Prioritizing Capital Projects in a Suffering Economy

By Abraham, Austin | Public Management, May 2009 | Go to article overview

Prioritizing Capital Projects in a Suffering Economy


Abraham, Austin, Public Management


Elected officials across the country are facing an intensified dilemma with capital projects--not enough money! This may not be a new dilemma, as many communities and their managers would say they never have enough. And they would be correct if measured against the number of portable classrooms used in the education of our children, the miles of aging utility lines, or the number of aging bridges in need of rehabilitation in this country. But for most local government managers, until recently, there has at least been a sense of making some progress for their communities through annual investment in capital projects.

Enter the recession (or worse) of 2008-2009. Declining revenues on all fronts have quickly resulted in operating funds that no longer balance. Money formerly set aside for capital projects is now an enticing and perhaps necessary backstop for balancing the operating fund.

Declining revenues make capital funding choices extremely challenging. Elected officials and managers find themselves in a swirl of rapidly changing economic dynamics, torn between attractive prices on construction bids and little funding, and between projects promised to citizens for years (parks, libraries, and new schools) and important projects that never made it on the books because they didn't have enough curb appeal (bridge and road rehabilitation).

No one is disputing that contractors are hungry and bid prices are extremely attractive. Great bid prices, however, are not enough to make everything affordable. But this positive pricing environment makes a case for continued capital spending to the extent possible.

One way to approach limited capital funding is for elected officials and managers to revisit objectives for capital funding choices. During such a review, several objectives should be given priority over the others as a result of today's suffering economy.

Preserve long-term assets. Don't let the capital investments that you have already made deteriorate during these times. It's tempting but unwise. Roads, bridges, buildings, and treatment plants all require major maintenance and rehabilitation over time. Avoiding these expenses only increases the cost of keeping these assets in service for the long term.

Acquire property for defined needs for both the present and future. If your community has decided a new park is a priority for improved recreational opportunities, the development of the park might have to wait, but buy the land if you can. In many areas, land prices are lower than they have been for years. Land acquisition is usually only a fraction of an overall project cost, and acquisition opportunities should be seized when possible. Be careful, though, to avoid speculative purchasing of raw land just because it is available and seems like a deal.

Reduce operating costs. Look for projects that will reduce operating costs rather than increase them. Although your community may desire to increase services by expanding the library system, building more athletic playing fields, or constructing additional cultural facilities, all of which are worthy goals, such expansion projects come with increased operating costs for staffing, programming, utilities, and maintenance. …

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