A new study estimates U.S. cities face a $1.03 trillion liability for aging infrastructure, a hidden cost that could impact municipal bonds and city budgets.
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US Cities Face a $1.03 Trillion Bill for Hidden Infrastructure Decay
A new study has placed a number on the crumbling foundation of urban America, estimating a $1.03 trillion liability from the accumulated wear and tear on infrastructure across 2,000 U.S. cities. The figure highlights a massive, off-balance-sheet risk that could eventually force tax increases and service cuts.
“You’re hiding an obligation or a commitment that’s got to be made sooner or later, and it’s usually more expensive at that point,” Richard Ciccarone, the study's author and a veteran of the municipal market, said. He noted many city structures are already well past their intended expiration date.
The study, published by Investortools, found the $1.03 trillion figure is more than three times the cities’ municipal bond debt and four times their pension debt. Older industrial cities like Philadelphia, Baltimore, and Milwaukee carry some of the largest potential burdens. In contrast, growing Sun Belt cities such as Austin, Charlotte, and Phoenix were found to be in better shape.
The core issue is that these future costs are not defined as liabilities under current Governmental Accounting Standards Board (GASB) rules, making them invisible to investors in the $4 trillion municipal bond market. This creates a situation analogous to the one cities faced before a 2014 rule change forced them to account for long-term pension obligations, which subsequently led to credit downgrades, budget cuts, and falling bond prices for many.
The High Cost of Delay
Breakdowns of aging infrastructure can be disruptive and dangerous. Residents in Jackson, Mississippi, were left without drinking water for weeks in 2022 after flooding overwhelmed an out-of-date water treatment facility. That same year, a Pittsburgh bridge collapsed, injuring 10 people, after the city failed to perform needed maintenance and repairs, according to federal investigators.
To arrive at the $1.03 trillion figure, Ciccarone multiplied the original cost of an asset by the portion of its "useful life" that has passed, then adjusted for inflation. While this provides a snapshot of the scale of the issue, the study acknowledges the actual repair costs could be different and that assets can often function safely past their estimated life.
A Familiar Financial Reckoning
Some cities are already moving to address the shortfalls. Philadelphia is considering spending $1.5 billion in city funds over the next six years, expecting to leverage an additional $20 billion from federal and state governments. Baltimore is also in the middle of a 10-year spending plan that includes significant infrastructure updates.
The study serves as a critical first step in quantifying a long-ignored financial risk. The GASB is reportedly considering rules that would force more transparency around infrastructure assets at the end of their useful lives. Should the board eventually move to define this deferred maintenance as a formal liability, cities across the country could face a sudden and painful fiscal reckoning.
"How do people make budgetary decisions about how scarce resources are getting spent?" Lisa Washburn, a managing director at Municipal Market Analytics, said in reaction to the study's findings.
This article is for informational purposes only and does not constitute investment advice.
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