Interest rates are at historic lows, Utah’s AAA bond rating is still going strong, and we have significant bonding capacity, even within the state’s tight statutory and constitutional constraints. Under normal circumstances, these factors alone would make this an advantageous time to consider a bonding program for infrastructure.
But with Utah and its local governments exploring options for economic stimulus, a strong case can be made for focusing efforts on infrastructure. Investments in infrastructure protect and encourage employment in fields ranging from architecture and engineering to construction and aggregates. They also have long-term impacts as the economic benefits associated with newly constructed assets unfold over the course of many years. This is particularly true of transportation, water, and other infrastructure that allows for the movement of goods and people or opens the way for new development.
Local governments could benefit from the state’s strong position through a recapitalization of the State Infrastructure Bank, which provides local governments with loans at the state’s low rate plus 0.5%. Many shovel-ready projects are already sitting on local capital project to-do lists. That said, policymakers should explore whether infrastructure investments are well-calibrated to the capacity of Utah’s construction and related industries. If such investments go to out-of-state firms due to inadequate in-state capacity, the economic benefits could to some extent decrease.
This op-ed written by Peter Reichard was first published on December 9, 2020, at UtahPolicy.com: https://utahpolicy.com/index.php/features/today-at-utah-policy/25710-policy-savants-panel-is-now-the-time-to-bond-for-infrastructure-2