With regards to aging infrastructure, we can pay now or pay later

The list of America’s infrastructure shortcomings is long, and deferred maintenance is near the top.  A 2019 report from the non-profit, non-partisan Volcker Alliance warned that repairs to the nation’s aging infrastructure (roads, highways, and other critical public assets) could cost more than $1 trillion, or about 5 percent of the country’s gross domestic product.

Reflecting the poor condition of U.S. infrastructure, the American Society of Civil Engineers gave it an overall grade of C- in 2021.

Congress is considering a $1.2 trillion, eight-year bipartisan physical infrastructure package that includes about $579 billion in new spending on roads, broadband, and other public works projects.

It is unclear how much, if any, of the new funding will be used to eliminate the backlog of deferred maintenance that plagues America’s public works infrastructure. Deferred maintenance is broadly defined as maintenance and repair needed to bring current infrastructure assets up to a minimum acceptable physical condition.

Democrats hope to follow up this legislation by moving a $3.5 trillion spending package that includes funds for education, climate change, Medicaid, and other social programs. They plan to expand the social safety net without Republican support using the budget reconciliation process, which avoids the 60-vote threshold typically needed in the Senate.

When it comes to the hard infrastructure package, it is important to remember that maintenance funding is often seen as the step- child of infrastructure assets, since it does not generate the excitement associated with new capital projects.

Given maintenance’s relative invisibility (except when a system failure occurs), it is often the first expense to be deferred, a short-term, stop-gap that usually leads to higher costs in the long run. Another challenge is that government often sets the price for using the asset too low to cover the cost of service delivery.

The maintenance of existing infrastructure is not politically compelling.  Short-term political incentives conflict with asset management activities that focus on the long-run sustainability of infrastructure assets. Guaranteed media coverage for ribbon cutting events and the ability to issue debt (to be paid by future taxpayers) encourage politicians to favor new public works projects, perpetuating the Build, Neglect, Rebuild model.

Ignoring or reducing ongoing maintenance funding enables politicians to move resources to more politically rewarding investments in new infrastructure.  The idea of states having balanced budgets is fiction if they fail to account for the cost of infrastructure maintenance that has been deferred.

Poor asset management means infrastructure maintenance is conducted on an ad-hoc basis and is reactive rather than routine and preventive. Delayed maintenance of infrastructure assets can add billions of dollars to the cost of assets and accelerate the time when they must be replaced.

Infrastructure investment has traditionally been divided into two categories: Capital, and Operations and Maintenance (O&M).  A more useful breakout would include four categories:  New Capacity, Rehabilitation, Maintenance and Operations.  These represent the life-cycle cost of an infrastructure asset.

Sure, a rigorous breakout of spending into each category is difficult. For example, maintenance and rehabilitation in particular are easily confused. Maintenance focuses on short-term improvements while rehabilitation has a long-term focus. Effective maintenance reduces rehabilitation costs.

Still further it is difficult to separate maintenance from operating activities.  But an effective asset management program must account for the full life-cycle costing of a public infrastructure asset.

In short, the story of maintaining infrastructure assets is pay me now or pay me many times more later.  Current funding programs need to be modified to make sure maintenance is not ignored.

If government is to be a responsible steward, new infrastructure projects should not be pursued until the sponsor has demonstrated the true life-cycle costs of existing assets can be paid for.

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