The Good, The Bad & The Hope: 16th Annual Municipal Survey

As the old saying goes, money makes the world go round. From the municipal perspective, the world stopped going round about four years ago. But there is emerging a legitimate undertone of hope for improvement emerging from many municipal personnel.

The 16th Annual Underground Construction Municipal Sewer & Water Survey includes a detailed look at 2013 spending plans for America’s cities along with insights and perspectives from municipal officials.

After several years of recession and being continuously squeezed by deep budget cuts, municipalities across the country are still waiting for an economic turnaround or a state/federal budgeting miracle that will finally provide some kind of financial relief for cash-strapped city sewer, water and storm water departments.

A huge majority of respondents to the survey consistently ranked funding as their biggest challenge in 2013 – even more so than in years past, the survey revealed. As one West Coast public works director point out, “Will it take a disaster to make them (governments) understand just how desperate our situation really is?” Another Northeast respondent added, “I almost wish the EPA would come down on us – at least it would force our city council to focus on underground infrastructure for a change!”

However, for some, it is not about obtaining funding; rather, it’s their ability to repay loans. “We know that we can get funding – there are sources (including private) available,” admitted a respondent from the Mid-Atlantic region. “Problem is we don’t have enough cash flow to pay back loans without raising user fees substantially. But our city admin doesn’t want to hit our residents with what would amount to a major tax hike until the economy is much improved. It’s a classic catch-22 situation.”

Many survey respondents also complained that there is still a fear of spending their annual budgets. “Our city is hanging onto every precious dime of revenue,” said this municipal Arizona respondent. “We’ve still got money left over in our budget for 2012 that our managers were afraid to spend. We’ll never see it, either.”

But it wasn’t all bad news from municipal personnel. Most of the respondents believe (and hope) that their overall economic troubles have at last hit bottom and now they can begin their slow climb out of the financial malaise that has plagued U.S. cities for several years. Indeed, a majority believe that 2013 will be a better year than 2012 in terms of available monies for sewer and water infrastructure projects. In fact, survey results show that municipal officials are budgeting a slight increase in their projected new underground infrastructure spending for both water and sewer systems in 2013. However, as has been the case for the past four years, funding for large projects is still scarce.

Conducted in October and November 2012, the survey polled U.S. municipalities about their 2013 infrastructure funding plans along with perspectives on technologies, trends, industry issues and working relationships with consulting engineers and contractors. The survey results came from all 50 states plus the District of Columbia, and were weighted for regional population density and city sizes to develop a nationwide benchmark that would allow for projections.

Responding cities ranged from very small such as: Morland, KS (population 160), Reliance, WY (population 271), Rienzi, MS, (population 353) and Evansville, WI (population 612); to huge metropolis’ such as New York City, Dallas, Atlanta, Los Angeles, Houston and Chicago.

While approximately 42.6 percent of cities say their 2013 sewer/water/storm water budgets will remain flat, almost 40 percent indicated they will actually have an increase in their projected 2013 infrastructure spending ranging from three to 5.5 percent on average. Although a modest increase, that’s by far the largest number of cities planning to raise their budgets and the first overall positive spending growth since 2007.

That said, city representatives still strongly believe their budgets are woefully inadequate to address infrastructure needs. Survey respondents estimated they need an average budget increase of 30 percent just to maintain their systems properly. “But that’s nothing new,” lamented one respondent from the Northeast. “Our budgets have been inadequate for 30 years.”

Silver lining
Another positive development is that the economic downturn has provided a silver lining scenario for many rehabilitation contractors and vendors. With tight budgets, cities are turning to modern rehabilitation techniques to affect limited, band-aid repairs to their most serious problem areas rather than addressing much-needed system replacement or upgrades. “We know we’re just sticking a finger in a dike that could break at any time, but this gets us by for a few years until our funding situation improves,” stressed this Florida respondent. Whatever the reasoning, cities plan to invest more in rehabilitation in 2013.

Municipal officials have budgeted an overall solid spending increase of 4.4 percent for new underground infrastructure piping construction in 2013 at $8.25 billion. Rehabilitation spending continues to be more aggressive and is anticipated at $6.35 billion for 2013. Of course, those increases are contingent upon the continued economic recovery and municipal bean counters are planning on somewhat stable and/or increasing user fees and tax revenue. It goes without saying that municipal spending plans remain tentative and understandably flexible.

There have been many estimates trying to pinpoint just exactly how much of an investment would be needed to bring America’s sewer/water/storm water piping infrastructure up to date. The survey this year asked municipal employees directly how much money they estimate would be needed to repair or expand their systems. City officials projected those costs at $260 billion for sewer, $85 billion for water and $9.6 billion for storm water.

While it is always politically painful to raise user fees, desperate times call for desperate measures. In 2012, cities bit the bullet and raised their utility fees at a record rate. For the first time in the 16-year history of the survey, the average time between fee hikes for U.S. municipalities has fallen below three years. In fact, 52 percent of this year’s respondents reported raising their rates within the last two years. On the other hand, 29 percent said it has been at least three years since user fees were adjusted. One sizable city admitted it had been more than 13 years since it last boosted utility rates. Several reported five years or more.

Top concerns
In addition to funding woes, municipal personnel have a litany of other pressing issues. Unfunded state and federal mandates was one of the more common concerns expressed by survey respondents. “It is extremely frustrating to be forced to spend money we don’t have to comply with some ridiculous new mandate that is unnecessary or, worse yet, conflicts with existing regulations,” complained this official from a Southeast city.

In the upper Midwest, this city representative pointed out that they are having trouble “finding enough minority/woman business enterprise contractors to meet the requirements of public funded projects.”

Many municipalities are struggling with personnel issues as well. Said this respondent from the Northeast, “retirement and replacement of qualified personnel is a critical problem for a lot of cities.”

Behind funding, government and EPA regulations were cited by 60 percent of respondents as a major concern entering 2013. Other worrisome areas included safety, finding qualified employees and improving community relations.

With trenchless construction and rehabilitation methods continuing to make their impacts upon the underground piping infrastructure markets, more and more cities are working with consulting engineers and contractors to utilize the technology whenever possible. Roughly 71 percent of American cities report using trenchless methods within the last year. Of those who have not utilized trenchless, 60 percent plan to do so in 2013.

Survey participants were asked their opinion of trenchless methods. While most replied favorably, many still have practical reservations or limitations. Some 51.2 percent prefer to use trenchless, when practical, for their projects; 18.8 percent still favor open-cut except for rare exceptions; and 30 percent of respondents didn’t have a preference – just whatever gets the job done efficiently, on-schedule and on-budget.

“As great as trenchless is, it is still only practical to us in certain applications. Some of these gung-ho contractors and even engineers need to sit back, look realistically at the job and then determine if trenchless is the best way to proceed,” cautioned this Mountain States public works director. This New York state employee believes that “where services are involved, there is no benefit for trenchless.”

Another respondent from Virginia pointed out a practical limitation of trenchless in their situation. “A large part of our interceptor system is pressure pipe (force mains), therefore the logistics of bypass pumping for isolating the host pipe makes trenchless difficult. On our gravity system, trenchless is the preferred rehabilitation method.”

This Upper Midwest official had a pragmatic view of trenchless. “We evaluate every project on its own merits and make decisions that are most beneficial.”

Yet by far, municipal survey respondents embrace trenchless when practical. “We’re using pipe bursting more so we can upsize,” said a Mountain States respondent. “Anytime you don’t have to open cut, the safety factor rises 10-fold,” pointed out this official from a New York community.

“It’s been a game-changer for us,” said a North Carolina municipal official. “Trenchless provides us with many positive options that we never had in the past.”

Engineering relationships
Each year, survey respondents are asked to evaluate, on a scale of one to 5 (with five being the highest mark) the working relationship consulting engineers have with municipalities. Engineers largely held their own in the eyes of municipal personnel in 2012 with a score of 3.73, down only slightly from 2011’s score of 3.75.

According to 83.1 percent of the municipal respondents, quality was the most important feature they seek in consulting engineers. That was followed by: ‘understanding of new technology,’ cited by 48.3 percent; ‘affordability’ cited by 46 percent; ‘cost’ mentioned by 40 percent; and having a ‘productive relationship with contractors’ was emphasized by 37 percent.

Survey respondents had many comments and advice for consulting engineers. A respondent from the Pacific Northwest said bluntly that consulting engineers should “lose the ego.” From the Midwest, a city official said “do not use our projects to train your engineers.”

A Mid-Atlantic respondent would like engineers to “stay abreast of industry and regulatory changes,” while a Midwest city official suggested engineers should “be more collaborative.”

From this Southwest respondent came a comment that was essentially repeated by several survey participants. “Help us create clear, concise and practical specs.” An Oregon muni official added that “quality control of documents needs to be improved along with avoiding vague or conflicting specifications and drawings.”

A survey participant from Ohio stated that “schedule creep is the biggest problem. Also, recognize when you have an out-of-scope task and tell the owner then, not when the job is done. Manage your time and budget.”

This advice from a Georgia respondent was repeated by others – and seems to be an annual concern. “Engineers, especially newer ones, need to get out in the field more and understand the design versus actual construction dynamic. They need to witness first hand equipment in use.”

Contractor relationships
Like engineers, survey respondents evaluated their relationship with contractors as well. The composite score (on a scale of one to 5) was 3.91, a sizable improvement over the 2011 rating of 3.87.

The number one contractor quality cited by a resounding 87.6 percent of municipal respondents was quality. Two other areas were also both strongly emphasized by 74.2 percent of city personnel: ‘timely completion of projects’ and ‘experience.’

Municipal personnel had a litany of recommendations for their contractor partners. “When on a job, help keep the public informed about what is going on in and near construction sites,” advised a Michigan respondent. “Effective communication is a key towards project success,” echoed this Wisconsin municipal employee.

A similar piece of advice comes from this Texas community representative. “Help the field crews understand they are working for the customers that they are dealing with. Get field crews to act as ambassadors for the city.”

“We need contractors that take pride in their work and can suggest cost saving,” said this Oregon respondent. From Colorado, this city official suggests a similar theme: “Perform work to high quality standards.”

“Keep on schedule or, more importantly, get in and get out, minimizing public disruption,” advised a city employee from Ohio.

A Florida respondent emphasized that contractors should “bid real estimated costs rather than a low bid and rely on change orders later.” The essence of that comment was reflected by several survey respondents.

This interesting comment regarding safety came from an Oklahoma municipal official. “Match the safety program of the agency so costs can be compared fairly.

But it was not all critical comments of contractors. This respondent from Massachusetts said “I’ve had no worries. We’re a small department and most contractors understand and accept the fact that they will be asked to do more for a little less.”

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