OREANDA-NEWS. April 05, 2016. Rob Duncan is a Solutions Consultant for ABM Building & Energy Solutions.

Cities, towns, counties, and other municipalities encounter financial imbalances because of a multitude of factors that negatively impact their budgets and limit their ability to fund all of their critical infrastructure needs. In fact, this is one of the most pressing challenges they face. Creative, energy-based funding solutions are changing the tide, and helping local governments to overcome budget obstacles and finally invest in needed infrastructure improvements to make their facilities more operationally and energy efficient, comfortable, healthy, and safe.

In Part I of my two-part blog post, I’ll explore the details behind the financial challenges faced by local governments who lack the necessary funding to enhance their infrastructure. Read on to learn more:

It’s no secret infrastructure needs have become a critical challenge for local governments. Cities and counties are trying to catch-up on deferred investment in roads, drinking water, wastewater, building and public parks and recreation. While financial conditions have stabilized somewhat, municipalities have had to defer infrastructure projects to balance budgets. The backlog of needs and lack of funding have been budget constraints since the start of the recession.

With the infrastructure needs mounting, many reports have been published revealing these financial challenges. In fact, the 2015 Menino Survey of Mayors found that aging and underfunded physical infrastructure weighs most heavily on the mind of mayors, who identify it as the most pressing challenge they face.

Resource Demands Have Outpaced Resources for an Extended Period of Time

While an uptick in new revenues are providing some much needed financial relief for local governments and making it easier to balance the budget, financial sustainability includes the ability to proactively address necessary infrastructure that will not be possible without additional sources of funding.

The cause and effect relationship of insufficient funding and mounting deferred infrastructure improvements is obvious. However, the current challenges are not limited to the recent past and the impact of the recession. The public service demands in local government have outpaced the ability to raise revenue for quite some time. According to the Walking a Tightrope: Are U.S. State and Local Governments on a Fiscally Sustainable Path? whitepaper, the nationwide per capita trend gap has been on a growing path over the last three decades.

Perhaps the most critical step to jump starting new investment in infrastructure will be new debt issuance. Municipalities have reduced new money borrowing for capital purposes, reflecting a reluctance to commit to expensive projects in times of uncertainty and revenue constraints. Also, their decline in borrowing corresponds to a decline in capital spending, revealing a reliance on debt issuance as a main source of infrastructure funding. For more on this topic, check out this Moody’s Investor Service article.

Concern over new debt is commonplace in local governments. City of Temple Terrace (Florida) Council Member Grant Rimbey recently said to me, “Numerically we might be recovering, but the mind frame and perception of elected officials that I know is still one of fear.” And, I have witnessed this fear first hand at many local government meetings during the last few years as public officials continue to prioritize a conservative financial approach and avoid long-term spending commitments. Deferred investment leads to excessive annual costs because of reactive repairs and unnecessary utility spending. Failing to properly maintain facilities can also impact the municipality’s ability to provide services, which could have further budget consequences.

Reactive and unbudgeted spending costs from deferred maintenance cost local governments more on an annual basis than it would cost to implement improvements on a structure program. In these instances, fear is serving to increase the trend gap as cost of services are increasing at an artificially faster rate.

Stay tuned next week for Part II of this blog series. You’ll learn more about how innovative local governments are leveraging inventive financial strategies to overcome their funding issues and invest in much needed infrastructure improvements. Many municipalities are receiving millions of dollars in energy and operational savings – without adding any new taxpayer burden.