Capital Improvement Program in Montgomery County

The County's Capital Improvement Program (CIP) is a five-year plan that prioritizes and provides a funding mechanism for large-scale capital infrastructure improvements in the County. These improvements include significant upgrades to existing infrastructure and facilities and/or the addition of new infrastructure and facilities. In order to qualify as a capital improvement, a project must have a useful life of five years or more and cost at least $50,000. Montgomery County's CIP is an integral part of the County's overall budget.

The CIP process begins each summer when departments are asked to update current capital projects and identify potential capital project needs. Department submissions are collaboratively evaluated and prioritized by a Technical Review Committee which includes staff from Finance, General Services, Information Technology, Public Safety, Planning, Management and Budget, County Administration, and the Schools. Funding requests are evaluated and prioritized using criteria that include the County’s goals and need, public health and safety concerns, projects already underway, percent of the population served, potential funding, and mandated improvements to County infrastructure. Projects are selected for inclusion in the CIP based on the prioritization and the available funding.

The CIP is then presented to the County Board of Supervisors (BOS) for consideration. During the winter of each year, work sessions and public hearings are held with the Planning Commission and the BOS as part of the annual budget process. In late April, the BOS considers and adopts a capital budget for the upcoming fiscal year and a capital plan for five fiscal years.

Financing of capital projects

There are two primary methods of financing the construction costs for capital improvements:

(1) Debt financing – Under debt financing, the locality sells municipal bonds to finance the debt. The type of bonds sold can be General Obligation Bonds which are backed by the full faith and taxing authority of the government or Revenue Bonds which are supported by a revenue source from a specific project.

(2) Cash-to-capital financing – Under cash-to-capital financing the locality uses direct cash contributions for capital projects. Cash-to-capital contributions are one-time funds that are used directly for construction.

In addition to construction costs, the County must also pay for the operating costs of new capital projects. Operating costs include debt service costs, facility maintenance costs, and program costs. Operating costs vary depending on the type of facility and/or infrastructure constructed. These costs are included in the County's operating budget.

Decisions concerning the type of financing are made based on the costs of the project, current and future debt obligations, yearly operating costs and the County's General Fund Balance. On the next two pages is a listing of the County's Capital Improvement and Debt Policies.