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in Southern Nevada |
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in Southern Nevada |
Needs Assessment/Infrastructure Financing.
The funding of infrastructure is the most critical issue addressed in the Authority’s Strategic Plan. In fact, the issue of infrastructure funding, including local government’s ability to manage it, was the impetus for creating the Authority in the first place. The needs for infrastructure expansion were identified by the Authority’s Needs Assessment Committee and the costs of meeting those needs were estimated by its Finance Subcommittee. The following table gives a broad overview of those costs (the middle column) for the seven major categories of infrastructure studied by the Authority. In addition, estimates were made of the portion of those costs that are “unfunded” (the right-hand column), meaning that a revenue source has not been earmarked to cover that cost.
It is important to note that these estimates are for needs projected to occur over the next twenty years. There is always a degree of the unknown in projecting what the future holds, and the more extended the time one looks into the future, the greater the degree of the unknown. Nevertheless, this plan offers these estimates in order to help identify which courses of action, of the many possible, are most likely to yield an outcome that is desired. The estimates are intended as approximations of the future that narrow the potential range of possible futures sufficiently to allow broad strategies to be defined. They are not intended to be precise statements about the future or to suggest the resources that should be budgeted for the future. The uncertainties of knowing the future only reinforce the need to continually reassess what the future holds.
Estimated costs to meet projected needs (in $ millions) Estimated portion of previous column that is unfunded (in $ millions) New Schools (K-12 only)
School Modernization (K-12)
1998-2008
$2,200*
$1,206*2008-2018
$1,577
Not Addressed
1998-2008
$0**
$02008-2018
$1,577
Not AddressedParks & Recreation $574 to 769 $399 to 595 Public Safety $205 to 278 $56 to 129 Transportation (roads only) $1,457 $0 Water Supply $2,855 Funded by rates and connection fees Wastewater/Water Quality $1,457 Funded by rates and connection fees Flood Control (regional facilities) $2,076 $0 TOTALS $12,699 to 12,967 $2,032 to 2,301
* This modification to the format was made to be more consistent with recent Clark County School District 10-year estimates. The costs for school modernization were not otherwise addressed by the Authority.
** With the approval of the school bond question in November, 1998, the Clark County School District estimates that sufficient revenue will be generated to cover its construction program, including new schools and modernization of existing schools, for the next ten years (1998 to 2008). For the subsequent ten years (2008 to 2018), an additional $1.6 billion is estimated to be needed for new schools and an unknown amount for modernization.The costs, $12.7 to $13.0 billion dollars over twenty years, appear staggering. The good news is that revenue sources (taxes, fees and other charges) have been identified and earmarked to pay for $10.7 to 10.9 billion of that total. There appears to be sufficient revenues being generated to pay for roads and regional flood control facilities. Water supply and wastewater facilities can be funded by rates and connection fees (although the Authority does offer strategies and recommendation for reducing the impacts of those particular charges). However, Schools, Parks, and Public Safety warrant particular attentionbecause revenue sources have not been identified and earmarked to fully fund these facilities over the twenty-year horizon. The Authority’s recommendations for each of these critical needs address many of these deficiencies.
Operations and Maintenance (O & M) Costs
As defined by Senate Bill 383, the committee’s evaluation for infrastructure needs and financing requirements concentrated solely upon infrastructure improvements, and did not include an analysis of the related operations and maintenance (O & M) costs. While the Authority’s work has captured the overall needs for each of the main infrastructure categories, the timing of the construction over a 20-year period should be explored to adequately identify the magnitude of annual increases for the related O & M costs.
These related O & M costs can be a significant portion of the whole capital infrastructure financing equation. The phenomenal growth and the strong economy to date have allowed local governments to meet the majority of O & M costs through the related expansion of our tax and revenue base. Of the infrastructure categories defined in SB 383, the school, park and public safety categories have the most significant operational and maintenance related expenses. This is an important factor since the ratio of O & M costs to debt service in these areas can be as much as 4 to 1. Successful tax override referendums related to public safety O & M costs in the past decade have alleviated the impact of associated O & M costs. However, there should be a recognition that local government entities ability to use debt and incremental tax overrides will be restricted as local entities move closer to the $3.64 tax cap.
The Authority recommends that an evaluation of operating and maintenance cost impacts on all affected entities in Southern Nevada be undertaken.
The Authority established its Infrastructure Financing Committee with the express intent to conduct “an evaluation of the current allocation of resources in the development of regional infrastructure that is not supported by the payment of user fees, including, without limitation, regional flood control, transportation and parks” (SB 383). With this purpose in mind the Committee assessed the financial policies and structures already in place for the seven categories of infrastructure. The intent was to determine the sufficiency of funding, to identify potential methods for fund optimization, and to make financial recommendations. Its recommendations (see Appendix 4, “Infrastructure Financing Report”) included those broadly applicable across the categories and those that are specific to one or a few categories.
Infrastructure Financing Recommendations
Immediate Local Action
The Authority is recommending that all local entities which plan, fund or construct capital facilities:
Immediate Local Study - Potential Future Action
The Authority recommends that a study be undertaken, perhaps by the Southern Nevada Regional Planning Coalition, of the feasibility and advisability of establishing a Southern Nevada community bond bank to coordinate debt structuring opportunities for local governmental borrowing for infrastructure needs. This strategy could provide economies of scale savings for all borrowers and could provide smaller borrowers the opportunity to take advantage of debt structuring and cash management options that otherwise would be unavailable to them. The study should include what should or could be done to strengthen the existing Debt Management Commission.Immediate Local Study - Potential Future Legislation
The local entities should work together to develop standardized Capital Improvement Plan formats, definitions of terms and definitions of various types of infrastructure, especially for parks, public safety and transportation. There may be a need to clarify the criteria in state law on how Capital Improvement Plans are submitted by each entity to the State. This recommendation is intended to make local collaboration on infrastructure financing more feasible.Immediate State Legislation
State law should be changed to remove impediments to allow bonds to be sold in synchronization with project construction payments.Immediate State/Local Study - Immediate State Action
The Authority recommends that the SB 253 Committee minimize the number of new tax exemptions while ensuring sufficient incentives to