Table of Contents: Chapter 8
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807 CAPITAL ASSET POLICY
807.1 Purpose
This policy applies to all City departments. The intent of this policy is to establish the plan of organization and procedures that are necessary for safeguarding the assets and infrastructure of the City, including maintaining accountability for those assets and ensuring accuracy of the asset related financial and insurance reports.
807.2 Objectives
- 807.2.1 Define capital assets, the general criteria for capitalizing assets and methodology for valuation of capital assets.
- 807.2.2 Establish a consistent process and set of procedures for accepting and receiving property.
- 807.2.3 Establish departmental accountability for authorization and responsibility for safeguarding assets, including designation of responsibility for insuring the asset.
- 807.2.4 Establish the process for the receipt, transfer, and disposition of assets.
807.3 Definition of Capital Asset
- 807.3.1 Capital assets include land, land improvements, buildings, building improvements, building renovations/replacements, extraordinary repairs, construction in progress, machinery, equipment, vehicles, infrastructure, easements, and works of art and historical treasures. Capital assets are to be reported and, with certain exceptions, depreciated. Assets that are not capitalized are expended in the year of acquisition.
- 807.3.2 Infrastructure assets are long-lived capital assets that normally can be preserved for a significant greater number of years than most capital assets and that are normally stationary in nature. Examples include roads, bridges, tunnels, drainage systems, water systems and dams. Infrastructure assets do not include buildings, drives, parking lots or any other examples given above that are incidental to property or access to the property Upon submission of a written request by a Department Director and approval of the request by the City Manager and Finance Department Director, certain items may be excluded from the capital assets policy under limited circumstances based on operational issues.
- 807.3.3 Capital assets should be accounted for at cost, or if the cost is not practicably determinable, at estimated cost. Cost includes miscellaneous charges necessary to place the item in service. Shipping costs, closing costs, legal fees, engineering costs, and installation costs should be capitalized with the asset.
- 807.3.4 In new buildings, building improvement, renovations or extraordinary repairs, a building's outside "shell" is to be treated separately from its building service components for asset classification and cost depreciation purposes. Building service components are to be categorized by separate asset classes with each asset class having its own estimated useful life
- 807.3.5 Building Improvements - Additions of a building component or a building section where one did not previously exist are building improvements and treated as capital assets rather than renovations. These costs are capitalized.
- 807.3.6 Building Renovations/Replacements - Renovation/replacement is the total replacement of a unit with a new unit that serves the same purpose and has the same estimated useful life as the unit being replaced. The purchase of a new unit to replace a worn out unit represents an addition to and deduction from property and the cost of the new asset is to be capitalized. The old asset is to be written off.
Replacement parts, which do not materially extend the life of an asset, are to be considered ordinary repairs and expensed.
Expenditures for dismantling or removing an old asset are to be expensed.
- 807.3.7 Extraordinary repairs - repairs, not recurring in the routine maintenance process, which extend the useful life of an asset or increase its use value (utility) beyond what it was before the repair, are capitalized. Expenditures to maintain an asset in efficient operation condition, which do not extend the normal economic useful life, are expensed.
- 807.3.8 Fabricated Assets - Assets fabricated by the City are to be capitalized if they meet the general capitalization criteria above. All materials, labor and project administration and management costs required for the construction of an asset are to be capitalized. The project completion date is to be considered the acquisition date of a fabricated asset.
- 807.3.9 Interest payments for financed projects are to be capitalized during the construction period.
- 807.3.10 Donated items approved and accepted by Department Directors that meet the general capitalization requirements should be recorded at their estimated fair market value at the time the asset is received by the City.
807.4 Capitalization Thresholds and Depreciation Method
- 807.4.1 A capital asset must have a useful life of two or more years.
- 807.4.2 Capitalization thresholds shall be as follows:
| Capital Asset Category | Captialization Threshold |
| Buildings | $5,000 |
| Building Improvements | $5,000 |
| Computers and computer equipment | $5,000 |
| Land Improvements | $5,000 |
| Machinery and equipment | $5,000 |
| Vehicles | $5,000 |
| Infrastructure | $50,000 |
| Land | $1 (one dollar) |
| Construction in progress | $1 (one dollar) |
- 807.4.3 The depreciation method used shall be straight-line with one-half year's depreciation to be taken in the first and last years of the asset's life, regardless of the purchase date.
807.5 Responsibility for Administration
- 807.5.1 Department Directors shall designate in writing one(1) position for each division authorized to receive, tag, transfer and dispose of capital assets within their department. Department Directors shall exercise control over their non-capitalized tangible capital type items by establishing and maintaining adequate control procedures at the department level.
- 807.5.2 Information Technology Services (ITS) shall be responsible for administering the asset tracking for all computer equipment.
- 807.5.3 Fleet Division shall be responsible for administering the asset tracking for all vehicles and heavy equipment.
- 807.5.4 The Finance Department will issue blocks of asset tags to each department upon request.
- 807.5.5 The Finance Department will periodically conduct random inventories of departments or inventories of a specific asset classification.
807.6 Notification
The department shall not use the capital asset until the authorized department designee, as set forth in Section 807.5.1, notifies the City's designated Insurance Manager in writing all necessary changes to the City's insurance records. Upon disposition of a Capital asset, the department designee shall notify the Insurance Manager in writing or email within three (3) working days.
807.7 Reporting and Asset Tracking
- 807.7.1 Insurance Manager. On an ongoing basis, the Insurance Manager will update the insurance records, including the quarterly property schedule, with the changes that occurred during the quarter not previously reported by a department.
- 807.7.2 Finance Department. Quarterly, the Finance Department will provide an update to the Insurance Manager of asset-related transactions that have been posted to the financial system during the month to validate that the inventory records are complete.
Quarterly, the Finance Department will prepare a schedule of additions and deletions of capital assets for the purpose of maintaining the depreciation schedule.
- 807.7.3 Department. Periodically, each department will be responsible for validating and updating an inventory from an inventory report prepared by Finance within thirty (30) days of receipt of the report from Finance.
807.8 Receipt of Capital Assets
- 807.8.1 Upon receipt of other capital assets, those persons authorized by the Department Directors to accept capital items will sign the receiving form (green sheet). Items acquired throughout the City's Business Procurement Card Program (Procard) shall also follow this policy.
- 807.8.2 At the time vehicles or heavy equipment are received, both a representative of Fleet Division and the user department will sign off on the Capital Asset Tracking Form and the receiving form (green sheet) in accordance with the attached procedure entitled "Receiving, Transferring, and Disposing of Vehicles and Heavy Equipment."
- 807.8.3 At the time computer equipment is received, both a representative of ITS and the user department will sign off on the Capital Asset Tracking Form and the receiving form (green sheet) in accordance with the attached procedure entitled "Receiving, Transferring and Disposing of Computer Equipment."
807.9 Transfer of Capital Assets
- 807.9.1 Transfers of assets require the authorization of the Department Directors involved, as well as reporting the valuation agreed upon for the transaction to Finance.
- 807.9.2 For transfers between departments, the vehicle valuation will be based on the most current edition of the National Auto Research Black Book average wholesale pricing index. Any requests for a change in valuation must be approved by the Assistant City Manager.
- 807.9.3 All computer related transfers within department or between departments shall be coordinated by ITS in order to ensure the computer inventory remains accurate.
807.10 Disposal of Capital Assets
- 807.10.1 Department Directors or their designee must authorize the disposal of capital assets.
- 807.10.2 At the time vehicles and heavy equipment are disposed of, both a representative of the Fleet and the department will sign off on the Capital Asset Tracking form in accordance with the attached procedure entitled "Receiving, Transferring, and Disposing of Vehicles and Heavy Equipment."
- 807.10.3 At the time computer equipment is disposed of, both a representative of the ITS and the department will sign off on the Capital Asset Tracking form in accordance with the attached procedure entitled "Receiving, Transferring and Disposing of Computer Equipment."