US Cities Face a $1T Infrastructure Repair Backlog

US cities may be sitting on one of commercial real estate’s most overlooked risks: aging infrastructure that isn’t fully reflected on municipal balance sheets. The WSJ reports that a new study from municipal finance researcher Richard Ciccarone estimates that deferred wear and tear across roads, bridges, buildings, vehicles, and public systems in roughly 2,000 US cities totals $1.03T.

The report lands as local governments continue balancing pension obligations, debt service, and rising operating costs while many public assets age beyond their intended lifespan. For CRE owners and developers, deteriorating infrastructure increasingly affects everything from tenant demand and insurance costs to redevelopment timelines and municipal fiscal health.

A Hidden Municipal Burden

Ciccarone, founder of Merritt Research Services, analyzed infrastructure assets based on their original cost, expected useful life, and inflation-adjusted depreciation. His estimate is not a direct replacement-cost figure, but rather an attempt to quantify deferred maintenance obligations that cities have largely avoided booking as liabilities.

The comparison is striking. According to the study, the estimated infrastructure wear and tear equals more than three times the municipal bond debt carried by the cities analyzed and roughly four times their pension liabilities.

Unlike pensions, which accounting rules forced cities to recognize on balance sheets beginning in 2014, infrastructure deterioration remains mostly invisible in municipal financial statements. That creates little immediate pressure for elected officials to prioritize repairs when budgets tighten.

The Details

Older industrial cities emerged as some of the most exposed markets. Philadelphia, Baltimore, and Milwaukee ranked among the municipalities facing the largest infrastructure burdens due to aging systems and slower population growth.

Philadelphia is currently weighing a $1.5B city-funded infrastructure initiative over the next six years, according to city finance director Rob Dubow, while expecting another roughly $20B from state and federal sources. Baltimore is already in the middle of a 10-year capital spending plan focused heavily on infrastructure modernization.

The consequences of deferred maintenance are no longer theoretical. In 2022, Jackson, Mississippi’s aging water-treatment system failed after flooding overwhelmed the facility, leaving residents without safe drinking water for weeks. That same year, a bridge collapse in Pittsburgh injured 10 people, with federal investigators later citing maintenance failures.

Meanwhile, faster-growing Sun Belt cities generally scored better in the study. Austin, Charlotte, Phoenix, and Jacksonville benefited from newer infrastructure systems, stronger tax growth, and in some cases dedicated infrastructure funding mechanisms.

The Infrastructure Divide

The study highlights an increasingly important divide between legacy cities and high-growth metros. Older cities often face shrinking tax bases alongside aging infrastructure networks built decades ago for larger populations and manufacturing economies.

By contrast, many Sun Belt markets have expanded alongside newer roads, utilities, and public facilities, giving municipalities more flexibility as population growth boosts tax revenues. Jacksonville, for example, ranked relatively well despite pension challenges thanks to a dedicated infrastructure sales tax, federal stimulus funding, and post-hurricane rebuilding efforts.

That divergence matters for commercial real estate. Infrastructure quality increasingly influences where employers expand, where multifamily demand concentrates, and how investors underwrite long-term market risk.

Why It Matters

Municipal infrastructure stress has direct implications for CRE fundamentals. Aging transit systems, unreliable utilities, and deteriorating roads can weaken economic competitiveness, slow development activity, and increase operating costs for property owners.

The issue also carries growing financial-market significance. The $4T municipal bond market has historically focused heavily on pension liabilities and debt levels, but infrastructure obligations could become a larger credit consideration if accounting standards evolve. That shift comes as municipalities are already leaning more heavily on bond financing to fund large-scale housing and infrastructure-related initiatives, particularly as traditional funding sources remain constrained.

The Governmental Accounting Standards Board is already considering stricter disclosure requirements for infrastructure assets nearing the end of their useful lives. If cities eventually have to recognize more infrastructure-related liabilities, local governments could face pressure to raise taxes, cut services, or defer other spending priorities.

What’s Next

Cities are likely to rely increasingly on a mix of federal infrastructure dollars, targeted local taxes, and public-private partnerships to close repair gaps over the next decade. But many municipalities remain structurally underfunded relative to long-term maintenance needs.

For CRE investors, the trend reinforces the importance of underwriting municipal health alongside property fundamentals. Markets with aging infrastructure and weak fiscal flexibility may face growing challenges attracting investment, while cities actively modernizing public systems could strengthen their competitive position for employers, residents, and capital.