Return to Governor Lowry's Proposed 97 - 07 Capital Plan Table of Contents
Selecting Projects for Funding in the Capital Plan
HE 1997-2007 CAPITAL PLAN charts a course for investments in capital
facilities that are necessary for delivering essential public
services, promoting economic development, and enhancing the quality
of life over the next ten years. Development of this plan, and
selection of specific projects to be funded in the 1997-99 Biennium,
were guided by many of the same factors that affect operating
budget decisions. These include:
- Demographic Pressures: Washington State's population
is currently forecast to grow by 22 percent through the 1990s,
approaching almost six million people by the year 2000. This
rapid increase in population, now growing at the fastest rate
since the World War II boom of the late 1940s, is exerting strong
pressure on the state's infrastructure, including public schools,
higher education institutions, prisons, parks, and recreational
- Spending Limits: The operating budget is constrained
by the Initiative 601 expenditure limit and the capital budget
is constrained by the 7 percent Statutory Debt Limit. Both budgets
must balance short and long-term demand for services within these
- Interdependency: The capital and operating budgets
are dependent on the decisions made concerning the other. For
example, the decision to open a branch campus or renovate a prison
has major implications on both budgets. In recent years, the
Governor, the Legislature, and state agencies have worked to improve
coordination between these two aspects of Washington's financial
The 1997-99 capital budget proposed by Governor Lowry recognizes
all of these influences, providing $1.8 billion for new projects,
with $934.2 million funded by the proceeds of general fund-supported
bonds. An additional $1.4 billion in reappropriations are recommended
to allow currently funded projects to proceed.
The capital budget from bond funds proposed for the 1997-99 Biennium
must be viewed together with the 1997 supplemental operating budget
proposed by the Governor. The supplemental budget includes funding
for four capital items: $50 million for public school construction
grants; $38.5 million for the Harborview Medical Center research
facility for the University of Washington (UW); $21 million for
construction of a Health Sciences facility at the Joint Center
for Higher Education in the city of Spokane; and $2.6 million
for the Building for the Arts program to meet the full commitment
for state assistance to the Seattle Symphony.
The $112.1 million provided for these projects in the supplemental
budget, added to the $934.2 million in new bond appropriations
for the 1997-99 Biennium, brings total state bond and general
fund commitments for capital purposes to approximately $1.05 billion.
Major projects and programs proposed in the 1997 supplemental
and 1997-99 capital budgets are summarized below.
The capital budget proposed by the Governor for the 1997-99 Biennium
includes $743 million in new funding for projects in the K-12
and higher education systems. Combined with funds provided in
the Governor's 1997 supplemental operating budget, education will
receive $801.5 million over the next two years. This represents
the largest functional area to receive funds. Highlights of this
funding plan include:
- A total of $251 million in new funds is provided to assist
local school districts with new construction and modernization
projects. New funds are made available through timber revenues,
$50 million in general fund resources deposited in the Common
School Construction Account through the 1997 supplemental operating
budget, and another $50 million available from the Timber Trust
Land Transfer program in the 1997-99 Biennium. Funds are also
provided to continue currently authorized projects.
- The UW construction program totals $188.9 million
in new funds in the 1997 supplemental and 1997-99 capital budget,
plus funding to continue ongoing projects. Construction of the
Harborview Research and Training Facility is included in the 1997
supplemental budget. The 1997-99 capital budget includes funds
for major projects on the Seattle campus including construction
of the Law School and the Oceanography Building, decommissioning
and remodeling the old Nuclear Reactor building for the School
of Mechanical Engineering, and design of the modern research laboratories
located in the Health Sciences Center. Funding is also provided
for construction of the first phase of the new collocated Bothell
branch campus, and for soil cleanup at the Tacoma branch campus
- A total of $84.2 million is included for new
projects at Washington State University (WSU). Major construction
projects include renovation of Bohler Gym and Thompson Hall, and
renovation and an addition to Kimbrough Hall. Design funds are
provided for the Teaching and Learning Center. Funds are also
provided for design of the Engineering Building, construction
of physical plant facilities, and road and site improvements at
the WSU-Vancouver branch campus.
- The capital budget for the community and technical
colleges includes $164.2 million for new projects. Funds are provided
to begin construction of a collocated campus for the new Cascadia
Community College in Bothell, and construction of projects at
North Seattle, Everett, South Seattle, Bellevue, and the Poulsbo
Campus for Olympic Community College.
- A total of $21 million is provided in the 1997 supplemental
budget for the Joint Center for Higher Education in Spokane.
Funds will allow design and construction of a new Health Sciences
building that will serve WSU and Eastern Washington University.
The second phase of the facility, including research space, is
scheduled for funding in the 2001-03 Biennium.
- The Higher Education Coordinating Board will receive $2 million
to distribute to higher education institutions for the construction
of classrooms to accommodate K-20 technology improvements.
The capital budget proposed by the Governor for the 1997-99 Biennium
includes $271.5 million in funding for projects in corrections,
juvenile rehabilitation, and other areas of human services. Highlights
- A total of $200.6 million is budgeted for new
Department of Corrections projects, including $155.6 million to
construct the 1,936-bed multi-custody Stafford Creek Correctional
Center in Grays Harbor County. Funding is also included to convert
medium custody housing to close custody at the Monroe Reformatory,
design a 400-bed pre-release facility in Tacoma, and to begin
site selection for a new $106.7 million women's facility. Design
funds will prepare for expansion of the Monroe Special Offender
Unit to 400 beds in conjunction with the Civil Commitment Center
administered by the Department of Social and Health Services (DSHS).
Authorization for alternate financing to construct a Tacoma pre-release
center on tribal lands is also provided.
- The budget for DSHS includes $64.1 million in
new funds. New projects include continued funding for the residential
redevelopment of Green Hill School to increase capacity to 416
beds, the addition of new and replacement beds at Maple Lane School,
and site selection and related costs for a new 300 bed Juvenile
Rehabilitation Administration (JRA) institution at a site to be
determined. Funding is provided for renovation of the Eastern
State Hospital Eastlake Building for legal offenders. Design
funds are provided for a $43 million replacement of the Western
State Hospital Legal Offenders Unit.
- Funding is provided to perform a feasibility
study for analyzing housing options and preparing a plan for the
future of the Washington Veterans Home at Retsil. A feasibility
study for the Soldiers Home at Orting is planned for the 1999-01
The capital budget proposed by the Governor for the 1997-99 Biennium
includes $486.2 million in funding for projects administered by
natural resource agencies. Highlights include:
- A total of $70 million for the Interagency Committee for Outdoor
Recreation to provide grants to state agencies and local governments
for acquisition and development of wildlife and recreation lands
under the Washington Wildlife and Recreation Program (WWRP).
With the funding level provided in the Ten-Year Plan, the full
commitment to the WWRP program identified by the Capital Forum
will be achieved. Total new funding for all grant programs is
- The Department of Ecology receives $206.2 million
in new funds, including $70.5 million for the Centennial Clean
Water Fund, $31.4 million from the Local Toxics Control Account,
and $6.4 million for the Resource Conservation Recovery Act.
An additional $53.2 million in state funds and $44 million in
federal funds will be provided to the Water Pollution Control
- The Department of Natural Resources will receive $114.8 million
for new projects including $53 million for the Timber Trust Land
Transfer program that provides funding for public school construction,
permanent protection of forested lands, and the purchase of replacement
- A total of $35.4 million in new funding is provided to the
Department of Fish and Wildlife for renovation and stewardship
of fish and wildlife facilities and resources across the state.
- New projects totaling $21.2 million are funded to preserve
and maintain facilities, upgrade utilities, and improve roads
and access throughout the park system.
The 1997-99 capital budget, together with funding for four capital
construction projects funded in the Governor's 1997 supplemental
operating budget, includes $323.9 million in funding for projects
administered by general government agencies. Highlights include:
- A total of $245.9 million is provided for new programs in
the Department of Community, Trade, and Economic Development.
New funding includes $158 million for Public Works Trust Fund
loans; $60 million for housing assistance, weatherization and
affordable housing programs; $11 million for Community Economic
Revitalization Board loans and grants for local infrastructure
improvements; $4.7 million to assist community-based family service
providers to acquire and rehabilitate buildings used for services
to low-income people; $5 million to the Development Loan Fund;
$3.9 million for Building for the Arts grants in the 1997-99 Biennium;
and $2.6 million for completion of the Building for the Arts grant
to the Seattle Symphony in the 1997 supplemental budget.
- The $49.6 million for new projects for the Department
of General Administration includes funding to continue addressing
safety concerns at the Plaza/Department of Transportation Garage,
clean and preserve the historic sandstone buildings on the Capitol
Campus and proceed with the Heritage Park project by constructing
the "Arc of Statehood." The Governor's proposal also
provides project management expenses and funding for continued
preservation of the buildings owned and managed by the Department
on the Capitol Campus and around the state.
- The Secretary of State is provided $2.3 million,
with $2.1 million to purchase land and design the Eastern Branch
Archives to be located on the Riverpoint Campus in Spokane.
- A total of $14.3 million in new capital funds for projects
administered by the Office of Financial Management includes pooled
funds for distribution to agencies for asbestos abatement, compliance
with the Americans with Disabilities Act, and environmental cleanup
associated with underground storage tank removal.
- The budget authorizes the use of alternate financing for the
Department of Revenue to construct a new headquarters building
in Thurston County in order to consolidate the operations of the
Most of the funding for transportation-related projects is contained
in the transportation budget. However, the capital budget includes
funding for facilities managed by the Washington State Patrol.
- A total of $9.6 million in new funds to upgrade
and preserve district headquarters and other support facilities
across the state; continue development of the Fire Training Center;
and upgrade the existing communication infrastructure. Design
funds are included for renovation of space to replace the existing
Seattle crime laboratory with a new laboratory that is collocated
with the Seattle Police Department and University of Washington
There are two main funding sources in the proposed Ten-Year Plan:
proceeds from general fund supported bond sales, and dedicated
funds. Dedicated funds are limited by statute as to the sources
of revenues and allowable expenditure purposes. Bond funds, however,
can be allocated to any capital project to meet priority needs.
The bond-supported capital plan is constructed within two statutory
- The 7 percent statutory debt limit specifies the maximum percentage
of general state revenues that can be spent for debt service.
Since debt service on previously issued bonds is committed, the
statutory debt limit effectively limits the amount of new bond
funded projects that can be initiated in the 1997-99 and 1999-01
biennia. After Fiscal Year 2001 the structure of previously sold
bonds allows the amount of new appropriations to increase.
- The Initiative 601 expenditure limit places an indirect constraint
on debt service, since the general fund is used to pay debt service.
The recommended Ten-Year Plan for bonds will result in debt service
growth of 16.8 percent in the 1997-99 Biennium, decreasing over
the following two biennia to approximately 8.3 percent in 2001-03.
For the next two biennia, this rate of growth in debt service
is above the Initiative 601 fiscal growth factor.
|General Fund Capital Appropriations and Debt Service
Dollars in Millions
|New General Fund
The proposed ten-year capital plan recognizes these financial
limits by putting forward a borrowing program that is well-managed
and affordable. The State Finance Committee manages a borrowing
program that commands attractive interest rates and pursues refinancing
to reduce costs whenever possible. As a result, the state currently
enjoys bond ratings of Aa, AA and AA by Moody's, Fitch Investor
Services and Standard and Poor's, respectively. In a bond sale
analysis issued in June 1996, Standard and Poor's described its
rationale for the state's favorable bond rating:
- The rating on Washington's debt reflects a strong and diversifying economic base, which is exhibiting less vulnerability to cyclical downturns in the aerospace industry; sound financial performance; and a moderate debt burden.
- -- Standard and Poor's Ratings Group, June 21, 1996
A commonly used measure to evaluate debt service trends is the
amount of debt service as a percentage of state personal income.
This measure portrays the financial capacity of the state's economy
to pay for the costs of previous capital investments. This measure
has remained relatively stable in recent years.
The total amount of new bond supported appropriations proposed
for 1997-99 is $934.2 million composed of $925.9 million allowed
under the debt limit and $8.3 million in bond capacity made possible
by the elimination of appropriations for projects previously authorized
that will not proceed. New bond-supported appropriations allowed
under the debt limit in the 1999-01 Biennium are estimated to
be $921 million, with new appropriation levels increasing in subsequent
years. The structure of past bond sales allows increased new
appropriation levels after the 1999-01 Biennium within the 7 percent
statutory debt limit.
Selecting Projects for Funding
in the Capital Plan
There are three steps involved in identifying projects that are
included in the Governor's capital plan. The first step is a
technical review of agency capital budget proposals.
- Major project requests (in excess of $5 million) undergo a
value engineering study to identify opportunities to increase
value in projects, which may reduce or increase the proposed project
- Predesign proposals for major projects that have received
previous funding are reviewed.
- Elements of proposed project cost are reviewed for consistency
across agencies and universities, with appropriate adjustments
for location or other factors.
- Project requests are compared to the amounts identified in
previous budgets for consistency or justification of changes.
- Project requests are reviewed based on actual progress to
date on currently appropriated projects. The completion of projects
on schedule is an indicator of the capacity of an agency to undertake
additional projects in the next biennium.
- Requests for funds to preserve existing facilities are reviewed
for consistency with long-term plans to identify and manage the
preservation needs of each agency. The plan for the management
of existing facilities is a new requirement of the capital budget
process, and will maximize funds invested in preserving existing
The second step is to compare the operating budget needs and decisions
with the capital budget requests. Caseload growth in the operating
budget may have capital budget implications. Decisions to expand
or reduce operating programs often have a similar effect on the
capital projects . Linking agency operating budget strategic
plans to long-term capital plans is essential for ensuring that
appropriate facilities are available to carry out agency responsibilities.
Capital project recommendations from the Higher Education Coordinating
Board and the State Board for Community and Technical Colleges
are also reviewed. These recommendations help set priorities
within the community and technical college, and university systems
for funding to accomplish the goals defined by these Boards.
The final step is to prioritize the various agency and university
requests and select the final list of recommended projects. At
this point, the choices between facility preservation versus new
investments, new capacity versus improvements in quality, and
completing previously funded projects versus new proposals, must
be resolved. A final set of projects for each biennium across
the Ten-Year Plan is identified so that progress is made on recommended
projects in an orderly manner. To bring the cost of projects
into balance with available resources may require that some projects
are delayed, or completed in phases. The outcome of this process
of balancing needs and resources is evident in the capital plan
OFM implemented a new process for evaluating the financial implications
of alternate financing proposals during this capital budget process.
A standard methodology for calculating and comparing cash flow
and the present value of a long-term investment was developed
and applied to each proposal for alternate financing. The total
costs for each proposed alternate financing project are now clearly
presented in short-term cash flow and long-term present value
investment terms. The full cost implications of each proposal
are clearly displayed so that projects proposed on the basis of
anticipated savings can be accurately evaluated. Similarly, the
future cost/savings for projects proposed on the basis of program,
service, or operational need can now be reviewed with more comprehensive
and accurate financial information.