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42 <br />Independent Accountants have not been asked to consent to the City regarding inclusion of the <br />Annual Comprehensive Financial Report in this Official Statement. In addition, the Independent <br />Accountants have not reviewed this Official Statement. <br />Enterprise Accounting <br />The Enterprise is accounted for as an enterprise fund with a separate set of self- balancing <br />accounts that comprise its assets, liabilities, fund equity, revenues and expenditures or expenses, <br />as appropriate. The enterprise funds are used to account for operations (a) that are financed and <br />operated in a manner similar to private business enterprises--where the intent of the governing <br />body is that the costs of providing goods or services to the general public on a continuing basis <br />are to be financed or recovered primarily through user charges, or (b) where the governing body <br />has decided that periodic determination of revenues earned, expenses incurred or net income is <br />appropriate for capital maintenance, public policy, management control, accountability or other <br />purposes. Revenues are fully accrued to include unbilled services at fiscal year-end. <br />The City uses the accrual basis of accounting for its “proprietary funds,” including the City’s <br />water enterprise fund. Revenues are recognized when earned and expenses are recognized <br />when the related liabilities are incurred. All assets and liabilities for these funds are included on <br />the balance sheet with this measurement focus. Fund equity (i.e., net total assets) is segregated <br />into restricted, unrestricted and net investment in capital assets. <br />Outstanding Enterprise Obligations <br />Following issuance of the Bonds and the discharge of the 2013 Installment Purchase <br />Contract, the obligations of the City secured by Net Revenues will be the 2024 Installment <br />Purchase Contract, the 2017 Installment Purchase Contract, and the 2015 Installment Purchase <br />Contract. <br />Capitalization Policy <br />Generally, capital assets are major assets that have initial useful lives extending beyond <br />a single reporting fiscal period. The cost criterion used to determine whether a given asset should <br />be capitalized and included in the balance sheet is known as the “capitalization threshold.” If the <br />cost of the asset equals or exceeds this threshold, then that amount is included in the balance <br />sheet, or capitalized. The City's current threshold for each individual general capital asset is <br />$5,000 for equipment with an initial useful life of 2 years or greater and $100,000 for all other <br />general capital assets with an initial useful life of 20 years or greater. The threshold for <br />infrastructure is $100,000 for assets with a useful life of 20 years or greater. <br />Costs are capitalized only if they are directly identifiable with a specific asset. Thus, the <br />cost of a study undertaken to determine water system improvements for a specific area would not <br />be capitalized. Neither would the cost of training employees on new capital assets. Improvements <br />to capital assets that provide additional value, such as lengthening a capital asset's estimated <br />useful life, or increasing a capital asset's ability to provide service, such as greater effectiveness <br />or efficiency or increasing water pumping capacity, would be capitalized, but only if the cost of the <br />improvement met or exceeded the capitalization threshold. Repairs and maintenance costs, which <br />are costs incurred to retain the value of a capital asset, rather than provide additional value, are <br />not capitalized. Repairs and maintenance costs are generally recognized as those expenses <br />necessary to keep an asset in its intended operational condition and which do not materially <br />provide additional value to the asset. <br />8.A. - Page 56 of 255 <br />684