Why good roads and infrastructure are needed for development

Above: Loop 303 I-10 Interchange Real Estate | 21 Jun, 2016 |

Existing transportation infrastructure can be a make it or break it point for any development project. If there aren’t any roads or other necessary infrastructure pieces in place, then a site isn’t very developable, says Brad Wright, of counsel at Squire Patton Boggs.

“I really see the connection between our ability to finance good public infrastructure and how it ties directly to our ability to grow the economy,” he says, “and be successful at economic development.

When Wright worked for SunCor Development Company, he saw how important infrastructure was to development projects.

Valley Partnership is part of business coalition that supports the restoration of Highway User Revenue Funds (HURF) this year at the State Legislature, in addition to a public-private partnership — referred to as a P3 — and other methods to pay for Interstate-11, State Route 30 and corridors that will have an economic impact and create public safety benefits.

Creating those projects could be tricky, though.

According to the State of Arizona Office of Auditor General, the Arizona Department of Transportation’s long-term plan for the state’s infrastructure requires $88.9 billion between 2010 and 2035, but is expected to only receive $26.2 billion during that time frame. That’s a $62.7 billion shortfall.

But hope isn’t lost. Arizona is making huge investments in its transportation infrastructure. The passing of Proposition 104, a transit sales tax increase from .4 percent to .7 percent over the next 35 years, will allow the City of Phoenix to expand the Metro Light Rail, busing system, street pavement and much more.

A common trend across the country — and in Arizona — has been the live, work, play model, and public transportation has attracted businesses and folks to city cores like downtown Phoenix, and other areas across the Valley.

While public transportation is covered in Phoenix, Mesa, Tempe and others in the West Valley have needs. But what about the state’s highways?

Arizona’s First complete North-South Corridor

The majority of the nation’s Interstates were built in the 1950s and 1960s, connecting major cities across the country through a vast network of interstates, but Arizona never saw an interstate that went completely north and south, and Interstate-17 stops at Flagstaff.

“The reason there’s no north to south corridor in Arizona is because we have this ditch in the way, called the Grand Canyon,” says Scott Higginson in a jovial manner. Higginson is the executive director of the Interstate 11 Coalition and is working to create the state’s first complete North-South Corridor.

Before the Mike O’Collaghan-Pat Tillman Memorial Bridge was finished in 2010, traffic was forced to use the top of the Hoover Dam to get between Phoenix and Las Vegas. The Hoover Dam was not an adequate crossing point because it was only two lanes, is a major tourist attraction and required a lot of curvy roads to get to, Higginson says.

The bridge will eventually be a part of upcoming Interstate 11.

Congress recently designated Interstate 11 to run from the Arizona-Mexico border all the way up to Las Vegas, Higginson says. The interstate, once completed, will be the first North-South Corridor in the state, opening up new opportunities for tourism, trade and retail in Arizona.

Mexico is Arizona’s No. 1 trade partner, accounting for 30 percent of the state’s exports to foreign markets, according to the Arizona Mexico Economic Indicators annual report.

Since the recession, Arizona has recovered the slowest out of the border states, according to the report. The state’s share of border-state GDP has declined from 7.9 percent in 2003 to 7.4 percent, the report found.

Higginson says Interstate 11 will serve as a significant commerce corridor, finally connecting Mexican markets with United States markets through Arizona, but the Interstate will take decades to fully complete.

Currently, the two best options to ship goods in and out of Mexico is either in Texas’ vast network, or through California’s Interstate 5, which is essentially a parking lot due to high traffic volume, Higginson mentions.

The interstate will be built in segments, Higginson says, and building the interstate in this manner will involve all levels of government and will break the interstate’s cost into bite-sized pieces.

Many of the environmental studies still need to be completed in Arizona for the interstate to become a reality, Higginson says.

“Interstate 11 will not be built without funding from a variety of sources at the local, state and federal levels,” he says. “And the potential for it to be a toll road, that is authorized under Arizona law, is of course one of the alternatives that will be examined.”

P3 agreements

One example of a P3 that would turn Interstate 11 into a reality is already being used to complete the 22-mile connection of the Loop 202 through the Southwest Valley.

ADOT recently signed a $1 billion P3 agreement with Connect 202 Partners to construct, maintain and design the rest of the freeway, says Jay Kramer, commercial transactions chairperson at Fennemore Craig.

Kramer says through this partnership, the freeway will be finished three years earlier and it will cost $100 million less.

“This P3 agreement will be a test case for ADOT and the private sector and, if successful, this template — or other innovative project delivery systems — may be used for design, construction, and maintenance of Loop 303, State Route 30, and Interstate 11,” he says.

A P3 agreement isn’t the only tool to complete these infrastructure projects.

Wright, the former SunCor attorney, says tools like Government Property Lease Excise Tax (GPLET), improvement districts, highway user revenue funds and community facilities districts are just some of the tools that can be used to build the necessary infrastructure to create a successful project.

“They all play a role on how we can finance (infrastructure),” Wright says.

Developers need to find the right tool for the project, but they are out there, he mentions.

Without things like GPLET, the mid-rise office buildings along Tempe Town Lake wouldn’t exist, he mentions.

“From a developer’s perspective, you look at the cost of public infrastructure required for these large-scale projects and it’s needed for the front end of the project, and a lot of the times the numbers just don’t work to move forward,” Wright says.

Comments
Show Buttons
Hide Buttons