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Local Government and School Accountability

Capital Planning and Budgeting

A Tutorial for Local Government Officials

Module 1 - The Capital Improvement Plan

Setting Goals

Capital planning is not done in a vacuum. It is best developed in the context of a larger strategic plan that spells out a local government's mission, goals and objectives.

Many local governments also have master plans, which identify economic, land-use and infrastructure needs 10 to 25 years in the future. If a locality does have a master plan, it should be used in the capital planning process, as capital projects and acquisitions should be aligned to this master plan.

In the absence of a formal strategic vision, leaders should come to a consensus on the future objectives of the local government or school district. What is envisioned for the community five, 10 or 25 years down the road? Does the community want to encourage growth and economic development? Does it wish to retain a rural character? Will additional schools or infrastructure be needed, or will facilities geared toward an aging population be a priority?

Next, leaders need to examine financial goals. For example, besides formal tax and debt limits that legally limit taxing and borrowing powers, there are more discretionary goals that need to be considered. What percentage of the budget should be committed to capital projects? What level of debt can a municipality comfortably absorb? Will capital projects or acquisitions affect future operating budgets? Consider both negative and positive effects. For example, will the cost of debt service restrict spending on other services? Will an updated facility lessen operating costs?

Generally, identified capital program goals should incorporate improvements in operational effectiveness and efficiency. Capital acquisitions should be expected to improve service delivery or some other aspect of quality. Whenever possible, capital asset managers should plan for improved efficiencies and cost savings.

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