Capital Improvement Committee Aims to Define Capital Expenditures

Capital Improvement Committee worked on a first definition of what capital expenditures are Monday, in hopes to communicate to voters about how their tax dollars are spent.

Alderman Stephen Webb, a committee member, said that the committee takes the responsibility seriously and they look forward to implementation of the policies, should voters approve of the tax extension in August. A year five plan for 2017 is shown below.

The current Capital Improvement Plan definition is:

Assets owned or leased by the City of Sunset Hills for which the city has the authority to acquire, pay the costs of, maintain, operate or to contract with other persons to have the same done, including but not limited to, roads, streets, land, improvements to land, easements, buildings, building improvements, vehicles, machinery, equipment, infrastructure and all other tangible or intangible assets that are used in operations, having initial useful lives extending beyond a single reporting period and having a unit cost greater than $5,000.

Perhaps the biggest issue the committee had with the definition was the unit cost of $5,000.

“When we came together and put together a definition it’s largely your (City Attorney Robert Jones’) counsel and one of our recent audits,” Webb said. “We used that language and married them together and tweaked it a bit to add the $5,000 threshold.” 

Webb asked if the committee wanted to lower that number, however the number was chosen because that was on the audit side. He submitted that if they reduced the $5,000 number, they should just omit it because any dollar amount would be subjective at that point.

Under the current definition, if maintenance costs for a facility weren’t over $5,000 a year, they wouldn’t fall into the capital improvement sales tax definition. The committee agreed that currently maintenance costs weren’t falling into the definition, and it is all about how these things are defined. Jones didn’t see a requirement in the statute that there was a restriction placed on the funds. Committee Member and Alderman Pat Fribis said that she thinks they should have the dollar figure in there for accounting reasons.

“It’s always been $5,000 as long as I’ve been with the city,” she said.

Jones said that the current statute states that the current surplus can only be used to maintain facilities that were constructed with the funds to begin with.

“They can’t be used for a new capital project, but new funds that are collected once the (bond) debt is paid off can be used for new projects,” Jones said. 

He also said that the Attorney General’s office has been “all over the place” when it comes to defining what a capital expenditure is. He recommended to the committee that if the sales tax measure passes in August, funds should not be comingled, that separate accounts should be set up.

“I would segment the surplus as well. New capital improvement funds should be used after the debt is paid off and should not be mixed with general operating,” Jones said.

Ultimately if there is a question if something is considered a capital expenditure, the accountant will help when the annual audit takes place whether a typical expenditure needs to be recharacterized. Eventually the surplus will go away.

The committee aims to come back by June 29 with more defined categories within the current working definition, such as maintenance and intangible assets. They also aim to get clarification on the unit cost and validate or invalidate the $5,000 threshold. Under the current bond issue the city hasn’t always held to the $5,000, so they want to be consistent moving forward.

“Things may be ‘too small’ under the $5,000 per unit, but in total may be over the $5,000 and if maintenance on those items are under $5,000 does that meet the threshold?” Webb asked. “I would submit that we leave it as it is for now.”

The committee hopes to hone their definition for voters by June 29. Election day is Aug. 7.

Capital Improvement Five Year Plan Year 5 (2017)

Public Works Roadway