March 2009 Vol. 64 No. 3
Features
Stimulus Package To Hit Sewer/Water Fast
The economic stimulus package passed by Congress and signed by President Obama on Feb. 17 will unleash a national flood of wastewater and drinking water construction funds with the $4 billion and $2 billion emergency appropriations for the federal Clean Water and Drinking Water State Revolving Funds (SRFs).
There is also $1.38 billion for the U.S. Department of Agriculture’s rural development loan and grant programs for small town water utility construction.
These one time EPA and USDA water infrastructure infusions are supposed to serve two objectives: putting laid off construction workers back in hardhats and refurbishing sewer and drinking water systems which in many places give new meaning to the word “dilapidated.”
The EPA stimulus funds will be dispersed very quickly to the states using the standard SRF formula. The $4 billion emergency CWSRF appropriation will equal four to five times what states would get in a recent year; the same scenario applies to the DWSRF. As a television huckster might say: “But wait, there is more.” Not only will there be a deluge of emergency funds cascading into states, that money can be used much more freely than the annual SRF funds, which the state gives out in the form of low interest loans, which have to be matched 20 percent by the locality.
20 percent match flexibility (subhed)
For these stimulus funds, the 20 percent match has been eliminated. Also, Congress has mandated that states use at least 50 percent of its portion of the emergency CWSRF and DWSRF funds “to provide assistance for additional subsidization in the form of forgiveness of principal, negative interest loans, or grants, or any combination of these.” In the conference report on the 1,000 plus page stimulus bill, called the American Recovery and Reinvestment Act (H.R. 1), states are instructed “to reach communities that would otherwise not have the resources to repay a loan with interest” and “to ensure expedited award of grants under the additional subsidy provisions.”
At least 20 percent of a state’s stimulus sewer and drinking water funding must go to projects to address green infrastructure, water and/or energy efficiency, innovative water quality improvements, decentralized wastewater treatment, stormwater runoff mitigation and water conservation. If there aren’t enough applications in those categories, however, a state can ignore the “20 percent green” requirement.
As the stimulus bill was working its way through Congress, there was a lot of talk that the infrastructure money – whether for roads, bridges, water or rail – ought to go to “shovel ready” projects. That term was never defined, although legislators talked in terms of projects that could be ready to break ground within 120 days. That time frame is not in the legislation. Instead, the sewer and drinking water section specifies that revolving funds should be used “expeditiously to create jobs.” To that end, states are supposed to direct emergency funds to projects on “state priority lists that are ready to proceed to construction within 12 months of enactment.” If the state gives the nod to a project, and that project is not ready to go within 12 months, the state is supposed to cancel the project and give the funds to another project which is ready to go.
The speed with which states download stimulus SRF funds to towns and cities will probably vary. Governors have to first assemble “priority lists” of projects. When it became clear the stimulus package would pass, and it would include SRF funds, some states pushed back annual application deadlines, anticipating that there would be more than the usual number of first time applicants. Those applicants would need additional time to do environmental and engineering studies necessary for a project to get National Environmental Policy Act (NEPA) clearance from both the state and federal government. Ohio, for example, pushed its application deadline back from March 15 to July 1 for projects it will fund in its 2010 program year, which begins July 1, 2009.
State reactions (subhed)
Dave Bornino, manager, operations and financial assistance, Ohio Environmental Protection Agency, expects that much of the state’s extra $58 million for drinking water projects will go to projects which have applied in prior years, but which were not funded. In many instances, smaller or rural cities and counties particularly have been unable in the past to come up with the 20 percent match, either because they were unsuccessful in getting grant money from a federal program such as the Community Development Block Grant program (operated by the federal Commerce Department) or because they declined to raise sewer and water rates. With the stimulus funds, however, there is no need to come up with the 20 percent match.
Nonetheless, Bornino thinks that smaller, rural towns will have a hard time getting an application together in time to meet even Ohio’s extended priority list deadline if they have never submitted an application for a given project before. They will be hard pressed to afford the consultants who do the engineering and environmental studies necessary for NEPA approval. Congress had considered adding language to the stimulus bill easing NEPA requirements; but a Senate amendment on that score fell to a voice vote.
One funding hopeful in Colorado is Gene Michael, director of the Pueblo (Colo.) Wastewater Department. He has applied to the state SRF in past years for a $22.2 million loan. But the money was never forthcoming because Pueblo is neither a small town with a population of under 10,000 nor a town with a wastewater non compliance issue. Those are the two top criteria Colorado uses in awarding SRF loans. The Pueblo project was one of four cited by the House Transportation and Infrastructure Committee as a “shovel ready” wastewater project which could be “green lighted” if Congress passed the stimulus package. The project includes construction of four concrete holding tanks, fans to blow air into those tanks, and a number of pumps. Now that Colorado is getting an extra $31 million for its SRF via the stimulus package, Michael is hoping the “nos” of past years will turn into “yes.”
Michael says, “We are ready to go now.” He has submitted the project for inclusion on the state priority list and believes that if the Pueblo project is funded the money would be forthcoming toward the end of 2009.
Milwaukee has had more luck getting Wisconsin SRF funding than Pueblo has with Colorado. Kevin Shafer, executive director of the Milwaukee Metropolitan Sewage System, is very optimistic about the $107.8 million in CWSRF stimulus funding Wisconsin is getting. That is four or five times what the state gets annually from the EPA CWSRF. Milwaukee can get as much as 35.2 percent of Wisconsin’s SRF allocation; Shafer expects to get about $37 million in stimulus funds. But Shafer points out that Milwaukee has a five year sewer capital program of $692 million. Of that, about $249 million is for underground piping and appurtenances. The $37 million from the stimulus bill will help but it won’t be near enough to fund all the improvements Milwaukee needs to make, in piping and elsewhere.
‘Buy American’ no deterrent (subhed)
The stimulus package doesn’t put any constraints on the construction companies who win sewer and drinking water contracts, at least not directly. But the “Buy American” provision in the stimulus package could come into play with regard to either pipe or earth moving equipment purchased by a construction company. The “Buy American” provision says that the U.S. must honor its procurement agreements with Canada, the European Union, Japan and a short list of other trading partners to the extent those agreements talk about federal procurement. That appears to mean that pipe can be purchased from those countries, but not from other countries such as China, India, Brazil and Russia, which are not members of an international government procurement agreement. However, there are provisions in the bill which give President Obama significant leeway to issue exclusions leading some observers to believe that the “Buy American” provision in the stimulus bill won’t be any more of a roadblock than the one that has long governed highway grants from the Federal Highway Administration, where foreign suppliers have never been locked out.
Another issue weighing on construction companies is the Executive Order 13502 President Obama issued the week before he signed the stimulus bill. That Order repealed Executive Order 13202 (established by President George W. Bush) which prohibited federal agencies and recipients of federal funding from requiring contractors to sign union only project labor agreements (PLAs) as a condition of performing work on federal and federally funded construction projects. A union only PLA is a contract that requires a federal construction project to be awarded only to contractors and subcontractors that agree to recognize unions as the representatives of their employees on that job; use the union hiring hall to obtain workers; pay union wages and benefits; and obey the union’s restrictive work rules, job classifications and arbitration procedures.
Obama’s order says federal agencies “may” require PLAs, and they are “encouraged” to do so on projects over $25 million. Gail Raiman, a spokeswoman for the Associated Builders and Contractors (ABC), says each federal agency has 120 days to write regulations implementing the Obama Executive Order. But probably the vast majority of contracts underground pipeline installers will sign under the two SRFs, and certainly the USDA program, will be under $25 million; so they may be minimally affected.
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