Central Basin

My district does a significant amount of direct installs but mostly funded from other grant programs. I believe the consensus you will find is that the toilets will never be considered a capital asset of the district. It is always considered an expense. As for The gift of public funds I would ask legal counsel not the auditor ( I used to be an auditor). The question is a legal one and not an accounting one. In my experience there is a very broad interpretation of what qualifies as a "public use or purpose". IE the very fact you are considering this is a public need to conserve water. This is how much grant programs are qualified. Your real trouble is finding some one to buy bonds on a operation expense. Most bond buyers only like the idea of long term capital assets.

KNN Public Finance

It is always dangerous to seek legal advice from a non-lawyer, but here goes.

The accounting issue is separate from the tax law issue. Though bond financing private improvements raises questions I haven’t personally faced, that will be a question for bond counsel. Sounds like you have already received good advice there. There is no requirement that an item be accounted for as a capital asset for it to be eligible for tax exempt bonds. It would play a little havoc with your balance sheet (you would have a new liability without a new asset), but that in itself shouldn’t drive anything.

The gift of public funds is a red herring. The test is not whether there is private benefit, but whether you are doing so for a public purpose. Clearly water conservation is for a public purpose. And rebates for toilets and the like are a common program. You might give Eric Sandler, CFO at East Bay Municipal Utilities District, a call; they have rebates (and Eric is a good and assessable guy).

I don’t think a vote gets you anywhere on these issues, and you don’t need voter approval to sell bonds (though you might have to call them COPS to deal with some statutory issues).

Santa Nella County Water District

I don't know the answer to your question....but I tend to agree with your auditor that anything purchased for the public should not be recorded as a capital asset because it is no longer yours, and could be a gift of public funds, where you much tread carefully.

Having said all that, if you don't want to seek counsel on it, I suggest purchasing the Governmental Accounting, Auditing and Financial Reporting "Blue Book". I ALWAYS refer to it when I have a question, and my auditor is questioning something I've done. You can purchase it online, it's kind of expensive, I think I recently paid $299.00 for a 2013 version, but it is my "bible" for accounting tasks and I recommend anyone that does any kind of accounting of public money have it! I pull it out when I get into an argument with my auditor, and now he just expects me to refer to it. It has actually made my life easier!

Diablo Water District

I don't see this issue as a gift of public funds. It is very common in California for water agencies to provide incentives for customers to use less water. What you are really doing is buying supply. If you built a new pipeline to a new supply then it sounds like your auditors would be OK with issuing tax exempt COPs. I would go with Bond Counsel's determination since they're the ones that the bond underwriters will be listening to when you come out with your POS. You are investing in a new water supply.

City of Vista

I would agree with the auditors as to these items not being a capital asset I would agree that ownership passes when the low-flow items are installed at the businesses or residences. Besides, do you really want to try to keep track of a depreciate all of those toilets?

I do not agree that it is a gift of public funds as it is in furtherance of the Districts purpose (perhaps even the survival of?). However, I believe that this issue would best be addressed by the District’s legal counsel.

San Juan Capistrano

We fund our toilet rebate program through our operations funds. (And the customer purchases/installs the toilets – we do not.)

Inland Empire Utilities Agency

As members of the Metropolitan Water District of Southern California we have benefited from their grant programs to fund similar conservation measures. Below is a great resource in this area, good luck.

Bill McDonnell, Sr. Resource Specialist, Phone: 213-217-7693 or e-mail:

Coachella Valley Water District

You would have to look at the bond ordinance to see what costs are allowable. Normally they are for capital assets. But if your bond counsel said it is allowable, I would get something in writing from them.We give away water conservation kits and such to our customers as part of the conservation program and it is not considered a gift of public funds, but I am not sure on bond-financed items.