GA’s Infrastructure Woes Could Lead to Further Economic Downturn

With Georgia ranked among the top 10 for mortgage foreclosures, unemployment claims up 174 percent from the previous year and state leaders trying to figure out how to close a $2.8 billion dollar state budget gap, a funding crisis may well turn into a years-long financial catastrophe. It could hammer the state’s ability to attract and maintain business for the year to come.

Gov. Sonny Perdue said budget and infrastructure shortfalls were the “problems of prosperity,” during an annual State of the State speech given this week before a joint session of the Georgia House and Senate. He said the state’s population had risen by 1.5 million people in recent years.

He has asked the state legislature to allow his office maximum-level access to the state’s $1.2 billion reserve fund, otherwise known as the Rainy Day Fund, to meet state budget demands, appropriating $50 million this year and $408 million next year, as well as $187 million for the 2009 mid-year education spending. Perdue’s total 2010 budget request is $20.2 billion.

Perdue said simply cutting state departmental waste was no longer enough to meet the state budget shortfall.

“The budgets I present to you today are balanced and do not assume money from Washington. Our latest revenue estimate for this fiscal year shows a decline of $2.2 billion, resulting in a $19.2 billion amended budget,” Perdue said.

Georgia is one of seven states that enjoy an AAA bond rating because of its large reserve fund, but Perdue said he wanted to take advantage of several one-time financial strategies available this year.

As part of his 2010 budget request, the governor has recommended a hefty $1.2 billion in bonds for building projects across the state, designed to boost the state’s recession economy by creating an estimated 20,000 construction jobs.

“These projects touch every corner of the state and include new construction at our universities, technical schools, local school systems and libraries; harbor deepening at the Savannah port and needed improvements at state facilities,” said Perdue.

A few hours later, House Minority Leader DuBose Porter (D-Dublin), blasted Perdue for attempting to borrow against future Georgia taxpayers with a heavy burden of debt.

His sentiments were echoed by Minority Caucus Chairman Calvin Smyre (D-Columbus) who said Perdue was forcing the tax burden back onto every local system and onto the backs of homeowners and taxpayers.

“[Perdue’s budget recommendations] will end up being the largest tax increase in Georgia’s history,” Smyre said.

Smyre said homeowners would not feel the real pinch until later this year when the new tax bills are sent.

Porter also accused Perdue of ignoring critical needs, such as transportation funding and education, to take a broad ax to the budget. He said Smyre has made five recent visits to Washington to meet with the Obama Administration in order to help secure stimulus funding for Georgia.

“This is not a time for politics,” said Smyre. “It is a time to work together.”

LONG-TERM INFRASTRUCTURE DEFICIENCIES MAY WALLOP BUSINESS
Like a bad wreck, it’s hard to look away. The tanked national economy is deeply impacting the fiscal solvency of state budgets around the country and Georgia is no exception. The governor said he doesn’t want to depend or wait on federal money to turn things around.

But finding a predictable and reliable transportation and infrastructure funding mechanism won’t be easy. Long-time statewide battles over how and where transportation dollars should be spent threaten to persist. The state’s motor fuel tax, which has remained virtually unchanged for 27 years, does not generate enough funds to build all of the transportation projects Georgia needs, and most current funding formulas do not take into account congestion, but there is a long running funding battle on metro versus non-metro areas of the state.

A report card issued last week by the Georgia Section of the American Society of Civil Engineers, gave the state’s infrastructure a grade of “C,” saying that a $150 billion over the next 30 years was necessary to improve roads, bridges, transit, water, parks, and school facilities.

GOP Leaders Differ on Remedy
In remarks made at the Georgia Chamber of Commerce’s Eggs and Issues legislative breakfast this week, Perdue, Lt. Gov. Casey Cagle and House Speaker Glenn Richardson made it clear, once again, Republican leadership is not on the same budget page.

Cagle supports a regional T-SPLOST (Transportation Special Purpose Local Option Sales Tax) transportation and infrastructure funding mechanism, while Richardson said he would throw his weight behind a statewide tax.

A SPLOST-like funding mechanism would provide communities local control over how their tax dollars are used for road improvement projects. A regional SPLOST would require two or more contiguous counties to enter inter-governmental agreements with the same requirements as other SPLOST structures – an oversight committee, a sunset provision and local flexibility on timing. Already, 10 metropolitan Atlanta counties have agreed to a T-SPLOST that would allow any county a one-time opt-out from the program.

Also in play is the soap-opera-like drama that has been playing out in Georgia’s Department of Transportation (G-DOT). Perdue has called for restructuring of the state (even though the agency director Gena Evans in the center of that storm was Perdue’s choice).

The Obama Administration has expressed concerns about Georgia’s agencies to Democrat leaders and that concern could translate to the how much stimulus funding the state receives for “shovel ready” and other projects.

WHERE THE RUBBER HITS THE ROAD, THE RAIL, OR THE MONEY TRAIL
Current stimulus money and recession woes aside, Georgia sits at a larger economic crossroads. While Georgia ranks fourth in national growth, it ranks second from the bottom in transportation infrastructure spending. No surprise to any Georgian, Atlanta ranks second in congestion only to Los Angeles. And it’s gaining fast.

Year after year, Georgia’s infrastructure maintenance has been deferred; the cost to simply maintain roads and bridges multiplies each year repairs are delayed. Construction costs, and the cost of acquiring rights of way, have soared over the last year.

Doug Hooker, vice president and east director for PBS&J, one of the nation’s largest engineering and architecture firms, said infrastructure decisions are beginning to take a marked toll on businesses decisions to expand or relocate to Georgia.

“People generally understand how traffic hurts quality of life and business,” said Hooker, who served as Perdue’s 2003 State Roads and Toll-ways Authority appointee and now sits on the board for Metro Atlanta Chamber of Commerce.

But Hooker goes on to say that metro Atlanta’s 4 million-employee-base has become a series of Balkanized unconnected labor sheds of 300,000 – 500,000 people. Businesses want to know how many potential employees live within a 30-minute commute time.

Once upon a time, everybody wanted to be like Georgia but now, not so much.

“There is a noticeable increase in businesses that have chosen not to relocate here,” Hooker said. “It’s the silent killer. There are companies who don’t even bother to look at Georgia. We are being crushed on the transportation front.”

Sandy Springs City Councilman Rusty Paul agreed with that thinking.

“Atlanta exists because of transportation – its railroad, the airport, the first urban expressway. From the 1840s – 1970s we were the leader and in the 1980s we began abdicating that power,” said Paul.

Hooker said that not only does that impact business and the economy, but transportation and infrastructure consultants and engineers currently living and working in Georgia are likely to be lured to cities that have taken a progressive approach to transportation, such as Charlotte, Dallas, Phoenix and Salt Lake City.

“Georgia loses skill and memory,” he said.

And what do those cities have in common? Light rail and forward-looking infrastructure spending.

Hooker said the chamber is a member of the Get Moving campaign that supports a regionalized transportation tax, allowing local governments and coalitions to make decisions that are smart for their areas.

He believes Georgia’s political leadership is in favor of doing something different, but there are nuanced differences in approach. He cautioned that if the state legislature doesn’t pass something this year, the delay would impact Georgia business pipeline for years to come.

“If we don’t do something, what we are signaling to the rest of the country is that we do not have the political will to save ourselves. We will all be in a ship that rides – or sinks – together,” he said.

Paul also likes some form of regional spending. In North Fulton, he says, the need for road repaving, traffic light synchronization and intersection improvements make more sense than in other areas of the state.

“You can’t retrofit highly mature and developed areas, said Paul.

In his budget address Perdue’s comments seemed similar.

“We must not allow ourselves to be trapped in a short-term mindset where rash decisions result in dire long-term consequences. Our perspective must be one of optimism even in the face of difficult economic cycles,” he said.

The devil is always in the details.

Originally published January 17, 2009, Beacon News