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Local Government and School Accountability

Capital Planning and Budgeting

A Tutorial for Local Government Officials

Scope of Capital Planning

Capital planning should take into account all appropriations for expenditures related to:

  • Construction or acquisition of capital facilities, including land purchase, preparation and easements
  • Acquisition, construction, demolition or replacement of a capital asset
  • The major repair or renovation of a capital asset which materially extends its useful life or improves or increases its capacity
  • Equipment
  • The planning or design of any of the above
  • Construction management, legal fees, and supervision costs
  • Financing charges.

There are two components to capital planning, which are the capital improvement plan and the capital budget. Critical to essential public services, a multiyear capital plan identifies and prioritizes expected needs, establishes project scope and costs, and details revenue streams. The capital budget flows from the capital improvement plan and lists proposed capital outlays and the means to finance them for the upcoming fiscal year. Some capital plans also project their effect on key financial variables, such as the real property tax rate.

We invite you to test your knowledge on capital improvement planning and budgeting by taking this tutorial's capital planning questionnaire.

  Next: Module 1 - The Capital Improvement Plan