§ 35.16 CAPITALIZATION POLICY.
   (A)   Purpose. To establish a uniform capitalization policy for fixed assets that complies with generally accepted accounting principles.
   (B)   Scope. This policy applies to all departments of the city now in existence or established in future.
   (C)   Policy.
      (1)   (a)   The city will capitalize all fixed assets with a purchase price greater than $5,000 and a normal useful life of more than one year.
         (b)   Depreciation will be provided over the estimated useful life of each item using the straight-line method. The estimated useful lives are as follows:
            1.   Buildings: 20 to 50 years;
            2.   Systems equipment: 20 to 50 years; and
            3.   Vehicles, tools, and equipment: five to ten years.
      (2)   Fixed asset.
         (a)   A fixed asset is any tangible asset purchased for use in the day-to-day operation of the city from which an economic benefit will be derived over a period greater than one year and has a value of $5,000 or more. Fixed assets include items of property and equipment such as buildings, office furniture, fixtures, and computers.
         (b)   Bulk purchases of similar items that have an aggregate value of $10,000 or more are also captured as a fixed asset, regardless of individual price of item. Items that are routinely purchased as a set and have a total value of $5,000 or more will be capitalized and depreciated.
         (c)   Fixed assets with a value of less than $5,000 are expensed in the period acquired.
      (3)   Building improvements and renovations.
         (a)   Major improvement projects that will extend the useful life of the asset beyond one year, increase the efficiency, or add new capabilities will be capitalized. All costs including parts and labor will be included in the total cost of the project.
         (b)   Parts and labor utilized to perform minor repairs on an existing asset of the city are routine maintenance and expensed in the period incurred.
      (4)   Land. LAND is defined as the actual land cost which does not depreciate over time. The acquired value is recorded for the cost of the land.
      (5)   Land improvements. Land improvements are modifications to outside areas such as sidewalks, parking lots, fences, and lighting.
      (6)   Infrastructure. Public domain general fixed assets consisting of certain improvements, other than buildings, including roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, and lighting systems are immovable and of value only to the city.
      (7)   Disposal of fixed asset. The gain or loss on the sale or disposal of fixed assets is recorded by removing the cost and accumulated depreciation from fixed assets and applying the sales proceeds.
   (D)   Valuation of assets.
      (1)   Purchased assets. The value of the asset is determined by including the purchase price of the item, transportation costs, installation costs, and any other direct expenses incurred by the city in obtaining the asset. Subsequent items purchased, which fall under the $5,000 threshold, are expensed immediately and not capitalized.
      (2)   Donated assets. The value recorded by the city for a donated asset is market value on the date the gift was acquired. To determine the market value of the asset, the city may use the appraisal price, selling price to municipalities of an equivalent item, and/or information from the state’s Department of Administrative Services.
      (3)   Leased assets. The lessee records a capital lease as an asset and a corresponding liability. The initial recording value of the leased asset is fair value, excluding any costs such as interest.
      (4)   New construction and capital projects. When the city constructs a depreciable asset for its own use, all direct costs are included in the total cost of the asset. This includes, but is not limited to, items such as architectural, engineering, legal, consulting, and project managements from outside sources.
(Res. 2021-06, passed 4-7-2021)