Free Money Costs A Fortune

In his proposed 2010 budget, President Obama has proposed a huge increase for sewer and water funding. His budget proposal is $2.4 billion for the Clean Water State Revolving Fund and $1.5 billion for the Drinking Water State Revolving Funds.

(See the report from our Washington Editor Stephen Barlas). Of course, Congress will actually have to appropriate the additional funds. That may be a challenge in view of our soaring and ever-increasing super-sized budget deficit.

I’m all for more sewer and water funding: we needed it 20 years ago. Small problems then are mega-problems now. But it’s one thing to wake up and turn on the light; it’s another issue entirely when it comes to funding the light bulb.

Let us not forget the original intent of the federal fund programs – to jump start cities’ repair and expansion efforts for their seriously polluting infrastructure. Little things like mercury in fish and burning rivers tend to get a lot of attention.

The funding was meant to be a major booster shot; then cities and states were supposed to assume their share of the load. That’s why the programs have to be periodically re-authorized and re-funded – they were supposed to have expired years ago. But political pressure has kept the financial pipeline flowing though at increasingly reduced levels.

Now the talk is to open the tap back up and provide free-flowing billions to projects around the country. However, this may be too good to be true without a commitment and acceptance of responsibility from the municipal community.

The revolving funds have largely been seen as the primary funding mechanisms for cities, particularly large municipalities. Mayors and city councils couldn’t resist the temptation of pleasing voters by keeping sewer and water rates artificially low, often for 10 years or more. If a loaf of bread increases in price, doesn’t it make sense that your cost of labor and equipment – just to maintain – your sewer/water system would increase in cost as well? As systems have continued to deteriorate and fail, some cities are finally desperate enough to raise their users fees. The problem is that raising fees to levels high enough to maintain systems creates a scenario similar to last summer when gasoline jumped to over $4 a gallon in a matter of months – sticker shock quickly set in among consumers. And that creates a different subset of economic woes.

I sincerely hope the additional funding levels being discussed come to fruition (and it’s still not nearly enough money to solve the national infrastructure problems). But funds need to arrive with an understanding that city councils will raise their user fees when appropriate to allow their overworked and resource-deprived public works departments to remain current with real costs for maintaining systems. Both federal and local funding mechanisms are desperately needed to initiate a rebirth of our horribly neglected sewer, water and stormwater infrastructure.

Case study in forward thinking

While attending a John Deere Construction & Forestry media event recently in the Phoenix area, I was impressed by their forward thinking in the middle of an economic recession.

John Deere gets it. Now is not the time to panic and put your head in the sand. Now is the time to be cautious yet proactive, ready to take advantage of market opportunities.

Kevin Karlix, John Deere’s director of North American Marketing & Sales, stressed that Deere has been through the financial up and downs before. Because of living and learning from the past, John Deere’s management now has the company on sound financial footing and “we have a plan,” Karlix related.

Deere’s plan is to be proactive and take advantage of opportunities while much of their competition retreats. In 2009, John Deere will continue to release new products and enhance existing ones; they will maintain, rather than cut, their marketing to their most important business niches; they will continue with aggressive business development efforts. John Deere’s intent is to build market share during the recession and they are well-positioned to do so.

Many of Deere’s competitors have pulled back their business development and marketing programs to the point that their customers are wondering if those companies will survive. Most likely, they will. But the tarnished image of a struggling company falling behind the competition is not easy to overcome. When we ride out this latest recession and construction markets bounce back with a vengeance – which they will – Deere will have enhanced its market position substantially and be ready to ride at the crest of a new, lucrative economic wave.

It’s a business model that companies, both large and small, new construction or rehabilitation, open-cut or trenchless, could follow to success. John Deere’s approach is not unique, just business savvy and the actions of a true market leader.

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