Full Text
CITY OF MIDDLETON Middleton, Wisconsin FINANCIAL STATEMENTS December 31, 2003 ---PAGE BREAK--- CITY OF MIDDLETON TABLE OF CONTENTS December 31, 2003 INDEPENDENT AUDITORS' REPORT BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Assets Statement of Activities Fund Financial Statements Balance Sheet - Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Statement of Net Assets - Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Assets - Proprietary Funds Statement of Cash Flows - Proprietary Funds Statement of Fiduciary Net Assets - Fiduciary Fund Notes to Financial Statements REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and 1 - 2 3 4 5 6 7 8-9 10 11 - 12 13 14 - 52 Actual - General Fund 53 Schedule of Revenues Compared to Budget - Budget and Actual - General Fund 54 - 55 Schedule of Expenditures Compared to Budget - Budget and Actual - General Fund 56 - 57 Notes to Required Supplementary Information 58 SUPPLEMENTARY INFORMATION Combining Balance Sheet - Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds Combining Statement of Fiduciary Net Assets - Fiduciary Funds Statement of Cash Flows - Component Unit 59 - 60 61 - 62 63 64 ---PAGE BREAK--- To the City Council City of Middleton Middleton, Wisconsin ~ VirchoWKrause &.company INDEPENDENT AUDITORS' REPORT We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Middleton, Wisconsin , as of and for the year ended December 31 , 2003, which collectively comprise the city's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Middleton's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation . We believe that our audit provides a reasonable basis for our opinion. In our opinion, based on our audit, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business- type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Middleton, Wisconsin at December 31 , 2003, and the respective changes in financial position and cash flows, where applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. As described in Note I.B., the City of Middleton has implemented a new financial reporting model , as required by the provisions of GASB Statement No. 34 , Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments, as of December 31, 2003. In addition , the Pleasant View Golf Course is now reported as an enterprise fund . The budgetary comparison information on pages 53 through 58 is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board . We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Page 1 Virchow, Krause & Company, LLP Certified Public Accountants & Consultants. An Independent Member of Baker Til ly International ---PAGE BREAK--- To the City Council City of Middleton Middleton, Wisconsin The City of Middleton, Wisconsin, has not presented the management's discussion and analysis that the Governmental Accounting Standards Board has determined is necessary to supplement, although not required to be part of, the basic financial statements. Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the City of Middleton's basic financial statements. The combining financial statements and statement of cash flows - component unit as listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining financial statements and statement of cash flows - component unit have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. Madison, Wisconsin April 9, 2004 Page 2 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF NET ASSETS December 31, 2003 Primal}:' Government Business- Governmental Type Component Activities Activities Totals Unit ASSETS Cash and investments $ 5,914,200 $ 4,010,269 $ 9,924,469 $ 696,935 Receivables (net of allowance for uncollectibles) Taxes 12,946,001 12,946,001 Delinquent taxes 205,016 205,016 Accounts 349,357 611,783 961,140 Loans 64,448 64,448 675,000 Special assessments 142,297 2,239,574 2,381,871 Delinquent special assessments 734 734 Due from other governments 121,505 16,994 138,499 Due from primary government 210,010 Due from component unit 6,719,651 6,719,651 Internal balances 806,627 (806,627) Inventories 3,675 3,675 Restricted Assets Temporarily Restricted Cash and investments 2,912,656 29,600 2,942,256 6,719,651 Leases receivable from primary government 16,475,000 Other assets 94,810 660,267 755,077 55,844 Capital Assets Land 6,623,191 2,382,607 9,005,798 Right of ways 17,207,087 17,207,087 Construction in progress 7,881,245 7,881,245 Land Improvements 4,071,843 7,291,981 11,363,824 Buildings 7,918,077 208,763 8,126,840 Machinery and equipment 3,764,861 315,484 4,080,345 Infrastructure 18,941,425 31,932,256 50,873,681 Less: Accumulated depreciation (7,358,922) (6,428,814) (13,787,736) Investment in joint ventures (deficit) (513,039) (513,039) Total Assets 88,813,070 42,467,812 131,280,882 24,832,440 LIABILITIES Accounts payable 2,235,837 289,512 2,525,349 3,019 Accrued liabilities 902,804 179,217 1,082,021 210,010 Due to other governments 9,549 9,549 Due to primary government 6,719,651 Due to component unit 210,010 210,010 Unearned revenue 12,853,486 14,584 12,868,070 675,000 Noncurrent Liabilities Due within one year 5,351,371 654,780 6,006,151 Due in more than one year 64,190,671 11,478,533 75,669,204 16,259,760 Total Liabilities 85,753,728 12,616,626 98,370,354 23,867,440 NET ASSETS Invested in capital assets, net of related debt 9,279,595 23,691,801 32,971,396 Restricted 2,190,292 29,600 2,219,892 Unrestricted (deficit) (8,410,545) 6,129,785 (2,280,760) 965,000 TOTAL NET ASSETS $ 3,059,342 $ 29,851,186 $ 32,910,528 $ 965,000 See accompanying notes to financial statements. Page 3 ---PAGE BREAK--- CITY OF IViIlJDLETON STATEMENT OF ACTIVITIES For the Year Ended December 31, 2003 Net (Expense) Revenue and Program Revenues Changes in Net Assets Operating Capital Primar:l' Government Charges for Grants and Grants and Govemmental Business-Type Component Functions/Programs EXQenses Services Contributions Contributions Activities Activities Totals Unit Primary Govemment Governmental Activities General government $ 946,095 $ 96,227 $ 13,037 $ - $ (836,831) $ $ (836,831) $ Public safety 4,469,230 732,329 65,280 (3,671,621 ) (3,671,621) Public works 5,086,333 801,130 865,408 3,583,283 163,488 163,488 Leisure activities 2,994,150 431,402 570,020 633,000 (1,359,728) (1,359,728) Conservation and economic development 6,428,853 5,982 6,841 (6,416,030) (6,416,030) Interest and fiscal charges 3,292,483 (3,292,483) (3,292,483) Total Governmental Activities 23,217,144 2,067,070 1,520,586 4,216,283 (15,413,205) (15,413,205) Business-Type Activities Water 1,185,283 1,673,035 1,035,224 1,522,976 1,522,976 Sewer 1,389,651 1,463,027 1,154,635 1,228,011 1,228,011 Pleasant View Golf Course 1,483,910 1,521,454 37,544 37,544 Total Business-Type Activities 4,058,844 4,657,516 2,189,859 2,788,531 2,788,531 Total Primary Government $ 27,275,988 $ 6,724,586 $ 1,520,586 $ 6,406,142 (15,413,205) 2,788,531 (12,624,674) Component Unit Community Development Authority $ 894,834 $ 7,111 $ - $ (887,723) General Revenues Taxes Property taxes, levied for general purposes and debt service 7,960,454 7,960,454 Property taxes, levied for tax increment district 3,616,925 3,616,925 Other taxes 439,822 439,822 Cable television franchise fees 179,735 179,735 Intergovernmental revenues not restricted to specific programs 1,071,826 1,071,826 Public gifts and/or grants 54,732 54,732 Investment income 334,382 140,748 475,130 847,359 Gain on the sale of assets 19,636 19,636 98,071 Miscellaneous 69,965 69,965 Transfers (91,689) 91,689 Total General Revenues and Transfers 13,655,788 232,437 13,888,225 945,430 Change in net assets (1,757,417) 3,020,968 1,263,551 57,707 NET ASSETS - Beginning 4,816,759 26,830,218 31,646,977 907,293 NET ASSETS - ENDING $ 3,059,342 $ 29,851,186 $ 32,910,528 $ 965,OOQ See accompanying notes to financial statements. Page 4 ---PAGE BREAK--- CITY OF MIDDLETON BALANCE SHEET - GOVERNMENTAL FUNDS December 31,2003 Other Total 2003 Capital Governmental Governmental General Debt Service TI F District #3 Projects Funds Funds ASSETS Cash and investments $ 1,809,069 $ - $ 3,126,506 $ 1,733,077 $ 2,158,204 $ 8,826,856 Receivables (net) Taxes 8,516,675 4,412,982 16,344 12,946,001 Delinquent taxes 205,016 205,016 Accounts 221,863 498 1,516 125,480 349,357 Loans 37,182 27,266 64,448 Special assessments 77,451 64,846 142,297 Delinquent special assessments 734 734 Due from other funds 306,778 5,800 312,578 Due from other governments 121,506 121,506 Due from component unit 6,719,651 6,719,651 Advances to other funds 3,787,444 3,787,444 TOTAL ASSETS $ 15,046,536 $ 5,800 $ 14,296,819 $ 1,734,593 $ 2,392,140 $ 33,475,888 LIABILITIES AND FUND BALANCES Liabilities Accounts payable $ 1,221,314 $ $ 711,681 $ 270,973 $ 31,869 $ 2,235,837 Due to other governments 9,549 9,549 Due to other funds 98,359 98,359 Deferred revenue 8,565,668 4,412,982 16,344 12,994,994 Deferred special assessments 78,185 64,846 143,031 Deferred interest income 650,662 650,662 Advances from other funds 1,567,397 1,627,639 3,195,036 Other liabilities 4,057 4,057 Total Liabilities 10,623,737 4,057 6,692,060 270,973 1,740,698 19,331,525 Fund Balances Reserved for: Loans receivable 27,266 27,266 Delinquent personal property taxes 205,016 205,016 Advances 3,136,782 3,136,782 Debt service 1,743 2,460,438 2,462,181 Encumbrances 2,973,598 395,027 3,368,625 Unreserved and designated, reported in: General fund 176,000 176,000 Unreserved and undesignated (deficit), reported in: General fund 905,001 905,001 Special revenue funds 1,195,102 1,195,102 Debt service fund Capital projects funds 2,170,723 1,068,593 (570,926) 2,668,390 Total Fund Balances 4,422,799 1,743 7,604,759 1,463,620 651,442 14,144,363 TOTAL LIABILITIES AND FUND BALANCES $ 15,046,536 $ 5,800 $ 14,296,819 $ 1,734,593 $ 2,392,140 Amounts reported for governmental activities in the statement of net assets are different because: 4,692,103 Capital assets used in governmental funds are not financial resources and, therefore, are not reported in the funds. 59,048,806 Some receivables that are not currently available are reported as deferred revenue in the fund financial statements but are recognized as revenue when earned in the government-wide staternents. 935,201 Investment(deficit) in joint venture is not a financial resource and, therefore, is not reported in the funds. (513,039) Some liabilities, including long-term debt, are not due and payable in the current period and, therefore, are not reported in the funds. See Note II.A. (70,345,979) NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 3,269,352 See accompanying notes to financial statements. Page 5 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS For the Year Ended December 31,2003 Other Total 2003 Capital Govemmental Governmental General Debt Service TIF District #3 Projects Funds Funds REVENUES Taxes $ 8,110,909 $ - $ 3,616,925 $ - $ 289,367 $ 12,017,201 Intergovernmental 2,123,035 369,197 60,841 99,039 2,652,112 Licenses and permits 663,279 663,279 Fines, forfeitures and penalties 240,510 240,510 Public charges for services 746,277 360,639 1,106,916 Intergovernmental charges for services 294,156 294,156 Special assessments 98,716 239,243 337,959 Investment income 172,216 1,743 143,369 15,970 333,298 Miscellaneous 153,337 1,231,728 38,063 1,423,128 Total Revenues 12,602,435 1,743 5,361,219 60,841 1,042,321 19,068,559 EXPENDITURES Current General government 1,289,230 1,289,230 Public safety 4,541,558 2,114 4,543,672 Public works 2,117,580 2,117,580 Leisure activities 2,232,935 171,408 2,404,343 Conservation and economic development 236,378 448,055 684,433 Capital Outlay 15,089,341 2,808,281 17,897,622 Debt Service Principal retirement 4,698,731 4,698,731 Interest and fiscal charges 1,962,645 1,088,111 27,800 3,078,556 Total Expenditures 10,417,681 6,661,376 16,177,452 2,836,081 621,577 36,714,167 Excess (deficiency) of revenues over (under) expenditures 2,184,754 (6,659,633) (10,816,233) (2,775,240) 420,744 (17,645,608) OTHER FINANCING SOURCES (USES) Debt issued 8,117,588 2,792,412 10,910,000 Debt premium 5,128 5,128 Transfers in 306,778 6,661,376 40,000 7,008,154 Transfers out (2,607,486) (398,467) (3,781,140) (312,750) (7,099,843) Total Other Financing Sources (Uses) (2,300,708) 6,262,909 4,341,576 2,792,412 (272,750) 10,823,439 Net Change in Fund Balance (115,954) (396,724) (6,474,657) 17,172 147,994 (6,822,169) FUND BALANCES - Beginning (as restated) 4,538,753 398,467 14,079,416 1,446,448 503,448 20,966,532 FUND BALANCES - ENDING $ 4,422,799 $ 1,743 $ 7,604,759 $ 1,463,620 $ 651,442 $ 14,144,363 See accompanying notes to financial statements. Page 6 ---PAGE BREAK--- CITY OF MIDDLETON RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended December 31,2003 Net change in fund balances - total governmental funds Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of net assets the cost of these assets is capitalized and they are depreciated over their estimated useful lives with depreciation expense reported in the statement of activities. Capital outlay is reported as an expenditure in the fund financial statements but is capitalized in the government-wide financial statements Less: Some items are reported as capital outlay but are not capitalized Capital assets charged to operating expenditures Depreciation is reported in the government-wide statements Capital contributions reported in the government-wide statements (infrastructure) Capital assets given to developers Net effect of various miscellaneous transactions involving capital assets sales, trade-ins) is to increase net assets. Receivables not currently available are reported as deferred revenue in the fund financial statements but are recognized as revenue when earned in the government-wide financial statements. Debt and lease proceeds provide current financial resources to governmental funds, but issuing these obligations increases long-term liabilities in the statement of net assets. Repayment of principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. This is the amount by which proceeds ($10,910,000 G.O. debt) exceeded payments($4,698, 731). Governmental funds report the effect of issuance costs, premiums, discounts, and similar items when debt is first issued, whereas these amounts are deferred and amortized in the statement of activities. Some expenses in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds. Compensated absences Unfunded pension liability Accrued interest on debt CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES See accompanying notes to financial statements. $ (6,822,169) 17,897,622 (3,406,576) 320,215 (725,230) 3,164,732 (5,697,281 ) 19,637 48,555 (6,211,269) 94,810 (69,383) 6,360 (167,430) $ (1,547,407) Page 7 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF NET ASSETS - PROPRIETARY FUNDS December 31,2003 Business-Type Activities - Enterprise Funds Pleasant View Golf Water Sewer Course ASSETS Current Assets Cash and investments $ 2,992,358 $ 1,017,911 $ - Accounts receivable, net 273,683 335,603 2,497 Interest receivable 15,834 1,160 Due from other funds 118,355 46,397 Inventories 3,675 Total Current Assets 3,403,905 1,401,071 2,497 Noncurrent Assets Restricted Assets 29,600 Other property and investments Special assessments receivable 2,239,574 Property held for future use 622,421 Preliminary engineering 13,322 Unamortized debt expenses 11,050 13,474 Capital Assets Property and equipment 18,934,025 13,164,838 10,032,228 Less: accumulated depreciation {4,030,849) {2,223,232) {174,733) Total Capital Assets (Net of Accumulated Depreciation) 14,903,176 10,941,606 9,857,495 Total Noncurrent Assets 15,549,969 13,224,254 9,857,495 Total Assets 18,953,874 14,625,325 9,859,992 Totals $ 4,010,269 611,783 16,994 164,752 3,675 4,807,473 29,600 2,239,574 622,421 13,322 24,524 42,131,091 {6,428,814) 35,702,277 38,631,718 43,439,191 Page 8 ---PAGE BREAK--- Business-T:t~e Activities - Enter~rise Funds Pleasant View Golf Water Sewer Course Totals LIABILITIES Current Liabilities Accounts payable $ 63,628 $ 207,916 $ 17,968 $ 289,512 Accrued interest 30,940 20,565 127,712 179,217 Accrued compensated absences 13,253 6,527 19,780 Due to other funds 306,778 72,193 378,971 Current portion of long term debt 170,000 135,000 330,000 635,000 Total Current Liabilities 584,599 442,201 475,680 1,502,480 Noncurrent Liabilities Accrued compensated absences 49,437 24,350 4,746 78,533 Customer advances for construction 14,584 14,584 Advances from other funds 592,408 592,408 General obligation debt 1,700,000 1,155,000 8,545,000 11,400,000 Total Noncurrent Liabilities 1,764,021 1,179,350 9,142,154 12,085,525 Total Liabilities 2,348,620 1,621,551 9,617,834 13,588,005 NET ASSETS Invested in capital assets, net of related debt 13,044,226 9,665,080 982,495 23,691,801 Restricted for: Equipment replacement 29,600 29,600 Unrestricted (deficit) 3,561,028 3,309,094 (740,337) 6,129,785 TOTAL NET ASSETS $ 16,605,254 $ 13,003,774 $ 242,158 $ 29,851,186 See accompanying notes to financial statements. Page 9 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS - PROPRIETARY FUNDS For the Year Ended December 31,2003 Business-TYl2e Activities - Enterl2rise Funds Pleasant View Golf Water Sewer Course Totals OPERATING REVENUES Charges for services $ 1,673,035 $ 1,463,027 $ 1,521,454 $ 4,657,516 Total Operating Revenues 1,673,035 1,463,027 1,521,454 4,657,516 OPERATING EXPENSES Operation and maintenance 718,456 1,124,750 1,011,625 2,854,831 Depreciation 364,945 198,281 50,377 613,603 Total Operating Expenses 1,083,401 1,323,031 1,062,002 3,468,434 Operating Income 589,634 139,996 459,452 1,189,082 NONOPERATING REVENUES (EXPENSES) Investment income 98,836 41,912 140,748 Interest expense (98,082) (64,715) (421,908) (584,705) Amortization of debt issuance costs P,800) {1,905) {5,705) Total Nonoperating Revenues (Expenses) {3,046) {24,708) {421,908) {449,662) Income before contributions and transfers 586,588 115,288 37,544 739,420 Capital contributions 1,035,224 1,154,635 2,189,859 Transfers in 398,467 398,467 Transfers out P06,778) {306,778) Change in Net Assets 1,315,034 1,269,923 436,011 3,020,968 TOTAL NET ASSETS - Beginning 15,290,220 11,733,851 {193,853) 26,830,218 TOTAL NET ASSETS - ENDING $ 16,605,254 $ 13,003,774 $ 242,158 $ 29,851,186 See accompanying notes to financial statements. Page 10 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF CASH FLOWS- PROPRIETARY FUND TYPES For the Year Ended December 31, 2003 Business-T:il2e Activities - Enterprise Funds Pleasant View Golf Water Sewer Course Totals CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 1,395,236 $ 1,393,728 $ 1,552,993 $ 4,341,957 Cash received from city for services 371,227 371,227 Cash paid to suppliers for goods and services (446,245) (997,136) (832,059) (2,275,440) Cash paid to employees for services (249,114) (114,703) (157,882) (521,699) Net Cash Flows From Operating Activities 1,071,104 281,889 563,052 1,916,045 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Repayment of advances (220,396) (220,396) Cash paid for tax equivalent (294,845) (294,845) Transfers in 398,467 398,467 Net Cash Flows From Noncapital Financing Activities (294,845) 178,071 (116,774) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal paid (160,000) (130,000) (280,000) (570,000) Interest paid (100,742) (66,650) (424,235) (591,627) Capital contributions received 750 (40,153) (39,403) Acquisition and construction of capital assets (411,775) (16,631) (428,406) Special assessments received 40,812 113,202 154,014 Net Cash Flows From Capital and Related Financing Activities (630,955) (100,079) (744,388) (1,475,422) CASH FLOWS FROM INVESTING ACTIVITIES Investment income 131,146 43,334 174,480 Investments sold and matured 2,629,027 709,926 3,338,953 Marketable securities purchased (2,515,961) (736,665) (3,252,626) Net Cash Flows From Investing Activities 244,212 16,595 260,807 Net Increase (Decrease) in Cash and Cash Equivalents 389,516 198,405 (3,265) 584,656 CASH AND CASH EQUIVALENTS - Beginning of Year 86,881 112,441 3,265 202,587 CASH AND CASH EQUIVALENTS - END OF YEAR $ 476,397 $ 310,846 $ - $ 787,243 Page 11 ---PAGE BREAK--- Business-Type Activities - Enterprise Funds Pleasant View Golf Water Sewer Course Totals RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES Operating income $ 589,634 $ 139,996 $ 459,452 $ 1,189,082 Adjustments to Reconcile Operating Income to Net Cash Provided From Operating Activities Depreciation expense 364,945 198,281 50,377 613,603 Depreciation charged to sewer utility 41,948 Changes in Noncash Components of Working Capital Accounts receivable 3,677 (22,129) 31,539 13,087 Other accounts receivable (484) (2,112) (2,596) Due from other funds 33,703 (45,058) (11,355) Inventories 11,489 11,489 Accounts payable 1,034 1,515 16,938 19,487 Accrued compensated absences 10,574 5,208 15,782 Due to other funds 6,188 6,188 Deferred revenues 14,584 14,584 NET CASH FLOWS FROM OPERATING ACTIVITIES $ 1,071,104 $ 281,889 $ 558,306 $ 1,869,351 RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS - PROPRIETARY FUNDS Cash and investments - statement of net assets - proprietary fund $ 2,992,358 $ 1,017,911 $ - $ 4,010,269 Restricted cash and investments - statement of net assets - proprietary fund 29,600 29,600 Non-cash equivalents (2,515,961 ) (736,665) {3,252,626) CASH AND CASH EQUIVALENTS - END OF YEAR $ 476,397 $ 310,846 $ - $ 787,243 NONCASH INVESTING, CAPITAL AND RELATED FINANCING ACTIVITIES Municipality financed additions to utility plant $ 324,683 $ 421,175 $ Developer financed additions to utility plant $ 749,377 $ 733,460 $ See accompanying notes to financial statements. Page 12 ---PAGE BREAK--- ASSETS Cash and investments Taxes receivable Accounts receivable Prepaid items CITY OF MIDDLETON STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS December 31,2003 Due from other governmental units TOTAL ASSETS LIABILITIES Accounts payable Due to other governmental units TOTAL LIABILITIES See accompanying notes to financial statements. Agency Funds $ 15,262,861 9,955,039 52,685 3,564 174,231 $ 25,448,380 $ 105,974 25,342,406 $ 25,448,380 Page 13 ---PAGE BREAK--- CITY OF MIDDLETON INDEX TO NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE I. Summary of Significant Accounting Policies A. Reporting Entity B. Government-Wide and Fund Financial Statements C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation D. Assets, Liabilities, and Net Assets or Equity 1. Deposits and Investments 2. Receivables 3. Inventories and Prepaid Items 4. Restricted Assets 5. Property Held for Future Use 6. Capital Assets 7. Other Assets 8. Compensated Absences 9. Long-Term Obligations/Conduit Debt 10. Claims and Judgments 11. Equity Classifications 12. Basis for Existing Rates - Proprietary Funds II. Reconciliation of Government-Wide and Fund Financial Statements A. Explanation of Certain Differences Between the Governmental Fund Balance Sheet and the Statement of Net Assets III. Stewardship, Compliance, and Accountability A. Budgetary Information B. Excess Expenditures Over Appropriations C. Deficit Balances IV. Detailed Notes on All Funds A. Deposits and Investments B. Receivables C. Restricted Assets D. Capital Assets E. Interfund Receivables/Payables and Transfers F. Long-Term Obligations G. Lease Disclosures H. Governmental Activities Net Assets/Fund Balances I. Restatement of Net Assets/Fund Balance J. Component Unit V. Other Information A. Employees' Retirement System B. Risk Management C. Commitments and Contingencies D. Joint Ventures Page 15 15 16 19 21 21 22 23 24 24 24 25 25 26 26 27 27 28 28 28 28 29 29 30 30 32 34 34 38 40 44 44 48 48 50 50 50 51 51 Page 14 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the City of Middleton, Wisconsin conform to generally accepted accounting principles as applicable to governmental units. A. REPORTING ENTITY This report includes all of the funds of the City of Middleton. The reporting entity for the city consists of the primary government, organizations for which the primary government is financially accountable, and other organizations for which the nature and significance of their relationship with the primary government are such that their exclusion would cause the reporting entity's financial statements to be misleading or incomplete. Component units are legally separate organizations for which the elected officials of the primary government are finanCially accountable. The primary government is financially accountable if it appoints a voting majority of the organization's governing body and it is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to or burdens on the primary government. The primary government may be financially accountable if an organization is fiscally dependent on the primary government. Blended component units, although legally separate entities, are, in substance, part of the government's operations and are reported with similar funds of the primary government. The discretely presented component unit is reported in a separate column in the government-wide financial statements (see note below for description) to emphasize that it is legally separate from the government. Discretely Presented Component Unit Community Development Authority of the City of Middleton The basic financial statements include the Community Development Authority of the City of Middleton ("CDA") as a component unit. The CDA is a legally separate organization. The board of the CDA is appointed by the mayor. Wisconsin Statutes provide for circumstances whereby the city can impose its will on the CDA and also create a potential financial benefit to or burden on the city. As a component unit, the CDA's financial statements have been presented as a discrete column in the basic financial statements. Separately issued financial statements of the CDA are not prepared. Excluded from the reporting entity: The Middleton Area Development Corporation is a separate legal organization that is not reported in these financial statements. Page 15 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS In December 1998, the Governmental Accounting Standards Board (GAS B) issued Statement No. 33 - Accounting and Financial Reporting for Nonexchange Transactions (GASB No. 33). In June 1999, GASB issued Statement No. 34 Basic Financial Statements - and Management's Discussion and Analysis - for State and Local Governments (GASB No. 34). In June 2001, GASB issued Statement No. 37 Basic Financial Statements - and Management's Discussion and Analysis - For State and Local Governments - Omnibus, (GASB No. 37), and Statement No. 38 Certain Financial Statement Note Disclosures. The City of Middleton made the decision to implement these standards effective January 1, 2003. Statement Nos. 34 and 37, among many other changes, add two new "government-wide" financial statements as basic financial statements required for all governmental units. The statement of net assets and the statement of activities are the two new required statements. Both statements are prepared on the full accrual basis. Previously, in accordance with accounting standards for governmental units, the city used the modified accrual basis of accounting for certain funds. The modified accrual basis of accounting continues to be the appropriate basis of accounting for governmental activity fund financial statements. In addition, all funds in the fund financial statements are reported as business-type activities, governmental activities or fiduciary funds. The definitions for these types of activities are discussed in other portions of Note I. Finally, all non-fiduciary funds are further classified as major or non-major funds. In reporting financial condition and results of operations for governmental units, the new standard concentrates on major funds versus non-major funds. Statement No. 33 requires capital contributions to proprietary funds to be presented as a change in net assets rather than being directly credited to net assets. Statement No. 38 requires additional note disclosures. Government-Wide Financial Statements The statement of net assets and statement of activities display information about the reporting government as a whole. They include all funds of the reporting entity except for fiduciary funds. The statements distinguish between governmental and business-type activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange revenues. Business-type activities are financed in whole or in part by fees charged to external parties for goods or services. Likewise, the primary government is reported separately from the legally separate component unit for which the primary government is financially accountable. Page 16 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (cont.) Government-Wide Financial Statements (cont.) The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. The city does not allocate indirect expenses to functions in the statement of activities. Program revenues include 1) charges to customers or applicants who purchase, use or directly benefit from goods, services, or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not included among program revenues are reported as general revenues. Internally dedicated resources are reported as general revenues rather than as program revenues. Fund Financial Statements Financial statements of the reporting entity are organized into funds, each of which is considered to be a separate accounting entity. Each fund is accounted for by providing a separate set of self-balancing accounts, which constitute its assets, liabilities, net assets/fund equity, revenues, and expenditure/expenses. Separate financial statements are provided for governmental funds and proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Funds are organized as major funds or non-major funds within the governmental and proprietary statements. An emphasis is placed on major funds within the governmental and proprietary categories. A fund is considered major if it is the primary operating fund of the city or meets the following criteria: a. Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise fund are at least 10 percent of the corresponding total for all funds of that category or type, and b. The same element of the individual governmental fund or enterprise fund that met the 10 percent test is at least 5 percent of the corresponding total for all governmental and enterprise funds combined. c. In addition, any other governmental or proprietary fund that the city believes is particularly important to financial statement users may be reported as a major fund. Page 17 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (cont.) Fund Financial Statements (cont.) The city reports the following major governmental funds: Major Governmental Funds General Fund - accounts for the city's primary operating activities. It is used to account for all financial resources except those required to be accounted for in another fund. Debt Service Fund - accounts for resources accumulated and payments made for principal and interest on long-term debt other than TID or enterprise fund debt. Tax Incremental District (TID) No.3 Capital Projects Fund - accounts for expenditures outlined in the TID project plan and related revenues and proceeds from long-term borrowing. 2003 Capital Projects Fund - accounts for proceeds from long-term borrowing and other resources to be used for capital improvement projects originally initiated in 2003. The city reports the following major enterprise funds: Major Enterprise Funds Water Utility - accounts for operations of the water system Sewer Utility - accounts for operations of the sewer system Pleasant View Golf Course - accounts for operations of the Pleasant View Golf Course. This fund was previously reported as a special revenue fund. The city reports the following non-major governmental funds: Non-Major Governmental Funds Special Revenue Funds - used to account for the proceeds of specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specified purposes. Subdividers' Deposits Land and Park Donations Drug Evidence Cable TV Youth Commission Donations EMS Railroad Depot Lost and Damaged Book Library Gift EMS Equipment Replacement Library Endowment Economic Development Economic Development Grant Airport Alcohol Awareness Drug Forfeitures Senior Citizen Railroad Tourism Commission Page 18 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (cont.) Fund Financial Statements (cont.) Non-Major Governmental Funds (cont.) Capital Projects Funds - used to account for financial resources to be used for the acquisition or construction of equipment and/or major capital facilities. Southwest Quadrant In addition, the city reports the following fund types: Agency funds are used to account for assets held by the city in a trustee capacity or as an agent for individuals, private organizations, and/or other governmental units. Tax Roll Fire District MJPSISC C. MEASUREMENT Focus, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION Government-Wide Financial Statements The government-wide statement of net assets and statement of activities are reported using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. Property taxes are recognized as revenues in the year for which they are levied. Taxes receivable for the following year are recorded as receivables and deferred revenue. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider are met. Special assessments are recorded as revenue when earned. Unbilled receivables are recorded as revenues when services are provided. The business-type activities follow all pronouncements of the Governmental Accounting Standards Board, and have elected not to follow Financial Accounting Standards Board pronouncements issued after November 30, 1989. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the city's water and sewer utility and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Page 19 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) C. MEASUREMENT Focus, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION (cont.) Fund Financial Statements Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recorded when they are both measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. For this purpose, the city considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on long-term debt, claims, judgments, compensated absences, and pension expenditures, which are recorded as a fund liability when expected to be paid with expendable available financial resources. Property taxes are recorded in the year levied as receivables and deferred revenues. They are recognized as revenues in the succeeding year when services financed by the levy are being provided. Intergovernmental aids and grants are recognized as revenues in the period the city is entitled the resources and the amounts are available. Amounts owed to the city which are not available are recorded as receivables and deferred revenues. Amounts received prior to the entitlement period are also recorded as deferred revenues. Special assessments are recorded as revenues when they become measurable and available as current assets. Annual installments due in future years are reflected as receivables and deferred revenues. Delinquent special assessments being held for collection by the county are reported as receivables and deferred revenue in the general fund. Revenues susceptible to accrual include property taxes, miscellaneous taxes, public charges for services, special assessments and interest. Other general revenues such as fines and forfeitures, inspection fees, recreation fees, and miscellaneous revenues are recognized when received in cash or when measurable and available under the criteria described above. The city reports deferred revenues on its governmental funds balance sheet. Deferred revenues arise from taxes levied in the current year which are for subsequent year's operations. For governmental fund financial statements, deferred revenues arise when a potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. Deferred revenues also arise when resources are received before the city has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the city has a legal claim to the resources, the liability for deferred revenue is removed from the balance sheet and revenue is recognized. Page 20 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) C. MEASUREMENT Focus, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION (cont.) Fund Financial Statements (cont.) Proprietary and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as described previously in this note. The proprietary funds follow all pronouncements of the Governmental Accounting Standards Board, and have elected not to follow Financial Accounting Standards Board pronouncements issued after November 30, 1989. The proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the water, sewer, and Pleasant View Golf Course are charges to customers for sales and services. Operating expenses for proprietary funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY 1. Deposits and Investments For purposes of the statement of cash flows, the city considers all highly liquid investments with an initial maturity of three months or less when acquired to be cash equivalents. Investment of city funds is restricted by state statutes. Available investments are limited to: 1. Time deposits in any credit union, bank, savings bank or trust company maturing in three years or less. 2. Bonds or securities of any county, city, drainage district, technical college district, village, town, or school district of the state. Also, bonds issued by a local exposition district, a local professional baseball park district, a local professional football stadium district, a local cultural arts district, or by the University of Wisconsin Hospitals and Clinics Authority. 3. Bonds or securities issued or guaranteed by the federal government. 4. The local government investment pool. Page 21 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 1. Deposits and Investments (cont.) 5. Any security maturing in seven years or less and having the highest or second highest rating category of a nationally recognized rating agency. 6. Securities of an open-end management investment company or investment trust, subject to various conditions and investment options. 7. Repurchase agreements with public depositories, with certain conditions. Investments are stated at fair value, which is the amount at which an investment could be exchanged in a current transaction between willing parties. Fair values are based on quoted market prices. No investments are reported at amortized cost. Adjustments necessary to record investments at fair value are recorded in the operating statement as increases or decreases in investment income. Investment income on commingled investments of municipal accounting funds is allocated based on average balances. The difference between the bank balance and carrying value is due to outstanding checks and/or deposits in transit. The Wisconsin Local Government Investment Pool (LGIP) is part of the State Investment Fund (SIF), and is managed by the State of Wisconsin Investment Board. The SIF is not registered with the Securities and Exchange Commission, but operates under the statutory authority of Wisconsin Chapter 25. The SIF reports the fair value of its underlying assets annually. Participants in the LGIP have the right to withdraw their funds in total on one day's notice. At December 31, 2003, the fair value of the city's share of the LGIP's assets was substantially equal to the amount as reported in these statements. 2. Receivables Property taxes are levied in December on the assessed value as of the prior January 1. In addition to property taxes for the city, taxes are collected for and remitted to the state and county governments as well as the local school district and technical college district. Taxes for all state and local governmental units billed in the current year for the succeeding year are reflected as receivables and due to other taxing units on the accompanying agency fund balance sheet. Property tax calendar - 2003 tax roll: Lien date and levy date Tax bills mailed Payment in full, or First installment due Second installment due Personal property taxes in full Tax sale - 2003 delinquent real estate taxes December 2003 December 2003 January 31, 2004 January 31, 2004 July 31, 2004 January 31, 2004 October 2006 Page 22 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 2. Receivables (cont.) Accounts receivable have been shown net of an allowance for uncollectible accounts. Delinquent real estate taxes as of July 31 are paid in full by the county, which assumes the collection thereof. No provision for uncollectible accounts receivable has been made for the water and sewer utilities because they have the right by law to place delinquent bills on the tax roll. During the course of operations, transactions occur between individual funds that may result in amounts owed between funds. Short-term interfund loans are reported as "due to and from other funds." Long-term interfund loans (noncurrent portion) are reported as "advances from and to other funds." Interfund receivables and payables between funds within governmental activities are eliminated in the statement of net assets. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances". In the governmental fund financial statements, advances to other funds are offset equally by a fund balance reserve account which indicates that they do not constitute expendable available financial resources and, therefore, are not available for appropriation. The city has received federal grant funds for economic development loan programs to various businesses. The city records a loan receivable when the loan has been made and funds have been disbursed. It is the city's policy to record revenue when the initial loan is made from the federal grant funds. The net amount of the loan receivable balance is offset by a reserve for loans receivable. As loans are repaid, the reserve for loans receivable is reduced and the designated fund balance is increased. When new loans are made from loan repayments, the reserve for loans receivable is increased and the designated fund balance is decreased. Interest received from loan repayments is recognized as revenue when received in cash. Any unspent loan repayments at year end are presented as designated fund balance in the governmental fund balance sheet. 3. Inventories and Prepaid Items Governmental fund inventory items are charged to expenditure accounts when purchased. Year- end inventory was not significant. Proprietary fund inventories are generally used for construction and for operation and maintenance work. They are not for resale. They are valued at cost based on weighted average, and charged to construction, operation and maintenance expense when used. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. Page 23 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 4. Restricted Assets Mandatory segregations of assets are presented as restricted assets. Such segregations are required by bond agreements and other external parties. Current liabilities payable from these restricted assets are so classified. The excess of restricted assets over current liabilities payable from restricted assets will be used first for retirement of related long-term debt. The remainder, if generated from earnings, is shown as restricted net assets. 5. Property Held for Future Use In 2001, the water utility acquired property held for future use. The property is a pre-dug well that is currently not being used. 6. Capital Assets Government-Wide Statements In the government-wide financial statements, fixed assets are accounted for as capital assets. Capital assets are defined by the government as assets with an initial cost of more than $5,000 for general capital assets and $25,000 for infrastructure assets, and an estimated useful life in excess of one year. All capital assets are valued at historical cost, or estimated historical cost if actual amounts are unavailable. Donated fixed assets are recorded at their estimated fair value at the date of donation. Prior to January 2003, infrastructure assets of governmental funds were not capitalized. Upon implementing GASB No. 34, governmental units are required to account for all capital assets, including infrastructure, in the government-wide statements prospectively from the date of implementation. Retroactive reporting of all major general infrastructure assets is encouraged but not required until January 1, 2007, when GASB No. 34 requires the city to retroactively report all major general infrastructure assets acquired since January 1, 1980. For the year ended December 31, 2003, the city has retroactively reported all of the network infrastructure acquired by its governmental fund types. Additions to and replacements of capital assets of business-type activities are recorded at original cost, which includes material, labor, overhead, and an allowance for the cost of funds used during construction when significant. For tax-exempt debt, the amount of interest capitalized equals the interest expense incurred during construction netted against any interest revenue from temporary investment of borrowed fund proceeds. No net interest was capitalized during the current year. The cost of renewals and betterments relating to retirement units is added to plant accounts. The cost of property replaced, retired or otherwise disposed of, is deducted from plant accounts and, generally, together with removal costs less salvage, is charged to accumulated depreciation. Page 24 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 6. Capital Assets (cont.) Government-Wide Statements (cont.) Depreciation of all exhaustible fixed assets is recorded as an allocated expense in the statement of activities, with accumulated depreciation reflected in the statement of net assets. Depreciation is provided over the assets' estimated useful lives using the straight-line method of depreciation. The range of estimated useful lives by type of asset is as follows: Buildings Land Improvements Machinery and Equipment Infrastructure Water Plant Source of Supply Pumping Water Treatment Transmission and Distribution General Sewer Plant Collecting System Collecting System Pumping General Fund Financial Statements 30 Years 30 Years 3 - 15 Years 20 - 50 Years 33 Years 20 - 40 Years 33 - 40 Years 16-90Years 4 - 15 Years 30 - 100 Years 20 - 40 Years 7 - 40 Years In the fund financial statements, fixed assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Fixed assets used in proprietary fund operations are accounted for the same way as in the government-wide statements. 7. Other Assets In governmental funds, debt issuance costs are recognized as expenditures in the current period. For the government-wide and the proprietary fund type financial statements, debt issuance costs are deferred and amortized over the term of the debt issue. 8. Compensated Absences Under terms of employment, employees are granted sick leave and vacations in varying amounts. Only benefits considered to be vested are disclosed in these statements. All vested vacation and sick leave pay is accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements, or are payable with expendable available resources. Page 25 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 8. Compensated Absences (cont.) The city provides postemployment health insurance benefits for all eligible employees. Eligibility is based on retiring from the city or becoming disabled and being eligible to receive social security benefits or Wisconsin Retirement benefits. The benefits are based on contractual agreements with employee groups, local ordinances, and employee benefit policies. Employees may convert their accumulated sick leave to pay for health care premiums. The cost of those premiums is recognized as an expenditure in the year of retirement. The entire cost is paid by the city. Funding for those costs is provided out of the current operating budget of the city's general fund. Total expenditures for retirees' medical premiums during the year were $60,971. The number of participants currently eligible to receive benefits is 13. The total amount outstanding at year end to be paid in the future is $319,593 and is included in the general fund as an accrued liability. Payments for vacation and sick leave will be made at rates in effect when the benefits are used. Accumulated vacation and sick leave liabilities at December 31, 2003 are determined on the basis of current salary rates and include salary related payments. 9. Long-Term Obligations/Conduit Debt All long-term obligations to be repaid from governmental and business-type resources are reported as liabilities in the government-wide statements. The long-term obligations consist primarily of notes and bonds payable, and accrued compensated absences. Long-term obligations for governmental funds are not reported as liabilities in the fund financial statements. The face value of debts (plus any premiums) are reported as other financing sources and payments of principal and interest are reported as expenditures. The accounting in proprietary funds is the same as it is in the government-wide statements. The city may approve the issuance of industrial revenue bonds (IRS) for the benefit of private business enterprises. IRS's are secured by mortgages or revenue agreements on the associated projects, and do not constitute indebtedness of the city. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. No industrial revenue bonds were outstanding as of the end of the year. 10. Claims and Judgments Claims and judgments are recorded as liabilities if all the conditions of Governmental Accounting Standards Soard pronouncements are met. Claims and judgments that would normally be liquidated with expendable available financial resources are recorded during the year as expenditures in the governmental funds. If they are not to be liquidated with expendable available financial resources, no liability is recognized in the governmental fund statements. The related expenditure is recognized when the liability is liquidated. Claims and judgments are recorded in the government-wide statements and proprietary funds as expenses when the related liabilities are incurred. There were no significant claims or judgments at year end. Page 26 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2003 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 11. Equity Classifications Government-Wide Statements Equity is classified as net assets and displayed in three components: a. Invested in capital assets, net of related debt - Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. b. Restricted net assets - Consists of net assets with constraints placed on their use either by 1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments or, 2) law through constitutional provisions or enabling legislation. c. Unrestricted net assets - All other net assets that do not meet the definition of "restricted" or "invested in capital assets, net of related debt." When both restricted and unrestricted resources are available for use, it is the city's policy to use restricted resources first, then unrestricted resources as they are needed. Fund Statements Governmental fund equity is classified as fund balance. Fund balance is further classified as reserved and unreserved. Unreserved fund balance includes funds set aside by management for specific uses, which are labeled "designated". The balance of unreserved fund balance is labeled "undesignated", which indicates it is available for appropriation. Proprietary fund equity is classified the same as in the government-wide statements. 12. Basis for Existing Rates - Proprietary Funds Current water rates were approved by the PSCW on March 15, 1997. Sewer rates are adjusted annually for rate changes from the Madison Metropolitan Sewerage District. The 2003 rates were approved in November 2002 and became effective January 1, 2003. Page 27 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE II - RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS A. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND BALANCE SHEET AND THE STATEMENT OF NET ASSETS The governmental fund balance sheet includes a reconciliation between fund balance - total governmental funds and net assets - governmental activities as reported in the government-wide statement of net assets. One element of that reconciliation explains that "some liabilities, including long-term debt are not due and payable in the current period and, therefore, are not reported in the funds. The details of this $70,345,979 difference are as follows: Bonds and notes payable Unfunded pension liability Compensated absences Capital leases payable Accrued interest Unamortized debt discount and issue costs Combined Adjustment for Long-Term Liabilities NOTE III - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. BUDGETARY INFORMATION $ 51,536,593 333,445 1,197,004 16,475,000 898,747 (94,810) $ 70,345,979 Budgetary information is derived from the annual operating budget and is presented using the same basis of accounting for each fund as described in Note I. C. A budget has been adopted for the general fund, debt service fund, certain special revenue funds, and capital projects funds. Budgets have not been formally adopted for the Depot Restoration, Alcohol Awareness, Drug Forfeitures, Senior Citizen, and Railroad special revenue funds. Wisconsin Statute 65.90 requires that an annual budget be adopted for all funds. Page 28 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE III - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY (cont.) A. BUDGETARY INFORMATION (cont.) The budgeted amounts presented include any amendments made. The city administrator may authorize transfers of budgeted amounts between departments up to $1,000. Transfers exceeding $1,000 between departments and changes to the overall budget must be approved by a two-thirds council action. There were no supplemental appropriations during the year. Appropriations lapse at year end unless specifically carried over. Budgets are adopted at the departmental level of expenditure. B. EXCESS EXPENDITURES OVER ApPROPRIA TlONS The following individual funds experienced excess expenditures over appropriations. Special Revenue Funds Subdivider's deposits Park donations Tourism Library gifts Cable TV Railroad Capital Projects Funds TID No.3 capital projects fund $ 207,824 1,890 12,231 4,610 18,698 95,556 2,790,108 The city controls expenditures at the departmental level. Some individual departments experienced expenditures which exceeded appropriations. The detail of those items can be found in the city's year-end budget to actual report. c. DEFICIT BALANCES Generally accepted accounting principles require disclosure of individual funds that have deficit balances at year end. Page 29 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE III - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY (cont.) C. DEFICIT BALANCES (cont.) As of December 31, 2003, the following individual funds held a deficit balance: Special Revenue Funds Amount Reason Railroad $ 674,713 Excess expenditures over revenue. This deficit is anticipated to be funded by room taxes in future years. Tourism Commission $ 291,468 Excess expenditures over revenue. This deficit is anticipated to be funded by room taxes in future years. Capital Projects Fund Southwest quadrant $ 570,926 Infrastructure costs in excess of special assessments. This deficit is anticipated to be funded by future special assessments and transfers from other funds. NOTE IV - DETAILED NOTES ON ALL FUNDS A. DEPOSITS AND INVESTMENTS The city's deposits and investments are categorized to give an indication of the level of custodial credit risk assumed by the entity at year end. Category 1 includes items that are insured or registered or which are collateralized by or evidenced by securities held by the city or its agent in the city's name. Category 2 includes deposits collateralized with securities held by the pledging financial institution's trust department or agent in the city's name, or uninsured and unregistered investments for which the securities are held by the counter party's trust department or agent in the city's name. Category 3 includes uncollateralized deposits, and uninsured and unregistered investments, with securities held by the counterparty or its trust department or agent but not in the city's name. Page 30 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) A. DEPOSITS AND INVESTMENTS (cont.) Category 2 3 Totals Carrying Amount! Fair Value Local and area banks $ 500,000 $ 13,176,719 $13,676,719 $ 13,406,328 Local government investment pool Mutual funds Petty cash Total Deposits and Investments - Reporting Entity Statement of net assets - cash and investments Statement of net assets - restricted cash and investments Statement of net assets - fiduciary funds Total 4,521,892 10,200,787 579 $ 28,129,586 $ 9,924,469 2,942,256 15,262,861 $ 28,129,586 The city had no significant type of investment during the year not included in the above schedule. Deposits in each local and area bank are insured by the FDIC in the amount of $100,000 for interest bearing accounts and $100,000 for noninterest bearing accounts. Bank accounts are also insured by the State Deposit Guarantee Fund in the amount of $400,000. However, due to the relatively small size of the Guarantee Fund in relationship to the total deposits covered and other legal implications, recovery of material principal losses may not be significant to individual municipalities. This coverage has not been considered in computing the amounts in Category 1 above. Investments in the local government investment pool are covered under a surety bond issued by Financial Security Assurance, Inc. The bond insures against losses arising from principal defaults on substantially all types of securities acquired by the pool except U.S. Government and agency securities. The bond provides unlimited coverage on principal losses, reduced by any FDIC and State of Wisconsin Guarantee Fund insurance. Fluctuating cash flows during the year due to tax collections, receipt of state aids and/or proceeds from borrowing may have resulted in temporary balances exceeding insured amounts by substantially higher amounts. Page 31 ---PAGE BREAK--- NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) B. RECEIVABLES CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 Receivables as of year end for the government's individual major funds and nonmajor, and fiduciary funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: Nonmajor TI D District 2003 Capital Pleasant View and Other General NO.3 ~ects Water Sewer Golf Course Funds Totals Receivables: Taxes $ 8,516,675 $ 4,412,982 $ - $ - $ - $ - $ 16,344 $ 12,946,001 Delinquent taxes 205,016 205,016 Accounts 295,156 498 1,516 273,683 335,603 2,497 125,480 1,034,433 Loans 37,182 27,266 64,448 Special assessments 77,451 2,239,574 68,846 2,385,871 Delinquent special assessments 734 734 Interest 15,834 1,160 16,994 Due from other governments 125,506 125,506 Gross Receivables 9,220,538 4,450,662 1,516 289,517 2,576,337 2,497 237,936 16,779,003 Less: Allowance for uncollectibles (73,293) (73,293) Net Total Receivables $ 9,147,245 $ 4,450,662 $ 1,516 $ 289,517 $ 2,576,337 $ 2,497 $ 237,936 $ 16,705,710 Amounts Not Expected to be Collected Within One Year $ 250,000 $ - $ - $ - $ - $ - $ - $ Page 32 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) B. RECEIVABLES (cont.) Revenues of the city are reported net of uncollectible amounts. Total uncollectible amounts related to revenues of the current period are as follows: Uncollectibles related to ambulance billings $ 73,293 Total Uncollectibles of the Current Fiscal Year $ 73,293 Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Property taxes levied for the subsequent year are not earned and cannot be used to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue and unearned revenue reported in the governmental funds were as follows: Unavailable Unearned Totals Property taxes receivable $ $ 12,853,486 $ 12,853,486 Special assessments not yet due 143,031 143,031 EMS receivable 141,508 141,508 Interest income (TIF No.3) 650,662 650,662 Total Deferred/Unearned Revenue for Governmental Funds $ 935,201 $ 12,853,486 $ 13,788,687 For economic development loans, the city is limited by the Wisconsin Department of Commerce to the amount of program income from economic development loans that it may retain and loan to other businesses. Program income includes the principal and interest received from economic development loans repayments. Based upon its current population, the city may retain $750,000. At December 31, 2003, the city has not exceeded its maximum retention cap. When it does, a liability to the state will be recorded. Page 33 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE IV - DETAILED NOTES ON ALL FUNDS (cant.) C. RESTRICTED ASSETS Replacement Account The sewer utility established an equipment replacement account to be used for significant mechanical equipment replacement as required by the Wisconsin Department of Natural Resources. Following is a list of restricted assets at December 31, 2003: 2003 Restricted assets replacement account $ 29,600 D. CAPITAL ASSETS Capital asset activity for the year ended December 31, 2003 was as follows: Beginning Ending Balance Additions Deletions Balance Governmental Activities Capital Assets Not Being Depreciated: Land $ 12,110,220 $ 210,252 $ 5,697,281 $ 6,623,191 Right of ways 16,197,190 1,009,897 17,207,087 Construction in progress 7,881,245 7,881,245 Total Capital Assets Not Being Depreciated $ 28,307,410 $ 9,101,394 $ 5,697,281 $ 31,711,523 Capital Assets Being Depreciated: Land improvements $ 3,981,995 $ 95,628 $ 5,780 $ 4,071,843 Buildings 7,918,077 7,918,077 Machinery and equipment 3,187,448 784,177 206,764 3,764,861 Streets - infrastructure 4,422,260 4,238,481 8,660,741 Storm sewers - infrastructure 3,477,554 1,556,528 5,034,082 Traffic signals - infrastructure 419,506 343,590 763,096 Sidewalks - infrastructure 2,171,641 253,677 2,425,318 Bridges - infrastructure 455,668 1,602,520 2,058,188 Total Capital Assets Being Depreciated 26,034,149 8,874,601 212,544 34,696,206 Page 34 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) D. CAPITAL ASSETS (cant.) Governmental Activities (cont.) Less: Accumulated Depreciation for: Land improvements Buildings Machinery and equipment Streets - infrastructure Storm sewers - infrastructure Traffic signals - infrastructure Sidewalks - infrastructure Bridges - infrastructure Total Accumulated Depreciation Capital Assets, $ Beginning Balance 613,528 1,231,977 1,575,967 1,465,345 936,264 219,086 771,177 52,529 6,865,873 Additions $ 96,222 147,079 239,867 98,123 58,368 22,657 45,970 16,944 725,230 $ Net of Depreciation $ 19,168,276 $ 8,149,371 $ Depreciation expense was charged to functions as follows: Governmental Activities General government Public safety Public works, which includes the depreciation of roads, storm sewers and street lighting Leisure activities Total Governmental Activities Depreciation Expense Deletions 1,577 $ 230,604 232,181 Ending Balance 708,173 1,379,056 1,585,230 1,563,468 994,632 241,743 817,147 69,473 7,358,922 19,637 =$==2~7,~3~37~,2=8=4 $ $ 16,606 57,765 390,037 260,822 725,230 Page 35 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE IV - DETAILED NOTES ON ALL FUNDS (cant.) D. CAPITAL ASSETS (cant.) Beginning Balance Additions Water Utility Capital assets not being depreciated: Land and land rights $ 99,777 $ - Construction in progress 46,501 Total Capital Assets Not Being Depreciated 146,278 Capital assets being depreciated: Source of supply 285,396 34,387 Pumping 1,658,508 23,944 Treatment 343,242 Transmission and distribution 14,694,223 1,445,699 Administrative and general assets 459,450 5,536 Total Capital Assets Being Depreciated 17,440,819 1,509,566 Total Capital Assets 17,587,097 1,509,566 Less: Accumulated Depreciation for: Source of supply (197,714) (10,076) Pumping (626,510) (67,774) Treatment (316,534) (6,816) Transmission and distribution (2,285,452) (277,729) Administrative and general assets (324,375) (44,498) Total Accumulated Depreciation (3,750,585) (406,893) Net Water Plant $ 13,836,512 $ 1,102,673 Ending Deletions Balance $ - $ 99,777 46,501 46,501 99,777 319,783 4,789 1,677,663 343,242 111,348 16,028,574 464,986 116,137 18,834,248 162,638 18,934,025 (207,790) 4,789 (689,495) (323,350) 121,480 (2,441,341) (368,873) 126,629 (4,030,849) $ 36,009 $ 14,903,176 Page 36 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) D. CAPITAL ASSETS (cont.) Beginning Ending Balance Additions Deletions Balance Sewer Utility Capital assets not being depreciated: Land and land rights $ 66,830 $ $ $ 66,830 Capital assets being depreciated: Collection system 10,375,120 1,159,534 11,534,654 Collection system pumping 1,215,786 1,215,786 Administrative and general assets 347,568 347,568 Total Capital Assets Being Depreciated 11,938,474 1,159,534 13,098,008 Total Capital Assets 12,005,304 1,159,534 13,164,838 Less: Accumulated Depreciation (2,032,453) (198,281 ) 7,502 (2,223,232) Net Sewer Plant $ 9,972,851 $ 961,253 $ 7,502 $ 10,941,606 Beginning Ending Balance Additions Deletions Balance Pleasant View Golf Course Capital assets not being depreciated: Land and land rights $ 2,216,000 $ $ $ 2,216,000 Capital assets being depreciated: Buildings 208,763 208,763 Land improvements 7,291,981 7,291,981 Equipment 275,331 40,153 315,484 Total Capital Assets Being Depreciated 7,776,075 40,153 7,816,228 Total Capital Assets 9,992,075 40,153 10,032,228 Less: Accumulated Depreciation for: Buildings (34,800) (5,219) (40,019) Land improvements (19,125) (19,125) Equipment (89,556) (26,033) (115,589) Total Accumulated Depreciation (124,356) (50,377) (174,733) Net Golf Course Plant $ 9,867,719 $ (10,224) $ $ 9,857,495 Total Net Capital Assets: Business Type Activities $ 31,461,082 $ 35,702,277 Page 37 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) D. CAPITAL ASSETS (cont.) Depreciation expense was charged to functions as follows: Business-Type Activities Water Water - charged to sewer Sewer Pleasant View Golf Course Total Business-Type Activities Depreciation Expense E. INTERFUND RECEIVABLES/PAYABLES AND TRANSFERS $ $ 364,945 41,948 198,281 50,377 655,551 The following is a schedule of interfund receivables and payables including any overdrafts on pooled cash and investment accounts: Receivable Fund Payable Fund Amount General Water utility $ 306,778 Debt service General 5,800 Sewer utility General 46,397 Water utility General 46,162 Water utility Sewer utility 72,193 Total - Fund Financial Statements 477,330 Less: Eliminations {263,111) Total Government-Wide Financial Statements $ 214,219 The balances resulted from the time lag between the dates that interfund goods and services are provided or reimbursable expenditures occur, transactions are recorded in the accounting system, and payments between funds are made. All amounts are due within one year. For the statement of net assets, interfund balances which are owed within the governmental activities or business-type activities are netted and eliminated. The general fund advanced funds to TIF District NO.3 and is charging interest on the advance at a rate which is 2% over the city's cost of funds. No repayment schedule has been established. Interest on the interfund advance is recorded as a deferred revenue in the general fund until paid by the TIF District. Interest costs on the advance are recorded as an expenditure of the TIF District when the expenditure is incurred. Deferred interest income in the general fund at December 31, 2003 is $650,662. Page 38 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) E. INTERFUND RECEIVABLES/PAYABLES AND TRANSFERS (cont.) The following is a schedule of amounts due from the component unit to the primary government: TIF No.3 capital projects fund Component unit - CDA $ 6,719,651 This amount represents the unspent debt proceeds by the CDA that is intended to be spent on capital projects within TIF No.3. Over the past few years, the general fund advanced funds to the Tourism Commission, Railroad, and Pleasant View Golf Course in 2002. The debt service fund advanced funds to the Pleasant View Golf Course enterprise fund for debt payments. No repayment schedules have been established on the advances to Pleasant View Golf Course. Interest will be charged on the advances. Repayment of the advances to the Hotel Room Tax and Railroad funds will be made over four years at an interest rate of The following is a schedule of interfund advances: Receivable Fund General fund General fund General fund General fund General fund Payable Fund Pleasant View Golf Course Railroad Tourism TIF District No.3 Southwest Quadrant Total - Fund Financial Statements Less: Eliminations Total - Government-Wide Financial Statements $ $ Amount Not Due Within Amount One Year 592,408 $ 592,408 674,713 674,713 382,000 382,000 1,567,397 1,567,397 570,926 570,926 3,787,444 $ 3,787,444 p,195,036) 592,408 The principal purpose of these interfunds is to finance the deficiency of revenues over expenditures and other financing sources since the fund's inception. For the statement of net assets, interfund balances which are owed within the governmental activities or business-type activities are netted and eliminated. Page 39 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) E. INTERFUND RECEIVABLES/PA YABLES AND TRANSFERS (cont.) The following is a schedule of interfund transfers: Fund Transferred To Fund Transferred From Amount General Water utility $ 306,778 Debt service fund General fund 2,567,486 Debt service fund TIF District NO.3 3,781,140 Debt service fund Southwest Quadrant fund 312,750 Pleasant View Golf Course Debt service fund 398,467 Total - Fund Financial Statements $ 7,366,621 Governmental Fund Transferred To Fund Transferred From Activities General Water utility $ 306,778 Pleasant View Golf Course Debt service fund {398,467) Total - Government-Wide Financial Statements $ 91,689 Principal Pureose Payment in lieu of tax Debt service Debt service Debt service Debt service Business-Type Activities $ (306,778) 398,467 $ 91,689 Generally, transfers are used to move revenues from the fund that collects them to the fund that the budget requires to expend them, move receipts restricted to debt service from the funds collecting the receipts to the debt service fund, and use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. F. LONG- TERM OBLIGA TlONS Long-term obligations activity for the year ended December 31, 2003 was as follows: GOVERNMENTAL ACTIVITIES Bonds and Notes Payable: General obligation debt Other Liabilities: Unfunded pension liability Vested compensated absences Capital leases Total Other Liabilities Total Governmental Activities Long-Term Liabilities Beginning Balance $ 45,325,324 339,805 1,127,621 16,475,000 17,942,426 $ 63,267,750 Ending Increases Decreases Balance $10,910,000 $ 4,698,731 $ 51,536,593 24,127 30,487 333,445 387,717 318,334 1,197,004 16,475,000 411,844 348,821 18,005,449 $ 11,321,844 $ 5,047,552 $ 69,542,042 Amounts Due Within One Year $ 4,962,200 32,000 357,171 389,171 $ 5,351,371 Page 40 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) F. LONG- TERM OBLIGA TIONS (cont.) BUSINESS-TYPE ACTIVITIES Bonds and Notes Payable: Beginning Balance Increases Decreases Ending Balance Amounts Due Within One Year General obligation debt $ 12,605,000 $ - $ 570,000 $ 12,035,000 $ 635,000 Other Liabilities: Vested compensated absences Total Business-Type Activities Long-Term Liabilities General Obligation Debt 77,785 $ 12,682,785 $ 20,528 98,313 19,780 20,528 $ 570,000 $ 12,133,313 $ 654,780 All general obligation notes and bonds payable are backed by the full faith and credit of the city. Notes and bonds in the governmental funds will be retired by future property tax levies or tax increments accumulated by the debt service fund. Business-type activities debt is payable by revenues from user fees of those funds or, if the revenues are not sufficient, by future tax levies. In accordance with Wisconsin Statutes, total general obligation indebtedness of the city may not exceed five percent of the equalized value of taxable property within the city's jurisdiction. The debt limit as of December 31, 2003, was $90,725,135. Total general obligation debt outstanding at year end was $63,571,593. Original Date of Final Interest Indebted- Balance Governmental Activities Issue Maturit}:' Rates ness 12-31-03 General Obligation Debt 1994 State trust fund loan 12-07-94 3-15-04 4.50% $ 500,000 $ 66,593 1996 General obligation promissory notes 6-01-96 6-01-06 4.00%- 5.15% 5,675,000 1,685,000 1997 General obligation promissory notes 3-01-97 3-01-07 3.95%- 5.15% 9,250,000 3,940,000 1997 General obligation promissory notes 4-01-97 3-01-12 3.90% - 5.40% 2,325,000 1,590,000 1998 General obligation promissory notes 4-01-98 9-01-08 3.90%- 4.60% 9,675,000 5,800,000 1999 General obligation promissory notes 5-15-99 3-01-09 3.50% - 4.40% 6,800,000 5,400,000 2000 General obligation promissory notes 4-01-00 3-01-10 4.80%- 5.20% 6,800,000 6,400,000 Page 41 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) F. LONG-TERM OBLIGA nONS (cont.) General Obligation Debt (cont.) Date of Governmental Activities Issue General Obligation Debt (cont. ) 2001 General obligation promissory notes 3-15-01 2002 General obligation promissory notes 3-15-02 2002 State trust fund loan 11-06-02 2003 General obligation promissory notes 5-01-03 2003 State trust fund loan 1-30-03 Total Governmental Activities - General Obligation Debt Date of Business-Type Activities Issue General Obligation Debt 1996 General obligation promissory notes 6-01-96 1997 General obligation promissory notes 4-01-97 1999 General obligation promissory notes 5-15-99 2001 General obligation promissory notes 3-15-01 2002 General obligation promissory notes 3-15-02 Total Business-Type Activities - General Obligation Debt Final Maturity 3-11-11 3-01-12 3-15-19 9-01-13 3-15-19 Final Maturity 6-01-96 3-01-12 3-01-09 3-11-11 3-01-12 Interest Rates 4.00% - 4.40% 2.125% - 4.50% 5.00% 2.00% - 3.40% 5.00% Interest Rates 4.00%- 5.15% 3.90%- 5.40% 3.50% - 4.40% 4.00%- 4.80% 2.125% - 4.50% Original Indebted- Balance ness 12-31-03 $ 8,000,000 $ 7,600,000 6,250,000 5,975,000 2,170,000 2,170,000 9,980,000 9,980,000 930,000 930,000 $ 51,536,593 Original Indebted- Balance ness 12-31-03 $ 1,365,000 $ 905,000 4,155,000 2,840,000 500,000 320,000 2,000,000 1,975,000 6,005,000 5,995,000 $ 12,035,000 Page 42 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) F. LONG- TERM OBLIGA TlONS (cont.) General Obligation Debt (cont.) Debt service requirements to maturity are as follows: Governmental Activities Business-Type Activities General Obligation Debt General Obligation Debt Principal Interest Principal Interest 2004 $ 4,962,200 $ 1,788,169 $ 635,000 $ 560,066 2005 5,819,515 1,529,321 850,000 526,791 2006 5,641,491 1,310,592 900,000 487,475 2007 6,008,815 1,087,348 965,000 435,621 2008 5,281,154 868,217 1,020,000 388,868 2009 - 2013 22,351,673 1,589,465 5,340,000 1,134,570 2014-2018 1,195,573 178,629 2,325,000 170,239 2019-2023 276,172 9,698 Totals $ 51,536,593 $ 8,361,439 $ 12,035,000 $ 3,703,630 Totals $ 7,945,435 8,725,627 8,339,558 8,496,784 7,558,239 30,415,708 3,869,441 285,870 $ 75,636,662 Estimated payments of accumulated employee benefits and other commitments are not included in the above schedule. Also, the capital lease principal and interest requirements are not included. They are equal to the CDA's lease revenue bonds required payments. See Note IV.J. for a repayment schedule. $1,743 is on deposit in the debt service fund which is available to meet the above debt service requirements as of December 31, 2003. Capital Leases Refer to Note IV.G. Other Debt Information Estimated payments of compensated absences are not included in the debt service requirement schedules. The compensated absences liability attributable to governmental activities will be liquidated primarily by the general fund. There are a number of limitations and restrictions contained in the various bond indentures and loan agreements. The city believes it is in compliance with all significant limitations and restrictions, including federal arbitrage regulations. Prior- Year Defeasance of Debt In prior years, the city defeased certain general obligation bonds by placing the proceeds of new bonds into an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the city's financial statements. At December 31, 2003, $5,845,000 of bonds outstanding are considered defeased. The bonds are callable on November 1, 2006. Page 43 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) G. LEASE DISCLOSURES Lessee - Capital Leases The Tax Increment District NO.3 (TIF No.3) is leasing land and other fixed assets from the Community Development Authority (CDA). The CDA borrowed $16,475,000 in revenue bonds for these costs in 2002. The annual lease payments to be paid are the same as the CDA's annual debt service payments on the bonds. Tax increment revenues generated by TIF No. 3 are expected to be paid over to the CDA to make the debt payments. Lessee - Operating Leases In March of 2000, the city entered into a 61 month operating lease agreement for golf carts. Annual lease payments total $29,353. On November 21, 2001, the city entered into a 120 month operating lease agreement for railroad equipment. Annual lease payments total $85,543. The CDA took over the train lease and negotiated a reduction in the operating lease payments down to $3,564/month. Lessor - Capital Leases The city has no material outstanding sales-type or direct financing leases. Lessor - Operating Leases The city does not receive material lease payments from property rented to others. H. GOVERNMENTAL ACTIVITIES NET ASSETS/FuND BALANCES Governmental activities net assets reported on the government wide statement of net assets at December 31, 2003 includes the following: Governmental Activities Invested in capital assets, net of related debts Land Right of ways Construction in progress Other capital assets, net of accumulated depreciation Less: related long-term debt outstanding (excluding unspent capital related debt proceeds) Total Invested in Capital Assets, Net of Related Debt $ 6,623,191 17,207,087 7,881,245 27,337,283 (49,769,211) 9,279,595 Page 44 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) H. GOVERNMENTAL ACTIVITIES NET ASSETS/FuND BALANCES (cont.) Governmental Activities (cont.) Restricted: Restricted for debt service Subdivider's deposits Land and park donations Drug evidence CATV Youth commission EMS Railroad depot Lost and damaged books Library gift EMS equipment replacement Library endowment Economic development Economic development grants Airport Alcohol awareness Drug forfeitures Senior citizens Total Restricted Unrestricted (deficit) Total Governmental Activities Net Assets $ 1,743 1,163,339 7,784 5,861 78,679 1,808 23,471 37,025 11,471 10,491 164,280 341,549 90,622 230,979 5,549 4,337 2,167 9,137 2,190,292 (8,410,545) $ 3,059,342 Governmental fund balances reported on the fund financial statements at December 31, 2003 include the following: Reserved Major Funds General Fund Delinquent personal property taxes Advances Total Debt Service Fund Debt service TID NO.3 Capital Projects Fund Reserved for debt service Reserved for encumbrances Total $ 205,016 3,136,782 $ 3,341,798 $ 1,743 $ 2,460,438 2,973,598 $ 5,434,036 Page 45 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) H. GOVERNMENTAL ACTIVITIES NET ASSETS/FuND BALANCES (cont.) Governmental Activities (cont.) Reserved (cont.) Major Funds (cont.) 2003 capital projects fund Non-Major Fund Economic Development Grant Reserved for loans receivable Unreserved (Designated) General Fund 2004 budget Unreserved (Deficit) Major Funds General fund 2003 capital projects fund TID NO.3 capital projects fund Total Non-Major Funds (Deficit) Special Revenue Funds Subdividers' deposits Land and park donations Drug evidence Cable TV Youth commission donations EMS Railroad depot Lost and damaged book Library gift EMS equipment replacement Library endowment Economic development Economic development grant Airport Alcohol awareness Drug forfeitures Senior citizen Railroad Tourism commission Total $ 395,025 $ 27,266 $ 176,000 $ 254,339 1,068,593 2,170,723 $ 3,493,655 $1,163,339 7,784 5,861 78,679 1,808 23,471 37,025 11,471 10,491 164,280 341,549 90,622 203,713 5,549 4,337 2,167 9,137 (674,713) (291,468) $ 1,195,102 Page 46 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) H. GOVERNMENTAL ACTIVITIES NET ASSETS/FuND BALANCES (cont.) Governmental Activities (cont.) Capital Projects Fund (Deficit) Southwest quadrant Business- Type Activities $ (570,926) The following calculations support the net assets invested in capital assets, net of related debt. Capital assets Accumulated depreciation Sub-Total Less: Capital Related Debt Current portion of capital related long-term debt Long-term portion of capital related long-term debt Unamortized debt issuance costs Sub-Total Total Net Assets Invested in Capital Assets, Net of Related Debt Pleasant View Golf Water Sewer Course $ 18,934,025 $ 13,164,838 $ 10,032,228 {4,030,849) {2,223,232) {174,733) 14,903,176 10,941,606 9,857,495 170,000 135,000 330,000 1,700,000 1,155,000) 8,545,000 {11,050) {13,474) 1,858,950 1,276,526 8,875,000 $ 13,044,226 $ 9,665,080 Page 47 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2003 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) I. RESTATEMENT OF NET ASSETS/FuND BALANCE Fund balance of the general fund has been restated to record the tax equivalent from the water utility. Fund Balance - December 31, 2002 (as reported) Add: Water utility tax equivalent per GASB No. 33 Fund Balance - January 1, 2003 (as restated) $ $ 4,243,908 294,845 4,538,753 Net assets have been restated due to the Pleasant View Golf Course becoming a proprietary fund that was previously recorded as a governmental fund. PLEASANT VIEW GOLF COURSE Fund Balance - December 31, 2002 (as reported) (Deficit) Add: Capital assets, net of accumulated depreciation Less: Long-term debt Accrued interest Net Assets - January 1, 2003 (as restated) (Deficit) J. COMPONENT UNIT $ $ (776,533) 9,867,719 (9,155,000) (130,039) (193,853) This report contains the Community Development Authority (CDA), which is included as a component unit. Financial information is presented as a discrete column in the statement of net assets and statement of activities. In addition to the basic financial statements and the preceding notes to financial statements which apply, the following additional disclosures are considered necessary for a fair presentation. a. Basis of Accounting/Measurement Focus The CDA follows the full accrual basis of accounting and the flow of economic resources measurement focus. b. Restricted Cash and Investments The bond ordinance relating to the CDA bonds requires the establishment of certain accounts. These are as follows: Construction fund Capitalized interest Debt reserve fund Total $ 4,259,211 868,406 1,592,034 $ 6,719,651 Page 48 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE IV - DETAILED NOTES ON ALL FUNDS (cant.) J. COMPONENT UNIT (cant.) c. CDA Lease Revenue Bonds 2002 redevelopment lease revenue bonds dated August 15, 2002 with interest at 2.60%-4.75%. Principal payments vary. Bonds mature Balance 1-1-03 October 1, 2020. $ 7,375,000 $ 2002 redevelopment lease revenue bonds dated August 15, 2002 with interest at 4.3%-6.65%. Principal payments vary. Bonds mature October 1, 2020. Less: Unamortized debt discount 9,100,000 (228,090) Increases Decreases Balance 12-31-03 - $ - $ 7,375,000 9,100,000 (12,850) (215,240) Totals $ 16,246,910 $ (12,850) $ 16,259,760 Debt service requirements to maturity are as follows: Principal Interest Totals 2004 $ - $ 840,040 $ 840,040 2005 840,042 840,042 2006 790,000 840,042 1,630,042 2007 815,000 812,532 1,627,532 2008 850,000 781,670 1,631,670 2009 - 2013 4,840,000 3,303,228 8,143,228 2014-2018 6,195,000 1,936,972 8,131,972 2019 - 2020 2,985,000 263,344 3,248,344 Totals $ 16,475,000 $ 9,617,870 $ 26,092,870 Page 49 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE V - OTHER INFORMATION A. EMPLOYEES' RETIREMENT SYSTEM All eligible city employees participate in the Wisconsin Retirement System (System), a cost- sharing multiple-employer defined benefit public employee retirement system (PERS). All permanent employees expected to work over 600 hours a year are eligible to participate in the System. Covered employees in the General category are required by statute to contribute 5.2% of their salary (3.1 % for Executives and Elected Officials, 4.0% for Protective Occupations with Social Security, and 3.0% for Protective Occupations without Social Security) to the plan. Employers generally make these contributions to the plan on behalf of employees. Employers are required to contribute an actuarially determined amount necessary to fund the remaining projected cost of future benefits. The payroll for city employees covered by the system for the year ended December 31, 2003 was $4,817,690; the employer's total payroll was $5,773,839. The total required contribution for the year ended December 31, 2003 was $586,167 or 12.1 percent of covered payroll. Of this amount, 100 percent was contributed by the employer for the current year. Total contributions for the years ending December 31, 2002 and 2001 were $513,672 and $458,887, respectively, equal to the required contributions for each year. Employees who retire at or after age 65 (62 for elected officials and 55 for protective occupation employees) are entitled to receive a retirement benefit. Employees may retire at age 55 (50 for protective occupation employees) and receive actuarially reduced benefits. The factors influencing the benefit are: final average earnings, years of creditable service, and a formula factor. Final average earnings is the average of the employee's three highest year's earnings. Employees terminating covered employment before becoming eligible for a retirement benefit may withdraw their contributions and, by doing so, forfeit all rights to any subsequent benefit. For employees beginning participation on or after January 1, 1990 and no longer actively employed on or after April 24, 1998, creditable service in each of five years is required for eligibility for a retirement annuity. Participants employed prior to 1990 and on or after April 24, 1998 are immediately vested. The System also provides death and disability benefits for employees. Eligibility for and the amount of all benefits is determined under Chapter 40 of Wisconsin Statutes. The System issues an annual financial report which may be obtained by writing to the Department of Employee Trust Funds, P.O. Box 7931, Madison, WI 53707-7931. The pension related debt for the city as of December 31, 2003, was $333,445. This liability was determined in accordance with provisions of GASB Statement No. 27 regarding pension-related debt. Depending on actuarial assumptions, this estimate can vary significantly. B. RISK MANAGEMENT The city is exposed to various risks of loss related to torts; theft of, damage to, or destruction of assets; errors and omissions; workers compensation; and health care of its employees. All of these risks are covered through the purchase of commercial insurance, with minimal deductibles. Settled claims have not exceeded the commercial coverage in any of the past three years. There were no significant reductions in coverage compared to the prior year. Page 50 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE V - OTHER INFORMATION (cont.) C. COMMITMENTS AND CONTINGENCIES From time to time, the city is party to various pending claims and legal proceedings. Although the outcome of such matters cannot be forecasted with certainty, it is the opinion of management and the city's legal counsel that the likelihood is remote that most of such claims or proceedings will have a material adverse effect on the city's financial position or results of operations. However, the city is involved in a claim for refund of personal property taxes that it is vigorously defending. The possibility exists that the city may not be able to collect this receivable. Funding for the operating budget of the city comes from many sources, including property taxes, grants and aids from other units of government, user fees, fines and permits, and other miscellaneous revenues. The State of Wisconsin provides a variety of aid and grant programs which benefit the city. Those aid and grant programs are dependent on continued approval and funding by the Wisconsin governor and legislature, through their budget processes. The State of Wisconsin is currently experiencing budget problems, and is considering numerous alternatives including reducing aid to local governments. Any changes made by the State to funding or eligibility of local aid programs could have a significant impact on the future operating results of the city. The city has received federal and state grants for specific purposes that are subject to review and audit by the grantor agencies. Such audits could lead to requests for reimbursements to the grantor agency for expenditures disallowed under terms of the grants. Management believes such disallowances, if any, would be immaterial. As stated in Note V.D., the city jointly operates the Metropolitan Refuse District, Inc. (District). For the year ending September 30, 1994, the District was required to adopt Governmental Standards Board Statement No. 18, "Accounting for Municipal Solid Waste Landfill Closure and Postclosure Care Costs." The District's fund balance at September 30, 2003 is a deficit of $861,955. Reporting standards require the city to report its share of the net deficit. The city's proportionate share in the operations of the District is 59%, which amounts to $513,039 of the District's net deficit. The city's share of the net deficit has been reported in the government-wide statement of net assets. See also Note IV.G. and Note V.D. D. JOINT VENTURES Metropolitan Refuse District, Inc. The City of Middleton and the Villages of Shorewood Hills and Waunakee jointly operate the local sanitary landfill, which is called the Metropolitan Refuse District, Inc. The landfill stopped accepting waste in 1997. The communities share in the operation of the District based on estimated population as follows: City of Middleton Village of Shorewood Hills Village of Waunakee 59% 7 34 Page 51 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE V - OTHER INFORMATION (cont.) D. JOINT VENTURES (cont.) Metropolitan Refuse District, Inc. (cont.) The governing body is made up of citizens from each community. Local representatives are appointed by each city. The governing body has authority to adopt its own budget and control the financial affairs of the District. The city made payments totaling $55,473 to the District in 2003. The city has an equity interest (deficit) of $(513,039) at year end. The city will continue to support the District's postclosure care costs in the future. The District's landfill is being monitored for possible groundwater contamination as required by the Wisconsin Department of Natural Resources. The costs for groundwater monitoring are being budgeted for on an annual basis. At the current time it is not possible to determine if extensive contamination has occurred and the effects, if any, on the District's financial statements. Multijurisdictional Public Safety Information System Commission (MJPISC) The City of Fitchburg, City of Sun Prairie, and City of Middleton jointly operate the Multijurisdictional Public Safety Information System Commission. On March 20, 2003, the City of Middleton, City of Fitchburg, and City of Sun Prairie executed an intergovernmental agreement under authority of Section 66.0301 of the Wisconsin Statutes. The commission adopts its own budget. Net operating costs including debt service are shared by the three communities equally. The department is governed by the Intermunicipal Commission. The commission consists of one representative from each community. The transactions of the commission are not reflected in these financial statements. The city does not have an equity interest in this joint venture. Middleton Fire District The City of Middleton and the Towns of Springfield, Westport and Middleton jointly operate the local fire District, which is called the Middleton Fire District, which provides fire protection. The communities share in the operation of the District based on the ratio of equalized values of each member. The governing body is made up of elected officials from each community. Local representatives are appointed by the municipalities. The governing body has authority to adopt its own budget and control the financial affairs of the District. The city has made payments totaling $326,595 to the District in 2003 for operating expenses. The city believes that the District will continue to provide services in the future at similar rates. In 2003, the city also contributed $306,600 for its share of a new tanker truck and land for a new fire station. The transactions of the District are not reflected in these financial statements. The city does not have an equity interest in this joint venture. Page 52 ---PAGE BREAK--- REQUIRED SUPPLEMENTARY INFORMATION ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31,2003 Variance with Final Budget - Budgeted Amounts Over Original Final Actual (Under) REVENUES Taxes $ 8,100,557 $ 8,100,557 $ 8,110,909 $ 10,352 Intergovernmental 2,117,101 2,117,101 2,123,035 5,934 Licenses and permits 432,150 432,150 663,279 231,129 Fines, forfeitures and penalties 194,000 194,000 240,510 46,510 Public charges for services 772,186 772,186 746,277 (25,909) Interdepartmental charges for services 203,000 203,000 294,156 91,156 Special assessments 25,000 25,000 98,716 73,716 Investment income 244,365 244,365 172,216 (72,149) Miscellaneous 377,500 377,500 153,337 (224,163} Total Revenues 12,465,859 12,465,859 12,602,435 136,576 EXPENDITURES Current General government 1,247,541 1,292,898 1,289,230 (3,668) Public safety 4,500,829 4,455,472 4,541,558 86,086 Public works 2,158,643 2,158,643 2,117,580 (41,063) Leisure activities 2,221,690 2,221,690 2,232,935 11,245 Conservation and development 275,173 275,173 236,378 (38,795) Total Expenditures 10,403,876 10,403,876 10,417,681 13,805 Excess (deficiency) of revenues over expenditures 2,061,983 2,061,983 2,184,754 122,771 OTHER FINANCING SOURCES (USES) Transfers in 265,500 265,500 306,778 41,278 Transfers out (2,567,483) (2,567,483) (2,607,486) 40,003 Total Other Financing Sources (Uses) (2,301,983) (2,301,983) (2,300,708) 1,275 Net Change in Fund Balance (240,000) (240,000) (115,954) 124,046 FUND BALANCE - Beginning 4,538,753 4,538,753 4,538,753 FUND BALANCE - ENDING $ 4,298,753 $ 4,298,753 $ 4,422,799 $ 124,046 Page 53 ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND SCHEDULE OF REVENUES COMPARED TO BUDGET - BUDGET AND ACTUAL For the Year Ended December 31, 2003 Variance with Final Budget - Budgeted Amounts Over Original Final Actual (Under) TAXES General property tax $ 7,953,557 $ 7,953,557 $ 7,959,379 $ 5,822 Omitted property tax 1,075 1,075 Fees in lieu of taxes 25,000 25,000 25,000 Room tax 120,000 120,000 124,014 4,014 Interest on taxes 2,000 2,000 1,441 (559) TOTALS $ 8,100,557 $ 8,100,557 $ 8,110,909 $ 10,352 INTERGOVERNMENTAL REVENUES Shared taxes from state $ 473,662 $ 473,662 $ 473,663 $ State aid - road allotment 802,032 802,032 802,074 42 State aid - exempt computer aid 229,527 229,527 227,652 (1,875) State aid - fire insurance dues 47,893 47,893 57,343 9,450 State aid - miscellaneous grants 11,445 11,445 28,565 17,120 Federal and state aid - other 57,000 57,000 70,568 13,568 County aid - library 371,089 371,089 350,054 (21,035) County aid - signals 10,000 10,000 9,334 (666) County aid - senior citizens 42,653 42,653 47,737 5,084 School district payments for liaison officer 71,800 71,800 56,045 (15,755) TOTALS $ 2,117,101 $ 2,117,101 $ 2,123,035 $ 5,934 LICENSES AND PERMITS Liquor and malt beverage licenses $ 23,250 $ 23,250 $ 27,932 $ 4,682 Operators' licenses 7,000 7,000 6,005 (995) Contractor's licenses 5,500 5,500 7,260 1,760 Alarm licenses 8,500 8,500 9,608 1,108 Cigarette licenses 200 200 265 65 Bicycle licenses 200 200 103 (97) Dog and cat licenses 200 200 421 221 Cable TV franchise licenses 130,000 130,000 130,000 Other miscellaneous licenses 600 600 300 (300) Building permits 150,000 150,000 280,250 130,250 Recycling permits 3,600 3,600 1,350 (2,250) Electrical permits 35,000 35,000 84,326 49,326 Plumbing permits 50,000 50,000 84,892 34,892 Erosion control permits 10,000 10,000 16,300 6,300 Park reservation permits 8,100 8,100 14,267 6,167 TOTALS $ 432,150 $ 432,150 $ 663,279 $ 231,129 FINES, FORFEITURES AND PENAL TIES Court penalties $ 135,000 $ 135,000 $ 152,496 $ 17,496 Parking violations 28,000 28,000 50,150 22,150 Court costs 31,000 31,000 37,864 6,864 TOTALS $ 194,000 $ 194,000 $ 240,510 $ 46,510 Page 54 ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND SCHEDULE OF REVENUES COMPARED TO BUDGET - BUDGET AND ACTUAL (cont) For the Year Ended December 31, 2003 Variance with Final Budget- Budgeted Amounts Over Original Final Actual (Under) PUBLIC CHARGES FOR SERVICES Clerk fees $ 12,000 $ 12,000 $ 21,027 $ 9,027 Police special services 38,837 38,837 Police department fees 30,000 30,000 29,234 (766) Ambulance services 360,000 360,000 224,221 (135,779) EMS fixed cost abatement 53,386 53,386 57,299 3,913 Plan commission charges 10,000 10,000 16,167 6,167 Senior citizens 5,000 5,000 25,440 20,440 Swimming pools 219,250 219,250 231,890 12,640 Summer recreation 32,000 32,000 34,122 2,122 Public works charges 4,902 4,902 Other recreation 49,550 49,550 61,388 11,838 Zoning 1,000 1,000 1,750 750 TOTALS $ 772,186 $ 772,186 $ 746,277 $ (25,909) INTERDEPARTMENTAL CHARGES FOR SERVICES Administration reimbursements - utilities $ 91,000 $ 91,000 $ 98,436 $ 7,436 Administration reimbursements - TIF 100,000 100,000 190,000 90,000 Administration reimbursements - Landfill 5,000 5,000 5,000 Administration reimbursements - Fire District 7,000 7,000 720 (6,280) TOTALS $ 203,000 $ 203,000 $ 294,156 $ 91,156 SPECIAL ASSESSMENTS Curb, gutter and sidewalks $ 25,000 $ 25,000 $ 97,632 $ 72,632 Interest on special assessments 1,084 1,084 TOTALS $ 25,000 $ 25,000 $ 98,716 $ 73,716 INVESTMENT INCOME Investment income $ 244,365 $ 244,365 $ 172,216 $ (72,149) MISCELLANEOUS Rent of city buildings and offices $ 12,000 $ 12,000 $ 13,037 $ 1,037 Compensation for loss of fixed assets 8,300 8,300 Refund of prior year's expenditures 25,000 25,000 90,868 65,868 Sale of city property 313,500 313,500 6,114 (307,386) Sale of materials 2,000 2,000 10,018 8,018 Pool contribution 25,000 25,000 25,000 TOTALS $ 377,500 $ 377,500 $ 153,337 $ (224,163) OTHER FINANCING SOURCES Transfer In - Water Utility 265,500 265,500 306,778 41,278 TOTALS $ 265,500 $ 265,500 $ 306,778 $ 41,278 TOTAL REVENUES AND OTHER FINANCING SOURCES $ 12,731,359 $ 12,731,359 $ 12,909,213 $ 177,854 Page 55 ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND SCHEDULE OF EXPENDITURES COMPARED TO BUDGET - BUDGET AND ACTUAL For the Year Ended December 31, 2003 Variance with Final Budget - Budgeted Amounts Over CURRENT EXPENDITURES Original Final Actual (Under) GENERAL GOVERNMENT Council $ 41,388 $ 41,388 $ 41,728 $ 340 Police commission 5,000 5,000 2,785 (2,215) Landmarks commission 600 600 (600) Middleton youth commission 19,500 19,500 19,372 (128) Municipal court 17,508 62,865 66,174 3,309 General administration 470,386 470,386 454,762 (15,624) Information technology 64,900 64,900 62,725 (2,175) Independent auditing 16,500 43,500 43,500 Legal counseling 135,000 135,000 138,978 3,978 Special legal counsel 10,000 10,000 22,899 12,899 Buildings and grounds 100,010 100,010 106,968 6,958 Illegal taxes and tax refunds 5,000 5,000 10,473 5,473 Reduction of prior years revenue 3,029 3,029 Property and liability insurance 300,000 300,000 283,530 (16,470) Board of review 375 375 (375) Additional expenditures - prior years 5,000 5,000 (5,000) Emergency preparedness 4,920 4,920 7,806 2,886 Income continuation insurance 12,650 12,650 16,111 3,461 Contingency 31,204 4,204 (4,204) Group life insurance 7,600 7,600 8,390 790 TOTALS $ 1,247,541 $ 1,292,898 $ 1,289,230 $ (3,668) PUBLIC SAFETY Police administration $ 431,350 $ 385,993 $ 457,930 $ 71,937 Police patrol 2,286,773 2,286,773 2,304,594 17,821 Training 25,100 25,100 27,287 2,187 Police uniform allowance and equipment 11,500 11,500 14,318 2,818 School patrol 11,727 11,727 12,043 316 Fire suppression 303,622 303,622 326,595 22,973 Public fire protection 340,000 340,000 366,191 26,191 Building inspector 80,135 80,135 73,151 (6,984) Electrical inspector 73,333 73,333 75,776 2,443 Plumbing inspection 45,619 45,619 41,179 (4,440) Sealer of weights and measures 2,640 2,640 2,640 Erosion control enforcement 10,000 10,000 16,324 6,324 EMS 584,422 584,422 521,278 (63,144) Communications 294,608 294,608 293,663 (945) Other 8,589 8,589 TOTALS $ 4,500,829 $ 4,455,472 $ 4,541,558 $ 86,086 Page 56 ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND SCHEDULE OF EXPENDITURES COMPARED TO BUDGET - BUDGET AND ACTUAL (cont.) For the Year Ended December 31,2003 Variance with Final Budget - Budgeted Amounts Over CURRENT EXPENDITURES Original Final Actual (Under) PUBLIC WORKS Machinery $ 206,448 $ 206,448 $ 192,180 $ (14,268) Garage 45,200 45,200 60,616 15,416 Protective equipment 2,300 2,300 2,311 11 Engineering 545,395 545,395 558,788 13,393 Street maintenance 178,610 178,610 153,086 (25,524) Street cleaning 36,685 36,685 47,161 10,476 Snow and ice control 80,688 80,688 60,220 (20,468) Traffic signs and markings 57,662 57,662 124,031 66,369 Traffic signals 33,974 33,974 34,232 258 Street lighting 52,000 52,000 62,877 10,877 Tree and brush 72,822 72,822 79,757 6,935 Storm sewers 19,422 19,422 13,975 (5,447) Mass transit 196,413 196,413 210,277 13,864 PW fringe benefits 131,085 131,085 (131,085) Garbage collection 262,600 262,600 257,379 (5,221 ) Sanitary landfill 55,475 55,475 55,772 297 Leaf pick-up 32,714 32,714 54,630 21,916 Recycling 149,150 149,150 150,288 1,138 TOTALS $ 2,158,643 $ 2,158,643 $ 2,117,580 $ (41,063) LEISURE ACTIVITIES Library $ 987,167 $ 987,167 $ 992,360 $ 5,193 Senior citizens center 297,294 297,294 301,725 4,431 Recreation administration 42,190 42,190 48,373 6,183 Swimming pool 254,855 254,855 257,302 2,447 Summer recreation 61,630 61,630 80,652 19,022 Other recreation 84,081 84,081 88,624 4,543 Parks 494,473 494,473 463,899 (30,574) TOTALS $ 2,221,690 $ 2,221,690 $ 2,232,935 $ 11,245 CONSERVATION AND DEVELOPMENT Weed control $ 2,974 $ 2,974 $ 5,831 $ 2,857 Creek maintenance 1,119 1,119 Water resources 24,100 24,100 22,451 (1,649) Conservancy land commission 77,032 77,032 51,925 (25,107) Planning commission 171,067 171,067 155,052 (16,015) TOTALS $ 275,173 $ 275,173 $ 236,378 $ (38,795) OTHER FINANCING USES Transfers out - debt service fund $ 2,567,483 $ 2,567,483 $ 2,567,486 $ 3 Transfers out - EMS equipment replacement fund 40,000 40,000 TOTALS $ 2,567,483 $ 2,567,483 $ 2,607,486 $ 40,003 TOTAL EXPENDITURES AND OTHER FINANCING SOURCES $ 12,971,359 $ 12,971,359 $ 13,025,167 $ 53,808 Page 57 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO REQUIRED SUPPLEMENTARY INFORMATION December 31, 2003 BUDGETARY INFORMATION Budgetary information is derived from the annual operating budget and is presented using generally accepted accounting principles and the modified accrual basis of accounting. Excess expenditures over appropriations are as follows: Amended Budget EXf2enditures Excess General Fund Current Expenditures Council $ 41,388 $ 41,728 $ 340 Municipal court 62,865 66,174 3,309 Legal counseling 135,000 138,978 3,978 Special legal counsel 10,000 22,899 12,899 Buildings and grounds 100,010 106,968 6,958 Illegal taxes and tax refunds 5,000 10,473 5,473 Emergency preparedness 4,920 7,806 2,886 Income continuation insurance 12,650 16,111 3,461 Group life insurance 7,600 8,390 790 Police administration 385,993 457,930 71,937 Police patrol 2,286,773 2,304,594 17,821 Training 25,100 27,287 2,187 Police uniform allowance and equipment 11,500 14,318 2,818 School patrol 11,727 12,043 316 Fire suppression 303,622 326,595 22,973 Public fire protection 340,000 366,191 26,191 Electrical inspector 73,333 75,776 2,443 Erosion control enforcement 10,000 16,324 6,324 Protective equipment 2,300 2,311 11 Garage 45,200 60,616 15,416 Engineering 545,395 558,788 13,393 Street cleaning 36,685 47,161 10,476 Traffic signs and markings 57,662 124,031 66,369 Traffic signals 33,974 34,232 258 Street lighting 52,000 62,877 10,877 Tree and brush 72,822 79,757 6,935 Mass transit 196,413 210,277 13,864 Sanitary landfill 55,475 55,772 297 Leaf pick-up 32,714 54,630 21,916 Recycling 149,150 150,288 1,138 Library 987,167 992,360 5,193 Senior citizens center 297,294 301,725 4,431 Recreation administration 42,190 48,373 6,183 Swimming pool 987,167 992,360 5,193 Summer recreation 61,630 80,652 19,022 Other recreation 84,081 88,624 4,543 Weed control 2,974 5,831 2,857 Page 58 ---PAGE BREAK--- SUPPLEMENTARY INFORMATION ---PAGE BREAK--- ASSETS Cash and investments $ Taxes receivable Accounts receivable Loan receivable Special assessments TOTAL ASSETS $ LIABILITIES AND FUND BALANCES Accounts payable $ Deferred revenues Deferred special assessments Advances from other funds Total Liabilities Fund Balances Reserved for loan receivable Unreserved Undesignated (deficit) Total Fund Balances TOTAL LIABILITIES AND FUND BALANCES $ CITY OF MIDDLETON COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS December 31, 2003 Special Revenue Funds Sub- Land and Youth dividers' Park Drug Cable Commission Deposits Donations Evidence TV Donations EMS 1,163,339 $ 7,784 $ 5,861 $ 21,248 $ 1,808 $ 23,471 57,454 1,163,339 7,784 $ 5,861 $ 78,702 $ 1,808 $ 23,471 - $ - $ - $ 23 $ - $ - 23 1,163,339 7,784 5,861 78,679 1,808 23,471 1,163,339 7,784 5,861 78,679 1,808 23,471 1,163,339 $ 7,784 $ 5,861 $ 78,702 $ 1,808 $ 23,471 Lost and EMS Railroad Damaged Library Equipment Depot Book Gift ~Iacement $ 37,025 $ 12,766 $ 10,491 $ 164,280 $ 37,025 $ 12,766 $ 10,491 $ 164,280 $ - $ 1,295 $ - $ 1,295 37,025 11,471 10,491 164,280 37,025 11,471 10,491 164,280 $ 37,025 $ 12,766 $ 10,491 $ 164,280 Page 59 ---PAGE BREAK--- CITY OF MIDDLETON COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS (cont.) December 31, 2003 Capital Project S~ecial Revenue Funds Fund Economic Total Economic Develop- Nonmajor Library Develop- ment Alcohol Drug Senior Tourism Southwest Governmental Endowment ment Grant ~ort Awareness Forfeitures Citizen Railroad Commission Quadrant Funds ASSETS Cash and investments $ 341,549 $ 90,622 $ 203,713 $ 5,549 $ 4,337 $ 2,167 $ 9,137 $ $ 53,057 $ - $ 2,158,204 Taxes receivable 16,344 16,344 Accounts receivable 68,026 125,480 Loan receivable 27,266 27,266 Special assessments 64,846 64,846 TOTAL ASSETS $ 341,549 $ 90,622 $ 230,979 $ 5,549 $ 4,337 $ 2,167 $ 9,137 $ - $ 121,083 $ 81,190 $ 2,392,140 LIABILITIES AND FUND BALANCES Accounts payable $ - $ - $ $ $ $ - $ - $ $ 30,551 $ - $ 31,869 Deferred revenues 16,344 16,344 Deferred special assessments 64,846 64,846 Advances from other funds 674,713 382,000 570,926 1,627,639 Total Liabilities 674,713 412,551 652,116 1,740,698 Fund Balances Reserved for loan receivable 27,266 27,266 Unreserved Undesignated (deficit) 341,549 90,622 203,713 5,549 4,337 2,167 9,137 (674,713) (291,468) (570,926) 624,176 Total Fund Balances 341,549 90,622 230,979 5,549 4,337 2,167 9,137 (674,713) (291,468) (570,926) 651,442 TOTAL LIABILITIES AND FUND BALANCES $ 341,549 $ 90,622 $ 230,979 $ 5,549 $ 4,337 $ 2,167 $ 9,137 $ - $ 121,083 $ 81,190 $ 2.392,140 Page 60 ---PAGE BREAK--- REVENUES Taxes Intergovernrnental Public charges for services Special assessrnents Investment income Miscellaneous Total Revenues EXPENDITURES Current: Public safety Leisure activities Conservation and development Total Expenditures Excess (deficiency) of revenues over expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net change in fund balance FUND BALANCES (DEFICIT) - Beginning of Year FUND BALANCES (DEFICIT) - END OF YEAR $ CITY OF MIDDLETON COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS For the Year Ended December 31,2003 S~ecial Revenue Funds Sub- Land and Youth dividers' Park Drug Cable Commission Del20sits Donations Evidence TV Donations EMS $ $ $ $ $ 5,092 265,995 49,735 10,302 1,833 185 265,995 10,302 1,833 49,735 185 5,092 4,890 28,698 4,892 257,824 257,824 4,890 28,698 4,892 8,171 5,412 1,833 21,037 (4,707) 5,092 8,171 5,412 1,833 21,037 (4,707) 5,092 1,155,168 2,372 4,028 57,642 6,515 18,379 $ 1,163,339 $ 7,784 $ 5,861 $ 78,679 $ 1,808 $ 23,471 Lost and EMS Railroad Damaged Library Equipment Del20t Book Gift ~Iacement $ $ $ $ 25,356 7,237 5,174 25,356 7,237 5_,174 24,951 9,610 24,951 9,610 405 (2,373) 5,174 40,000 40,000 405 (2,373) 45,174 37,025 11,066 12,864 119,106 $ 37,025 $ 11,471 $ 10,491 $ 164,280 Page 61 ---PAGE BREAK--- CITY OF MIDDLETON COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS For the Year Ended December 31,2003 Capital Project Stlecial Revenue Funds Fund Economic Economic Nonmajor Library Develop- Development Alcohol Drug Senior Tourism Southwest Governmental Endowment ment ~ort Grant Awareness Forfeitures Citizen Railroad Commission Quadrant Funds REVENUES Taxes $ $ $ $ $ $ $ $ $ 289,367 $ $ 289,367 Intergovernmental 93,947 99,039 Public charges for services 5,470 5,549 8,534 360,639 Special assessments 239,243 239,243 Investment income 2,330 3,851 8,057 1,732 15,970 Miscellaneous 2,660 9,347 1,325 38,063 Total Revenues 101,747 3,851 5,549 8,057 2,660 9,347 8,534 290,692 240,975 ~321 EXPENDITURES Current: Public safety 2,114 2,114 Leisure activities 405 2,406 95,556 171,408 Conservation and development 190,231 448,055 Total Expenditures 405 2,114 2,406 95,556 190,231 621,577 Excess (deficiency) of revenues over expenditures 101,342 3,851 5,549 J3Jl57 546 6,941 _(87,022) _ 100,461 240,975 420,744 OTHER FINANCING SOURCES (USES) Transfers In 40,000 Transfers Out (312,750) (312,750) Total Other Financing Sources (Uses) _(312,750) (272,750) Net change in fund balance 101,342 3,851 5,549 8,057 546 6,941 (87,022) 100,461 (71,775) 147,994 FUND BALANCES (DEFICIT) - Beginning of Year 240,207 86,771 222,922 3,791 2,167 2,196 _ . (587,691) (391,929) (499,151) 503,448 FUND BALANCES (DEFICIT) - END OF YEAR $ 341,549 $ 90,622 $ 5,549 $ 230,979 $ 4,337 $ 2,167 $ 9,137 $ (674,713) $ (291,468) $ (570,926) $ 651,442 Page 62 ---PAGE BREAK--- CITY OF MIDDLETON COMBINING STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS December 31, 2003 Fire District Tax Roll Fund ASSETS Cash and investments $ 15,262,861 $ - Taxes receivable 9,955,039 Accounts receivable Prepaid items 3,564 Due from other governmental units 174,231 TOTAL ASSETS $ 25,217,900 $ 177,795 LIABILITIES Accounts payable $ - $ 64,182 Due to other governmental units 25,217,900 113,613 TOTAL LIABILITIES $ 25,217,900 $ 177,795 MJPSISC Totals $ - $ 15,262,861 9,955,039 52,685 52,685 3,564 174,231 $ 52,685 $ 25,448,380 $ 41,792 $ 105,974 10,893 25,342,406 $ 52,685 $ 25,448,380 Page 63 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF CASH FLOWS - COMPONENT UNIT For the Year Ended December 31,2003 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers Cash paid to suppliers for goods and services Net Cash Flows From Operating Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Interest paid Sale of fixed assets Acquisition and construction of capital assets Net Cash Flows From Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Investment income Net Cash Flows From Investing Activities Net Decrease in Cash and Cash Equivalents CASH AND CASH EQUIVALENTS - Beginning of Year CASH AND CASH EQUIVALENTS - END OF YEAR RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES Operating income (loss) Changes in Noncash Components of Working Capital Accounts receivable Other accounts receivable Accounts payable NET CASH FLOWS FROM OPERATING ACTIVITIES NONCASH INVESTING, CAPITAL AND RELATED FINANCING ACTIVITIES: None $ $ $ $ Component Unit - CDA 113,456 35,258 148,714 (947,378) 98,071 (7,951,239) (8,800,546) 847,359 847,359 (7,804,473) 15,221,059 7,416,586 (30,506) 106,345 69,856 3,019 148,714 Page 64