[RP TownTalk] balancing the budget by letting the infrastructure decay

[Sarah Wayland]

It has been a common practice for governments to balance their budgets
by letting their infrastructure decay.

In response to this, in 1999, the Governmental Accounting Standards
Board (GASB) adopted new accounting standards (GASB No. 34) that
discourage this practice. You can read a summary at:

http://www.gasb.org/st/summary/gstsm34.html

Below are selected relevant quotes:

"Most governmental utilities and private-sector companies use accrual
accounting. It measures not just current assets and liabilities but
also long-term assets and liabilities (such as capital assets,
including infrastructure, and general obligation debt). It also
reports all revenues and all costs of providing services each year,
not just those received or paid in the current year or soon after
year-end."

[Translation: We can't pave the roads now, and then let them decay for
30 years. We must instead include the long-term cost of maintaining
those roads in the annual budget.]

"Governments should report all capital assets, including
infrastructure assets, in the government-wide statement of net assets
and generally should report depreciation expense in the statement of
activities. Infrastructure assets that are part of a network or
subsystem of a network are not required to be depreciated as long as
the government manages those assets using an asset management system
that has certain characteristics and the government can document that
the assets are being preserved approximately at (or above) a condition
level established and disclosed by the government."

[Translation: We have to document that our roads are being preserved.]

"Governments with less than $10 million in revenues (phase 3) should
apply this Statement for periods beginning after June 15, 2003."

[Translation not required.]

Furthermore, another article on the GASB website
(http://www.gasb.org/repmodel/IMGgasb34.pdf) states that "all
infrastructure assets acquired, renovated, restored, or improved after
the effective date of GASB 34 are to be reported on a prospective
basis."

So even if the Town of Riverdale Park *wanted* to balance the budget
by letting the current infrastructure improvements decay for 30 years,
the policies of the GASB no longer allow them to do so.

-Sarah

-- 
Sarah Wayland
Maryland - USA
sarah.wayland at gmail.com