[HISTORY: Adopted by the Board of Selectmen 11-3-2003. Amendments
noted where applicable.]
A.
Several separate but related policies are included herein: the Capital
Budget Policy, the Debt Management Policy, and the Capital Asset Policy.
These polities, when adopted, will be added to the Southwick Town
Code but do not amend the Town's existing bylaws. The policies set
forth herein will be utilized by the Town's existing boards and commissions,
and will not cause to be created any new board, commission, or committee
of the Town of Southwick.
(1)
The Capital Budget Policy establishes the methodology for including
a program or project in the five-year Capital Plan.
(2)
The Debt Management Policy establishes the strategy for financing
the Capital Plan.
(3)
The Capital Asset Policy establishes a guideline for capitalizing
assets and estimating useful lives of those assets.
B.
The Capital Policy serves as the comprehensive capital financing
plan as a matter of Southwick Town Code and incorporates the approved
Capital Plan. The Capital Policy establishes the general financing
goals and the specific elements that comprise a long-range financing
strategy.
C.
The Chief Administrative Officer, Finance Committee, and Board of
Selectmen, on a regular basis, shall conduct a review of the Capital
Financing Policy and make necessary revisions contingent upon changes
in external factors such as interest rates and legislation, and changes
in internal factors including the level and mix of financing required
over five years for capital expenditure appropriations.
A.
The policy goals are to:
(1)
Establish written Town policies for capital financing.
(2)
Minimize the reliance on long-term debt.
(3)
Retain the Town's credit rating of Al and endeavor to pursue an upgrade
with Moody's Investor's Service.
(4)
Continue to take advantage of permissible exclusion from federal
restrictions on the issuance of tax-exempt debt.
(5)
Maintain flexibility in the mix of financing sources.
(6)
Maintain stability in the planning and execution of the Capital Plan.
(7)
Make Capital Plan program decisions consistent with identified financing
sources.
B.
Investment objectives should reflect the long-term nature of capital
project financing.
A.
The Town will develop and maintain a five-year Capital Plan for capital improvements which will be adopted annually by the Southwick Capital Expenditures Committee "CapCom" and recommended annually to the finance Committee and Board of Selectmen as the Capital Budget pursuant to Chapter 13 of the Southwick Town Code.
B.
The Town will make all capital improvements in accordance with the
Town's annually approved Capital Plan.
C.
The Town will coordinate the development of the Capital Plan with
the development of the annual operating budget. Future operating costs
associated with new capital projects will be projected and included
in operating budget forecasts.
D.
The Town will maintain its assets at a level adequate to protect
the Town's capital investment and minimize future maintenance and
replacement costs.
E.
The Town will identify the estimated cost and potential funding source
for each capital project proposal before it is submitted to the appropriate
body for approval.
F.
The Chief Administrative Officer, Board of Selectmen, and Finance
Committee, with input front the appropriate Board(s), Department(s),
or Commission(s), will identify the potential financing method for
each capital project.
G.
The Chief Administrative Officer, Town Accountant, and the Treasurer/Collector
will identify the optimum mix and financing sources for all capital
projects, in conjunction with the adopted debt policy.
H.
The Chief Administrative Officer, Board of Selectmen, and Finance
Committee, with input from the appropriate Board(s), Department(s),
or Commission(s) will monitor and manage capital project expenditures
with all department managers for each project in the annual Capital
Budget.
I.
All capital projects should conform to the Town's Capital Planning
Guidelines, as described herein.
A.
The Town will confine long-term borrowing to capital improvements
or projects that cannot be financed with current revenues or from
state or federal funds.
B.
The Town will not fund current operations from the proceeds of borrowed
funds.
C.
Any capital project financed through the issuance of general obligation
bonds shall be financed for a period commensurate with the useful
life of the asset. Moreover, whenever possible, projects with an estimated
cost of less than $100,000 shall not be financed with long-term debt.
D.
The Town may use short-term financing in the form of Bond Anticipation
Notes ("BANs") to provide temporary financing for capital projects.
BANs will be retired either through cash reserves or through the issuance
of long-term bonds as soon as market conditions permit.
E.
The Town will adhere to the requirements of Rule 15c2-12(b)(5), promulgated
by the Securities and Exchange Commission when issuing Bonds and will
provide to any nationally recognized municipal securities repository,
or "NRMSIR," annual financial information and operating data and timely
notices of material events with respect to the bonds.
F.
The Town will maintain an annual debt service appropriation equal
to the level in the preceding year unless new large construction or
mandated emergency projects are introduced within the five-year Capital
Plan.
G.
The Town will comply with and keep current with all federal regulations
for tax-exempt bonds.
H.
To qualify under IRS arbitrage rebate exemption provisions, the Town
will not issue more than $10 million in debt in any calendar year
of which not more than $5 million of the issue may be for non-school
construction expenditures and will comply with the two-year expenditure
schedules.
I.
The Town will comply with federal reimbursement regulations for tax-exempt
bond proceeds used to reimburse capital expenditures by:
J.
The Town will endeavor to comply with the median debt ratios used
by investors (underwriters) and credit analysts when reviewing the
Town's creditworthiness. The matrix below contains ratios that the
Town will endeavor to adhere to:
Fiscal Indicators
|
Guideline
|
FY 2002 Actuals
| |
---|---|---|---|
Debt service as a percentage of budget
|
10.0%
|
9.57%
| |
Percent of debt retired in 10 years
|
50.0%
|
47.6%
| |
Debt as a percentage of equalized value
|
1.5%
|
0.2%
|
K.
The Town will plan and schedule bond sales to obtain a true interest
cost (TIC) at or below the published bond yield averages for debt
of similar credit quality (Moody's A1 ratings).
A.
Objective: The objective of these guidelines shall be to develop
a set of guidelines to be used by the Capital Expenditures Committee
in evaluating and proposing projects for inclusion in the Town's capital
budget.
B.
C.
Quantifying and ranking of capital projects:
(1)
The Capital Expenditures Committee shall review all capital project
submittals and weight them accordingly based on the criteria listed
below.
Criteria
|
Weighted Points
| |
---|---|---|
The project is mandated by state or federal statute or approved
through a referendum.
|
0 to 20
| |
The project ensures code compliance and/or improves public health
and safety in Town.
|
0 to 20
| |
The project meets a critical infrastructure need identified
by the Chief Elected Official and Finance Committee.
|
0 to 20
| |
The project can be definitively shown by an appropriate Town
official to improve program effectiveness and efficiency.
|
0 to 15
| |
The project can be definitively shown by an appropriate Town
official to reduce operating and maintenance costs.
|
0 to 15
| |
If implemented, the project will enhance community values and
improve the Town's quality of life.
|
0 to 10
| |
Maximum Possible Score
|
100 Points
|
(2)
Department heads submitting capital projects for funding consideration
are encouraged to rank these projects based on the above weighting
schedules. This will demonstrate to the Capital Expenditures Committee
that some background work was undertaken to substantiate the validity
of the project request.
D.
Disqualified projects: The Capital Expenditures Committee will disqualify
capital project submittals that do not conform to the above-stated
criteria. Examples of ineligible projects include, but are not limited
to, the following:
(1)
Maintenance projects such as painting, mechanical repairs, building
repairs, and other peripheral projects that are neither long-term
in their nature nor non-recurring. (Examples: painting projects, grounds
maintenance, furniture repairs, etc.)
(2)
Non-Tangible Projects, including special consulting studies which,
as an end-product, may recommend the development and implementation
of certain capital projects, but in themselves are not capital projects.
(Examples: space utilization reports, planning studies, engineering
services, etc.)
A.
The purpose of the Capital Asset Policy is to comply with GASB #34
statement requirements which provide for capitalizing assets and estimating
useful lives of those assets. The statement requires that the Town
disclose major classes of assets, beginning and end of year balances,
asset acquisitions, sales and dispositions of assets, and current
depreciation expense.
C.
For financial reporting purposes, a capital asset item must be at
or above the capitalization threshold and therefore have an historical
cost of $5,000 or more and have a useful life of greater than one
year. A total purchase for an amount greater than the threshold, which
consists of multiple items, each below the threshold, will not be
capitalized. Improvements and additions must be significant in terms
of increased capacity of efficiency. The capitalization threshold
for building improvements and additions must be in an amount equal
to or greater than $25,000. Infrastructure improvements and additions
shall have a threshold greater than $50,000, except for storm drains
and water lines, which should be greater than $25,000.
D.
Capital assets must be reported using historical costs including
capitalized interest and ancillary charges (freight and transportation
charges, site preparation, and professional fees) necessary to place
the asset into its intended location and condition for use. Donated
assets should be reported at estimated fair value at the time of acquisition.
E.
Infrastructure assets are long-lived capital assets that are stationary
in nature and normally preserved for a significantly greater number
of years than most capital assets. Examples of infrastructure assets
include:
F.
Resurfacing a road is considered to be road maintenance. In order
to be capitalized, an improvement must expand capacity. An example
would be changing a one-lane road to a two-lane road or adding a turning
lane.
G.
Depreciable lives should be based on actual expected use by the Town,
and not by tax lives. An attempt should be made to set depreciable
lives to coincide with the Town's capital replacement program. Capital
assets have estimated useful lives extending beyond one year and are
depreciated using the straight-line method. Depreciable lives for
different classes of vehicles and equipment shall be based on recommendations
by appropriate department heads.
H.
Standard useful lives include:
Asset
|
Standard Useful Life
(years)
| |
---|---|---|
Land
|
Nondepreciable
| |
Land Improvements
|
20 to 30
| |
Roads
|
30 to 50
| |
Sewer lines and water lines
|
50
| |
Bridges/large culverts
|
30 to 50
| |
Dams
|
50
| |
Buildings
|
50 to 75
| |
Fire equipment
|
20 to 25
| |
Ambulances
|
5
| |
Vehicles (autos/light trucks/heavy trucks)
|
7 to 15
| |
Machinery and equipment
|
3 to 10
| |
Construction equipment
|
15 to 30
| |
Computer equipment
|
5
|
I.
The Chief Administrative Officer and Town Accountant will ensure
that the capital asset report will be updated annually to reflect
improvements, additions, retirements, and transfers, and to reflect
new, annual capital asset balances for financial reporting purposes.
J.
Day-to-day stewardship of personal property above the capitalization
thresholds is the expressed responsibility of the operating department
utilizing the property.
K.
Regarding maintenance of the capital asset accounting report, the
operating departments have the responsibility to report improvements,
additions, retirements, and transfers in detail to the Town Accountant.
This detail is to be captured on the Fixed Asset Addition/Deletion
data entry forms attached to this policy.[1]
[1]
Editor's Note: The Fixed Asset Addition Data Entry Form and
the Fixed Asset Deletion Data Entry Form are included at the end of
this chapter.
L.
Assets below the capitalization thresholds, but considered sensitive,
may include radios, personal computers, lap-top computers, printers,
fax machines, and small power tools. These items shall be inventoried
and controlled at the department level.