interviews
Water and the American West
by Richard Frank
October 25, 2021
This interview with Richard Frank, professor of environmental practice at the UC Davis School of Law and Director of the California Environmental Law and Policy Center, was conducted and condensed by franknews.
frank | Can you tell me a little bit about the story of water and how it's tied to the West, and to California in particular?
Richard | A friend of mine who's a Court of Appeals Justice here in California wrote an opinion on a water law dispute and started it with the quote, "the history of California is written on its waters." And I think that the point is true of the entire American West.
Water policy and legal issues are inextricably tied to the development of the Western United States; water is the limiting factor in so many ways to settlement, to economic development, to prosperity, and to the environment and environmental preservation.
Can you talk about the difference between groundwater and surface water– and the policies that regulate each?
There are really two types of water when it comes to human consumption. There's surface water: that is the water that is transmitted by lakes, rivers, and streams. Then there is groundwater, and a substantial amount of water that Americans and the American West rely on is groundwater. That is water that is stored in groundwater aquifers, which are naturally occurring groundwater basins. Both groundwater and surface water are critical to the American West and its economy and its culture.
Traditionally a couple of things are important to note, first of all, water is finite. Second, water gets allocated in the Western United States generally at the state level. There's a limited federal role. Primarily, policy decisions about who gets how much water for what purpose are made state by state.
I think allocation is really interesting in that it's more state-level than federal. How was water and the allocation of water in California designed? Is it a public-private combination? What goes on in terms of the infrastructure of water?
Another very good question. The answer is it depends. Most of our water infrastructure is public in nature.
Again, in the American West, the regulation of water rights is generally done at the state level, but the federal government, historically, has a major water footprint in the American West because it has been federal dollars and federal design and management that really controlled much of the major water infrastructure in the American West — you know, Hoover Dam, and the complex system of dams and reservoirs on the Colorado River in California, with the Central Valley Project that was built and managed by the federal government with Shasta Dam on the upper Sacramento River as the centerpiece of that project. But we also have a California State Water Project, the key facility being the Oroville Dam and reservoir on the Southern River that is managed by state water managers. If we were starting over, that kind of parallel system would make no particular engineering or operational sense.
But, we are captive to our history.
And then you have these massive systems of aqueducts and canals that move water from one place to another throughout the American West. They are particularly responsible for moving water from surface water storage facilities to population centers. In the last 50 to 75 years, these population centers have really expanded dramatically, so you need massive infrastructure to deliver water from those storage facilities, the dams, and reservoirs, which generally are located in remote areas to the population centers. So it takes a lot of time and energy to transport the water, from where it is captured and stored to where it is needed for human use.
California has faced continuous drought – what measures is the state taking now to manage water?
Just to frame the issue a little bit — we have, as I mentioned, a growing population in the American Southwest at a time when the amount of available water is shrinking due to drought and due to the impacts of climate change. We have growing human demand for residential and commercial purposes and at the same time, we have a shrinking water supply. That is a huge looming crisis.
And it is beginning to play out in real-time. You see that playing out in real-time. For example, several different states and Mexico rely on Colorado River flows based on an allocation system that was created in the 1920s, which is overly optimistic about the amount of available water. From the 1920s until now, that water supply has decreased, and decreased, and decreased. Now you have interstate agreements, and in the case of Mexico, international agreements that allocate the finite Colorado river water supplies based on faulty, now obsolete, information. It is a real problem.
What measures do you take now, knowing this information?
If you look at the US Drought Monitor, it is obvious the problem is not limited to the Colorado River. We are in a mega-drought, so cutbacks are being imposed by federal and state water agencies to encourage agricultural, urban, and commercial water users to cut their water use and, and stretch finite supplies as much as possible through conservation efforts.
In California, we have the State Water Resources Control Board, the state water regulator in California, and they have issued curtailment orders. Meaning, they have told water rights holders, many of whom have had those water rights for over a hundred years, that, for the first time, the water that they feel they are entitled to, is not available. Local water districts are also issuing water conservation mandates; the San Francisco water department is doing that, in Los Angeles, the metropolitan water district, is urging urban users to curtail their efforts.
And then agriculture. Agricultural users — farmers and ranchers — have had to get water rights in many cases through the federal government, as the federal government is the operator of these water projects. They have contracts with water users, individual farmers, ranchers, or districts, and they are now issuing curtailment orders. They're saying, we know you contracted for X amount of water for this calendar year, but we are telling you because of the drought shortages we don't have that water to supply. Our reservoirs are low at Lake Shasta or at the Oroville Dam.
When you drive from San Francisco to LA on the five, you see a lot of signage from the agricultural farming community about water. There's apparently some frustration about this. What are the other options for them?
About 80% of all human consumed water goes to agriculture. That is by far the biggest component of water use, as opposed to 20% used for urban and commercial, and industrial purposes.
Over the years, ranchers and farmers, and agricultural water districts assumed that the water would always be there — as we all do.
And the farmers and ranchers have, in hindsight, exacerbated the problem by bringing more and more land into production. You see on those drives between San Francisco and Los Angeles, particularly in the San Joaquin Valley, all these orchards are being planted. Orchards are more lucrative crops than row crops — cotton, alfalfa, and rice. But, if you are growing a row crop, you can leave the land fallow in times of drought.
We don't have to plant. If the water stopped there, or if it's too expensive to get, it may make economic sense, but if you have an orchard or a vineyard it's a high value, those are high value crops, you don't have that operational flexibility and they need to be irrigated in wet years and in dry years. Now, you see these orchards, which were only planted a few years ago, are now being uprooted because the farmers realized that they don't have the water necessary to keep those vineyards and orchards alive. For ranchers, the same thing is true with their herds. They don’t have enough water for their livestock.
The water shortage has never been drier than it is right now. Farmers and ranchers are being deprived of water that they traditionally believed was theirs and they're very understandably, very unhappy about it. They see it as a threat to their livelihood and to the livelihood of the folks who work for them. Their anger and frustration are to be expected, but it's nobody's fault.
To say, as some farmers do, that it is mismanagement by state and federal government officials, I think is overly simplistic and misplaced in the face of a mega-drought. Everybody's going to have to sacrifice. Everybody's going to have to be more efficient in how they use water. All sectors are going to need to be more efficient with the water that does exist.
Looking at this percentage breakdown of water use – is it actually important for individual users to change their water habits?
Well, every little bit helps. When you're talking about homeowners, about 70% of urban water use is for outdoor irrigation. So we're talking parks and cemeteries and golf courses and folks' yards. You know, that used to be considered part of that American dream and the California dream — you would have a big lawn in front of your house and behind your house. Truth be told, that has never made much sense in an arid environment. That's where the water savings in urban areas is critical in the way it really involves aesthetics rather than critical human needs, like water for drinking and bathing and sanitation purposes. There is a growing movement away from big lawns, and away from the type of landscaping that you see in the Eastern US — there is no drought in the Eastern United States. As Hurricane Ida and other recent storms have shown, the problem is too much water, or rather than too little in most of the Eastern United States. So it really is a tale of two countries.
We just need to recognize that the American West is an arid region. It has always been an arid region, we can't make the desert bloom with water that doesn't exist. We need to be more efficient in how we allocate those water supplies. And it seems to me in an urban area, the best way to conserve and most effective way is to reduce urban landscaping, which is the major component of urban water use.
You also write about water markets and making them better – for those who don’t know, what is the water market?
Water markets, that is, the voluntary transfer of water between water users, is more robust in some other Western states. Again Arizona and New Mexico come to mind. California somewhat surprisingly is behind the curve. We are in the dark ages compared to other states. Water markets are kind of anecdotal. There is not much of a statewide system. It is done at the local level, through individual transactions without much oversight and without much transparency. And I have concerns about all of those things.
I believe conceptually watermarks are a way to stretch scarce, finite water resources to make water use more efficient. I can, for example, allow farmers or ranchers to sell water to urban uses or commercial usage or factories in times of drought.
Farmers sometimes can make more money by farming water, than they can by farming crops.
There are efficiencies to be gained here.
The problem in my view is really one of transparency. The water markets are not publicly regulated, and some of the people who are engaging in water transactions like it that way, frankly, they want to operate under the radar.
In my opinion, water markets need to be overseen by a public entity rather than private or nonprofit entities. We need oversight and transparency, so that folks like you and myself can follow the markets to see who's selling water to whom, for what purpose, and make sure that those water transfers serve the public interests and not just the private interests.
There have been a number of stories in the New York Times and the Wall Street Journal and the Salt Lake City Tribune about efforts in some parts to privatize water transfer. Hedge fund managers are buying and selling water, as a means of profiting. And it strikes me that when you're talking about an essential public resource — and in California, it is embedded in the law that public water is an inherently public resource, that water is owned by the public and it can be used for private purposes, but it is an inherently public resource — the idea of commoditizing water through the private, opaque markets is very troublesome to me. I think it represents a very dangerous trend and one that needs to be corrected and avoided.
Why is California so behind?
There's no good reason for it. It's largely inexplicable that since the state was created on September 9th, 1860, we've been fighting over water. In the 19th century, it was miners versus farmers ranchers. In the 20th century, with the growth of urban communities, the evolution of California into one of the most populous states with 40 million Californians, it has been a struggle between urban and agricultural uses of water.
In the second half of the 20th century, there was a recognition that some component of water had to be left in streams to protect ecosystems, landscape, and wildlife, including the threatened and endangered wildlife. That suggestion has made agricultural users in California angry. You will see those signs that allude to the idea that food and farming are more important than environmental values. I don't happen to believe that's true. I believe both are critically important to our society. But the advocates for the environment have a proverbial seat at the water table. So that's another demand for water allocation that exists.
Do you maintain optimism?
Yes. I think it's human nature to look on the bright side. I try to do that through research scholarships and teaching. There are models for how we can do this better in the United States. Israel and Saudi Arabia and Singapore are far more efficient with their water policies and efforts. Australia went through a severe megadrought. They came out of it a few years ago, but they used that opportunity to dramatically reform their water allocation systems. That's an additional model. I think most people would agree in hindsight that their previous system was antiquated, and not able to meet the challenges of climate change and the growing water shortage in some parts of the world.
Here in the United States, we can learn from those efforts. There are also some ways to expand the water supply. Desalination for one. Again, Singapore and Saudi Arabia have led the world in terms of removing the salt content from ocean water and increasing water supply that way. In Carlsbad, California, north of San Diego, we have the biggest desalination plant in the United States right now, and that is currently satisfying a significant component of the San Diego metropolitan areas’ water needs. It's more expensive than other water supplies, but the technology is getting more refined, so the cost of desalinated water is coming down at a time when other water supplies, due to shortages and the workings of the free market are going up.
At some point, they're going to meet or get closer. Unlike some of my environmental colleagues, I think desalination is an important part of the equation.
In a proposal that came up in the recall election, one of the candidates was talking about how we just need to build a canal from the Mississippi River to California to take care of all our problems. That ignores political problems associated with that effort, as well as the massive infrastructure costs that would be required to build and maintain a major aqueduct for 2000 miles from the Mississippi to California. That's just not going to happen. Some of those pie in the sky thoughts of how we expand the water supply, I think, are unrealistic.
interviews
Uncertainty is the Universal Challenge
by Polina Bakhteirov
April 8, 2020
This interview with Polina Bakhteirov, a vice president of development with Omni New York, was conducted and condensed by frank news.
Will you tell me about your current work?
Omni is an exclusively affordable housing developer, established in 2004. Since then, we have acquired, developed, and managed over 17,000 affordable units across 11 states with an aggregate transaction value of around $3 billion. Omni has a reputation for acquiring very distressed properties and turning them around through extensive rehab and added security.
Prior to joining Omni, I spent about a decade in the public sector. Immediately before joining the firm, I was working in Newark, NJ on small business development with a focus on supporting and growing minority and woman owned business enterprises. Prior to that, I was the inaugural director of preservation for the New York City Housing Authority [NYCHA]. There, I built out the preservation team to implement NYCHA’s PACT plan, which stands for “Permanent Affordability Commitment Together.” I led the rollout of various federal subsidy conversion tools, such as the Rental Assistance Demonstration [RAD] and Section 18, to convert public housing units to project-based Section 8 funding.
These conversions require the housing authority to address the repair needs of each converted property, so we partnered with private and non-profit development teams to raise adequate financing to address the capital backlog and also to bring on new property management and increase on-site social services for residents.
What are your most pressing concerns right now?
I’m primarily concerned about our residents – their health, level of access to medically-accurate information, and ability to cover the costs of basic necessities. Many may be laid off or have hours cut back.
More broadly, low-income renters, especially those living in public housing, may not be receiving information on how to protect themselves from the virus and how to care for those in their homes who are, or may be, infected.
We know that across the board, public housing residents are predisposed to becoming sick with COVID-19 due to pre-existing conditions. Furthermore, 40% of NYCHA families are led by seniors who may contract the virus from their (sometimes asymptomatic) family members, while nearly one in four NYCHA residents are seniors who tend either not to have access to information virtually or are reluctant to trust it. What happens when these residents show up at their management office to pay rent and discover that they can only pay online, via phone, or by mail? Now this senior has unnecessarily left the safety of their home and potentially exposed themselves and others.
Another prominent issue is the lack of consistent government guidance for affordable housing operators. At this point, HUD has issued three consecutive sets of FAQs and more are expected. Sometimes, updated guidance rolls back provisions from previous iterations. For example, the agency changed its guidance on mark-up-to-market projects from what was originally a 5% rent increase allowance since rent comparability studies are suspended due to widespread stay-at-home orders, to now saying that they will issue additional guidance on the matter in the coming weeks. Any requirements for a second appraisal will be a practical challenge as appraisers are not consistently deemed essential workers from state to state.
Furthermore, HUD’s guidance on interim recertification of income for residents differs from that of some public housing authorities, including NYCHA. Even New York State has contributed to the litany of guidance discrepancies, reversing their previous stop on in-person real estate showings, inspections, and appraisals. Another confusing inconsistency that I’m experiencing on my portfolio at Omni is how various states are defining essential workers. For example, New York has carved out the construction of affordable housing as essential, but Philadelphia has shut down such development. My hope is that Phase 4 of the federal legislation will provide more guidance on infrastructure and specifically housing.
HUD wants to keep RAD transactions going, but some documents cannot be recorded. Numerous public land disposition processes are on hold, while others are moving forward but without defined timelines. That makes responding to certain Requests for Proposals [RFPs] more difficult. Should we proceed with architectural design or pause it? Will the changing needs of the community call for a different development program in 3-6 months? Furthermore, the halt of land use review processes may have a multi-year stalling effect on construction. We as developers are obsessed with predictability, so you can imagine our current state of mind. Nonetheless, I think we can all agree that the market will eventually recover, especially given its strength coming into the current crisis and what we anticipate to be even stronger demand for the affordable asset class coming out of the pandemic.
As the federal government contemplates all of its economic triggers, the LIHTC rate [Low-Income Housing Tax Credit Rates] is at a ten-year low of 3.12% for the month of April, and is expected to be even lower in May. This is actually an opportunity to push Congress to permanently set the rate at 4%, similar to how it has done so for 9% credits. Adding this additional layer of predictability to affordable housing finance will definitely be welcomed in this time of great economic uncertainty where underwriting of LIHTC deals - and in general - will most certainly become more stringent.
I believe our biggest areas of opportunity moving forward are in the urban multifamily market. Residential occupancy levels are typically 5% higher for the affordable asset class vs. market-rate units during economic recessions, so the next 12 months may be a greater opportunity to build more new affordable units. And as the federal government is determining the best way to support American renters, I think they should take heed of former HUD Secretary Castro’s proposal to make Section 8 - Housing Choice Vouchers - a federal entitlement for every eligible adult, just like Social Security and Medicare. Or enact a monthly renter’s tax credit for government unassisted households.
At Omni, we have discussed property management logistics, how we're going to continue to operate our sites at this time. It's everything from how are we going to collect rent, to who is on the properties cleaning, and how is garbage being collected.
What are you doing to enhance the safety of residents and employees alike?
In terms of property management, we're looking to stagger shifts. We're looking at reducing the onsite presence of employees to the extent possible, while still maintaining high-quality service. And then obviously examining various cleaning mechanisms and, and ensuring that those deep cleaning sessions are being implemented on a more aggressive schedule. We are also looking to see what work needs to be done immediately and what work is going to have to be delayed. And that's obviously challenging. We have to be able to communicate that to our residents. Other considerations are the policy on visitors to the properties, communications delivered in the languages spoken there, and supporting residents with alternative methods of paying rent and completing interim income recertifications. I’ve found guidance from the National Initiative on Mixed-Income Communities quite helpful when it comes to property management.
People already living in poverty are losing work – how do you protect your most vulnerable tenants?
There are various eviction moratoria coming from different state governors. It's an effective measure in terms of protecting folks from eviction for a period of time, but that doesn't solve our revenue and debt service issues. We still need a residential income coming in order to continue to run the buildings and to run the business. We are also of course worried about having to do layoffs internally.
A lot of our developments have Section 8 contracts on them. And so we hope that the additional infusion of funds from the federal stimulus will fill the gap when it comes to federally assisted households.
We also have properties that are strictly LIHTC (Low-Income Housing Tax Credits) where residents don't have a federal subsidy. We're still thinking through how we can support those folks and how long our reserves will last because of course, all these properties have reserves for emergencies. The biggest challenges that we are facing now, similar to the federal shutdowns we encounter from time to time, is that we just don't know how long this will last. That is really what we are grappling with now.
What do you think about a rent freeze?
That is tough, right? We are not in the business of evicting our residents. In the entirety of our existence over the past 16 years, we have come in and turned around properties that no one in the private sector wanted to touch. We don't want senior residents to lose their homes. At this point, we're trying to figure out how much leeway we can give on rent collection, while also ensuring that we have enough income to continue to operate. We don't want folks that have to choose between rent and other necessities.
I don’t believe that a full-on rent freeze or strike without support for property operators is the best economic solution, since many affordable housing owners have mortgages out on their developments that are securitized, and the investors in these mortgage-backed securities are often pension funds for public workers. Their inability to collect on those investments will have a negative economic impact on working and middle-class families. It’s very circular.
I think the new forebearance allowance for affordable housing owners is a stop gap measure, but there are a few issues. First, the time period (90 days) does not sync up with the “parallel” eviction moratorium of 150 days (120 days plus 30 days’ notice). Second, forbearance is reserved for federally-backed multifamily mortgage borrowers who were current on their loan payments as of February 1st. But we closed on a 2,600-unit property in mid-February with over 6,000 vulnerable residents – where does that leave us?
My top questions as of today are: