California Infrastructure Spending Likely to Decrease

Projected expenditures for public infrastructure systems in California are likely to decrease in the foreseeable future, according to a recent survey conducted by the West Coast consulting firm Winzler & Kelly.

The survey of municipal leaders in California showed that half (%50) of respondents expect their agency's future capital spending budget to decline, with 34% saying that they expect it to decrease and 16% saying they expect it to decrease significantly. In addition, while 45% say they expect their capital funding to stay the same, only 5% expect it to increase. Over half (55%) of respondents indicated that their agency's current capital spending plans have remained unchanged.

The survey also found that municipal agencies are most likely to respond to funding shortfalls by postponing projects. Other responses may include seeking additional funding sources and reducing the scope of projects. Respondents are least likely to privatize their public infrastructure or divert operating funds for projects in the face of capital budget decreases.

Respondents, who represented a broad cross-section of public infrastructure managers from agencies with diverse funding sources, said that the state's budget has the greatest impact on their spending plans, followed by sales tax revenue. Other factors influencing spending plans include new building permits, energy costs, the federal budget, and to a lesser extent, interest rates. Unemployment and the performance of the stock market have the least impact on spending plans among the criteria mentioned in the survey.

The effect of the economy on the construction-bidding climate is inconclusive. Nearly half (48%) of respondents said that contract bids for similar capital spending projects in 2002 were unchanged, and the remainder of respondents are nearly split on whether bids are higher or lower, compared to 2001. While one quarter (25%) said the bids are lower or significantly lower, 27% say they are higher or significantly higher.