Gas Leak Explosion Symbolizes Huge Need for Infrastructure Improvements

Gas leaks resulted in an explosion causing two buildings in East Harlem, NYC to collapse on March 12, 2014.  Eight deaths and a substantial destruction of property catch the public attention this week, suggesting an even larger long smoldering issue of inadequate investment in the infrastructure we build our lives on and take for granted.

One hundred years ago America was not an urban nation.  The industrial age was moving the country from agrarian to  urban.  Rail beds were laid.  Water systems were built.  Roads were paved. Bridges built.   Pipes were laid to carry gas, oil and electric power.  Telegraph lines morphed to telephone lines.  Rail morphed to underground subways as the population centers grew more dense.  Private capital initiated much of this early infrastructure.  Government or quasi-governmental authorities took over responsibility for expansion and operations of much of this infrastructure so critical to the lives of 21st century Americans.  But operating costs aren’t enough to preserve, maintain, renovate or renew these critically important physical systems that support our lives.

How much would it cost to replace these assets?  A generally accepted “rule of thumb” is that about 1% to 3% of the “asset replacement value” should be spent each year to maintain that asset, separate from the capital investment required to make substantial improvements.  The USA owns infrastructure worth an estimated $342.9 trillion.  This is excluding infrastructure owned by cities, counties, states or quasi governmental organizations in the USA.  Is the USA spending 1% or $3.4 trillion on maintaining this infrastructure each year?  

Of the total $862 billion in the 2008 American Recovery and Reinvestment Act  stimulus package, the amount allocated to federal government purchases was $7.9 billion in 2009 and $10.1 in the first half of 2010 according to the US Bureau of Economic Analysis.  The portion allocated to infrastructure (gross investment) at the federal level was $0.9 billion in 2009 and $1.5 billion in the first two quarters of 2010.  Assuming the same level of infrastructure funding at the federal level for 2010 would be only $0.03 trillion.  Even if that were all dedicated to maintaining existing infrastructure it is barely a drop in the bucket for what is needed to maintain our infrastructure, $3 trillion dollars short.  A century of no maintenance.  Is it any wonder our buildings are exploding, our water supplies turn dangerously polluted, our bridges are collapsing?  We are not even maintaining what we built, let alone building the power grid and the digital communications systems we will need to compete in the 21st century.

We are so far from spending what we need to keep ourselves safe.  Yet when we talk about spending money for infrastructure it is almost always in the context of providing jobs to stimulate the economy…. as if the expenses to generate jobs would not be needed if the economy would get back to normal.  Hey.  What would happen if the economy never got back to normal because we let the infrastructure that supported us over the last 100 years deteriorate beyond redemption, instead of maintaining it and adding new infrastructure for the future?

by Barbara Thornton
Follow Barbara Thornton @assetstewards

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