creasingly tougher time selling municipal bonds to pay for construction projects. Already the market is turbulent. In the past, governments without the best credit ratings would buy insurance through companies with higher ratings so they could get lower interest rates on the bonds and have a better chance of selling them. A few years ago, roughly a dozen bond insurers offered Triple A, the highest-rated bond insurance; now there is only one willing to offer Triple A insurance, and predictably, the fees are often prohibitive. “Most of those insurers have been down-graded by the major rating agencies because of exposure to subprime mortgage debt,” says Richard Gleitsman, Sarasota County’s bond manager. Fortunately, Sarasota expects its credit rating is high enough to issue the bonds without the extra insurance, Gleitsman adds.
Growing Gaps State budget gaps for fiscal year 2009* indicate that the country may see a decline in public works investments. State
Amount of Gap
ALABAMA
$784 MILLION
9.2%
ARIZONA
$1.9 BILLION
17.8%
$107 MILLION
2.5%
ARKANSAS 12
CALIFORNIA
$22.2 BILLION
21.3%
CONNECTICUT
$150 MILLION
0.9%
DELAWARE
$217 MILLION
6.4%
DISTRICT OF COLUMBIA
$96 MILLION
1.5%
FLORIDA
$3.4 BILLION
11.0%
$245 MILLION
1.2%
$1.8 BILLION
6.6%
GEORGIA ILLINOIS
“We are looking at other forms of funding. … The big question mark now is how long is this going to last? Is this year the worst year? Is next year going to be the worst?”
IOWA
$350 MILLION
6.0%
KENTUCKY
$266 MILLION
2.9%
MAINE
$124 MILLION
4.0%
MARYLAND
$808 MILLION
5.5%
$1.2 BILLION
4.2%
1
MICHIGAN
$472 MILLION
4.9%
MINNESOTA
$935 MILLION
5.5%
MISSISSIPPI
$90 MILLION
1.8%
NEVADA
$898 MILLION
13.5%
NEW HAMPSHIRE
$200 MILLION
6.4%
$2.5 BILLION - $3.5 BILLION
7.6% - 10.6%
$4.9 BILLION
9.1%
$733 MILLION - $1.3 BILLION
2.7% - 4.7%
MASSACHUSETTS
—JAMES LAVENDER, PUBLIC WORKS DIRECTOR, LEE COUNTY, FLA.
NEW JERSEY NEW YORK
Meanwhile, Lee County is cutting its budget and looking for other ways to finance its infrastructure needs. Parks and road improvements are bearing the brunt of the cuts. A prime example: The I-75 evacuation route out of the coastal community, already severely overburdened by traffic and scheduled for widening, has had its repair work postponed. “We are looking at other forms of funding” to widen the evacuation route and continue the county’s other formerly budgeted public works projects, Lavender says. “We are looking at tolls and open road tolling as really the only ways to pay for these improvements. We haven’t made any hard and fast decisions yet.” 48
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Percent of FY2008 General Fund
OHIO OKLAHOMA
$114 MILLION
1.6%
RHODE ISLAND
$430 MILLION
12.6%
SOUTH CAROLINA
$250 MILLION
3.7%
TENNESSEE
$468 MILLION - $585 MILLION
4.2% - 5.2%
VERMONT
$59 MILLION
5.1%
VIRGINIA WISCONSIN TOTAL
$1.2 BILLION
6.9%
$652 MILLION
4.8%
$47.6 BILLION - $49.2 BILLION
9.3% - 9.7%
1. These states have not yet adopted budgets for FY2009. 2. In a special session earlier this year, California adopted measures to close $7.0 billion of this shortfall. A gap of $15.2 billion remains to be closed. Assumes that FY08 gap would have carried over to FY09. *Source: Center on Budget and Policy Priorities
But it’s difficult to plan when you don’t know how bad things are likely to get or when they will get better. “The big question mark now is how long is this going to last?”
DEVELOPER SEPTEMBER/OCTOBER 2008
Lavender says. “Is this year the worst year? Is next year going to be the worst?” Teresa Burney is a senior editor at Big Builder magazine, a sister publication. WWW.DEVELOPERONLINE.COM