(A) Definitions. For the purpose of this section, the following definitions apply unless the context clearly indicates or requires a different meaning.
CAPITAL OUTLAYS. Expenditures which benefit both the current and future fiscal periods. This includes costs of acquiring land or structures; construction or improvement of buildings, structures or other fixed assets; and equipment purchases having an appreciable and calculable period of usefulness. These are expenditures resulting in the acquisition of or addition to the government’s general fixed assets.
ENTERPRISE FUNDS. Those funds used to account for operations:
(a) That are financed and operated in a manner similar to private business enterprise, where the intent of the governing body is that the costs (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or
(b) Where the governing body has decided that periodic determination of revenues earned, expenses incurred and/or net income is appropriate for capital maintenance, public policy, management control, accountability and other purposes.
FIXED ASSETS. Tangible assets of a durable nature employed in the operating activities of the unit and that are relatively permanent and are needed for the production or sale of goods or services are termed property, plant and equipment or fixed assets. These assets are not held for sale in the ordinary course of business. This broad group is usually separated into classes according to the physical characteristics of the items (e.g., land, buildings, improvements other than buildings, machinery and equipment, furniture and fixtures).
HISTORICAL COST. The case equivalent price exchanged for goods or services at the date of acquisition. Land, buildings, equipment and most inventories are common examples of items recognized under the historical cost attribute.
IMPROVEMENTS OTHER THAN BUILDINGS. Betterments affixed to real estate, other than buildings, having a useful life of greater than two years. Examples would include, but not be limited to, sidewalks, parking lots, fountains, fences and retaining walls. Excluded are roads, streets or other infrastructure open to the public for use without limitation or charge. Roads or streets open as thoroughfares are excluded. Roads or drives providing ingress to and egress from city buildings are assets. A sidewalk adjacent to public streets are capital assets.
MACHINERY AND EQUIPMENT. An apparatus, tool or conglomeration of pieces to form a tool. The tool will stand alone and not become a part of a basic structure or building.
TANGIBLE ASSETS. Assets that can be observed by one or more of the physical senses. They may be seen and touched and, in some environments, heard and smelled.
(B) Provisions for land.
(1) The city will capitalize all land purchases, regardless of cost.
(2) Exceptions to land capitalization are interests purchased for rights-of-way for infrastructure. Examples of infrastructures are roads and streets, street lighting systems, bridges, overpasses, sidewalks, curbs, parking meters, street signs, viaducts, wharfs and storm water collection.
(3) 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 opinion), appraisal and negotiation fees, surveying and costs for preparing the land for its intended purpose (including contractors and/or city workers (salary and benefits), such as demolishing buildings, excavating, clean up and/or inspection).
(4) A department will record donated land at fair market value on the date of transfer, plus any associated costs.
(5) Purchases made using federal or state funding will follow the source funding policies and above procedures.
(C) Provisions for machinery and equipment.
(1) The city will capitalize and tag 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.
(2) Shipping charges, consultant fees and any other cost directly associated with the purchase, delivery or set up, (including contractors and/or city works (salary and benefits)), which makes such equipment operable for its intended purpose will be capitalized.
(3) Improvements 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 cost exceeds $5,000;
(b) The useful life is extended two or more years; and
(c) The total costs will be greater than the current book value and less than the fair market value.
(4) Examples include:
(a) A work truck being equipped with screens, lights or radios for use as a single unit throughout its life expectancy is considered one unit; and
(b) If police cars are constantly changing light bars or radios to other vehicles, the city will capitalize each piece of equipment separately, if it meets the required dollar amount.
(5) A department’s computer (CPU, monitor, keyboard and printer) is considered one unit.
(6) A department will record donated machinery and equipment at fair market value on the date of transfer with any associated costs.
(7) Purchases made using federal or state funding will follow the source funding policies and above procedures.
(D) Provisions for buildings.
(1) A department will capitalize buildings at full cost with no subcategories for tracking the cost of attachments. Examples of attachments are roofs, heating, cooling, plumbing, 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.
(2) 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.
(3) A department improving or renovating an existing building will capitalize the cost only if the result meets all of the following conditions:
(a) The total cost exceeds $5,000;
(b) The useful life is extended two or more years; and
(c) The total cost will be greater than the current book blue and less the fair market value.
(4) Capital building costs will include preparation of land for the building, architectural and engineering fees, bond issuance fees, interest cost (while under construction), accounting costs if material and any costs directly attributable to the construction of a building.
(5) A department will record donated buildings at fair market value on the date of transfer with any associated costs.
(6) Purchases made during federal or state funding will follow the source funding policies and above procedures.
(E) Provisions for improvements other than buildings.
(1) The city will capitalize new improvements other than buildings 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 will capitalize improvements or renovations to existing improvements other than buildings only if the result meets the following conditions:
(a) The total cost exceeds $5,000;
(b) The asset’s useful life is extended two or more years; and
(c) The total cost will be greater than the current book value and less the fair market value.
(3) Purchases made using federal or state funding will follow the source funding policies and above procedures.
(F) Recording and accounting.
(1) (a) 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.
(b) The cost of property, plant and equipment includes all expenditures necessary to put the asset into position and ready for use.
(c) For purposes of recording fixed assets of the city and its departments, the valuation of assets shall be based on historical cost or where the historical cost is indeterminable, by estimation for those assets in existence.
(2) The city’s municipally owned utilities shall record acquisition of fixed assets in accordance with generally accepted accounting principles. When as asset is purchased for cash, the acquisition shall be recorded at the amount of cash paid, including all outlays relating to its purchase and preparation for intended use. Assets may be acquired under a number of other arrangements including:
(a) Assets acquired for a lump-sum purchase price;
(b) Purchase on deferred payment contract;
(c) Acquisition under capital lease;
(d) Acquisition by exchange of non- monetary assets;
(e) Acquisition by issuance of securities;
(f) Acquisition by self-construction; and
(g) Acquisition by donation or discovery.
(3) In addition, an asset register, in the form prescribed by the state’s Board of Accounts, shall be maintained to provide reasonable assurances that:
(a) Capital expenditures made by the city, its various departments and utilities be in accordance with management’s authorization as documented in the minutes;
(b) Transactions of the utilities be recorded as necessary to permit preparation of financial statements in conformity with generally accepted principles;
(c) Adequate detail records be maintained to assure accountability for city and utility owned assets;
(d) Access to assets be permitted in accordance with management’s authorization; and
(e) The recorded accountability for assets be compared with the existing assets at least every two years and appropriate action be taken with respect to any differences.
(Prior Code, § 37.10) (Ord. G-01-14, passed 11-13-2001)