Tuesday, August 02, 2005

Stink Bond: Wisconsin's Backwards Building Program

I know, I know – the whole issue of bonding is about as sexy as Jim Doyle in a thong. I’ll try to spice it up using understandable terms.

So think about your first date – you finally have a girl with two eyes and a full set of teeth that said she’d go out with your stinky behind. You slap on the Polo cologne and load of your “love van” with a sixer of Pabst and your Zeppelin mix tapes. Only one problem – the "sin wagon" won’t start.

You immediately catch a ride down to the auto shop. After fighting off the mechanics who are drawn to you by your manly musk, you proudly announce that your Grandma just died and left you $2,000, and that’s what you have to spend on repairs.

Guess what your repairs are going to cost?

As goofy as it would be to announce how much money you have before you start a negotiation, that is exactly what the state does every time it starts a building project.

According to the Legislative Fiscal Bureau, the process works like this: a state department decides it needs a new building. It then gets an estimate of what it would cost to build the building. The request goes to the Department of Administration Division of Buildings, which then can add the project to the capital budget. After approval of the State Building Commission, this budget is included as part of the state budget and voted on by legislators. Once passed by the full legislature, the project is then “enumerated,” and then the bidding process begins.

See the problem here? The bidding process only begins after a set dollar figure has been approved. If a contractor wants to make a bid, they know exactly how much money the state is willing to spend. This is like moving all your chips into the middle of the table in a hand with Phil Hellmuth, and announcing that you are bluffing with a seven and a two. Even if they could do the project for much less, they will want to milk the project for as much as possible.

This setup is nearly scandalous. Wisconsin needs to move to a system where bids are solicited to figure the cost of the project, not after the project has been enumerated. To make matters worse, these projects are usually paid with bonds, meaning the state will also be paying the inflated cost plus 20 to 30 years’ worth of interest. Think about how much interest you end up paying on the life of your home mortgage, then apply that to a $50 million research lab at the University of Wisconsin. Often times, legislators don’t apply as much scrutiny to spending funded with bonds, because the money is raised up front and the obligations are pushed off into the future.

This is no small potatoes. The budget that just passed enumerated projects totalling about $1.1 billion. That could mean tens, if not hundreds, of millions of dollars the taxpayers will pay back, with interest, that could be avoided by an independent bidding process. Click the above link and you will see clearly how much the state has authorized for each of these projects. And if you have a hammer and some nails in your basement, get your bid in now -there are some sweet deals to be had.

Just make sure you wear that cologne to the job site. It will drive your co-workers wild.

Side note: As you can see from Informational Paper #71 referenced above, special considerations are giving to contractors and construction companies that are minority owned (Page 7). This seems like it could be a lot of money for a relatively limited pool of businesses, which might lead one to think that some favorable contracts are given out. Something an enterprising reporter might want to look into.