San Diego Infrastructure Funding Gap Exceeds $5 Billion

The financing gap for infrastructure projects in San Diego exceeded $5 billion this winter for the first time, a nearly 20 percent jump driven by soaring needs for park projects, street lighting upgrades and flood prevention.

The city’s infrastructure debt — the gap between projected infrastructure needs for the next five years and the funding available for them — has increased from $4.32 billion last winter to $5.17 billion now.

“Past decisions have dug a very deep hole,” said City Council member Joe LaCava. “I think we are really doing our best to try and resolve this issue in a very transparent way. We have a long way to go.”

This year’s jump is partly due to new state mandates, rising material and labor costs, and the city’s focus on its infrastructure, comprehensively reviewing all of its assets in recent years.

For example, the city’s first comprehensive assessment of parks a year ago increased the projected need for park infrastructure funding over the next five years by 57 percent, from $700 million to $1.1 billion.

Required street lighting funding more than doubled from $281 million to $574 million as the City prioritized repairing broken lights and inflation increased the cost of those repairs.

Street paving costs also skyrocketed from $430 million to $987 million. The city said inflation was a key factor as the city revises its estimated cost per mile of pavement from $800,000 to $1.5 million.

Spending on storm water projects, which include flood prevention and water quality measures, has increased from $1.4 billion to $2.1 billion, the highest cost of any urban infrastructure need.

City officials say San Diego faces a bigger infrastructure challenge than many other cities because its biggest population boom came in the 1950s and 60s, meaning that much of the infrastructure built during of this boom is nearing the end of its lifespan.

“Our city is aging,” says Caryn McGriff, deputy director of the city’s Department of Engineering and Capital Projects. “As a result of the periodic population booms in the past, we have more end-of-life infrastructure than in previous years.”

And these are not just ordinary replacements. The city says it must replace bridges, roads, sewers, storm drains and other infrastructure projects with new versions that comply with current seismic standards and dozens of other regulations.

“We are not only replacing more, but we are replacing more to a higher standard and with a focus on the future,” McGriff said.

The infrastructure funding gap, summarized in a 38-page report released by the City this week, would have been even larger had the City not excluded some building upgrades from the analysis.

The estimated cost of building upgrades over five years has fallen from $618 million in last year’s analysis to $78 million.

McGriff said the city did not estimate the necessary costs to upgrade the building because several factors led them to doubt they could provide reliable estimates.

These factors included the need for an updated assessment of the condition of all city buildings. The last assessment was carried out from 2014 to 2016. Another factor was the new city mandate, renovated buildings do not emit greenhouse gases.

The city’s funding gap would also be much higher if the analysis included the projected costs associated with rising sea levels and other issues the city expects due to climate change.

The analysis also excludes estimated costs for special projects, such as the possible expansion of the waterfront convention center.

City Councilwoman Monica Montgomery Stepp said she would like future versions of the report to include estimates of the infrastructure upgrades that will be required to support all of the new mid-rise and high-rise housing projects the city approves.

The City has said these costs are not included in part because the funding will come from the developers who build the projects.

The city’s infrastructure funding gap continues to widen despite a steady increase in the money San Diego receives from projects, including commissions from developers, money from the state gas tax, and two dozen other sources.

Since 2019, projected city funding for projects has increased from $3.76 billion to $4.58 billion. But the projected cost of required projects has risen even more sharply, from $5.62 billion to $9.75 billion.

The City says a key factor in these cost growth projections is that San Diego is the only city in the region to have priced all of its infrastructure over the past decade. It’s also the only city to assess its infrastructure funding shortfall each winter, a practice that began eight years ago.

While the funding gap is daunting, city officials say they’d rather know where they are than remain in the dark and kick the can on their way to future city leaders.

Officials say this has been going on for decades, creating the problem the city is facing now.

“Over the past nine years, the city has come a long way in understanding capital needs and being transparent,” said Erin Noel, financial and political analyst at the independent City Budget Analyst.

Noel, however, criticized the analysis for excluding a key data item included in previous years: projected funding gaps for selected categories such as parks, street lights or libraries.

She also noted that funding estimates do not include money from rental income bonds, a method the city has frequently used in recent years to fund infrastructure projects.

This year’s analysis also eliminated the distinction between “priority” and “discretionary” infrastructure needs. This distinction, which was added a few years ago, was intended to make the city see how many projects are truly critical.

The City said infrastructure spending in San Diego is expected to change significantly in the coming years thanks to several new policies.

Infrastructure equity policies favor projects in areas that have historically been underserved.

Build Better San Diego allows fees charged from project developers anywhere to be directed to low-income areas for infrastructure development. Instead of the developer’s money remaining in the area where the residential or commercial project is being built, it will be placed in a new citywide money bank.

A new infrastructure funding gap analysis is scheduled to be presented to the city council on Tuesday, February 14. An independent budget analyst should release a detailed report about a week in advance. ◆

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