A new national report suggests local governments may face another long-term fiscal challenge that rarely appears in budget headlines: the growing cost of replacing aging public assets already in service.

A recent analysis from Merritt Research Services estimates that US cities carry more than $1 trillion in infrastructure and capital asset obligations tied to aging roads, buildings, equipment, and other public assets. The report attempts to measure the replacement cost of assets that continue operating after consuming much or all of their expected useful life.

Unlike debt or pension obligations, these costs do not appear as formal liabilities on financial statements. Governments still eventually must repair or replace those assets, even if those obligations sit quietly in the background.

For counties, the issue extends well beyond roads and bridges.

County governments help build schools and maintain public safety facilities, emergency communications systems, libraries, parks, courthouses, and transportation networks. Counties also maintain more than 80% of Maryland’s road miles and continue carrying infrastructure responsibilities that often extend decades into the future.

The report estimates that deferred infrastructure obligations exceed total direct debt by roughly three times and exceed unfunded pension liabilities by roughly four times.

The findings also connect with issues counties continue raising in Maryland. Transportation funding and school construction continue sitting near the top of county concerns as local governments manage aging assets and rising capital costs.

Local governments maintain more than 80% of Maryland’s road miles but receive less than one-fifth of transportation revenues through Highway User Revenues (HUR), the primary State funding source for local roads and bridges. Counties continue warning that the upcoming fiscal 2028 HUR cliff will reduce the local share from roughly 20% to 15.6%, resulting in nearly $100 million in reduced local transportation funding in a single year.

The history behind the chart below matters. For decades, Maryland followed a more balanced approach to transportation funding, splitting primary transportation revenues such as fuel taxes and vehicle titling taxes between the State and local governments. Local governments received a larger share because they maintain most of Maryland’s road network.

That changed during the Great Recession. In 2009, the State sharply reduced the local share of HUR to address broader budget pressures, creating the steep decline shown below. The State later restored many recession-era reductions in other areas, but HUR never returned to historic levels even after significant transportation revenue increases in more recent years.

The chart also shows another challenge ahead. Temporary increases pushed local transportation funding higher in recent years, but current law reduces the local share again beginning in fiscal 2028. Counties rely heavily on HUR to support resurfacing projects, bridge repairs, and safety improvements, making long-term planning more difficult when funding levels shift significantly.

School construction presents similar pressures. Counties continue facing rising project costs as labor, materials, and inflation push budgets higher while temporary funding sources begin expiring and project backlogs continue growing. Counties help finance and build school facilities, and those rising costs continue placing additional pressure on local capital programs.

Baltimore City also stood out in the report’s analysis.

The report estimated Baltimore’s infrastructure and capital asset burden at nearly $8 billion, or more than $14,000 per resident, placing it among lower-ranked large cities in the study. Many older East Coast cities maintain extensive infrastructure networks built decades ago and continue balancing significant capital and maintenance demands.

That challenge carries added significance in Baltimore. Over the past decade and a half, HUR cuts have cost Baltimore nearly $1 billion in transportation funding that otherwise could have supported road resurfacing, bridge repairs, and other local infrastructure projects.

Infrastructure discussions often focus on the next project, the next funding package, or the next major investment announcement. This report points toward another issue that often receives less attention: maintaining and replacing the systems, facilities, and assets communities already rely on every day.

Counties continue managing long-term infrastructure responsibilities while balancing rising costs, shifting funding structures, and growing capital demands. MACo will continue working toward practical solutions that bolster State-local partnerships and support sustainable investments in the roads, schools, facilities, and public assets residents depend on every day.

Stay tuned to Conduit Street for more information.