2026 Budget for the City of Shakopee

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CAPITAL IMPROVEMENT & CAPITAL ASSET REPLACEMENT POLICY (34.13.01.P Adopted 9/16/2025) The purpose of the capital improvement and capital asset replacement policy is to plan for the construction, replacement and maintenance of the City’s infrastructure and capital assets with as minimal impact to City funds as possible. Capital Improvement Program (CIP) 1. The City will develop a 5-year plan for capital improvements and will update the plan annually. 2. The City will identify the estimated cost and potential funding sources for each capital project, which includes new and replacement infrastructure projects. 3. The City will coordinate development of the capital improvement budget with the development of the operating budget. As resources are available, the most current year of the plan will be incorporated into the current year operating budget. Years two through five are for planning purposes only. 4. Future operating costs associated with new capital improvements will be projected and included in the operating budget. 5. All infrastructure assets will be managed to deliver expected service levels at the lowest total life cycle costs. 6. The City will use inter-governmental assistance to finance those capital improvements that are consistent with the capital improvement plan and City priorities. 7. The City will maintain all its assets at a level adequate to protect the City’s and its residents’ capital investment and minimize future maintenance and replacement costs. 8. Federal, State and other intergovernmental and private funding sources of a special revenue nature shall be sought out and used as available to assist in financing capital improvements. 9. All infrastructure assets will be inventoried in the City’s GIS database. Information will be kept regarding their physical location, date of installation, and maintenance records. Capital Asset Replacement 1. The City will maintain internal service funds for the replacement of equipment, park asset, and city owned buildings. Funding for future replacement costs will be provided through annual internal rent charges to the appropriate departments. 2. The City will plan the capital asset replacement program and revenues to assure that funds remain in the internal service funds to accrue interest. 3. The City will plan for the purchase of replacement vehicles and major equipment as part of the City’s 20-year equipment replacement program. 4. Anticipated replacements and additions will be based on realistic asset life expectancies and cash balances. 5. Capital assets will be maintained to protect its capital investment and minimize future capital expenditures. 6. The City will use the least expensive financing method for all capital equipment purchases. 7. Multiple cost estimates and bids will be requested when appropriate and required by law. 8. Capital asset purchases will follow the requirements of the City’s purchasing policy. 9. The initial cost of capital assets not planned through the replacement program will be purchased from department operating budgets.

Prioritization – Capital improvements/replacement will be considered using the following priority guidelines (in order):

1. Have to do. Projects necessary for public health and safety, or to meet legal mandates. 2. Smart to do. Projects which help maintain existing systems more efficiently. Cost benefits and coordination with related projects will be considered. 3. Want to do. Projects expanding existing systems, providing new services, or for general community betterment.