A Capital Budgeting Methodology for a Small Town

Elmendorf, Richard G., Isley, Phyllis, Government Finance Review

A problem faced by many local governments is to provide a stable level of services to a growing population without continually accelerating tax increases. The normal practice to accommodate growth is to wait until capital expenditures are required and then either raise taxes or float a bond issue to pay for them. This "incremental" spending approach generally results in abrupt increases in taxes, causing voter resentment and making it difficult for local governments to function effectively.

Good planning for growth can balance revenues and expenditures over long periods and reduce costs to taxpayers, as well. This article describes the financial planning methodology developed for the town of St. Albans, Vermont, a methodology allowing the elected town officials to replace old equipment, maintain services desired by voters and still present a budget calling for only moderate increase in taxes. The voters accepted the plan, it has been implemented, and the process has been gaining increasing support for its businesslike approach to government finance.

The Setting

The town of St. Albans, Vermont, like many small communities, is trying to provide government services and to support controlled and orderly growth while minimizing tax increases. It is a small town of about 4,000 permanent and 1,200 seasonal residents, located 30 miles north of Burlington on Lake Champlain. The town's proximity to Burlington has subjected it to rapid growth in recent years: During the 1980s it had a population growth of about 15 percent, twice that of the state. While desiring to accommodate controlled and managed growth, the residents did not want to lose their quality of life, which is based on a mixture of farming, light industry, recreational business and residence.

St. Albans is governed by a select board of five members. As one of several measures designed to promote controlled and orderly growth and development, the select board adopted a town plan with zoning bylaws and subdivision regulations TABULAR DATA OMITTED in September 1987. They also formed a capital budget planning …

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Publication information: Article title: A Capital Budgeting Methodology for a Small Town. Contributors: Elmendorf, Richard G. - Author, Isley, Phyllis - Author. Magazine title: Government Finance Review. Volume: 9. Issue: 2 Publication date: April 1993. Page number: 32+. © 1999 Government Finance Officers Association. COPYRIGHT 1993 Gale Group.

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