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Sustainable Public Works Funding Southeast Regional Academy

Sustainable Public Works Funding Southeast Regional Academy. Stan Finkelstein May 22, 2013. Outline. Introduction Personal Observations Infrastructure Shortfall History Funding Strategies Closing Comments. Personal Observations. 1. “Do no Harm!” 2. Utilities: “Pay as you use”, versus

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Sustainable Public Works Funding Southeast Regional Academy

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  1. Sustainable Public Works FundingSoutheast Regional Academy Stan Finkelstein May 22, 2013

  2. Outline • Introduction • Personal Observations • Infrastructure Shortfall History • Funding Strategies • Closing Comments

  3. Personal Observations 1. “Do no Harm!” 2. Utilities: “Pay as you use”, versus “pay as you go” 3. Maintenance/capital expenditure interdependencies 4. Funding depreciation 5. Failure to fund infrastructure can impact future economic growth

  4. Shortfall History • 1982: America in Ruins, Pat Choate & Susan Walter • 1983: Washington State Public Works Report • 1999: Bonnie Berk Study • 2008: American Society of Civil Engineers’ Study • 2012 ASCE STUDY

  5. Funding Strategies 1. Borrow Now! 2. Utilities: Funding depreciation 3. Utilities: Annualizing rate adjustments 4. Utilities: Transitioning from “pay as you use” to “pay as you go”

  6. Example: (AAA rated jurisdiction) Amount to be borrowed: $10,000,000 Duration: 30 years Interest Rate: 3.478 percent Total of interest and amortization: $16,121,430 Monthly sinking fund: $44,719 Hypothetical rate increase to service the debt: 10 percent

  7. 2nd Example: (AAA rated jurisdiction) Amount to be borrowed: $10,000,000 Duration: 15 years Interest rate: 2.855 percent Total of interest and amortization: $12,305,327 Monthly sinking fund: $68,363 Hypothetical rate increase to service the debt: 15.3 percent

  8. Effects of Reducing the Maturity 1. 53 % higher rate increase (Additional 5.3% could be phased in) 2. $12,300,000 plus accrued interest would be available for replacement after full 30 years 3. Would have transitioned to a partial “pay as you go” system and funded a portion of depreciation

  9. Funding Strategies (Continued) 5. Seek outside funding 6. Commit that portion of a jurisdiction’s operating budget that could be absorbed to fully service non-voter approved debt or to a capital asset replacement or improvement reserve. Basically, make capital a co- equal priority to ongoing services.

  10. Closing Thoughts 1. Morally, we should leave the next generation an adequate capital stock 2. Elected officials must be “sensitized” to the importance of addressing infrastructure needs 3. Addressing infrastructure needs will require sacrifices. 4. Failure to address our capital needs will impact our state’s ability to compete for economic activity/jobs

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