Thursday, September 22, 2016

Time and the Principle of Imminent Collapse

Investors and bankers assert that time is money. Time may as well be money but so is money both a wealth and a debt. Debt may indeed be a form of negative money but there are two types of debt: one is currency and the other is physical need.

Monitory debt is the borrowing of cash with a promise to repay after some period of time. Physical debt arises when infrastructure needs are not addressed in a timely fashion. A simple example is a fleet of two vehicles with useful life of 5 years. The fleet owner must replace two vehicles every year in order to not let the average fleet age exceed 5 years. If the owner does two vehicles every year, that replacement schedule will go on indefinitely. If the requisite two vehicles are not replaced a physical debt is incurred that must some time be repaid. One could wait for all 5 years to pass then make the expenditure for 10 vehicles all at once.

The first plan works well for anyone who plans to stay in business for a long time such as generationally.  The second plan works well if the current owner expects to bail out of the business and leave the ruins for someone else to handle.

Now we need to extend this concept to the millions of miles of water mains and customer tap pipes that are buried under our city streets and roadways. Most water mains are publicly owned and will be replaced at ratepayer expense at some time in the future. With a 30 to 50 lifecycle for water mains, between 1/30th to 1/50th of the total miles of pipe need to be replaced every year for there to not be a physical debt building up that will reach epidemic proportions as all the pipes and joints become a day older for every day they are not replaced. Since we are talking millions of miles of pipes we ate likewise talking about hundreds of thousands of miles of pipe every year.

Sewer lines are likewise publicly owned and must be maintained by the governing municipalities. The most common cause of urban sinkholes that suck down entire street intersections is a collapsed sanitary or storm sewer line deep under the street that has been in place about a month too long. The collapse starts deep underground when the collapse occurs. It progresses unseen until it reaches the surface and surprises everyone with a gaping hole it the street. It is then that politicians vow to get it fixed as quickly as possible so that traffic may resume its carefree flow.

Gas transmission lines are usually privately owned and operated but they cannot escape the ravages of time and the Principle of Imminent Collapse. Corrosion, earth movement, frost heaving, weld and metal fatigue have caused nearly half of the 7,763 volatile liquid and gas pipeline failures since 1986. The other half is from excavation neglect and the mysterious Other Cause. This article is not an indictment of the fossil fuel industry but rather one of the ubiquitous need for regular pipe replacement and maintenance. Both will necessitate an increase of operating costs, but someone has to pay the monitory debt or the physical debt. There is no such thing as a free lunch. (TINSTAAFL)

The big infrastructure debt that we have been incurring during the past few decades is the highway and bridge category. Our tax base via the motor fuels tax on cents per gallon has not been raised since 1985. The Federal 18.5 Cents per gallon has become woefully inadequate as more and more vehicle miles driven increases at the same time as the fuel efficiency has double to tripled over the years.  In 1973 a car that got 11 mpg and be driven 20,000 miles per year would have paid $612 in tax at the 1985 rate (same as today). That same driver today in a car that gets 24 mpg pays $154 for the road he uses. The roads are wearing out. The bridges are 30 years older since the last time the tax rate was increased. someone needs to pay for the maintenance and replacement.

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