The Expenditures (actual cost) for each project active in the Previous Year
The Appropriations (funds allocated as budget) for each project scheduled during the Current Year
The Capital Budget (budget designated for Capital Improvement) for each project scheduled during the Next 6 Years
We are going to focus on two questions:
- What is the City of Omaha spending on transportation?
- Is the CIP reliable?
- If a project is scheduled to start in a certain year, can we count on it starting as planned?
- If a project is budgeted for a certain amount, can we count on it cost that amount?
Let’s start with a few definitions:
- Current Year – The year in which the CIP is published
- Next 6 Years – The 6 years that follow the Current Year
- Previous Year – The year before the Current Year
Each CIP is supposed to include:
A. The Expenditures (actual cost) for each project active in the Previous Year.
B. The Appropriations (funds allocated as budget) for each project scheduled during the Current Year.
C. The Capital Budget (budget designated for Capital Improvement) for each project scheduled during the Next 6 Years.
Even though B & C above have different names, we can both treat them as budget. So we can say that each CIP is supposed to include:
A. The actual cost for each project active the Previous Year
B. Project budgets for the Current Year and for the Next 6 years
Let’s return to our questions:
- What is the City of Omaha spending on transportation? If we add up all the actual costs, we’ll get the answer.
- Is the CIP reliable? If we can show that each project’s actual cost occurs when planned and matches the budget, then the CIP is reliable.
Missing Actual Cost
A major hurdle impacts our study: 66% of the past costs are missing from the CIP:
- There is no cost information after 2013 – The CIP Expenditures columns are blank.
- Prior to that, the cost is restricted to one fund: Street Bonds. The cost for the other eleven funds is blank.
So we only have 34% of the cost for the CIP’s transportation projects. (See here for details about the missing data, along with some information about a recent data release from the City that may increase our available data to 47%).
We’re off to a bad start and can’t answer our first question.
The CIP falls short of its stated goal to “reflect the fiscal status and the physical progress of each project.” We can hardly gauge the fiscal status of a project if we don’t know what it is costing.
Yearly Cost vs. Budget
To answer our second question (Is the CIP reliable?) we wanted to look at the budgets in past CIPs and compare them to the actual cost. It’s easiest to explain this with an example.
The CIP published in 2009 forecasted that work would occur on project 207, budgeting $237,000 of Street Bonds-2006, and $403,000 of local funds.
A year later, the next CIP reports project 207’s actual cost for Street Bonds only (as mentioned above, all other data is not provided). So we can conclude:
- The work on project 207 proceeded on schedule (there is budget and cost in the same year)
- The actual cost covered by the Street Bond fund was over budget: $3.273 million, or 1,381% of the budget.
If there had been no actual cost for project 207, we could assume that the project’s work was dropped (delayed or cancelled).
If there had been no budget for project 207, then we could assume that the project’s work was added (unplanned).
This illustrates how Mode Shift, using the limited past cost data, was able to assess the reliability of past CIPs. Here’s what we found:
In the Current Year (the year that a CIP is published), it is likely that 30% of the projects will be dropped (cancelled or delayed at least a year). To the remaining project count, it is likely that another 48% will be added (new projects or planned ones that are moved up in priority). And it is likely that the City will spend 118% of the street bond appropriations. The second column of the table shows the same numbers for the Next 6 Years. It is interesting that the City is better at forecasting the cost for the Next 6 Years then it is at forecasting the cost of the Current Year. See Cost vs. Capital Budget and Cost vs. Appropriations for the details behind all these numbers.
We realize that the City’s priorities will change over the 7 years forecasted in each CIP, and projects will be dropped, added, and over budget. But a few questions remain:
- Shouldn’t the variances noted for the Current Year be smaller? One would think the City would have a handle on its priorities and cost control in the year that the CIP is published.
- Is anyone tracking these variances? It is likely that if they were tracked and published, they would be reduced over time.
- Are the delayed projects caused by budget overruns? We assume that when one project overruns its budget, others are delayed until future years when more budget is available.
Project Cost vs. Budget
We finished our study of past costs by looking at individual projects and compared them to their Current Year budget. Details are available here, but in summary, for the years 2008 to 2013, we found:
- 41% of the cost transaction had zero matching budget; in other words, they were projects that weren’t supposed to happen that year.
- Five projects with a total cost of $3.3 million had zero budget: The cost of these projects was never budgeted.
- 84% of projects had at least one year of unplanned work
- Most of the completed projects had cost overruns; many costing double or triple their budget.
- Some projects appeared under budget, but a closer look showed that they were delayed, cancelled, or completed with a reduced scope so in fact they were not under budget.
The CIP actual cost data is incomplete. Many projects are over budget by substantial amounts and proceed without any appropriations, and many other projects are delayed. We started with two questions, which we can answer:
- What is the City of Omaha spending on transportation? We don’t know because of missing data.
- Is the CIP reliable?
- If a project is scheduled to start in a certain year, can we count on it starting as planned? 84% of projects had at least one year of unplanned work
- If a project is budgeted for a certain amount, can we count on it cost that amount? Most completed projects appear well over budget.
We believe that accurate past cost and a reliable CIP is desirable and can be achieved:
- Accurate past costs for all fund sources should be in the CIP. Result: A clear picture of the City’s accomplishments.
- Cost overruns will occur less if they are tracked and analyzed. Result: a CIP with more solid numbers and fewer project delays.
- When funds are diverted from one project to the next, the criteria for the diversion and the impact on the CIP should be published. Results:
- A transparent process using rational decisions
- An end to the CIP’s plasticity, which undermines its credibility.
With the steps listed above, the CIP will meet its stated goal to “reflect the fiscal status and the physical progress of each project”, and we will have a better city.
Our next blog will address What are the CIP projects? and Where are they? Stay tuned!