December 2017 Vol. 72 No. 12


December 2017 News

TWDB Approves $47 Million For Houston Stormwater Project

The Texas Water Development Board (TWDB) approved $47.195 million in financial assistance from the Clean Water State Revolving Fund to the city of Houston for design and construction costs associated with a stormwater management project.

The project will address flooding in the Brays Bayou watershed, increasing the bayou’s capacity to move stormwater through it. It’s part of a larger project that involves channel widening and detention basin construction to reduce the flooding impacts across the entire watershed.
Houston could save approximately $25 million over the life of the loan by using the Clean Water State Revolving Fund.
TWDB is the state agency charged with collecting and disseminating water-related data, assisting with regional planning, and preparing the state water plan for the development of the state’s water resources.

EPA Awards $12.3 Million For Iowa Critical Water Projects

The U.S. Environmental Protection Agency (EPA) Region 7 has awarded $12.326 million to Iowa’s drinking water revolving loan program funds to help finance projects that are essential to protecting public health and the environment.

The more than $12 million will be used across Iowa for water quality projects that will improve municipal drinking water and wastewater infrastructure, help protect public drinking water systems, make projects more sustainable by increasing water and energy efficiency, and reduce water pollution.will be funded that are listed on Iowa’s Intended Use Plan. The DWSRF Capitalization Grant funds public and privately owned community water systems’ improvement projects, nonprofit non-community water systems, and disadvantaged communities. Infrastructure replacement and other projects are also funded with this grant, ensuring safe and affordable drinking water supplies to Iowans.

Private Players To Capitalize On $728 Billion Municipal Water Sector Opportunity

In the wake of tightening municipal budgets, environmental violations and aging infrastructure, private players are poised to capitalize on struggling water and wastewater utilities. According to a new report, U.S. Municipal Water & Wastewater: Defining the Addressable Market for Private Investment, Bluefield Research estimates the total market value of more than 78,000 community water and wastewater systems across the U.S. to be more than $728 billion.

“We’ve been talking about this trend for several years – municipalities and smaller private system owners’ growing inability to keep up with deteriorating utility infrastructure, so our analysis has been developed as a tool to evaluate the opportunities for investment,” said Reese Tisdale, president of Bluefield Research. “There seems to be no shortage of interest, and capital for that matter. Rather, the challenge for new market entrants, particularly for those looking to secure a platform from which to grow, is scale. Big deals are difficult to find.”

Approximately 15 percent of community water systems are already owned by private players, including investor-owned utilities. In the first half of 2017, Bluefield has tracked more than $224 million of investor-owned utility acquisitions across 53 deals.

At the extreme end of the spectrum, representing almost $2.5 billion of potential deal value, per Bluefield analysis, are highly stressed public water systems – those with a combination of low-interest loan forgiveness applications, which signal financial distress, and serious EPA-compliance violations.

Driving private interest in public water systems are a number of key market shifts:

  • Public water systems face environmental violations, financial burdens. Approximately 5,300 municipal, and private drinking and wastewater systems in the U.S. are listed as significant regulatory violators, indicating  an immediate need for infrastructure investment.
    Climbing residential water rates are adding pressure to utilities. Adjusting for inflation, the combined water and wastewater bill for a typical U.S. household has increased 18.5 percent since 2012, or 4.4 percent per year on average. This rise is attributed to growing populations, more efficient water usage and aging systems networks, all of which pressure municipal and utility budgets.
  • Federal funding for water infrastructure has decreased. Peaking at $16.9 billion in 1976, federal funding has fallen to $4.3 billion in 2014, passing the financial burden to states and municipalities. A primary resource continues to be the EPA managed State Revolving Funds, which totaled more than $12.7 billion in 2016-2017 for drinking water and clean water projects across all 50 states.
    States are encouraging private investment in public water systems. Since 2013, five states – Missouri, Illinois, New Jersey, Indiana and Pennsylvania – have joined California in facilitating private investment with fair market value legislation. The Mid-Atlantic region hosts the greatest private ownership presence in water systems. Texas and Pennsylvania are hot spots for acquisitions, with 90 pending and completed deals in 2017.
  • Merger & Acquisition is not the only approach to resolving America’s water and wastewater infrastructure woes. Public-private partnerships, including third-party operation and maintenance contracts, and concessions represent other options. These deals have been slow to gain momentum largely because of local resistance, despite ready access to capital.

“As water needs grow across the country, we expect the private sector to continue to play a key role, including companies from outside the water industry,” added Tisdale. “There is no doubt water infrastructure needs serious investment – from private or public capital. The status quo is not an option.”

Equipment Rental Industry Forecasts Consistent Growth

In its latest five-year forecast, the American Rental Association (ARA) expects equipment rental industry revenue to grow consistently with a U.S. compound annual growth rate (CPGR) between 2017 and 2021 of 4.7 percent, resulting in total revenue of $59.3 billion in 2021.
Total rental revenue in the U.S. is expected to grow by 4.5 percent in 2018 to reach $51.5 billion, 5.5 percent in 2019, 4.9 percent in 2020 and 4.1 percent in 2021–  almost exactly the same as the previous forecast in August, with only minor fluctuations up or down in expected growth rates each year.

In Canada, equipment rental revenue also is expected to show consistent growth, reaching $5.3 billion in 2018, with growth rates of 4.1 percent in 2019, 5 percent in 2020 and 4.8 percent in 2021, to total $6.11 billion.

Construction/industrial equipment rental revenue is expected to show a 4.1 percent CAGR over 2017-21, reaching $40.4 billion in 2021.
“This is a strong forecast, showing the equipment rental industry will continue to consistently grow over the next five years, without factoring in any possible impact from tax reform or infrastructure spending,” said John McClelland, ARA’s vice president for government affairs and chief economist.

In Memoriam

Robert Boh died October 20, at age 87, in New Orleans, the city he made a huge impact on through infrastructure construction projects.
From 1967 to 1993, Boh was CEO and president of Boh Bros. Construction Company, which was founded as A.P. Boh & Co. in 1909. When it became Boh Bros. Construction in 1932, it was headed by Boh’s uncle and father, with a focus on building houses, and drainage and sewer projects.

Boh became principal design engineer at the company in 1955, with bachelor and master’s degrees in Engineering from Tulane University. In this role, he participated in the company’s work on the original Greater New Orleans Bridge (later renamed the Crescent City Connection) in the 1950s. Three decades later, he was CEO and chairman of the board when Boh Bros. contributed to construction of the second bridge span.

He was also involved in engineering work for the construction of the Interstate 10 high-rise bridge over the Industrial Canal in 1964. Boh Bros. drove the piles for the Superdome in 1971, and was involved in renovation of Jackson and Lafayette squares, and the paving or renovation of French Quarter streets.

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