The Source

by Martin Doyle

  One of the most insightful elements of the league’s report was its recognition that political decisions would always come down to finance. In the (ironic) gendered convention of the time, the league wrote, “The citizen must reconcile himself to the inescapable cost of pollution abatement and realize that he will pay in all his roles.” Cleaning up the environment needed to happen, and it wasn’t going to be free. In addressing this line of thinking, the league raised the biggest issue standing between the activists and a solution: Who was going to pay? Specifically, they focused on what should be the division of costs among federal, state, and local budgets.13

  Armed with the report, which drew considerable attention from Upper Midwest media and politicians, the League of Women Voters organized a series of clean water conferences. In turn, league members were invited to major national conferences. They incessantly pressured local and state politicians, which led the Cleveland legislature to pass a $100 million bond issue to finance river cleanup, sewer system improvements, stormwater overflow controls, harbor improvements, and debris removal. In short, the league had successfully convinced the general public in Cleveland and the surrounding communities to take on significant debt for cleaning up the river.

  Despite this victory, there remained major barriers both political and financial. While the voters had approved going into debt to clean up the river, the city government was wary about actually selling the bonds. Additionally, money from the city’s bonds would address only the public side of pollution—sewage—and cleanup efforts would be effective only if the industries treated their own wastes as well, at their own cost. State and local politicians were not willing or able to take on the polluting industries, because any threat of local regulation would simply drive away the companies that had converted Ohio from frontier backwater to industrial empire—and those firms employed many of the politicians’ constituents. In fact, the state government added insult to injury by reclassifying the Cuyahoga as an industrial river, meaning that polluting facilities along the river were immune to public nuisance lawsuits and thus protected from local efforts to combat pollution.

  The League of Women Voters had reached an impasse. For most of the 1960s, the league and Edith Chase had done an enormous amount of work in building coalitions and arguing persuasively that changes were necessary. But they hadn’t caught a break.

  Then things started to go the league’s way in the summer of 1969—ironically, when the Cuyahoga caught fire, the Apollo 11 astronauts returned successfully to Earth, and young Ted Kennedy drove his car off a bridge.

  The Cuyahoga had caught fire at least a dozen times since the Civil War and probably many more than that. By the 1930s, the local press was more critical of the lack of firefighting services to put out the river fires than they were of the river burning in the first place. Throughout that period, other industrial rivers also routinely caught fire, including the Buffalo River in New York, the Schuylkill in Pennsylvania, and the Rouge River in Michigan. Compared to some of these earlier fires, the 1969 blaze on the Cuyahoga was small, easily contained, brief, and seemingly insignificant. It was so short lived, in fact, that local photographers were not able to get there in time for a photo. In the Cleveland papers, the fire was barely mentioned; it merited a single paragraph in one paper and back-page coverage in another.14

  Local coverage never would have helped the league’s push for calling attention to water quality. But only a few weeks after the Cuyahoga fire, the Apollo 11 astronauts returned from the moon. Surprisingly, even this giant leap for mankind got secondary coverage in the news cycle thanks to the scandal at Chappaquiddick Island, where Senator Ted Kennedy had driven off a bridge. He escaped; but his passenger, Mary Jo Kopechne, drowned. In a single week, men returned from the moon and a famous senator was caught in a scandal. It was a magazine publisher’s dream. Both were featured in the August 1, 1969, issue of Time Magazine, which splashed a photo of Ted Kennedy in a neck brace across the cover. And there, tucked away in that issue’s science section just behind the series of articles about lunar exploration, sat an article about water pollution in cities. It ran with the now infamous image of the Cuyahoga burning: the photo was taken in 1952, yet it was attributed to the event in 1969.

  The infamous photograph of the burning Cuyahoga River in 1952, printed in the August 1, 1969, issue of Time Magazine.

  In recounting that summer forty-five years later, Edith Chase said with a sly grin, “Poor Ted, but lucky us.”

  The aftermath was the stuff of legend. The burning Cuyahoga, regardless of the date, gave the league and the environmental movement its catalyzing image. People everywhere bought the magazine to see Ted Kennedy and the astronauts but then browsed their way to read about the burning river in Cleveland. Faced with the embarrassment of the river burning, the federal government and the State of Ohio sprang into action. Within weeks of the blaze, the federal government threatened six industrial firms—including two steel mills along the Cuyahoga—with prosecution if they did not reduce pollution. Over the next 6 months, another sixty-six federal prosecutions were commenced against industrial water polluters around the United States. And from there, in the frenzy of federal environmental activism, came the Clean Water Act, the Clean Air Act, and the National Environmental Policy Act—the environmentalist’s holy trinity of regulations.

  The Clean Water Act implemented standards for pollution control and reduction. It gave the newly created federal Environmental Protection Agency (EPA) teeth—where state agencies, like those in Ohio, had none—by giving it the authority to permit or deny water pollution. That is, if manufacturing plants or public wastewater plants wanted to route their wastewater into a stream or river, they had to ask the EPA for permission. And the EPA made treating that waste a condition of granting permission.

  If the EPA’s permitting program was a “stick” to force pollution reduction, the 1972 Clean Water Act also had an extremely tasty carrot: a generous federal spending program that funded initiatives to clean up the nation’s rivers. Whereas previously cities like Cleveland had footed the bill for cleanup, now the federal government would provide up to 75 percent of the costs for planning and building wastewater treatment plants. Even FDR’s New Deal, with its expansive building programs, had been minor compared to the spending spurred by the Clean Water Act. In the first twelve years after the act was passed, the federal government spent over $40 billion on wastewater treatment. By 1990 there were over 16,000 centralized public wastewater treatment facilities, servicing over 75 percent of the U.S. population, along with an additional 160,000 industrial treatment sites.15

  The 1970s would prove to be a peak for both regulating water pollution and spending in a fiscal era. For just over six decades—from 1914 through the middle of the twentieth century—the federal government used income tax to increase its own revenue and then used that revenue to take on the central role in government spending. State and local governments, the predominant sources of revenue for infrastructure in the nineteenth and early twentieth centuries, gradually adapted their budgets to be dependent on funding from the federal government. In 1978 grants accounted for almost a third of state and local government revenues, and even more for some cities: that year, federal grants made up 55 percent of St. Louis’s budget and 69 percent of Buffalo’s. The federal government had become the primary taxing entity, redistributing as it saw fit to state and local governments, which gradually decreased their own taxes thanks to the availability of grants from the federal government. The cleanup of rivers polluted by industrial and municipal wastes was made possible as much by this mid-twentieth-century approach to fiscal governance as by the introduction of new regulations.16

  In the 1980s, the United States would undergo its next dramatic financial and political reorganization with the Reagan Revolution. And once again, river pollution would be part and parcel of its effects.

  For all the benefits of the Clean Water Act, it had an enormous blind spot: Farmers and suburbanites with Irish
-green lawns were let off the hook. When a farmer fertilizes a field, or a homeowner uses a bag of fertilizer from the local garden store, they play a role in changing the chemistry of the planet.

  The ability to grow plants is limited by the availability of a handful of elements, most notably nitrogen and phosphorus. The central goal of agriculture for centuries, and the real work of farming, has been in providing nitrogen and phosphorus. In search of nitrogen (though they didn’t know it was nitrogen they were after), twelfth-century Japanese farmers brought “night soil”—human waste from outhouses—back from the cities they visited to sell crops; and nineteenth-century British farmers imported bones from other European countries to supplement their own depleted soils. Until the 1840s, the principal commercial nitrogen fertilizer was guano, the solidified bird excrement that accumulates on a few arid islands. Regular commercial shipments of guano to New York started in the 1840s and totaled about 760,000 tons in the 1850s. At that point, in 1856, Congress passed the U.S. Guano Act, declaring that any uncharted island containing guano could be claimed as the property of the first U.S. citizen to stumble upon it. For phosphorus, sources were available closer to home; commercial-scale deposits were found in the southern United States in the late 1800s and quickly grew to global importance during the early twentieth century.17

  The game changer came in 1913, when two German scientists perfected the synthetic production of nitrogen fertilizer. This breakthrough occurred simultaneously with the development of commercial-scale phosphorus mining, such as those enterprises growing rapidly in Florida. Thanks to these new sources of nitrogen and phosphorus, for the first time in human history farmers had an effectively unlimited supply of the primary nutrients needed to fertilize plants. After realizing the increase in productivity made possible by using synthetic fertilizer, the farmers’ conversion was rapid and thorough: by the 1960s, over 90 percent of all cornfields in the United States were fertilized with synthetic nitrogen. The amount used per acre increased by a factor of ten over the second half of the twentieth century, when farmers began applying more than was needed to ensure maximum crop yields. As farmers used more and more fertilizer, the plants were unable to absorb it all—and more of the nitrogen ran off the fields, into the irrigation ditches, and on to streams and rivers.18

  By the 1980s, just under half of the nitrogen fertilizer applied in the Mississippi watershed region ended up in the Gulf of Mexico rather than in crops. Just as fertilizers instigate the growth of plants on land, they also instigate the growth of plants in water. When they wash off farmlands in the Midwest and eventually fertilize the tiny plants—algae—floating in the Gulf of Mexico, they create massive algal blooms. As the algae die, they sink to the bottom of the Gulf, where their tiny bodies feed booming numbers of bacteria that use up all the oxygen in the water. The resulting dead zone of low or even no oxygen in the Gulf now typically exceeds 7,700 square miles, making it just a bit smaller than New Jersey. Through this cascading ecological pathway, farming in Iowa is destroying shrimping in Louisiana.19

  Farms were not alone, and the Gulf is not alone, because any activity using fertilizer leads to runoff to rivers, which delivers the excess fertilizer to whatever water body is downstream. Every suburbanite engaged in an endless quest for the greenest lawn in the neighborhood follows the same rationale as a farmer (over-fertilize), and the fertilizer from Home Depot has the same effect as the fertilizer used in commercial agriculture. Just as streams in the early twentieth century were a dumping ground for sewage, streams in the late twentieth century have become a commons for fertilizer. By the turn of the twenty-first century, the EPA had classified just under half of the 3 million river and stream miles in the United States as either threatened or impaired, and the cause was fertilizer from agricultural and suburban runoff.20

  In cities and suburbs, the degrading aquatic effect of fertilizer is combined with the success of decades of water infrastructure construction. In many suburban areas, sewer lines carry both human sewage and storm flows; this is the legacy of Chesbrough’s water carriage system, introduced a century and a half ago. However, by being combined, both sewage and stormwater must all go through a treatment plant, there to be handled by the John Dodsons of the United States. On a normal dry day in Durham, John Dodson’s treatment plant has to manage about 8 million gallons of primarily sanitary wastewater. On a rainy day, about 40 million gallons will come rushing through the pipes, and the extra 32 million gallons comes from runoff—storm sewer. All of this water has to be processed; it has to be slowed down long enough for the microorganisms to do their work. And with all the fertilizer on lawns, the organisms have to consume that much more nitrogen and phosphorus.

  On the rainy days, Dodson wonders if his treatment plant can handle all the water pouring through its system; someday, will there be just too much water? These are the days when problems arise, when wastewater treatment plants have to bypass treatment altogether. Because all of the sewage is combined, very rainy days mean that in addition to suburban runoff, untreated sewage bypasses the treatment plant altogether and flows directly into streams and rivers. This is the worst-case hydrologic scenario—pollutants and pathogens passing on to downstream water supplies along with untreated fertilizer and thus exacerbating dead zones in reservoirs and estuaries. John Dodson knows these untreated overflows can incur the regulatory wrath of state and federal regulators.

  In Alabama the worst-case hydrologic scenario occurred simultaneously with the worst-case financial scenario, all made possible by the most recent financial transformation in the United States: the Reagan Revolution. The perfect storm occurred at the Cahaba River in Alabama, which went from anonymity to infamy in the world of finance.

  The Cahaba River is a perfectly nice river. Contained entirely in Alabama, the Cahaba starts its 190-mile route near Birmingham, semicircles through the state, and culminates by joining the Alabama River just outside Selma. Amid the rapid suburbanization of the U.S. South in the mid-1990s, sewage treatment plants were becoming overwhelmed with runoff and sewage, and those along the upper Cahaba River were no different. Moderate rainstorms—common in the humid Southeastern United States—caused repeated overflows during which the wastewater, including raw sewage, bypassed the treatment plant and flowed directly into the river.

  In addition to implementing new regulations and providing funding for wastewater infrastructure, the Clean Water Act also enabled citizens to sue when those regulations were being violated. In the mid-1990s, the Cahaba River Society did just that; it sued Jefferson County for violating the Clean Water Act. After some legal back-and-forth, in 1996 Jefferson County agreed to take on the task—and cost—of eliminating sewage overflows. The county planned to take over management of twenty-one different sanitary sewer systems along the river and improve the existing treatment plants. It would also improve over 3,100 miles of sewer lines, some of which were found to be made of clay installed over a century earlier. Initial cost estimates came in at a shade over $250 million, but they quickly ballooned to $1.2 billion.

  In the 1970s, Jefferson County could have expected that substantial federal grants would be available to finance the work. However, the era of money flowing freely from Washington, D.C., to cities and states came to a screeching halt as Ronald Reagan’s administration took hold in 1981. As the fiscal conservative in chief, Reagan reined in the regulatory and environmental spending portions of the federal budget—in order to cut income taxes—by pushing the responsibility for financing projects back down to more local levels. It worked: by 1991 the federal share of spending on wastewater infrastructure had dropped to 5 percent. This was a jarring reality for local governments, which suddenly faced the reality of paying for the requirements of the Clean Water Act on their own dime.21

  Besides the Reagan Revolution, another dramatic financial transition was occurring in the world of finance: this was the era that introduced the world to the vocabulary of derivatives, options, and swaps. The best way to understand these
abstract concepts—what they are and why they are used—is to look at how sewers in Jefferson County were financed.

  For Jefferson County in the late 1990s, the costs for the revamped wastewater infrastructure system would be large, but the finance mechanisms to pay them were, at least initially, tried and true: muni bonds—a long and steady, even boring, form of investment due to their extended duration and nearly guaranteed returns. Municipal bonds are simply loans given to a city to do work, whether for building a hospital, public housing, or a sewage system. When an investor buys a $10,000 municipal bond from a city, that investor is giving the city a loan for $10,000. In return for the loan, the city pays the investor some percentage of that loan each year for some number of years. At the end of the term, the city returns the original total, $10,000. If you buy a 20-year, $10,000 bond at 5 percent interest, you will get $500 each year for 20 years; at the end of the twentieth year, you’ll get your $10,000 back—as long as the city has the money to pay back all those loans. The city must then set its water rates high enough to generate revenue, which the city uses over time to pay back the interest and principal for all those bondholders. Because infrastructure is expensive as well as long lived, municipal bonds tend to be very large and long term; it is not unusual for municipal bonds for a sewer project to provide tens of millions of dollars in funding and have loan periods of 10 to 30 years.

  Loaning a city money for three years is relatively low risk, and so the interest rate for a three-year municipal bond would typically be very low, perhaps 1 percent. Loaning a city money for thirty years is riskier; lots of things can change in a city over three decades. Therefore, the interest rate for a thirty-year municipal bond will typically be higher, say 5 to 7 percent. This is where rating agencies come in: Companies like Moody’s or Standard & Poor’s dig into the city’s financial details, along with its justification for the costs, to arrive at an overall assessment of the safety of the investment. The agency then grades the bonds, like a teacher would grade a homework assignment. Safe investments are given A’s while risky investments are given B’s and C’s. Cities that get an A rating can offer lower interest rates on their bonds because they are considered more likely to pay back investors over the lifetime of the bond; cities given a lower rating will have to pay higher interest rates to lure in investors to take on the additional risk. But here is what makes municipal bonds boring: Most of the municipal bonds issued in recent decades were rated at the highest grade—A and above—and had default rates of at most 0.03 percent, only a fraction of the default rate of private corporations. That is, if you bought a Grade A sewer bond, you had a 99.9 percent chance of getting your money back.22