Capital Improvement Plan
Overview
A Capital Improvement Plan (CIP) is a comprehensive outline used by governments and organizations to schedule and budget for major infrastructure projects and significant purchases over a five year period. These projects typically involve construction, renovation, or acquisition of physical assets such as buildings, roads, bridges, parks, and major equipment.
Key components of a Capital Improvement Plan include:
- Project Identification: Listing and prioritizing projects based on their importance and urgency.
- Cost Estimates: Estimating the financial requirements for each project, including construction costs, equipment purchases, and associated expenses.
- Funding Sources: Identifying how each project will be funded, which may include bonds, grants, dedicated taxes, or other revenue sources.
- Timeline: Establishing a timeline for each project, outlining start and completion dates.
- Public Input and Approval: Involving stakeholders and the public in the planning process and gaining necessary approvals from governing bodies.
- Implementation and Monitoring: Executing the projects according to plan and monitoring progress to ensure they stay on schedule and within budget.
Capital Improvement Plans are crucial for maintaining and upgrading infrastructure, ensuring that resources are allocated efficiently, and providing a clear roadmap for future development and growth.
A Capital Improvement Plan (CIP)—also called a capital plan—contains:
- All individual capital improvement projects
- Equipment purchases
- Major studies
In the capital plan, these elements all exist in conjunction with construction and completion schedules, and with financing plans.
A CIP has two parts:
- A capital budget. The capital budget is the upcoming year’s spending plan for capital items.
- A capital program. The capital program is a plan for capital expenditures that extends five to years beyond the capital budget.
The CIP provides a working blueprint for sustaining and improving the community’s infrastructures. It coordinates strategic planning, financial capacity, and physical development.
Importance
A capital plan is critically important and one of the major responsibilities for a government entity because:.
- The capital plan helps a community anticipate needs rather than just reacting to problems in the moment.
- Capital planning ahead provides time for leaders to to get the necessary resources in place gradually, as opposed to all at once.
- A capital plan provides the proper preparation necessary to determine the most economical means of financing a project.
- When prepared collectively, the CIP helps increase “buy-in” among officials and employees, and helps voters understand its importance.
- The capital plan puts the community in position to quickly take advantage of federal or state grant programs and opportunities.
Benefits
CIP delivers the following benefits:
- Synchronizes capital and operating budgets
- Systematically evaluates competing demands for resources based on a prioritization matrix reflecting the entity’s long-term goals and objectives
- Identifies, prioritizes, and optimizes the financing of capital projects
- Federal and State grants
- Debt financing
- Links strategic and comprehensive plans with fiscal capacity
- Informs the public about the government’s investment in infrastructure
The CIP Process
Organizing the capital improvement plan
CIP Governance
The Public Works Department takes the lead because they have excellent multi-year programs that strategically examine capital projects.
Develop CIP Process, Forms, Criteria, and a Schedule
The next step in preparing the CIP is to develop:
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A CIP budget calendar detailing milestones and dates for the CIP process
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Specific forms detailing project proposals
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A prioritization and decision-making matrix for evaluating and selecting capital projects
Citizen and Stakeholder Involvement
The CIP budget calendar may include the CIP process to involve citizens and important stakeholders.
Identify projects and funding options
Identify projects from the individual infrastructure systems’ “capital needs studies.” It is still possible to put together an effective CIP without these resources through effective development of the project request forms.
The project request forms designate the funding source(s) available for the project.
Selecting the Projects
After the project proposals have been submitted, the projects submitted are evaluated and prioritized without regard to the funds available.
Then, finance staff forecast the amount of unearmarked money available. Projects competing for general funds (that is, un-earmarked money) are re-prioritized based upon the available funds.
The projects are next divided into priority groups—i.e., those which are urgent and for which efforts should be made to find funding, those which should be completed as funds become available, and so on.
Projects with existing funding, from enterprise funds, should also be evaluated. The next step is to actually decide on what will be funded.
Prepare and recommend a capital plan and capital budget
The selected projects, plans, timelines, and financing summaries are then compiled and presented for approval to the City Council.
The governing body conducts hearings, workshops, and other outreach efforts to ensure all stakeholders and interested parties can provide feedback.
Adoption of the capital budget
The CIP’s first year becomes the Capital Budget. There are three ways that the projects in the capital budget can be approved:
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Adopt an annual capital budget: This method funds projects only a year at a time with the funds needed for the project for that year.
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Adopt the capital budget with the entire amount for every project approved in that fiscal year, regardless of whether it will be spent that year: In addition, carryover funds for capital projects from one year are usually put into the next year’s budget and approved again by the elected officials.
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Approve a bond financing and authorizing the project(s).
CIP Documents
Capital Improvement Plan FY 2024/25 – 2028/29
Capital Improvement Plan FY 2023/24 – 2027/28
Capital Improvement Plan FY 2022/23 – 2026/27
Capital Improvement Plan FY 2022/23 – 2026/27: 3rd Quarter CIP Update
Capital Improvement Plan FY 2022/23 – 2026/27: 2nd Quarter CIP Update
Capital Improvement Plan FY 2022/23 – 2026/27: 1st Quarter CIP Update
Capital Improvement Plan FY 2021/22 – 2025/26
Capital Improvement Plan FY 2020/21 – 2024/25
Capital Improvement Plan FY 2019/20 – 2023/24
Capital Improvement Plan FY 2018/19 – 2022/23
Capital Improvement Plan FY 2017/18 – 2021/22
A capital project is a multi-year, large-budget effort that aims to improve existing infrastructure, create new infrastructure, or make some other large change or improvement to public land, property, or equipment.
A capital improvement project—also called a capital project—is typically a permanent structural change to a property or asset to prolong its life, increase its value, or enhance its capabilities.
Capital projects can include asset upgrades or large scale maintenance work.
Capital Improvement Project Examples
Some examples of capital projects for may include:
- Improvements to community gardens, parks, public playgrounds, or other public spaces, like resurfacing a community tennis court.
- Street and sidewalk repairs.
- Work on public buildings, including renovations and additions.
- Installing or improving assets like streetlights, benches, or accessibility ramps on public property.
- Work on public infrastructure like subways, service water lines, or waste management systems.
How are capital projects different from regular maintenance?
Here are four tips to help you distinguish between a capital project to be included in the CIP and ordinary maintenance to be included in the operating budget.
We’ll also help identify differences between capital and maintenance expenditures.
Tip 1. Define a capital project in writing
Each city has its own definition of a capital project. Typically, the definitions were broad in scope, and included a range of items such as land acquisition, construction, equipment purchases, technology infrastructure and major systems (such as an ERP), major renovations, and special studies such as new Infrastructure Master Plans. Frequently there are additional criteria such as minimum expenditure thresholds, minimum useful life (in years), non-recurring nature or other requirements.
Tip 2. Define maintenance expenditures and designate maintenance funding sources
It is critical to define major infrastructure maintenance expenditures and establish policies designating the funding sources for maintenance expenditures. This lets you emphasize the importance of preserving existing facilities and relieve some competition between maintenance needs and new capital projects.
If the definition developed in Tip 1 includes major maintenance and asset preservation projects, then these maintenance expenditures are considered, funded, and included in the capital budget process. Otherwise, maintenance expenditures should be included in the operating budget.
Tip 3. Identify capital projects not included in the CIP
The CIP often does not include projects from the government’s enterprise fund. This can be confusing to elected officials and citizens when assessing infrastructure investments’ overall impacts.
Tip 4. Develop a comprehensive inventory and infrastructure rating system
This tends to be the most commonly left out item in Capital Improvement Planning. However, a formal inventory of all properties and assets, complete with deferred maintenance needs across the entity and a condition assessment to help decision-makers develop priorities, is essential for elected officials and appointed executives.
The inventory should include documentation on the need for renewal, replacement, expansion, or retirement of all physical assets. The inventory should also have information on the year the facility was built or acquired, the date of last improvement, its condition, the extent of use, and the scheduled date for rebuilding or expansion.
