Comprehensive Annual Financial Report - City of Santa Monica

CITY OF SANTA MONICA, CALIFORNIA
Notes to Basic Financial Statements, Continued
For the fiscal year ended June 30, 2008
Major outlays for capital assets and improvements are capitalized as projects are constructed.
Interest incurred during the construction phase of capital assets of business-type activities is
included as part of the capitalized value of the assets constructed. No interest was capitalized
during the year ended June 30, 2008.
Capital assets of the City are depreciated using a straight-line method over the following estimated
useful lives:
Assets
Years
Buildings 5 to 85
Improvements other than buildings 2 to 50
Infrastructure 15 to 75
Utility systems 20 to 100
Machinery and equipment 2 to 30
The City has elected not to capitalize its collection of artwork. GASB 34 waives the requirement
for artwork capitalization if the collection meets all the following conditions:
• The collection is held for reasons other than financial gain.
• The collection is protected, kept unencumbered, cared for, and preserved.
• The collection is subject to an organizational policy requiring that the proceeds from sales of
collection items be used to acquire other items for collections.
The City’s artwork collection meets the above criteria and therefore qualifies for the exemption
from the capitalization requirement. The collection includes both permanent and portable artworks,
artworks integrated into overall projects, murals, and stand-alone permanently installed paintings
and sculptures, art integrated into the design of public works projects (not stand-alone), and a
contemporary collection of almost 100 portable artworks which are on display in public areas of
City facilities.
Lease Obligations
The City leases various assets under both operating and capital lease agreements. In the
government-wide and proprietary funds financial statements, capital leases and the related lease
obligations are reported as liabilities in the applicable governmental activities or proprietary funds
statement of net assets.
Compensated Absences
It is the City's policy to permit employees to accumulate earned but unused vacation and sick leave
benefits up to a maximum determined by bargaining unit agreements. Employees are paid 100% of
their accumulated vacation when they terminate employment for any reason. All vacation is
accrued when incurred in the government-wide and proprietary fund financial statements. A
liability is reported in the governmental funds only if they have matured, for example, as a result of
employee resignations or retirements. Additionally, employees of the United Transportation Union
are able to exchange unused sick days balances for equal dollars of medical insurance premiums. In
order to qualify the employee must have 10 years of service at retirement and at least 50 days of
unused sick leave.
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