How will we afford new water projects?
May 4, 2009
While much of our attention regarding municipal water
projects has been focused on the provisions of the "American Recovery and Reinvestment Act of 2009"
(better known as the "stimulus" bill), the economic climate has changed a different part of the municipal water-project financing picture. Financial analysts are starting to question the long-term stability of municipal bonds
, which are a major source of funding for many infrastructure projects in normal times. Some analysts are concerned that cities and towns simply don't have the wherewithal to pay back the money they've borrowed. In some communities, the risk comes from fluctuations in property values -- in Las Vegas, for instance, property values have fallen by double-digit percentages
. This causes property-tax receipts to decline, which in turn hurts a community's capacity to pay its bills. In Iowa and Nebraska, the effect is less one of fluctuating property values as it is a question of population shift from small communities to large ones
. In Nebraska, for instance, a third of the incorporated towns
have lost 10% or more of their respective populations in less than a decade. Over the long term, the importance of finding stable sources of government revenue to fund ongoing infrastructure costs will become more important to our business than ever before.
last revised May 2009