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HomeMy WebLinkAboutResolution_08-21_6/10/2021RESOLUTION NO. 28-21 A RESOLUTION OF THE VILLAGE COUNCIL OF THE VILLAGE OF TEQUESTA, FLORIDA, ADOPTING A CAPITAL ASSET POLICY; PROVIDING AN EFFECTIVE DATE; AND FOR OTHER PURPOSES. WHEREAS, the Village's capital assets represents a significant portion of its total assets; and WHEREAS, the Village's Capital assets include major government facilities, infrastructure, equipment and networks that enable the delivery of public services. The performance and continued use of these capital assets is essential to the health, safety, economic development and quality of life of those receiving services; and WHEREAS, the Government Finance Officers' Association recommend local, state and provincial governments establish a system for identifying, valuing, and accounting for capital assets; WHEREAS, the Village Council of the Village of Tequesta, Florida deems it advisable to adopt a written Capital Asset Policy. NOW, THEREFORE, BE IT RESOLVED BY THE VILLAGE COUNCIL OF THE VILLAGE OF TEQUESTA, PALM BEACH COUNTY, FLORIDA, AS FOLLOWS: Section 1: The purpose, objectives and standards outlined in the Capital Asset Policy, a copy of which is attached hereto and incorporated herein by reference as Exhibit A, are hereby approved and adopted. Section 2: That all prior policies relating to capital assets in conflict with policies adopted herein are hereby repealed. Section 3: This Resolution shall become effective immediately upon passage. No Text EXHIBIT A VILLAGE OFTEQUESTA, FLORIDA CAPITAL ASSET POLICY Directive No. Effective Date June 10, 2021 No Text Introduction The Village of Tequesta's Capital Asset Policy has been prepared in conjunction with Generally Accepted Accounting Principles (GAAP). Included in this policy are asset class definitions, capitalization thresholds, depreciation methodologies, and examples of expenditures for each classification of assets. Additionally, guidelines for leasehold improvements and construction in progress have been included. II. Authoritv The Village of Tequesta requires all departments to use this policy to protect and report on capital assets held by the Village. III. Responsibility The responsibility for the custody, use, control and care of Village property lies with each Village department. It is each employee's responsibility to use property only for Village purposes and to exercise reasonable care for its safekeeping. Additions, disposals and transfers of capital assets will be recorded in accordance with Generally Accepted Accounting Principles (GAAP). The Finance Department will tag capital assets on a regular basis, with the assistance of the department in possession of the capital asset. IV. Capital Asset Definition Capital assets are real or personal property that have a value equal to or greater than the capitalization threshold for their respective asset class and have an estimated initial useful life of greater than one year. Capital assets include the following: land, land improvements, buildings, building improvements, infrastructure, machinery and equipment, vehicles, works of art and historical treasuries, and construction in progress and other intangible assets that are used in operations. V. Valuation of a Capital Asset Capital assets should be reported at historical costs. The cost of a capital asset should include ancillary charges necessary to place the asset into its intended location and condition for use. Items to include in the cost of a capital asset are as follows: • Original contract or invoice price ■ Freight and transportation charges ■ Import duties ■ Handling and storage charges ■ In -transit insurance charges • Sales, use, and other taxes imposed on the acquisition • Installation charges • Charges for testing and preparation for use • Costs of reconditioning used items when purchased ■ Parts and labor associated with the construction of equipment • Site preparation costs ■ Professional fees In the absence of the historical cost, the asset's estimated cost may be used to value the asset. Page 11 No Text Costs of extended warranties and/or maintenance agreements, which can be separately identified from the cost of the equipment, should not be capitalized. Donated capital assets should be reported at the acquisition value. Developer Contributions should be reported at their fair market value at the time of acceptance. This includes, if applicable, reimbursement to the developer for the cost differential of water or wastewater main over sizing as required by the Village to meet future expansion needs. Capital assets that are acquired through donation should be reported at their estimated fair value at the time of donation plus ancillary charges, if any. By definition, capital assets are typically used in operations rather than held for resale. Therefore, the appropriate fair value is what the Village would have had to pay to acquire the asset on its own, i.e., "buy" price, not the amount for which the donated asset might be resold. VI. Capitalization Thresholds With the exception of assets acquired with grant funds, which will be capitalized in accordance with grantor agencies' guidelines, the capitalization threshold is established for each capital asset category/class as follows: Asset Class Threshold Land Capitalize All Buildings $5,000 Improvements Other than Buildings $5,000 Infrastructure $25,000 Machinery & Equipment $5,000 Intangibles $25,000 Other Assets $5,000 VII. Capital Asset Categories A. Land Land is defined as the surface or crust of the earth, which can be used to support structures and roadways, and may be used to grow crops, grass, shrubs, and trees. Land is characterized as having an unlimited life (inexhaustible). Betterments, site preparation and site improvements (other than buildings) that prepares the land for its intended use are added to the cost of the land. Examples of expenditures to be capitalized as land are as follows: ■ Purchase price or acquisition value at time of donation ■ Commissions, Professional fees (title searches, architect, legal, engineering, appraisal, surveying, environmental assessments, etc.) ■ Land excavation, fill, grading, drainage ■ Demolition of existing buildings and improvements (less salvage) • Removal, relocation, or reconstruction of property of others (railroad, phone, power lines etc.) Page 12 No Text ■ Accrued and unpaid taxes at date of purchase B. Buildings A building is a structure that is permanently attached to the land, has a roof, is completely enclosed by walls, and is not intended to be transportable or moveable. It is generally used to house persons, property, and fixtures attached to and forming a permanent part of such a structure. Items to be capitalized with the building: ■ Original purchase price and any other costs associated with getting the building ready for use. ■ All costs associated with the original construction of a building. ■ Improvements to existing buildings that materially extend the useful life of the building or change the use of a building, or both should be capitalized. The improvement must meet one of the following criteria: • The improvement adds square footage to the existing building. ■ The improvement is a major renovation that prepares an existing building for a new use. ■ The improvement extends the useful life of the building by more than 25%. C. Improvements Other Than Buildings This major asset class is used for permanent (i.e., non -moveable) improvements, other than buildings, that add value to land but do not have an indefinite useful life. Moveable items (e.g., picnic tables in a park) should be classified as furnishings and equipment. Expenditures to be capitalized as Improvements Other Than Buildings include, but are not limited to the following: ■ Basketball courts, playground equipment, swimming pools and tennis courts ■ Boat docks and ramps ■ Bus shelter pads • Fencing ■ Parking lots/driveways and parking barriers • Park peripherals • Paths and trails ■ Pavilions ■ Recreation areas and athletic fields • Shade Structures ■ Signals and signage ■ Landscaping D. Infrastructure Infrastructure is a long-lived capital asset that is normally stationary in nature and can be preserved for a significantly greater number of years than most capital assets. Expenditures to be capitalized as infrastructure include, but are not limited to the following: ■ Roads ■ Bridges and retaining walls Page 13 No Text ■ Storm -water drainage systems/improvements • Water and sewer utility plant, piping equipment ■ Water and Wastewater Transmission and Distribution Systems E. Machinery & Equipment Machinery and Equipment is defined as a fixed or movable tangible asset with a projected useful life of more than one year. Examples of expenditures to be capitalized as machinery and equipment include but are not limited to the following: • Vehicles ■ Machinery ■ Fire Equipment ■ Laboratory Equipment ■ Safety Equipment ■ Other Equipment (mowers, generators, containers, etc.) ■ Technological Equipment ■ Furniture ■ Trailers F. Other Assets "Other Assets" represent the final major class of capital assets that is available for all items not properly included in one of the other major asset classes. 1) Works of art and Historical Treasures. Works of art, historical treasures, and similar items should be recorded at historical cost or fair value at the date of purchase or donation. These items of significance are not held for financial gain, but rather for public exhibition, education, or research in furtherance of public service. 2) Patents, Copyrights and Trademarks. A Patent is the legal right to use an invention. A Copyright is the exclusive legal right to reproduce, publish, sell, or distribute the matter and form of something (as a literary, musical, or artistic work). Trademarks are a word or mark that distinctly indicates the ownership of a product or service, and that is legally reserved for the exclusive use of that owner. Patents, copyrights and trademarks will be amortized. G. Leased Assets A lease is defined as a contract that conveys control of the right to use another entity's non- financial asset for a period of time in an exchange or exchange -like transaction. Examples of non -financial assets include buildings, land, vehicles, and equipment. Assets should be capitalized if the lease agreement is non -cancelable and meets any one of the following criteria: ■ The lease transfers ownership of the property to the lessee by the end of the lease term. ■ The lease contains a bargain purchase option. ■ The lease term is equal to or greater than 75 percent of the estimated economic life of the leased property. • The present value of the minimum lease payments at the inception of the lease, excluding executor costs, equals at least 90 percent of the fair value of the leased asset. Page 14 No Text Leasehold Improvements. Leasehold improvements are defined as construction of new buildings or improvements made to existing structures by the lessee, who has the right to use these leasehold improvements over the term of the lease. Moveable equipment or office furniture that is not attached to the leased property is not considered a leasehold improvement. Leasehold improvements do not have a residual value. Leasehold improvements are capitalized only if they revert to the lessee at the expiration of the lease. If capitalized, they are amortized over the shorter of (1) the remaining lease term or (2) the useful life of the improvement. Improvements made in lieu of rent should be expensed in the period incurred. If the lease contains an option to renew and the likelihood of renewal is uncertain, the leasehold improvement should be written off over the life of the initial lease term or useful life of the improvement, whichever is shorter. H. Construction in Progress Construction in Progress reflects costs incurred to construct or develop a tangible or intangible capital asset before it is substantially ready to be placed into service (at which time the asset would be reclassified into the appropriate major asset class. Each project and its related expenditures must be evaluated on a case by case basis to determine when the asset is considered complete for financial reporting purposes. Projects which are not candidates for closure but show that ninety percent of the budget has been expended will require documentation on outstanding work. Construction in Progress projects should be capitalized to their appropriate capital asset classes upon the earlier occurrence of: • Final Acceptance from the Contractor ■ Placed into Service • Continuing Programs Construction in progress will be capitalized upon final acceptance from the contractor. At a minimum, this will include final pay application, final record drawings, completion of punch list, and a certificate of completion or occupancy. This action begins the warranty period, at which point construction staff will turn over the asset to Village staff. Continuing programs are projects that continue from year to year without a pre -determined end date and do not have thresholds. Expenditures will be capitalized annually. Programs are specific to a certain task. Projects may encompass multiple small tasks to complete a major job. Program examples include but are not limited to: • Bridge Replacement & Rehabilitation • Lift Station Rehabilitation Program • Meter Replacement Program ■ Oversizing Water Facilities Program ■ Radio Telemetry Water Upgrade Program • Radio Telemetry Waster Water Upgrade Program ■ Roadway Resurfacing • Sidewalk Replacement Program • Signals & Intersections Program • Wastewater System Rehabilitation Program • Water Main Rehabilitation Program • Water Quality Page 15 No Text Improvements to Non -Village Owned Capital Assets When the Village, through an inter -local agreement, performs a capital improvement of a non - Village owned asset the improvement will be recognized as a non -capital expenditure. The Village will only capitalize that portion of the asset which the Village bears the incidence of legal ownership. J. Controlled Capital Type Items ("Attractive Items" for inventory purposes only) Attractive items are Items which are not capitalized but require special attention because they are sensitive for one or more of the following reasons: ■ Items that require special attention to ensure legal compliance. Legal or contractual provisions may require a higher than ordinary level of accountability over certain capital - type items (e.g., items acquired through grant contracts); ■ Items that require special attention to protect public safety and avoid potential liability. Some capital -type items by their very nature pose a risk to public safety and could be the source of potential liability (e.g., police weapons); and ■ Items that require special attention to compensate for a heightened risk of theft (walk- away items). Some capital -type items are both easily transportable and readily marketable or easily diverted to personal use (e.g., portable computers, handheld two- way radios, etc. under $5,000). Vill. Depreciation of Capital Assets Depreciation and its related concept, amortization (generally, the depreciation of intangible assets) are expenditures recorded to allocate an asset's cost over its useful life. Capital assets should be depreciated or amortized over their estimated useful lives unless they are: inexhaustible (i.e. land) construction in progress ■ considered to have an indefinite useful life The useful life of an intangible asset that arises from contractual or other legal rights should not exceed the period to which the service capacity of the asset is limited by contractual or legal provisions. Intangible assets should be considered to have an indefinite useful life if there are no legal, contractual, regulatory, technological, or other factors that limit the useful life of the assets. The Village uses straight-line depreciation (historical cost divided by useful life) applying the half- year convention method for all capital assets. It is the Village's policy that capital assets have no residual value at the end of their useful lives. Depreciation does not affect the removal of a fixed asset from inventory. A fixed asset will remain in inventory until the end of its useful life and has been disposed of. Page 16 No Text Estimated Useful lives are as follows: Asset Class Land Buildings Improvements Other than Buildings Infrastructure Machinery & Equipment Intangibles Other Assets IX. Placed into Service Depreciable Lives Capitalize All 20 — 40 years 20 — 40 years 20 — 50 years 5 — 15 years 5 — 20 years 5 — 15 years Assets are placed into service when they are ready and available for their intended use. If an asset is in "use" but there are small commitments outstanding, the project will be reported to the Finance Department to be closed at the end of the fiscal year. If it is determined that a project should be closed but there are minor commitments outstanding, the project should be reported for closure; capital project accounting code(s) may remain open for a carry-over period of one fiscal year beyond asset capitalization. X. Tagginq of Capital Assets The purpose of capital asset tagging is to facilitate accounting for the asset, aid in its identification if the asset is stolen and to discourage theft. All moveable capital assets will be tagged by using a standardized adhesive tag with the following information: • Village of Tequesta, optional bar code, and an assigned property control number (capital asset number). Occasionally, it will be impractical to physically tag items such as infrastructure and improvements other than buildings. Instead, a capital asset number will be assigned. Control and accountability of vehicles will also be based on VIN number and fleet (vehicle) number. XI. Asset Impairment As part of the process at the end of each fiscal year, a determination will be made with appropriate Village staff as to whether any capital assets should be considered impaired. Asset impairment is both a significant and unexpected decline in the service utility of an asset. The events or changes in circumstances that lead to impairments are not considered normal or ordinary. That is, at the time the capital asset was acquired, the event or change in circumstance would not have been expected to occur during the useful life of the capital asset. Service utility, in turn is defined as the usable capacity that a capital asset was expected to provide at its acquisition. • Evidence of physical damage. Examples would include a building damaged in a natural disaster (e.g., hurricane or fire), or a building facing the costs associated with mold remediation or asbestos removal. • Changes in legal or environmental factors. Examples would include underground storage tanks or water treatment plants that cannot meet new EPA requirements. ■ Technological change or obsolescence. Examples would include equipment that is rarely used because a newer model provides better service or results. Page 17 No Text ■ Changes in manner or duration of use. Examples would include an office building now used as a warehouse, or the closure of a street prior to the end of its useful life for safety reasons. • Permanent construction stoppage. Examples include the halting of building construction due to a lack of funding or a stoppage following the discovery of an endangered species at a construction site. ■ Development stoppage. An example would be internally generated computer software development that is stopped due to a change in the priorities of management. XII. Disposition of Capital Asset Prior to disposal of an asset, the department responsible for the asset will complete a Request to Surplus Fixed Asset Form. The disposition of surplus property must be done in accordance with the Village's Procedures for Disposing of Surplus Village Property, in accordance with Directive No. 09-18/19. Directive Number: Approved by: Jeremy Allen, Village Manager Page 18 No Text RESOLUTION Date 28-21 6/10/2021 Motion Vice -Mayor Kyle Stone Mayor Frank D'Ambra, III Vice -Mayor Kyle Stone Council Member Laurie Brandon Council Member Molly Young Council Member Bruce Prince Second Council Member Laurie Brandon FOR AGAINST ABSENT CONFLICT rxl 0 ri El ED M 1 177 ri 1 rXI El The Mayor thereupon declared the Resolution duly passed and adopted. MAYOR OF TEQUESTA: Frank D'Ambra, III ', 0 0" SEAL '.INCORPORATED ATTEST: n ..,.... (�c�ec'Grin, Lori McWilliams, MMC Village Clerk No Text