Guidebolt

Infrastructure

2018.03.09

Construction, Maintenance, Modernization

All types of infrastructure spending creates jobs. Additionally, new infrastructure creates new commercial opportunities (ex. airports for air freight) and reduces costs (ex. roads for travel efficiency). But infrastructure maintenance does not. Therefore, new infrastructure has much higher marginal value than maintaining infrastructure, from both a tax revenue and business growth perspective.

Infrastructure modernization sits in the middle. Energy-efficient upgrades with a quick payback period are a great combination of maintenance (ex. old equipment was going to break down in 2 years, new one will last 20 years) and cost-effectiveness (ex. new equipment pays for itself in 5 years with energy savings). On the other hand, lifespan upgrades can be great in terms of cost per year, but are weak in terms of adding tax revenue much like maintenance.

For a balanced budget, infrastructure must be thought of as a continuous expense based on the costs of construction and maintenance over the lifespan of the installation.