A Capital Improvement Plan (CIP) is a financial planning, budgeting and management tool that identifies capital project and equipment requirements, places these requirements in order of priority and schedules them for funding and implementation.
The CIP is divided into three parts: 1) the Baseline Analysis, 2) Identification of Planned Projects, and 3) Projected Financial Impact.
The “Baseline Analysis” summarizes the prior debt or lease obligations made by the local unit of government and how they impact the system's current and future financial picture.
The “Identification of Planned Projects” is the process of identifying new capital projects or equipment purchases.
Once the initial lists of improvements have been identified, the financial advisor will take the information and put together the CIP, which will include the third section, “Projected Financial Impact”.
The third section of the CIP will forecast the financial impact of the proposed projects.
In summary, a capital improvement plan (CIP) is a guide on how to match future demand for capital projects and equipment purchases with available funding and revenue resources.
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