Tuesday, September 25, 2007

Infrastructure planning and Maintenance

When any type of new infrastructure is being evaluated, its maintenance cost must also be calculated over the structures useful life. When this is not done, then at some future date, a bill will come due to fix or replace something. Any new infrastructure must accrual its costs each year so that there is no need to borrow, float a bond or raise taxes. Our problem has been that we build something now and that is all the cost there will be.

Anyone who owns a home knows that as the home ages, things need replacing such as windows, paint, furnace, AC, cabinets, carpet and more. These are large expenses that occure years apart. Generally speaking you need to set aside 1.5% to 2.5% of the value a year. Otherwise, these expenses will have to come out of current income or cut expenses.

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