Be “shovel-ready” through CIP

Earlier this year President Obama’s federal “stimulus program” swept across the country offering federal funding to jump start “shovel-ready” capital improvement projects.

This highlighted the ongoing need for local governments to be more nimble and able to respond without delay to new economic development and community building opportunities. For long-term success, local governments must do more than simply respond and react.

An up-to-date capital improvements program (CIP) is a tool local governments can use to plan for major expenditures, to ensure that public funds are used wisely and as efficiently as possible, and most importantly - to be prepared with “shovel-ready” projects when unexpected sources of funding appear!

A CIP is also an important tool for implementing a community’s adopted master plan and other long-range plans (such as parks and recreation plans and utility plans).

WHAT ARE “CAPITAL IMPROVEMENTS”?

Capital improvements are physical facilities that require substantial investments to construct/develop, and are intended to last/be used for a long period of time. Typical project examples include:

fire engines, bulldozers, and similar large equipment purchases;
treatment plants, water and sewer lines, landfills, street construction or reconstruction, and similar infrastructure improvements;
libraries, schools, government buildings, and similar building projects; and
replacement, expansion, or major repair of existing facilities and equipment.

“Gray area” projects that could also be considered “operating” expenses outside the scope of a CIP include vehicle and small equipment purchases, repairs, and remodeling projects. Here are two ‘rules of thumb‘ to help determine whether a project should be considered a “capital” or an “operating” expense:

Cost. Commonly used thresholds separating “major expenditure” capital projects from what should be considered regular municipal operating expenses range from $2,500 to $10,000 or higher, depending on the size of the municipality’s budget.
Frequency. A capital project should not be something that appears in the budget more often than once every three to five years.

WHAT IS A “CAPITAL IMPROVEMENTS PROGRAM”?

A capital improvements program (also called a “capital improvements plan” or “CIP“):

identifies the community’s capital needs;
ranks them by priority;
coordinates their scheduling over a specific number of years; and
determines the best funding method(s) to pay for them.

Many CIPs are organized into three (3) sections:

Overview of the CIP process, along with a list of the benefits the community will derive from the capital improvements;
Financial data, including charts outlining historical revenue and expenditure data, projected revenue, expenditure, and debt service; and a
Description of projects recommended for funding in the CIP period, including a justification for a project’s inclusion in the CIP, the project’s relationship to the community’s master plan and other long-range plans, and how the project will be financed within the community’s fiscal capacity.

The CIP should cover a six (6) year period, updated annually, with the first year representing the community’s capital budget. The document lists the proposed capital improvement projects and expenditures by:

Location, date of construction, and relationship to other existing and proposed facilities;
Cost, means of financing, and sponsor; and
Priorities over the CIP time period and geography of the Township.

Per the Michigan Planning Enabling Act (Public Act 33 of 2008), any municipality with jurisdiction may prepare and adopt a CIP, but it is typically mandatory for most cities and villages and for those Michigan townships that “alone or jointly with 1 or more other local units of government owns or operates a water supply or sewage disposal system.”

WHAT ARE THE BENEFITS OF USING A CIP?

The CIP is a tool to enable and improve the local government’s ability to balance its capital needs and available financing over a multi-year period. A CIP helps to:

ensure that new public facilities and infrastructure improvements meet Master Plan goals and objectives;
spread large capital expenses over time and break large projects into phases; and
bring plan recommendations for public facilities to reality.

Also, the process of adopting and updating a CIP minimizes the potential for poorly planned or unnecessary public improvements and expenditures, and increases opportunities for pubic input on and public support for proposed capital improvements.

Not every public project is a good idea, even if it seemed that way at first glance.
Some “good ideas” cost more than their benefits. A public facility may turn out to be unnecessary, over-designed, or may not meet the community’s actual needs. This usually becomes apparent during the CIP process.
Use of the CIP “tools” by the municipality enables private businesses and citizens to have some assurance as to when public improvements will be undertaken.

To learn how to implement a capital improvements program in your community, contact Building Place today! (see contact information below or click here)

© 2009 Building Place - Rodney C. Nanney, AICP (www.buildingplace.net) - All rights reserved. Contact us here for information regarding reprinting, redistribution, or other use of original material. Excerpts may be quoted with proper attribution and a link to this website.

About the Author

As the principal planner and Zoning Guru for Building Place Consultants, Rodney C. Nanney, AICP is an innovative provider of solutions to community planning, zoning, and local economic development challenges. Mr. Nanney is a recognized zoning expert and the creator of the Place Zoning model for mixed-use neighborhoods and walkable communities.

An accomplished writer and public speaker, he also has the all-to-rare gift among planners of being able to effectively communicate planning and zoning concepts in plain language. He has spoken before audiences large and small, and as diverse as church groups, college students, elected officials, and elementary-age children.