Capital Investment vs Capital Expense
Who pays and when?
It's Town Meeting Cycle time and this year we finally have a pretty detailed list of capital improvements the town needs. It's wonderful to see this so fully described and I've extracted the material presented at a December meeting of the Selectboard here.
One concern I have about this is the lack of distinction between capital expense items and capital improvement items.
Capital expense items are things like fire trucks, ambulances, dump trucks, paving and the like -- stuff that will last for years but will wear out and need to be replaced. These kinds of capital costs are predictable, and need to be covered year in and year out.
Capital investment items are things like renovating the municipal building, the Barwood Arena (aka the Building of Recreation, the hockey rink), the Wilder School. These are improvements that will last a generation or more. These kinds of capital costs can only be handled with bonds that spread the cost of the improvement over a long period of time in the future, to reduce the impact on taxes and to put the cost of the improvement on the shoulders of those who benefit -- the future taxpayers.
I'd love to see our Voting Day question be changed from "X amount in expenses covered by G amount of grants, T amount of taxes, and P amount of Prior Surpluses" to something more like "X amount of ordinary expenses, Y amount of capital expenses, Z amount of long term bond payments covered by G amount of grants, T amount of taxes, and P amount of Prior Surpluses."
A predictable stream of capital expense funding would require the town to publish and maintain a detailed list of capital equipment and its estimated future life and replacement cost, enhancing transparency across the board. It would also make clear that other costs were not capital expenses but instead improvement costs that need to be funded through bonding. We already have detailed lists of bond schedules and know what our debt load is. It's time we broke out our capital expenses the same way. The Selectboard and town manager have made a good start toward this goal; now is the time to tie it all together.