In this article, Peter Nichols discusses the social, economic, and fiscal importance of municipal infrastructure and argues for more attention to this relatively neglected area of local responsibility.

Can there be any doubt as to the core importance of properly functioning and well maintained municipal infrastructure, including roads, water and sewer systems, parks and recreation facilities, and public works and emergency equipment? These facilities are at the very essence of what makes a community work and they are integral to the quality of life of residents. Local transportation and environmental conditions (together with policing and zoning matters) have been shown to be fundamentally important to business, and those conditions are strongly linked to municipal infrastructure.

But despite the obvious importance and role of community infrastructure, it seems often that municipal operational matters absorb much of the attention of local councils and administrators. Perhaps this operational orientation is explained in part by the existence of relatively short-term one or two-year budget and election cycles. Compared to operational issues, infrastructure decisions tend to have less immediacy and usually convey much longer term cost and benefit implications -- and as a result are easier to put on the "back burner".

Notwithstanding the lesser attention, the quality and standard of municipal infrastructure in this province remains generally high -- a legacy in part of 1970s and early 1980s economic growth and facility spending and the historical levels of senior government grant programs. That said, there are a number of signs for increasing concern:

• The deferral by municipalities of capital expenditures in recent years as provincial transfer reductions have taken hold. These deferrals have had the effect of allowing infrastructure to deteriorate, and at the same time compounding future maintenance and replacement costs. These backlogs of capital spending -- which often can no longer be delayed -- are now beginning to seriously affect the budgets of some municipalities.
  
• A rising demand for new infrastructure to accommodate the resurgence in the local and provincial economies. During the slow-growth period of the late 1980s and early 1990s, capital requirements were typically modest and of an incremental nature. As urban growth continues to accelerate, many municipalities will soon face the need for major new infrastructure spending. How able will they be to respond to these new demands?
  
• The need to tie the competing demands for new capital spending within an overall strategy and set of priorities. Often, municipalities gather together a long list of capital spending requests and allocate funds in a somewhat piece-meal and ad hoc manner. There is a compelling need among municipalities to improve the overall project priorization and approval process.
  
• The need to revisit and redefine financing policies. Municipalities often have never articulated their capital financing policies or, if they have, they have not re-assessed them for some time. It may be time to revisit those policies. Which projects will you debt finance and which will you fund on a pay-as-you-go basis? If the latter, are reserve provisions adequate? Will you generate funds through user fees or general tax revenues or developer contributions and levies? Are existing fees and levies appropriate? Who will front-end new utility infrastructure and the financing of over-sizing requirements? And if financing changes are proposed, what will be the impacts? These are some of the questions that should be examined and resolved.
  
• The need to review local infrastructure standards. Public needs and priorities change over time. Material qualities improve and construction processes change. Infrastructure standards that were appropriate in the past may now be outdated. For example, with more sprinkler systems and lower fire losses, are fewer fire stations required? Conversely, more demanding environmental concerns may call for improved solid waste disposal and sewage treatment facilities. When was the last time your municipality re-examined its infrastructure standards?
  
• A need to improve facility planning and evaluation procedures. During the last cycle of major capital spending, a number of municipalities succumbed to overbuilding -- and some are still paying the price through excessive debt servicing costs. In our consulting practice, we witness investment decisions that are based on illusory "economies of scale" arguments or which ignore phasing solutions that may conserve capital and reduce risks.
  
• Finally, the need to assess periodically whether it would be appropriate to privatize certain infrastructure components. Ensuring the provision of essential infrastructure does not necessarily imply the need for municipal ownership. A number of jurisdictions have moved away from the direct ownership of administrative and recreation facilities, airports, vehicles, and so forth, and a few have privatized water and sewage treatment facilities and even fire-fighting services and facilities.

It is clear that in recent years many municipalities have taken up the challenge to improve their operational efficiency and effectiveness. Given the importance of municipal infrastructure and the magnitude of investment dollars involved, perhaps it's time to shift some of that innovation effort toward the capital side of the municipal spending equation!