(A)   Land.
      (1)   Land is defined as specified land, lots, parcels, or acreage.  The city will capitalize all land purchases, regardless of cost.  Exceptions to land capitalization are land purchased outright, as easements, or right-of-way for infrastructure.  Examples of infrastructure include roads and streets, street lighting systems, curbs, parking meters, street signs, viaducts, wharfs and storm water collection.
      (2)   Original cost of land will include the full value given to the seller, including relocation, legal services incidental to the purchase (including title work and legal opinion), appraisal and negotiation fees, surveying and costs for preparing the land for its intended purpose (including contractors and/or city employees (salary and benefits)), such as demolishing buildings, excavating clean up and/or inspection.  Land is not depreciated under generally accepted accounting principles.
   (B)   Machinery and equipment.
      (1)   The definition of machinery and equipment is an apparatus, tool or conglomeration of pieces to form a tool.  The tool will stand along and not become part of a basic structure or building.  This category also includes any other asset or type of physical property not otherwise classified in this policy.
      (2)   The city will capitalize items with an individual value equal to or greater than $5,000.  Machinery combined with other machinery to form one unit with a total value greater than the above-mentioned limit will be one unit with a total value greater than the above-mentioned limit will be one unit.
      (3)   Improvement or renovations to existing machinery and equipment will be capitalized only if the result of the change meets all of the following conditions:
         (a)   Total costs exceed $5,000;
         (b)   The useful life is extended two or more years; and
         (c)   The total cost will be greater than the current book value and less than the fair market value.
      (4)   Salvage value of machinery or equipment will be determined on an asset-by- asset basis.  Depreciation will be calculated at year-end.
   (C)   Buildings.  A department will capitalize building as full cost with no subcategories for tracking the cost of attachments.  Examples of attachments are roofs, heating, cooling, lighting or sprinkler systems, or any part of the basic building.  The department will include the cost of items designed or purchased exclusively for the building.
      (1)   A department’s new building will be capitalized only if it meets the following conditions:
         (a)   The total cost exceeds $5,000; and
         (b)   The useful life is greater than two years.
      (2)   A department improving or renovating an existing building will capitalize only if the result meets all of the following conditions:
         (a)   The total cost exceeds $5,000;
         (b)   The useful life is extended two years or more; and
         (c)   The total cost will be greater than the current book value and less than the fair market value.
      (3)   Any land, building, improvements, or equipment that has been donated will be recorded at fair market value on the date of transfer.
   (D)   Improvements other than buildings.  These assets are defined as improvements to land for better enjoyment, attached or not easily removed, and which will have a life expectancy of greater than two years.  Examples are walkways, parking areas and drives, golf cart paths, fencing, retaining walls, pools, outside fountains, planters, underground sprinkler systems, water supply mains, collection sewers, wells, dams, intake pipes, manholes, fire hydrants, and other similar items.  Improvements do not include roads, streets, or assets that are of value only to the public.  Roads or drives upon city- owned land that provide support to the city facilities are assets.  A sidewalk down the road for public enjoyment is an infrastructure improvement and is not capitalized.  However, sidewalks installed upon the city-owned land for use by the public and for the support of the city facilities are capital assets.
   (E)   Recording and accounting.  The city and its various departments shall classify capital expenditures as capital outlays within the fund from which the expenditure was made in accordance with the Chart of Accounts of the Cities and Towns Accounting Manual.  The cost of the property, plant and equipment includes all expenditures necessary to put the asset into position and ready for use.  For purposes of recording fixed assets of the city and its departments, the valuation of assets shall be based on historical costs, or where the historical cost is indeterminable, by estimation for those assets in existence.
   (F)   Composite/group network.  A network of assets is composed of all assets that provide a particular type of service for government.  A subsystem of a network of assets is composed of all assets that make a similar portion or segment of a network of assets.
      (1)   Composite depreciation refers to calculation of depreciation for a collection of similar assets.  A single composite rate is applied annually to the acquisition cost of the collection as whole.  At year-end, an adjustment will be made to the total cost to account for any additions/disposals throughout the year.  The accumulated depreciation associated with it will also be adjusted.  A gain or loss will never be reported on the asset when using the composite method.  A full year’s depreciation will be taken when the asset is placed in service and no depreciation will be recorded in the year it is sold or disposed of.  Dissimilar assets will be grouped by useful lives.
      (2)   To determine the appropriate depreciation rate for the composite rate, divide one by the number of years the assets are depreciated.  For instance, a group of assets with a 25 year life will be depreciated at 4% each year (1/25).
      (3)   The following is a list of asset groups and useful lives that will be used for depreciation purposes:
Street Lights:
35 years
Traffic Signals:
25 years
Flood Walls/Gates:
50 years
10 years
15 years
30 years
   Asphalt Concrete:
10 years
   Brick Stone:
50 years
Building and Improvements:
50 years
Sewer Lines:
50 years
Combined Sewer Overflow:
50 years
Lift Station:
20 years
Treatment Plant/Equipment:
10 years
Office Equipment:
5 years
Miscellaneous Operating Equipment:
5 years
5 years
Large/Heavy Equipment:
10 years
Fire Grass Trucks:
15 years
Fire Pumpers and Tankers:
25 years
Fire Rescue Vehicles:
30 years
(Ord. 829-2013, passed 2-11-2013)