Preparing for That Rainy Day Budgeting for Capital Improvements

It’s hard—if not impossible—to plan a budget for your building and stick to it if maintenance problems and structural crises are constantly taking you by surprise and depleting your community’s bank account. Capital budgets are the long-term budgets that improve building conditions, and they require a different kind of planning than regular operating budgets because the expenditures are infrequent and unfamiliar.

Capital vs. Operation

Boards, if they are making plans for the long-term financial health of the building, will have two different budgets for the upkeep of the physical structure.

“You’ve got expenses which are normally recurring costs and then there are capital improvements, which you do to improve the value of your property,” says Douglas Lister, of Douglas J. Lister Architects, in Manhattan.

Something like heat, which is an operating or maintenance expense, obviously must be supplied each year, but replacing the roof is a capital expense—something that only needs attention every several years.

“Capital improvements are things that are going to have a value beyond the current period,” adds Richard Montanye, CPA, of Marin & Montanye LLP, in Uniondale, Long Island, “say a roof, sod work, new boiler, elevator repair—that kind of thing.”

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