Brian Pugh: Thinking Strategically About Our Infrastructure Investments

To the Editor:
Recently, NYS Comptroller Tom DiNapoli released a report that places the state’s drinking water infrastructure needs at $40 billion. Fortunately, the Village of Croton on Hudson has been ahead of the curve on this issue–undertaking a historic once-in-a-generation upgrade to our water system.
Although some decried recent issues of municipal bonds, I believe that recent events have demonstrated the prudence of making improvements to our infrastructure at a time when interest rates were at historic lows and construction costs were moderate–an era that’s drawing to a close.
As many readers may already be aware, the Federal Reserve has raised its benchmark interest rate for the second time in three months and signaled further hikes this year. The move will likely mean higher rates on municipal bonds.  The Wall Street Journal also forecasts continuing interest rate increases in the years to come.
This squeeze could get tighter still. “If the Trump administration passes tax reform and successfully pushes infrastructure spending, the Fed may increase its rate-hike plans,” warns the financial newspaper Barrons.
And it is not just interest rates that are going up.  According to industry experts, the cost of construction (and therefore the “principal” of future municipal bonds) is increasing and at rates well above the coverall rate of inflation.
Meanwhile future opportunities for federal funding support for municipal infrastructure projects are dwindling.  Donald Trump’s first annual budget request to Congress proposes to cut $2.4 billion from discretionary transportation programs—a 12.7% reduction from FY 2017.
We must remain aware that the window for affordable investments in infrastructure may well be closing.  Delaying key projects may force the Village to pay more for less in the the near-future. As the Village Board works to develop this year’s budget, I hope that we will make far-sighted strategic decisions about what is in the long-term interest of our community.
Brian Pugh

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