Capital Improvement Planning

One key issue in the upcoming election is whether we will continue to try to fund capital expenses through yearly Warrant Articles or develop a Capital Improvement Plan (CIP) and begin funding these expenses by building capital reserves.

I have heard a number of opinions for and against developing a CIP ranging from, "It is a waste of time. Ashland only has 2,000 people, and the townspeople won't support it," to "Some towns New Hampshire fund all of their capital expenses through capital improvement plans and capital reserves." While there is a wide range of opinion, people on both sides are concerned about tying up tax payer money. This is particularly important concern in Ashland where our taxes and debt are high, and our ability to raise revenues is limited by demographic factors and a lack of economic development.

The whole point of developing a Capital Improvement Plan, however, is to find the best approach to budget for and fund large capital improvements like equipment, buildings, building repair, and roads. Although CIPs are generally a necessity for cities and larger towns, they also benefit small towns like Ashland. However, they have to be tailored to meet the needs of the community. It is also important to understand that CIPs are not new to our State. RSA 674:5 provides the guidance for developing Capital Improvement Programs. Many towns have already developed or are in the process of developing plans. The benefits of a CIP according to The League of Women Voters of the Upper Valley are as follows:

• Avoiding undue tax increases
• Preserving public health, safety and welfare
• Anticipating the demands of growth
• Improving communication and coordination
• Developing a fair distribution of capital costs
• Building a foundation for growth management and impact fees
• Identifying "scattered and premature" development
• Supporting economic development

For Ashland, the key benefits are avoiding undue tax increases, improving coordination among the town's governing bodies, preserving public health, safety, and welfare, and supporting economic development. One resident who is familiar with economic development said to me that given our limited ability to raise revenues, the only way we can solve our financial problems is to grow our way out." Towns with Master Plans and CIPs attract business and talented people.

What does a CIP plan involve? The core of the plan involves the following tasks:

• assessing the town's financial capability
• inventorying the town's capital assets (equipment, buildings, and infrastructure)
• determining when assets will need to be replaced or repaired
• developing a plan to finance assets
  
• determining the best approach to replace or repair them

For Ashland, one of the most important features of the planning process will be to assess the town's financial capability. I have already mentioned that our ability to raise revenues is limited. Our ability to control spending is also limited by factors that are internal and external to the town. This year, for example, the town limited budget increases by putting capital expenses and charitable contributions in Warrant Articles, and changing the Director of Parks and Recreation position to part-time. The town cannot control the cost of fuel, the economic situation, or cuts in state and federal spending.

Since we have no CIP, we end up as we did last year having to replace equipment and make costly repairs without having accumulated any capital reserves to help fund them. For example, the problems with the Fire Station roof were known but the repairs were not planned for. This year there are warrant articles to replace or repair about $250,000 worth of capital assets. If we approve these articles, we will raise our taxes approximately 1 mill. But, if we had a CIP, we could have paid for part or all of these expenses, saved money in the long, and made our budgeting process more straight-forward and transparent.

A key advantage of a CIP is that it helps the Selectmen and the Budget Committee manage the town's finances by prioritizing capital improvements, preparing cost-benefit analyses to determine the best approach to purchasing and financing capital assets given the town's financial capacity. Now we invest in capital improvements on a yearly basis when equipment wears out, buildings need repairs, and roads are so bad we cannot ignore them. Our assets literally plan for us. We are going to be trying to catch up for quite some time because we have put off purchases and repairs for so long.

One final point. Putting requests for the funding of key capital equipment and repairs can put the town at risk if voters do not approve them. Capital Improvement Plans do not take control away from voters because voters have input into the plans, and the plans provide voters with the necessary information to support spending. This year we are being asked to approve a new bucket loader and tractor just a year after purchasing an expensive sidewalk plow, and we have no cost benefit analysis that justifies these purchases and no idea of how they fit into the town's priorities. A CIP makes the entire process easier for voters to understand and easier for town officials to manage.