What is a capital improvements plan?

Visitor Question: What exactly is a capital improvements plan? I was just elected to a city council and am now trying to catch up on understanding what our planning director is saying to us during the budget workshop.

Editors Reply: A capital improvement plan is a city's proposed program of improvements to its own assets over a period of years, often five. It may represent new construction or significant maintenance and upgrading of streets, roads, city-owned buildings used for its own operations, street lighting, parks, and then myriad other facilities and improvements, should the city operate a health clinic, utilities, nature preserve, cemetery, or what have you.

In most cities, the capital improvement plan (or capital improvement program) is rapidly abbreviated to CIP. Some places differentiate the plan from the program in that the "program" is what is actually included in a budget, whereas the "plan" covers a longer time period and is aspirational rather than actually incorporated into a budget.

The capital improvements plan then interfaces heavily with the city's budget process, and either one year or two years of the plan advance to the actual budget appropriation process each time the budget is prepared. In an ideal world, projects from the capital improvements plan are the only capital projects that make it into the actual budget program, but of course political considerations or large-scale emergency repairs sometimes substitute a capital project that was not even included in the capital improvements plan.

A particular capital improvements plan will define items that are considered capital improvements as opposed to operating expenses that will be consumed within the year. Capital improvements generally have a life span of at least five years and sometimes much longer. The "capital" idea obviously comes from accounting, so if you are familiar with capital versus operating expenses, that will help you understand in the context of a city.

Another generalization that citizens notice is that capital improvements tend to be more expensive than other expenses in the budget.

Usually capital improvements plan do not address city funding for city-owned assets that it does not intend to keep. Stabilization of any properties the city obtains because of non-payment of taxes, for instance, would not be included in the capital improvements plan because they are not actively being used by the city for its purposes.

Another significant exclusion in most cities is what they might call "rolling stock," including cars, trucks, and transit vehicles. Thankfully, many of these items do last more than five years, but they are not the semi-permanent types of things listed in a capital improvements program.

If the capital improvement plan is actually prepared by the planning department, a process that we applaud, planners work closely with other departments that hold significant capital assets, and with the office of the city manager, finance director, and mayor.

These days it is more likely that if there is a city manager or powerful finance director, that official's office initiates the capital planning and plays an outsize role in the decision making. But in all cases, there should be consultation with and significant involvement of the planning department.

The planning department's role should emphasize an evaluation of whether a particular capital improvement furthers the goals of the comprehensive plan. For instance, if your plan is all about sustainability, and yet the capstone of the capital improvement request from the public works department is a new 60-foot wide connector street, the planning department should flag that issue for the benefit of the city council and other reviewers, possibly including a city manager or mayor. Ideally that project does not become part of the capital improvements plan.

Investigating the planning term more closely, we see that a capital improvement can help leverage private development dollars into a specific neighborhood. Because land uses tend to follow transportation, construction of new streets (and in some instances, new utilities such as new sewer lines extended outward from the core of the city) may be the decisive factor in where city growth occurs. We hope you can see why the planning director was the one who made the presentation that raised this question for you.

The capital improvement plan is somewhat different from other plans in the extent to which it involves planners in cross-disciplinary work with almost all city departments and the extent to which well-managed cities are able to plug plan contents right into a budget. Well-done capital improvements plans represent the very best of planning implementation and are worth significant investment of effort in a worthy planning cycle that includes public input, generation of alternatives, and thoughtful evaluation and choice among the alternatives.

The role of a city councilperson such as yourself is to shepherd the projects in the capital improvements plan into the budget with as little friction from other competing political demands as possible. Of course, you will have situations such as a bridge collapse, wildfire or tornado destruction, or building failure that demand immediate attention and justify allowing a new project to be interjected into the budget before the planned capital improvements, but the goal is to keep that sort of activity to a minimum and allow the planning process to prevail.

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