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HomeMy WebLinkAboutD-2451-18 Amends Capital Asset PolicySponsors: Councilors Finkam, Worrell ORDINANCE D-2451-18 AN ORDINANCE OF THE COMMON COUNCIL OF THE CITY OF CARMEL, INDIANA AMENDING CHAPTER 2, ARTICLE 1, DIVISION III, SECTION 2-13 OF THE CARMEL CITY CODE Synopsis: Amends the City's Capital Asset policy to reflect updated accounting and financial reporting standards. WHEREAS, the Common Council (the "Council") of the City of Carmel, Indiana (the "City") previously adopted Ordinance D-1680-04 which established a Capital Asset Policy which was codified as Chapter 2, Article 3, Division IV of the City of Carmel, Indiana Code of Ordinances; and WHEREAS, in order to reflect updated accounting and financial reporting standards, including Generally Accepted Accounting Principles ("GAAP"); Governmental Accounting Standards Board ("GASB"); Governmental Accounting, Auditing and Financial Reporting ("GAAFR"); Code of Federal Regulations ("CFR") and Indiana State Board of Accounts Manuals, it is necessary to amend the City's Capital Asset Policy; and WHEREAS, it is in the public interest to amend the Capital Asset Policy of the City. NOW THEREFORE, BE IT ORDAINED by the Common Council of the City of Carmel, Indiana, as follows: Section 1: The above recitals are incorporated herein by reference. Section 2: Chapter 2, Article 1, Division III, Section 2-13 of the Carmel City Code should be and the same is hereby amended as follows: "Section 2-13: Capital Asset Policy (a) Definition of Capital Assets. Capital Assets are assets that are used in operations and have an initial useful life in excess of one year. The term includes both tangible assets (land, construction in progress, buildings, building improvements, vehicles, machinery, equipment, works of art, historical treasures, infrastructure) and intangible assets (easements, software, water rights). Assets acquired for the purpose of sale or investment do not qualify as capital assets, regardless of their form, because they are not used in operations. The City has a minimum capitalization threshold of $5,000. The capitalization threshold is applied to individual items in a group of items, rather than to the group as a whole, unless the effect of doing so would be to eliminate a significant portion of total capital assets. Assets that 1 This Ordinance was prepared by Jon Oberlander, Carmel Assistant City Attorney, on 2/4/19 at 5:16 PM. It may have been subsequently revised. However, no subsequent revision to this Ordinance has been reviewed by Mr. Oberlander for legal sufficiency or otherwise. Sponsors: Councilors Finkam, Worrell are not capitalized (items less than $5,000 and greater than $1,000) are expensed in the year of acquisition. An inventory is kept of all assets greater than $1,000. (b) Major Capital Asset Classes and. In order to ensure that governmental entities have an accurate, complete, and current record of capital assets, it is important that asset categories are appropriately determined. This section further clarifies the asset definition by major category. Land Land is defined as specified land, lots, parcels or acreage including rights of way owned by the City of Carmel, its various departments, boards or commissions, regardless of the method or date of acquisition. Easements are not included, as the City does not own them, but as an interest in land owned by another (i.e. property owner) that entitles its holder to a specified limited use. The City Utility, however, does capitalize easements. 2. Buildings. Buildings are defined as permanent (non -moveable) structures. Any structures designed and erected to house equipment services or functions are included. This includes systems, services, and fixtures within the buildings, as well as attachments such as porches, stairs, fire escapes, canopies, areaways, lighting fixtures, flagpoles, sound equipment, security cameras, lifts and riggings, curtains and staging and all other such units that serve the building. Plumbing systems, lighting systems, sound systems, surveillance systems, passenger and freight elevators, escalators, built-in casework, walk-in coolers and freezers, fixed shelving and other fixed equipment are included as part of the building if it is owned. Communications antennas and/or towers are not included because they are treated as part of the equipment unit. 3. Improvements Other Than Buildings. Improvements other than buildings have a limited useful life. Examples of the Civil City assets in this category are parking areas, drives, fencing, pools, fountains, underground sprinkler systems, decorative street lighting and other similar items. Examples of the City Utilities assets are water supply mains, collection sewers, wells, fences, intake pipes, manholes, and fire hydrants. 4. Furnishings and Equipment. The furnishings and equipment asset class is used to account for moveable items. Included within this category are office equipment, office furniture, appliances, furnishings, machinery items, maintenance equipment, communication equipment, police, fire, laboratory equipment, vehicles, road equipment, aircraft, emergency equipment, earth moving equipment, text equipment, civil defense equipment, law enforcement equipment, and data processing equipment. Supplies are excluded. 2 This Ordinance was prepared by Jon Oberlander, Carmel Assistant City Attorney, on 2/4/19 at 5:16 PM. It may have been subsequently revised. However, no subsequent revision to this Ordinance has been reviewed by Mr. Oberlander for legal sufficiency or otherwise. Sponsors: Councilors Finkam, Worrell 5. Infrastructure. Infrastructure assets are long-lived capital assets that normally are stationary in nature and can be preserved for a significantly greater number of years than most capital assets and that are normally stationary in nature. Examples include roads, streetlights, traffic signals, drainage systems, and water lines. 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 described above. 6. Construction in Progress. Construction, or development, in progress is a special class of capital assets that are still in the process of construction (tangible) or development (intangible). Depreciation does not begin until the capital assets are substantially ready to be placed in service. 7. Other Capital Assets. This is a separate category for capital assets that do not fit into any of the major asset classes listed above. (c) Threshold Levels for Capital Assets. The following schedule will be used for capitalization and depreciation of the City's capital assets. Amounts are based on governmental entities with revenues exceeding $100 million. Capitalize/Depreciate Land Capitalize only Land Improvements $50,000 Buildings $100,000 Building Improvements $100.,000 Construction in Progress Capitalize only Machinery and Equipment $5,000 Vehicles $5,000 City Utility Assets $5,000 Computer Software $5,000 Infrastructure $3,000,000 (d) Valuation of Capital Assets. Capital assets should be recorded at historical cost and should include the cost of freight, site preparation, architect and engineering fees and other costs as applicable. If a method other 3 This Ordinance was prepared by Jon Oberlander, Carmel Assistant City Attorney, on 2/4/19 at 5:16 PM. It may have been subsequently revised. However, no subsequent revision to this Ordinance has been reviewed by Mr. Oberlander for legal sufficiency or otherwise. Sponsors: Councilors Finkam, Worrell than cash is used to pay for the asset, then the fair -market value of the non -cash payment or consideration determines the asset's cost or acquisition value. When the value of the consideration paid cannot be determined, the asset's fair market value determines its cost. With a few exceptions, an asset's cost should also include necessary costs incurred to place the asset in service. Costs include the invoice price plus incidental costs (insurance during transit, freight, capitalized interest, duties, title search, registration fees and installation costs). Exceptions to the rule include interest expenses associated with deferred payments and real estate taxes paid, if any, in the acquisition of property. (e) Depreciation Method and Salvage Value. 1. Depreciation is the process of allocating the cost of tangible property over a period of time, rather than deducting the cost as an expense in the year of acquisition. Generally, at the end of the asset's life, the sum of the amounts charged for depreciation in each accounting period (accumulated depreciation) will equal original cost less salvage value. The City depreciates its capital assets by using the Straight-line Method. Under this method, the basis of the asset is written off evenly over the useful life of the asset. The same amount of the depreciation is taken each year. Depreciation is calculated at the end of each fiscal year. 2. The salvage value of an asset is the value it is expected to have when it is no longer useful for its intended purpose. In other words, the salvage value is the amount for which the asset could be sold at the end of its useful life. The City determines salvage value on an asset -by -asset basis. (f) Estimated Useful Lives of City Assets. The following 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 reported. The most common useful lives are as follows: 1. City Civil a) Vehicles - 5 years. b) Police Vehicles — 4 years. c) Office Equipment - 5 years. d) Office Furniture - 20 years. e) Heavy Equipment - 10 years. 4 This Ordinance was prepared by Jon Oberlander, Carmel Assistant City Attorney, on 2/4/19 at 5:16 PM. It may have been subsequently revised. However, no subsequent revision to this Ordinance has been reviewed by Mr. Oberlander for legal sufficiency or otherwise. Sponsors: Councilors Finkam, Worrell f) Fire Trucks - 15 years. g) Ambulances —10 years. h) Buildings - 50 years. i) Building Components (HVAC systems, roofing) - 20 years. j) Leasehold Improvements - useful life of asset or lease term (whichever is shorter). k) Land Improvements - structure (parking lots, athletic courts, swimming pools) - 20 years 1) Land Improvements - groundwork (golf course, athletic fields, landscaping, fencing) - 20 years. m) Outdoor Equipment - (playground equipment, radio towers) - 15 years. n) Grounds Equipment - (mowers, tractors, attachments) - 15 years. o) Computer Software - 5 years. p) Security Cameras -10 years. q) Stage Lighting - 5 years. r) Mobile Stage Trailer - 10 years. s) Rigging and Lifts - 10 years. t) Sound Equipment for Palladium - 10 years. 2. City - Water. a) Buildings and Improvements - 50 years. b) Transmission and Distribution Mains - 50 to 75 years. c) Meters/Meter Installation - 25 to 30 years. d) Pumping Equipment - 50 years. e) Water Treatment Equipment - 50 years. 5 This Ordinance was prepared by Jon Oberlander, Carmel Assistant City Attorney, on 2/4/19 at 5:16 PM. It may have been subsequently revised. However, no subsequent revision to this Ordinance has been reviewed by Mr. Oberlander for legal sufficiency or otherwise. Sponsors: Councilors Finkam, Worrell f) Elevated Storage - 75 years. g) Office Equipment - 5 years. h) Machinery - 5 to 40 years. i) Hydrants - 50 to 75 years. j) Well Equipment - 15 to 20 years. k) Wells - 50 to 100 years. 1) Communications Equipment - 10 years. m) GPS - 100 years. n) Clearwell - 100 years. 3. City Utility - Sewer. a) Buildings and Improvements - 50 years. b) Sewer Lines - 50 years. c) Lift Station - 50 years. d) Treatment Plant Equipment - 10 years. e) Office Equipment - 5 years. f) Machinery - 6-20 years. g) Vehicles - 5 years. h) HVAC Systems - 25 years. i) GPS - 100 years. j) Computer Software - 5 years. 4. Infrastructure. The following is the list of networks and their useful lives: a) Roads/Streets Network 6 This Ordinance was prepared by Jon Oberlander, Carmel Assistant City Attorney, on 2/4/19 at 5:16 PM. It may have been subsequently revised. However, no subsequent revision to this Ordinance has been reviewed by Mr. Oberlander for legal sufficiency or otherwise. Sponsors: Councilors Finkam, Worrell Subsystems: Types of Roads/Streets, Curbs, and Sidewalks - 45 years b) Traffic Components Network Subsystems: Traffic Signals —35 years Street lights - 25 years c) Drainage Systems Network - 50 years. (g) Capital Leases. 1. Leased equipment should be capitalized if the lease agreement meets any one of the following criteria: a) The lease transfers ownership of the property to the lessee by the end of the lease term. b) The lease contains a bargain purchase option. c) The lease term is equal to 75% of the estimated economic life of the leased property (and the lease is non -cancellable during that time). d) The present value of the minimum lease payments at the inception of the lease (excluding executory costs) equals at least 90% of the fair -value of the leased property. 2. Leases that do not meet any of the above criteria are considered operating leases. (h) Assets not Capitalized. Assets less than $5,000 are expensed in the year of acquisition. Assets greater than $1,000 are recorded in the General Ledger. Exceptions are: 1. Items costing less than the above limits which are permanently installed as a part of the cost of original construction or installation of a larger building or equipment unit will be included in the cost of the larger unit; 2. Modular equipment added subsequent to original equipment construction of a larger building or equipment unit which may be put together to form larger units costing more than the prescribed limits will be charged to capital assets even though the cost of individual items is less than such units; and 7 This Ordinance was prepared by Jon Oberlander, Carmel Assistant City Attorney, on 2/4/19 at 5:16 PM. It may have been subsequently revised. However, no subsequent revision to this Ordinance has been reviewed by Mr. Oberlander for legal sufficiency or otherwise. Sponsors: Councilors Finkam, Worrell 3. Cabinets, shelving, bookcases, and similar items, added subsequent to original construction, which are custom made for a specific place and adaptable elsewhere, will be capitalized. (i) Capital Assets Purchased with Grant Funds. When Federal Grant Funds are used to purchase capital assets, compliance with the applicable Subparts of Part 200 — Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards in the Code of Federal Regulations is required. All grant types typically have requirements specified in the Grant Award Letter with which the City must comply. 0) Asset Acquisition, Transfer and Disposal. City assets may be acquired or disposed of using various methods, as described in supplemental City documentation and forms. The following procedure must be observed for all acquisitions, transfers and disposals of assets: complete the requisite forms, obtain the signature of the Department Director and forward the completed documentation to the Fiscal Office for recording purposes. (k) Reporting of Fraud. Any city employee who suspects the misappropriation of capital assets should follow the applicable requirements outlined in Ordinance No. D-2286-16. This Ordinance establishes a policy on materiality and the process for reporting material variances." Section 3. All prior ordinances or parts thereof inconsistent with any provision of this Ordinance are hereby repealed, to the extent of such inconsistency only, as of the effective date of this Ordinance, such repeal to have prospective effect only. However, the repeal or amendment by this Ordinance of any other ordinance does not affect any rights or liabilities accrued, penalties incurred or proceedings begun prior to the effective date of this Ordinance. Those rights, liabilities and proceedings are continued and penalties shall be imposed and enforced under such repealed or amended ordinance as if this Ordinance had not been adopted. Section 4. If any portion of this Ordinance is for any reason declared to be unconstitutional or invalid, such decision shall not affect the validity of the remaining portions of this Ordinance so long as enforcement of same can be given the same effect. Section 5. This Ordinance shall be in full force and effect from and after its passage and signing by the Mayor and such publication as required by law. 8 This Ordinance was prepared by Jon Oberlander, Carmel Assistant City Attorney, on 2/4/19 at 5:16 PM. It may have been subsequently revised. However, no subsequent revision to this Ordinance has been reviewed by Mr. Oberlander for legal sufficiency or otherwise. Sponsors: Councilors Finkam, Worrell PASSED by the Common Council of the City of Carmel, Indiana, this Ll Y11 day of fhV'Aw4 2018, by a vote of ayes and nays. COMMON COUNCIL FOR THE CITY OF CARMEL evin D. Rider, President Jeff W��eyyice-President ..• - == J ...�� Laura D—Campbell / H. Bruce Kimball C keb Presented by me to the Mayor of the City of armel, f V 2018, at 12 ; 70 f M. this day of Pauley, Approved by me, Mayor of the City of Carmel, Indiana, this day of reo V`u 2018, at q `• /2 9(-.M. mes Brainard, Mayor OE� Mstine S. Pauley, Clerk -Tr asurer 9 This Ordinance was prepared by Jon Oberlander, Carmel Assistant City Attorney, on 2/4/19 at 5:16 PM. It may have been subsequently revised. However, no subsequent revision to this Ordinance has been reviewed by Mr. Oberlander for legal sufficiency or otherwise.