Engineering Inc. - May/June 2013 - (Page 4)

MarketWatch BY G E R RY D O N O H U E F or firms in the water/ wastewater market, the projected 3 percent annual growth in 2013 is cause for enthusiasm. “I’ve been in the water business for 35 years and this has been the longest flat period I’ve ever seen,” says Rob Andrews, chief executive of water at AECOM. “Indications are since it’s not getting worse, it’s going to get better.” In the four years following the 2008 global economic crisis, the water supply market failed to grow in three of them (2009–2011), according to a report by industry consultants FMI Corp. Two of those years saw declines, including an 11 percent drop in 2011. Economic indicators suggest the tide, at long last, has begun to turn. FMI forecasts 4 percent annual growth in 2014 and 5 percent in both 2015 and 2016. “Water is one of those industries that we can’t do without,” says Ralph Eberts, executive managing director of professional services for Black & Veatch’s global water business. “We have to invest and continue to invest.” Necessary Growth “The main driver in the water business is replacing aging infrastructure,” says Andrews. According to the American Water Works Association’s recent Buried No Longer report, more than 1 million miles of water and wastewater pipes run underground in this country, and “much of it is reaching the end of its useful life and approaching the age at which it needs to be replaced.” 4 ENGINEERING INC. MAY / JUNE 2013 Climate change is also affecting the industry. “We have severe drought in some places, like Texas and parts of California, while at the same time we have severe flooding in others,” explains Eberts. “The infrastructure is being stressed. Up to now we’ve tended to react to disasters. We’ve got to address these things before they hit us hard.” A third factor is the expansion of the water utility’s traditional scope of service. Rather than focus solely on treatment and distribution, many utilities are now involved in reclaiming and reusing water, finding commercial uses for the nutrients and latent energy in wastewater and using green infrastructure to manage stormwater, for example. “We see good opportunities in helping utilities create robust asset management plans, put together risk plans and prioritize where to invest their limited amounts of money,” says Eberts. Federal and state regulation will also likely force significant investment. “On the wastewater side, many clients are still dealing with consent orders so we expect to see a lot of activity,” says Michael MacPhee, president of the water division for ARCADIS U.S. Falling Behind The United States Conference of Mayors recently estimated that water and wastewater investment needs could total as much as $80 billion annually for the next 20 years. Current funding levels are less than half that. FMI projects the water sector will reach $39 billion in funding VICTORIA SNOWBER/GETTY IMAGES Slow but Steady Increases for Water/Wastewater Market in 2013 and $45 billion by 2016. A gap between what is spent and what is needed each year pushes those costs into the next year. “When it comes to water, you can only defer investment for so long,” says Eberts. “At some point, you have to do it.” The federal government was once a robust source of funding for the water industry, but no longer. In the wastewater sector, federal funding has decreased by more than 90 percent since the 1980s to just $1.4 billion in 2013. Drinking water appropriations in 2013 totaled only $908 million. Congress appears to have taken note. The House is working on extending the Clean Water State Revolving Fund and doubling funding for wastewater projects to $13.8 billion over five years. Other legislative efforts include the Water Infrastructure Finance and Innovation Act, which would provide lowinterest federal loans and loan guarantees for water projects and exempt water and wastewater projects from the state volume cap on private activity bonds. Ratepayers will continue to account for the largest share of utility funding, but they are constrained in many markets by local politics. “Many of the big enterprise water authorities have full-cost pricing, giving them the rate structure to replace their aging infrastructure, but there’s a lot of resistance in the smaller and medium-sized cities and they are gridlocked,” says AECOM’s Andrews. According to a 2012 USA Today analysis of water rates in 100 municipalities, average monthly bills have climbed 75 percent since 2000, but most of that increase has come in larger cities. In Atlanta, for example, rates are up 233

Table of Contents for the Digital Edition of Engineering Inc. - May/June 2013

Engineering Inc. - May/June 2013
From ACEC to You
Market Watch
Legislative Action
2013 Engineering Excellence Awards
Annual Convention Wrap-Up
Mobile Power
Guest Column
Business Insights
Members in the News
Mergers & Acquisitions

Engineering Inc. - May/June 2013