Selecting Capital Investment Projects for Local Governments

Abstract

Faced with burgeoning infrastructure needs and circumscribed capital revenues, local governments must perforce set priorities among competing capital projects submitted by their operating agencies. This process involves value choices and political resolutions in addition to technical considerations. This article finds current priority‐setting procedures in need of improvement and suggests a framework for local government assessment and selection of capital investment projects.

Local Budgeting and Finance: 25 Years of Developments

“…143 The emphasis on ''rational'' budgeting motivated Lisle Bozeman to conclude that capital budgeting ''ties together the major components needed for a rational budget.'' 144 A major Urban Institute project on ''setting priorities for capital investment,'' which identified critical performance and evaluative criteria that local governments should establish, was summarized in PB&F. 145 Echoing the NCPWI report, the article concluded that the ''literature on capital budgeting does not really help local government officials select among diverse and competing capital projects'' 146 and continued to suggest a list of selection criteria (ranging from operating and maintenance estimation, health and safety impacts, funding availability, conformance to long-range plans, to a host of other usual suspects). But, looming ominously, was the ''political task reflecting the jurisdiction's values and priorities.''…”

Measuring Efficiency and Effectiveness of Highway Management in Sustainability

“…So far, previous literature on infrastructure investment in the field of public affairs can be classified into two groups. One group deals with early studies that are about the normative approach of how to manage or improve capital assets [2][3][4]. For example, Millar [3] criticized that prior literature on capital budgeting is not useful for local governments to set capital project priorities.…”

“…One group deals with early studies that are about the normative approach of how to manage or improve capital assets [2][3][4]. For example, Millar [3] criticized that prior literature on capital budgeting is not useful for local governments to set capital project priorities. Rather, it was suggested that technical issues, organizational issues, and feasibility issues should form the criteria for setting priorities for capital projects.…”

Budgeting for Public Capital

“…This is a logical and theoretically simple approach to public decision-making'' (Vaughn, 1984, p. 23, emphasis added). Likewise, Millar (1988) describes capital budgeting as primarily a technical process by which projects are compared using standard criteria such as fiscal impacts, safety and health effects, environmental changes, and other cost-benefit considerations.…”