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VIDEO and ARTICLE. “InPerspective” from Gregg A. Diéguez, Director of Sustainability – SHIFT Bay Area and Founder: MIT Club of Northern Calif. Energy & Environment Program. Was also on the Midcoast Commmunity Council (MCC) from 2020 to 2024.
Video is from a public hearing held by GASB (Government Accounting Standards Board) on Wednesday February 12th, 2025.
“Your public works infrastructure is decaying without a fiscally sustainable plan to replenish it. Allowing public works to fall into disrepair will lead to critical failures which will ultimately burden residents more when costly emergency remedies become necessary and when borrowing, at 70% additional cost, must be used to replenish exhausted assets. I’m not saying your Government is lying to you about this situation, because most of them don’t even realize it. And that’s another problem we’re going to fix…
But what is coming to a ballot bond or tax measure near you soon, is a request for a LOT more of your money. And much of it does not deserve to be funded. And for the parts that are valid, we need EFFECTIVE Oversight – as opposed to the sham and farce we have now. In addition, we need a new model of governance, because continuing to fund what got us into this mess is just insanity.
In an analysis last year, I found $6.7 Billion in reserve deficits for SFPUC. Those are the folks who provide 3.5 Bay Area counties most of their water. SFPUC is not only “under water”, it has so much bond debt it is cash flow negative. Ratepayers should expect 20% rate increases for the next couple of years. But that’s just one example, there will be many more.
Public Works Infrastructure is often “perpetual”, meaning that the services provided are essential to our civilization, and must be funded as long as we live here. Even a memorial park bench, if it is truly perpetual, has an infinite cost – because it must be repainted; cracked boards must be replaced; rust must be sanded off; and eventually the base must be replaced – over and over again. And at 3.5% inflation, every 40 years an asset QUADRUPLES in cost. So that $10 million sewer pump station will cost $40 million to replace after 40 years. What this means to us residents and taxpayers is that we have to be VERY CAREFUL about what infrastructure we build.
We also need to tell the truth about the looming replacement cost of our infrastructure. Which is why I submitted a paper to the Government Accounting Standards Board (GASB) as they consider changes to Infrastructure Accounting.
A video of my testimony is here.
There is a way to estimate the Capital Reserve Adequacy of government entities (and condo associations, or any business for that matter). An article on the methodology is here: The Iceberg of Public Works Deficits, and a 2022 survey of some San Mateo County public works entities is here: Public Works’ Capital Deficits – How Deep Is The Hole?. Things are worse now, as we at SHIFT shall show in coming months.
Our failure to anticipate and fund infrastructure replenishment is an Inter-generational Injustice. As we deplete our infrastructure to rust and dust, we’re telling our descendants “Here, now you can rebuild our civilization and, oh by the way, pay 70% more in bond interest, because we undercharged ourselves as we exhausted it”.
To quote a founder of our local water & sewer agency:
“In 1974 we got 7/8ths of the money from the Clean Water Act, and then we forgot we’d have to replace the plant”
My hope is that GASB will change accounting practices, as they did for Unfunded Pension Liabilities, to require disclosure of the future costs of infrastructure and of the variance between those costs and current reserves. Our job at SHIFT will be to advise you, dear reader, on what the hidden costs of that infrastructure are, so you can decide what Infinite Cost Infrastructure is worth keeping and paying for.
In future articles, we will detail the infrastructure funding deficits on several fronts: transit, water, sewer, power, schools – and we’ll contrast effective governance and oversight with what we have today.”
More with Gregg Dieguez and InPerspective on Coastside Buzz
Author: mdrag
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