Think no bonding bill this year is saving you money? Not so fast.

Bill Salisbury, Pioneer Press
·6 min read
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If you think the Minnesota Legislature’s failure to appropriate funds for public construction projects this year is saving you money, you’re right — in the short run. But you’re probably wrong in the long run. Here’s why:

Minnesota Management and Budget officials estimated the state will pay an estimated $13.5 million less on debt service during this fiscal year than it would have if the bonding bill that Gov. Tim Walz and legislative leaders tentatively agreed to in June had passed, MMB spokesman Patrick Hogan said last week.

But many of the projects in that package will still need to be built, and they will cost more in the future because of rising construction costs.

The Associated General Contractors of America recently estimated, based on federal data, that construction input prices for materials and services increased 16.8 percent since June 2021.

If applied to the proposed spending on the state-backed construction projects, the price tag would jump to $1.75 billion — an increase of more than $250 million that would wipe out the $13.5 million in savings this year many times over.

The state’s failure to pass a bonding bill this year means “we’re going to pay more in the future for projects that need to be done,” Walz said in an interview last week.

“They’re projects that can make our state safer,” the DFL governor said, and those facilities would enable public institutions like St. Paul College to renovate classroom spaces to train the skilled workers that Minnesota nursing homes need.

Walz has proposed calling the Legislature into a special session this year to pass a bonding bill, and he reiterated he still wants to do that, but Republican legislative leaders oppose that idea.

If they don’t get it done this year and he is re-elected in November, the governor said he “absolutely” will propose another bonding bill next year “and it will be robust.” He said it would “provide good construction jobs in every corner of the state,” build local projects that are sorely needed and provide economic-development opportunities.

‘HUGE CONSEQUENCES’

If lawmakers don’t fund construction projects within a year, it would have “huge consequences” for Minnesotans, said House Capital Investment Committee Chairman Fue Lee, DFL-Minneapolis. Some deteriorating roads and bridges might be closed, aging sewer and water systems could fail, state parks and trails could fall into disrepair and college classrooms due for renovations may no longer be safe, warm and dry.

Moreover, Lee said, the state must provide matching funds for much of the billions of dollars in federal infrastructure grants that Congress passed last year. If Minnesota doesn’t pay its share, he said, the money could go to other states.

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Senate Capital Investment Committee Chairman Tom Bakk, an independent from Cook, did not respond to a Pioneer Press request for comment. Neither did Sen. David Senjem, R-Rochester, vice chair of the bonding committee.

Sen. Sandy Pappas of St. Paul, the lead DFLer on the committee, said: “Bonding bills have deep but often unseen impacts across the state. For example, the failure to pass a bonding bill will lead to worsening quality of our air and water as we fail to invest in water-treatment plants and state park conservation.

“If outdated wastewater infrastructure isn’t upgraded soon, it could force many cities to pay for essential repairs and upgrades. During this time of increased prices and economic difficulty, many families simply cannot afford that additional expense.”

LOCAL PROJECTS

In St. Paul, Pappas said, a lack of state funding could adversely affect such projects at the Keystone community food site, Hillcrest Redevelopment proposal and the Kellogg Boulevard Bridge at RiverCentre.

Rep. Dean Urdahl of Grove City, the lead Republican on the House bonding committee, said he believes lawmakers must address such public safety concerns as a contaminated water site in Andover and an antiquated wastewater system in Austin.

“We need to finish what we started,” Urdahl said.

He’d also like the state to take on some new projects, such as restoring facades of buildings in historic business districts where “bricks are falling onto streets and sidewalks.”

‘BONDING YEARS’

Even-numbered years, such as this one, are often called “bonding years” because that’s when lawmakers tend to focus on funding construction projects. They pass two-year state operating budgets in odd-numbered years.

But in reality, every year is a bonding year. Legislators just authorize more public construction funding in the even-numbered years. During the 10 years before 2018, they passed bonding bills averaging $800 million in even-numbered years and $230 million in the odd-numbered ones.

And lawmakers almost always agree to borrow large sums for construction projects. Since 1983, they have passed bonding bills in all but three years: 2004, 2016 and 2021, MMB’s Hogan said in an email.

State officials have not estimated how much money rising construction costs are likely to add to infrastructure project price tags. Those costs will vary from project to project and depend on the products used. The Associated General Contractors estimated that concrete product prices have increased 13.5 percent since June 2021, paving mixtures and blocks are up 17.7 percent, asphalt and tar roofing and siding products 22.2 percent, plastic construction products 27 percent and diesel fuel 111.1 percent.

Lawmakers could agree to appropriate more money to cover rising construction costs next year. But typically they’ve been reluctant to do that.

Instead they could ask local governments and state agencies to do more work with less money. Or they may decide not to fund some non-essential projects or to phase in construction on high-priority facilities over several years to spread out costs.

If and when lawmakers get around to funding public works projects again, they are likely to focus on repairing and renovating buildings, lands and other structures that the state and local governments already own. In government jargon, that’s called “asset preservation.”

When Walz pitched a $2.7 billion construction package in January, he called for spending $1 billion — 38 percent of the total — on fixing those aging assets. Bakk, the Senate bonding chair, agreed with that priority, saying, “Let’s fix what we own.”

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The University of Minnesota and the Minnesota State higher education system — traditionally two of the main beneficiaries of state bonding bills — made asset preservation their No. 1 priority in capital improvement requests. The U asked for $200 million for repairs and renovations, and Minnesota State sought $150 million.

Officials from both systems said most of their facilities are more than 40 years old and have a backlog of needed maintenance.

In the same vein, the Department of Natural Resources requested $149 million in each of the next three two-year budget cycles to repair and upgrade its nearly $3 billion in aging buildings, roads, bridges, trails, public water accesses and other recreational facilities. “The growing list of deferred maintenance … poses considerable risk to the safety and usability of DNR-managed assets,” the agency warned in its bonding request.

This year, local governments and state agencies requested $5.5 billion for construction projects. The $1.4 billion that Walz and legislative leaders tentatively agreed to fund would have covered about one-fourth of that amount.