EXCLUSIVE: Underground Construction’s 12th Annual Municipal Survey: Year of Hope and Caution

Recession Causes Budget Concerns While Stimulus Stirs Excitement, Potential Windfalls
February 2009 Vol. 64 No.2

Overall new construction spending was projected to decrease from $7.5 billion to $7.1 billion in 2009. Sewer/storm sewer spending levels were estimated to fall from $4.5 billion to $4.3 billion.

Construction/Rehab Spending: 2008 (actual), 2009 (projected)

Sewer rehabilitation spending was one of the bright spots of the survey as city officials are hoping to match last year’s spending levels of $3.3 billion.

In recent years, water infrastructure has seen a significant increase in attention and funding across the country. Water rehabilitation, once thought impractical and expensive, has grown from a fledgling industry to a billion dollar-plus market. But water’s growth is expected to slow with the economy in 2009. New water construction will contract from $3 billion to $2.8 billion, and rehab funding levels will drop from $1.4 in 2008 to $1.3 this year.

It is important to distinguish that projected spending levels in this survey are based upon anticipated “actual” funds generated by in-place user fees and other city revenues sources. Many municipal managers are either keeping planned construction/rehabilitation on the back burner or even developing programs to launch quickly as federal funding becomes available. There is a chance that 2009 spending levels could reach or slightly exceed 2008 levels by the fourth quarter. The odds are also good that 2010 spending levels will actually see a substantial increase, perhaps as high in some areas as 15 - 20 percent. As one veteran senior municipal official from the Southeast stressed: “We think we’ll be able to increase our spending, perhaps by a lot, with the stimulus money – we desperately need to. But we won’t count on it until they actually ‘show us the money’.”

Rehabilitation work could potentially see the most direct benefit from stimulus funding. Often, those types of infrastructure problems have already been defined. Cities and consulting engineering firms can react faster to letting that work. Indeed, several respondents said they could launch major rehab programs quickly if stimulus money became available.

Another driver for emphasizing rehab programs is that the recession has not slowed monitoring and enforcement protocols by state DEQs and the EPA. One city official said stimulus money could “keep us out of hot water with the EPA.”