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, 2009
Property Taxes
Assessed property values are determined on an annual basis for the period July 1 to June 30 by the
Los Angeles County Assessor as of January 1. Article XIIIA of the State Constitution (Proposition
13, approved by voters in June 1978) limits the real property tax rate to 1% of the full market cash
value plus rates imposed to fund indebtedness approved by the voters. Locally assessed property is
appraised at the 1975-76 full cash value, the base year value, and is adjusted each year after 1975 by
the change in the consumer price index, not to exceed an increase of 2%. Property is reappraised to
current full value upon either a change in ownership or new construction. If property values decline
below the base year value, the value is adjusted to reflect the lower value. Taxes are levied annually
on July 1 and become a lien on real property at January 1. Taxes are due November 1 and February
1 and are delinquent if not paid by December 10 and April 10, respectively, at which time
applicable penalties and interest are assessed.
Inventories and Prepaid Items
All materials and supplies inventories are valued at cost using the average cost method. Inventory
in the General Fund is recorded as expenditures when consumed rather than when purchased.
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.
Restricted Assets
Certain proceeds of the City's bonds, as well as certain resources set aside for their repayment, are
classified as restricted assets on the balance sheet because they are maintained in separate bank
accounts and their use is limited by applicable bond covenants.
In the absence of specific statutory provisions governing the issuance of bonds, certificates or
leases, these bond monies may be invested in accordance with the ordinance, resolutions or
indentures specifying the types of investments its trustees or fiscal agents may make. These
ordinances, resolutions and indentures are generally more restrictive than the City's general
investment policy. In no instance have additional types of investments been authorized that are not
permitted by the City's general investment policy.
Capital Assets
Capital assets, which include land, buildings and improvements, equipment, and infrastructure
assets (e.g., roads, sidewalks, curbs and gutters and similar items), are reported in the applicable
governmental or business-type activities columns in the government-wide financial statements.
Capital assets are defined by the City as assets with an initial individual cost of $15,000 or more and
an estimated useful life of two years or longer. The City defines buildings, improvements other
than buildings, and infrastructure as assets with an individual cost of $100,000 or more and an
estimated useful life of two years or longer. Such assets are recorded at historical cost. Donated
capital assets are recorded at estimated fair market value at the date of donation. The cost of normal
maintenance and repairs that do not add to the value of the asset or materially extend assets lives are
not capitalized.
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