Draft
Issue Paper # 12
Planning and Financing of Capital Facilities
I. IDENTIFICATION OF THE ISSUE
At the heart of the GMA is the concept of planning for and providing infrastructure in a timely and efficient manner. The state has long been concerned with the capacity and condition of our public infrastructure, but the GMA for the first time, provided a framework for integrating land use and capital facilities planning. It is critical that the state, in partnership with local governments, begin to step forward and address the large unmet need for infrastructure as identified through growth management planning. Infrastructure is the key incentive for locating new industrial capacity, for servicing requirements within urban growth areas, and providing the mobility and quality-of-life improvements a modern economy demands. While the need is large, it will become even larger and unmanageable, if new tools and financing sources are not found. Growth management depends on developing minimum level of service standards that can be maintained.
II. BACKGROUND
Both the urban growth goal and the public facilities and services goal of the GMA address the need to provide adequate public facilities where they currently exist and can be provided efficiently. The GMA at RCW 36.70A.070(3) requires that every comprehensive plan contain a capital facilities element, which includes a six year plan for financing needed facilities within projected funding capacities. The six year pan must identify revenue sources. The intent was to ensure that local governments could provide necessary infrastructure with concurrent with projected growth. If they could not provide the infrastructure, the same RCW requires a reassessment of the land use element.
Because of the importance and high cost of providing public infrastructure, Washington has periodically surveyed the level of statewide expenditures and needs. In 1983, the state issued the Public Works Report, identifying nearly which led to the creation of the Public Works Trust Fund. The Public Works Trust Fund is a national model infrastructure loan program for repair and maintenance of local capital facilities projects. Combining taxes and repayments, the fund provides nearly $143 million of capital financing each biennium.
In 1993, the Washington State Report on Local Public Works and Options (1993-1999) identified nearly $13 billion in capital facilities needs ranging from $8.6 B for roads, streets and bridges, $2.5 B for wastewater/stormwater, $2.2 for drinking water, and $703m for solid waste, toxic and hazardous waste. The total unmet need considering other financing sources was $5.3 billion.
A 1996 study by Henderson and Young of the Kitsap County comprehensive plan options provides a wide variance of costs for different options. Costs of public facilities on the 1994 comprehensive plan that was invalidated that allowed for a variety of densities throughout the county was estimated to cost $10.8 billion. The Planning Commission Plan that restricted urban growth more tightly was estimated to cost $4.3 billion. The interim zoning plan adopted by the county soon after invalidation at build out would cost $2.8 billion. This study underscores the how essential a comprehensive plan is for determining over all capital facilities costs. It further demonstrates the point that sprawl costs additional capital facilities funds.
Additional review of the capital facilities elements of GMA plans yields similar numbers with new infrastructure requirements for the next six years averaging over $ 6 billion. CTED issued a report on public works needs identified in local comprehensive plans submitted through March, 1995. The six year capital facilities plans varied substantially. Projects were categorized for general government and public safety; parks, open space and recreation; transportation; domestic water; sanitary sewer/wastewater; and, stormwater/surface water. The total need for the 89 jurisdictions reporting was $6 billion.
This finding suggests GMA plans are seriously underfunded. The situation becomes even more critical as the federal government cuts back on infrastructure funding. With pending reductions in federal funding and the limits on state revenues imposed by Initiative 601, Washington will have to be more strategic in allocating its increasingly scarce revenues.
Public infrastructure can be a significant determinant of economic performance on a regional basis. Generally, the impact is through the actual construction of the infrastructure and through productivity impacts and influence on employment growth. An investment of $100 million in road infrastructure has been estimated to generate 2500 jobs and $136 million of added goods and services. (The Road Information Project, An Analysis of the Economic Impact of Increased Highway Funding in New Jersey, 1987.
Other studies suggest that public capital investment also has a positive impact on employment growth at the state level by influencing locational decisions. In some cases, public infrastructure investment can be shown to be critically related to private capital formation at the local level. Capital facilities investment can have a significant impact on property values and thus property taxes in a city.
III. DISCUSSION OF THE ISSUE
The state and local governments should develop a more comprehensive strategy to fund and allocate infrastructure dollars. As discussed in the 1993 Report on Local Public Works Options, the state role in assisting local governments should be based on important policy considerations. These considerations include: supporting local self-sufficiency, especially important given the lid placed by initiative 601; facilitating efficient and effective financing and services; ensuring financial viability; leverage local funds, considering all costs and benefits; and meeting basic infrastructure needs.
The discussion of state financed options and local funded programs should be based on effective growth management planning that is tied to a well-documented capital facilities element. The capital facilities element of the comprehensive plan is designed to be a continuously updated document and rolling 6 year plan. Reviews of these plans have determined that many need additional detail and technical assistance to bring them to a level where they can be relied upon for financing and implementation.
The state, too, needs to continually assess and prioritize its infrastructure programs and make sure that they reinforce and support good growth management and watershed planning. The essential public facilities list, maintained by OFM, has not really provided the direction needed to help local governments plan for state capital projects. The state could use a coordinated process to help establish a state of the infrastructure report that also helps to plan for essential public facilities.
State financing options should move to fill gaps in current financing requirements especially roads and bridges, stormwater/wastewater facilities, industrial development infrastructure, and drinking water. State assistance should examine options for providing maximum leverage of funds including ways to promote demand management, efficient use, local self-sufficiency, and long-term financial viability. At the state level, establishing a growth capital facilities fund, similar to the Public Works Trust Fund can provide for efficiency and prioritized funding. New sources of funding would need to be found, preferably those that did not divert state general funds. New local option taxes for capital facilities are also needed. Additional local funding options have the advantage of being exempt from Initiative 601 limitations.
With the support for additional funding for infrastructure should come increased accountability. Builders should expect increased certainty and relief from additional mitigation payments if they are required to pay these fees up front. Concurrency requirements could establish further limitations on projects once fees and mitigation payments have been made. The more capital facilities mitigation requirements are identified and financed upfront, the greater certainty and broader base of funding that should be available for system improvements.
IV. OPTIONS
Option 1: Utilize state grant funding and technical assistance to improve the quality of capital facilities plans, especially for determining priorities and financing options.
Option 2. The state should coordinate a process to determine state and local infrastructure needs and develop a report on a biennial basis. The report should provide baseline data and address essential public facilities.
Option 3. Provide incentives for permitting and financing industrial lands. This would include increased funding for CERB and uses of PERF for planning for industrial and commercial growth.
Option 4. Develop additional local option funding sources for infrastructure including:
a. Tax increment financing to divert portions of property taxes to special capital facilities projects.
b. Utilize additional Real Estate Excise Tax revenue for more targeted capital facilities projects.
c. Determine ways to better allocate taxing authority to allow for funding of capital facilities in unincorporated areas of urban growth.
d. Examine other possible local revenue options including street utility taxes, motor vehicle taxes and vehicle license fees, etc.
Option 5. State Financing Options:
a. Develop a State GMA Capital Facilities Fund using surplus I-601 funds as a revenue source or other financing options including diverting funds from the sales tax on new construction.
b. Develop a new state bond program or bank that can provide financing and pooling of smaller bond issues for water, sewer, stormwater and flood reduction facilities.
Option 6. Develop a mechanism where payment of mitigation and impact fees provide a "pay and go" system for builders.