Putting Benchmarking to Work
As part of the Bond Bank’s Infrastructure Month, we’ve asked a number of members of the wider Vermont infrastructure community to comment on related and important topics. This week’s comment comes from Mike Gilbar, Chief Financial Officer at the Vermont League of Cities and Towns (VLCT) and formerly held the same position for several towns and school districts in Vermont and New Hampshire.
Strategic budgeting is a best practice that is sometimes overlooked in a state where legislation is generally not a product of professional standards, thereby offering no substantive guidance. The Bond Bank medians are an incredible tool to inform a better approach to budgeting for municipalities and school districts.
Master plans and capital improvement programs are pieces of that long-term strategic planning, but the annual budget appropriation is the centerpiece of Vermont’s municipal and school district budgeting. This one-year focus for our communities can be detrimental in the long run if not combined with a longer-term vision that makes use of strategic planning tools.
Aside from labor costs, capital investment can be the next largest slice of the operating budget. Planning and managing maintenance and upgrade of equipment and infrastructure is important. Deteriorating roads, buildings and utilities can be costly to a community by deterring economic development and kicking costs to future taxpayers who will pay more for renovations or replacements.
Debt financing is not the only way many communities can deal with this problem but can be a great tool if used to fund projects over the long haul. Strategic consideration of the amount of debt to use, how this will impact taxes, and the role of reserves are interrelated considerations in the development of annual budgets consistent with long-term goals.
Debt tools such as the Bond Bank Debt Medians allow communities to analyze their current debt load and debt capacity against other communities while giving a baseline for better planning. The medians are only one tool but nevertheless offer an objective starting point for larger discussions about priorities for capital investment.