot, named after the veritable sea of alfalfa blowing in the wind, watered by the distant Truckee. Regardless, water was not a concern during the boom, and similarly the sustainability of the endeavors was not really evaluated either. According to former Citizen Planner Fred Lokken, residential developments never pay for themselves. Retail doesn't either. It's not the buildings, the lost land, or even conforming to expensive building codes. It's the public utilities.

Roads cost a lot to build, over their lifetime the maintenance makes them cost several times their initial building costs. The tax revenue generated from a large sprawling development will never pay for the cost of the roads. Think of it: the average large scale development has about 6000 square feet per lot; the roads, with enough space for dual side street parking and one and a half lanes of driving have to be at least 25 feet across. Then add in the arterial roadways that lead to the neighborhoods, several four or five lane boulevards, two or three freeway entrances, and subtract the tax revenue of the houses that won't sell immediately or possibly ever to get the final tally on the roads. It ain't cheap to build; then maintain it. It doesn't pay, and that doesn't include the costs of new schools, businesses, increased traffic on existing roadways, fire, police, hospitals, parks, gas, electric, water, and sewer.

Even worse, in the state of Nevada the housing tax decreases every year for 30 years until the only tax is on the value of the property. The tax revenue of a new development is worth significantly more than any taxes on an old one; every year a development ages, the lower the tax revenue until the taxes come back to their initial cost without the houses that were put in the first place. Only now the cost of maintaining all those new services is added into the city's expenditures. What once was large ranch land with minimal city services and a fixed property tax suddenly transforms into a ticking time bomb for the city.

America's addiction to homeownership has a long and storied history. Suffice it to say that by 2006, it was part of the American Dream. Homeownership is a symbol of status and responsibility. It says, “I have a job and I can afford to live away from concentrated poverty and high unemployment.” In the years leading up to the collapse of the banks and the mortgage crisis, financial institutions took advantage of that attitude and gave out tons of loans. Michael Lewis's novel The Big Short explains the complex factors that led to the housing bubble and its after effects. On the consumer side, banks were approving loans that borrowers couldn't ever repay on property that was overvalued. In Reno, the largely construction based economy was allowing a whole host of blue collar workers to take out loans to purchase houses. Their stable workload of construction and development gave them job security and the high value of their houses coupled with government policy to keep loan rates low allowed many workers to take out multiple mortgages on their homes.

Then the bottom fell out. Interest rates went through the roof on those overvalued houses. People couldn't pay back their loans, and construction ground to a halt. Unemployment shot through the roof in Washoe county, jumping as high as 13%. Homes foreclosed at an enormous rate, at one point Washoe county led the nation in foreclosures. Under this enormous burden of being without a job and close to without a home, many people walked. A good portion of Reno's economy collapsed. Suddenly all the new infrastructure built during the boom had no tax base to support it.

That leaves us at today. The alternative is not anything new or groundbreaking in terms of ideas. In fill and urban development are the secret everyone knows. In fill is taking the current city limits and growing the city vertically. As a city becomes more vertical it also becomes more efficient. Less services and more individuals splitting the costs for the services is a logical way of solving most of our problems with cost. Granted, urbanization is not without its drawbacks, but those costs don't jeopardize the city's ability to pay off its debts like suburban sprawl does. Many authors also point out that cities don't have to grow solely vertically, they can spread out horizontally, but our current policies of eating land at an unprecedented pace is completely unsustainable. I use sustainable loosely, a city does not need to grow its own food and be a Communist city-state. Sustainable, for now, is simply the ability for any new development to pay for itself. It doesn't even have to be for today, it can be over time.

The fact that current build policies for the region—and for most of the nation as well—require the taxpayer to support most and eventually all of the costs is not capitalism or democracy.

Next: Retail, water, wildlife, and floods.