Arizona infrastructure needs top $500 billion

To keep pace with the state’s projected explosive population growth during the next 25 years, Arizona will need to invest a half-trillion dollars in infrastructure—energy, water, transportation, and telecommunications—according to a study by the Arizona Investment Council (AIC). Between 2008 and 2032, the projected change in Arizona’s population is 4.2 million, a 65-percent increase.

"The fact is, we are not spending enough on infrastructure to keep pace with growth. In some areas, our infrastructure is wearing out faster than we can replace or maintain it," says Gary Yaquinto, president of AIC. AIC is a not-for-profit organization comprising approximately 5,500 debt and equity investors in Arizona utility companies.

"This study provides hard evidence that infrastructure investment must be made—and the amount of that investment is staggering," says Yaquinto. "Decisions must be made now, not five or 10 years from now. We must bring to the decision-making table our policymakers, regulators, and our business and community leaders, and we must be open and forthright with the public regarding costs as we move forward. This is the only way we can ensure Arizona’s economic competitiveness and quality of life."

According to Tim James, Ph.D., director, Research & Consulting, of Arizona State University’s Seidman Research Institute, the road ahead for Arizona is difficult, but it is not impassable. "One of the principal aims of this study is to initiate and add to the level of debate about pressing infrastructure concerns," he says. "A major issue is how public and private sectors can fund the enormous cost of the state’s infrastructure requirements over the next quarter century."

Key findings from the infrastructure study include the following:

• The total capital investment in the energy sector (electricity, natural gas, petroleum, and other fuels) required to serve Arizona’s growing population to 2032 is between $74 billion and $86.5 billion, depending upon the mix of generation technologies employed.
• The bill for improving Arizona’s transportation network—roadways, highways, transit system, airways, and railways—to meet the rapidly growing demand is about $253 billion to $311 billion over the 25-year study period. About 79 percent to 83 percent of the bill will be for roadways and highways.
• There is a huge gap between the money that current funding mechanisms can generate and this enormous infrastructure bill. The Arizona Department of Transportation estimates within seven years the state will be in a "preservation only" mode, meaning that incoming revenues will be sufficient only to support current operations and maintenance costs. There will be no money available to fund capital projects from current mechanisms.
• Arizona needs to spend more than $109 billion over the next 25 years on water and wastewater infrastructure. Current funding sources will fall some $30 billion short of what is necessary. If user fees alone are used to close the funding gap, the required one-time price increase is about 55 percent in the water sector and 62 percent in the wastewater sector. These one-time increases translate to annual rate increases of 3.0 percent and 3.3 percent, respectively, over the 25-year period.