Local government leaders are facing a unique variety of pressing infrastructure-related issues this year. Making targeted investments into infrastructure improvements will be particularly important for future growth, from preparing for extreme weather events, to addressing growing public demand for renewables and EV adoption, to potential budget shortfalls as federal pandemic aid comes to an end.

As we move into 2024, here are the key trends poised to impact infrastructure planning this year, along with proactive strategies to navigate these challenges and opportunities.

Cities take on the pressing need for climate resilience adaptation

After a record breaking year of climate-related extreme weather, local governments are getting serious about climate resilience in 2024. Cities like Jersey City, NJ made headlines last year for major investments into resilience, as projections show that extreme weather will continue to become the new norm. Meanwhile, the federal government is also encouraging more local governments to pursue “transformative” climate adaptation by offering over $6 billion in resilience grants.

Building climate-resilient infrastructure means designing and constructing assets and systems that can withstand and recover from the impacts of extreme weather events, such as floods, storms, droughts, heat waves and wildfires. To begin addressing climate resilience, local governments should prioritize these actions:

• Focus on modernizing, weatherizing and addressing deferred maintenance in existing buildings. By improving their buildings, local governments can ensure that critical public infrastructure and services are better equipped to withstand and quickly recover from extreme weather events.
• Embrace new technologies that bolster resilience. Microgrids, battery storage and onsite renewable energy sources help reduce reliance on traditional energy sources, making communities more energy resilient. Water infrastructure upgrades are also an important measure for boosting flood and drought resilience.
• Mitigate risk by putting strong disaster preparedness measures in place. The best resilience plans facilitate faster recovery from extreme weather. Put measures in place that harden critical services like the sanitation system, city works fleets and emergency shelters.

Budget shortfalls, rising costs are an obstacle for critical infrastructure upgrades

2024 is shaping up to be a turning-point fiscal year for cities when it comes to spending on infrastructure and deferred maintenance.

Years of cautious post-pandemic capital investments, meant to shore up fiscal reserves against uncertain economic headwinds, have left cities with a backlog of pressing infrastructure needs. While the majority of US municipalities are in a strong financial position this year as tax revenues return to pre-pandemic levels, high labor and construction material costs will be an obstacle for governments looking to start tackling those infrastructure projects. The National League of Cities also reports that many of their members are anticipating fiscal strain as federal aid from the American Rescue Plan Act (ARPA) comes to an end this year.

Postponing infrastructure upgrades and deferred maintenance is a short-term cost saving measure that can lead to much more costly issues in the future.  As local leaders plan their expenditures for the year, they should focus on blending short- and long-term solutions like:

• Pursuing federal grants for infrastructure upgrades and retrofits. As local governments contend with the end of ARPA funding, they should capitalize on the wealth of federal grants currently available. The DOE is currently offering over $31 million in grants for building retrofits, as well as $530 million in grants to support local governments’ implementation of new building codes and performance standards.
• Exploring financing options through public-private partnerships. Alternative funding solutions available from private sector partners can provide the funding for critical public infrastructure improvements. Energy savings performance contracts (ESPCs) and energy-as-a-service (EaaS) agreements are two commonly used options for infrastructure projects tied to water systems, energy infrastructure, or deferred maintenance.
• Prioritizing infrastructure investments that lower operational costs. Infrastructure improvements can reduce overall operating costs by as much as 30% on average. Those savings can be reinvested to cover budget shortfalls in other areas. 

The IRA’s new direct pay provisions encourage more renewable energy adoption

2024 will be an exciting year for local governments that are interested in adopting renewable energy. This is the first tax year that they can apply for the clean energy Investment Tax Credit (ITC) under the new provisions of the Inflation Reduction Act (IRA.) In other words, non-taxable entities can now receive direct payments for building new clean energy projects like onsite wind, solar or battery storage.

These new ITC rules will empower more cities to adopt renewable energy by subsidizing projects or adding to the capital stack for project financing. Local leaders should keep these benefits and hurdles in mind as they begin planning to use direct pay for clean energy projects:

• Capitalize on the benefits of renewable energy infrastructure. Clean energy projects can be used strategically to bolster climate resilience, speed up the adoption of EVs and create new economic development opportunities.
• Reinvest funds from energy savings and net metering. Onsite renewable energy generation allow municipalities to save on energy costs, reduce energy cost volatility and even create new income sources from net metering agreements with utility providers.
• Work with a trusted partner. Navigating the ITC can be a complex undertaking for resource-constrained local governments. The right partner can help ensure that a project meets all eligibility requirements, as well as the requirements for additional bonus credits. They can also provide bridge financing options in the interim period between initial investment and receiving the direct pay credit.

Developing a comprehensive infrastructure plan in 2024

2024 is shaping up to be an eventful year for local governments across the US. City and county leaders should view these trends as opportunities to drive innovation, build stronger communities and enhance quality of life for all residents.

With the right partner, navigating funding for resilient infrastructure planning doesn’t have to be complex. Learn how Schneider Electric is helping local governments create a more sustainable future by visiting us here.