CAPITAL IMPROVEMENT PLANNING AND BUDGETING By JAY HEDGES, Director, Department of Commerce & Community Affairs

One of the most vital functions of local government is to construct and maintain the public works infrastructure. Without this network of roadways, bridges, sanitary sewers, water mains, and other essential public facilities, a wide range of negative impacts are likely to be felt by the residents and commercial enterprises which rely on local governments for their physical well-being and economic prosperity.

The 1980s saw the advent of two important and parallel trends. The first involved an increasing awareness on the part of local officials of the continuing deterioration of our nation's network of public facilities. The second involved a perhaps belated understanding on the part of these same public officials that an expanding economy requires an adequate infrastructure to sustain growth.

Unfortunately, most local governments have failed to evaluate their capital facility repair and expansion needs, or to allocate sufficient resources to correct the deficiencies. Recent experience has clearly demonstrated that this casual, short-sighted approach to capital project decision-making is likely to result in a funding crisis and an accelerating rate of deterioration of our capital assets.

Those local governments which have sought to address these problems have often turned to the Five-Year Capital Improvement Plan. The plan is a tool used to allocate scarce resources in an efficient manner. Rather than allow capital improvement decisions to be made on an ill-defined, haphazard basis, the Five-Year Capital Improvement Plan and annual capital budget identifies the needs, the prioritization of the various projects, and provides for the funding and an implementation strategy on an annual basis.

When properly executed, the capital improvement planning process allows local government to:

(1) Identify deficiencies in the existing network of roadways, water and sewer systems, and other essential public facilities.

(2) Determine infrastructure expansion needs to meet future residential and commercial development requirements.

(3) Select priority projects with input from elected officials, staff and the public.

(4) Draft the Five-Year Capital Improvement Plan.

(5) Draft the annual capital improvement budget or appropriation ordinance to allocate funds on an annual basis for each priority project selected.

It is important in the capital asset planning process to recognize that public facilities depreciate in value over time, and that annual cash reserves should be set aside to pay for the future repair and replacement needs of the system. Too often, capital projects are viewed as "one-time" undertakings which require neither maintenance nor replacement in years to come. By applying a long-range capital budget plan, a local government can assure its taxpayers that they will not suddenly be called upon to finance expensive public facility improvements.

The implementation of a capital improvement planning and budgeting system will assist in reversing the historical trend toward declining public investment in important public facilities. The rewards to Illinois local governments are many, particularly the assurance that current and future residential and commercial development will continue to be served by an efficient and cost-effective infrastructure network via a well-conceived long-range capital master plan.

For further information on this topic, please call the Office of Local Government Management Services toll-free government hotline at 1-800-562-4688.

Page 16 / Illinois Municipal Review / October 1989