Back to the Jul-Aug 2021 issue

Budgeting for Technology

By Melissa Reeder and Lisa Sova

Two people at a dollar-symbol shaped desk.Technology — love it or hate it, but the fact is your city can’t survive without it.

Reliable technology is crucial for cities to conduct business and provide excellent service to residents. Budgeting for technology is a unique task that plays a key role in ensuring your city has the funds to maintain current equipment, replace outdated technology, and plan for future initiatives.

Creating value

In many ways, the pandemic put technology in the spotlight. The world went virtual, and we all had to turn to tools like Zoom, cell phones, and email to keep the city moving. Many city employees began telecommuting, and cities had to invest in new technology to allow for that. This is one way many cities spent the Coronavirus Relief Funds they received from the federal government.

Even before the pandemic, though, technology had begun creating more value for cities in recent years. Many cities are using technology to do things like control their water treatment plants, allow residents to make online payments to the city, or even receive reports of new potholes via a smartphone app.

All this reliance on technology is making cities more efficient, but it also requires regular maintenance and planned improvements. Your city needs to make sure to budget for technology maintenance every year and plan for future upgrades.

This brings us to an important fact: Computers don’t rust.

Your city has a finite number of dollars, and funding for technology may seem easy to delay. After all, computers rarely show outward signs of age. They do not rust like playground equipment or crumble like streets. The need for computer maintenance is often invisible until there is a failure, but technology carries a great liability when not properly maintained.

Key components of an IT budget

There are three key areas to think about when budgeting for technology:

  • Your city staff, and how they use technology and their space.
  • The equipment and software your city needs.
  • Technology support.

Staff, space, and projects

When building your budget, think about the way people work. More and more employees are working remotely, and if that’s true at your city, then you’ll want to buy a laptop instead of a desktop computer for some positions.

You’ll also need to consider whether your staffing needs are changing. Is your city planning to hire someone for a newly created position? If so, consider the technology and tools this person will need. While it may be obvious to buy a computer, there are other costs for things like software licensing, email, telephone, and additional network cabling to connect this computer to the city’s network.

Conversely, if your city is reducing its staff, you won’t need as many software licenses, and computers can be redistributed among staff, with the older ones decommissioned rather than replaced.

It is also helpful to spend some time in each work area to watch how staff use space to perform their work duties. For example, research shows that having two monitors increases efficiency by about 25%. As more city operations move online, desk space will become less important and there will be a need to budget and purchase additional monitors.

The online movement has also reduced printing needs. Consider replacing two or more printers with a single efficient multifunction device. These new devices scan, fax, and print at a fraction of the cost per page of older laser printers.

Also, consider upcoming technology- related projects. If your city is planning to buy new or different software, question how that may affect existing computers, data storage, backups, and internet usage.

Equipment and software

When considering hardware and software, you need to think beyond current needs. There are ongoing expenses for replacing technology, maintenance renewals, software subscriptions, and upgrades.

You will find it beneficial to take inventory. A spreadsheet with the make, model, and purchase date of every piece of equipment — including computers, monitors, servers, switches, firewalls, and more — will help paint an accurate picture of the life cycle of your city’s systems.

The need for computer maintenance is often invisible until there is a failure, but technology carries a great liability when not properly maintained.Don’t forget “connected equipment” such as uninterruptible power supply (UPS) battery backups, water treatment computers, meters, and security cameras. Be sure to track the software packages purchased as a one-time cost, as well as subscription software that requires monthly or annual fees. With this inventory, you can start to form predictions on the replacement cycle and build your budget forward for years to come.

Some cities use their computers and software until they stop working. This is not proactive and can create an interruption in service. You should not use technology that is unsupported by the manufacturer. Unsupported hardware and software no longer receive updates and bug fixes for security issues. This puts your city at risk for a cyber incident.

Establish a life cycle for technology just like you do for roads and bridges. A typical computer workstation has a one- to threeyear warranty. As long as the manufacturer continues to support the system with updates and patches, using the item after the warranty expires is a budgeting decision. With the rapid change in technology, expect computer workstations to last no more than four or five years.

And don’t forget about upgrading your internet access. We often add workstations or services via the internet without increasing the capacity of our internet connection. That can lead to slow service, inefficiencies, and frustration.

Also, it is easy to overlook printers, servers, and other network devices that are hidden behind closed doors. This equipment can have a significant impact on productivity. It is also critical to keep this equipment up to date to ensure your city is protected from hackers and other outside intruders.

IT support

Funding to support your technology can be the most challenging part of assembling your budget. Some cities can justify and fund technology staff. If this is not an option in your city, then you are likely considering some sort of contracted support. If you decide to contract support, there are several payment methods, including:

  • Flat fee. This type of fee is predictable for budgeting and is usually established for two types of support services:
    1. When the contractor is handling everything related to IT. This is a good choice when you need day-to-day support. Keep in mind any special projects or upgrades are usually quoted and billed separately from the flat fee
    2. When the contractor is providing monitoring services only. In this scenario, the contractor monitors your environment to ensure things keep running smoothly. This type of service is a good compromise if you don’t need a full support model, yet you hate to wait for things to break. You can designate areas you want them to monitor. Often these contractors monitor your security and data backups to ensure they do not fail. Make sure you have the needs clearly outlined, so all areas of support are accounted for.
  • Pay for blocks of time. Some cities choose to contract IT support for blocks of time. If a block of time is not used during a month, it can be combined with other time and then applied toward a project. Also, when buying blocks of hours, you may be able to negotiate a lower rate than if you relied on an ad hoc, pay-as-you-go method.
  • Pay as you go. In this situation, you would have an IT support partner but only use them when needed. Each project and price will vary. It is more difficult to be proactive when using this method. Often staff are unaware of proper maintenance schedules for equipment and software, and a call for help is placed only after symptoms become apparent. Decide if your city wants to handle all the software licensing or if you would rather have the contractor manage licenses. Either way, keep a close eye on government collaborative purchasing programs.

As you work through your budget numbers, also consider if your city will need a helpdesk for everyday questions or assistance outside business hours, and budget accordingly.

Capital vs. operating budget

Another thing to keep in mind is whether technology equipment will be paid out of the capital budget or the operating budget. This is important when working on a capital budgeting plan, sometimes referred to as a capital improvement plan, or CIP.

The CIP typically lists five or six years of major capital improvements, the order of priority, and a way to pay for the items. A plan allows your city to save money for these projects. Priorities in the CIP remain tentative, and the council reviews them annually. This type of planning ahead provides protection to your city by avoiding unforeseen infrastructure failures and expensive emergency repairs. So, for technology, what is considered capital and what is an operating expense? Consider useful life and cost.

You can learn more about this topic from the League webinar, Fitting Technology Into Your City’s Budget. Watch the recorded webinar at www.lmc.org/techbudgetwebinar.

Lower-cost items that have a shorter life will usually be included in the annual operating budget. For example, computers are often expensed in the operating budget. And software licensing is an annual expense also included in the operating budget.

Higher-cost items that last several years, such as a server or an accounting software system, are typically part of the capital budget.

Technology needs can sneak up on you if you’re not careful. Error messages and system lockups may not catch your eye as easily as a leaky roof or broken window. But with a proactive plan and budgeting process, you’ll be sure to catch problems before they begin.

Melissa Reeder is chief information officer and Lisa Sova is assistant finance director with the League of Minnesota Cities.

Contact Reeder: mreeder@lmc.org or (651) 281-1221. Contact Sova: lsova@lmc.org or (651) 281-1208.