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NOTES TO FiNNNCIFL STATEMENTS (CONTINUED) DECEMBER 31. 1990 Note 1- Sumnarv of Siqnificant Accountina Policies (Continued) PubLic domain ("infrastructure") general fixed assets consisting of roads, bridges, wrbs and gutters, streets and sidewatks, and lighting systems are capitalized, as [hese asseis are imnovabte and of va We only to the 9overrvnent. Assets in the generat fixed assets account group are not deoreciated. Depreciation of 6uildings, equipment and vehicles in The proprietary types is computed using the straighi-line method. Interest is capitalized on proprietary funds assets acquired uith 2ax-exempt debt. The amount of interest to be capitalized is wlcutated by offsetting interest expense incurred from the date of the borrouing until completion of the project uith interest earned on invested proceeds over the same period. Speciat Assessments - Special assessments are levied against the benefited properties for the assessable costs of speciat assessment improvement projecTs in accordance uith State statutes. ?he City usually adopts the assessment rotls uhen the individual projects are comptete or substantially complete. The assessments are coLlectibte over a term of years generally consistent uith the term of years of the relaied bond issue. Collection of annual instaltments (including interest) is handled by the County in the same manner as property taxes. Property ouners are alloued to prepay Cotal future instattments Without interest or prepay- ment penalties. Inventories - Inventories hetd by the Enterprise tunds are s[ated at [he louer of cost or market, using the firsT-in, first-out method. The cosC of inveniory is recognSzed as expense at the time the items are sold or used (consumption method). Utility service charges are recognized uhen earned uith no allouance tor uncollectible as deLinquent accounts are ceriified as a tien against the property billed. Unbilled utility service charges are included in receivabLes at year-end. Encumbranres - Encumbranres represent purchase comnitmenis. Encumbrances outstanding at year-end are reported as reservations of tund balances since they do not cons[iiute expenditures or liabilities. Vacation, Sick and Compensatory Time Off Pay - 7he City compensaTes emptoyees upon termination for unused vacation and compensatory time off. Employees are not compensaxed for unused sick pay upon termination of employment, except upon retirement, at uhich time employees are entitted to one-half ot their accumulated leave up to one month�s pay. Vacation and compensatory time off are accrued uhen earned and sick pay is expensed when payment is made in the proprietary funds. Vacation, compensatory time off, and sick pay are recognized uhen payment is made in the goverrvneniat tunds. Liability for the governmental funds is reflect- ed in the Generet Long-Term Debt Acrount Group representing the City's comnitmeM to tund such casts from future operations. Cash Flows - For purposes of this statement, all highly Iiquid investments (including restricted assets) with a maturity ot three months or less when purchased are considered to be cash equivalents. � CLaims - There are a number of claims for uorker's compensation and tiabitity damage in the internal service funds uhich have occurred but have not yet been comeyed to the City on December 37 of each year. The City prepares an estimate ot Those claims based on historical information and su6sequent events. The amount of the estimate is expensed and shown as a current tiabitity tor the reporting year. Post-Retirement Benefits - The City does no[ provide for employee post reiirement benefits. 34