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CIPPlanner Corporation >> Library >> Financial Series >> Fiscal Crisis and CPM Part III

Fiscal Crisis and Capital Program Management (CPM)

Part 3: Finding the Money

In the end, after addressing Capital Program Management (CPM) Portfolio Optimization and then the efficiencies associated with executing the CPM function, there remains the burning issue of finding the money. In the face of shrinking Impact Fees, and property tax relief programs, the resultant impact on services and capital projects can be significant. For the purposes of this article let’s focus on capital projects.

 

Imagine the impact of deferring or cutting capital projects because of lack of funds. Deferring or cutting projects happens every year as part of the CPM Optimization process, however, it should be understood that deferring a project or cutting a project does not limit the impact to just that specific project. It creates a ripple effect wherein that deferred or cut project must now be considered in out years relative to other projects originally scheduled for that timeframe. The funds originally earmarked for other projects in out years are now subject to being used for the deferred projects thus continuing the cycle and thus extending the risk to maintaining a viable infrastructure.  Another wrinkle to consider in this scenario is the case where the project(s) deferred or cut were revenue generating projects. What does the delay in revenue generation caused by this decision mean to the out year planning for capital projects? These are the considerations that must be addressed when optimizing the CPM Portfolio but they must be addressed with eyes wide open as to the negative spiral effect created. Needless to say the best answer probably is to minimize deferring and or cutting projects deemed necessary to the health of the municipality but to do so requires identifying and securing funds to replace those that would have been available if not for such things as the shrinking impact fees or tax relief programs.  Alternative or Supplemental Funding sources are the key.

 

So, what are these "other" fund sources, how are they identified, how does a municipality qualify for the funds etc.  

Finding funding for capital projects is a major concern for many public agencies. Capital funding is defined as funding used for construction, expansion or renovation, purchase of major equipment or a new facility to enhance quality of life, public safety, and expanded services to residents. In searching for funding for capital projects, it is very important that public agencies consider and use a variety of potential sources, including both public and private sources. Private funds come from charitable giving organizations, foundations, direct giving programs, community groups and voluntary agencies. Public funds come from the government such as federal, state, and local agencies in the form of grant and loan programs.

 

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