When it comes to budgeting, no one needs a crystal ball more than a manager-level government employee trying to eke more life out of old assets or plan a major upgrade.
As recently as August, the Commerce Department reported that record construction spending by all levels of government was picking up the economic slack left in the wake of the slowest residential market in decades. But just a few months later, the management consulting and investment banking firm FMI predicted cutbacks of 5% to 10% for 2009 municipal budgets, and the American Institute of Architects' billing index reached its lowest levels in years.
Guessing how U.S. foreign policy may affect oil prices and, in turn, basic expenses like asphalt and electricity, is always a shot in the dark. But who could have predicted a perfect trifecta — the highest oil prices, largest decline in property and sales tax revenues, and toughest credit market in years — would converge to throw a wrench into short- and long-term plans? Accustomed to all manner of crises, financial and otherwise, PUBLIC WORKS readers re-evaluated their options and found ways to move projects forward.
Let's consider what a public works director in the Western United States faced last fall, a scenario no doubt familiar to many readers.
Located in Montana's fastest-growing county, Bozeman offers excellent skiing, access to Yellowstone National Park, and is home to Montana State University. To accommodate growth, the city designed a wastewater plant upgrade to increase treatment capacity from 5.8 mgd to 8.5 mgd.
When opened in October, bids on the $49 million construction phase were 34% to 64% higher than estimated. Unable to postpone because of permit requirements and excessive organic loadings, the city did a cost/benefit reanalysis and devised a new plan of attack: narrow the project's scope, raise rates, and borrow more money.
The city decided to forgo dewatering capability and rebid construction of a new administration building instead of making it part of the overall project. Future rate increases will be in the neighborhood of 10% instead of 2%. Still, the city must borrow 58% more from the state's revolving loan fund than originally anticipated.
“We're hardly dead in the water,” says Public Services Director Debra Arkell. “We're still seeing building activity, but growth isn't what we'd experienced over the last several years. We were banking on it continuing at 5% to 6%, and for impact fees to defray more of the cost than they will now. We also anticipated moving right from the first to the second phase of the project, but now that probably won't be necessary.”
So the mood was grim in early November when we asked readers to share their spending expectations for the year. Overall, operating and capital budgets are consistent with 2008 levels. When we asked the same questions in November 2007, readers reported an overall increase for maintenance and consistent funding levels for 2008 capital improvement programs.
As always since launching our annual “outlook” survey with the January 2005 issue, we heard from men and women whose operations provide virtually any type of infrastructure-related service a city, county, state, or special district can think to provide. In addition to streets, roads, and bridges; drinking water; wastewater and stormwater; fleets; solid waste; grounds, buildings, and rights of way; and engineering and/or planning, feedback came from managers involved in animal control, public transit, and electric utilities.
Respondents' budgets range from less than $1 million to $50 million or more, and they serve communities with less than 10,000 to more than a million residents (see charts on next page). We analyzed data by EPA region (see map below) to provide a general overview of budget expectations in 10 areas of the country and Canada.
DOWN BUT FAR FROM OUT
Although national and global financial markets were in chaos when our survey was deployed, respondents blamed cutbacks in planned new construction or capital improvements on material costs more than tight credit. Readers working in the water and wastewater sectors — or any enterprise operation — reported more funding increases than those whose departments rely primarily on general revenues for funding.
“I'm forecasting a flat sales year, but not a significant reduction reduction in work because most of our infrastructure projects are regulatory-driven,” says William Spearman III, a vice president at engineering firm Woolpert Inc. “Bonding concerns are affecting large projects. Projects that have been designed aren't proceeding to construction. There's a reluctance to return to the marketplace with interest rates still above-average.”
By themselves, though, numbers don't reveal much about the average reader's psyche.
Our request to suggest a slogan for the year provides valuable insight into how managers choose to interpret their situation. For every respondent who's looking forward to a challenging year, another is determined to capitalize on the precedent set by a national leader who's repeatedly indicated his commitment to infrastructure.
So for every suggestion along the lines of Depression Lite and No fine wine in '09 unless we walk the thin line, we received something like Move forward and things should be fine; be optimistic for 2009.
The concept of “eco-infrastructure” popped up as well, reflecting readers' increased exploration of “green” alternatives: wetlands instead of treatment plants, full or partial reclamation instead of new pavement, compost instead of gravel on roadsides. Although the debate over the ultimate cost-effectiveness of green buildings continues, infrastructure managers clearly see a public relations opportunity as well, as indicated by slogans like Green today for growth tomorrow and Live green, stay green.
USE IT OR LOSE IT
In addition to electing an infrastructure-hip president in November, voters also approved almost $40 billion in new borrowing for infrastructure.
American Public Works Association members have 3,600 road-widening, paving, traffic-light-and-signal repair, highway intersection improvement, storm drain pipe realignment, pumping station improvement, sewer line replacement, treatment plant upgrade, water valve replacement, pedestrian underpass safety improvement, and sidewalk repair projects ready to go within 90 days once $15 billion in funding is made available.
As of mid-December, 641 cities had identified 15,221 projects in 10 sectors — including street/metro roads, transit, water and wastewater infrastructure, and airport technology — worth $97 billion. The U.S. Conference of Mayors is lobbying Congress and President Barack Obama hard for a corresponding MainStreet Recovery plan that w would create 1.2 million jobs over the next two years, almost half the president's goal. Whether their r their recommendations become part of a second economic-stimulus legislative package in the $700 billion billion range remains to be seen.
Regardless of how much of the legislation is devoted to infrastructure, numerous parties will be working in the same space at the same time.
“We haven't seen this level of funding since the 1950s, but we're still coordinating projects much the same way we did then,” says Martha Bednarz of Envista, a company whose software allows public and private utilities to share project dates and locations. “For the economic stimulus to work the way the new president envisions, we'll need to use new technology to manage all the infrastructure projects getting under way at the same time.”
The wild card is whether the law requires funds to be dispersed through the states or allocates them directly to cities and counties that have approved projects ready to go.
And that depends in large part on Raymond LaHood, an Illinois Republican who served in the U.S. House of Representatives for 14 years before being named U.S. Transportation Secretary last month. His appointment was applauded by Building America's Future, a coalition formed last year by the governors of California, New York, and Pennsylvania to promote the value of infrastructure investment to U.S. economic growth.
“The new Administration and Congress are poised to make a once-in-a-generation investment in infrastructure,” the organization announced in response to LaHood's nomination. “We call on them to reform the failed policies of the past and craft a bold economic recovery bill that addresses urgent national needs and delivers results, cost-effectiveness, accountability, and transparency.”
Candidates for the Cabinet position had included Steve Heminger, executive director of the Metropolitan Transportation Commission, which is the transportation planning agency for the San Francisco Bay Area.
What to expect over the next 18 months for …
National funding legislation. 32
Air pollution initiatives. 37
Streets, roads, bridges, and public transit 42
Authority over public rights of way . 45
Solid waste. 49
The urban forest. 51
Wastewater and stormwater 52
Drinking water 53
Q: For which of the following is your department responsible? Check all that apply.
A: 57% and 55%, respectively, chose “engineering and/or planning” and “streets, roads, and bridges.” Water, wastewater, and stormwater represent the third most-common response.
Source: PUBLIC WORKS
Source: PUBLIC WORKS
Source: PUBLIC WORKS
Source: PUBLIC WORKS