ANNAPOLIS — A new national report estimates that U.S. cities face more than $1 trillion in infrastructure and capital asset obligations tied to aging public assets still in service, presenting a long-term fiscal challenge for local governments that rarely appears in budget documents.
The analysis by Merritt Research Services, released May 5, measures the replacement cost of assets that continue operating after consuming much or all of their expected useful life. These costs do not appear as formal liabilities on financial statements, yet governments must eventually repair or replace roads, buildings, equipment and other infrastructure.
For Maryland counties, the issue extends beyond roads and bridges. Counties maintain more than 80% of the state’s road miles and are responsible for schools, public safety facilities, emergency communications systems, libraries, parks, courthouses and transportation networks. The report estimates that deferred infrastructure obligations exceed total direct debt by roughly three times and unfunded pension liabilities by roughly four times.
Baltimore City stood out in the analysis. The report placed the city’s infrastructure and capital asset burden at nearly $8 billion, or more than $14,000 per resident, ranking it among the higher-burden large cities studied. Over the past decade and a half, cuts to Highway User Revenues have cost Baltimore nearly $1 billion in transportation funding that could have supported road resurfacing, bridge repairs and other local projects.
Local governments in Maryland receive less than one-fifth of transportation revenues through Highway User Revenues, the primary state funding source for local roads and bridges. Counties have long warned 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 of the funding formula traces to the Great Recession. In 2009, the state sharply reduced the local share of HUR to address broader budget pressures. Although the state later restored many recession-era cuts elsewhere, HUR never fully returned to historic levels despite subsequent transportation revenue increases. Current law will lower the local share again beginning in fiscal 2028, complicating long-term planning for resurfacing, bridge repairs and safety improvements.
School construction adds similar pressures. Counties finance and build school facilities amid rising labor, material and inflation costs, growing project backlogs and expiring temporary funding sources. These demands strain local capital budgets at a time when many assets built decades ago require replacement.
The Merritt report, titled “Infrastructure & Capital Assets Commitment Burden: Quantifying the Hidden Fiscal Risk,” analyzed audited financial statements from roughly 2,000 cities. Author Richard A. Ciccarone, president emeritus of Merritt Research Services, described the obligation as a “hidden” fiscal risk that can obscure the true cost of maintaining public services. Large legacy cities tend to carry the largest relative burdens, while faster-growing cities show lower levels of capital asset depletion.
Infrastructure discussions in Maryland and nationally often center on new projects and funding packages. This report shifts attention to the ongoing cost of maintaining and replacing systems communities already rely on daily.
The Maryland Association of Counties, which highlighted the findings in a May 26 statement, said counties continue managing long-term infrastructure responsibilities while balancing rising costs, shifting funding structures and growing capital demands. MACo pledged to pursue practical solutions that strengthen state-local partnerships and support sustainable investments in roads, schools, facilities and other public assets.
No immediate state or county responses to the specific Merritt findings were detailed in the MACo release. The report does not prescribe policy solutions but provides a framework for credit analysts and local officials to quantify deferred maintenance risks.
In Southern Maryland, counties such as St. Mary’s, Calvert and Charles face the same pressures on local roads and public buildings. The findings underscore the need for stable, predictable funding as officials prepare budgets and capital plans for the coming decade.
