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Note: The following contentions are prominent among the arguments used by opponents of the proposal. They do not necessarily represent the views of the Mackinac Center for Public Policy.
The Problem Is Overstated
Discharges of combined sewer overflows (CSOs) into lakes and streams are a highly visible source of water pollution, especially after heavy rainfalls. For this reason they are a ready target when rounding up “the usual suspects” of beach closings due to high counts of bacteria in the water. But are they the main culprit? Other sources include runoff of fertilizer used in agriculture, animal wastes, failing residential septic systems, illegal discharges (often by units of government), etc. Also, while beach closings are certainly inconvenient, there do not seem to be any long term environmental consequences associated with temporarily high bacteria levels. Despite their visibility, ending CSOs by separating storm and sanitary sewers may not solve water pollution problems – even the problem of temporarily elevated bacteria counts.
For example, a 2001 Detroit News article reported that an analysis at one popular beach in Lake St. Clair using sophisticated genetic fingerprinting showed that 69 percent of the bacteria were from bird droppings and other animal waste. Another story discussed how fertilizer and manure spread on farm fields can raise surface water E. coli bacteria levels. The bottom line is, even if CSOs were eliminated altogether, doing so may not solve serious water pollution problems, or even temporary beach closings.
Encourages Profligate Behavior by Local Governments
Local communities have known for decades that under federal environmental standards, either massive new sewer treatment plants must be built, or storm and sanitary sewers must be separated. The prudent, businesslike thing to have done would have been to set aside part of annual user fee revenue in a “sinking fund,” gradually building up enough to undertake the projects without new taxes. Instead, most local governments spend every bit of revenue on current operations. Indeed, many communities have even deferred regular maintenance on existing systems in anticipation of future separation projects – but then spent the money thereby saved, rather than prudently setting it aside, or returning it to taxpayers.
Given this, state taxpayers have a right to wonder why they are being asked to bail out profligate local governments. Some of these have refused to take steps that would boost their tax base so they could afford new sewer projects. They have not made their communities attractive to new job providers by cutting bureaucracy, spending, and taxes, and by privatizing services. Now they want taxpayers statewide to subsidize this failure by incurring new debt.
Fix Cost-Boosting Prevailing Wage Law First
Existing state “prevailing wage” laws will boost the cost of any new sewer projects. Taxpayers should know that their money will not be spent as efficiently as possible as long as this law remains on the books (See Mackinac Center report on Michigan's prevailing wage law.)
We Can't Afford It
Regarding the cost, the bond issue could double the amount of outstanding general obligation bonds, pledging the full faith and credit of the state. The nonpartisan Senate Fiscal Agency estimates that, assuming 20-year bonds issued over a 10-year period at a constant interest rate of 5%, annual debt service paid from the state general fund would be approximately $8 million in the first year, increasing by $8 million a year for ten years, when it would be $80.2 million, where it would remain for 11 years, then decrease gradually until the bonds were paid off in 30 years. Total interest costs would be $605 million, bringing the total cost of the bonds to $1.605 billion. This amounts to $160 for every man, woman and child now in the state over the life of the bonds.
Meanwhile, some experts contend that state government faces a structural revenue shortfall, due to the fact that spending has continued to increase, while revenues have not risen as much as expected. The legislature has all but drained the Budget Stabilization Fund (BSF, or "Rainy Day Fund") in order to sustain current spending levels, and dipped into many other temporary funding sources. Several senators voted against the legislation authorizing the new debt, saying they could not figure out how to pay the $80 million in eventual annual debt service expense.
Doubling the state’s general obligation debt is of dubious economic merit at best, particularly in light of the fact that between 1979 and 1998, Michigan’s outstanding bond debt increased a whopping 550 percent. (Per-capita bond debt increased 61 percent.) A bond issue of this magnitude invites profligacy. Absent funding constraints, there would be little or no budgetary discipline that would otherwise necessitate spending priorities. Meanwhile, the state could not possibly maintain adequate oversight of the multitude of infrastructure projects that would result.
