Back when I was on the governing board of a state college, I was surprised to learn that our redoubtable, familiar red-brick dorms and classroom buildings had a life span — determined by maintenance costs. On some campuses (not ours, fortunately), the buildings were slapped up to cope with the influx of baby boomer students and became shabby very quickly. I had a building inspector friend in the mid-1990s who had the grim task of dealing with a university music facility with a collapsing ceiling, but it was only 20 years old! Clearly, in the big-spending sixties and seventies, nobody thought about lifecycle budgeting, but it’s an idea that’s catching on now in our era of massive government fiscal constraints.
Many ordinary Americans do lifecycle budgeting every time they go shopping in a big-box store for major appliances. If you’re one of those who takes into account the information on the appliance’s energy usage sticker, you’re practicing lifecycle budgeting because you’re factoring in the annual cost to operate the fridge, washer, etc.
Sounds sensible, doesn’t it? You’d think this would be the standard for states as they decide on infrastructure projects, but frequently it’s not.
For example, the Pew Charitable Trusts with the Rockefeller Foundation recently released a report ranking the 50 states on the effectiveness of their transportation spending; one of its six metrics is “environmental stewardship,” which includes climate change considerations. Lifecycle budgeting isn’t on their menu, however.
Their report nods to the need for cost-benefit analysis, but in reality, politicians, not robots, are making the decisions, and politicians are easily distracted by bright, shiny promises of near-term jobs resulting from construction spending. Looking at lifecycle costs adds a critical dimension to decision making.
You may recall that last year, New Jersey governor Chris Christie cancelled plans for a commuter rail tunnel to Manhattan over concerns that his state would have to pay for additional costs, ranging from $2.5 to $5 billion.
Meanwhile, in northern Virginia, local governments are alarmed by the costs of building an underground subway station at Dulles International Airport. An unelected D.C. airport authority board chose the underground option instead of a less-costly above-ground station, but the bill is being paid for by taxpayers in two Virginia counties as well as their toll-road users. Plus, the total cost for the project has exceeded the original estimate by $1 billion; it now stands at $3.5 billion. No wonder Virginians are angry!
And I wonder about all those Obama stimulus infrastructure projects, such as a huge new passenger rail station that’s being built in Normal, Illinois. Normal’s annual passenger traffic is about 200,000; by contrast, my local station in Wilmington (yes, the one’s that named for Joe Biden) has about 700,000. Warning to the good folks in Normal: just because you build it doesn’t mean they will come. And if they don’t, you’re going to be stuck with the bill once the federal money dries up (and it will). Those high-paying union construction jobs will melt away once the ribbon is cut, and the local taxpayers will soon find out what the true cost of the project is.
Lifecycle budgeting isn’t just a good thing to do; it’s a moral obligation that decision-makers owe the taxpayers . . . you know, the folks who actually have to write the checks!
Joanne Butler is a senior economics fellow at the Caesar Rodney Institute of Delaware. You can email her at email@example.com.