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Infrastructure Debt Index Supports Investment Decisions

One of the key objectives of Asset Management is the ability to assess the long-term impacts of deferred or accelerated funding. With a growing infrastructure system, funding cuts typically have an adverse affect on future asset condition and performance targets (outcomes). Having a multi-year investment plan covering all life cycle costs and all assets enables a jurisdiction to not only minimize adverse outcome impacts, but to assess the future debt and the premium that must eventually be paid to recover. Combining the multi-year investment plan with sound asset valuation information data allows a jurisdiction to quantify debt versus outcomes and report the findings through an infrastructure debt index over a variety of funding scenarios. The Infrastructure Debt Index (IDI) is the asset's accumulated deterioration divided by the cost to replace the asset. In the example below the IDI = 6,836/45,770 = 15%.

Example: Asset Valuation Data
(Asset values in millions)

Replacement Cost

Deterioration

Current Value

Highway Surface 8,999 2,480 6,519
Highway Sub-surface 10,300 1,362 8,938
Bridge Deck 1,741 447 1,294
Bridge Structure 2,663 700 1,963
Land 4,442 71 4,371
Land Improvements 13,326 896 12,430
Furniture 3,779 652 3,127
Buildings 93 32 61
Auxiliary Pavement 64 25 39
Other 363 171 192
Total 45,770 6,836 38,934

The following chart shows the interaction between the growing infrastructure debt (red) and the IDI (yellow bars). The example below shows how a cumulative 410 million dollar need growing at 10% per year outgrows a fixed cumulative $400 million dollar funding level. Over a 15-year period the unfunded infrastructure needs have grown to about $3 billion dollars.

Sample chart showing growing debt versus funding. The IDI can be divided into competing infrastructure needs and their interaction modeled:
       * Ongoing repair
       * Reconstruction
       * Operational improvements; or
       * Expansion.

These can be further separated into different asset categories, such as pavement, bridges, ferries, utilities, etc.

Using the debt and IDI information, jurisdictions can assess funding levels in combination with internal and external design and construction capability to eliminate the debt or simply arrest its growth. These funding levels can be seen as steady state funding levels that provide steady state investment outcomes around asset condition and performance.

In this example steady state funding would result in a paralleling of the red area with the blue area at some point in the future. This state will not remove the debt or improve infrastructure condition/ performance, and may still result in the growth of operational debt due to status quo safety and congestion problems.

This type of financial analysis may be used successfully with funding agencies to demonstrate the long-term impacts of investment decisions.

 

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