The world enters another month of the COVID-19 pandemic and we all slowly continue to figure out how to deal with it. “This new normal,” “in these uncertain times,” and wishing friends and colleagues to “stay safe” are the phrases of today. We use these now because they are necessary. As of mid-July, COVID-19 has infected over 13 million people worldwide and caused over 580,000 deaths – over 135,000 in the United States alone. For a time, the U.S. economy essentially shut down and the unemployment rate went from 3.6% in January to 11.1% in June. Children went to school from home or stopped altogether, and now I have masks for my family hanging next to my car keys in the kitchen. This is all anything but normal.
For communities that the Water Design-Build Council (WDBC) members serve, the challenges of COVID-19 are felt in real time and the financial impacts of the pandemic reach far into the future in possibly disproportionate ways. At the local government level, municipalities and authorities have to continue to do their best to provide services to their citizens even as the world turns itself upside down. The challenge is that all community services are not funded the same way.
Municipalities have several budget fund types they use for daily operations, including a general fund and an enterprise fund. The general fund includes monies raised from taxes (sales, property, etc.) and spent wherever the government needs it. Schools, fire and police, libraries, senior centers, and refuse removal are examples of general fund activities. An enterprise fund is more specific. Only collected fees related to its specific purpose, such as water and sewer service, fund it. Taxes typically do not fund an enterprise fund.
Why does all this matter? The shutdown of most businesses in the U.S. has dramatically reduced spending, which means less collected sales tax. Citizens out of work means less collected income tax. Stay-at-home orders mean fewer miles driven and less collected gasoline tax. This unplanned loss of tax revenue is having a severe impact on general fund budgets and communities are forced to limit services and, in some cases, lay off municipal employees. For the enterprise funds of water and sewer, WDBC members are hearing that the financial impact of COVID-19 is not as severe because of the self-sustaining fee-based funding structure and no reliance on taxes. As an example, in a conversation I had with a city public works director this week, he said the state of his general fund budget was dismal and his enterprise fund budget was pretty good.
The members of the Water Design-Build Council serve communities with their water infrastructure needs through a variety of collaborative project delivery methods. In 2018, the EPA’s 6th Drinking Water Infrastructure Needs Assessment showed $472 billion is needed to maintain and improve the U.S. water infrastructure over the next 20 years. That’s not including the nation’s wastewater systems. And COVID-19 didn’t make any of this need go away; it just made an already challenging situation that much more difficult.
So how can collaborative project delivery methods help communities with this challenge? First, the WDBC recognizes that the uncertainty of future budgets may make it difficult for communities to move forward swiftly and confidently with multi-million-dollar construction projects. Spending money on a water or wastewater plant project while laying off firemen or librarians would be very challenging politically as well. Yet the infrastructure needs that existed at the end of 2019 still exist today.
I have some ideas for you to consider. Some key benefits of collaborative project delivery are the ability to understand project cost implications early in the design process and to move a project forward quickly. In this time, the collaborative methods may also be valuable to help go more slowly. For example, a previously planned $25 million single-phase project may now be financially achievable in phases over a longer duration. The design-build team can work with the owner to focus early work on the most critical needs and within their financial constraints. Another concept is “design-build to a budget” where the customer dictates the amount of project funds available and a list of desired results or improvements. Teams then compete to show how many of the improvements they can achieve through their innovation and collaboration. Finally, collaborative project delivery can incorporate detailed financial evaluations that look beyond project price to impacts on operating budgets and new potential sources of revenue. Strategic investments that serve new customers or develop new products create revenue diversity for the community that help minimize future budget fluctuations, like those caused by COVID-19.
The member firms of the Water Design-Build Council are grateful to have the opportunity and proud to serve communities with collaborative approaches and innovative thinking. Each of these companies are people, like you and me, who live in cities and towns around the U.S. affected by COVID-19 every day. Our purpose is to help all we can to get all of us back to whatever normal will be, as soon as we can.