Tipsheet: Capital spending

With state and local budgets about as tight as they've ever been, how is it that some localities are considering spending more?

Proposals to increase spending on capital construction projects are bubbling up even as states and localities trim their operating budgets. In Georgia, Macon.com reports that the governor would increase funding for transportation projects and for deepening Savannah harbor. And as Minnesota Public Radio reports, the governor there "has proposed $685 million in state borrowing to fund projects covering everything from flood mitigation to bridge improvements to preserving state university buildings."

In suburban Washington, D.C., Montgomery County, Maryland, is considering a 7% increase in capital spending on everything from classrooms to clinics, according to the Washington Post, even as the county's tax revenue continues to fall. How is that justifiable?

The drop-off in tax revenue presents an immediate problem for the day-to-day operating budget, but much of the money for capital projects such as schools, roads and parks is borrowed, often with a 20-year payment period.

With interest rates at historically low levels and construction companies willing to accept low bids in order to get work, some government officials believe this is a good time to get going on long-term projects.

It's worth taking a close look at what your local government is planning to see if cuts in the operating budget for salaries and the like is just one part of the equation.There might actually be a little good news on the capital side of the ledger.

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