By Rebekah Morris for Arizona Builder’s Exchange
Show me the Money! If looking for opportunities in the Public Works sector, an obvious route is to “follow the money.” Thankfully, public agencies like the State, Counties, Cities & Towns all create an internal planning document, the 5-year (or, sometimes, 10-year) Capital Improvement Plan. The document is intended to help agencies plan for major capital projects. By state law, any capital expenditure greater than $100K is required to be included.
Top Public Agencies
The top 10 agencies with Capital Programs collectively represent $18.6B in their five-year plans. Each year the five-year plan is revised and updated, and we can learn a lot about the market from studying these collectively.
For instance, the top 10 are showing increases of 20.94 percent year-over-year. That indicates that significant funds are being poured into Capital Programs. Last year the programs showed an 11 percent increase. In fact, every one of the Top 10 have 5-year programs in excess of $500M. Six of the 10 top the $1B mark.
Most projects are related to infusions of funding – whether it be from bond issues, sales tax measures or the like passing the sniff test of voters, or enterprise-funded. Roadway, Water and Wastewater projects have the brightest outlook. Notably hard to find are building projects like libraries, police and fire stations, etc. They’re out there, albeit few and far between.
Highlights from the Top 10
ADOT: The state agency consistently has the largest 5-year CIP, and with good reason. Responsible for the interstate system, state highways, airports and more, the $5.469B program is up 20.24 percent from last year. Phoenix: The City is showing significant increases in their planning document, the 5-year total is up 38.97 percent over last year.
The T2050 sales tax measure was approved by voters last year, and related projects are starting to show up in the planning documents. There is a growing push to spend funds the year they are budgeted. For example, the water department expended every dollar budgeted for improvements this past year. That bodes well for consultants and contractors doing work for the City of Phoenix. Planned projects are much less likely to be delayed as long as this sentiment exists. Additionally, as funds return to the CIP, line items without projects are starting to swell. Those “funds” will have to start being distributed into individual projects, another good sign for Engineering firms.
Valley Metro: The third largest agency has moved up a spot from last year, mainly due to a 56.59 percent increase over last year.
Town of Gilbert: The Town has a conservative mentality toward capital projects – they want to have the entire amount of funds before starting a project. The Town will have a General Obligation Bond question on the ballot in 2018, and possibly a bond question on the ballot in 2020 for parks improvements.
City of Scottsdale: One of the very few municipalities showing a decline in the 5-year total, Scottsdale is funding capital projects from the General Fund. That’s very different from most public agencies in Arizona. Most notably, voters have not approved City bonds in recent history, defeating four measures in 2013, and only narrowly approving a much smaller bond question in 2015. Without this funding mechanism, the City is funding projects from enterprise funds and the General Fund. While the City still has infrastructure needs, it’s not likely to be able to fund them without voter approval of bond measures.
City of Tempe: Realizing a 21.07 percent increase in the 5-year total, Tempe is investing heavily in Water projects. This fits the theme across many agencies of funding projects that have a dedicated revenue stream, i.e. user fees on utility customers. Tempe does have two new fire stations in the CIP, as well as a $4M project for improving tennis courts at Kiwanis Park.
City of Chandler: The 5-year total for the City of Chandler has dropped, one of only three out of the top 10 to see a decline. In 2017 Chandler will have a bond question on the ballot to fund streets, parks, public safety and a museum project. Mesquite Groves Park will see significant investment in the coming years. Phase I has been in the CIP for a while, but Phases II and III were added to this year’s CIP.
Revenue is returning to public agencies and trickling into the 5-year CIP documents. Projects tied to bonds and enterprise funds reign supreme. Project counts are declining as funds are increasing. This indicates projects have to start moving into the study and design phases. Bonds are no longer the only game in town; sales tax measures and other funding mechanisms are taking up the slack.