Water/Wastewater Rates Continue to Rise

Black & Veatch in August released the results of its sixth 50 Largest Cities Water and Wastewater Rate Survey, a valuable knowledge resource for water and wastewater utilities. The survey highlights customer charges for water and sewer service for residential, industrial and commercial customers.

?This survey is a tool for managers of water infrastructure to see how their rates compare with national trends,? said John Kersten, Associate Vice President and Water Industry Lead in Black & Veatch?s management consulting division. ?The primary source of income for these utilities to pay for operating, maintaining, expanding and updating their infrastructure is through water and sewer rate collections, which must be continuously adjusted to address rising costs.?

A key finding of the survey is that water and wastewater bills for residential use across the country have increased at a steady rate since 2001 ? when Black & Veatch began producing the survey.

This trend correlates with findings from The 2009 Report Card for America?s Infrastructure, published by the American Society of Civil Engineers (ASCE), showing approximately $2.2 trillion of investment is needed to improve vital infrastructure over the next five years. Overall, America?s grade is a cumulative ?D? as noted by the ASCE.

Black & Veatch?s analysis cites five key issues that influence rates and sheds more detail around the value of water and wastewater services and the solutions needed to address these two areas of vital infrastructure:

Commodity price increases. Primarily in electricity, chemicals and natural gas costs. A leading contributor to operating and maintenance costs of water and wastewater facilities ? highlighting the important inter-relationship or nexus of water and energy.

Lower consumption and high fixed cost. In general, demand or a consumer?s usage is declining while many utility costs, such as debt service, are fixed. Since most pricing structures include volume-based charges, revenues are declining while costs are not.

Benefits. Pension obligations and health care benefits are prompting an increase in labor costs.
Influence of wastewater legal action. Significant capital programs are being implemented in most major cities to comply with legal action related to wastewater system performance.

Aging infrastructure. Updating and replacing aging infrastructure are significant costs for most water and sewer utilities, as noted in the ASCE report (available at: www.asce.org). ?

Analysis of the 2010 survey results indicates the average annual increase in typical residential water bills is approximately 5.3 percent from 2001 through 2009, while the increase in typical residential sewer bills is approximately 5.5 percent.

The full survey results are available at www.bv.com/top50ratesurvey.

Weak Demand Hindering Construction Market Despite Stimulus

Construction employment decreased by 11,000 between June and July 2010 while the industry?s unemployment rate fell to 17.3 percent, according to a new analysis by the Associated General Contractors of America of federal employment data released today. The third month of construction employment declines, despite the stimulus, reflects overall weak demand for private, local and state funded construction, association officials noted.

?The fact that this industry continues to suffer from unemployment rates nearly double the national average is a reflection of how much demand for construction has cratered in little more than two years,? said Stephen E. Sandherr, the association?s chief executive officer. ?Worse yet, there?s every indication that as the benefits of the stimulus fade the industry?s employment picture will get even worse.?

Sandherr noted that since July 2008, construction employment has declined by a total of 1,591,000 jobs, a 22 percent decline. He added that even though the industry accounts for four percent of the non-farm workforce, it has experienced 23 percent of the total job losses over the past two years. ?The sad fact is that construction workers have been forced to endure depression-like conditions for far too long.?

Heavy and civil engineering construction ? the category that covers most workers in transportation, power, water and wastewater construction ? lost 700 workers in July and has held roughly steady since last October, as federal stimulus funds have boosted construction in these categories, Sandherr noted. Nonresidential specialty trade contractors were a lone bright spot, gaining 8,000 workers in July.

Noting continued high retail, commercial and manufacturing vacancy rates and depressed state and local tax revenues, association officials said overall construction demand was unlikely to increase until at least 2011 and likely much later in many areas of the industry. Given the fact that many stimulus-funded construction projects were likely to end later this year, they urged Congress and the Administration to act now to pass a host of long-delayed infrastructure bills to finance new highway, transit, water and utility projects that are crucial to America?s global economic competitiveness.

?Anyone who thinks we are going to outcompete China and India with old roads, unsafe bridges and outdated power grids is either sadly wrong or woefully ill-informed,? Sandherr said. ?The choice ought to be clear: put Americans to work today rebuilding our economy, or be prepared for our economy to drown in traffic, brownouts and water shortages.?

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