Capital Planning

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What it is and What is Our Belief?

One outcome of asset management and all planning processes is the capital improvement program – a plan to build the infrastructure needed to meet the community’s vision for the future.  Capital projects are defined as projects “having a long life, and a significant expenditure of funds.”  Typical examples of capital projects are water lines, sewer collection lines, sewer pump stations and treatment plants (many other "permanent" installations also qualify).  

The need for a utility to construct new pipes, treatment plants and other facilities is never-ending as a result of regulatory changes, growth, obsolescence and emergency needs of the utility.  Capital expenditures are ongoing expenses by utilities to meet these needs.  Broadly conceived, a capital expenditure is one where there is a significant outlay of funds or other considerations that results in the acquisition or addition of a capital or fixed asset (Vogt, 2004).  A fixed asset includes many types of property that a utility might own including:

  • Buildings, Land
  • Renovations to buildings
  • Equipment, vehicles or other furnishings that exceed a value threshold (often $1000 or $5000, depending on the asset and the size of the utility).
  • Improvements to property other than buildings that add value to the property, such as parking lots, landscaping, drainage, piping, etc.

Most utilities include a capital expenditure component in their annual budget for purchasing vehicles, certain equipment, or refurbishing of same if they exceed the threshold value.  Larger improvements are reserved for the capital improvement plan, which includes much larger facilities directly related to the extension, replacement or development of the utility’s infrastructure (piping, pumping or treatment).  Utility infrastructure is both costly and immobile, with only the local community receiving benefit from them.  The intrinsic value of an installed pipeline is basically zero (as an example, piping cannot be dug up and reused). 


Many capital plans make the error of budgeting design and construction in the same year.  This is rarely accomplished and distorts the financial needs of the plan.  We have prepared capital plans for over 20 years involving over $500 million.  These are small, medium and large utilities, growth and age driven.  Capital is specific to the utility.  That is what we can help you with.  Some examples are included. They can be very simple or very complex.