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6.C. - Page 75 of 196 CITY OF REDWOOD CITY NOTES TO THE BASIC FINANCIAL STATEMENTS For the Fiscal Year Ended June 30, 2020 NOTE I — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) G. Inventories and Prepaid Items Inventories are stated at moving average cost. The cost is recorded as expenditure at the time an individual inventory item is consumed. As inventories must be maintained at a certain level, an amount for inventories is recorded as non -spendable in the general fund balances. Consequently, these non -spendable fund balance amounts are not available for appropriation. General fund inventories consist of stationery. Equipment services fund inventory consists of tires, batteries, testing equipment, automotive parts, and small tools. Under the consumption method, certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government -wide and fund financial statements. The cost of prepaid items is recorded as expenditures/expenses when consumed rather than when purchased. H. Property Taxes Property taxes attach as an enforceable lien on property as of January 1, and are collected for a 12 month period effective July 1 by the San Mateo County tax collector. Taxes are billed once a year in late October and are payable in two equal installments due by December 10 and April 10 of the following year. The taxes not paid by those dates are subject to a penalty of 10%. In September of 1993, the County of San Mateo Board of Supervisors adopted the "Teeter Plan" for secured property taxes. Under the Teeter Plan, the state law allows the county to advance to the cities all property taxes billed, regardless of whether the taxes have been paid. The county then is entitled to keep all penalties and interest accruing on delinquent taxes. Property taxes on unsecured taxable property are not affected by this change. L Unbilled Service Receivables In the water and sewer utilities, residential customers are billed bi-monthly and all commercial and industrial customers monthly. Revenue is recorded as billed to customers on a cyclical basis. No accrual is made for unbilled services. There were no unbilled services in Port, parking, Docktown Marina, or internal service funds as of June 30, 2020. There is no accrual for unbilled water services as of June 30, 2020; revenues cannot be recognized since water meters are not read at such date. Management believes that the revenue from unbilled services does not have a material effect on total revenue. J. Capital Assets All capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Donated capital assets, donated works of art and similar items, and capital assets received in a service concession arrangement are valued at acquisition value on the date donated. The City's policy is to capitalize all assets with costs exceeding certain minimum thresholds, $5,000 for machinery and equipment, $100,000 for buildings, improvements, and infrastructure, and with useful lives exceeding two years. 43 162