CIP

What is Capital Improvement Planning (CIP) and Why Should We Do It?

Recently, considerable attention has focused on the increasing inadequacies and deterioration of federal, state and locally held capital assets. As the State and Federal Governments address their own deficiencies, more of the responsibility for financing and managing local capital assets is diverting to local governments. Therefore, it is essential that a program of planned repair and replacement for local capital assets be implemented in order to maximize the impact of the dollars spent on your community’s infrastructure.

High quality capital assets are critical to the preservation of the quality of life in Oklahoma’s towns and cities. These assets are an essential component of growth and development. Consequently, as facilities and services degenerate, growth will be deterred and quality of life adversely influenced.

Communities attempting to attract new business and communities encountering large growth are struggling to stretch available financial resources. In an attempt to meet demand for increased services and an increasing demand on financial resources, many communities are experiencing budget shortfalls. As an example, President Bush’s 2006 budget is eliminating EDA and CDBG funding, further straining rural communities. The current environment of scarce financial resources, coupled with the need for determining alternative capital financing mechanisms, forces Oklahoma communities to face a critical need for advanced planning and budgeting (Strategic Planning).

Strategic planning is a continuing process; not a one-time event. With local leadership constantly changing, it is imperative that the planning is completed. Failure to strategically and financially plan for expenditures to provide needed projects, virtually assures that scarce resources will be consumed in reaction to crises. Planning for the future helps communities to avoid expensive mistakes that are frequently the result of postponed infrastructure improvements.

Planning a strategy for construction, reconstruction, operation, and maintenance of public facilities, and preparing an annual capital budget are essential processes to sound, stable governance. Each year elected officials in leadership positions adopt financial plans to conduct the peoples’ business. Concurrently, a long-range strategy must be developed to match the cost of future capital improvements to anticipated revenues. Such a long range strategy, known as the community’s Capital Improvement Plan (CIP), establishes a timetable for initiating and completing capital asset projects. In the process, the strategy creates and blueprint for allocating resources and a means for tracking progress. The financial component of a community’s CIP is commonly referred to as the Capital Budget. Enacted as part of the annual budget, the Capital Budget is the mechanism that binds the CIP to finances available in the current fiscal year. Consequently, with a CIP in place, which includes a Capital Budget, the leadership is privy to established goals for the community, regardless of the political environment.

Benefits of Capital Improvement Planning. Capital planning done carefully and thoroughly can serve as a mechanism for identifying capital needs and setting priorities for all those capital needs. It produces not only a wish list, but a schedule of realistic needs that include the cost and method of financing capital improvements. A list of some of the community benefits from Capital Improvement Planning include:

  • Reduces the frequency for crises adjustments and management
  • Facilitates efficiency among government departments
  • Promotes fiscal planning and improved bond ratings
  • Enhances decisions about community growth and development
  • Focuses attention on existing facilities
  • Provides a framework for public education and participation
  • Fosters mechanisms for monitoring and revision
  • Improves intergovernmental and regional cooperation State – level agencies have idea of needs

Jennifer Phipps, CIP Coordinator jphipps@eoddok.org