The Impact of Capital Spending on Municipal Operating Budgets

What is the impact of capital spending for buildings, equipment, and other facilities on future operating expenditures of municipal governments? Because capital spending decisions are made independent of operating decisions in many larger municipalities, managers make long‐term capital commitments w...

Full description

Saved in:
Bibliographic Details
Published in:Public budgeting & finance 1992-07, Vol.12 (2), p.32-47
Main Authors: Bland, Robert L., Nunn, Samuel
Format: Article
Language:English
Subjects:
Automation
Budgeting
Budgets
Capital budgeting
Capital expenditures
Cities
Construction
Fires
Municipal finance
Operating budgets
Operating costs
Preventive maintenance
Public sector
Statistical analysis
Studies
United States
Citations: Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:What is the impact of capital spending for buildings, equipment, and other facilities on future operating expenditures of municipal governments? Because capital spending decisions are made independent of operating decisions in many larger municipalities, managers make long‐term capital commitments without fully understanding the repercussions for operations. This implies the need for research that examines more closely the linkages between these budget cycles. This article develops a theory of the relationship between capital and operating expenditures, then uses data from the fortyeight largest U.S. cities to estimate both the magnitude of capital's impact and the time it takes for operating budgets to adjust. The study finds that five of six commonly provided municipal services were affected to varying degrees by past years' capital expenditures. Especially notable is the finding that the operating budgets of labor‐intensive services, such as police and fire protection, are most sensitive to capital spending. For public managers, the findings point to the need for closer coordination between the capital and operating budget cycles, especially in those cases where capital outlays have clear, unambiguous positive implications for future operations.
ISSN:0275-1100
1540-5850
DOI:10.1111/1540-5850.00936