Economic Conditions Favorable for Replacing Underground Infrastructure

Economic Conditions Favorable for Replacing Underground Infrastructure

It appears 2017 will be a good year to construct or replace underground infrastructure.  Thanks to relatively favorable interest rates, infrastructure projects are more affordable right now.  “The interest rates in Federal and State funding programs such as the Drinking Water and Clean Water State Revolving Funds (DWSRF/CWSRF) and USDA Rural Development funding are at or near historic lows. Similarly, the traditional municipal securities market also remains very attractive for those local governments that have maintained good credit ratings.  These financing realities coupled with an excellent bidding market in our region as compared to the last few years means that the cost of capital is low.  Now is an opportune time to look at reinvesting in infrastructure.” Shawn Gaddie, AE2S Nexus Division Manager.

On top of favorable interest rates, many clients who are bidding work have received very competitive bids from contractors trying to fill up their staff with work for 2017 and 2018.  “We noticed a positive bidding environment this spring as our clients received bids for their projects.  In some cases, lower than expected bids saved our clients millions of dollars,” says Nate Weisenburger, AE2S Drinking Water Practice Leader.

The U.S. Environmental Protection Agency (USEPA) also began offering credit assistance under the new Water Infrastructure Finance and Innovation Act (WIFIA) program this year.  WIFIA provides another option for financing large infrastructure projects in addition to the State Revolving Funds (SRF) and the bond market. USEPA estimates that funds appropriated to the WIFIA program can be leveraged at a ratio up to 60 to one, which means the $17 million program budget could allow USEPA to make more than $1 billion in loans and stimulate about $2 billion in total infrastructure investment.  The WIFIA program will provide long-term, low-cost credit assistance in the form of direct loans and loan guarantees to creditworthy water and wastewater projects.

 “The lower interest rates and bid prices combined with the new financing opportunities through WIFIA are making the immediate future look bright for affordable infrastructure investments,” says Gaddie.