When the Regional Transportation Authority plan was presented to voters in 2006, it was estimated that the half-cent sales tax that would fund much of the infrastructure work would bring in $2.1 billion over its 20-year life.
It is an understatement to say the next several years did not fit neatly into those projections.
The Great Recession took a massive bite out of sales-tax revenues, with the ratio of taxable retail sales to disposable income plummeting to historic lows. Through 2013, $100 million less than forecast went into RTA coffers, according to a previous analysis done by the University of Arizona’s Eller College of Management. Revenues were $200 million short of 2005 projections as of June 2016, according to the recent RTA audit covered in last week’s column.
However, the recession is just the most dramatic factor behind what another recently released Eller analysis says will be a roughly 24 percent — or $500 million — revenue shortfall through 2026. Also at play are shifting patterns of consumption, with consumers spending more on untaxed services and less on the goods that are taxed, as well as changing patterns of income, with more coming from so-called transfer payments, like Social Security and workers compensation. Online retail is also growing in popularity, though sales taxes are still assessed on purchases from “stores that have a legal nexus to the county,” like Home Depot or Best Buy.
Eller’s conclusion?
“It is hard to imagine real RTA revenues ever returning to 2007 levels,” the executive summary of the most recent report reads.
At the same time, the recent audit concluded that, even with the serious shortfalls, “The RTA plan partners seem well-positioned to complete the remaining RTA plan projects as promised to the voters in 2006.”
Given the magnitude of the shortfall, how is that possible?
The RTA’s Jim DeGrood had some insight for the Road Runner. One of the key factors is that, while the Great Recession was terrible for sales-tax revenues, it created a very favorable bidding environment in which numerous contractors fighting for work pushed final award amounts substantially below estimates.
“When we did original cost estimates, they were done with the backdrop of an overheated economy,” he said.
Marana Mayor Ed Honea said that was seen clearly with the major Twin Peaks Road rebuild between Silverbell Road and Interstate 10, which came in millions of dollars under projections.
“They basically bid it for cost,” he said of the firm that eventually won, adding that many companies were just hoping to keep their employees working through the slow post-recession years. “We did get several projects that came in cheaper than we thought they were going to come in by quite a bit.”
Though the recession started almost a decade ago, some projects are still coming in well under estimates. For example, eight contractors put in for the Houghton Road widening, which was originally estimated at $16.9 million, and the winner — Phoenix-based Pulice Construction — won with an $11.3-million bid.
Lower construction costs, however, aren’t enough to cover the shortfalls. That’s why, for the remainder of the RTA term, the member jurisdictions agreed to direct all federal surface-transportation-program funds and state-highway fund dollars to “potentially cash-strapped RTA plan projects as needed,” according to the audit.
As a result, “No major project delivery impacts are anticipated as a result of the diminished revenue projections,” meeting materials from the March 23 RTA board meeting state.
At the same time, Honea said the redirecting of those state and federal funds means the sort of “side projects”previously paid for by those dollars won’t be seen moving forward.
“Its pretty much going to be what we promised to people we would do, and we’ll do that,” he said. “We think we can pull it off, and that’s going to be all we’re going to do.”
DOWN THE ROAD
- Three county road projects are slated to start Monday, May 15. On North First Avenue, crews will work from River Road to Ina Road through Saturday, May 20. Shifts will be from 6 a.m. to 6 p.m., during which lane restrictions and reduced speeds will be in effect. All three projects have the same shifts and traffic impacts.
- Crews will also repave South Nogales Highway from West Los Reales Road to West Lumber Street, work that is expected to last through May 27.
- East Old Spanish Trail, from South Melpomene Way to East Escalante Road, will also see some repaving work, which is slated to last through May 27. The work includes a new turn lane to Saguaro National Park’s east entrance.
