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If your school owns a school bus or bus used to transport kids for athletics or activities, you should be familiar with the Bus Depreciation Fund.   

Q: What is the Bus Depreciation Fund for?

A: If your district owns a bus, this fund allows you to levy taxes to accumulate a portion of the cost of a bus each year so you can pay for a replacement when it wears out.

 Q: Is the fund only for replacing yellow school buses?

A: No, it can be also be used to replace a greyhound-type over the road coach bus used for athletics/activities.  Vans or other vehicles cannot be depreciated and can not be purchased using the Bus Depreciation Fund. 

 Q: How does the fund work?

A: For each bus it owns, a district can budget to levy up to 20% of the original cost of the bus each year.  The amount accumulated over time can't exceed 150% of the original cost when replacing a bus or buying a new yellow school bus, the district can use the accumulated money in the fund for that purchase. 

 Q: If there is a trade-in, how does that affect the "original cost" you can use to calculate the allowable levy?

A: The law doesn't say how to use a trade-in value.  Most districts lower the cash cost by the amount they received as a trade-in value and use the net amount as the original cost of the bus.  This seems most justifiable from a taxpayer perspective.

Q: What can the fund be used for?

A: MCA 20-10-147 allows the bus depreciation fund to be used for "conversion, remodeling, rebuilding of a bus or replacement of a bus radio."   Conversion usually entails making the necessary changes to allow wheelchair access, etc. Remodeling usually means replacing seat cushions, adding surveillance cameras, etc.  Rebuilding can include a major brake job, new engine, and other major overhauls needed to keep the bus working.  However, ordinary maintenance is not considered  an allowable cost of the  fund.

 Q: Can the Bus Depreciation Fund be used to buy an additional bus?

A: Yes, if the bus is a yellow school bus that meets Montana School Bus standards. Additional buses are not allowed to be purchased using the fund.  The transportation fund may also purchase an additional yellow school bus, and the General fund or the extracurricular fund may purchase an additional Greyhound-type activities bus

   Q: Can Bus Depreciation Fund money be transferred to other funds?

A: As of October 1, 1997, voters can authorize the trustees to move bus depreciation fund money to another fund to use for other purposes IF THEY SELL ALL THE DISTRICT'S BUSES.  Before October 1, 1997, voters could authorize the trustees to move a portion or all of the Bus Depreciation Fund money to another fund.  The new law (MCA 20-9-147) is more restrictive.

 Q: Can you start depreciating a bus you are still paying for?

A:  NO. The law says that the district has to OWN the bus.  A lease-purchase generally results in the ownership being transferred to the district upon completion of payment.  That means the Bus Depreciation Fund can be used to depreciate a bus the school holds title to.

 Q: If you've only depreciated Bus A for one year and you've depreciated Bus B 5 years, can you use the fund to replace Bus A? 

A: Yes.  The money accumulated in the fund can be used to replace any bus you have been depreciating.  In other words, money accumulated by depreciating Bus B can be used to replace Bus A.  Over time, however, you are limited in accumulating 150% of the cost of a bus you still own.  If you spend Bus B's depreciation money on Bus A, you have used up the portion of the depreciation on Bus B that you have accumulated to date. 

 Q: If the district buys a bus FOB factory, can the costs of sending an employee to pick it up be added to the Bus Depreciation Fund?

A: Yes. If the manufacturer delivered to you, they would tack on the cost of delivery and you would pay it as part of the “cost” of the bus, anyway. If you have to go get it, that can be considered part of the “cost” in lieu of delivery charges.  That’s consistent with Generally Accepted Accounting Principals which says the cost of a fixed asset includes all costs of putting the asset into use for its intended purpose.

 OPI Contact:  Donell rosenthal at (406) 444-3024 or email drosenthal@mt.gov