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CITY OF CENTERVILLE, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2004 Note 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED Property Taxes The Council annually adopts a tax levy io December and certifies it to the County for collection io the following year. The County is responsible for collecting all property taxes for the City. These taxes attach an enforceable lien on taxable property witbio the City on January I and are payable by the property owners io two iostallments. The taxes are collected by the County Auditor and tax settlements are made to the City duriog January, July and December each year. Taxes payable on homestead property, as defined by Mionesota statutes, were partially reduced by a market value credit aid. The credit is paid to the City by the State of Minnesota (the State) io lieu of taxes levied agaiost the homestead property. The State remits this credit io two equal iostallments io October and December each year. Delioquent taxes receivable ioclude the past six years' uncollected taxes. Delioquent taxes have been offset by a deferred revenue liability for delioquent taxes not received witbio 60 days after year end io the fund frnancial statements. Special Assessments Special assessments represent the frnanciog for public improvements paid for by benefitiog property owners. These assessments are recorded as receivables upon certification to the County. Special assessments are recognized as revenue when they are received io cash or witbio 60 days after year end. All special assessments receivable are offset by a deferred revenue liability io the fund financial statements. Inventories and Prepaid Items All ioventories are valued at cost usiog the first-in/first-out (FIFO) method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. Certaio payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items io both government-wide and fund fmancial statements. Capital Assets Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items) are reported in the applicable governmental or busioess-type activities columns io the government-wide fmancial statements. Capital assets are defmed by the City as assets with an initial, individual cost of more than $5,000 (amount not rounded) and an estimated useful life io excess of three years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated rair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets' lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest iocurred duriog the construction phase of capital assets ofbusioess-type activities is iocluded as part of the capitalized value of the assets constructed. -21- I