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By Jack McHugh
Michigan voters will be asked on November 5 to take on $1 billion in new debt to subsidize local projects addressing “combined sewer overflows,” or CSOs. Many cities have one set of sewers to transport both sewage and storm water runoff. After a heavy rainfall treatment plants can’t handle the massive influx of storm water, resulting in overflows that discharge untreated sewage into lakes and streams. Solutions are expensive – by some estimates Southeast Michigan alone would have to spend up to $26 billion.
Before answering “yes” on the ballot question, voters should ask a few questions of their own. For example: Is spending billions on CSOs a cost effective way to improve water quality?
CSOs are a highly visible source of pollution - a ready target when rounding up “the usual suspects” of beach closings due to high bacteria counts. But are they the main culprit? Other sources include agricultural runoff, animal wastes, failing residential septic systems, illegal discharges, etc. Also, while beach closings are certainly inconvenient, there do not seem be any long-term environmental consequences from temporarily high bacteria levels. So ending CSOs may not solve water pollution problems.
It may not even fix elevated bacteria counts. Recent news reports describe how sophisticated genetic fingerprinting at one popular Lake St. Clair beach found that 69 percent of the bacteria were from bird droppings and other animal waste. So the phenomenon might be entirely natural, although more pavement and other impermeable surfaces diverting rainwater could make it worse. Nevertheless, taxpayers should be wary of claims that this is a silver bullet to solve our pollution problems.
Another question: Why should state taxpayers incur debt for local water projects? Local governments have known about the problem for decades. The prudent, businesslike thing would have been to set aside part of annual user fee revenue and undertake fixes without state subsidies. Instead, most spend every penny on current operations. Indeed, some have even deferred regular maintenance in anticipation of future sewer separation projects.
Given this, state taxpayers might wonder, why bail out profligate local governments? Older communities like Detroit with aging infrastructure and a shrinking tax base say the cost will worsen their economic situation. This has some merit, but begs the question of why those same officials aren’t doing more to attract jobs by cutting bureaucracy, spending, and taxes. And a bond issue of this magnitude invites profligacy. Without funding constraints, there’s little reason for local governments to prioritize and “cut the fat.” Meanwhile, the state could not possibly maintain adequate oversight of the multitude of infrastructure projects that would result.
Also, existing state “prevailing wage” laws will boost the cost of any new sewer projects. Taxpayer dollars will not be spent as efficiently as possible as long as this law remains on the books. (See Mackinac Center reports on how Detroit can realize significant savings by privatizing services now provided by city departments, and on Michigan’s prevailing wage law.)
The bottom line question is, can we afford it? The proposal could double the state’s outstanding general obligation debt. The nonpartisan Senate Fiscal Agency estimates that, assuming a five percent interest rate, annual debt service will gradually rise to $80.2 million, and then fall as bonds are paid off. Total interest costs would be $605 million, for a total cost of $1.605 billion, or $334 for every Michigan taxpayer.
Meanwhile, state government faces a structural revenue shortfall, due to continued spending increases, and flat revenues. To sustain current spending levels, the legislature has all but drained the “Rainy Day Fund” and other temporary funding sources. Given these realities, voters should think long and hard before taking on another huge liability.
Jack McHugh is a legislative analyst for MichiganVotes.org, a service of the Mackinac Center for Public Policy.
