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Not a lot of funds for state engineers
The federal stimulus money coming to Michigan over the next two years isn’t likely to stimulate a lot of work, or income, for engineering firms in the state — despite $936 million being provided for roads, transit, water and sewers.
For instance, the state is getting a tidy sum — $66 million — to be used on water projects and sewers. But as a whole, the state’s engineers are likely to see very little of that money due to the federal government requiring that the funds be handed out in loans.
“When you talk about water and sewer, there is more money available, but I think the problem is that it’s still in the form of loans, and the different groups that can take advantage of those dollars need to be able to pay the money back,” said Ronald Brenke, executive director of the American Council of Engineering Companies of Michigan.
“Whether it’s rural-development money or water and sewer money, those programs are still using the same method and are still going through the same process to get the funds,” added Brenke in a phone interview from his office in Lansing.
Following federal orders, Michigan incorporated those dollars into the state’s low-interest revolving loan fund, a program that most West Michigan communities have shied away from because the application has been seen as too complex and too costly to complete. The result is the stimulus money will help finance 16 water and sewer projects across the state this year, but none will be in this region.
“I guess I wish the federal government would have done it more like the transportation dollars, where it was 100 percent federal aid. They put money into the (water) programs, but the people who use the programs are still going to have to come up with a way to pay the money back,” said Brenke.
Brenke said he understood why the feds distributed the water money in that fashion. He said if the government hadn’t, it would have had to create a new method to get the money to the states. He also said the state’s revolving loan fund is a valuable resource and capable of dishing out the money.
“But it’s a loan and it’s not very stimulating, necessarily, for the folks that are going to take advantage of it. It’s nice to have that pot of money and know that it’s available. But in the end, folks still have to find a way to afford it. And with the uncertainty in the overall economy, it doesn’t give people a real comfortable feel for that,” said Brenke.
Although the $870 million Michigan is getting for transportation and transit comes in the form of a grant, Brenke said engineering companies probably won’t be receiving a big chunk of that work, either. That’s because road projects had to be “shovel ready,” meaning the design engineering must already have been done to make the stimulus list.
“It’s largely for the contractors. The old shovel-ready concept is, you have projects that have been designed and are ready to be let for construction. So I think our engineers will do a lot of the construction engineering, the inspection and possibly the testing, but the primary focus of that money goes for construction projects,” Brenke said.
Engineers, however, may find themselves more involved later on. Half of the money has to be spent within 120 days. But if a state chooses, the second half can go to design-and-build projects. If the state makes that choice, Brenke said that could mean more work for ACEC members as they team up with contractors later in the year.
The association has about 100 firms on its membership roll that cover virtually all segments of the engineering field. And for the past five years or so, members have pretty much done an equal amount of work in the private and public sectors.
Right now, though, most of the engineering contracts are with the public sector.
“We have some firms in our membership that were really 100 percent private development-type work, and that market has seriously dried up. There just isn’t a lot of new developments going on right now,” said Brenke.
Grand Rapids is represented at the top of the association. Roger Johr, principal-in-charge of engineering at Williams & Works, is ACEC president. James Susan, of FTC&H, and Larry Fleis, of Fleis & Vandenbrink Engineering, are directors.
Brenke told the Business Journal that most of the association’s members have told him they’re holding their own right now and are trying to stay busy during the recession. But they’ve also told him that they’ve seen better days.
“To generalize it, work is down, without question. People have told me it’s 10 percent to 15 percent below the previous year, and that trend seems to be continuing. There is a lot of uncertainty in the market about the future, and people are real apprehensive to start new projects or take on debt because they’re not sure what the future holds,” said Brenke.
“But most of them are finding ways to keep their people busy and, again, it depends on what the firm is involved in. I know some firms have laid off quite a few people just because they don’t have enough work on their books to keep them busy. But, in general, I think local funding is steady, but it is down from the previous year.”