February 2010 Vol. 65 No. 2

Features

Underground Construction’s 13th Annual Municipal Infrastructure Survey: Signs Of Life in Sewer/Water Economy

Trepidation: [n.] a feeling of alarm or dread.
As we approached 2009 with an economy in free fall and zero confidence in any kind of positive funding trend, public works officials approached the coming year with extreme trepidation.

A year later, after a sobering 12 months of bad news and worse news regarding the economy and construction industry, several obvious questions emerge for 2010. Have we truly turned the economic corner? Just how much money will be available for underground infrastructure spending? Will the almost mythical stimulus funds finally have a substantial impact? What is the mind set of public works officials regarding their budgets for 2010? In short, are sewer and water public works officials budgeting with trepidation? Or are they somewhat more confident with their 2010 outlook?

Based upon the results of the 13th Annual Underground Construction Sewer & Water Municipal Infrastructure Survey, the answers present a mixed bag, most likely making 2010 a year of transition. But through all the answers, concerns and speculations presented in the survey results, a thread of hope and higher expectations emerged.

Overall spending, for the most part, has increased for 2010 according to the survey results. However, those figures include many caveats and a lot of “definite maybes.” Municipal personnel are very tentative about their spending plans. The strategy for most cities seems to be:
$ First six months of 2010:

• For those fortunate few who have received stimulus monies, that will carry spending plans early in the year; and
• For the rest of the cities, just treading water, delaying much of the budgeted spending.

$ Last half of 2010:

• If the economy has indeed stabilized and funding reflects more certainty, adjust budgets and release work in the back-end of 2010;
• If the economy is still shaky, continue treading water.

For new construction, 51.4 percent of respondents anticipate spending more money in 2010 compared to 49.6 percent expecting to spend less. Rehabilitation spending demonstrates much more optimism among survey respondents with 59 percent planning to increase 2010 spending.

Dollars
In dollar terms, municipalities expect to spend $4.14 billion for new construction in 2010, an increase of 1.5 percent over the actual $4.04 spent in 2009. New construction for water should drop slightly (.8 percent) to $2.79 billion. Storm water spending will see a decline from $1.06 billion to about $1 billion.

Sewer rehabilitation spending in 2009 was $3.35 billion. That number is expected to climb to $3.56 billion, or 5.9 percent, for 2010. Water rehab was stronger than anticipated in 2009 and should climb to $1.62 billion for this year while storm water rehabilitation will remain relatively flat at $800 million.

Overall construction and rehabilitation spending for sewer, storm water and water is expected to rise 2.4 percent to $14.1 billion in 2010, according to survey respondents.

The annual municipal surveys were distributed through both regular mail and e-mail to a targeted, non-duplicate sampling of over 9,000 municipal management personnel directly involved or responsible for underground piping infrastructure across the United States. Respondents were from all 50 states, grouped by region and weighted by populations and city sizes to avoid skewing results. The study was conducted in November and December of 2009. Cities responding to the survey ranged in size from 158 and 265, all the way up through the nation’s most populous cities: New York, Los Angeles, Chicago and Houston.

For many reasons – often politically motivated – city councils have historically been reluctant to raise sewer and water rates to keep pace with normal inflation, system growth and routine maintenance and rehabilitation. As federal and state funding programs have shrunk over the past 20 years, an increasing number of cities have reluctantly recognized that user fees should more accurately match true costs. The result has been a steady trend to boost user fees. The survey found that cities are still dragging their feet, albeit not as slowly as in the past. As we enter 2010, the national average for cities between rate hikes is 3.4 years. A surprisingly large number of cities, both large and small, reported that it had been between five and 10 years since their last sewer/water fees were raised.

The pressure for cities to maintain and expand underperforming or dilapidated systems continues to grow ever stronger from the EPA, state environmental agencies and even the public which has grown weary of leaky systems and health risks. However, trying to work out elusive funding options in a recession is extremely difficult, leaving user fees as the easiest and obvious target. Thus, in 2010, raising funds through increased user fees – even at the risk of a public backlash – is getting serious consideration for 58 percent of the cities responding to the survey. “In tough economic times, citizens do not want to hear that you need to raise rates to be able to continue your services,” observed a Southwest municipal manager. “Voting constituents also do not want to hear that you may be spending millions of dollars for arsenic programs and sewer rehabilitation.”

Funding woes
That funding is the number one concern for cities is perhaps an understatement. Roughly 68.5 percent believe there will be a serious funding gap between what is budgeted and what is actually needed for infrastructure construction and rehabilitation. Frustration was apparent in many of the responses.

“Our biggest issue is funding for an ancient system that needs to be replaced,” stressed this municipal respondent from the Midwest. “Pipe replacement expenditures do not equal what actually needs to be replaced and/or rehabilitated,” observed a Mountain West official. “Years of system neglect will be tough to catch up.”

A muni official from the upper Midwest pointed out a unique twist to the funding issue, directly tied to the recession: “People with no jobs will still need to pay taxes and utility rates. The city is way behind in collections this year.”

Still another twist came from this Southwest respondent who was commenting about lack of funding: “Aging infrastructure is leading to SSOs.”

Ironically, several cities reported that they went too far in slashing budgets and cutting work. Often, all but emergency work ground to a halt in 2009. “We basically had an extreme, knee-jerk reaction to all the bad economic news we were hearing,” lamented one survey respondent from the Midwest. “There’s nothing wrong with being cautious and fiscally conservative, but we went overboard – really didn’t look at the facts and adjust our spending accordingly.”

The results were that as 2010 drew near, many cities found themselves with an unexpected stash of cash. “We were five years behind where we needed to be with our rehab program,” observed a Northeast respondent. “Now, we’re six years behind. And the bad thing is that even as the economy improves, we won’t receive additional funding to catch up – we’ll always stay behind.” When asked how much additional funding to their routine, annual budgets would be necessary to allow cities to catch up with needs, answers ranged from 10 percent to 100 percent with the average at 27.5 percent.

Another respondent from the Southwest commented, “With an aging infrastructure, it will be difficult to receive enough funding to actually maintain the collections systems, let alone the treatment plant.”

Comments and complaints about spending and hiring freezes and staff cutbacks were also common and appeared to be widespread among municipal staffs. But it is apparent that there are pockets of projects kicking off this spring with increasing plans for early summer. Most respondents indicated they were very anxious to get back on track with projects delayed far too long.

In addition to funding, municipal personnel cited government and Environmental Protection Agency regulations and enforcement as a top concern in 2010. A respondent from the Southeast emphasized: “Just because there is a recession, it doesn’t mean the EPA has cut back on its enforcement emphasis – we’re hearing they are going to actually step up enforcement.”
Also being cited as a strong concern were safety and damage prevention issues. “It seems like more and more, our sewer or water lines are being damaged by construction for other utilities – we’re very concerned,” said this West Coast municipal official.

Trenchless
Trenchless methods continue to have a strong impact on sewer and water construction and rehabilitation. Almost 58 percent report using trenchless techniques during the last year. Of those who have not used trenchless, 52.1 percent plan on doing so in 2010 and 75.3 percent anticipate utilizing trenchless within the next five years.

While 40.5 percent report that trenchless methods have had a minimum impact on their city’s construction and rehab efforts, 59.5 percent report a moderate to strong impact.

Asset management
Over the past few years, asset management has been a key buzz term of the underground infrastructure industry. But with money woes, enforcement concerns, user fee issues, etc., interest in asset management substantially ebbed in 2009 and that trend is projected to continue in 2010. Almost 57 percent of the cities responding do not have an underground asset management plan in place. When asked if an asset plan will be incorporated into operations in the near future, 32.3 percent say yes, 20 percent no and 47.6 percent don’t know. “Quite frankly,” said this Mid-Atlantic official, “as important as asset management could be for us, it is low on our list of priorities right now.”

Contractors
A positive note for contractors is that their performance rating, according to survey respondents, reached an all-time high in 2009 of 3.87 on a five-point scale, up from 3.71 in 2008. “We’ve had excellent relationships with our contractors,” said a Pacific Northwest muni official. “Of course, the cynical side of me says contractors are trying harder because the work is scarcer. We had about double the amount of contractors bidding for what work we let this year.”

Whatever the reasons, municipal personnel seemed genuinely pleased with contractor relations. That’s not to say they didn’t have several suggestions when asked how contractors can do a better job.

“Even though we are experiencing tough economic times, don’t bid jobs that you aren’t capable of doing,” advised this Southwest respondent. “I understand that it is tempting to bid all jobs but refrain from bidding jobs that might take more experience to complete.”

As indicated earlier, damage prevention and safety are becoming more of a concern for municipalities. This muni manager from California said simply “Locate, locate, locate, dig!” A Southwest respondent said contractors need “more owner contact and spotting time exposing other utilities before excavating. Also, more experience for excavator operators is needed.” A western Mountain state official cautioned that contractors should “become more efficient and improve safety adherence.” And another respondent from the Southwest stated the need for “more advance exploration such as potholing.”

A Midwest official wants contractors to be “trustworthy, do the right thing even if the inspector is not on the job site.” A north central muni respondent advised contractors to “go the extra mile. As the years wear on and revisiting old projects can leave a bad taste in the utilities’ mouths if a contractor has not dotted the ‘i’s’ and crossed the ‘t’s’.” And a Texas city official reminded contractors to “remember they work for the client! Communicate, communicate, communicate.”

Engineers
Consulting engineers saw their performance rating drop slightly from 3.61 to 3.59. Like contractors, municipal personnel cited several common themes in their dealings with engineers.

“Better communication,” was suggested by this West Coast respondent and a host of other city personnel from around the country. A Midwest muni manager added “listen to the staff and public.”

In this day and age of constant technology change, an upper Midwest city official counseled engineers to “make sure they are up to date on all new technologies that can help keep costs down.” Along a similar theme, a Northeast respondent suggested that engineers “be more creative in their proposed solutions.”

A northern Mountain state respondent said there is a need for “more thorough construction inspection.” A Midwest official agreed: “Engineers should promote full-time inspection of all municipal work.”

And this Texas city official advised consulting engineers to “ask a utility what they need and can afford instead of designing a gold-plated Taj Mahal they can’t operate or afford.”

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