Capital Improvement Program

What is a Capital Improvement Program?

A Capital Improvement Program (CIP) is a roadmap that provides direction and guidance for the City of Mesa on carefully planning and managing its capital and infrastructure assets.

Identifying capital projects and their anticipated funding sources assists in the planning and scheduling of finances for projects and the manpower needed to plan, design, and construct the projects.

The CIP promotes coordination of capital projects that are from different program areas but are similar in scope or in the same geographical area of improvement.

Examples of projects in Mesa's 5-Year CIP include street construction, water treatment plants, wastewater facilities, park improvements, libraries, mass transit, airport improvements, gas lines, fire stations, police precincts, and public building construction.

Land purchases are also listed in the 5-Year CIP since it is considered a capital asset. These projects are long-term in nature (over one year) to complete and are usually financed over a period of time. Typically, a CIP project has a dollar amount over $10,000. The first year of the 5-Year CIP is referred to as the capital budget of a project while the remaining four years are referred to as the programmed amount for a project.

How are projects in the Capital Improvement Program paid for?
The 5-Year CIP is a format by which the City uses to review the funding of desired capital improvements that compete for scarce financial resources. Generally, there are two primary sources of funding for capital improvements - revenues sources (various) and the issuance of City bonds. Other sources such as State Aid and Federal Aid may augment the funding for projects.

Revenue - Revenue sources range from general and special revenue (sales and development taxes, Highway User Revenue, State shared revenue, Federal and State grants, fines) to enterprise revenue (electric, gas, water, solid waste, etc.).

Bonds - The issuance of City bonds is another major source of funding for capital improvements. Issuing bonds is not only a common practice among cities; it is the primary and most widely accepted method of funding large capital projects for municipalities throughout the nation. There are three types of "bond" fund projects in the 2004-2009 CIP book. They are listed below with their definitions:

General Obligation (G.O.) - General obligation bonds are categorized into two groups. The two groups are:

  • 20% - Under Arizona law, cities can issue G.O. Bonds for purposes of water, wastewater, artificial light, open preserves, parks, playground, and recreational facilities up to an amount not exceeding 20% of assessed valuation, in this case, the secondary assessed valuation for Mesa.
  • 6% - Under Arizona law, cities can issue G.O. Bonds for all purposes other than those listed above (definition of 20% G.O. Bond), up to an amount not exceeding six percent of assessed valuation, in this case, the secondary assessed valuation for Mesa.

Utility Revenue Bonds - Utility Revenue Bonds have no statutory limitations as to the amount of which may be issued. Projects that fall into this category are Gas, Water, Wastewater, and Electric projects. Bonds used for these projects are repaid from revenues received from the City's customers of that particular utility.

Highway User Revenue Fund (HURF) Bonds - HURF Bonds are bonds secured by revenues received from the State of Arizona. These revenues are collected from vehicle taxes, penalties, interests, and fees. Only street transportation related activities and projects could utilize these types of bonds.