What Is A Capital Improvement Plan & How to Create One

What Is A Capital Improvement Plan & How to Create One


A capital improvement plan (CIP) is a tool used by organizations to make smart budgeting decisions on which large projects or purchases to pursue. It is used more often by public entities such as local governments for major public expenditures, such as playground equipment, snowplows or computers. It can also be used for the acquisition of land for a public purpose, construction expansion or a major renovation of a public facility, such as a library or sewage treatment plan. The capital improvement plan is used to coordinate between community planning and fiscal management to determine the location, timing and financing of the capital improvement, usually a multi-year project, often four to six years. The most important details in this text are the features of a capital improvement plan, which must align with the organization's larger strategic plan.

These features include outlining the capital projects and purchases, timeline and funding options, and prioritizing them to align with the city's strategic plan. Additionally, there are common elements that are shared with nearly all capital improvement plans, such as a list of all the capital projects, equipment and major studies related to the projects. A financing plan must be created to estimate the overall cost of each project, a project justification must explain the need for the projects, expenditures must be classified, itemized and explained, and funding sources must be outlined. Each jurisdiction has a different process and requirements for submitting a capital improvement plan, so it is important to reach out to the city or state to understand how they do business.