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.