Officials at Arizona's three public universities are floating a proposal that calls for state lawmakers to put $1.4 billion toward new campus construction and renovation to stimulate the lagging construction industry.
Already approved by the Arizona Board of Regents, all of the building projects have detailed plans and in the last two weeks have been repackaged and presented together as an economic-stimulus plan that university lobbyists have brought to lawmakers.
The universities argue that now is the best time to start building, with lower interest rates and costs for labor and materials. The universities plan to pick up 20 percent of the overall debt service on the construction, as well as temporary financing for the first year, and pass the debt service payment on to the state over the next three years after expected economic improvement.
"The universities are working closely with the construction industry to help find a mechanism to get the economy out of the doldrums," said Christine Thompson, lobbyist for the Arizona Board of Regents. "These are all projects not only new construction but a great amount of deferred maintenance and the Phoenix biomedical campus that have been vetted by the board and need to move forward."
Neither Thompson nor University of Arizona lobbyist Charlene Ledet would comment on how lawmakers are responding to the proposal of borrowing $1.4 billion in the face of a state budget deficit of $1.2 billion this year and what is expected to be at least $1.7 billion next year.
The state would pay off the construction debt over 25 years, with a first payment of $27 million coming in 2010. The universities themselves typically issue bonds to pay for new construction projects.
Laura Devany, a spokeswoman for state Senate President Tim Bee, R-Tucson, said the universities' proposal is part of the ongoing budget negotiations held during almost daily meetings between the bipartisan legislative leadership and Democratic Gov. Janet Napolitano, and that Bee couldn't comment publicly at this point.
Ledet said the proposal is structured to immediately impact the construction industry, with 14,438 jobs created as a direct result of the building projects, as well as another 16,660 jobs created indirectly.
"When we began looking at it with the construction industry, the decision was made that if we asked for it at this time, it could be a stimulus for the economy and take advantage of the lower interest rates and lower labor costs because the construction industry is somewhat depressed," Ledet said. "This is as good a deal as we're likely to get in the next several years to build these buildings and do this deferred maintenance."
State funding wouldn't begin immediately. The plan calls for temporary financing by the universities, with the state phasing in its commitment over time, similar to the funding structure for $440 million in state-funded research buildings approved by the Legislature in 2003. That funding was secured based on the universities' argument that research facilities have direct returns on the state investment through federal research funding.
The largest single portion of the $1.4 billion would go to fund the UA's medical school campus in downtown Phoenix, which calls for $470 million. That would go toward a $190 million medical education building, a $165 million research building shared with Arizona State University, and $115 million in infrastructure and core support facilities.
"If we want to increase the number of MDs we're graduating, we have to have the medical education building," Ledet said, noting that when the second class of 24 medical students starts at the new campus this summer, the current facilities will be at capacity.
The proposal also includes $327 million for UA construction in Tucson, as well as $329 million for ASU and $311 million for Northern Arizona University.
The UA's projects include $131 million in maintenance for a number of buildings, as well as various heating, ventilation and mechanical systems. New facilities include a $90 million environment and natural science research building, a $70 million engineering research facility, a $44 million social and behavioral science office and classroom building, and $12 million in renovations for Centennial Hall.
Critics of the plan say fundamental elements of the universities' economic-stimulus argument don't hold up. Goldwater Institute economist Byron Schlomach countered that the proposal is actually an impediment to improving the construction industry.
"I know part of the argument is this would be potentially more immediate, but the fact is that the private sector will get on its feet even faster if it's not having to compete with the public sector," said Schlomach, director of the institute's Center for Economic Prosperity. "If this is all about economic stimulation, what you really have is the public sector competing with the private sector for resources, and if anything, keeping the prices from falling as much as they would otherwise."