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Capital Improvements Programs (CIP). What is a Capital Improvements Program? “A multi-year schedule of public physical improvements.” Rolling 5-6 year plan Outlines revenues and expenditures for approved capital projects over this period

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Capital Improvements Programs (CIP)

  • What is a Capital Improvements Program?

    • “A multi-year schedule of public physical improvements.”

    • Rolling 5-6 year plan

    • Outlines revenues and expenditures for approved capital projects over this period

    • “A statement of budgetary policy and a planning document.”

  • As such, the CIP is riddled with policy issues, policy choices, and political pressures.

  • In his PAS report, Bowyer asserts that:

    • The CIP is one of the best ways to implement the Comp Plan

    • Many planners have too little contact with financial decisions and financial techniques. This is an unexploited area where the real power of planning may lie; control of the public purse.

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What are Capital Projects?

  • Capital projects are major, nonrecurring expenditure, typically one of the following:

  • 1) Any acquisition of land for a public purpose;

  • Examples: Purchase of land for a new park; ROW for road

  • 2) Any construction of a new facility or a major addition to a facility;

  • Examples: New road; Widening of road; New fire station

  • 3) A nonrecurring rehabilitation or major repair to all or a part of a facility and its grounds (must be a major rehabilitation: long-lived and expensive);

  • Example: Major renovation to city hall

  • 4) Purchase of major equipment (again must be major: long-lived and expensive);

  • Examples: Purchase of a new fire engine; New transit buses

  • 5) Any expense related to any planning, feasibility, engineering, or design study related to a capital improvement.

  • Example: Expenses related to studies of Capital Circle SE expansion

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Excerpts from Tallahassee’sCapital Improvements Program (CIP)

  • The CIP lays out the capital budget for the Fiscal Years 2004-2008 (a five year period). --Projected Revenues --Projected Expenditures

  • The CIP organizes the funding sources by major funds: --Bond Proceeds --Federal Funds --General Government --RR&I Funds --Special Funds --State Funds

  • The CIP organizes expenditures by Department/Program, for example:

  • --Fire/Police --Various Utilities --Planning/GM --Public Works --Parks & Recreation --Solid Waste

  • 4) For a given project, detail is provided on the expenditures per year and the sources of funds

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Selecting Capital Projects

  • Local governments are usually faced with allocating scarce resources among alternative programs and projects. In capital budgeting, project requests far outstrip available resources.

  • How should municipalities choose among various projects? For example, how can you compare and choose between 1) constructing a new regional park, 2) resurfacing several major arterials, 3) buying new police cars and fire engines, or 4) purchasing sensitive landsall of which can be considered capital purchases?

  • Old School: Political Dealmaking and “Smoke-filled Rooms”

    • When local governments do not have systematic procedures for making decisions politicking and deal making must result

  • New School: Planning Decisions with Little Input from Planners

    • A disjointed process, one detached procedurally from the planning process.

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Characterizing the Typical, Inefficient Capital Projects Selection Process

  • The Decision-making Process

    • Usually a mix of officials in different departments, all with different agendas and political pressures

    • Decisions often made based upon short term political priorities

  • Linkage of CIP to the Comprehensive Plan

    • Very loose, with very little explicit policies to guide decisions

  • System Inventory and Assessment

    • Typically a part of the process, but wholly dependent upon the quality and availability of data on the current system

  • System Replacement Schedule

    • Usually an important component in most cities, but this also requires established and available standards for replacement

  • Citizen Involvement

    • Usually by means of complaints after decisions have been made

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Effective CP Selection Processes

  • Research and experience have shown that effective and efficient spending of public dollars on capital projects is achieved through: 1) the establishment of procedures for prioritizing and selecting among projects 2) the use of reasonable, defensible criteria; criteria linked to key factors like safety, fiscal impact, distribution, feasibility, etc. 3) the linkage of capital expenditures to the longer-term goals and objectives as laid out in a community’s comprehensive plan

  • In an effective CP selection process, decision making is separated (as much as possible) from political pressures and projects are selected based upon community needs and the merits of a given project.

  • There are two typical approaches to selecting capital projects: 1) Accounting Methods (B/C, IRR, NPV) 2) Inventory/Criteria/Committee Approaches (Dayton, Tallahassee)

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Accounting Methods for Selecting Projects

  • Typical methods for choosing among capital projects include: --IRR (Internal Rate of Return) --NPV (Net Present Value) --B/C (Benefit-Cost Analysis)-Why are these the usual methods for choosing among projects?

  • Other options are available and these include: --Cost-Effectiveness Analysis --Contingent Valuation Methods

  • Primary limitations of these methods:

  • 1) Benefits of projects are often intangible, difficult to quantify.

  • 2) Spillover effects occur so all beneficiaries may not be paying.

  • 3) Opportunity costs should be factored in.

  • The calculations within each of these formulas is not difficult, but the estimation of benefits is very difficult.

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The Importance of Criteria

  • What is absolutely essential to the process are evaluation criteria that allow for the comparison of a very broad set of proposed projects. (Bridge repaving vs. New park, for example)

  • Criteria often used:- Fiscal Impact - Distributional Effects- Health and Safety - Project Feasibility- Community Economic Effects - Amount of Uncertainty/Risk- Interjurisdictional Impacts - Linkages to Other Projects- Disruption and Inconvenience- Environmental, Aesthetic, and Social Effects

  • Once adopted, criteria should be made as specific as possible with anchored definitions that minimize subjectivity.

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Dayton’s Capital Allocation Process

  • Step 1: An Oversight Committee is formed.

  • Step 2:Written policies understood by all in the committee guide decisions. These policies come from the Comp Plan.

  • Step 3: An Inventory of existing infrastructure is compiled and updated annually (a Public Document).

  • Step 4: An Assessment of existing infrastructure is compiled with clearly defined Levels of Service established to rate the systems (a Public Document).

  • Step 5: A Replacement Schedule is drawn up by the lead department for replacing ALL elements of a system (a Public Document).

  • Step 6: A Rating System that evaluates all submitted major infrastructure projects is used to identify priority projects.

  • Step 7:Citizen Involvement is an important component from day one of the decision-making process via the Infra Handbook.

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Procedural Issues

The capital projects review process should require the following of the sponsoring department and the reviewing agency/council:

1) Reviewing Agency should

  • establish data and quality requirements for proposals

  • review proposals for accuracy prior to assessment

  • return/reject inadequate proposals

    2) Sponsoring Department should be responsible for

  • examining alternatives to these proposed projects

  • generating the full range of appropriate data for a project to be properly reviewed (cost, construction period, impacts, benefits, etc.)

  • rating or ranking their proposed projects submitted for review

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The Comprehensive Plan

Community Vision

Goals, Objectives for City/County

The “Big Picture” Planning Document





Capital Budget

(Year 1, CIP)

Years 2-5

“The Rolling

Spending Plan”





The Annual Budget

The Ideal Relationship Between Documents

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--Leapfrog Development

--Overloaded Infra

--Reactive Planning

In this model, the CIP process is largely unrelated to and

unaffected by the Comprehensive Plan. Investments in

infrastructure happen with little regard to the long-term

vision of the community.

The Current Comp Planning Model






At best, a tenuous

relationship between

CIP and Comp Plan

Land Use




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--Compact Dev.

--Growth Shapers

--Proactive Planning

In this model, the choice of infrastructure investments is based

upon the long-term vision outlined in the Comprehensive Plan.

The Comprehensive Plan, therefore, is “implemented” through

two complementary means; 1) the regulatory process (land use regs)

and 2) investments in infrastructure systems

The Desired Comp Planning Model



Land Use







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The CIP Process in Tallahassee

Mid-October: Capital Budget Instructions mailed out to departments, including information on revenue availability, target goals, and the 5 year financial plan.

Mid-December: Project Requests due for review. (Reviewed by mid-January)-Projects reviewed by Engineering Dept for cost feasibility, scheduling.-Planning and GM review project for concurrency and impact/relation to the Comp Plan. Planning ranks projects based upon these considerations.-Public Works reviews projects for workload capacity and coordination issues.

Late Winter/Early Spring: Selection of OBP Project ListOffice of Budget and Policy (OBP) considers 1) rankings from Planning Department, 2) target goals from City Commission, 3) the five year financial plan, and 4) their own evaluation of projects to develop a priority project list.

Late Spring/Early Summer: Executive Team meets with OBP and department staffs to discuss each department’s original project list and OBP’s recommendations. The City Manager then makes CIP recommendations.

June/July: Public meetings on the proposed budget.

September: The Operating and Capital Budgets are approved by the City Commission and they become effective October 1.

Ongoing: OBP monitors each project through status reports that are submitted for each project in March and September of each year.

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The CIPComp Plan Linkage in Tallahassee

During FY98, the OBP developed a method to ensure that a clearer linkage between the capital budget and the City’s various planning processes (specifically the City’s comprehensive plan) exists. Under the new approach:

1) Priority status should be given to those projects that assist the City in furthering and achieving the goals and objectives set forth in the comprehensive plan.

2) Funding priorities should be given to those projects that address deficiency levels of services as identified in the comprehensive plan as well as those intended at maintaining existing levels of service.

Beginning with the FY99 budget, the Planning Department began reviewing project requests to determine how each project furthers the intent of the comprehensive plan. The Planning Department ranks projects that should receive priority status. Information provided by the Planning Department is utilized as one of the criteria in the overall ranking of project requests.

“The main purpose of creating this linkage is to make the comprehensive plan the guiding force behind the CIP.”

--The City of Tallahassee’s FY2002 Capital Budget