Capital Budgeting Over the Last Several Years, Essay

Capital Budgeting

Over the last several years, different levels of government have been facing a variety of challenges when it comes to budgetary issues. For the city of Ft. Lauderdale, the Department of Public Safety is encompassing 60% of their total expenditures every year. This is because it includes areas such as police and fire / rescue services. At the same time, many of these departments are subdividing into other areas of specialization. To fully understand the way different events have impacted the city requires: examining how debt capacity is determined, studying the effects of refunding / reorganization on existing debt obligations and analyzing alternatives that can be used. Together, these elements will offer specific insights as to as the long-term effects of various activities on the budget and possible tactics for dealing with them. ("Comprehensive Annual Financial Report," 2012)

Discuss how the debt capacity of the governmental entity is determined.

The debt capacity is determined for the entire city of Ft. Lauderdale using a complicated formula. This involves analyzing the total amounts of current debt in comparison with the sinking fund and revenues. These figures are compared with the needs of city and bonds can be issued to address specific needs. This is used by the city council, to set a limit of 12% for all revenues collected in contrast with outstanding liabilities.("Comprehensive Annual Financial Report," 2012) ("Statistical Section," 2012)

In the case of the Department of Public Safety, they have to remain within these guidelines. This is because, they are receiving their financing directly through the city's general revenues fund. To qualify, the department has to be in compliance with these provisions. Otherwise, there is the possibility that they could see a decrease in funding. During the last two years, the total amounts of spending have been increasing from $181 thousand to $187 thousand. This is a sign that the department is following the basic guidelines of the city for their debt obligations of 12% in comparison to all total revenues. ("Comprehensive Annual Financial Report," 2012)

For example, the Department of Public Safety will receive a percentage of the funds collected from various general obligation, capital lease and revenue bonds. These are provided to them in the form of additional financing for different activities. While the city, is responsible for repaying the loan to investors. This makes the department directly answerable to city officials (which means they have to follow their policies and procedures). ("Comprehensive Annual Financial Report," 2012) ("Statistical Section," 2012)

Evaluate the effect of refunding or reorganizing existing debt obligations.

In the last two years, the city….....