Joseph Krist

Publisher

WESTERN WATER

Back in 2017, the dam at Lake Oroville in California was damaged by water overflows resulting from a wet winter. It resulted in significant repairs to spillways and other infrastructure to handle anticipated water flows. Over the next few years, the lake found itself in a drought and water levels almost became too low to produce hydroelectric power. The Oroville Dam was becoming a virtual barometer of short-term water conditions.

Now those repaired spillways are being tested as the lake has filled and water is being released in a controlled manner. That water primarily serves customers in the north and east of the state and has a significant agricultural demand. Under current conditions, water is being counted on to recharge groundwater aquifers depleted during the drought years to support agriculture.

Compare this situation to that of southern California. There, irrigation interests and agencies like the Metropolitan Water District of Southern California are much more impacted by conditions in the Colorado River basin. The latest measurements of the lake, taken in February, showed its water levels at 1,047 feet, down more than 19 feet from the same time last year and down more than 40 feet from 2021.

March however, did bring unexpected good news. While the weather focus has been on the weather in California and its favorable drought impact, the weather has also been more favorable in the Rockies. Proof of that came this week when Lake Mead’s water level was at 1,045.91, almost 3 feet above the projected level. snowpack has built the Snow Water Equivalent (SWE) stored in the Colorado Rockies to 158% of the average. Lake Powell has risen more than a foot over the last month after dropping to a new all-time low in mid-March.

THE CLIMATE DEBATE IN A NUTSHELL

There may be no bigger fundamental disagreement than that we see in the debate over climate change. The amount of hype and distortion supporting various diverse opinions is overwhelming. While there are serious debates over the science of climate, the issue of climate change has become wrapped up in corporate virtue signaling and greenwashing.

The latest example comes from the Pacific Northwest. When the NHL Seattle Kraken was accepted into the league, they decided to play in a new arena which was designed to be carbon neutral. Much was made of the fact that even the ice the hockey was played on would be made from recycled rain water. Amazon went so far as to pay for the naming rights to the arena. In the midst of real debates over the contribution to climate change that distribution companies like Amazon make to a changing climate, Amazon is paying to have the arena named the Climate Pledge Arena.

Now, the Oregon legislature is considering a bill which would require data centers and crypto miners to use clean energy in big, new facilities. Amazon, Apple, Facebook and Google all operate large data centers in central and eastern Oregon. The companies have as yet not weighed in on their support or opposition to the bill publicly. It has become clear though that in private, Amazon has made significant efforts to oppose the clean energy requirement.

Apple and Facebook have built renewable energy projects to help power their Oregon data centers. Amazon’s data centers in Morrow and Umatilla counties appear to be relying primarily on carbon-burning fuel sources for most of its electricity. It’s not an accident that these facilities are located in eastern Oregon. Climate legislation passed in recent years in Oregon imposes emission limits on areas like Portland. Rural eastern Oregon was exempted from those limits.

The situation provides an example of why the politics and maybe more importantly the culture of the climate movement are so difficult. It is hard to advance the cause of decarbonization if its most prominent “influencers” creates an easy to criticize approach to the whole issue. And in the annual poll of NHL players by its labor union, Climate Pledge Arena did not make the top five of the rankings for best ice in the league.

PARIS PANS SCOOTERS

In the debate around “micro transit”, experiences in Europe and other locales are referenced by proponents of various schemes in the U.S. Whether it be bicycles, congestion pricing, Citibikes or other schemes (especially in New York), European experiences are referenced in the efforts to “nudge” behavior. This was especially true under the Bloomberg administration and continued since. Now, there is some evidence that those references might not be so helpful.

Voters in Paris voted to ban the devices from the streets of the French capital. Supporters of scooters will cite the fact that 100,000 Parisians voted, less than 7.5 percent of those eligible. Supporters of the ban can cite the margin of victory – 89%. Even the mayor of Paris who once championed the deployment of scooters led the campaign to support the ban. According to the mayor, “there will be no more self-service scooters in Paris” come Sept. 1. Privately owned scooters will still be permitted.

The City of Light joins Copenhagen and Montreal as large cities where deployment has been stopped. Copenhagen did allow scooters again but under a much stronger regulatory framework. It’s another example of not as much a rejection of technology but it’s manner of deployment. The same issues which have dogged scooter rental systems across the U.S. – careless riding, use on sidewalks, idle scooters strewn about sidewalks – plagued the Parisian system.

MEDICAID UNWINDING

Towards the end of 2022, Congress passed legislation which allows the continuous enrollment policy requiring that Medicaid recipients retain their coverage to end. That legislation carved out Medicaid from other pandemic related items and provided for states to begin to unwind changes during the pandemic which allowed people to stay on Medicaid without additional qualification checks through the term of the public health emergency declared due to the pandemic.

The carve out allows states to begin the process as of April 1 whereas most other impacted programs have until the end of the public health emergency on May 10. The eligibility verification process is expected to reduce Medicaid enrollment significantly. The legislation mandates that states report data monthly to the Department of Health and Human Services on how many people have been taken off Medicaid. It also allows the department to intervene if a state does not comply with federal requirements. It does not prevent recipients from losing benefits.

Last week we highlighted the importance of Medicaid to the rural hospital sector. Five states — Arizona, Arkansas, Idaho, New Hampshire and South Dakota — were expected to begin their processes of removing people from Medicaid this month. The expectation is that the process could take up to one year in some states. We note that these five states have significant rural health sectors.

The policy change also returns to the spotlight issues which plagued the Medicaid program before the pandemic regarding eligibility. The lack of computer and internet access and issues with literacy have been cited as major hurdles to be overcome by potential recipients.

COMMUTER RAIL GOES PUBLIC IN CHICAGO

Union Pacific announced that the freight railroad would transfer its Chicagoland commuter rail operation to Metra in early 2024. UP operates three commuter lines for Metra and the Burlington Northern Norfolk and Southern (BNSF) operates a fourth. Commuter service in Chicago is unique in that Metra operates some routes and others are operated by freight railroads under contract for Metra. The agency already owns the rolling stock operated by the private companies.

UP is paid $100 million annually to operate the commuter services. It has operated the lines since 1995 through an acquisition. In recent years, UP and Metra have had a contentious relationship. In 2019, UP sued Metra trying to get out of its obligation to provide commuter service. And in 2020, Metra said it was losing millions of dollars a month because UP was not having conductors collect fares. UP will continue to maintain the track and dispatch trains on the three impacted routes. 

WHY MADISON SQUARE GARDEN IS IN THE CROSSHAIRS

These should be heady times for the owner of Madison Square Garden. It’s two sports teams are in the playoffs, it remains a preeminent concert venue and it retains its reputation as “the world’s most famous arena. Nonetheless, the arena is now best known for the legal battles being waged between the Garden and some of its fans. The disputes have brought issues like the use of facial recognition to the forefront. That issue has focused a lot of attention on the tax breaks the Garden receives which are unique among New York’s teams

MSG is a privately-owned commercial property that would pay property taxes to New York City, if not for the property tax exemption granted to it in 1982 under state law. Prior to receiving the tax exemption, the owners of the arena, who also owned the Knicks basketball and Rangers hockey teams, threatened to move the teams to New Jersey if not provided with some form of property tax relief.

Since 1982, MSG has received a full exemption from property tax liability under Article 4, Section 429 of New York State Real Property Tax law. The exemption is contingent upon MSG’s continued use by professional major league hockey and basketball teams for their home games. It is worth some $40 million annually.

In contrast, Yankee Stadium, Citi Field, and Barclays Center were all built on publicly owned land that is exempt from property taxes. The land and the stadiums are leased to team-affiliated limited liability corporations (LLC). The team affiliated LLCs in turn make annual payments in lieu of taxes (PILOTs) to pay down the debt service associated with these bonds. The PILOTs do not enter the city’s general revenue stream as property taxes would. The stadium PILOTS totaled $84 million for Yankee Stadium, $44 million for Citi Field, and $39 million for Barclays Center in 2023.

It becomes more difficult to justify this sort of tax subsidy in the current environment. That has nothing to do with ownerships recent run of truly negative publicity (while he owns two playoff teams). It just screams out from an equity point of view that the current arrangement makes no sense.

NYC – WELL THAT WAS QUICK

It has been clear for some time that the fiscal outlook for NYC has been more guarded than many have let on. There were already questions about how the City would fund the increased costs related to labor settlements (MCN 2.27.23). When the settlements were announced, the City had no clear plan for those costs. Now it looks like the City is going to attempt to do things the old-fashioned way and rely on a significant budget cutback.

Mayor Adams announced that he was requesting the leaders of nearly every city agency, including the Police Department, to cut their budgets by 4 percent for the coming fiscal year, which begins in July. Only the Department of Education and the City University of New York will be subject to smaller cuts of 3 percent. The agencies must come up with a plan in 10 days.

The move comes after it became clear that the NYS budget was not going to significantly reduce the City’s costs associated with the wave of immigrants who have arrived in the City since last year. The budget director estimated that the price of providing services to the arriving migrants would be $4.3 billion through the next fiscal year. It also sets up a real conflict with the City Council who released its own plan that claims to have found an additional $2.7 billion in funding it said the mayor had failed to account for and called for $1.3 billion in new investments.

ARIZONA TRANSPORT CHOICE

In 1985, voters in Maricopa County, AZ approved a sales tax to fund transportation improvements in the County. It’s term was extended again in 2004. Over the years, projects like the City of Phoenix’s light rail system and major road projects were funded through the tax. Now the tax faces a 2025 sunset without a vote. Over the life of the tax, Maricopa County has been at the top of the list of the nation’s fastest growing counties. Regional leaders want to ask voters to extend the tax again but need approval from the state Legislature to hold an election. Two bills that would allow the county to hold the transportation tax election are under consideration in the Legislature. 

Over the same period, the politics of the state have become more ideological and the combination of climate issues and an anti-tax sentiment makes for an uncertain outlook for an extension. One bill would allow 39% of funds to be spent on transit, a small percentage of which could be used to operate and maintain light rail but not extend it. The second would allocate 26% of funds to public transportation and also forbids light rail expansion.

ANOTHER PRIVATE COLLEGE DOWNGRADE

Moody’s Investors Service has downgraded Rider University, NJ’s issuer rating to B2 from Ba3 and revenue bond rating to B2 from Ba2. The university had $111 million of outstanding debt as of fiscal year end 2022. The ratings have been placed under review for possible downgrade.

The downgrade reflects the university’s ongoing multi-year deep deficit of operations and rapidly deteriorating unrestricted liquidity, at just 22 monthly days cash on hand for fiscal 2022. Moody’s estimates that material negative cash flow from operations will continue through at least fiscal 2025, further depleting liquidity.

Starting in fiscal 2024, the university’s main source of liquidity is expected to be a $15 million line of credit; access to $10 million of the total $15 million line is at the bank’s discretion after it reviews the proposed use of funds, adding additional liquidity concern. Furthermore, the line expires on June 15, 2023, with the renewal process underway currently but not assured. Flat enrollment in fall 2023 continues the trend of enrollment which has seen enrollment decline 16% from fall 2018 to fall 2022.

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