This comprehensive plan recognizes planned growth and a diverse mix of land uses within the town as an important aspect of fiscal planning. The purpose of a capital improvement plan (CIP) is to establish a framework for financing needed capital improvements. A CIP guides budgeting and expenditures of tax revenues and identifies needs for which alternative sources of funding such as loans, grants or gifts will be sought.
At Appleton’s Annual Town Meeting held on June 19, 2004, the voters of Appleton voted to establish a Capital Improvement Plan Committee to prepare a five year Capital Improvement Plan identifying capital expenditures needed to be made by the Town and including proposed methods of paying for these identified improvements. Such a Plan, to be completed by April 1, 2005, which would identify necessary safety upgrades and maintenance of Town-owned buildings and property and would make provisions for Town ordinances designed to manage growth.
Capital Improvements Defined
Capital improvements are investments in the repair, renewal, replacement or purchase of capital items. Capital improvements differ from operating expenses or consumables. The expense of consumables is ordinarily budgeted as operations. Capital improvements generally have the following characteristics: they are relatively expensive (usually having an acquisition cost of $5,000 or more); they usually do not recur annually; they last a long time (often having a useful life of three or more years); and they result in fixed assets. Capital items can include equipment and machinery, buildings, real property, utilities and long-term contracts and are funded through the establishment of financial reserves.
ARTICLE 33.On an amended motion the Town voted to authorize the Selectmen to establish a Capital Improvement Plan Committee to prepare a five year Capital Improvement Plan identifying capital expenditures needed to be made by the Town and including proposed methods for paying for these identified improvements. Such a Plan, to be completed by April 1, 2005, which would identify necessary safety upgrades and maintenance of Town -owned buildings and property and would make provisions for Town ordinances designed to manage growth. Such a Plan, to be presented to the Town at the next annual town meeting.
Capital improvements are prioritized each year in the budget process based on the availability of funds and the political will of the community. A complete CIP describes expected yearly investment and allows for both changes in priorities and reduction of available funds. The CIP is intended to prevent an unavoidable capital improvement from occurring in a single fiscal year. The unexpected purchase of a sizeable improvement can overburden the tax rate and cause large fluctuations in tax bills from year to year. The annual provision for eventual replacement of capital improvements depends on the useful life of the capital improvements. It is important that capital improvements be financially accounted for each fiscal year, minimizing later expenses.
For the purpose of this plan, the total costs have been recognized with an indication of the expected period for each item that is desired based on priority ratings. Each year any necessary changes will be made to the CIP and it will be included in the annual budget. Each year theCapital Improvement Plan Committee and theBudget Committee will review the funding requests and make a recommendation for town meeting review. The 2005 Capital Improvement Plan is included in Appendix B.
Financing Options
Several financing methods can be used to fund the types of improvements noted in the plan. These are outlined in the following paragraphs.
Current Revenues: This is also known as pay-as-you-go. This method has the advantage
of avoiding bonding and its associated interest cost. The disadvantage is that financing a large project in this manner creates a high tax burden during the implementation period and results in extreme fluctuations in the tax rate.
Bonding: Borrowing against future taxes (general obligation bonds) or future fees
(revenue bonds) is widely practiced for public improvements that have a long life. This is also known as pay-as-you-use. Bonding evens out the tax burden as opposed to using current revenues. The term of bonds issued by a municipality for a public improvement should not exceed the useful life of the equipment or facility.
Reserve Fund: Reserve funds are often established by communities to purchase
equipment, build facilities or make repairs, etc. This method works well when a town knows several years in advance that expenditures will be needed, as well as the approximate value of the expenditures. Reserve funds earn interest in the intervening years and, like bonding, they even out the flow of revenue needed for a project. The town currently has several reserve funds in place.
Impact Fees: Impact fees are charged to new development for its proportional share of
the cost of a specific capital improvement made necessary because of the development. These fees are deposited into a fund to be used for construction of the project for which they were collected. Examples include new classrooms required due to development of a large subdivision or a new water supply capacity. One disadvantage of impact fees is the complexity of managing the funds.
Time-phased Projects: Large projects or those with individual elements can sometimes
be broken down into several smaller projects. It may then be feasible to accomplish the smaller projects through current revenues or smaller bonding efforts.
Summary
The capital improvement plan (CIP) guides budgeting and expenditures of tax revenues and identifies needs for which alternative sources of funding such as loans, grants or gifts
will be sought. By planning ahead, capital improvements can be funded through savings, borrowing or grants without incurring burdensome expenses in any one year that would tend to significantly increase property taxes. The recommended improvements for the next ten years are shown in the CIP provided in Appendix B and are based on the inventory, analysis, projected need, state and federal mandates, and on the