February 2020 Vol. 75 No. 2

Editor's Log

Municipal Funding, Reality and Candidates

This issue of Underground Construction contains our exclusive Sewer & Water Municipal Survey and Forecast. Information for the annual article came from our own survey and research combined with data from industry consulting expert FMI and our Washington D.C. correspondent Stephen Barlas.

While overall the report is basically good news in terms of spending plans by cities in 2020, there are also some very interesting twists. First of all, most cities don’t appear to be too concerned about 2020 being a presidential election year. Historically, that has negatively impacted spending plans, or at least been an inhibiting factor. Election rhetoric combined with reluctance to make any new or rising spending proposals, is typically considered risky during such an important campaign cycle. And on the surface, that’s easy enough to understand.

But in 2020, that doesn’t appear to be much of a bump in the funding road. For the most part, the economy is cruising. Rumors of another pending recession have been greatly exaggerated – for three years, ever since Donald Trump was elected. Now that’s not to
say the economy won’t come tumbling down soon, but there have just been too many people crying wolf over the past three years to lend much credibility to that outcome.

Screams of the sky is falling tend to be justifiably downplayed. Inevitably, the economic tables will turn, but it probably won’t be an abrupt crash, more of a slow-down type of pace and even that shows no real sign of happening any time soon. In short, that’s reassuring to local and state governments.

Another reason for cities to feel confident with their capital spending programs is that while budget cuts are always being discussed at both state and national levels, right now anything affiliated with “infrastructure” is in vogue. Not only do Senators and Representatives continue to provide a steady diet of positive lip service to the topic, occasionally something really happens. Such was the case with the Water Infrastructure Finance and Innovation Act, which was revised in 2018 and is beginning to have a major impact. The program is designed to accelerate investment in water infrastructure by providing long-term, low-cost supplemental loans for regionally and nationally significant projects.

Also, Congress maintained levels of funding for the State Revolving Loan Funds for 2020. The Clean Water State Revolving Funds received $1.64 billion and the Drinking Water State Revolving Funds netted $1.13 billion.

Public awareness and sympathy for infrastructure needs – even sewer and water – have made tremendous strides in recent years. Basically, people are concerned enough that our national “infrastructure crisis” has become a campaign issue. That new-found public concern has not been overlooked by the large field of Democrats vying for their party’s presidential nomination. Several have outlined grand plans for general infrastructure.

Of course, what is rhetoric and what is reality are two different things. President Trump has also tried his hand at the infrastructure issue, but the jury is still out on how much has/will be accomplished under his administration.

Further, cities are understanding the funding game better, realizing the limitations of Federal infrastructure funding – the spigot is being turned off. That’s been the trend for decades and the intent going forward. There simply isn’t enough government money to go around.

Cities created their funding problems, now they have to live with them. The survey revealed that more and more municipalities are making the always tough decision to increase user fees more frequently. Because of the political ramifications at the local level, city councils and mayors are reluctant to raise rates, always an unpopular move. But understanding that Federal dollars will continue to be constricted, while pipes steadily fail, is a strong motivator. Plus, waiting several years between rate increases is simply poor stewardship when operational costs are going up (in essence, simple inflation), growth is overpowering older systems and the life cycle expectation of many products expired more than 25 years ago.

Too many cities – even tiny towns – are having broken systems and failing pipes disasters. The long-time caution from the EPA that “it can happen to you” is becoming a reality. Consent Decrees prevail.

As mentioned previously, a consistent and strong economy for several consecutive years also brings confidence that local tax coffers will remain full. If there ever was a time to aggressively attack infrastructure woes, now is it.

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