As we move toward the November 2008 elections, public officials and policy analysts are predicting a robust course for government budgets and spending.
The ticket to fiscal prosperity may be marked by some uncertainty and economic detours along the way. However, by the time voters elect a new U.S. president, forecasts indicate that 2008 will turn out to be a solid year.
Highway expansions and maintenance, public-safety building construction and homeland security all will see boosts in their budgets during 2008. In addition, new technology applications in government, including state-of-the-art voting tabulating tools, will receive ringing endorsements this election year.
For a quick overview of the budget consensus, Government Product News conducted an informal, exclusive poll on http://www.govpro.com. We asked online visitors how the 2008 budget of their agency or department was shaping up, compared to their 2007 budget. To date, their responses were as follows:
- Higher than last year's: 48 percent
- Lower than last year's: 26 percent
- About the same: 26 percent.
Go to http://www.govpro.com to cast your budget vote, see the latest poll results and find additional budget forecasts throughout the year.
Significant spending will tally up
During 2008, government spending on goods and services is predicted to grow and prosper. Per-capita government consumption expenditures and gross investment (one measure of government purchases per person in the U.S.) will grow$304 between the fourth quarter of 2007 and the fourth quarter of 2008. By the fourth quarter of 2008, government consumption expenditures and gross investment will reach $9,346 per person, reports Economy.com (http://www.economy.com) in an exclusive analysis for Government Product News. This figure is an increase from $9,042 per person, calculated for the fourth quarter of 2007.
What's more, government purchases of goods and services are trending upward through 2014. As shown on the Global Insight chart at the bottom of this page, figures indicate that federal, state and local purchases will rise steadily. Global Insight (http://www.globalinsight.com) provides economic, financial and political trend data covering 200 countries and 170 industries and governments.
Likewise, federal revenues are growing, reported the Congressional Budget Office in its latest budget forecast through 2017. See chart for year-by-year figures.
Meanwhile, U.S. Communities, which provides a national purchasing forum for local and state governments and many other public agencies (visit http://www.uscommunities.org for details), is seeing a high demand among cities, counties and schools for a variety of items. One such item involves upgrades for sports fields.
“We will be awarding an artificial-turf contract in the next 30 days,” explained Kevin Juhring, national program manager of U.S. Communities. “This will be followed by an athletic/stadium lighting solicitation and award. The turf-field category is a major and growing trend across the country, with some agencies having budgeted for as many as 100 fields over the next five years at a cost of between $500,000 to more than $1 million each. Lighting, which is necessary to make turf economically desirable, adds another $100,000 to $200,000 to the cost of each field.
“Our other focus for 2008 is ‘green’ purchasing,”Juhring added. “We have created a Go Green program details can be found at http://www.gogreencommunities.org. Procurement professionals across the country are being handed green mandates by elected officials. U.S. Communities is not only looking to provide new green contracts, we are greening our existing offerings. Most of our current suppliers have significant green offerings. For example, in 2007 our Office and School Supply contract had green sales over $85 million.”
Juhring also added that U.S. Communities is considering solicitations in 2008 for the following products and services:
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Audio-visual and consumer electronics. “There's high demand in K-12 education [for this equipment],” Juhring noted.
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Elevator sales, repair and service, including escalators and moving walkways.
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Transit buses, both hybrid and diesel-powered.
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Alternative energy.
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Mobile offices and classrooms.
However, although goverment purchases and spending remain significant, their growth rates in selected commodities might be slowing a bit. For instance, Seattle-based Onvia (http://www.onvia.com), which specializes in government business intelligence, reports that growth has slowed from double-digit rates in the following categories for local, state and federal purchases, based on activity levels:
- Alternate fuels.
- Construction.
- Financial services.
- Insurance.
“Growth trends have flattened over the last 12 months with additional correction likely, given across-the-board budget challenges stemming from reduced revenues,” predicted Michael Balsam, Onvia's vice president of products and services.
Onvia's Dominion database tracks government sales information that companies can consult to discover sales opportunities. The company's 9,000 clients represent a variety of industries.
States pursue wealth of primary revenue sources
Forecasts indicate that 2008 will be a time of transition, not just for officeholders up for election, but also for state government budgets.
Good news was included in the “Fiscal Survey of States,” issued in December 2007 by the National Association of State Budget Officers (NASBO) and the National Governors Association (NGA). The report noted that “State fiscal conditions remained strong for most states in fiscal 2007, but overall growth slowed slightly from the robust conditions of fiscal 2006. Revenues were generally stable and only one state was forced to make mid-year budget cuts.”
For fiscal 2008, the report explained that state spending is budgeted to grow at a rate of 4.7 percent. In fiscal 2007, state general-fund spending grew at a rate of 9.3 percent, which was significantly higher than the spending growth-rate average over the past 30 years of 6.4 percent. This high rate of growth is the result of states using surpluses achieved in recent years to bolster spending on programs that experienced budget cuts in the last fiscal downturn.
In fiscal 2007, most states' revenue collections exceeded expectations, noted the NASBO/NGA report. Revenues, in fact, exceeded expectations in 38 states.
“Fiscal 2007 tax collections of sales, personal income and corporate income taxes were 5.6 percent higher than fiscal 2006 collections,” according to the report, which added that “states have budgeted for more moderate revenue growth in their fiscal 2008 budgets.”
Both NASBO and the NGA are headquartered in Washington, D.C., and additional budget forecasts can be found on their respective Web sites: http://www.nasbo.org and http://www.nga.org.
On another note, 2008 could offer some budgetary surprises. “National economic trends have a huge impact on state finances,” said Sujit M. CanagaRetna, senior fiscal analyst for the Council of State Governments (CSG). Headquartered in Lexington, Ky., the CSG (http://www.csg.org) is an association that helps states share resources, ideas and strategies to identify the best new approaches to significant state problems.
“Though states are in considerably better financial shape than earlier this decade, when they faced their worst financial downturn in 60 years, there are ominous signs that point to another economic downturn,” CanagaRetna added. “Current state revenues lag long-term historical trends, and a number of states are already signaling the onset of budget shortfalls. States continue to face rising expenditures for health care, education, retirement systems, corrections, transportation, emergency management and infrastructure. In 2008, states will confront the combined pressure of dealing with these expenditure categories and the fallout from the contracting national economy.”
Legislative bottlenecks in Congress, coupled with the uncertain economy, cause concerns for Kim Reuben. Reuben, who is a senior research associate at the Urban Institute, offered these thoughts: “I'm less optimistic about state budgets in 2008. I do think that there's going to be a fallout from what's going on now both on Wall Street and with the housing market in general. So how that's going to trickle down to the states, and how states are going to make decisions about issues like health care, when the federal government is sending very mixed signals, remains to be seen.”
Rueben's organization, the Urban Institute (http://www.urban.org), is a think tank based in Washington, D.C. The organization conducts policy research and promotes sound social policy and public debate on national priorities.
To ride out the fiscal turbulence of the housing market and counteract Congress' lengthy process for making budget decisions, some states are tapping into new revenue sources. For fiscal 2008, various states have enacted a variety of revenue generators, including hikes in cigarette and tobacco taxes, corporate income taxes and fees and motor-fuel taxes, according to the NASBO/NGA “Fiscal Survey of States” report.
In New York state, the Spitzer administration, when faced with a $4.3 billion budget deficit in 2008, thought briefly about requiring Amazon.com and other online retailers to charge state and local sales taxes on all purchases from New York. By assessing these taxes, the State could collect tens of millions of dollars in lost revenue from unreported taxes via New Yorkers who shop at out-of-state online retailers, including Amazon.com.
Although New York's Gov. Eliot Spitzer backed down on his plan to tax online retailers, other groups are working in a similar direction. The Governing Board of the Streamlined Sales and Use Tax Agreement (http://www.streamlinedsalestax.org), which is a multi-state group working to collect sales taxes on Internet and other purchases delivered from out of state, is working to expand its current 15-state roster to at least 20 states by 2010.
Local governments confront lengthy slate of budget priorities
Numerous sources, from think tanks to trade groups, say cities and counties were fiscally healthy in 2007, but that 2008 may bring some tightness in each jurisdiction's budget.
As noted in a “City Fiscal Conditions in 2007” report, issued by the National League of Cities (NLC) based in Washington, D.C., seven in 20 city finance officers said that their cities were better able to meet fiscal needs during 2007 than in the previous year.
Cities have seen their revenues grow: General-fund revenues in 2006 were 6.6 percent higher than 2005 levels, and at the close of 2007, city finance officers were expecting revenue growth to reach 3.6 percent over 2006 levels.
The picture for 2008 is less optimistic, with those same city officials in the NLC survey predicting a slowdown in revenues and increased spending pressures. Concerns about the health of real estate markets and their potential impacts on property tax revenues, combined with increased calls for property tax relief from homeowners, may cloud the picture in 2008.
Inflation also is impacting municipal budgets. “The purchasing power of cities and towns is under tremendous pressure — with increasing costs for such staples as public safety and infrastructure, as well as increases in health insurance and pensions for public employees,” said NLC Executive Director Donald Borut. “Cities are doing the people's business — getting commuters to work, picking up the trash, keeping libraries open, making sure their streets are safe. And city leaders are being innovators. But it's getting more difficult every year in the face of increased demands for more services from their constituents.”
Health care and pension costs, in particular, are increasing at a faster rate than city revenues. The NLC 2007 report found that when adjusted for inflation, city revenues grew only 1.1 percent from 2005 to 2006, while expenditures grew by 1.2 percent.
To boost revenues in 2008, nearly half (45 percent) of all responding city finance officers in the NLC survey reported that they have increased fees and charges for services. Twenty-nine percent reported that their respective city opted for increasing property tax rates, while 17 percent reported reducing property tax rates. The NLC survey noted that cities have been less likely to increase sales- or income-tax rates.
On the spending side, three in four city finance officers reported increases in public safety spending in 2007, while 59 percent have boosted spending for infrastructure or capital projects. About 52 percent of respondents to the NLC 2007 survey said they are increasing the growth rate in their operating budgets to support a variety of new and existing services, and 39 percent reported increases in human services spending.
For more information about the NLC and its fiscal surveys, visit http://www.nlc.org.
At a National Association of Counties (NACo)Corporate Forum held last October (visit http://www.naco.org for details), county officials echoed some of the same areas of concern for 2008 as city finance officials noted in the NLC survey, including:
- Increased costs of health insurance.
- Increased exposure on post- employment health and other insurance benefits.
- A likely increase in spending for technology products and solutions.
- Increased attention to the coming knowledge drain by the retirement of an estimated 40 percent of the work force within four years.
- Increased spending on security, including homeland security operations.
In California, the state's 2008-2009 budget, when approved, will have a big impact on Golden State counties. “Many of the programs and services that counties provide are in partnership with the state of California, and when funds are reduced for those areas, counties are either forced to cut back those services or provide funding of their own to ensure that those services are maintained,” said Jean Hurst, who is legislative representative for revenue and taxation for the California State Association of Counties in Sacramento, Calif. “I think that while there are certain areas of the state that are managing, overall, it's a pretty grim outlook.”
New initiatives become likely candidates for federal adoption
According to one budget expert, Alan Viard, resident scholar at the American Enterprise Institute (AEI): “Federal spending on defense will remain high during the upcoming year. As in most past years, there will be increases in federal health spending (Medicare and Medicaid).”
Viard also predicts that the following three appropriations bills are the most likely to post the sharpest percentage increases in fiscal year 2008: the Energy and Water bill; the Military Construction and Veterans' Affairs bill; and the Transportation and Housing and Urban Development bill.
AEI (http://www.aei.org) is a private, nonpartisan institution dedicated to research and education on issues affecting government, politics, economics and social welfare.
“The year 2008 offers a mixed picture — it's not a year with a lot of clarity,” Nick Johnson told Government Product News. Johnson is director of the State Fiscal Project at the Center on Budget and Policy Priorities in Washington D.C. The center (http://www.cbpp.org) conducts research at the federal and state levels on fiscal policy and public programs that affect low- and moderate-income families and individuals.
“As usual, I think education and health care will be the spending drivers,” Johnson added. “An area of uncertainty, I think, is environmental and climate-change-related initiatives of all sorts. It's very unclear whether this will be a major area of state focus or whether the federal government will end up taking the lead. Cap-and-trade initiatives offer the prospect of new revenue streams to finance these kinds of initiatives, but it's too soon to tell exactly what they'll look like- — probably not much for 2008, but maybe 2009.”
With cap-and-trade programs for greenhouse gases, emissions are capped, and businesses are permitted to trade credits to emit carbon dioxide and other heat-trapping gases.
In 2008, federal revenues and deficits are headed in opposite directions. Federal revenues are growing (see chart on page 12), reported the Congressional Budget Office in its latest budget forecast through 2017. The companion chart also shows that federal purchases of goods and services (based on data from Global Insight) will increase in the years ahead.
Federal deficits, meanwhile, are shrinking, noted Chris Edwards who is director of tax policy studies at the Cato Institute (http://www.cato.org), which is a nonprofit public policy research foundation headquartered in Washington, D.C.
“The deficit has fallen dramatically and continues to fall,” Edwards told Government Product News. “The final year-end numbers for FY 2007 showed that the federal deficit was down to $163 billion, which, as a share of the economy, is actually fairly low. The federal deficit is falling dramatically, and taxpayers should be celebrating. It will make it more difficult for Congress to impose new tax increases.”
In his recent “Tax and Budget Bulletin — Improving on the President's 2008 Budget,” Edwards urged federal budget administrators to consider curbing compensation for federal employees. “Pay and benefits for federal workers have been rising much faster than for private workers. Substantial savings would accrue from skipping the usual annual pay adjustments for two years.”
Innovative information echnology receives a unanimous ‘thumbs up’
As we move towards crucial 2008 elections, governments at all levels continue to embrace new information technology (IT) that increases the efficiency of important public processes. For instance, the San Francisco Board of Supervisors committee has given preliminary approval to buy newer voting machine technology for reading ballots.
The new machines, made by Sequoia Voting Systems of Oakland, Calif., promise to read lighter shades of ink on absentee ballots. Because the current equipment in use can only read darker shades, absentee ballots marked in lighter colors often were not properly read or counted in past elections. Value of the proposed contract is $12.6 million.
In a different Oakland jurisdiction — Oakland County, Mich. — IT administrators are relying on project portfolio management (PPM) software to improve governance. Developed by Islandia, N.Y.-based CA Clarity (http://www.ca.com/us), the PPM package is helping the county's IT operations work more effectively and better align these operations with Oakland County's business and economic development goals.
“Return on Investment (ROI) is what drives all of our decisions in the IT world today, and even though we are a government agency, we still have to look at tangible and intangible benefits to drive projects forward,” said Phil Bertolini, deputy county executive and CIO for Oakland County. “In many cases, projects will be prioritized based on their ability to return back the investment to the taxpayers, and CA Clarity's financial billing and project budget processing modules will help us in that regard.”
In another move to enhance operational efficiency and responsiveness, five departments in the city of Hampton, Va., soon will be using Strategy Management application software developed by SAP Public Services Inc. (http://www.sap.com/usa/industries/publicsector/index.epx).
The installation of the IT product, which will be handled by Cipher Business Solutions LLC, is part of the city's efforts to better define, measure and manage the effectiveness of operations, public service programs and projects for its 146,400 citizens.
“We needed a system that would improve information sharing and collaboration between city departments and promote the visibility of critical performance and program information,” said John Eagle, assistant city manager for the city of Hampton.
City officials selected SAP over nine other software vendors in a competitive process. According to Eagle, “SAP understood our goal, showed us a roadmap for achieving it and offered a full complement of services to make it happen.”
The city will use the new software to quantify performance in critical areas, such as its 3-1-1 services center and municipal and public works programs. According to SAP Public Services, the software will allow Hampton to track 3-1-1 call-abandon rates and wait times as well as view productivity and capacity levels for municipal problems such as clogged storm drains and nonworking traffic lights.
In addition, the software will help maintain critical institutional knowledge, especially for long-term projects. Goals are to avoid the negative impact of a retiring work force and employee turnover, according to SAP Public Services.
Governments buy full roster of technologies and products
Various indicators that reflect the importance of government purchases and the overall government market are outlined by the Freedonia Group (http://www.freedoniagroup.com), a market research firm headquartered in Cleveland, Ohio:
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Almost 25 percent of bearings used in maintenance and repair projects are bought by governments, reported a recent Freedonia study. The government market for bearings is projected to rise at a 2.4 percent annual pace through 2011 to $450 million. Sales of bearings to government will continue to be spurred by increases in defense expenditures.
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Demand for electric transmission and distribution equipment in government and institutional markets will increase 4.8 percent annually to $700 million in 2011. Switchgear, transformers, hardware and meters are a few of the products found in this category. Growth in government purchases will be supported by increases in transportation construction spending and government fixed investments.
Government and institutional demand for electric transmission and distribution equipment, said Freedonia, is affected by the level of government investment in infrastructure, which includes highway and maintenance needs, along with new construction and maintenance of public educational and health care facilities as well as other government buildings.
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Demand for rechargeable batteries used in government applications is expected to increase 4.6 percent annually through 2011 to $738 million. Governments, estimated Freedonia, buy more than 8 percent of the rechargeables used in the U.S., based on the value of those rechargeables. In the future, rechargeable power supplies in the government arena will face increased competition from alternative-energy source technologies, such as fuel cells.
Military, homeland security and emergency-disaster preparedness agencies (at all levels of government) are major customers for these power supplies.
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Demand for powered lawn and garden equipment in the government and institutional market is forecast to increase 3.4 percent per year to $580 million in 2011- — up from $490 million in 2006. By 2016, governments and institutions will be spending an estimated $650 million annually for this equipment.
Growth will be aided by continued increases in the construction of various institutional buildings, where the installation of new lawns and gardens is typically a part of new construction. In addition, these new buildings will provide lawn and garden maintenance opportunities in the long-term. Government and institutional markets for lawn and garden supplies include military bases, schools, parks, hospitals, correctional facilities and roadsides.
Government agencies purchase a wide range of landscaping equipment, such as tractors, hydraulically powered riding mowers, boom-mounted and zero-turning-radius mowers, chipper/shredders, leaf blowers, replacement parts and attachments.
Pro-active campaigns drive fleets
Currently, more than 4 million vehicles are owned by governments in the U.S. About 3.6 million of these vehicles are owned by state, county and municipal governments, and almost half a million are owned by federal agencies.
Throughout all levels of government, fleet managers are taking steps to enhance vehicle efficiency and reduce costs. For instance, governments increasingly are replacing traditional gas-powered vehicles with hybrids or other alternative-fuel vehicles. In Missouri alone, the state government fleet currently has 14 hybrid-electric vehicles and 1,032 E85 fuel-conserving vehicles.
Missouri Gov. Matt Blunt recently announced that some state agencies in his jurisdiction are leasing the Ford E85 Escape Hybrid, which is said to be the world's first hybrid vehicle capable of operating on fuel blends containing as much as 85 percent ethanol.
“Our state is doing our part to look for alternative fuels to help lessen America's dependence on foreign oil,” Blunt said. “The more clean-burning, renewable fuel Missouri produces and uses, the better off we will all be in the long-term.”
Like other hybrids, the Ford E85 Escape Hybrid can switch automatically between pure electric power, pure fuel power or a combination of the two. The E85 Escape produces about 25 percent fewer greenhouse gas emissions than a gasoline-fueled Escape Hybrid.
Blunt has taken other steps to make the “Show-Me State” an earth-friendly state. In addition to signing a 10 percent ethanol standard for the state, he has directed that 70 percent of any new vehicles bought or leased by state government agencies have flex-fuel capabilities.
One Missouri native and fleet executive who offers expert advice about hybrids in government is Christopher Amos, CAFM. Besides serving as commissioner of equipment services for the city of St. Louis, Amos is senior vice president of the National Association of Fleet Administrators (NAFA). Headquarted in Princeton, N.J., the NAFA (http://www.nafa.org) is a membership-based organization that has served fleet management professionals for the past 50 years.
“There has definitely been a trend toward adding hybrids in government fleets over the past three to four years, and that momentum is building,” Amos told Government Product News. “Just like individuals, fleet managers have to be aware that current hybrid-electric technology is not a good fit for every application and pattern of use- — hybrids are not a ‘silver bullet’ for combating high fuel prices. However, some fleets have found them to be a good fit- — that is, high-mileage use in urban stop-and-go traffic- — and are expecting a sufficient savings in fuel to more than offset the higher incremental cost of the hybrid vehicle for a lower life-cycle cost.”
New truck technology will aid government fleet conservation efforts, Amos added. “Probably the most exciting hybrid news for government fleets is that the medium- and heavy-duty truck systems from International/Eaton and other manufacturers are going mainstream and should be available this year in greater numbers,” he said. “Many fleets, including my own, will be giving them a try in applications like the aerial truck design, where the hybrid-electric system can cut the engine idle time and cost by running the power take-off hydraulic pump off the battery instead of off the diesel engine. This is a sweet system, and we all owe thanks to the Hybrid Truck Utility Forum for getting this design to market.”
Amos noted a few other steps that government fleet managers are taking to reduce the impact of higher fuel prices:
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Implementing and enforcing anti-idle rules.“Advances in diesel engine technology no longer make it necessary to leave trucks idling just so they will restart in most of the country, even in the winter.”
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Paying more attention to proper tire inflation. “This maintenance step reduces rolling resistance and improves fuel efficiency — not to mention improving safety and tire life.”
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Relying on GPS systems. “There is a big upsurge in interest and implementation of GPS-enabled telematics systems in fleets,” he added. “The implementation of telematics systems by some fleet management companies means that even those fleets leasing vehicles can get access to information generated by this valuable technology.”
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Buying smaller vehicles when possible. “Fleets, however, can get bitten when they downsize cargo handling trucks and vans too much. Operations managers and drivers have a tendency to overload these types of units, thinking that if it physically fits, then the vehicle was designed to carry it.”
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Changing a fleet's makeup. “The trend toward replacing pickups and SUVs with small sedans continues when the sole purpose is to transport people and usually only one or two of them.”
Amos urged Government Product News' readers to become acquainted with resources of the NAFA: “Our newest resource is FleetED (http://www.fleeted.org), and it's available even to nonmembers,” he said. “The pinnacle of NAFA's education program is the Certified Automotive Fleet Manager (CAFM) credential. Completing the program signifies expert knowledge in all facets of fleet management regardless of the sector (whether government, utility or corporate) that one happens to find themselves at any given point in their career.”
Governors around the U.S. likewise are launching fuel conservation initiatives in government fleets as we head into 2008.
Montana Gov. Brian Schweitzer is calling for state agencies to achieve a 20 percent reduction in energy consumption by 2010. The governor is asking agencies to apply a Montana CAFE (corporate average fuel economy) standard and mobilize state vehicle fleets to achieve an average of 30 miles per gallon or better. “With the exception of industrial vehicles and pickups needed for state work, many of the vehicles in the state fleet could be more efficient,” explained the governor.
In Michigan, Gov. Jennifer Granholm issued a directive that when feasible, the state will increase use of alternative fuels in its fleet of vehicles. The state's fleet already has more than 2,000 vehicles that can run on alternative fuels, according to estimates from the Michigan Department of Management and Budget.
New Mexico Gov. Bill Richardson has announced new energy-efficiency goals that emphasize rapid reduction in consumption at state agencies. One goal focuses on reducing energy consumption by 20 percent in state fleets by 2015.
Yea on public construction, nayon total construction in 2008
While the value of total construction (including private, housing, apartments and commercial facilities) is predicted to be down by 2 percent in 2008, there are pockets of significant growth in government/public construction projects, reports the “2008 Construction Outlook” published by McGraw-Hill Construction Research and Analytics.
On an optimisic note, the value of public works construction will be up 3 percent in 2008 over 2007 levels. Total value of public works construction in 2008 is estimated to be $121 billion, compared to $117.9 billion in 2007. Most areas of public works construction show increases over 2007 levels, including road projects, as well as sewer and water supply and treatment systems. Likewise, school construction will show a net increase in 2008, compared to 2007 levels.
Other predictions and findings from McGraw-Hill also address the government construction market:
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In 2007, construction and expansions of military armories swelled by 72 percent over 2006 levels.
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In 2008, public-building construction projects will exceed 42 million square feet. The value of these and other institutional building projects will be up 3 percent over 2007 levels, and the value of those construction projects will reach almost $39 billion in 2008.
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2007 was a boom year for these public sectors: new courthouse and capitol projects were up 38 percent; detention facilities, up 16 percent; police and fire stations, up 10 percent; and post offices, up 6 percent.
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Bush administration proposals for the 2008 fiscal year show funding increases for transportation and mass transit as well as Superfund cleanup, but reductions in airport improvement, Corps of Engineers' construction and EPA clean-water state revolving funds.
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State and local governments and voters have been approving much-needed funding programs for ambitious transportation and other infrastructure projects.
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Growth of public-private partnerships offers the potential of greater funding during 2008. The state of Texas has been a leader in developing innovative partnerships.
Also for 2008, McGraw-Hill Construction Research and Analytics sees a rising demand for sustainable building design and materials, thanks to a growing prevalence of green construction practices. The report notes that green building initiatives are taking place at all levels of government, and that new federal legislation promises enhanced energy conservation practices in federal buildings.
Those new practices undoubtedly will lead to purchases of various energy-saving devices and monitors in federal agencies. When they are designed and built, public administration buildings and schools are the most likely to institute green practices, explained construction experts at McGraw-Hill. Visit http://www.construction.com for more information about McGraw-Hill's forecasts.
One area of expansion in the years ahead is public safety construction, according to market researcher FMI (http://www.fminet.com), headquartered in Raleigh, N.C. “FMI anticipates solid growth through 2011, increasing from $12.8 billion to $18.0 billion,” said Heather Jones, FMI's construction economist. “The expected average growth of 9 percent per year through 2011 constitutes a total increase in public safety put-in-place construction of $5.2 billion, or 41 percent.”
Jones added: “Overcrowding remains a recurring, continued theme for the nation's correctional facilities. As the number of inmates entering the penal system grows faster than the number of inmates being released, overcrowding will persist until additional facilities are built. The Bureau of Justice Statistics reported the total number of inmates in state and federal prisons and local jails increased 2.3 percent in 2005, 2.6 percent in 2006 and 2.8 percent in 2007. For perspective, consider that the national population growth rate hovered around 1 percent annually during these same years.”
Referendum addresses road repairs
As reported in the “2008 Construction Outlook” published by McGraw-Hill: “Highways and bridges are likely to receive greater funding when fiscal appropriations are approved for 2008.”
Also bullish on road projects in 2008 is the American Road and Transportation Builders Association (ARTBA), a Washington, D.C.-based organization that represents the transportation construction industry. “Highway and bridge construction should continue to be among the most stable of U.S. construction markets during 2008, showing modest year-on-year growth,” predicted Dr. William Buechner, ARTBA vice president of economics and research.
“The value of construction work performed on highway and bridge projects will grow to just under $78 billion in 2008, representing a 3 to 4 percent increase over the estimated $75.5 billion during 2007,” Buechner added. “Equally important, recent signs that rapid inflation in the cost of highway construction materials is easing may allow the projected federal, state and local highway investment to support more projects in 2008.”
Beyond federal dollars, states also are budgeting significant amounts. In its draft of the “2008-2012 Transportation Improvement Program” report, the Iowa Department of Transportation called for investing $310 million annually for maintenance of the existing highway system. Higher road construction costs, noted the report, “have significantly reduced the buying power of highway funds.”
At the same time, the draft report explained: “Highway system needs and demands are growing due to the system's age and condition.” The report also noted that travel and freight levels on the Hawkeye State's roads continue to skyrocket.
Count on range of projects to strengthen homeland security
One crucial part of government budgets in 2008 centers on homeland security. “The good news is that the budget for the federal Department of Homeland Security continues to rise at a steady rate,” said P.J. Crowley, senior fellow and director of homeland security at the Center for American Progress (http://www.americanprogress.org). “Gross discretionary spending for FY 2008 will be in the range of $36 billion to $40 billion. It will be on the lower side if the president's veto threat is successful, and on the higher side if Congressional increases over the president's budget are sustained.
“The bad news,” concluded Crowley, “is that both the administration and Congress continue to fund all security-related federal departments in a vacuum, without regard to whether the cumulative budgets of the Department of Defense, Homeland Security, State and the intelligence community and security-related portions of the budgets of the Departments of Energy, Health and Human Services, Justice and others support the right strategy to reduce the risk of terrorism to the United States.”
Border security, along with citizenship and immigration services, will see the most significant increases in homeland security funding in FY 2008, predicted Crowley. These budget increases, Crowley said, “reflect the growing political importance of the immigration issue.”
“Congress and the Bush administration disagreed primarily over funding for port security and grants for first responders,” Crowley noted. “Congress added funding to implement the SAFE Port Act and restored cuts in grants for states, fire departments and local emergency managers.”
Based in Washington, D.C., the Center for American Progress is a think tank dedicated to improving the lives of Americans through ideas and action.
Even before the spring election caucuses and primaries are staged, government administrators and elected officials will be planning new revenue and spending initiatives to place alongside the November 2008 presidential ballot.
About the author
Michael Keating is online content editor for Government Product News, Government Procurement Journal and New Equipment Digest, all published by Penton Media Inc. Keating has written articles on the government market for more than 100 publications, including USA Today, Sanitary Maintenance, Industry Week and the Costco Connection. Keating can be reached via e-mail at [email protected] or through his Web site: http://www.mikekeat.net.
Total Government Purchases of Goods & Services, 2002-2014*
(In billions of current dollars, unless otherwise noted)
Source: Global Insight, Lexington, Mass., November 2007 U.S. Long-Term Economic Outlook.
All levels of government should see steady increases in purchases of goods and services through 2014.
Federal Revenue: Headed Upward in the Future
2008 Forecast
(Amounts are in trillions of dollars for fiscal years shown)
As shown on above chart, federal revenue is expected to climb steadily through 2017.
Milestone construction project links Washington community
On Sept. 25, 2007, the City of Renton, Wash., held a ribbon-cuttting ceremony to open Logan Avenue, the culmination of the largest public works project in the city's history. The project included construction of the Landing, a 46-acre retail and residential development that is now welcoming throngs of businesses and residents to the area.
“Today's grand opening of Logan Avenue represents a major milestone in the history of Renton,” said Renton Mayor Kathy Keolker. “Not only is it one of the largest and most elaborate road and utility construction projects in the history of Renton — it is the road to The Landing, the most exciting shopping, living and lifestyle experience south of Lake Washington.”
In July 2006, crews began construction on the massive project, which featured numerous transportation upgrades. Armed with a budget of almost $25 million, including federal and state funding, the project was completed on time and within the allocated budget.
Roadway and infrastructure improvements included the construction of new streets and sidewalks, widening and realigning existing streets and installing new traffic signals and utilities. Many amenities were added, such as stamped-colored concrete, raised sidewalks, street trees and decorative street lighting.
“The Landing is a great example of how an investment in infrastructure drives economic development, which then expands the tax base for both our city and state,” said state Sen. Margarita Prentice, chairperson of the Ways and Means Committee. “Our federal, state and local governments are getting a great return on their investment. This is the basic money-back guarantee. The vast future revenues will be reinvested in education, health care, public safety, parks and other critical priorities — all of which make Renton an even better place to live.”
Recreation projects surge in Tampa, Fla.
Sometime this year, the city of Tampa's Parks and Recreation Department hopes to open the New Tampa Community Park recreation center.
Programs at the center will focus on fitness, and the building will sport a 12,500-square-foot gymnastics area. Here, residents will find a gymnastics pit and tumbling strip, as well as a variety of gymnastics equipment for all competitive Olympic events.
The facility also will have a large multipurpose room that can be divided into two separate meeting areas, as well as a snack bar, gymnastic viewing area and a covered deck.
Located adjacent to Freedom High School and Liberty Middle School in Tampa Palms, Fla., the New Tampa Community Park is a popular spot for soccer, football, softball and lacrosse. The park has four softball fields, five soccer fields and a concession stand.
In addition to the recreation center, the city launched construction of a skate park in the fall of 2007. Team Pain, a skate park builder based in Winter Springs, Fla., will partner with local builder Cutler & Associates to create the skate bowl at the park. Construction will begin in early 2008 and should be completed before the end of this year.
Illinois elects to build new tollway and village hall
A valuable community asset that took shape in 2007 and is now in full use during 2008 is the New Lenox Village Hall in New Lenox, Ill. The 43,000-square-foot facility houses the village's public works and engineering offices, cable television production facilities and studio, as well as the village trustee board room.
The Williamsburg-style building, which is situated on 4.3 acres, includes office space for civic organizations. The new facility is part of the Village Commons, which is home to the New Lenox Public Library, an outdoor performing arts amphitheater and a park.
Meanwhile, traffic is flowing more efficiently in 2008 on the Illinois Tollway, thanks to an upgrade of the south extension of the I-355/I-55 interchange. The project included new roadways, ramps, drainage, earthwork and 1,400 feet of retaining wall.
In addition, the interchange project, valued at $69.3 million, required construction of five major bridges, including two mainline structures (each measuring more than 350 feet long), an integral-abutment mainline bridge that is over 100 feet long, and two curved steel girder flyover structures (approximately 1,900 and 2,600 feet in length). Construction was finished this past November.
Chicago-based Wight & Co. (http://www.wightco.com) provided construction services for both the village hall and tollway projects.
Chicago park takes form over a landfill
Located in the Bridgeport neighborhood of Chicago, Stearns Quarry was an active limestone quarry from approximately 1830 through 1969. After 15 years of use as a landfill, the site currently is being transformed into a dynamic 27-acre park. Amenities will include a fishing pond, wetlands, preserved quarry walls, trails, an athletic field, running track, sledding mound and more than a mile of paths.
The landfill closure activities, including large-scale grading, retaining walls and geomembrane placement, were completed in 2006, and construction of the park is underway. Completed projects range from path construction and lighting installation to the final grading of the athletic field and mound.
During 2007, the park's wetland areas and pond received a range of improvements, such as recycled concrete outcroppings and the addition of various plantings, boardwalks and a pier. The construction of three entrance plazas and the installation of new perimeter fencing are in the works.