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Home My WebLink AboutVIII-07 Amend Capital Asset Policy City Council Memorandum To: Mayor Fasbender & City Councilmembers From: Chris Eitemiller, Finance Manager and Ashley Bertrand, Senior Accountant Date: December 6, 2021 Item: Amend City Capital Asset Policy Council Action Requested: The Council is requested to authorize the Finance Department to amend the City’s Capital Asset Policy. Background Information: On December 15, 2014, the City Council adopted a Capital Asset policy for the first time. This policy has since served as the basis for how capital assets are defined and accounted for by the City of Hastings. City Finance requests there be two changes made to existing policy. When adopted, this policy directed that depreciation of capital assets should begin the month immediately after purchase. This has created a system that results in similar or identical assets to have different depreciation schedules, even though these assets have identical useful lives, and were purchased in the same year, but different months. As a result, City Finance has consulted with the City’s auditors and received approval to change the depreciation process. The Finance department requests beginning depreciation of capital assets, with the exceptions of road construction and utility projects, in the first month of the year after purchase. The other change Finance is requesting is to increase the threshold for capitalizing assets. When GASB 34 took effect in 1999, it mandated that Cities and Counties use $5,000 as the cost threshold capitalize an asset. Since then, increasing costs have caused this threshold to capture assets that originally were not intended to be capitalized assets. There are multiple Cities in this immediate area that either have, or are planning to, increase their capitalization threshold to $10,000. City Finance is requesting that Hastings’ capital asset policy be amended to $10,000 as well. As with the depreciation change, the City’s auditors have given their approval for this proposed change. VIII-07 Financial Impact: N/A Advisory Commission Discussion: N/A Council Committee Discussion: N/A Attachments: N/A VIII-07 City of Hastings  101 Fourth Street East  Hastings, MN 55033-1944  Phone: 651-480-2350  www.hastingsmn.gov CAPITAL ASSET POLICY The City of Hastings has established a policy to establish guidelines for the recording and tracking of the City’s assets and infrastructure. To define the City’s Fixed Asset type/category and to determine useful life for each type/category as well as define the City’s depreciation method. This policy was established in 2003 in preparation of the General Accepted Accounting Principle #34 in which the City first recognized all of the infrastructure assets and related costs within the body of the financial statements. Section 1. Definitions Asset Life This is the standard estimated useful life of an item. To be considered a fixed asset, an item must have a useful life greater than one year. Asset Value This is the value of the item. The value will be based on the invoice plus additional costs of preparing the asset for use. An asset must have a greater value than $5,000 $10,000 to be recorded in the fixed asset records. For the Capital plan the assets must have a value of $25,000 or greater. Building & Structures A building or structure that is roofed or walled and that is owned by the City. Computers This category includes personal computers, printers, modems, tape drives, servers. Printer cartridges, computer programs/applications are not considered fixed assets and thus expensed. Fire Arms A weapon from which a shot is discharges using gunpowder. Furniture & Fixtures Assets that are used by people in any City facility are considered furniture or fixtures. This category includes desks, chairs, modular work stations etc. Infrastructure Assets that are permanent installations such as water mains, sewer lines, dams, road subsystems including curbs, gutters, sidewalks, and storm water are infrastructure assets. Historic costs were determined by using a Federal Highway price index. The 2003 road costs were determined by the City of Hastings Public Works Director. The age of the roads were determined by using the Public Works map room and adding one year to the map year. Current costs are determined by actual costs incurred by the City to develop or redevelop the infrastructure system. Land Any parcel of land that is City-owned whether developed or undeveloped. (An assumption was made in order to determine cost-Dakota County’s assessed value was used.) Land Improvement Parking lots, streets on City-owned land. (An assumption to include curb & gutter and sidewalk was made in determining value of streets.) VIII-07 City of Hastings  101 Fourth Street East  Hastings, MN 55033-1944  Phone: 651-480-2350  www.hastingsmn.gov Machinery & Equipment Includes motorized and non-motorized equipment that has a primary function for a City department. Equipment such as streets, parks, ice arena or utility maintenance. It includes items such as tractors, mowers, ice resurfacer etc. Office Equipment Any item used by employees to perform a mechanized task in an office environment. Park Improvements Improvements made to a City park that will be capitalized. This category includes playground equipment, backstops, bleachers, flagpoles etc. Vehicles Motorized vehicles owned by the City such as squad car trucks, and vans. Vehicles Equipment Any equipment that is installed in/on a motor vehicle such as radios, wing plows, sanders, lighting packages, radar units and toolboxes. Section 2. Asset Type and Useful life. Category Asset Type Useful Life Bridges & Culverts Over 20 ft- Bridge 45 years Pre-stressed concrete 45 years Under 20 ft- culvert 45 years Buildings Carpeting 5 years Elevators 20 years Fire system 25 years Floor covering other then carpet 15 years Interior construction 15 years Permanent structure (includes excavation, foundation, frame, 50 years Plumbing, HVAC, Electrical 20 years Pre-stressed concrete 45 years Dams 50 years Land N/A Land Improvements Athletic fields 15 years Bleachers 20 years Fencing 20 years Landscaping 10 years Outside sprinkler 10 years VIII-07 City of Hastings  101 Fourth Street East  Hastings, MN 55033-1944  Phone: 651-480-2350  www.hastingsmn.gov systems Swimming pool 20 years Tennis courts 20 years Lighting Park 10 years Street 20 years Moveable Equipment Audio visual equipment 7 years Business machines 7 years Communications equipment 10 years Computer equipment 5 years Fire department equipment 12 years Furniture 20 years Machinery & tools 15 years Photocopiers 5 years Park Improvements 15 years Park Land N/A Park Trails Concrete 30 years Steel 30 years Wood 25 years Parking Lots Asphalt 15 years Roadways-by subsystem (includes roadway pavement, curbs and gutter) 20 years Sewer Lines 40 years Section 3. Depreciation Method Depreciation will be on a straight-line method over the useful life of item. See schedule above for each useful life. Depreciation on all capital items except for road construction and utility projects will begin the year of purchase following purchase. The closest full month first month of the year following purchase is used for the beginning date. Infrastructure-Road Construction project’s depreciation begins after the project is complete which is usually a two- year cycle from preliminary work to the end of the project. Infrastructure-Utility project’s depreciation begins the year after construction. Adopted: Never previously formally adopted. Council adopted: 12-15-2014 Council Amended: 12-6-2021 VIII-07