The State of North Carolina is suffering from aging facilities in dire need of repair, maintenance and renovation. This lack of attention to critical physical assets actually costs taxpayers more through loss of energy efficiency and the prevalent use of maintenance Band-Aids, driving up utility costs and ultimately leading to higher costs for repair.
Continuing to ignore the problem, as we have done for way too many years, only magnifies the financial commitment in the future. Now that the state’s budget is back on solid footing, it’s time we invested more resources toward critical repair and renovation needs for our state buildings.
North Carolina owns and manages nearly 12,000 buildings, totaling roughly 119 million square feet. The majority are of critical functional importance to the public, most notably for higher education, as well as health and human services and public safety. Despite the critical need for these facilities, they are aging faster than the state has been able to care for them through maintenance, repair and renovation. This underfunding of much-needed repairs and renovations has cost the state more in energy losses, collateral dysfunction and high priced emergency repairs than if funded adequately in the first place.
This “cost of doing nothing” has been estimated as a waste of $1.4 billion annually because of unfunded repairs. To avoid this loss, adequate repair and renovation funding by the state should be $630 million per year – or 3 percent of the building inventory replacement value. Over the last 12 years that funding has averaged around $100 million annually. Obviously, this is a poor report card for the state.
The steady diet of doing nothing (or very little) has taken its toll over the years. Facility condition index is a ratio of the deferred maintenance to its property value. Good is considered less than 5 percent while poor is over 10 percent. Currently, the state’s facility cost index is around 21 percent – and growing. The state’s deferred maintenance price tag is north of $4 billion. That represents a whole lot of broken or poorly performing buildings out there that are not being maintained. Data suggest that tackling this backlog could create or sustain 125,400 construction-related jobs.
Without adequate maintenance, aging equipment eventually fails (usually unexpectedly), and the unplanned repair has to be funded through operational budgets. Over time, this funding strategy puts a significant strain on planned maintenance effectiveness, as more and more dollars are diverted from “preventive” activities to “reactive” fixes. Another observable cost effect of this trend is an increase in energy costs. Poorly maintained systems are less efficient, and reduced efficiency directly translates to increased energy consumption.
The current budget model for funding repairs
and renovation essentially amounts to annually begging the N.C. General Assembly to fund these projects. The requests are typically based on most urgent needs, while the funding seems to be based on what’s left over in the budget. This year’s projected $400 million budget surplus represents a prime opportunity to begin to adequately fund our state building repair and renovation needs before these buildings fail. However, we need to budget enough money every year just to keep up.
This legislature needs to make infrastructure a top priority while there is an opportunity. Lawmakers should appropriate at least half of this surplus ($200 million would represent 1 percent of current building inventory replacement value) to repair and renovation of our state and university buildings. Additionally, if the legislature wants to avoid throwing away $1.4 billion each year on “too-little-too-late” emergency repairs, it should look to create an Operating Building Maintenance Reserve that mandates a minimum amount be appropriated each year – similar to the state’s rainy day fund.
Critical facility care should not be viewed as just a dreaded line item in a budget, but rather as an investment as well as a way to save money. As Abraham Lincoln once noted: “You cannot escape the responsibility of tomorrow by evading it today.”
Bill Smith, PE, is a member of the Professional Engineers of NC and a former state building commission member. Betsy Bailey is the government affairs director for the Building Division of Carolinas Associated General Contractors.
21 North Carolina’s facility condition index 5 The largest number considered a good FCI 10 The smallest number considered
a poor FCI $4 billion The state’s deferred maintenance price tag 125,400 The number of construction-related jobs tackling the backlog could sustain or create