Establishing a Capital Improvements Plan

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We have identified 16 steps to developing a CIP and various policy considerations within these steps. The ultimate goal for a CIP is the establishment and maintenance of credibility among departments, elected officials, and the public.

Step One—Study Committee of Legislative Body and Department Heads
Starting the process, the legislative body could appoint a committee of its members, elected officials, and local government staff to formulate a basic plan and resolution authorizing the capital improvements plan.

Step Two—Authorization Establishing the CIP
The county legislative body should authorize the capital improvements plan. This authorization is by an approved resolution. Sample Authorizing Resolution.

Step Three—CIP Committee
Since local government usually involves many elected officials and various agencies, it is recommended that a committee be established with the authority to set policies and implement procedures for the CIP. The committee could be made up of legislative body members and key department heads.

Step Four—Coordinator and Staff Assignments
A person should be assigned the task of coordinating the CIP and sufficient staff should be assigned to assist the coordinator in administering the CIP.

Step Five—Annual Calendar for CIP Preparation
Below is a suggested annual calendar for preparing the capital improvement program and submitting it for approval.



September 1

Distribute CIP manual, forms, and computer work sheets

September 15

Briefing session for all departments

October 1 to November 15

Each department prepares information

November 15

Each department submits CIP requests

December 1 

Consolidate all requests into a master plan

December 15 

CIP committee reviews and prepares recommendations

Jan. 1 to Jan. 31

CIP committee presents CIP to legislative body for review

Feb. 1 to Feb. 28

Legislative body holds hearings for
department heads and public

March 1 to March 31

Master plan developed with

March 31

Legislative body approves plan and

April 1

Departments begin implementing plan

Step Six—CIP Forms
In order to analyze the cost and priority of each capital improvement project request submitted, a form should be developed itemizing the major factors to be considered. Sample CIP Request Form; the top portion or front of the form provides detailed cost and description and the bottom or back of the form provides a means to evaluate and set a priority for each project.

Step Seven—Public Involvement
The degree and amount of public involvement will depend on local conditions; however, if the project will result in a major tax increase, it is recommended that the public be involved from the beginning of the planning and evaluation. It seems that the more knowledge a person has of the problem, the more likely he or she will respond positively to a solution. The public’s involvement can be achieved by issuing a Public Survey.

Step Eight—Needs Analysis—Capital Investment Records
How can you make an intelligent decision unless the facts are available relative to quantity, quality, and age of facilities and equipment? Few local governments have historically maintained adequate records of capital improvements, and of these only several have all the facts readily available for use in planning the replacement of buildings and equipment. This section of your plan should show how a records and information systems could be maintained. The threshold dollar amount may vary from government to government depending on the policies they have established.

Step Nine—Consolidated Capital Improvement Project Schedule
A schedule for consolidating all capital improvement requests for the year showing the estimated cost and possible funding sources is suggested. This schedule could be used as the master listing of all projects for evaluation by the CIP Committee and legislative body. A schedule for presenting all projects closed out during the last fiscal year and all current projects is also suggested.

Step Ten—Prioritizing Projects
No perfect system has been developed for evaluating and prioritizing capital improvement projects; however the county legislative body should develop a system of prioritization which would include issues related to safety, legal, education, value of life, and conveniences.

Step Eleven—Financial Analysis and Impact
After developing a capital improvements plan or receiving a request for capital improvements, the CIP committee and local legislative body must determine how much the local government can afford and how it will pay for the improvement. This section of your plan should discuss the logical steps in analyzing current debt requirements and funding sources. CTAS’s Debt Management Workshop class discusses issues related to the county’s current operating debt payments and projects future payments in a multi-year budget plan.

Public hearings and news articles seem to be the most used means of communicating with the public, but regardless of the means, the information should be correct and complete. Credibility should never be compromised by intentionally misleading the public or providing inaccurate information.

Step Twelve—CIP Committee's Report and Recommendations to Legislative Body
When all the input and documents from department heads, staff, and public have been analyzed, a report and recommendations should be given to the legislative body.

Step Thirteen—Legislative Body Consideration and Adoption
The legislative body's task is to weigh the necessity of the projects with the availability of funds and the amount of tax increase, if needed. After serious deliberations and consideration of all the facts, the adoption process of the legislative body involves three phases:

Phase One. CIP Document—The first phase is the adoption of the CIP multi-year planning document, with tentative approval of project scheduling in the second year and thereafter. It must be clear to the legislative body that the CIP document is a planning document with budget authorization and funding included in the second and third phases.

Phase Two. Capital Budget and Financing—In this phase, a capital budget is approved for various capital project funds for different departments. This authorization is for new projects to begin in the current or ensuing fiscal year, and the budget format would be similar to an operating budget except using different account numbers. Once this budget is approved, the department may begin bids and signing contracts for the projects authorized by the capital budget. A second part of this phase is to authorize funding either by issuing capital outlay notes and/or bonds. Once the capital outlay notes or bonds are approved, the local government may issue the notes or bonds immediately using a financial advisor, in most cases, or the local government may borrow temporary cash by either issuing revenue (tax) anticipation notes or bond anticipation notes. The borrowing of temporary cash is similar to construction loans used by private businesses.

Phase Three. Capital Improvement Included in Operating Budgets—In-lieu of authorizing separate capital budgets using capital project funds, the legislative body may approve the purchase of capital improvements in the operating budget for the specific department. Usually this is done when the amount of expenditure is small, and/or when funding is from accumulated funds or excess revenues in the operating budget. In some cases when the expenditure is small, capital outlay notes will be issued and the proceeds placed in the operating budget. If the expenditure is authorized in an operating budget, then the department must wait until the operating budget is approved, or a specific resolution for the expenditure is approved by the legislative body.

Step Fourteen—CIP Financial Plan

Capital funding sources include


  • Annual Revenue – Local Taxes
  • Reserves - one time revenue as one time transfer
  • Earmarked Revenue
  • Special Assessments
  • Impact Fees
  • Grants/Donations


  • General Obligation Bonds
  • CON – Capital Outlay Notes
  • Revenue Bonds
  • Capital Leases
  • Special Obligation Bonds
  • Loan Pools

For  additional information, see the Capital Funding Sources and Debt Financing page in e-Li.

Step Fifteen—Implementation, Monitoring, Follow-up and Final Inspection
This may be the most important step since it determines the quality of the project which in some cases could last fifty years or longer. The success of this step and project lies mainly with the department head or official; however, it should be a joint effort of the legislative body, CIP Committee, and the department head. The general areas of concern in this step, which determine the success and quality if properly and extensively managed, are the following:

1.     Complete and clear specifications

2.     Proper bidding and awarding of the contract

3.     Complete contract with surety bond requirements

4.     Constant monitoring of specifications and contract with inspection of projects

5.     Monthly reporting of project progress and financial condition

6.     Encumbrance (obligation) accounting, for the contract and change orders

7.     Final inspection and approval by the department head, CIP Committee, and other officials responsible for the operation

Step Sixteen—Use the Asset
Finally, after all is done, the asset is ready for use.