CAPITAL BUDGETING MODEL

Optimize Capital Expenditure Allocation Across Projects Considering Both Quantitative & Qualitative Factors.

TILT’s Capital Budgeting Optimization tool has helped municipalities plan their spending budgets several years out. Get the most out of your capital projects budget with a model that finds what timing of projects is financially possible and which combinations result in the highest assessed benefit.

construction crane

TILT in action

An Oregon County needed a model to optimize the selection & ordering from a diverse set of possible capital projects over the next 10 years utilizing hundreds of millions of dollars, with a methodology that was as objective, transparent, and analytically rigorous as possible.

The challenge was to optimize decisions with a high degree of complexity – the county planners and the model needed to consider an array of qualitative attributes acting as guiding principles (e.g., Equity) and objectives for the county, while operating within realities of debt limits, debt service capabilities, and other financial constraints.  Typical possible projects in contention being things like renovating county buildings for seismic, upgrading animal services, improving roadways, bridge maintenance, digitization of records, etc – it is not hard to sympathize with decision makers who need a methodology for comparison and selection.

The Model serves to create discussion – by giving the user choices, comparisons, tools for sorting priorities, and inputs for weighting attributes.  This is accomplished in several ways, both before running the model and after running the model.

Initially, the model requires information that leads to collaboration, such as as outreach to create the universe of possible projects to undertake, discussions around how much weight to put on each of the county attribute categories, assessments on how each potential project should ‘score’ across each of the attributes, projections on future funding availability, and more.

Once run, the model presents committees not with a single prescription, but with several choices on how to proceed in terms of which projects to undertake and when to schedule them for maximum regarded benefit, without violating county expenditure limitations.  The model maps out specific lists of projects, which year they should be undertaken, assesses various benefits from each portfolio of projects, and more.  Users can sort all viable portfolios based on, for example, which ones fit in the greatest number of important projects, which maximizes attribute scores, which have the most impact per dollar, etc.