The public aspects of cities include not only services (i.e., police and fire protection, education, and protection of the public health) but also things (i.e., capital goods) that require labor, materials, and finance to bring them into being. Acquisition of these capital goods requires careful budgeting.
A budget balances income sources against outgo items in the fulfillment of needs and aspirations. A municipal operating budget does this annually for the costs associated with the provision of on-going city services. A municipal capital budget does the same for facilities to be constructed on land owned by the community or to be acquired to fulfill the community’s needs.
Responsible expenditure of public funds requires foresight into the emerging character of the community and its needs. Responsible encumbrance of public funds and credit (future income) calls for a plan for public construction prepared, in most cases, well ahead of actual needs.
One of the principal purposes of the comprehensive plan (see C is for Comprehensive Plan) is to serve as a guide to the preparation of a capital budget to assure rationality and efficiency in the expenditure of public funds on capital projects.
Capital funds borrowed to construct municipal projects are commonly provided in the sale of 20-year or longer, bonds. Public facilities are constructed to serve, and are expected to endure, at least as long as it takes to pay off the bonds sold to construct them. For this reason, a carefully prepared forward-looking community comprehensive plan is valuable in assessing whether the proposed facility will meet the community’s needs years into the future, and — quite importantly — whether it will be physically located where it can best serve current and future users. This means examining how the facility relates not only to current, but also to future land use patterns.
The capital budget (or “program”) is often conceived as a six-year budget drawn from the recommendations of municipal departments with reference to a continuously updated comprehensive plan. The capital budget is periodically revised (commonly every other year) as elements are completed or revised, and as new projects are added.
The capital budget includes not only a list of projects and their estimated costs, but also the source of the funds to be used to pay for each project. Running totals are kept to track their impact on the encumbrance of the municipal borrowing power and on the municipal tax rate.
One of the key responsibilities of many planning commissions and departments is the preparation of a recommended capital program for the local governing body’s consideration. This planning commission role, first undertaken in Cincinnati in the 1920s, has helped ensure that the municipality’s capital expenditures serve to meet the goals and objectives contained in the adopted comprehensive plan.
See Michael Chandler’s three-part series on capital improvement programs.