(A) (1) Land.
(a) LAND is defined as specified land, lots, parcels, or acreage. The city will capitalize all land purchases, regardless of cost including donated land. 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.
(b) 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.
(2) Infrastructure. INFRASTRUCTURE is defined: streets, bike/jogging paths, storm sewers, water/sewer lines, parking lots, streetlights and retention/detention ponds. The city will capitalize infrastructure that has a life expectancy of greater than two years. Including donated infrastructure from developers. Exceptions to infrastructure sidewalks are not owned by the city.
(a) New infrastructure will only be capitalized only if it meets the following conditions:
1. The total cost exceeds $5,000; and
2. The useful life is greater than two years.
3. Meters will be expensed rather than capitalized.
4. Only streets and curb constructed on or after 2024 as required ISBOA will be included.
(b) Improvements or renovations to existing infrastructure will be capitalized only if the results meet the following conditions:
1. The total cost exceeds $5,000; and
2. The useful life is extended by two or more years.
(3) Unless maintenance/repairs exceed $50,000 they will be considered as expensed items will not be capitalized such as: water/sewer/storm line repairs. Milling and paving is always maintenance regardless of cost.
(4) The donated infrastructure will be recorded at fair market value on the date of transfer with any associated costs.
(5) Infrastructure purchases using federal, or state funding will follow the above provisions.
(B) MACHINERY AND EQUIPMENT.
(1) The definition of MACHINERY AND EQUIPMENT. Examples include trucks, cars, machinery, furniture, computer equipment and other similar items that have a known or estimated historical cost of $5,000 or greater.
(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;
(c) Capitalization of machinery and equipment costs will include shipping charges, consultant fees and any other cost directly associated with the purchase, delivery or set up, which makes such machinery or equipment operable for its intended purpose. Cost of attachments for machinery and equipment shall be included since they are necessary for using the asset for its intended purpose.
(d) Repairs and maintenance will not be capitalized such as: collisions, engine replacements, maintenance, and the like. They will be charged even if they meet the threshold of $5,000 or greater.
(e) Salvage value of machinery or equipment will be determined on an asset-by-asset basis.
Depreciation will be calculated at year-end.
(3) Buildings.
(a) 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.
(b) A department’s new building will be capitalized only if it meets the following conditions:
1. The total cost exceeds $5,000; and
2. The useful life is greater than two years.
(c) A department improving or renovating an existing building will capitalize only if the result meets all of the following conditions:
1. The total cost exceeds $5,000; and
2. The useful life is extended two years or more; and
3. Replacement of roofs or other building components such as HVAC systems will be expensed unless the project total is greater than $100,000.
4. Donated buildings will be recorded at fair market value on the date of transfer with any associated costs.
(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 sidewalks, parking areas and drives, golf cart paths, fencing, retaining walls, pools, outside fountains, planters, and underground sprinkler systems. 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.
(1) Improvements or renovations to existing improvements other than buildings will be capitalized only if the result meets the following conditions:
(a) The total cost exceeds $5,000; and
(b) The useful life is greater than two years.
(2) Donated improvements will be recorded at fair market value on the date of transfer with any associated costs.
(3) Improvements other than building purchases using federal or state funding will follow provisions in divisions (D)(1) and (D)(2) above.
(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 City’s 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 the purpose 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) Construction work in progress capitalization provisions. Where construction work has not been completed in the current calendar year, the cost of the project shall be recorded as “construction work in progress.” When the project is complete, the project will be recorded to the applicable capital asset item type account and only if the capital asset meets the required conditions.
(G) Life expectancy and depreciation methods.
(1) The city will indicate life expectancy for each asset and by using a national table and our generally accepted life expectancy for specific items. Depreciation of capital assets will be calculated using the straight-line method. There will be no salvage value used. Depreciation will be calculated at year-end. The asset current life year and ensuing depreciation shall begin the year after the year purchased (example: the asset purchased in 2012; the 2013 current life and depreciation year is one). Land is not depreciated according to general accepted accounting principles.
(2) Straight-line depreciation. All assets accounted for under the capital asset policy will be depreciated using the straight-line method of depreciation. A gain or loss on disposal will be recorded. Following is a list of the most city useful lives:
ASSET | USEFUL LIFE (years) |
Land | Not depreciation |
Infrastructure | 20-50 |
Buildings | 15-50 |
Improvements other than buildings | 10-50 |
Machinery and equipment | 3-20 |
Construction in progress | Not depreciated |
(Ord. 829-2013, passed 2-11-2013; Ord. 988-2023, passed 4-24-2023)