Today, our world is in unfamiliar territory, but our industries and our people are resilient. One of the things that has remained constant is the need to build and maintain our infrastructure. A few years ago, I would have called it “critical infrastructure,” but as we continuously are reminded, all infrastructure is critical. Though it’s difficult to find a bright spot in any of this, we’re seeing possibilities emerge through stimulus packages and in the Federal Reserve’s recent interest rate cut — and we can expect more as additional efforts to simulate the economy are sure to come.
As an emergency response to the coronavirus pandemic, the Fed reduced interest rates by a full percentage point on March 15 — the second rate cut in two weeks and the largest in its history. A year ago, the federal funds rate stood about 2.5%; a month ago, it was about 1.75%; and today it’s at 0.25%. It’s possible that it could reach 0% in the near future.
The same is happening with the federal discount rate. A year ago, it was 3%; a month ago, it was 2.25%; and on March 16, it was lowered to 0.25% as well. As we have seen in the past, lower interest rates will work their way into bond markets and into low interest loan programs, such as state revolving loan funds. Lower interest rates, or even zero interest, create a rare opportunity to advance infrastructure projects with little or no “cost of money,” allowing a shift in purchasing power to increase construction value and decrease interest cost.
In addition to falling interest rates, federal and state governments are moving to stimulate the economy and create jobs. Infrastructure has been a significant part of all previous stimulus packages. If things follow the same pattern that they have in the past, when the economy begins to open up again we’re going to see infusions of cash for infrastructure projects that show readiness to proceed. Projects that can move rapidly into construction and supply chains — and, therefore, create a positive economic impact — will be prioritized and funded first.
Logic dictates that our current situation is relatively temporary, which means that the window of opportunity, and those attractive interest rates and funding opportunities, could be short-lived as well. As we have seen in the past, speed to market is the key to securing what might prove to be the most attractive funding packages in recent history.
Keeping infrastructure projects moving is critical to bringing back our economic health, which is why it’s important to acquire funding so projects are ready for construction, when given the go-ahead, and can make an economic impact as soon as possible. Design-build and EPC project delivery methods are both well-suited to accelerate project execution by quickly capitalizing on lower interest rates and other funding opportunities. Getting projects up and running will help restore economic security to our families and citizens as we move through this temporary crisis.
Despite what’s happening in the world around us, funding water and wastewater infrastructure projects is an ongoing challenge. Though many assume the chances for securing federal funding is minimal, the money is out there for the right projects — and it’ll go unclaimed if no one asks or applies for it.