Capital Improvement Plans: Strategies for Long-Term Investment
Communities face constant decisions about maintaining aging infrastructure, supporting new development, and making the most of limited budgets. Effective economic development depends on making strategic infrastructure investments that support long-term community growth. In this episode of Civic Minds, Environmental Design Group’s Director of Water and Wastewater Engineering, Jeff Carr, explains how a Capital Improvement Plan (CIP) helps local governments prioritize projects, secure funding, and plan for long-term success.
What is a Capital Improvement Plan?
While strategic plans and comprehensive plans establish a community’s vision, a Capital Improvement Plan turns that vision into actionable projects. A CIP identifies infrastructure needs, prioritizes improvements, estimates costs, and creates a roadmap that helps elected officials and staff make informed decisions over the coming years. It also supports broader economic development strategies by helping communities invest in projects that encourage sustainable growth.
Jeff also explains that a CIP provides continuity as leadership changes. Rather than starting over with each new administration, communities have a shared plan that guides future investments while remaining flexible enough to adapt as priorities evolve.
Building a CIP That Works
Jeff recommends starting with collaborative planning sessions that bring together staff, leadership, and stakeholders to identify community needs. These discussions often function as an early development feasibility study, helping communities evaluate which infrastructure investments will deliver the greatest long-term value.
Those ideas are then organized into prioritized projects with estimated costs, timelines, and potential funding sources. By reviewing and updating the plan regularly, communities can stay proactive instead of reacting to unexpected infrastructure challenges.
Funding Long-Term Infrastructure Investments
A CIP works best alongside a utility rate study. Jeff explains that setting the right utility rates helps communities maintain infrastructure, fund future projects, and improve eligibility for state and federal grants. With a clear plan and sustainable funding strategy, local governments can make informed decisions that support long-term growth, strengthen economic development, and improve opportunities to pursue economic development grants for future infrastructure projects.
Civic Minds Podcast Episode #3 Transcript
Laura Hengle:
Welcome to Civic Minds, a podcast by Environmental Design Group, highlighting civil engineering, planning, and design. I’m your host, Laura Hengle. Today we welcome Jeff Carr, the Director of Water and Wastewater Engineering at Environmental Design Group.
With more than 30 years of experience in engineering, planning, and operations, he has extensive insight in how communities need to plan for the future and find the means to get their infrastructure projects from concept to completion. Welcome, Jeff.
Jeff Carr:
Thank you very much for having me on.
Laura:
For sure. So planning isn’t always like, “Oh, great. Let’s talk about planning.” But it’s definitely something that every municipality needs to consider, but not something that everyone wants to address.
So, we’re going to look specifically at sort of how to get started on that. And as these governments and entities are looking towards the future, as it relates to their infrastructure, aging infrastructure, expanding infrastructure, they have to consider how to maximize the return on investment.
And one of the things that you’ve told me is to really start out with a great capital improvement plan, which is also known as a CIP. Could you summarize why it’s important to have the CIP and what differentiates it from other types of planning?
Jeff:
That’s a great question. A lot of communities will do a master plan or a strategic plan or a comprehensive plan. And those are all good places to start. It’s very high level, and that helps to define the vision for the community. But once you kind of have that vision in place, what we like to do is take the next step into capital improvement planning. And that’s when you start to focus in on the actual infrastructure, whether it’s roads, water, sewer, parks, whatever the piece of infrastructure it is, and define all of those different components that come with that.
So, the CIP, what it typically does is it focuses in on what those projects are, the different year horizons that kind of come with that, what their costs are, how they prioritize themselves within the overall community. And then it also gives council the ability to look forward five years or even the next year. So, it’s a good document that helps inform council and make good decisions.
Laura:
Which is very important because, for one thing, some of the members of your council might stay the same, but some of them may change. And so, if there’s this sort of…
Jeff:
It provides continuity across…
Laura:
Right. It gives you this blueprint.
Jeff:
Yes, yes.
Laura:
If the mayor shifts or your city administrator changes, everyone’s like, “Well, this is what we all kind of thought about and we’re really planning for. So now if we have this in place, even if things sort of shift and change, there’s at least sort of this master document to go back to.”
Jeff:
And that’s been very effective in these communities because councils do change and the benefit there is they can pick up that document and go, “I know where the previous administration left off. I know where to go from here.”
Laura:
Yeah. Which is fantastic. So now that we sort of have a better understanding of what makes a capital improvement plan different than a master plan or any other type of planning, there may be communities out there of any size that haven’t really ever thought about doing one or haven’t done one in a long time or to the earlier point, if they have a lot of different personnel, don’t even know where to get started. So where should a community begin if they’re gonna kick off this capital improvement plan?
Jeff:
So, this is what I think is kind of the exciting part is, what I typically like to do is have a stakeholders plan or meeting. And what that really is, is getting all of the people, water, sewer, parks, whatever it is, get them all in the same room, get a map together, and then everybody pull out Sharpies and sit down and say, “This is what we’re thinking here. This is what we’re thinking there. We know this is a problem. We know we need to improve on this.”
And basically, it’s a brain dump of everybody in your community, all of your operators, your staff, and leadership. What it does is it gets all of the ideas out there, no matter how big, no matter how small. And at that point, you would engage with your consultant and say, “Put this into an organization to where I can understand what I’m looking at.” So, what we typically try to do is then take all of those brain dump projects, put them into different categories, again, water, sewer, parks.
And once we have those all categorized, we sit back down with council, those same stakeholders, and we say, “What’s the priority of these?” That’s where it starts to become a little bit more of an intelligent document. Because now we’re saying, “This project needs to happen now. This one can wait two or three years.”
Once we have the priority, we go back to work again as your consultant and then determine, what is the cost? What are the funding sources? And then that starts to make a full capital improvement plan.
Laura:
What I love is that this big master document that’s going to look to the future, but it can all start with Post-it notes and Sharpies.
Jeff:
Yes.
Laura:
I know. I love the basics of it.
Jeff:
Right, right, right. You’ve got to start somewhere, and the brain dump is the perfect place because there may be a lot of things that people aren’t thinking or you may not be thinking about, but the operator, it’s one of his biggest concerns. And so that’s where you can kind of close the gap between staff and leadership.
Laura:
Yeah, and you may get something that comes to the top of the list that maybe the council hasn’t thought about, but someone who’s out there day to day with the community is like, I’m putting this on a Post-it and see if they pick it up and read it.
Jeff:
Yeah. One hundred percent. This is my pain point. Yes. It’s not your pain point, but this is my pain point.
Laura:
So, it gives voice to a lot of different people by doing it this way.
Jeff:
Well said.
Laura:
Yeah. Perfect. So, these plans can be five, 10, 20 years down the road for getting things sort of put together. But as with all things, it hinges on funding. So, what are some examples of funding sources that can help move the projects that you would prioritize out of a capital improvement plan to help move them forward?
Jeff:
You know, you said something there about five, 10, and 20 years, and I think that’s really important to stop at before we get into those funding sources and think about. There’s too many communities out there that are reactive. So, getting your community to start being proactive and thinking about what are the needs tomorrow? What are the needs next year? And really getting those into that document.
One other thing I failed to mention earlier is, don’t forget those maintenance items. When it comes to roadway type jobs, you’ve got to do crack sealing every year. That needs to get injected into that capital improvement plan as well. But as you start to go forward and you start looking at this from a proactive standpoint, I think one of the things that you need to realize is that capital improvement plan is a living document, right? Every year it can be modified. It can be tweaked.
One of the things that I have seen some communities get upset with is they feel like it’s written in stone. And what I think is real important to realize is the funding may not be there one year to the next year for a particular project. So being flexible and letting it become a living document. You can always move something to the next year as it goes down the road.
And the second part to your question was funding. Like where can you get that? One of my big points that I try to really encourage all communities to think about is, funding is how you leverage your taxpayer’s dollar. So, if you can get no matter how big or small that grant is, basically that is free money coming into your community that you can then make other dollars go further for maintenance or other type of infrastructure. Leveraging your dollars is a good thing. So, when it comes to funding sources, this is where the conversation can get very big and laborious and long and tedious.
Laura:
Lots of acronyms.
Jeff:
Lots of acronyms. There you go. And that’s, I guess I don’t want to bore everybody with that. But in my world, in the water and sewer world, we’ve got five main funding sources that we use on a regular basis. OPWC (Ohio Public Works Commission), Rural Development, which is USDA, OWDA (Ohio Water Development Authority), EPA (and they both have a water fund and a sewer fund), and then CDBG, which is Community Development Block Grant. And that is more of an income-based funding stream.
So those are all good sources, but each one has different criteria that your community would fit within best. So, it’s real important to evaluate the projects based on the community demographics and what the project and what the community is. So, then that will help you define what is the best source of funding.
So, my best advice when it comes to that is to really think about what those projects are, speak with your consultant, and ask your consultant to basically give you a roadmap forward for what is best for this particular project. Understanding where you can actually leverage your dollars and what you are eligible to apply for. So those are all key things.
And don’t forget, you’ve got to revisit your capital improvement plan every year. Make sure that it’s current. Make sure that it’s still applicable. And then every five years, you’ll really want to take a wholesale look at that and go, yep, we’re still on the right track, or no, maybe we need to change directions.
Laura:
I like that advice because, I mean, you don’t know what’s going to happen in your community. Things could go along for 20, 30, 40 years, kind of the same, little spurts of population growth, kind of sedentary, these type of things. Or you could suddenly out of left field get a new hospital is going to get built in your community. What the heck are we going to do about this? And there’s infrastructure that needs to happen in and around that. So just because we did this three years ago, we now know this information.
So, we need to modify that plan because two years from now, we’re going to have this whole new entity to deal with as well. And I love the fact that you talked about working with a consultant because I myself have never been through these documents about what is eligible for some of these funding sources. But I’m sure it’s not easy reads or easy to understand, like how…
Jeff:
It’s good reading. I don’t know what you’re talking about.
Laura:
Great reading, like leisurely reading at the pool. Exactly. So having someone that’s been through these documents and say, “I think this would probably be eligible for this.”
And some people may look right past it and say, “Ah, I don’t know.”
But people that have done it for a while say, “Well, if you get creative and you pair it with this, you can make it work.”
Jeff:
Right. That’s one of the big things that we try to do is, one, each of our departments, again, whether it’s parks, water and sewer, or the transportation department, we all are the experts for our funding sources, right? Those projects that are applicable to our service line.
And if you get to do these things for, again, I hate to say the past 30 years, you get to know them, even though every year the requirements may change a little bit. But for the most part, everything is still kind of in the same thing. You know which ones are income-based, which ones are shovel-ready based. There’s a lot of different criteria that is in there.
And to your other point, Ohio has seen a lot of changes in the last couple of years.
Laura:
For sure.
Jeff:
And that’s required, I think, a lot of communities to step back for a moment and go, how are we going to keep up with the development pressure, the new hospital that’s coming to town, the new industry that’s coming? And some communities are encouraging that. Some communities are saying kind of NIMBY, right? Not in my backyard. Yep. So, you kind of have to decide who you are and how you want to move forward, which ties all the way back to you got to be proactive.
Laura:
Yep.
Jeff:
You got to know what you want to do and what your vision is.
Laura:
Yeah. And hopefully those things can be seen throughout this capital improvement plan.
Jeff:
Yes, exactly.
Laura:
Getting right back to that. So, let’s pivot a little bit more specifically beyond the sort of typical funding sources that we just walked through and some of those acronyms that you gave out. So, there’s some that need to be applied for and considered as options for your community. But then there’s other means of getting funding through utilities and utility collections.
I’ve had some conversations with you from some other things that we’ve worked on together to talk about people that leave substantial revenue on the table because perhaps they’re conducting a rate study in their community to determine if they’re charging the right water and sewer rates, which can be a great source of revenue for a community. So, can you talk a little bit about what goes into a rate study and how the information provided can increase revenue?
Jeff:
That is a great question. And rate studies and capital improvement plans really should go hand in hand. I mean, they complement one another really well. But to raise rates, that’s kind of the question. And I think that’s where a lot of councils don’t want to raise rates. That’s a very political decision.
They raise rates, they may get unelected. But I guess I would like to remind all council members that your sole purpose for being on council, being a leader in town, is to maintain your infrastructure, maintain your roads, maintain your water, maintain your sewer, provide drainage, right? That is your mandate. Pass laws and maintain your infrastructure.
So, if you’re not doing that, if you’re not giving your staff and your employees the ability to maintain it, it’s going to end up costing your community more dollars in the end. If you allow a road to just go completely to potholes and you have to do full depth repair, now all of a sudden that’s a much more costly repair than just doing crack sealing every year.
That’ll lengthen the life of that particular infrastructure. Same goes in your water system, same goes in your sewer system. So, it’s really important that a community do incremental rates every year. That is a much smaller and easier bite from your community, from your rate payers, than doing a large one when everything falls apart.
So, the next thing you said, and I like how you said it, the right rate. I think that’s such an important thing. So many communities will look to their neighbors to the east or to the west and go, “their rate is only blah blah per month. Why is ours so much more?” And it’s something that you have to understand what makes up your rates.
So, the right rate really comes down to what it takes for you, your community, to operate, maintain, and have a rainy-day fund, and then set aside dollars for that capital improvement plan that you’ve already done. So, if that’s all you need from a rate, is to basically fund those four categories, that’s the right rate for you. But don’t let the neighboring community say what is your rate. That’s where I think it becomes a political thing.
So again, that’s what that rate analysis is all about, is determining what is the right rate for you. So now that you’ve finished your capital improvement plan, you know all of the projects that are out there, what years you’re going to do those in, potentially what funding you’re applicable for, we would sit down with you, we would collect two to three years of your past revenue, your expenses, your debts, and we build a model of what was, right? That’s a rear-view mirror look at what was.
We take the capital improvement plan, and we start to plug in in the next year, and the year after, and the year after, what it takes to fund those particular new projects. So now we know what was, now we’re starting to bring in what is, or potentially what is, right? What is proposed, and that starts to tell us or inform us, this is what you need to do to your rates, to bring them in line to afford those projects that you and all your stakeholders sat around and said that you needed.
So, it’s really important to kind of pull all of those together. And then that gives you that roadmap. And I’ve seen these successes in communities that had a strong capital improvement plan and a very well thought out rate study. They knew every single year, “we’re going to do this project,” you know, “project A and project B, and the rate has to climb by 3% and that’ll pay for it or 5%,” whatever it happens to be. But you’ve already determined those are the projects we need to do, and this is the rate that needs to fund it.
Laura:
And again, you’re not giving your constituents sticker shock because you have to do an enormous rate because we’re so behind now that unless we do a rate increase of this amount, we’re never going to get any of these projects done. So, hand in hand with the improvement plan, it’s like the rate analysis and this is the applicable rate increases, or it stays the same for this number of years, and then we’re going to have to take it up 2% or whatever we’re going to have to do.
Jeff:
Right. And we can really show you the math that doing a 2% or a 3% incremental increase every year will collect more dollars, but will actually not raise your customers rates as much as just doing one big one.
Laura:
All at once.
Jeff:
Yeah. Because it’s an accumulative compounding way of looking at it. So, there is logic into just doing a 3%. And keep in mind, every year, electric goes up, wages goes up, chemicals go up, all of those things continue to climb. So, if you’re a community that only wants to do a rate increase every five years, well, then you’re really missing out on all of those every year changes that are happening to your expenditures.
Laura:
Well, and along with that, the proper, or as we said, the right rate can add to the collections. But again, from past conversations with you, it’s not just for the collections, but if you don’t implement the correct rate, it may deter you from receiving grant funding because sometimes the grant application requires that you’re meeting a certain standard for your rates in order to apply for additional funds, whether it’s from state or federal entities. Isn’t that correct?
Jeff:
That is 100% correct. All of the funders that are out there have different criteria for what they would say is the right rate. That’s a really good part of how the funders look at what your rates are and how it impacts their scoring.
So, everybody that submits to a funding agency basically has to go through a scoring criteria. So, there’s lots of different metrics that come into that. One of the biggest ones is shovel-ready. So, we say that all the time. I know everyone has heard that metric, but that is becoming one of the highest scoring criteria for the funders out there.
But another one is, and this ties back to the last question you asked me about, what is the right rate? What they try to do is look at, is the community helping themselves? And by that, I mean, if your rates are super, super low, the community may be looking at that as we’re helping our rate payers. And there’s some logic to that.
But if your rates are super low and you’re asking for grants, the community that has super high rates, they need help. So, what the funders do is they have set a metric that says one and a half percent of your MHI, median household income, that is the affordability index for that rate, whether that’s water or sewer.
Laura:
Okay, so it’s the same 1.5 for both.
Jeff:
For both, right. 3% for combined. So, if your rate is less than 1.5% MHI, median household income, then the funding agency may look at that and say, they’re not even helping themselves yet, right?
They want you to keep raising your rates until you get to the point of, okay, we can’t go any higher than this because that’s going to really start impacting our rate payers. So, that’s where it comes back to the right rate. Making sure that you’re asking for grant dollars, you need to make sure that your rates are high enough that you’ll actually qualify for that.
Laura:
Because they’re definitely going to have you report that.
Jeff:
Yes.
Laura:
And they’re going to want to have not only the right rate, they want the right answer.
Jeff:
The right answer, yes. And so, what we try to do is in that rate study, we tie everything back to that and we tell them, look, your MHI is X and you’re really only at 0.7% of that. You still have room to raise your rate some. It’s a political thing. I understand that. But from a funding agency, you may just not get any more grant dollars. They may give you a loan, but you may not get any grants.
Laura:
So, if you go back and raise that rate, that shows, you know, good faith and understanding of what they’re asking for, then a little bit down the road, you can go back and reapply for these funds because you’re showing that you’re doing something to improve your own financial situation so that they can say, okay, they’re making the effort and we can come in and assist on this.
Jeff:
Exactly right. You can absolutely apply consecutively the next year. And sometimes you may not be as far along in the design, the permitting, just the plan stage.
So, if you’re not there yet, but you still want to get on, whether it’s EPA, OPWC, whatever the funding agency, if you want to get on their radar, that’s fine. But you just have to know, walking into this, that you may not score as well. Other people that are shovel ready.
Laura:
Shovel ready.
Jeff:
Right? And the new term that I’ve been hearing is bid ready.
Laura:
Okay.
Jeff:
And that just kind of changes the context a little bit that you’re ready to bid this thing right now.
Laura:
If I can get the money, it’s going.
Jeff:
It’s going. Right. And that’s an important thing. The term shovel ready is the same, but we’re trying to define that a little bit more. So, between that, having your permits in place, you know, before you actually submit to these funders, it’s just so very, very important. It’s going to elevate your chance to get the money.
Laura:
Excellent. Well, this has been very informative. We got to some broad scope things, some more specifics. So just in closing, like what would you say your best piece of advice to anyone listening today is that are facing aging infrastructures and other types of projects, you know, in the midst of community growth or just like we say, aging services or whatever, what would be your best piece of advice for them as they’re looking five, 10, 20 years down the future?
Jeff:
Yeah, that’s a great question. I would say that one, you’ve got to be proactive, right? Now is the time as your community starts to change because of, again, development pressure, whatever that happens to be. Now is the time when you need to step back, decide who your community wants to be, right? That’s that strategic, that vision, that comprehensive planning, then move into that capital improvement plan, figure out what it takes to get there, right? You have your vision. Now you have to come up with how you’re getting from point A to point B. And then at that point, you’re starting to be proactive, put the right rates in place.
And as you’re going through this, you’ve got to be flexible. You’ve got to realize that things happen. Funding agencies change their requirements. You just have to be flexible and say, “Alright, we know we got to get these projects done, what do we need to do to get them done?” And just work with your consultant, go through that process and just have a plan.
Laura:
Yeah, that CIP isn’t set in stone.
Jeff:
Right.
Laura:
It’s just the roadmap to get you started.
Jeff:
Have a plan.
Laura:
Exactly, have a plan. Well, I appreciate you joining us today. I’m sure today’s discussion has given a lot of people things to think about for their own community, whether they’re the decision maker or whether they’re constituent, honestly, because as a homeowner myself, I think about, well, what are they going to, like, the road in front of my house could certainly use some work right now. And I’m like, when is this ever going to happen?
But I think change happens. Maybe they’re holding off on that because there’s something else that’s adjacent to that that’s coming along the way. So being proactive, recognizing that change happens can make all the difference. So, I just appreciate you sharing your insights today. And thank you for being here, Jeff.
Jeff: Well, thank you. This has been a great talk. And hopefully we’ve spurred someone to start thinking about this ever so important document, capital improvement plan.
Laura:
I think we have.
Jeff:
Thank you.