The depreciated book value of Dufferin County’s “tangible capital assets” (TCA) is just short of $80 million, according to a treasurer’s report being presented to county council tonight, but that doesn’t include significant additions in 2009.

The report says 2009 additions would bring the total up to between $145 and $150 million. And the values would grow when assets such as the seniors project on Orangeville’s Lawrence Avenue have been completed.

County treasurer Alan Selby uses the terms “historical value” and “accumulated amortization” in his report, representing the original cost (when known) and depreciation from the original construction to the end of 2008.

Municipalities have hitherto not accounted for capital assets in their financial statements, but will have to include these in their balance sheets before adopting their annual budgets in 2011 and ensuing years.

In an interview Wednesday, Mr. Selby said the change might not affect the municipal budgets, but will show how well the municipality is faring. If they aren’t collecting at least enough capital tax to cover current depreciation, they could be in trouble down the road.

The TCA statement and budget would “expose the inadequacy of cash raised.”

He said the easiest way to keep the budget low is to defer capital spending, and many municipalities use that method. “A year from now, the government will see (who is doing it).”

The TCA disclosure requirement is under a thing called Public Sector Asset Board. Mr. Selby opined that the process began about the same time as the stimulus grants, when the governments provided money for projects the municipalities needed but possibly couldn’t pay for.

If the TCA accounting reveals a widespread lack of adequate municipal capital taxes, “and 200 of the 400 are in a problem situation,” he said he could foresee a time when the rules would require minimum amounts of capital tax to be levied.

He acknowledged that, in municipalities where many capital projects have been debentured, this could drive taxes up to unreachable levels – as the tax base would be paying for both the debenture and the depreciation of the asset.

Even so, he said the rules have one serious flaw, as they base amortization on historical rather than replacement values.

For example, because of inflation, he said a five-yearold snowplow could not be replaced for its original purchase price. A realistic method would be to calculate what the replacement cost would likely be, and base the depreciation on that.

In his report to council, Mr. Selby used road surfaces as an example.

The county, he says, has 324 kilometres of roads, with historical value of about $58 million for the base and surface combined.

He said the paved surfaces have a life expectancy of 18 years. On that basis, the ideal would be to replace 18 km of roads yearly so all would be replaced within the 18-year span. Thus, at $125,000 a km, the annual roads replacement budget would be $225,000.

If that is not budgeted, the eventual replacement of surfaces could turn out to be in excess of $40 million – all in short order.

Mr. Selby suspected the new system will be more onerous for urban centres than for rural because of the sewer and water systems, miles of pipelines and other infrastructure they have to maintain.

Seeing the results as they expose the inadequacies “is going to be interesting,” he said.