Growth demands costly infrastructure
Columbia Daily Tribune

In this article we present data to show that infrastructure associated with urban and suburban population growth is expensive. In subsequent articles we will show that existing taxpayers and utility users underwrite or subsidize much of that cost; we also will offer alternatives for financing infrastructure. Our purpose is to provide facts that can serve as a basis for stimulating and encouraging an open discussion of alternatives for financing infrastructure and their possible consequences.

Current public financing of infrastructure in the outlying regions of the Columbia metropolitan area and Boone County threatens to promote unregulated, leapfrog - noncontiguous - development and, ultimately, to lead to the loss of natural areas important to the rural character of the county while draining potential resources from the central city. Infrastructure consists of transportation systems, sanitary sewer systems, water systems, electrical systems, schools, parks, libraries, fire protection buildings and major equipment, police stations and jails, and buildings, land and major equipment for other public services.

Costs associated with infrastructure can be divided into two categories: capital and operating. Capital costs typically are large one-time investments made to construct or expand infrastructure, such as building a new sewer line. Operating costs are expenses for operating and maintaining the infrastructure, such as keeping the water treatment plant operating 24 hours per day. Capital costs can be divided further into costs within subdivisions - internal - and costs outside of subdivisions - external - for infrastructure necessary to serve needs within subdivisions. What follows refers only to external infrastructure capital costs.

External infrastructure capital costs are a function of peak demand and distance from a service center. The greater the peak demand, the bigger the system needs to be. Peak demand is a function of the potential number of users and the amount used by each user during peak periods. Distance increases the cost for those systems with service areas that distribute - e.g., water and electricity - or collect - e.g., sewers and roads.

We recently conducted a survey by telephone, of recent literature, and of Internet Web sites to determine infrastructure costs and development-impact fees in some communities around the United States, including all Big 12 cities. Only six, including Lincoln, Neb., provided recent infrastructure cost information; consultants who were hired by the respective governing units generated the data. The total median infrastructure cost per new residence was $32,689.

Are these numbers representative of Columbia and Boone County? We undertook several local studies to find out. We felt that if the numbers for these selected local numbers agreed with the survey numbers, the other survey numbers probably are representative. We followed methodological guidelines provided in a book, "A Practitioner’s Guide To Development Impact Fees," and published by The American Planning Association, of which Columbia is a member. To determine the cost of infrastructure associated with growth, users generally are broken up into user groups - residential, commercial, industrial, institutional, etc. In general, specific infrastructure capital costs for the typical user in each user group can be estimated as follows:

● Determine the total cost of the project - for example, $1 million.

● Allocate cost to user groups based on their collective use of the infrastructure during peak periods - for example, 60 percent of peak demand is residential, so $600,000 of the cost is allocated to residential users.

● And allocate cost to the average user within user groups - for example, $600,000 divided by 1,000 dwelling units equals $600 per dwelling unit.

Each step presented obstacles unique to the type of infrastructure and the type of data available. Assumptions were required for some of the calculations. We used what we felt were conservative assumptions so that we would not be accused of padding our numbers. Sometimes the assumptions were modified as new data became available. At all steps, experts within the appropriate city, school or county departments were consulted for input and review. Two University of Missouri economists have agreed that our numbers are reasonable. Some specifics are provided in the table at left. Costs presented in the table are not the total costs; they represent only the infrastructure costs allocated to the residential user group. In addition, some cost categories were not included, such as solid waste.

One general assumption was that, if facilities outside a development are required for the internal system to function, proportionate shares - based on number of users at capacity - of external costs should be allocated to dwelling units in the development. It’s obvious that each development needs external water, sanitary sewers, roads, electricity, etc. Other, less obvious needs are schools, parks, libraries, etc. Excess capacity was built into existing external systems to handle growth, and costs were associated with this excess capacity. A full accounting of the costs of external infrastructure would allocate the proportionate share of costs for excess capacity to those who will eventually use them. Who should pay these costs is a topic for later discussion.

Another general assumption was that replacement costs are appropriate to use. Most infrastructure has a long life, so little depreciation occurs in the short term. Because of the cost of inflation, most infrastructure actually increases in value in current dollars over time; for example, most homes in Columbia that have been maintained are worth more today than when they were built. No interest costs were included in our calculations, but it is reasonable to expect interest on bonds to increase the total cost over the life of 20-year bonds by 50 to 75 percent. Therefore, we believe replacement cost probably is a reasonable estimate of present cost. An additional caveat is that replacement cost is relatively easy to determine, especially when similar infrastructure has been built recently.

Our cost analysis is based on maintaining the same level of service, except for transportation, that exists today as the population grows. Level of service refers to such parameters as pressure in water mains, number of pupils per teacher or building, level of pollutants in water, amount of congestion on roads, etc. The cost of maintaining level of service for transportation is prohibitive, so the cost we used allows for a significant increase in congestion.

For most city of Columbia calculations, we used 2000 census data. In April 2000 there were 33,689 households averaging 2.26 people each in Columbia. The Boone County Assessor’s Office provided the current number of households - 24,802 - within the 1965 city limits. The Water and Light Department provided information about the current and projected number of meters.

We have developed local estimates for external infrastructure for schools, water, sanitary sewers, fire stations and libraries in Columbia and for some sanitary sewers and libraries in Boone County. We use national survey figures for other infrastructure costs as discussed above. The results are presented in the table.

Using this analysis, the allocated cost per dwelling unit for Columbia is slightly more than $30,000. In other words, it costs about $30,000 to supply external infrastructure for each new home in Columbia. This number will change as we collect more data. This local number is lower than the survey figures. Note that in Boone County, electric and water infrastructures are co-ops, but we assumed their costs probably are similar to those of public facilities.

The most important point to take from this article is that external infrastructure costs are huge. When allocated per new home, these costs remain large. The cost of building new schools is the largest of all - 40 percent of the total. The cost of electrical facilities is a distant second at 23 percent of the total; however, this might change after the local electric infrastructure cost is determined. Transportation is next at 14 percent of the total, but recall that this is far below the theoretical cost to maintain service.

An external infrastructure cost of $30,000 per dwelling unit does not mean each new home in Columbia or Boone County should or would cost $30,000 more. It does show there are large expenses to the community as a whole. In subsequent articles we will show who pays for infrastructure in Columbia and Boone County and what alternatives exist for financing infrastructure.