When Wendell Town Manager Teresa Piner pointed out to town commissioners on Monday night that the town had not had a capital spending plan for several years it was more than a little surprising.
Piner raised the issue because she wants to commissioners to help create one and she’s certainly right that the town needs one. Capital spending plans are critical for towns to manage their resources properly.
A capital spending plan is, usually, a five-year plan that outlines major one-time expenditures that the town expects to have to make during that period of time. Large dollar items like police cars, heavy equipment, new construction and the like go on a capital spending plan. Unlike operating expenses such as employee salaries, utility bills and gasoline, capital expenditures generally only happen once, or more precisely once in a long while.
The lack of a capital spending plan means towns don’t properly save money for some of those expenses and, suddenly, they find they have equipment that doesn’t work, buildings that leak or police cars that spend more time in the shop than on patrol. And, they find they have no money to address those needs once they happen.
The beauty of a capital plan is that, because it’s a medium-range plan, there is flexibility. Towns generally spend money in the annual budget for the items on the first year of the plan. If done properly, money is set aside in savings to help pay for future capital expenditures.
When those needs change from year to year, the plan can be adjusted to meet the immediate needs or to prepare for new needs that may crop up in the next few years.
Piner proposed a draft capital plan and commissioners are likely to review it in some detail, which is fine. In fact, that’s what Piner wants. The dollar signs will mount up quickly, but commissioners should not let that frighten them. Instead, as they look at expenses in the out years, they should also be looking at revenues in those same years.
As Commissioner Jason Joyner noted, it would require a 38-cent increase in the tax rate to fund all the items in the capital improvement plan. No one expects that to happen, but if commissioners want to begin preparing to meet these needs in years 2 through 5, now is also the time to start thinking about new revenues, whether it comes from growth in the tax base, an increase in taxes, loans, a bond or some combination of all the above.