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Waning Service Life for Municipal Infrastructure Deferred Maintenance Escalates Renewal Costs
January, 2008
A recent study from the Federation of Canadian Municipalities (FCM) estimates Canadian municipalities collectively need $123 billion to provide required municipal infrastructure and bring existing assets into a state of good repair. The following is an excerpt from the report, Danger Ahead: The Coming Collapse of Canada's Municipal Infrastructure - Editor.
The municipal infrastructure deficit is now estimated at $123 billion. This is composed of:
( Water and wastewater: $31 billion
( Transportation: $21.7 billion
( Transit: $22.8 billion
( Cultural/social/community/recreational: $40.2 billion
( Waste management: $7.7 billion
WATER AND WASTEWATER
Assets in this category include:
( Water treatment, supply and distribution systems, including water mains, distribution pipes, pressure reducing stations, water meters, treatment plants, storage capacity and pumping stations; and
( Sanitary and storm sewers and related treatment facilities, including sewage pipes and interceptors, combined sewage pipes and interceptors, manholes, treatment plants and associated facilities and equipment, retention basins, septic tanks and lift stations.
As of 2000, water and wastewater systems made up approximately 30% of the Canada's municipal infrastructure stock. As Statistics Canada reported recently, "environmental management and the management of water systems mainly takes place at the local government level. Municipalities account for more than 80% of capital spending in these areas."
The Canadian Water and Wastewater Association (CWWA) estimated that Canada would need $88.5 billion to upgrade existing infrastructure and build new water and sewer systems between 1997 and 2012. And, according to Statistics Canada, investments in water systems "barely compensated for the aging of existing equipment from 1993 to 2002."
The Canadian Water Network has noted (2003) a water infrastructure deficit of up to $39 billion to maintain existing water and sewage systems. However, over a 10-year period, up to $90 billion may be needed to replace and upgrade this infrastructure across the country. This estimate is consistent with the finding of the FCM-McGill survey, which shows that the current deficit related to the water supply, wastewater and storm water system stands at $31 billion for the existing capital stock, while new needs are estimated at $56.6 billion.
The deficit for existing infrastructure in this area has increased considerably from $21 billion in the 1996 FCM-McGill survey to $31 billion today. This steep increase over the last 11 years can be attributed mostly to the aging of underground infrastructure and accelerated deterioration toward the end of an asset's service life. These factors are further aggravated by deferred maintenance.
There is a major need to rehabilitate water and sewage infrastructure, especially in larger, older cities such as Montreal, where 33% of water distribution pipes and about 3% of the sewage pipes reached the end of their service lives in 2002. Another 34% of the water-pipe stock will reach the same state by 2020, partly explaining the need for new infrastructure in larger cities where a more a feasible option for rehabilitation for an old deteriorated system could be reconstruction of the facility for enhanced service life and increased capacity.
The new needs are also inherent in smaller municipalities with populations smaller than 10,000 where water-supply systems may not exist and large investments will needed to build the systems from scratch.
TRANSPORTATION
Assets in this category include: paved roads; unpaved roads; sidewalks; curbs; bicycle paths; bridges; overpasses; road cleaning and snow removal equipment and facilities. As of 2000, transportation and public transit infrastructure made up approximately 55% of Canada's municipal infrastructure stock.
Much of the existing transportation systems in Canada, particularly the roads and highways built in the 1950s and 1960s, have reached the end of their service life and need to be replaced. Much of the newer transportation infrastructure also needs immediate attention due to a backlog of deferred maintenance over the years. According to Statistics Canada, "Governments have boosted the flow of investment in roads from $4.3 billion in 1998 to $7.3 billion in 2005, but this has barely offset the erosion of the road system."
The 2007 FCM-McGill survey indicates that municipalities need an additional $21.7 billion to maintain and upgrade existing transportation infrastructure assets.
The 1996 FCM-McGill survey considered roads, sidewalks, bridges and curbs as part of the transportation infrastructure category. The average cost to replace these was reported as $384 per capita for all population groups considered.
Based on the new $21.7 billion figure for the infrastructure deficit in this category, this number has almost doubled, rising to $686 per capita. As expected, the larger municipalities - with populations of greater than one million - account for 65% of this need.
There is also a significant need for investment in new transportation infrastructure of $28.5 billion. In this case, smaller municipalities accounted for approximately 38% of this need, confirming the need for more transportation networks and associated facilities in rural and northern communities, among other smaller communities.
TRANSIT
Assets in this category include:
( Rapid transit systems, light rail transit systems and subway, including track, rolling stock, stations, service facilities and parking facilities;
( Buses, including dedicated lanes, rolling stock, stations, service facilities and park-and-ride facilities; and
( Trams, including tracks, rolling stock, stations, service facilities and park-and-ride facilities.
The 1996 FCM-McGill survey included an average cost needed to upgrade transit infrastructure facilities of $103 per capita or a deficit of $3.05 billion. The 2007 results show that $22.8 billion are needed for existing infrastructure and $7.7 billion are needed for new transit infrastructure.
OTHER PUBLIC INFRASTRUCTURE ASSETS
This category includes:
( Cultural, social, community and recreational facilities (government buildings, public housing, public buildings, multi-purpose complexes, indoor and outdoor recreation facilities, and parks and playgrounds); and
( Waste management, including landfills, municipal recycling facilities and hazardous waste disposal, storage and recycling facilities.
The infrastructure stock included in the cultural, social, community and recreational categories is relatively broad and heterogeneous in the types of facilities it includes. These facilities are generally operated by local governments and need immediate attention, as many facilities are in poor condition and have inadequate capacity. Aging and accumulated deterioration have also strained these facilities considerably.
According to the Canadian Parks and Recreation Association (2007), the current deficit for sports and recreational facilities alone is $15 billion. This estimate covers only the repair, rehabilitation or replacement of existing facilities, and does not account for new infrastructure needed to address deficit capacity or new needs in a community.
In the 1996 FCM-McGill survey, which included parks and recreational facilities, public buildings and community and social services, the deficit for this category was estimated at $255 per capita, for a total of $7.55 billion.
The current deficit in this area is great and is estimated to be $40.2 billion. Some municipalities have already planned considerable expenditures in this area to deal with the present crisis. In terms of new needs, about $18.1 billion will be required in the near future to address this infrastructure category. This need is prevalent in larger cities and is associated with rapid urban growth. At the same time, many communities with populations of less than 100,000 may need to build new facilities in the future.
Waste management occupies a smaller share of the total deficit. The deficit for existing infrastructure is estimated at $7.7 billion, with an additional $4.3 billion required to meet new needs.
DEFERRAL COMPOUNDS CAPITAL NEEDS
By definition, infrastructure spending relates mainly to long-lived capital assets. Capital investments have inherent long-term characteristics: investments in new infrastructure must include plans to repair and eventually replace the asset.
As infrastructure investments declined in the late 1970s and 1980, maintenance, repair and rehabilitation activities were often deferred, even at the risk of jeopardizing assets and reducing their service life. Reversing this negligence is much more expensive than regular maintenance, so much so that it may not be possible to rehabilitate an asset, which instead must be decommissioned, demolished and constructed anew at an exorbitant cost to the taxpayer.
One of the principal causes of the extensive deterioration of Canada's infrastructure is deferred maintenance during fiscally difficult times. It is instructive to examine the influence of maintenance on the quality of performance and service life of a typical infrastructure asset. The qualitative influence of four different levels of annual maintenance rates - ranging from no maintenance (which would be the case with deferred maintenance) to 2% of the asset's construction cost, which would normally keep the asset in acceptable operating condition with ongoing low-cost regular maintenance was compared.
With no maintenance or sporadic deferred maintenance, the infrastructure facility deteriorates very rapidly and with a considerable reduction in its service life. However, if about 2% of the facility cost is invested in maintenance, the deterioration is much slower and a considerably longer service life is achieved. This clearly highlights the importance of both maintaining the infrastructure facility adequately and not deferring maintenance under any circumstances.
Without maintenance or with deferred maintenance, the municipal infrastructure deficit could be close to $2 trillion by 2065. However, with regular maintenance and good scientific management, the escalating infrastructure deficit can be controlled and within manageable levels. In other words, infrastructure will grow old gracefully - that is, attain its service life and beyond in reasonable condition requiring inexpensive routine maintenance. Alternatively, the cost of the actions needed for renewal of municipal and other infrastructure would be so high that governments would not be able to cope with them.
More research is required to establish the current rate of investment in infrastructure maintenance, repairs and rehabilitation. However, all available evidence suggests it is below the level required to keep municipal assets in good repair.
The complete text of Danger Ahead: The Coming Collapse of Canada's Municipal Infrastructure can be found at www.fcm.ca/english/advocacy/mdeficit.pdf.
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