GAO study: Damage to agriculture from climate change

Posted on November 15, 2017 by matt ohern
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The Government Accountability Office (GAO) is the audit, evaluation, and investigative arm of Congress. GAO evaluates federal programs and provides analyses to help Congress make informed funding decisions. Sens. Maria Cantwell (WA) and Susan Collins (ME) requested the GAO to evaluate how climate change impacts will increase costs for the federal government and presumably need more tax money to support.
GAO reviewed two national scale studies and asserted it interviewed many national experts. The two studies reviewed by GAO are The American Climate Prospectusstudy…produced by the Rhodium Group in 2014 to assess the economic effects of potential climate changes on different sectors of the U.S. economy and regions of the country.” The Rhodium Group, LLC is located in New York City and is a nonprofit which does not list its board of directors. No background information is provided by the Rhodium Group but its web page makes claims regarding its research capabilities.
The second study relied on by GAO is EPA’s study entitled Climate Change Impacts and Risk Analysis. EPA’s study reviewed future greenhouse gas emissions growth, climate sensitivity, natural variability and climate model selection. There is no indication to the experts GAO interviewed and I would suspect none were the experts who signed the petition filed with EPA which claims greenhouse gases such as carbon dioxide and methane are not endangering the planet.
Federal dollars spent on weather events
The GAO advised the two senators that $350 billion is being spent by the federal government in 2017 because of extreme weather and fire events. GAO believes these numbers will increase and that floods and drought once considered rare will become more common and intense because of climate change. The letter to the senators indicates “A November 2016 assessment by the Office of Management and Budget (OMB) and the Council of Economic Advisors found that recurring costs that the federal government incurred as a result of climate change could increase by $12 billion to $35 billion per year by mid-century and by $34 billion to $112 billion per year by late century,…” GAO admits that measuring the effects of climate change in the United States is difficult to measure. GAO says models produce imprecise results, imprecise climate model uncertainty, and that it is difficult to model climate change over long time frames.
Notwithstanding these caveats, GAO relies on a report by the Rhodium Group which had its project funded by Bloomberg Philanthropies, Paulsen Institute, Skoll Global Threats Fund, and the Rockefeller Family Fund. The Rhodium study was published by the Columbia University Press in 2015.
EPA’s climate change study and the Rhodium study plus experts “…suggested that potential economic effects of climate change in the United States could be significant and unevenly distributed.” As expected, agriculture is examined closely. On page 20 of the GAO climate change report, it is indicated there could be a change in our crop yields because of temperature, precipitation, and carbon dioxide fertilization. GAO projects between 2020-2039 agriculture could benefit by $8.5 billion to a loss of $9.2 billion. From 2040-2059, GAO estimates crop yields could possibly benefit from carbon dioxide fertilization by as much as $8.2 billion and lose as much as $19 billion. Another economics chart on page 22 indicates that if we have significant global emissions reductions in the United States, agriculture could save as much as $1.2-1.4 billion by 2050.
Forestry might have increased economic benefits by as much as $9.6 billion by 2050.  EPA suggests that “…estimated costs of climate changes without any emissions reductions…[will be] $5.0 trillion in economic costs to coastal property from climate change through 2100…”
According to the American Climate Prospectus study, “…the Southeast, Midwest, and Great Plains regions will likely experience greater combined economic effects than other regions…”
The purpose of this GAO study is to look at potential effects of climate change and therefore federal decision makers can better manage climate risks. If you believe that, I am sure you believe the government is here to help you.
(This article first ran in Farm Futures on October 31, 2017.)
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Trump and P3 Infrastructure: What Now?

Posted on November 15, 2017 by matt ohern
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Like much of the transportation infrastructure community, I was stunned and dismayed when President Trump suddenly told several Democratic members of Congress that “P3s don’t work” and are “more trouble than they’re worth.” He even trashed the largely successful experience of Vice President Pence’s home state of Indiana, which is moving toward a toll-financed, P3-delivered reconstruction and widening of its Interstate highway system.
After a week of reflection, and with no confirming actions or announcements from the White House, I’m less dismayed, for a number of reasons. First, nearly all P3 infrastructure projects are developed by state and local governments, which own the infrastructure. They will continue to launch such projects because they make sense—witness the $9 billion announcement by Maryland Gov. Hogan the week before, to use P3 concessions to add express toll lanes to three major highways.
Second, there is bipartisan support in Congress for the P3 infrastructure approach. In September 2014 a special panel of the House Transportation & Infrastructure Committee issued a report, “Public-Private Partnerships: Balancing the Needs of the Public and Private Sectors to Finance the Nation’s Infrastructure.” The report represented the consensus views of this bipartisan panel that included Ranking Democrat Peter DeFazio (D, OR). And just the other day, the House’s New Democrat Coalition released a three-page statement on infrastructure improvements that includes the use of P3s both for long-term fixes to existing infrastructure and to foster innovative solutions.
Third, it’s important to remember the old saw, “The President proposes, the Congress disposes.” Whatever approach the White House proposes, the actual infrastructure bill will be crafted, debated, and eventually passed by Congress. The latest indications are that the White House proposal will focus more on rethinking the respective roles of the federal government versus those of state and local governments. Since the latter own the infrastructure, this kind of rethinking is long overdue, especially given the ever-worsening fiscal position of the federal government. Despite the recent call from what we might call the Old Democrats (in this case, members of the Senate Environment & Public Works Committee) for $500 billion in net new federal spending on infrastructure—funding source unspecified—there is no hat from which to pull out a $500B rabbit.
We have aging highways, leaking municipal water systems, and decrepit locks on the inland waterways for two reasons. First, those who use and benefit from these systems have been unwilling to pay what it actually costs to use them—and seem to think that somebody else should do it for them. Second, those who manage these vital facilities have not leveled with the users about paying the real costs.
Users-pay/users-benefit is still the fairest and most effective way to pay for airports, seaports, waterways, highways, electricity, water supply, and other infrastructure for which the users are the ones who receive the vast majority of the benefits. That makes all of these systems viable candidates for revenue-based P3 reconstruction and modernization, but those decisions are properly made by the governmental jurisdiction responsible for the facilities—not by central planners in Washington.
As the federal government inevitably reduces its role as sugar daddy due to running short of money, there are things it can do to assist states, cities, and counties to become better stewards of their own infrastructure. Some of these were proposed by the Obama Administration: expanding tax-exempt revenue bond financing to all categories of P3 infrastructure, rather than just highway and transit projects; streamlining loan programs such as TIFIA and WIFIA, while continuing taxpayer safeguards; and liberalizing existing pilot programs such as those for airport privatization and toll-financed Interstate reconstruction.
I’d encourage the White House to forget about a grandiose $1 trillion total, and focus instead on giving state and local infrastructure owners better financing tools and assistance in using better procurement methods such as design-build-finance-operate-maintain (DBFOM). More important than an arbitrary dollar total is ensuring that infrastructure investment goes to the highest-value projects, where benefits solidly exceed costs. That’s how to make our economy more productive.
(This article first ran in the October 2017 issue of Surface Transportation Innovations.)
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Help Our Aging Public Schools

Posted on November 1, 2017 by matt ohern
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Every year at the state and local level of government, budget debates include funding issues surrounding our K-12 public schools.  Teacher salaries and class size are usually the focus, and competing comparisons compensation and limited budget dollars are always at issue.
But rarely do we discuss one of the on-going and increasing problems facing a large number of our rural and city school districts.  And that is the physical deterioration of many of our school buildings.  There are as many as 40% of the school buildings in Virginia which were built prior to 1960, and many of those buildings are in dire need of renewal today.  The electrical systems, the HVAC systems, the actual lighting fixtures, the insulation, the roofs and so much more are in bad shape.  And when these school buildings are physically ailing they damage the quality of the surrounding neighborhoods.  And, in reverse, if the local schools are in good shape they can be a catalyst for renewing the neighborhoods around them.
With this in mind there are two innovative efforts going on here in Virginia that can go a long way in renewing the physical structures where our children daily spend eight hours or more in a an effort to be educated.  Clearly, a building that is dreadfully deteriorating is not conducive to our kids learning.
A question on the Richmond ballot next Tuesday focuses on this issue.  If passed, it will require the Mayor to produce an improvement plan for the public school buildings without a tax increase or to officially take the position that this simply cannot be done.  This ballot initiative focuses on a real need in Richmond – the terrible shape of many of the public school buildings – and requires the leadership of the city to figure out how to deal with this too-often-ignored issue.
This ballot initiative is supported by a large cross section of the leadership in the city. How the voters see this issue will be important to how the city decides to handle it.  Deteriorating schools will not disappear with Richmond’s vote on Tuesday. But how and if this problem is confronted will be determined by the voters.
And directly tied to this issue is a national effort to make a relatively minor change in the federal law to encourage private sector money to help renew these aging school buildings that are crumbling due to lack of resources. Richmond’s support of this ballot initiative can be an important first step to changing the federal law and encouraging hundreds of millions of private sector dollars, and even more nationally, to rehab our nation’s older school buildings.
A bi-partisan effort by Senators Tim Kaine and Mark Warner, along with former Senator George Allen and others, supports a simple change in the federal tax credit code for saving historic buildings in this country.
The current law allows a substantial tax credit for taking an old, historic building and renewing it as long as the use of the “new” building is not the same as for the “old” one.  So when Donald Trump secured the contract to “renew” the historic Old Post Office in Washington DC and turn it into a beautiful “new” hotel, he was able to quality for tens of millions of dollars in federal tax credits.
But the current law does not allow a “renewed” building to be used for the same purpose as the “old” one.  This means there are no federal tax credits for using private sector dollars to renew public school buildings if those buildings are used for public education once they are “renewed.”  This is clearly not in the best interests of the community and this law should be changed to include public school buildings as part of the available tax credits.
If federal tax credits were available to encourage private sector investment in these older public schools, many could well be modernized over the next few years.  And updated, modernized local schools will encourage the re-development of surrounding area.  The neighborhood schools have always been a “draw” or a “hindrance” to the quality of the local neighborhood.  A modernized school sends the message to the students, parents and homeowners that cares about them just as deteriorating schools send a message that these kids and their education are not a priority.
Tax monies are limited and making federal tax credits available for renewing these schools makes good sense.  We are most willing to bring private dollars to the table in public private partnerships to build new roads, or improve existing roads, or to save an historic building as long as that building is used for a different purpose.  It is long past time to let federal historic tax credits be available to those willing to rebuild our aging public school buildings.
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How to Build Strong, Resilient Cities and Towns

Posted on November 1, 2017 by matt ohern
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Cities and counties across the United States are experiencing chronic fiscal stress, and the reason has nothing to do with Republicans or Democrats and everything to do with what Chuck Marohn calls the “growth Ponzi scheme.”
“Why are cities going broke?” he asked at a forum hosted by the Partnership for Smarter Growth, Coalition for Hanover’s Future, and the Virginia Conservation Network at Randolph-Macon College last night. “We can’t we keep the grass in the parks mowed? Why can’t we keep the library open past 5 o’clock?”
After World War II, the United States embarked upon a massive, society-changing experiment that departed from the accumulated wisdom of millennia of experience of building cities. That experiment, commonly referred to as suburban sprawl, changed the growth paradigm from building places with a pedestrian orientation to building places with an automobile orientation. Over the course of just two or three decades new zoning codes and highway construction transformed the character of cities across the country. Initially, that experiment seemed to work out well. Now the fiscal flaws are evident for all to see, and the system is on the verge of collapse.
In the post-World War II era, developers and government struck a deal: Developers would build a subdivision or shopping center, including roads and utilities, and then would turn over the infrastructure for local government to maintain. Early on, the arrangement seemed like a great deal for government. Taxes on the houses and commercial buildings generated loads of cash flow while the infrastructure cost almost nothing to maintain. In a typical cul de sac development in the mid-1990s, infrastructure would cost the builder $6,600 per development. Less visibly, localities had to spend thousands more on infrastructure outside the subdivision, such as arterial roads and highway interchanges. Everyone ignored the fact that it would take, say, 37 years to recoup the cost of all that infrastructure through property tax revenues. Because infrastructure costs little to maintain when it’s new, new subdivisions proved to be revenue gushers. But over time, roads required more and more maintenance and subdivisions began operating tax-wise at a net loss.
What was the solution? Build more new subdivisions and use the surplus revenues to cover deficits from the old subdivisions. Use good money to cover bad, like a Ponzi scheme. But at some point it’s impossible to build enough new subdivisions (strip malls, office parks, etc.) to cover the deficits. That’s where the nation is now, said Marohn. For thirty years, local governments enjoyed the “illusion of growth.” Now they’re facing the reality of chronic fiscal stress. Absent changed policies, they’ll follow Detroit into the abyss. For many, it is too late.
“We need growth so bad today that we’ll do all sorts of crazy stuff,” Marohn said. “We’re lending money to people we know can’t pay it back. We’re desperate for growth. We have to have it or everything falls apart.”
The United States is hitting the limits of its ability to fund more growth. There is no rabbit to pull out of the hat to rescue the nation from its predicament.
As an example, Marohn cited Lafayette, La., a city that is reasonably well run administratively yet experiences chronic fiscal stress. An in-depth analysis of its development patterns revealed that its downtown and older neighborhoods, which are compact and densely developed, net out fiscally positive but that the majority of the city, especially newer areas built according to suburban zoning codes, net out negatively. The median family in Lafayette makes $45,000 a year and pays $1,500 in local taxes. To cover the cost of the its growing infrastructure liability, the city would have to raise taxes to $9,000. “That will never happen,” he said. “Lafayette will have to make some very hard decisions about what to maintain and what to let go.”
Not all cities are in equally bad shape. Some grew more slowly and built less hop-scotch, low-density sprawl that inflated the expense-to-revenue ratio of its neighborhoods. Some have more flexible zoning codes that allow more adaptive reuse. And some are more willing to change than others.
“We should not accept decline as normal,” Marohn said. The answer is not some top-down Marshall plan. It’s the opposite — a bottom-up approach that emphasizes small, low-risk, high-return investments based on intimate local knowledge. Over time, small incremental improvements — bike lanes, cross walks, tree plantings, sidewalk widenings — can go a long way to rebuilding the tax base. The highest-return investments, he suggests, are those that enhance pedestrian and bicycle mobility. They make places feel safe and inviting. Their scale is a single block or intersection at a time.
The advantage of making small, safe bets is that if nothing gets better, you haven’t squandered much money. You haven’t mortgaged the farm, so to speak. But if the small bets do work out, you learn from experience and replicate the successes. In every community, Marohn says, there is a abundance of “pennies, nickels and dimes laying on the ground.” Over time, small improvements, leveraged by private investment, can create enormous value. “This is how we build wealth: slowly and incrementally.”
Marohn also abhors the rigidity of zoning codes and preaches the virtue of flexibility. Municipal planners suffer from the illusion that they can divine the future and anticipate the proper mix and location of residential, commercial and industrial property for the foreseeable future. But markets are too dynamic for anyone to predict long-term demand for different categories of real estate with consistent accuracy. A resilient city, he says, is flexible. A big-box building surrounded by a huge parking lot, typical of suburban development, is difficult to recycle into a different use. A single building set in a downtown street grid is very easy to switch from one use to another. Flexible development patterns like those found in downtown areas will prove more resilient in times of change than inflexible patterns. “Zoning codes are some of the most destructive things we have,” he said. “We need to rethink them.”
Thirdly, Marohn suggests that cities need to make it easier for entrepreneurs to bootstrap new businesses. While some 240 cities and regions across North America decided to chase the Amazon second headquarters, the economic-development deal of the decade, only one can win. Will Amazon HQ2 be a net gain to a community after a realistic accounting of costs and tax revenues and adjustments for incentives? Color him skeptical. It is more prudent, he says, to foster new business formation, which can be helped through a prudent relaxation of building codes, zoning codes and other regulations.
“If we play the Wall Street game, if we play the Washington game, we’ll get wiped out,” he said. By embracing new fiscal analytics, relaxing zoning codes, and embracing a philosophy of making small, low-risk, high-return public investments, America’s cities and towns can prosper.
(This article first ran in Bacon’s Rebellion on October 25, 2017)
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Understanding the Federal Budget: Part III The Budget and Taxes

Posted on November 1, 2017 by matt ohern
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In response to the U.S. Senate passing a budget for the next fiscal year, which includes reconciliation instructions to cut taxes, the U.S. House of Representatives will now proceed to the process of crafting tax legislation.
What the president submitted to Congress in May was not “the budget” but a series of recommendations and ideas that Congress is free to use or ignore, and most often Congress ignores large swaths of what the president seeks in that budget plan. Under the Budget Act of 1974 the president is required to provide his ideas for where he would like the budget to go. It is the start of a conversation about spending priorities for the federal government for the fiscal year ahead. Congress produces the actual budget.
The House and Senate Budget Committees’ Fiscal Year 2018 Budget Resolution includes reconciliation instructions for the tax-writing House Committee on Ways and Means, and Senate Finance Committee, requiring them to change the tax laws to reduce the tax rates on individuals and businesses. The Constitution requires all tax legislation to originate in the House of Representatives and Senate action on the tax bill will follow.
It was critical for the success of a tax package that reconciliation instructions were included in the Budget Resolution. Those reconciliation instructions trigger rules in the House and Senate governing the debate and passage of the resulting tax legislation. The crucial component of the rules limits the time of debate and removes the possibility of a filibuster in the Senate. That means the tax package can be adopted in the Senate with fifty-one votes. If the tax legislation was subject to the filibuster, sixty votes would be required for passage.
Some news outlets have said that reconciliation instructions reconcile differences between the House-passed version of the Budget Resolution and the Senate-passed version but that is incorrect. The reconciliation instructions require both chambers to reconcile current law, in this case the tax laws, with the new revenue numbers in the budget. In other words, the reconciliation instructions order the relevant committees to produce new legislation to increase or decrease taxes or otherwise reform the tax code in accordance with the Budget Resolution. If the House and Senate do not pass exactly the same language in a bill, they proceed to a conference committee to work out the differences between the two versions or in the current case the House will simply adopt the Senate’s budget in place of the one the House had previously passed so that Congress can get to work more quickly on the tax bill.
Some news outlets have also reported that the Senate’s version of the budget required the reduction or removal of certain tax deductions such as the deduction for state and local taxes paid, frequently called the “SALT” deduction. While it is true that an amendment dealing with the state and local tax deduction was adopted as part of the Senate’s budget, that amendment is not binding on the tax-writing committees. It is hortatory language only; all jurisdiction for deciding how to reach the revenue number lies exclusively with the House Ways and Means Committee and the Senate Finance Committee. The Senate budget language is an expression of the sense of the Senate and the committees of jurisdiction are free to adopt or ignore the Senate position.
Speaker Paul Ryan has said the House tax legislation will be unveiled on November 1, passed soon thereafter, and ready for the Senate by Thanksgiving. The goal of Congress is to have the tax bill on the president’s desk by Christmas. There is some doubt whether the bill can be completed on such a tight timeframe given the numerous hoops that still must be cleared and the fact that Congress is scheduled to be in session only twenty-six days before breaking for Christmas. Nonetheless, a tax cut for Christmas would be a fine gift for the American taxpayer and the American economy.
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