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US Conference of Mayors Foresees Major Spending on Water and Sewer Utilities

March 19, 2010

In a report published in February, the US Conference of Mayors is predicting that spending on water and wastewater systems will increase by by as much as four times.  Depending on how fast the country’s population grows, spending could double, triple, or quadruple, according to the report.  We’ve posted the full report here, which is an interesting read at just 56 pages.  Toward the end of the report, the author cites the Congressional Budget Office’s so-called best management practices for utilities to reduce costs thereby, presumably, opening up financial resources to pay for the identified infrastructure needs pointed out earlier in the report.  Among these best management practices:

• Demand management – conservation and the like.
• Labor productivity – automation and cross-training are mentioned
• Consolidation of systems - this sometimes goes by the name of “regionalization” and is probably one of the best recommendations to come from Washington in a long time.  Physical consolidation of small systems, where possible, is a money saver.
• Asset management planning – a topic to itself, but the CBO cites increased equipment life, reduced O&M, and elimination of redundant assets as benefits to be gained.
• Innovative construction contracting - alternative contracting like design-build-operate (DBO) offer some cost savings over traditional contracting approaches.

In all, the US Conference of Mayors’ report is more on point with the issue than most reports we’ve seen.  The report correctly identifies the need for increased water and wastewater utility infrastructure, estimates the annual spending at reasonable assumptions for growth, addresses the existing gap in infrastructure (between functional infrastructure and dilapidation), and correctly characterizes the funding issue as primarily a local one with a limited role in funding from federal and state sources.

Local utility rates will be the battleground where the funding issue get sorted out.  Firms  like StepWise, are already immersed in these issues.  Understanding the need is one thing, but getting local communities to get into a “willing to pay” mode is easier said than done.  Water and wastewater rate consultants know that even small increases to utility rates can lead to big problems for communities on a political and even an affordability level.  We see affordability as a major issue for most utilities going forward.  Making sure your water and sewer rates meet the actual costs of service, are transparent , and are clearly equitable to rate payers are principles that will be core strengths for utility managers in an era where spending is predicted to quadruple.

Click to Download “Trends in Local Government Expenditures on Public Water and Wastewater Services and Infrastrcuture: Past, Present and   Future”

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