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Reserves vs Borrowing

February 25, 2014
economy, Education, engineering, finance, funding, infrastructure, Leadership, local government, management, planning, politics, Reserve Funding, Revenues, Surpluses, sustainability, Uncategorized, utilities, Water Funding, water sewer management
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As water and sewer utilities, the public health and safety of our customers is our priority – it is both a legal and moral responsibility. The economic stability and growth of our community depends on reliable services or high quality. The priority is not the same with private business. Private businesses have a fiduciary responsibility to their stockholders, so cutting services will always be preferred to cutting profits. Therein lies the difference and yet the approach is different. Many corporations retain reserves for stability and investment and to protect profits. Many governments retain inadequate reserves which compromises their ability to be stable and protect the public health and safety. Unlike corporations, for government and utilities, expenses are more difficult to change without impacting services that someone is using or expects to use or endangering public health. Our recent economic backdrop indicates that we cannot assume income will increase so we need to reconsider options in dealing with income (revenue) fluctuations. If there are no reserves, when times are lean or economic disruptions occur (and they do regularly), finding funds to make up the difference is a problem. The credit market for governments is not nearly as “easy” to access as it is for people in part because the exposure is much greater. If they can borrow, the rates may be high, meaning greater costs to repay. Reserves are one option, but reserves are a one-time expense and cannot be repeated indefinitely. So if your reserves are not very large, the subsequent years require either raising taxes/rates or cutting costs. An example of the problem is illustrated in Figure 1. In this example the revenues took a big hit in 2009 as a result of the downturn in the economy. Note it has yet to fully return to prior levels as in many utilities. This system had accumulated $5.2 million in reserves form 2000-2008, but has a $5.5 million deficit there after. Reserves only go so far. Eventually the revenues will need to be raised, but the rate shock is far less if you have prudently planned with reserves. You don’t get elected raising rates, but you have a moral responsibility to do so to insure system stability and protection of the public health. So home much is enough for healthy reserves? That is a far more difficult question. In the past 1.5 months of operating reserves was a minimum, and 3 or more months was more common. However, the 2008-2011 economic times should change the model significantly. Many local governments and utilities saw significant revenue drops. Property tax decreases of 50% were not uncommon. It might take 5 to 10 years for those property values to rebound so a ten year need might be required. Sales taxes dropped 30 percent, but those typically bounce back more quickly - 3-5 years. Water and sewer utilities saw decreases of 10-30%, or perhaps more in some tourist destinations. Those revenues may take 3-5 years to rebound as well. Moving money from the utility to the general fund, hampers the situation further. Analysis of the situation, while utility (government) specific, indicates that appropriate reserves to help weather the economic downturns could be years as opposed to months. The conclusion is that governments and utilities should follow the model of trying to stabilize their expenses. Collect reserves. Use them in lean times. Develop a tool to determine the appropriate amounts. Educate local decision-makers and the public. Develop a financial plan that accounts for uncertainty and extreme events that might impact their long-term stability. Take advantage of opportunities and most of all be ready for next time. In other words, plan for that rainy day.

Surpluses?

February 16, 2014
economy, finance, funding, Holistic Water Planning, infrastructure, Leadership, local government, management, planning, politics, Revenues, sustainability, Water Funding
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It was not so long ago that we were talking about local and state governments suffering major shortfalls in their revenues as a result of the downturn in the economy.  Cuts were being made to police, fire, education and parks.  Politicians were fussing over the need to cut taxes and cut government expenditures in the process.  Employees lost jobs and benefits were cut.   In a prior blog we discussed the fact that economic upticks and downturns were cyclical, and unlike people, there is a tendency for local and state government policy makers to “hang with the curve” so to speak and have government expenses track the economy as opposed to try to stabilize spending by taking advantage of the ups to create reserves in order to take advantage of the downs.  They ignore the old adage that their grandparents told them – save for a rainy day.  And we don’t recognize those rainy days approaching!  It is not a lot different unfortunately than many citizens who spend when they have money, and are short when they don’t.  We are not a country of savers and it hurts us often.

There is however a major benefit for government to have reserves.  When government has reserves, it can take advantage of lower competition to construct or invest in infrastructure in lean times. There are many examples of governments getting construction done at discounted rates based on timing their projects to economic downturns.  A side benefit is that those governments are spending money at the time when they need to keep people employed.  FDR did this during the Great Depression.  Obama attempted to copy him in 2009 with the AARA monies.  In both cases they may not have invested enough, but both were faced with deficits on the federal level and a Congress that was reluctant to spend. 

The economy has rebounded and state and local governments are starting to run surpluses. The South Florida Sun-Sentinel recently reported that the big “challenge” for the Florida Legislature and many other state and local governments, is they are running surpluses.  Recall the last time the federal government ran a surplus, we got tax cuts that immediately put the feds back in the red because they had not built up any reserves, and won’t even with a balanced budget anytime soon.  Well Florida has $1.3 billion extra on hand and guess what we hear in this election year  – tax cuts, more money for special projects, extended sales tax exemption dates, etc.  Those running for office are thrilled with the surplus because it helps their platform but we hear nothing about restocking the trust funds that were raided during the 2009, 2010 and to some extent the 2011 budgets! 

Expect this to be the norm, and the rhetoric should be troubling to fiscally responsible people.   If we have surpluses, times must be better.  In good times we should be encouraging decision-makers to sock money away in reserves, savings and other solid investments, and at the same time restocking those accounts drained to pay the bills during the down time of the Great Recession.   In Florida, our highway trust fund, environmental trust funds and education funds were drained.  They have not been restocked.  In fact the cuts to most of those programs has not been restored either. The next economic downturn will come – will we be prepared to weather storm by spending our savings as opposed to cutting services which magnifies the impact of residents?

As times get better, utilities owned by local governments should pay particular attention to General Fund revenues.  Many of those General Funds increased contributions from the water and sewer funds to make up the difference in losses of property and sales tax dollars.  That prevented utilities from making investments, or forced them to borrow money to cover investments that might otherwise have been paid for in cash.  Time for the General Fund to pay the utility back!  Time to restock the reserves and time to spend money to catch-up with the deferred maintenance and capital.  Of course the costs are not what they were 3 or 4 years ago, and neither are the interest rates, so we all pay more for the same projects because we could not spend the reserves in the down period.

Utilities should always have significant reserves.  Nothing we do is inexpensive, so having reserves makes it possible to fix things that inevitably go wrong.  Reserves are a part of a well operated, fiscally sound utility. Taking money from the utility during down times hurts both the utility and the local government.  Total reserves diminish of the entity, making it less possible to deal with emergencies, cover the loss of revenues, or take advantage of lower costs for construction projects.  Meanwhile, creating reserves and a pay-as-you-go system for ongoing replacement of pipes and pumps is good business.  It insures that ongoing money is spent to prevent deterioration of the utility system.  The reserves allow for accelerated expenditures when times are tough, prices are down and people need work.  When utilities spend money, it translates to local jobs.  But the only way to do this is make convincing argument of the benefits of reserves and spending.  

SEA LEVEL RISE AND FLOOD PROTECTION

February 12, 2014
communciations, Flooding, funding, infrastructure, Leadership, local government, management, planning, politics, Revenues, sea level rise, stormwater, sustainability, Tidal flooding, Uncategorized, utilities
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Regardless of the causes, southeast Florida, with a population of 5.6 million (one-third of the State’s population), is among the most vulnerable areas in the world for climate change due its coastal proximity and low elevation (OECD, 2008; Murley et al. 2008), so assessing sea level rise (SLR) scenarios is needed to accurately project vulnerable infrastructure (Heimlich and Bloetscher, 2011). Sea level has been rising for over 100 years in Florida (Bloetscher, 2010, 2011; IPCC, 2007).  Various studies (Bindoff et al., 2007; Domingues et al., 2008; Edwards, 2007; Gregory, 2008; Vermeer and Rahmstorf, 2009; Jevrejeva, Moore and Grinsted, 2010; Heimlich, et al. 2009) indicate large uncertainty in projections of sea level rise by 2100. Gregory et al. (2012) note the last two decades, the global rate of SLR has been larger than the 20th-century time-mean, and Church et al. (2011) suggested further that the cause was increased rates of thermal expansion, glacier mass loss, and ice discharge from both ice-sheets. Gregory et al. (2012) suggested that there may also be increasing contributions to global SLR from the effects of groundwater depletion, reservoir impoundment and loss of storage capacity in surface waters due to siltation.

Why is this relevant?  The City of Fort Lauderdale reported last week that $1 billion will need to be spent to deal with the effect of sea level rise in Fort Lauderdale alone.  Fort Lauderdale is a coastal city with canals and ocean property, but it is not so different from much of Miami-Dade County, Hollywood, Hallandale Beach, Dania Beach and host of other coastal cities in southeast Florida.  Their costs may be a harbinger of costs to these other communities. Doing a “back of the napkin”  projection of Fort Lauderdale’s cost for 200,000 people to the additional million people in similar proximity to Fort Lauderdale means that $5 billion could easily be spent over the next 100 years for costal impoundments like flap gates, pumping stations, recharge wells, storm water preserves, exfiltration trenches and as discussed in this blog before, infiltration galleries. Keep in mind that would be the coastal number and we often ignore ancillary issues.  At the same time, an addition $5 to 10 billion may be needed for inland flooding problems due to the rise of groundwater as a result of SLR.

The question raised in conjunction with the announcement was “is it worth it?”  I suggest the answer is yes, and not just because local politicians may be willing to spend money to protect their constituents.  The reality is that $178 billion of the $750 billion economy of Florida, and a quarter of its population, is in the southeast. With nearly $4 trillion property values, raising a few billion for coastal improvements over 100 years is not an insurmountable task.  It is billions in local engineering and construction jobs, while only impacting taxpayers to the tune of less than 1/10 of a mill per year on property taxes. This is still not an insurmountable problem.

I think with good leadership, we can see our way.  However, that leadership will need to overcome a host of potential local community conflicts as some communities will “get more” than others, yet everyone benefits across the region.  New approaches to working together will need to be tried.  But the problem is not insurmountable, for now…

Detroit – Feast to Famine – it there a Lesson to Learn?

January 20, 2014
economy, engineering, finance, infrastructure, innovation, Leadership, local government, planning, Uncategorized, Water Funding, water sewer management
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I have said before in this blog that my Dad’s family were born and raised in Detroit – not the suburbs, in the City, about a mile north of Tiger Stadium.  My great-grandfather was a butcher.  His sons all became butchers, so my Dad grew up around the butcher shop as a kid.  It was the Depression, but because of the shop, my Dad had food on his table.  My Great-grandmother managed the money, and acquired a number of properties in the area of 13th and Magnolia that the sons, and extended families would eventually move to.  It was a solution to the difficulties outside the shop.  Family was the means to survive the hard times of the Depression. 

Of course Detroit was a booming city – over 100 auto companies were in Detroit at the turn of the last century, and the City was becoming the center of a new mode of transportation – the automobile.  Henry Ford developed the assembly line to allow everyone to own a car, furthering the status of the City.  As the twenties developed, Detroit and Chicago competed to become the “jewel” of the Midwest.  Elaborate stone buildings, expanding infrastructure for roads, trains, water, sewer and storm water were all centerpieces of pride in the City.  Employment and incomes were high, worker benefits were good, the workforce was highly skilled and education was good. Profits were good and the auto industry was Detroit-centric. Detroit was a vibrant City in the first 50 years of the last century. 

Scroll ahead 60 years and how the city has fallen.  The City has lost a million people.  It has $18 billion in debt, and is collecting $0.3 billion less in revenues since 2008.  The tax base has been decimated.  Houses can be purchased for minimal prices.  Churches have been abandoned.  Crime is high.  Employment is down, unemployment remains above the state and national average.  Poverty is up, incomes are down.  Huge areas must be served but serve no one or only a very few.   The City filed the highest profile bankruptcy for a municipality ever.

The television show Low Down Sun last summer provided a graphic look at the City – blocks of the City devoid or mostly so of housing or other buildings, schools no longer in use, roads in disrepair, classic stone buildings with the windows broken out.  You can see what the City was, and the haunting view of the City today are a stark reality.  To add insult to injury, the Sun-Sentinel wrote a recent article about how people are making money doing tours of abandoned buildings in Detroit, or how farming is occurring in the City limits. 

So if Detroit failed, why not Cleveland, Akron, Pittsburgh, St. Louis, Cincinnati or virtually any other large, older Midwestern industrial city?  Sadly many of these cities have lost the industries that made them famous and provided jobs and a stable tax base and incomes.  Many of these cities are also stressed, much as we found Birmingham was.  There are many arguments for what precipitated these losses:  unions, shifts in population, outsourcing offshore, competition within the US, changes in consumer preferences, technology…… the list goes on.  But the reality is it doesn’t matter why, the City must deal with the reality that is.  We all look at Detroit and its recent bankruptcy filings.  Maybe looking at Detroit allows us to feel better about our situations, but we need to learn the lesson from Detroit, Birmingham, Cleveland and others who filed for bankruptcy.  We need to look back to determine where the decisions were that created the issues.  Was it expanding to fast, poor economic assumptions, failure to manage finances better, political failures, failure to raise revenues/taxes/water fees, or failure to maintain or replace infrastructure?  Rarely is it corruption, so it is people trying to do well but failing in their jobs.  The question is why? 

I would start with training.  We need to train our public managers better, but MPA and MBA schools are not teaching about these failures.  In part it may be because we tend to teach positive lessons, versus negative ones, but they would be useful case study of the potential challenges.  In a prior blog I noted that the biggest challenge for government managers is managing in lean times.  Often lean times can be overcome by saving money as fund balances and investing (well), but long-term downturns like Detroit, Cleveland and other cities have experienced cannot be corrected this way.  There are major policy implications that must be overcome. 

From a utility perspective it is important to note that the economic difficulties are not limited to cities and counties but utilities are subject to long-term declines as well.  The problem is particularly acute in industrial communities where a large industry (think mills in the mid-Atlantic states) move away and leave water and wastewater facilities at far less capacity than they were designed for. Small systems may be especially at risk.

As an industry we need to learn from these failures.  We should study the difficult times to determine how the problems can be avoided.  The need to figure out how to manage funds better, deal with customer losses, and define strategies to overcome losses.  If anyone has some thoughts, please respond to the blog, but doesn’t this sound like a research project in the making?

Power to the Utilities?

December 13, 2013
communciations, Education, engineering, finance, funding, Holistic Water Planning, infrastructure, innovation, Leadership, local government, management, Marketing water, planning, power demands, power-water nexus, renewable power, solar power, utilities, Water Funding, water sewer management, wind power
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Local utilities are among the largest power users in their communities.  This is why power companies make agreements with utilities at reduced cost if the utilities will install backup power supplies.  The peak power generation capacity as well as backup capacity is at the local utilities and other large users.  Power companies can delegate this capital cost to large users without the investment concerns.  It works for both parties.  In addition, power companies spend effort to be more efficient with current power supplies, because recovering the costs for new, large plants is difficult, and in ways, cost prohibitive.  Hence small increment options are attractive, especially when they are within high demand areas (distributed power).  The use of localized wind, solar and on-site energy options like biogas are cost effective investments if sites can be found.  That is where the utilities come in.  Many utilities have sites.  Large water utilities may have large reservoirs and tank sites that might be conducive to wind or solar arrays.  Wind potential exists where there are thermal gradients or topography like mountains.  Plant sites with many buildings and impervious areas could also be candidates for solar arrays and mini-wind turbines.  Wastewater plants are gold mines for digester gas that is usually of high enough quantity to drive turbines directly.  So utilities offer potential to increase distributed power supplies, but many water/wastewater utilities lack the expertise to develop and maintain these new options, and the greatest benefit is really to power companies that may be willing to provide as much money in “rent” to the utilities as they can save.   Power entities obviously have the expertise and embedded experience to run distributed options optimally.  So why don’t we do this?

I would speculate several reasons.  First, the water/wastewater utilities have not really considered the option, and if they do there is the fear of having other folks on secure treatment sites.  That can be overcome.  The power entities have not really looked at this either.  The focus in the power industry is to move from oil-based fuels to natural gas to accumulate carbon credit futures, the potential for lower operating costs and better efficiency of current facilities to reduce the need for capital investments.  Power entities operate in a tight margin just like water/wastewater utilities do so saving where you can is a benefit.  There are limited dollars to invest on both sectors and political and/or public service commission issues to overcome to invest in distributed power options at water/wastewater facilities. 

But a longer-term view is needed.  While fossil fuels have worked for us for the last 100 years, the supply is finite.  We are finding that all that fracking might not give us 200 years, but more like 20-40 years of fuel.  We have not solved the vehicle fuel issue and fossil fuels appear to be the best solution for vehicles for the foreseeable future which means they will compete directly with power demands.  Natural gas can be used for vehicles fairly easily as evidenced by the many transit and local government fleets that have already converted to CNG. 

The long-term future demands a more sustainable green power solution.  We can get to full renewable power in the next 100 years, but the low hanging fruit need to be implemented early on so that the optimization of the equipment and figuring out the variables that impact efficiency can be better understood than they are now.  For example, Leadville, CO has a solar array, but the foot of snow that was on it last September didn’t allow it to work very well.  And solar arrays do use water to clean the panels.  Dirty panels are nowhere near as efficient as clean ones.  We need to understand these variables.

Area that are self sufficient with respect to power will benefit as the 21st century moves forward.  There are opportunities that have largely been ignored with respect to renewable power at water and wastewater facilities, and with wastewater plants there is a renewable fuel that is created constantly.  Wastewater plants are also perfect places to receive sludge, grease, septage, etc which increase the gas productions.  There are examples of this concept at work, but so far the effort is generally led by the wastewater utilities.  An example is East Bay Municipal Utility District (Oakland, CA) which produces 120% of its power needs at its wastewater plant, so sells the excess power back to the power company.  There are many large wastewater plants that use digester gas to create power on-site to heat digesters or operate equipment.  Others burn sludge in on-site incinerators to produce power.  But so far the utilities are only reducing their cost as opposed to increasing total renewable power supplies.  A project is needed to understand the dynamics further.  If you are interested, email me as I have several parties wishing to participate in such a venture. 

SRF Wars in Congress – What it Means to Utilities

December 9, 2013
communciations, Congress, economy, Education, engineering, finance, Holistic Water Planning, infrastructure, innovation, Leadership, local government, management, Marketing water, planning, power-water nexus, Revenues, utilities, Water Funding, water sewer management
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As 2014 is only a month away, expect water and sewer infrastructure to become a major issue in Congress.  While Congress has failed to pass budgets on-time for many years, already there are discussions about the fate of federal share of SRF funds.  The President has recommended reduction in SRF funds of $472 million, although there is discussion of an infrastructure fund, while the House has recommended a 70% cut to the SRF program.  Clearly the House sees infrastructure funding as either unimportant (unlikely) or a local issue (more likely).  Past budgets have allocated over $1.4 billion, while the states put up a 20% match to the federal share.  A large cut in federal funds will reverberate through to local utilities, because many small and medium size utilities depend on SRF programs because they lack access to the bond market.  In addition, a delay in the budget passage due to Congressional wrangling affects the timing of SRF funds for states and utilities, potentially delaying infrastructure investments. 

This decrease in funding comes at a time when ASCE rates water and wastewater system condition as a D+ and estimates over $3 trillion in infrastructure investment will be needed by 2020.  USEPA notes that the condition of water and wastewater systems have reached a rehabilitation and replacement stage and that infrastructure funding for water and sewer should be increased by over $500 billion per year versus a decrease of similar amounts or more.  Case Equipment and author Dan McNichol have created a program titled “Dire Straits:  the Drive to Revive America’s Ailing Infrastructure” to educate local officials and the public about the issue with deteriorating infrastructure.  Keep in mind much of what has made the US a major economic force in the middle 20th century is the same infrastructure we are using today. Clearly there is technical momentum to indicate there is greater need to invest in infrastructure while the politicians move the other way.  The public, caught in the middle, hears the two sides and prefers less to pay on their bills, so sides with the politicians as opposed to the data. 

Local utilities need to join the fray as their ability to continue to provide high quality service.  We need to educate our customers on the condition of infrastructure serving them.  For example, the water main in front of my house is a 50 year old asbestos concrete pipe that has broken twice in the past 18 months. The neighborhood has suffered 5 of these breaks in the past 2 months, and the City Commission has delayed replacement of these lines for the last three years fearing reprisals from the public.  Oh and the road in front of my house is caving in next to where the leak was.  But little “marketing” by the City has occurred to show the public the problem.  It is no surprise then that the public does not recognize the concern until service is interrupted.  So far no plans to reinitiate the replacement in front of my house.  The Commission is too worried about rates.

Water and sewer utilities have been run like a business in most local governments for years  They are set up as enterprise funds and people pay for what they use.  Just like the private sector.  Where the process breaks down is when the price is limited while needs and expenses rise.  Utilities are relatively fixed in their operating costs and I have yet to find a utility with a host of excess: workers.  They simply do not operate in this manner.  Utilities need to engage the public in the infrastructure condition discourse, show them the problems, identify the funding needs, and gain public support to operate as any enterprise would – cover your costs and insure you keep the equipment (and pipes) maintained, replacing them when they are worn out.  Public health and our local economies depend on our service. Keep in mind this may become critical quickly given the House commentary.  For years the federal and state governments have suggested future funding may not be forthcoming at some point and that all infrastructure funding should be local.  That will be a major increase in local budgets, so if we are to raise the funds, we need to solicit ratepayer support.  Now!  

Communication in to Often Under-rated with Utilities

December 1, 2013
communciations, economy, Education, engineering, funding, graduation, innovation, Leadership, local government, management, Marketing water, water sewer management
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Communicating effectively in both written form and public speaking is critical for the success of the utility.  I have been reading several books on leadership and communication remains an ongoing issue throughout.  We see many schools trying to incorporate this into the engineering curriculum, but that leaves far too many outside the training “program.”  The problem is that many people think they communicate well, when in fact they do not.  Nothing is  more of a reality check than college students, too many of which write in “text message form” as opposed to real written words.  Presenting utility concepts and ideas to different audiences is an integral part of the profession and unfortunately the technical nature of many of our issues requires technical people to communicate concepts to non-technical audiences.  This s far more difficult than it appears, which is part of why the message may be lost.  .Knowing this fact, aspiring utility employees must become familiar with using visual aids and computer-based tools to convey the important design details, so that, the client, regulators, politicians, the public and even other engineers can envision what the final product will look like and evaluate their ability to successfully execute the project. 

We tell our students that technical communication for civil engineers is essential to the profession and is a prerequisite for a successful engineering career. It assists in conveying information, serves as a thought process tool, and is arguably just as essential as excellent analytical or computational skills. For some, writing well comes naturally, for others, it can be a struggle. The difference can be experience, confidence, and proper planning. Planning makes writing easier. A good place to start would be to make an outline of topics to adequately cover the necessary content and in the appropriate order that allows the reader to follow along in a logical fashion. Of course too many of them resist outlines and read very little.  

Reading and writing go hand in hand.  If you read a lot, you have a better chance of being a good writer than those o do not.  The saving grace of the vampire books, Hunger Games, Game of thrones and 50 Shades series is that someone is actually reading the books. That is a first step.  Of course the news is another matter.  History, of course no so much.  For utility folks, it is technical materials that must be read, digested and conveyed to the ratepayers.  People are naturally suspicious of those they cannot understand, a huge barrier for the industry to overcome. I remind our students than when the general public is asked what engineers do, more than half answer:  drive trains.  Wow.  the disconnect!

It is important to avoid overly long documents with too much technical detail, jargon or specialized terms, distractions and tangents.The consequences of poor communications clearly justify the amount of time and effort required to write well because, for example, the written word in a document is permanent; therefore, the bad impression left with the reader of sloppy work can be extremely damaging.  We need to engage the public in a positive way.  Communication needs to be a more robust goal for all of us than it currently is to engender that needed support.

Engineers are getting hired!

November 25, 2013
communciations, contractors, economy, Education, engineering, local government, utilities
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Graduation is two weeks away for students in the Fall semester.  The good news is that unemployment is down which means more students may find jobs.  We see my students, civil engineers, nearly fully employed for the second straight semester.  That is a good sign that economy is bouncing back. 

Many are being hired by utilities and contractors.  The utilities are starting to spend money after several years of lean revenues.  Unfortunately many of these utilities were lean because their local governments have increased general fund contributions to reduce tax burdens of residents.  Reducing tax burdens by moving more money from utilities to general funds hits the utility twice – infrastructure improvements get delayed and catchup on deferred maintenance mean the hit is double the pay as you go policy.  It is no surprise that our infrastructure condition continues to deteriorate when funds are diverted for other purposes.  Hopefully the trend will reverse, but I am not optimistic. 

Contractor hiring is more interesting.  It seems that contractors are having many of the same issues as utilities have talked about for a number of years:  an aging workforce in the upper levels of the organization.  However the contractors are seeing that young engineers have a skill set not currently existing in many contractor organizations.  Contracting in lean times is a limited profit margin business.  Competing for low bid contracts further limits profits.  However when 40% of the cost for construction is often associated with materials, and 20-25% of materials may be wasted, finding a way to be more efficient can save a lot of money.  Engineers know software and some schools, like FAU, have their students use 3 dimensional (3D) BIM software for their design projects.  The BIM software allows contractors to merge drawings into 3 dimensions, finding conflicts, solving them early and identifying means to reduce materials.  For example, many pieces could be cut out of gypsum board, but often only one is cut.  The rest is tossed.  Saving big on materials creates added profits at the same price.  The benefit is seen as being well worth the cost to contractors.  As more contractors move this direction, more engineers will the hired; a good trend.

The engineering profession should benefit from this change.  As contractors hire engineers, there is the potential for better communication between engineers on contractor teams and design engineers.  The only question is getting the engineering community to adopt the same kind of attitude toward the new software tools like 3D software.  At present, far too many engineers do not believe the risks are reduced sufficiently by the costs of the software.  But adopting new methods for design will help communication with contractors and other engineers.  That communication has a benefit in saving dollars and limiting the potential for claims against design firms when conflicts are found in the design drawings.  We find that establishing a partnering mentality on projects fosters a better working relationship.  Great things can be accomplished. 

WHERE IS GROWTH COMING?

October 21, 2013
Development loans, economy, engineering, Environment, finance, Leadership, local government, management, sustainability, Water Funding, water sewer management
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I recent Wall Street Journal article outlined where growth is likely to be coming.  Of no surprise, Arizona, Las Vegas, Central Valley, San Antonio, Dallas, Houston, Denver, Albuquerque, Boise, Pensacola, Tallahassee, Raleigh, Atlanta, and the Washington DC area.  Only one of those areas is has water much water availability.  It means that all of these communities are in areas that are water limited.  We already know that Texas, Las Vegas and Arizona have lots of water problems.  Most of these areas have had issues in the past as well, and will have more in the future. 

Low growth areas:  Detroit, Cleveland, Chicago, Buffalo, Cincinnati, Omaha, and a variety of areas with plenty of water, but old infrastructure and limited funding.  So the big questions is how do we redirect development to areas with plenty of water as opposed to allowing development in areas where we know that there will be serious water supply consequences in the future?  It’s a leadership issue, but local officials and states are so in need to the growth we have discussed in prior blogs, that the long-term realities of water supply limits overrides the short term need to show growth in the communities to delay tax increases, water increases and the like.  But is delays the inevitable, with potentially serious future impacts.

 

INFRASTRUCTURE ISSUES COMES HOME TO ME

October 18, 2013
engineering, finance, infrastructure, Leadership, local government, management, planning, politics, Risk Management, sustainability, Uncategorized, water sewer management, water supplies
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In front of house

The doorbell rang and it was 1:30 am on a Saturday morning.  It was my neighbor telling me about a small problem on the street.  I looked out and the entire block was flooded.  Water was moving. It was dark, and while my street light was working, it shed little light in the blackness.  However I figured out the old AC pipeline in front of my house had sheared and the block’s leak was actually my problem.  We had no water.  Fortunately the water department was able to get the main repaired in a couple hours.

The next morning we were not as lucky.  Another break on the next street over had shut us down again.  AC water main, but this time under a tree.  They had to remove the tree before fixing the line.  We were out all day.  The water plant guys and the repair crew said that the lines were supposed to be replaced a couple years ago, but that the City had delayed the replacement for budget problems.