STAFF REPORT
Meeting Date:
October 28, 2025
CONSENT
13 SUBJECT: UPDATE TO THE CAPITAL ASSET POLICY AND PROCEDURES RECOMMENDATION: It is recommended that the City Council approve the proposed modifications to the City’s Capital Asset Policy to incorporate recent changes from the Office of Management and Budget’s Uniform Guidance for the dollar threshold of classifying capital assets.
SUMMARY OF THE MATTER
This report recommends that the City Council approve updates to the City’s Capital Asset Policy to align with recent changes in federal guidance. The revisions reflect the updated definition of “equipment” under the Office of Management and Budget’s Uniform Guidance (2 CFR §200.1), which increases the capitalization threshold for equipment from $5,000 to $10,000, effective October 1, 2024.
The revised Policy will be applied retroactively as of July 1, 2025. These changes are administrative in nature and do not impact the City’s procurement practices or budgetary processes, as the revised threshold was already incorporated into the City’s updated procurement policy adopted on October 14, 2025.
This action is not subject to the California Environmental Quality Act pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines.
DISCUSSION
The City’s current Policy outlines the processes for accounting and reporting on capital assets, including their acquisition, depreciation, and disposal. The Office of Management and Budget issued revisions to the Federal Uniform Guidance (2 CFR Part 200), effective October 1, 2024, which included an increase to the capitalization threshold for equipment purchases from $5,000 to $10,000. Under 2 CFR §200.1, “equipment” is now defined as tangible personal property having a useful life of more than one year and a per-unit acquisition cost of $10,000 or greater. City staff are recommending an increase in the capital asset thresholds to ensure consistency with Federal grant requirements and to streamline financial reporting.
FINANCIAL ANALYSIS
The recommended changes to the Policy have a financial reporting impact to the City’s Annual Comprehensive Annual Report as a threshold of $10,000 is recommended for capitalizing assets, with the exception of Leases and SBITAs relating to GASB 87 and 96, as those thresholds will remain at $25,000 per the last update taken to Council and approved on December 10, 2024.
The changes recommended do not affect the City’s current procurement policy or practices or budgetary practices, which include but are not limited to proper bids, etc., and/or proper approval at the various authority levels and budgetary authorization prior to purchases or entry into an agreement.
ENVIRONMENTAL ANALYSIS
UPDATE TO THE CAPITAL ASSET POLICY AND PROCEDURES
October 28, 2025
The recommended action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly.
ATTACHMENT
1. Final draft of the revised Capital Asset Policy and Procedures (Pgs. 3-7) Submitted By: Michelle Bannigan Approved: .David A Kiff Michelle Bannigan, Finance
Director
Dave Kiff, City Manager
Report Prepared By: Coordinated With:
Shannon Espinoza, Finance Manager