Document Middleton_doc_33b1454b4f

CITY OF MIDDLETON, WISCONSIN Middleton, Wisconsin ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED December 31, 2016 Prepared by: Department of Finance ---PAGE BREAK--- TABLE OF CONTENTS PAGE FINANCIAL SECTION Independent Auditors’ Report 1 Management’s Discussion and 4 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position 17 Statement of Activities 18 Fund Financial Statements: Balance Sheet - Governmental Funds 19 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net 20 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental 21 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 22 Statement of Net Position - Proprietary Funds 23 Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary 24 Statement of Cash Flows - Proprietary 25 Statement of Fiduciary Net Position - Fiduciary 27 Notes to Financial Statements 28 Required Supplementary Information Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - General Fund 73 Schedule OPEB Funding Progress 74 Schedule of the City’s Proportionate Share of the Net Pension Liability 74 Schedule of the City’s 74 Notes to Required Supplementary 75 Supplementary Information: Detailed Schedule of Revenues - Budget and Actual - General Fund 76 Detailed Schedule of Expenditures - Budget and Actual - General 78 Combining Balance Sheet - Nonmajor Governmental Funds 80 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Nonmajor Governmental 82 Combining Balance Sheet - Capital Projects 84 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances - Capital Projects Funds 85 Combining Statement of Net Position – Nonmajor Proprietary Funds 86 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position – Nonmajor Proprietary Funds 87 Combining Statement of Cash Flows – Nonmajor Proprietary 88 ---PAGE BREAK--- 1 INDEPENDENT AUDITORS' REPORT Common Council City of Middleton, Wisconsin Middleton, Wisconsin Report on the Financial Statements 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, 2016, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility 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 from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. CliftonLarsonAllen LLP CLAconnect.com ---PAGE BREAK--- Common Council City of Middleton, Wisconsin 2 Opinions In our opinion, 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 as of December 31, 2016, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, budgetary comparison information, the schedule of OPEB funding progress, schedule of City’s proportionate share of the net pension liability (asset), and the schedule of the City’s contributions, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City of Middleton, Wisconsin’s basic financial statements. The supplementary information as listed in the table of contents is presented for purposes of additional analysis and is not a required part of the basic financial statements. ---PAGE BREAK--- Common Council City of Middleton, Wisconsin 3 The supplementary information as listed in the table of contents is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information as listed in the table of contents is fairly stated, in all material respects, in relation to the basic financial statements as a whole. CliftonLarsonAllen LLP Middleton, Wisconsin June 26, 2017 a ---PAGE BREAK--- 4 MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) This section of the City of Middleton’s annual financial statements provides the reader with management’s narrative overview and analysis of the financial activities of the City for the fiscal year ended December 31, 2016. This discussion and analysis is designed to assist the reader in focusing on significant financial issues, provide an overview of the City’s financial activity, identify changes in the City’s financial position, and identify any changes in the City’s financial plan (approved budget). The financial discussion and analysis presented in the section is intended to be used in conjunction with the accompanying financial statements. Financial Highlights  The assets of the City of exceeded its liabilities by $120,563,471 (net position) as of December 31, 2016.  As of December 31, 2016, the City of Middleton governmental activities reported combined ending net position of $69,543,056. Of this balance, $9,130,412 is available for spending at the government’s discretion (unrestricted net position)  At the end of the current fiscal year, $5,134,962 of unassigned fund balance for the general fund is equal to 24.8% of the subsequent year budgeted general fund expenditures.  The City’s net Other Post Employment Benefit (OPEB) obligation increased by $60,916 to $133,328. This represents the amount of the implicit rate subsidy for retired employees who are able to purchase health insurance from the City’s group insurance plan.  Total governmental activities general obligation debt decreased by $3,400,000 to $47,330,000 and business-type debt decreased by $945,000 to $1,700,000. Governmental activities debt decreased as principal payments were made on outstanding debt. The City issued general obligation notes in December of 2015 to fund 2016 capital projects. No new debt was issued for capital projects in 2016. Business-type debt decreased as principal payments continue to be made on the outstanding debt issued for the Pleasant View Golf Course.  The City maintained a rating of Aa1 from Moody’s Investors Service. Overview of the Financial Statements This discussion and analysis is intended to serve as an introduction to the City of Middleton’s basic financial statements. The basic financial statements include: government-wide financial statements, fund financial statements, and notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide Financial Statements The City’s basic financial statements include two government-wide financial statements, the Statement of Net Position and the Statement of Activities. These financial statements are designed to provide the reader with a broad overview of the City of Middleton’s finances. Financial reporting at this level uses a perspective similar to that found in the private sector, utilizing full accrual accounting and the elimination or reclassification of internal activities. The Statement of Net Position presents information on all of the City’s assets, deferred outflows of resources, liabilities and deferred inflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City, as a whole, is improving or deteriorating. ---PAGE BREAK--- 5 The Statement of Activities presents information showing how the City’s net position changed during the current fiscal year. All current year revenues and expenses are included regardless of the timing of related cash flows. Both of the government-wide financial statements distinguish functions of the City of that are principally supported by taxes and intergovernmental revenues from other functions that are intended to recover all or a significant portion of their costs from fees and charges. Governmental activities include general government, public safety, public works, health and human services, leisure activities, and conservation and development. Business-type activities include water, sewer, and storm water utilities, golf course, and airport. The government-wide financial statements include not only funds of the City of Middleton (primary government), but also a legally separate Community Development Authority (component unit) for which the City of Middleton is financially accountable. Financial information for this discretely presented component unit is included in the governmental activities of the primary government. See Note I-B, page 31, of the Notes to Financial Statements for more information. The government-wide financial statements are presented on pages 17-18 of this report. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Middleton, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related laws and regulations. Within the basic financial statements, fund financial statements focus on the City’s most significant (major) funds rather than the City as a whole. Major funds are separately reported while other funds are combined into a single, aggregated presentation. Individual fund data for non-major funds is provided in the form of combining statements in a later section of the report. All of the funds of the City of Middleton can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental Funds Governmental funds are reported in the fund financial statements and encompass essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, the focus of fund financial statements is on the short- term use of spendable resources and balances of spendable resources available at the end of the year. Such information may be useful in evaluating annual financing requirements of governmental programs and the commitment of spendable resources for the near-term. Since the focus of governmental funds is narrower than that of government-wide financial statements, comparisons of the information for governmental funds presented in the fund financial statements with similar information for governmental activities presented in the government-wide statements may provide insight into the long-term impact of short-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. In 2016, the City of Middleton utilized eighteen individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, Debt Service Fund, Tax Increment Financing District #3 fund, and Capital Projects Fund, which are considered to be major funds. Data from ---PAGE BREAK--- 6 the other fourteen non-major funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. The City of Middleton adopts annual budgets for its various funds in accordance with state statutes. Budgetary comparison statements and schedules are included in the basic financial statements for the General Fund. There were no major special revenue funds for the year ended December 31, 2016. The basic governmental fund financial statements are presented on pages 19 and 21 of this report. Proprietary funds Proprietary funds are reported in the fund financial statements and generally report services for which the City charges customers a fee. There are two types of proprietary funds, enterprise funds and internal service funds. Enterprise funds are used to report the same function presented as business-type activities in the government-wide financial statements. Services are provided to customers external to the City. The proprietary fund financial statements provide separate information on the City’s three major enterprise funds: Water Utility, Sewer Utility, and Pleasant View Golf Course. Individual fund information for the City’s other enterprise funds is provided in the form of combining statements in a later section of this report. Internal service funds are used to accumulate and allocate costs internally among the City’s various functions. There were no internal service funds for the year ended December 31, 2016. The basic proprietary fund financial statements can be found on pages 23-26 of this report. Fiduciary Funds Fiduciary funds are used to account for resources held for the benefit of parties other than the City. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support City programs. The City of Middleton maintains fiduciary funds to record the tax roll and collections for other taxing governmental agencies and for the Middleton Fire District. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found on page 27 of this report. Notes to the financial statements The accompanying notes to the financial statements provide information essential to a full understanding of the government-wide and fund financial statements. The notes to the financial statements begin on page 28 of this report. Other information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information. The combining statements referred to earlier in connection with non- major governmental funds and enterprise funds are presented immediately following the notes to the financial statements. A detailed budgetary comparison schedule for the General Fund is presented to demonstrate compliance with the budget. The required supplementary information can be found on pages 73-75 of this report. ---PAGE BREAK--- 7 Government-wide Financial Analysis Over time, as year-to-year financial information is accumulated on a consistent basis, change in net position may be observed and used to discuss the changing financial position of the City as a whole. The City’s net position as of December 31, 2016 was $120,563,471. The following table provides a summary of the City’s net position: CITY OF MIDDLETON NET POSITION For the Years Ended December 31, 2016 and 2015 (amounts expressed in thousands) Governmental Business-type Total Primary Activities Activities Government 2016 2015 2016 2015 2016 2015 Current and other assets $56,725 $55,084 $ 3,998 $ 6,525 $ 60,723 $ 61,609 Capital assets 91,665 91,598 49,576 43,946 141,240 135,543 Total assets 148,390 146,682 53,574 50,471 201,964 197,152 Deferred outflows of resources 6,708 1,773 615 188 7,322 1,962 Current and other liabilities 4,091 3,742 696 821 4,787 4,563 Non-current liabilities 54,457 56,201 2,244 3,062 56,701 59,263 Total liabilities 58,548 59,943 2,940 3,883 61,488 63,826 Deferred inflows of resources 27,007 25,998 228 4 27,235 26,002 Net position: Net investment in capital assets 44,205 42,290 47,876 41,296 92,080 83,586 Restricted 16,207 12,628 61 243 16,268 12,872 Unrestricted 9,130 7,596 3,084 5,232 12,214 12,828 Total net position $69,543 $62,514 $51,020 $46,772 $120,563 $109,286 Changes in Net Position Net position of the City of Middleton increased by $11,277,703 (10.32%) in 2016. Net position of the City’s governmental activities totaled $69,543,056 as of December 31, 2016, an increase of $7,028,991 The net position of business-type activities totaled $51,020,415 as of December 31, 2016, an increase of $4,248,712 The following table provides a summary of the changes in net position for the City of Middleton: ---PAGE BREAK--- 8 CHANGE IN NET POSITION For the Years Ended December 31, 2016 and 2015 (amounts expressed in thousands) Governmental Business-type Total Primary Activities Activities Government 2016 2015 2016 2015 2016 2015 Revenues: Program Revenues: Charges for services $ 4,043 $3,302 $7,875 $6,723 $11,918 $10,025 Operating grants 1,785 2,433 - - 1,785 2,433 Capital grants/ contributions 1,694 620 1,214 1,371 2,908 1,991 General Revenues: General property taxes 16,430 16,092 - - 16,430 16,092 Property taxes, TIF 9,126 8,692 - - 9,126 8,692 Other taxes 1,700 1,715 - - 1,700 1,715 Cable franchise fees 258 258 - - 258 258 Intergovernmental 1,160 1,603 - - 1,160 1,603 Investments 170 107 11 13 182 119 Gain on sale of property 2,659 - - - 2,659 - Miscellaneous 597 433 - - 597 433 Total revenues 39,624 35,254 9,100 8,107 48,724 43,361 Expenses: General government 3,374 3,577 - - 3,374 3,577 Public safety 9,708 8,768 - - 9,708 8,768 Public works 5,662 4,413 - - 5,662 4,413 Human services 524 458 - - 524 458 Leisure activities 4,280 5,712 - - 4,280 5,712 Conservation/devel. 5,714 4,890 - - 5,714 4,890 Interest on LT debt 1,430 1,487 - - 1,430 1,487 Water utility - - 1,707 1,666 1,707 1,666 Sewer utility - - 2,798 2,249 2,798 2,249 Golf course - - 1,845 1,562 1,845 1,562 Nonmajor enterprise funds - - 404 260 404 260 Total expenses 30,691 29,306 6,755 5,736 37,446 35,042 Increase (decrease) in net position before transfers 8,933 5,949 2,345 2,371 11,278 8,319 Net Transfers (1,904) (2,275) 1,904 2,275 - - Change in net position 7,029 3,674 4,249 4,645 11,278 8,319 Net position-beginning 62,514 58,840 46,772 42,126 109,286 100,967 Net position-ending $69,543 $62,514 $51,020 $46,772 $120,563 $109,286 ---PAGE BREAK--- 9 Governmental Activities Governmental activities for 2016 increased the City’s net position by $7,028,991 as detailed above. Some of the significant changes in revenues and expenses were as follows: Revenues  Charges for service increased $741,656 (22.5%) largely due to an increase in activity related to building, electrical, and plumbing permits and development review. Additionally, recreation program and aquatic center revenue increased by more than 50% due to expanded programming and increased usage.  General property tax revenue increased $338,499 This was due to an increase of net new construction in the City of more than 2% and an increase in the tax levy limit. Tax increment district taxes increased by $433,993 This increase was due to an increase of the value of the land within Tax Increment Districts #3 and  Investment revenue increased $63,372 (59.3%) due primarily due an increase in market interest rates in the fourth quarter of 2016.  The City saw a gain on the sale of property of $2,659,850 in 2016. Two items contributed to this revenue. First, the sale of a parking ramp in Greenway Station for $1,023,000. Second, the sale to the water and sewer utilities for the Middleton Operation Center (MOC) for their portion of the new building in the combined amount of $1,660,656. Expenses  General government expenses decreased by $203,248 This is partially due to the result of turnover in positions resulting in lower costs wage and benefits costs and a reduction in compensated absences.  Public safety expenses increased by $960,043 (11.0%) largely due to increase in pension activity. In addition, there was an increase in compensated absences activity and additional wage and benefit costs including the impact of filing vacant positions.  Public Works expenses increased by $1,248,417 Factors contributing to this increase include changes in compensated absences, non-capitalized capital outlay, and additional depreciation expenses.  Expenses related to health and human services increased by $65,452 (14.3%) This includes additional costs for the Middleton Senior Center related to the nutrition program, utilities, maintenance, and items funded with donations.  Leisure activities expenses decreased by $1,432,857 (25.1%) primarily due to a change in the categorization of Tourism Fund expenses. In 2015, these expenses were classified as leisure activities. Beginning in 2016, tourism expenses are categorized as conservation and development expenses. In addition, there was a reduction in the non-capital outlay expenses of the Public Lands Activities Fund.  Expenses related to conservation and development increased by $824,180 This is largely due to the categorization of Tourism Fund expenses as conservation and development rather than leisure activities.  Interest on long-term debt decreased by $57,299 due to lower interest payments resulting from repayment of previous year borrowings and lower rates in the municipal debt marketplace. ---PAGE BREAK--- 10 Business Activities Business activities for 2016 increased the City’s net position by $4,248,712 as detailed above. Program revenues exceeded expenses by $2,333,252 while net general revenues and transfers had a positive variance of $1,915,460. Revenues  Water Utility charges for services increased by $367,348 Water utility rates were increased on July 1, 2015. The higher revenues are associated the full-year impact of the higher rates as well as additional water customers and usage.  Sanitary Sewer Utility charges for services increased by $181,052 Increases in sewer utility rates included 8.6% for service charges and 4.1% for volume charges. These increases largely cover the sewer treatment increases passed through by the Madison Metropolitan Sewerage District (MMSD).  Charges for services for the Pleasant View Golf Course increased by $324,612 The golf course did not make significant increases in rates, however, management of the Pro Shop moved from a third-party vendor to golf course staff, resulting in additional revenue. Additionally, the golf course saw higher activity in memberships and leagues.  Higher revenue in the nonmajor enterprise funds is related to two factors. The Stormwater Utility was implemented in July 2015, making 2016 the first full year of receipts. Secondly, the Airport Fund was reclassified from a special revenue fund to an enterprise fund in 2016 and airport revenues are now shown as business activities. Expenses  Water Utility expenses increased by $34,822 largely due to an increase in the depreciation expenses and water system pump repairs.  Sewer Utility expenses increased by $549,773 (24.4%) primarily due an 18.5% increase in MMSD fees as well as additional personnel costs and depreciation expenses.  Expenses for the Pleasant View Golf Course increased by $283,403 Contributing to this increase were additional costs for pro shop expenses, food and beverage, and grounds maintenance related to the increased activity at the course.  Other nonmajor enterprise fund expenditures were higher in 2016 due primarily to the reclassification of the Airport Fund as an enterprise fund rather than a special revenue fund. There was also an increase in the depreciation expense for the Stormwater Utility in 2016. Fund Financial Analysis As noted earlier, the City of Middleton uses fund accounting to ensure and demonstrate compliance with finance-related laws and regulations. Fund financial reporting focuses on short-term spendable resources and balances of spendable resources available at year-end. Governmental Funds As of December 31, 2016, the City’s governmental funds had a combined ending fund balance of $27,865,267. Of this balance, $2,857,944 is non-spendable and $15,751,251 is restricted. The remaining balance of $9,256,072 includes $4,129,112 committed or assigned for specific purposes and $5,26,960 that is unassigned. General Fund The General Fund is the primary operating fund of the City and supports the majority of day-to-day services provided by the City. The total fund balance of the General Fund as of December 31, 2016 is ---PAGE BREAK--- 11 $12,076,623 of which $2,857,944 was non-spendable, $4,083,717 was assigned, and $5,134,962 was unassigned. The General Fund assigned fund balance consisted of the following items as of December 31, 2016:  Compensated absences (vacation and sick accrual) $1,560,685  Public safety reserve (Fire) $401,413  Public safety reserve (EMS) $336,000  Golf debt retirement $1,100,000  Equipment replacement $600,000  Risk Management/insurance $42,344  Budgetary carryovers $43,275 The General Fund had a total increase in fund balance of $1,286,301. General Fund revenues were $869,116 higher than the previous year and expenditures increased by $733,169. Net Other Financing Sources and Uses were $598,249 higher in 2016. Debt Service Fund Debt Service fund balance as of December 31, 2016 totaled $24,120, a decrease of $3,558. Debt issuance expenditures incurred in 2016 for a refunding debt issue totaled $80,033 and expenditures for paying agent services were $7,127. The issuance expenditures were offset by premiums totaling $133,867 received from the sale of general obligation refunding bonds. Principal and interest payments of $6,968,009 were offset by transfers from other funds in the amount of $7,027,677. TIF District No. 3 The fund balance for the Tax Increment District #3 Fund increased from $4,439,260 to $9,143,261 as of December 31, 2016. Revenues and other financing sources were $10,902,252 including $9,126,294 in tax increment collections. Expenditures in 2016 included $1,972,967 for administration and professionals services, $1,166,961 for economic development incentive payments, and $859,490 for capital outlay. There was also a transfer to the Debt Service Fund in the amount of $2,108,833 in 2016. Capital Projects Funds The total fund balance for the City’s Capital Project Funds was $292,797 as of December 31, 2016. Capital improvement projects expenditures for 2016 totaled $6,580,349. Major expenditures for the year included the following projects:  Mendota Avenue Reconstruction $1,020,038  Park and High Street Reconstruction $961,888  Public Works Equipment Replacement $348,939  Street Maintenance (Chip Sealing) $295,145  Public Lands Equipment Replacements $213,124  Video Storage System $182,583  Emerald Ash Borer Tree Removal $175,006  City Hall and Library Roof Replacements $169,396  Graber Trail Connections $141,786  Orchid Heights Storm Water Pond $130,085  Police Squad Car Replacements $124,206 Proprietary Funds See page 60 for information related to the City’s Enterprise Funds. ---PAGE BREAK--- 12 General Fund Budgetary Highlights Differences between actual revenues and expenses and the final amended budget resulted in a positive revenue variance of $966,896 (4.0% of total) and a positive expenditure variance of $4,641 of total). The following items contributed to these variances: Revenues  Taxes $8,402 over budget primarily due to additional room tax collections.  Intergovernmental revenues were $160,888 higher compared to the budget. This includes additional state aid for exempt computer equipment of $136,413 more than the budgeted amount.  Licenses and permits were $412,204 over budget due to a very strong construction year in which multiple large projects and increased construction overall drove revenues higher than budget. Building permit revenue exceeded the budget by $272,529. In addition, cable television franchise fee revenue was $83,069 above budget.  Fines, penalties, and forfeitures were $52,836 under the original budget due largely to lower court penalty payments.  Public charges for services were $77,970 higher than budget largely due to recreation programs including the Aquatic Center, Hubbard Activity Center, and Fall-Winter-Spring recreation programs. This is attributable to additional program offerings and higher participation levels.  Interdepartmental charges were $27,148 over budget due primarily to a reimbursement from Madison Metro for excess funds collected related to the bus transportation system.  Special assessments revenue was $108,815 above budget due to additional street reconstruction activity and the associated assessments for curb, gutter, and sidewalks.  Investment income was $99,525 higher than budget. This was due to conservative budgeting and an increase in interest rates in the fourth quarter of 2016.  Miscellaneous revenues were $36,734 over budget. Included in this amount was $42,226 for rebates on purchases made with the City’s purchasing cards. Expenditures  General Government expenditures were $172,220 under budget due to an unspent general contingency of $255,832. Current year activity for compensated absences in the amount of $193,771 was not budgeted in 2016.  Expenditures for Public Safety were $96,220 lower than budgeted due primarily to savings from personnel vacancies in the Police Department.  Public Works expenditures were $65,423 under budget due to unused wage reserve funds and lower than anticipated costs for equipment maintenance.  Expenditures for Health and Human Services (Senior Center) were over budget by $20,746. Of this amount, $9,183 is due to higher senior center trip expenditures that have offsetting revenue. Higher costs for utilities, building maintenance, and equipment repair also contributed to the overage.  Leisure Activities expenditures were $185,589 under budget due primarily to savings from personnel vacancies and lower expenditures for professional services.  Expenditures for Conservation and Development were $36,983 lower than budgeted due primarily to reduced expenditures for conservancy lands professional services.  Transfers Out to Other Funds were over budget by $531,048. This is primarily due to the transfer of $472,548 from the General Fund Assigned Fund Balance for Fire Equipment to a capital projects fund to be used for the purchase of land for a new fire station location. Additional transfers were also made to the Public Lands Activities Special Revenue Fund in the amount of $40,000 and to the Youth Center Special Revenue Fund in the amount of $18,500. ---PAGE BREAK--- 13 Capital Assets and Debt Administration Capital Assets The City’s investment in capital assets for its governmental and business-type activities as of December 31, 2016 was $141,240,472 (net of depreciation), and increase of $5,697,062. This investment in capital assets includes land, buildings and improvements, equipment and furniture, infrastructure, and construction in progress. Governmental capital asset additions exceeded depreciation expense by $2,402,415 and net deletions (original cost less accumulated depreciation) totaled $81,071. There was also a net transfer of $2,254,177 from governmental activities to business-type activities for the Middleton Airport which is accounted for as an enterprise fund in 2016 rather than a special revenue fund as in prior years. Major changes in capital assets of governmental activities included the following:  $2,025,464 for infrastructure additions for the Mendota Avenue and Park & High Street reconstruction projects including street, sidewalk, storm sewer, traffic signal, and parking area improvements  $540,662 for developer contributed assets for the Bishops Bay Back Nine Phase 4 development including right-of-way, street, sidewalk, and storm sewer improvements  $357,546 for park improvements at the Lucille Taylor Park  $227,071 for library material acquisitions  $182,583 for a video storage system for police department files  $113,711 for the purchase of a new plow truck for the public works department  $110,181 for the installation of a bike path along Allen Boulevard Major changes in capital assets of business-type activities included the following:  $1,245,492 in water utility assets for the utility’s share of the cost of the Middleton Operations Center facility  $712,415 in water utility assets for the Park & High Street project including water main, services, and hydrants  $270,314 in water utility assets for developer contributed infrastructure for the Bishops Bay Back Nine Phase 4 development  $415,164 in sewer utility assets for the utility’s share of the cost of the Middleton Operations Center facility  $305,353 in construction in progress for the Esser Lift Station project  $149,858 in sewer utility assets for developer contributed infrastructure for the Bishops Bay Back Nine Phase 4 development  $129,156 in sewer utility assets for the Park & High Street project including water main, services, and hydrants  $168,053 for patio improvements for the Pleasant View Golf Course  $599,369 in stormwater utility assets for the Donna Drive and Orchid Heights ponds  $578,977 in stormwater utility construction in progress for the Confluence Pond dredging project ---PAGE BREAK--- 14 CITY OF MIDDLETON CAPITAL ASSETS (Net of Accumulated Depreciation) (amounts expressed in thousands) Governmental Business-Type Total Primary Activities Activities Government 2016 2015 2016 2015 2016 2015 Land $ 4,758 $ 6,199 $ 5,986 $ 4,440 $ 30,744 $ 30,640 Buildings & improvements 26,696 27,707 9,906 8,573 36,602 36,281 Equipment & furnishings 2,223 1,635 361 187 2,584 1,822 Streets 24,195 22,928 24,195 22,928 Storm Sewers 6,668 6,533 6,668 6,533 Traffic Signals 815 870 815 870 Sidewalks 2,940 2,605 2,940 2,605 Bridges 2,781 2,748 2,781 2,748 Fiber Optic 31 - 31 - Rail Spur 299 315 299 315 Water Utility - - 20,963 18,947 20,963 18,947 Sewer Utility - - 11,744 10,988 11,744 10,988 Infrastructure 37,729 35,999 32,707 29,935 70,437 65,934 Construction in Progress 259 57 615 810 873 867 Total capital assets $ 91,665 $ 91,598 $ 49,576 $ 43,946 $141,240 $135,543 Additional information on the City of Middleton’s capital assets can be found in Note 3. D. on pages 47-51 of this report Long-Term Debt At the end of the current fiscal year, the City of Middleton had total bonded debt outstanding of $49,030,000 which is all backed by the full faith and credit of the city. CITY OF MIDDLETON OUTSTANDING DEBT For the Years Ended December 31, 2016 and 2015 (amounts expressed in thousands) Governmental Business-Type Total Primary Activities Activities Government 2016 2015 2016 2015 2016 2015 General obligation bonds and notes $47,330 $50,730 $ 1,700 $ 2,645 $49,030 $53,375 Revenue bonds - - - - - - Total outstanding debt $47,330 $50,730 $ 1,700 $ 2,645 $49,030 $53,375 ---PAGE BREAK--- 15 State Statutes limit the amount of general obligation debt a government entity may issue to five percent of its total equalized valuation. The current debt limitation for the City of Middleton is $157,188,345 of which the City has utilized 31.2% for its current outstanding general obligation debt. The City of Middleton’s total outstanding debt decreased by $4,345,000 during the current fiscal year. The City issued $6,000,000 of new refunding debt and made principal payments totaling $10,345,000 in 2016. See Note 3. F. on pages 54-57 for this report for detailed information on the City’s long-term debt. Economic Factors and Next Year’s Budget and Rates The City of Middleton is located in Dane County, Wisconsin approximately seven miles from downtown Madison, the state capitol. Over the past ten years, the City has experienced significant growth in its population and total equalized value. The City maintains two active Tax Increment Financing Districts, several office and business park areas, retail shopping areas, and seven hotels with nearly 1,000 hotel rooms. Key economic factors include:  The City’s equalized property valuation has increased from $2.5 billion to $3.1 billion over the past ten years, an increase of 26.0%. Middleton’s equalized property value is the second highest in Dane County, behind only the City of Madison. The estimated median assessed value of a single family home in 2016 was $325,000.  Middleton’s estimated population has increased from 16,935 to 19,317 between 2006 and 2016, an increase of 14.1%  Unemployment remains low in Dane County averaging 3.4% over the past five years. In 2016, the unemployment rate in Dane County was 2.6%, below both the State of Wisconsin rate of 3.7% and the national rate of 4.5%  The City maintains a Aa1 bond rating from Moody’s Investors Service, based in part on the strong economic climate of the City. The City of Middleton adopts operating budgets for its governmental funds (general, special revenue, debt service, and capital projects) and enterprise funds (water, sewer, and stormwater utilities, golf course, airport, and special utility district). The 2017 fiscal year General Fund budget includes $20,680,335 in projected revenues and $20,680,335 in projected expenditures and transfers. Included in these amounts is the planned use of assigned fund balance in the amount of $848,650. The 2017 approved budget does not include the use of any unassigned fund balance. Funding for the operating budget of the City is provided from many sources, including property taxes, room taxes, grants and aids from the state and county, user fees, permits and licenses, fines, and other miscellaneous revenues. Several revenue sources are sensitive to economic factors, in particular building permits, room taxes, and investment earnings. Building permit and room tax revenue have shown strong positive growth due to the strength of the local economy. In the 2017 budget, building permit revenue and interest income are conservatively budgeted below the 2016 levels. Continued state-imposed property tax levy limits and state budget pressures may constrain property taxes intergovernmental sources in future years. Expenditures for salaries, which represent the single largest operating cost, continue to be moderate given the low inflation in the economy and active labor relations efforts. All eligible City employees are contributing toward the cost of the pension program through the Wisconsin Retirement System. The City ---PAGE BREAK--- 16 continues to work with its employees to manage health care costs. The 2017 budget projects a small increase (1.85%) in expected health care premiums due to an increase in plan deductibles for covered employees thereby reducing City expenditures. No significant new programs were added to the 2017 operating budget given the current economic climate and revenue pressures. One new full-time and additional part-time/limited-term employee hours were added for a total of 2.3 Full-Time-Equivalent (FTE) employees to address increased demands for service due to the City’s continue growth. Request for Financial Information This financial report is designed to provide users with a general overview of the City of Middleton’s finances and to demonstrate the City’s accountability. If you have questions about the report or need additional financial information, contact the Finance Department, City of Middleton 7426 Hubbard Avenue, Middleton, WI 53562. ---PAGE BREAK--- BASIC FINANCIAL STATEMENTS ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN STATEMENT OF NET POSITION December 31, 2016 The accompanying notes are an integral part of the financial statements. 17 Business- Governmental type Component Activities Activities Total Unit ASSETS Cash and investments 24,799,227 $ 5,512,135 $ 30,311,362 $ 691,900 $ Receivables (net): Taxes 24,754,154 - 24,754,154 - Delinquent taxes 104,029 - 104,029 - Accounts 1,166,328 1,238,890 2,405,218 - Interest - 7,879 7,879 - Loans - - - 121,392 Special assessments 610,588 2,009,059 2,619,647 - Internal balances 5,131,937 (5,131,937) - - Prepaid items 159,135 - 159,135 - Restricted assets - cash and investments - 60,820 60,820 - Property held for future use - 301,087 301,087 - Capital assets not being depreciated 25,016,788 2,511,163 27,527,951 154,000 Capital assets being depreciated 66,648,093 47,064,428 113,712,521 1,949,675 Total assets 148,390,279 53,573,524 201,963,803 2,916,967 Deferred outflows of resources Loss on refunding 275,436 - 275,436 - Deferred amounts related to pension 6,432,142 614,825 7,046,967 - Total deferred outflows of resources 6,707,578 614,825 7,322,403 - LIABILITIES Accounts payable and accrued liabilities 2,653,560 671,870 3,325,430 6,183 Deposits 863,685 - 863,685 - Accrued interest 559,007 24,417 583,424 - Due to other governments 14,369 - 14,369 - Noncurrent liabilities: Due within one year 7,030,598 349,000 7,379,598 - Due in more than one year 47,426,727 1,894,956 49,321,683 - Total liabilities 58,547,946 2,940,243 61,488,189 6,183 DEFERRED INFLOWS OF RESOURCES Subsequent year tax levy 24,526,061 - 24,526,061 - Deferred amounts related to pension 2,480,794 227,691 2,708,485 - Total deferred inflows of resources 27,006,855 227,691 27,234,546 - NET POSITION Net investment in capital assets 44,205,346 47,875,591 92,080,937 2,103,675 Restricted 16,207,298 60,820 16,268,118 - Unrestricted 9,130,412 3,084,004 12,214,416 807,109 TOTAL NET POSITION 69,543,056 $ 51,020,415 $ 120,563,471 $ 2,910,784 $ Primary Government ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN STATEMENT OF ACTIVITIES December 31, 2016 The accompanying notes are an integral part of the financial statements. 18 Operating Capital Charges for Grants and Grants and Governmental Business Type Component FUNCTIONS/PROGRAMS Expenses Services Contributions Contributions Activities Activities Totals Unit Primary Government Governmental activities: General government 3,373,515 $ 262,789 $ 290,675 $ - $ (2,820,051) $ - $ (2,820,051) $ Public safety 9,708,266 2,474,315 190,317 - (7,043,634) - (7,043,634) Public works 5,661,834 232,199 344,367 317,940 (4,767,328) - (4,767,328) Health and human services 523,561 32,442 50,977 - (440,142) - (440,142) Leisure activities 4,279,623 409,688 908,773 1,376,197 (1,584,965) - (1,584,965) Conservation and economic development 5,713,888 631,904 - - (5,081,984) - (5,081,984) Interest and fiscal charges 1,430,035 - - - (1,430,035) - (1,430,035) Total governmental activities 30,690,722 4,043,337 1,785,109 1,694,137 (23,168,139) - (23,168,139) Business-type activities: Water 1,707,466 2,684,956 - 270,314 - 1,247,804 1,247,804 Sewer 2,798,438 2,343,986 - 162,748 - (291,704) (291,704) Pleasant View Golf Course 1,845,233 2,430,426 - - - 585,193 585,193 Nonmajor Enterprise Funds 404,080 415,274 - 780,765 - 791,959 791,959 Total business-type activities 6,755,217 7,874,642 - 1,213,827 - 2,333,252 2,333,252 Total primary government 37,445,939 $ 11,917,979 $ 1,785,109 $ 2,907,964 $ (23,168,139) 2,333,252 (20,834,887) Component Unit Community Development Authority 188,539 $ 21,621 $ - $ - $ (166,918) $ General revenues: Taxes: Property taxes, levied for general purposes 16,430,234 - 16,430,234 - Property taxes, levied for tax increment district 9,126,294 - 9,126,294 - Other taxes 1,699,681 - 1,699,681 - Cable television franchise fees 258,069 - 258,069 - Intergovernmental revenues not restricted to specific programs 1,160,158 - 1,160,158 - Investment income 170,210 11,387 181,597 646 Gain on sale of property 2,659,850 - 2,659,850 - Miscellaneous 596,707 - 596,707 - Total general revenues 32,101,203 11,387 32,112,590 646 Transfers (1,904,073) 1,904,073 - - Change in net position 7,028,991 4,248,712 11,277,703 (166,272) NET POSITION - BEGINNING OF YEAR 62,514,065 46,771,703 109,285,768 3,077,056 NET POSITION - END OF YEAR 69,543,056 $ 51,020,415 $ 120,563,471 $ 2,910,784 $ Primary Government Changes in Net Position Net (Expenses) Revenues and Program Revenues ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN BALANCE SHEET – GOVERNMENTAL FUNDS December 31, 2016 The accompanying notes are an integral part of the financial statements. 19 Nonmajor Total Debt TIF District Capital Governmental Governmental General Service No. 3 Projects Funds Funds ASSETS Cash and investments 9,969,131 $ 27,387 $ 4,515,839 $ 2,867,634 $ 7,419,236 $ 24,799,227 $ Receivables (net): Taxes: Tax levy 16,592,203 - 7,076,275 857,583 - 24,526,061 Special assessments on tax roll 9,572 - 177,030 - - 186,602 Other 41,491 - - - - 41,491 Delinquent taxes 104,029 - - - - 104,029 Accounts 664,715 - 100,685 50,199 350,729 1,166,328 Special assessments 14,653 - 595,935 - - 610,588 Due from other funds 4,668 - - - - 4,668 Advances to other funds 2,594,780 - 4,653,545 - - 7,248,325 Prepaid items 159,135 - - - - 159,135 TOTAL ASSETS 30,154,377 $ 27,387 $ 17,119,309 $ 3,775,416 $ 7,769,965 $ 58,846,454 $ LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES LIABILITIES Accounts payable and accrued liabilities 1,374,301 $ 3,267 $ 126,809 $ 576,037 $ 573,146 $ 2,653,560 $ Advances from other funds - - - 2,048,999 - 2,048,999 Deposits - - - - 863,685 863,685 Due to other funds 67,389 - - - 4,668 72,057 Due to other governments 14,369 - - - - 14,369 Total liabilities 1,456,059 3,267 126,809 2,625,036 1,441,499 5,652,670 DEFERRED INFLOWS OF RESOURCES Subsequent year tax levy 16,592,203 - 7,076,275 857,583 - 24,526,061 Special assessments 24,225 - 772,964 - - 797,189 Other receivables 5,267 - - - - 5,267 16,621,695 - 7,849,239 857,583 - 25,328,517 FUND BALANCES Nonspendable 2,857,944 - - - - 2,857,944 Restricted - 24,120 9,143,261 292,797 6,291,073 15,751,251 Committed - - - - 45,395 45,395 Assigned 4,083,717 - - - - 4,083,717 Unassigned 5,134,962 - - - (8,002) 5,126,960 Total fund balances 12,076,623 24,120 9,143,261 292,797 6,328,466 27,865,267 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES 30,154,377 $ 27,387 $ 17,119,309 $ 3,775,416 $ 7,769,965 $ 58,846,454 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION December 31, 2016 The accompanying notes are an integral part of the financial statements. 20 Fund balances - total governmental funds 27,865,267 $ Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental funds are not financial resources and therefore are not reported in the funds. 91,664,881 Some receivables that are not currently available are reported as deferred inflows of resources in the fund financial statements, but are recognized as revenue when earned in the government-wide statements. Special assessments 797,189 Other receivables 5,267 Long-term assets and deferred outflows are not related to the current period and, therefore, are not reported in the funds. Deferred outflows of resources related to pension 6,432,142 Deferred outflows of resources related to loss on refunding 275,436 Deferred inflows of resources related to pension (2,480,794) Some liabilities, including long-term debt, are not due and payable in the current period and therefore are not reported in the funds. Long-term debt (47,330,000) Landfill post-closure liability (677,110) Debt discount or premium (697,768) Net pension liability (1,183,900) Compensated absences (4,435,219) Other postemployment benefits (133,328) Accrued interest payable (559,007) NET POSITION OF GOVERNMENTAL ACTIVITIES 69,543,056 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – GOVERNMENTAL FUNDS December 31, 2016 The accompanying notes are an integral part of the financial statements. 21 Nonmajor Total Debt TIF District Capital Governmental Governmental General Service No. 3 Projects Funds Funds REVENUES Taxes 17,027,636 $ - $ 9,126,294 $ 472,884 $ 1,369,480 $ 27,996,294 $ Intergovernmental 2,318,777 - 344,948 71,217 851,885 3,586,827 Licenses and permits 1,153,102 - - - 899,202 2,052,304 Fines, forfeitures, and penalties 262,164 - - - - 262,164 Public charges for services 1,364,157 - - - 1,481,227 2,845,384 Intergovernmental charges for services 1,946,971 - - - - 1,946,971 Special assessments 212,815 - 254,823 - - 467,638 Contributions - - - - 92,877 92,877 Investment and interest income 160,442 - 63,161 44 17,869 241,516 Miscellaneous 107,179 - 90,026 63,237 2,357 262,799 Total revenues 24,553,243 - 9,879,252 607,382 4,714,897 39,754,774 EXPENDITURES Current: General government 2,773,516 - 1,972,967 150 145,181 4,891,814 Public safety 8,462,228 - - - - 8,462,228 Public works 3,614,347 - - 150 - 3,614,497 Health and human services 473,469 - - - 30,108 503,577 Leisure activities 1,471,862 - - - 2,141,921 3,613,783 Conservation and economic development 758,985 - 1,166,961 2,127,387 1,087,673 5,141,006 Debt service: Principal - 5,680,000 - - - 5,680,000 Interest and fiscal charges - 1,375,169 - 3,500 - 1,378,669 Capital outlay - - 859,490 4,449,162 510,570 5,819,222 Total expenditures 17,554,407 7,055,169 3,999,418 6,580,349 3,915,453 39,104,796 Excess of revenues over (under) expenditures 6,998,836 (7,055,169) 5,879,834 (5,972,967) 799,444 649,978 OTHER FINANCING SOURCES (USES) Long-term debt issued - 3,900,000 - 2,100,000 - 6,000,000 Premium on debt issued - 133,867 - - - 133,867 Proceeds from sale of capital assets - - 1,023,000 1,660,656 - 2,683,656 Refunding payment to escrow agent - (4,009,933) - - - (4,009,933) Transfers in 488,046 7,027,677 - 1,909,959 1,427,997 10,853,679 Transfers out (6,218,581) - (2,108,833) (1,497,762) (678,399) (10,503,575) (5,730,535) 7,051,611 (1,085,833) 4,172,853 749,598 5,157,694 Net change in fund balances 1,268,301 (3,558) 4,794,001 (1,800,114) 1,549,042 5,807,672 FUND BALANCES - BEGINNING OF YEAR 10,808,322 27,678 4,349,260 2,092,911 4,779,424 22,057,595 FUND BALANCES - END OF YEAR 12,076,623 $ 24,120 $ 9,143,261 $ 292,797 $ 6,328,466 $ 27,865,267 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES December 31, 2016 The accompanying notes are an integral part of the financial statements. 22 Net change in fund balances - total governmental funds 5,807,672 $ 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 activities, the cost of these assets is allocated 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. 4,842,002 Capital assets transferred to the airport (2,254,177) Depreciation is reported in the government-wide statements (2,496,852) Receivables not currently available are reported as deferred inflows in the fund financial statements but are recognized as revenue when earned in the government-wide financial statements. (1,214,308) Proceeds from the sale of capital assets are recorded as revenues in the governmental funds but are removed from revenues in the statement of activities (2,683,656). The gain on the sale disposal of capital assets is recognized in the statement of activities $(2,659,850). (23,806) Debt and lease proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the statement of net assets. Repayment of debt principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net position. Debt issued (6,000,000) Premium on debt issued (133,867) Loss on refunding 289,933 Debt retired 9,400,000 Landfill post-closure liability (64,526) 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 (320,594) Other postemployment benefits (60,916) Pension activity (690,204) Amortization of debt premium and discount and loss on refunding 92,489 Accrued interest on debt (143,855) Change in net position of governmental activities 7,028,991 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN STATEMENT OF NET POSITION December 31, 2016 The accompanying notes are an integral part of the financial statements. 23 Pleasant Nonmajor View Golf Enterprise ASSETS Water Sewer Course Funds Totals Current Assets: Cash and investments 3,342,795 $ 1,604,366 $ - $ 564,974 $ 5,512,135 $ Accounts receivable 530,311 620,112 - 88,467 1,238,890 Accrued interest - 7,879 - - 7,879 Due from other funds 50,508 13,540 - 3,341 67,389 Total current assets 3,923,614 2,245,897 - 656,782 6,826,293 Noncurrent Assets: Restricted cash and investments - 60,820 - - 60,820 Special assessments receivable - 2,009,059 - - 2,009,059 Property held for future use 301,087 - - - 301,087 Capital assets: Property and equipment 30,782,572 17,089,126 11,841,037 6,231,126 65,943,861 Less: Accumulated depreciation (9,596,971) (5,278,122) (1,301,395) (191,782) (16,368,270) Total capital assets, net 21,185,601 11,811,004 10,539,642 6,039,344 49,575,591 Total noncurrent assets 21,486,688 13,880,883 10,539,642 6,039,344 51,946,557 Total assets 25,410,302 16,126,780 10,539,642 6,696,126 58,772,850 DEFERRED OUTFLOWS OF RESOURCES Deferred amounts related to pension 243,853 110,740 260,232 - 614,825 LIABILITIES Current Liabilities: Accounts payable and accrued liabilities 122,307 465,487 33,423 50,653 671,870 Accrued interest - - 24,417 - 24,417 Accrued compensated absences 21,738 12,893 14,369 - 49,000 Current portion of long-term debt - - 300,000 - 300,000 Total current liabilities 144,045 478,380 372,209 50,653 1,045,287 Noncurrent Liabilities: Accrued compensated absences 182,544 108,271 120,670 - 411,485 Net pension liability 33,689 14,318 35,464 - 83,471 Advances from other funds - - 4,739,070 460,256 5,199,326 General obligation debt - - 1,400,000 - 1,400,000 Total noncurrent liabilities 216,233 122,589 6,295,204 460,256 7,094,282 Total liabilities 360,278 600,969 6,667,413 510,909 8,139,569 DEFERRED INFLOWS OF RESOURCES Deferred amounts related to pension 90,492 40,783 96,416 - 227,691 NET POSITION Net investment in capital assets 21,185,601 11,811,004 8,839,642 6,039,344 47,875,591 Restricted for equipment replacement - 60,820 - - 60,820 Unrestricted 4,017,784 3,723,944 (4,803,597) 145,873 3,084,004 Total net position 25,203,385 $ 15,595,768 $ 4,036,045 $ 6,185,217 $ 51,020,415 $ Business-type Activities Enterprise Funds ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION – PROPRIETARY FUNDS December 31, 2016 The accompanying notes are an integral part of the financial statements. 24 Pleasant Nonmajor View Golf Enterprise Water Sewer Course Funds Total OPERATING REVENUES Charges for services and sales 2,684,956 $ 2,343,986 $ 2,430,426 $ 390,632 $ 7,850,000 $ Miscellaneous - - - 24,642 24,642 Total operating revenue 2,684,956 2,343,986 2,430,426 415,274 7,874,642 OPERATING EXPENSES Operation and maintenance 1,147,286 2,470,176 1,657,717 308,935 5,584,114 Depreciation 560,180 328,262 115,729 95,145 1,099,316 Total operating expenses 1,707,466 2,798,438 1,773,446 404,080 6,683,430 Operating income (loss) 977,490 (454,452) 656,980 11,194 1,191,212 NONOPERATING REVENUES (EXPENSES) Loss on disposal of capital assets - - - - - Investment income 3,508 7,879 - - 11,387 Interest expense - - (71,787) - (71,787) Total nonoperating revenues (expenses) 3,508 7,879 (71,787) - (60,400) Income (loss) before capital contributions and transfers 980,998 (446,573) 585,193 11,194 1,130,812 CAPITAL CONTRIBUTIONS 270,314 162,748 - 3,034,942 3,468,004 TRANSFERS IN 17,027 - - 142,496 159,523 TRANSFERS OUT (488,046) (21,581) - - (509,627) Change in net position 780,293 (305,406) 585,193 3,188,632 4,248,712 NET POSITION - BEGINNING OF YEAR 24,423,092 15,901,174 3,450,852 2,996,585 46,771,703 NET POSITION - END OF YEAR 25,203,385 $ 15,595,768 $ 4,036,045 $ 6,185,217 $ 51,020,415 $ Enterprise Funds Business-type Activities ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS December 31, 2016 The accompanying notes are an integral part of the financial statements. 25 Pleasant Nonmajor View Golf Enterprise Water Sewer Course Funds Totals CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 2,607,163 $ 2,307,584 $ 2,430,426 $ 379,688 $ 7,724,861 $ Operating transfers from other funds - - - - - Payments to suppliers for goods and services (647,980) (2,239,344) (978,522) (382,276) (4,248,122) Payments to employees for services (472,937) (216,406) (648,221) - (1,337,564) Operating transfers to other funds - (21,581) - - (21,581) Net cash provided (used) by operating activities 1,486,246 (169,747) 803,683 (2,588) 2,117,594 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers to other funds (471,019) - - 142,496 (328,523) Due from other funds - (82,910) - - (82,910) Advance from TIF No. 3 - - 545,877 60,256 606,133 Net cash provided (used) by noncapital financing activities (471,019) (82,910) 545,877 202,752 194,700 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets (2,776,192) (603,646) (336,096) (16,570) (3,732,504) Proceeds from sale of capital assets - - 14,236 - 14,236 Principal paid on capital debt - - (945,000) - (945,000) Interest paid on capital debt - - (82,700) - (82,700) Net cash used by capital and related financing activities (2,776,192) (603,646) (1,349,560) (16,570) (4,745,968) CASH FLOWS FROM INVESTING ACTIVITIES Interest income received 3,508 10,576 - - 14,084 Net increase (decrease) in cash and cash equivalents (1,757,457) (845,727) - 183,594 (2,419,590) CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 5,100,252 2,510,913 - 381,380 7,992,545 CASH AND CASH EQUIVALENTS - END OF YEAR 3,342,795 $ 1,665,186 $ - $ 564,974 $ 5,572,955 $ Business-type Activities Enterprise Funds ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS (CONTINUED) December 31, 2016 The accompanying notes are an integral part of the financial statements. 26 Pleasant Nonmajor View Golf Enterprise Water Sewer Course Funds Totals Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) 977,490 $ (454,452) $ 656,980 $ 11,194 $ 1,191,212 $ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation expense 560,180 328,262 115,729 95,145 1,099,316 Depreciation charged to sewer utility 12,977 (12,977) - - - Operating transfers from (to) - (21,581) - - (21,581) Changes in noncash components of working capital: Accounts receivable (77,793) (69,338) - (17,369) (164,500) Special assessments receivable - 32,936 - - 32,936 Due from other funds (7,399) (1,511) - (3,341) (12,251) Accounts payable 11,398 (11,315) (30,321) (88,217) (118,455) Pension activity 25,124 11,319 26,768 - 63,211 Accrued compensated absences (15,731) 28,910 34,527 - 47,706 Net cash provided (used) by operating activities 1,486,246 $ (169,747) $ 803,683 $ (2,588) $ 2,117,594 $ Reconciliation of cash and cash equivalents to the statement of net position - proprietary funds Cash and investments 3,342,795 $ 1,604,366 $ - $ 564,974 $ 5,512,135 $ Restricted cash and investments - 60,820 - - 60,820 Cash and cash equivalents, end of year 3,342,795 $ 1,665,186 $ - $ 564,974 $ 5,572,955 $ NONCASH INVESTING, CAPITAL, AND RELATED FINANCING ACTIVITIES Developer financed additions to Utility capital assets 270,314 $ 162,748 $ - $ 709,062 $ 1,142,124 $ City financed additions to Utility capital assets - - - - - Business-type Activities Enterprise Funds ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN STATEMENT OF FIDUCIARY NET POSITION - FIDUCIARY FUNDS December 31, 2016 The accompanying notes are an integral part of the financial statements. 27 Total Fire Agency Tax Roll District Funds ASSETS Cash and investments 18,954,992 $ (237,327) $ 18,717,665 $ Taxes receivable 22,251,289 461,657 22,712,946 Total assets 41,206,281 $ 224,330 $ 41,430,611 $ LIABILITIES Accounts payable - $ 94,669 $ 94,669 $ Due to other governmental units 41,206,281 129,661 41,335,942 Total liabilities 41,206,281 $ 224,330 $ 41,430,611 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 28 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the City of Middleton, Wisconsin (the City) conform to generally accepted accounting principles as applicable to governmental units. The accepted standard- setting body for establishing governmental accounting and financial reporting principles is the Governmental Accounting Standards Board (GASB). A. Reporting Entity This report includes all of the funds of the City of Middleton, Wisconsin. 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. A legally separate organization should be reported as a component unit if the elected officials of the primary government are financially accountable to the organization. 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. A legally separate tax exempt organization should be reported as a component unit of the reporting entity if all of the following criteria are met: the economic resources received or held by the separate organization are entirely or almost entirely for the direct benefit of the primary government, its component units, or its constituents; and the primary government is entitled to, or has the ability to otherwise access, a majority of the economic resources received or held by an individual organization that the specific primary government, or its component units, is entitled to, or has the ability to otherwise access, are significant to that 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. Discretely presented component units are reported in a separate column in the government-wide financial statements to emphasize that they are legally separate from the primary government. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 29 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Government-Wide and Fund Financial Statements Discretely Presented Component Unit - Community Development Authority of the City of Middleton, Wisconsin The government-wide financial statements include the Community Development Authority of the City of Middleton, Wisconsin (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. Government-Wide Financial Statements The statement of net position 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. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment is 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 Each fund is considered to be a separate accounting entity and is accounted for by providing a separate set of self-balancing accounts, which constitute its assets, deferred outflows of resources, liabilities, deferred inflows of resources, net position/fund balance, revenues, and expenditure/expenses. Separate financial statements are provided for governmental funds, 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. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 30 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Government-Wide and Fund Financial Statements (Continued) Fund Financial Statements (Continued) Funds are organized as major funds or nonmajor funds within the governmental and enterprise fund financial statements. A fund is considered major if it is the primary operating fund of the City or meets the following criteria: a. Total assets and deferred outflows of resources, liabilities and deferred inflows of resources, revenues, or expenditures/expenses of that individual governmental or enterprise fund are at least 10% 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% test is at least 5% of the corresponding total for all governmental and enterprise funds combined. c. In addition, any other governmental or enterprise fund that the City believes is particularly important to financial statement users may be reported as a major fund. The City reports the following 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 resources accumulated and payments made for principal and interest on long-term debt other than enterprise fund debt. Tax Incremental Financing District (TIF) No. 3 Capital Projects Funds - accounts for expenditures outlined in the TIF project plan and related revenues and proceeds from long- term borrowing. Capital Projects Fund - accounts for proceeds from long-term borrowing and other resources to be used for improvement projects originally initiated. The City reports the following major enterprise funds: Water Utility - accounts for operations of the water system. Sanitary Sewer - accounts for operations of the sewer system. Pleasant View Golf Course - accounts for operations of the Pleasant View Golf Course. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 31 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Government-Wide and Fund Financial Statements (Continued) Fund Financial Statements (Continued) The City reports the following nonmajor governmental funds: Special Revenue Funds - used to account for the proceeds of specific revenue sources (other than major capital projects) that are restricted to expenditures for specified purposes. Subdividers’ Deposits Economic Development Grant Lost and Damaged Books Tourism Commission Library Gift Police Activities Library Endowment EMS Activities Library Fund Public Land Activities Airport Senior Center Activities Safety Impact Fee and Other Youth Center The City reports the following nonmajor enterprise funds: Stormwater Utility – used to account for the operations of stormwater system. Middleton Utility District – used to account for the operations of the utility district. Airport Utility – Beginning in 2016, used to account for the operations of the municipal airport. In addition, the City reports the following fund types: Agency funds - 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 C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation Government-Wide Financial Statements The government-wide statement of net position 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 inflows of resources. 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. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 32 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) Government-Wide Financial Statements (Continued) 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. 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 inflows of resources. 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 to the resources and the amounts are available. Amounts owed to the City, which are not available, are recorded as receivables and deferred inflows of resources. Amounts received prior to the entitlement period are recorded as unearned revenues. Special assessments are recorded as revenues when they become measurable and available as current assets. Amounts due in future years are reflected as receivables and deferred inflows of resources. Delinquent special assessments being held for collection by the county are reported as receivables and deferred inflows of resources 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. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 33 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) Fund Financial Statements (Continued) The City reports unearned revenues and deferred inflows of resources on its governmental funds balance sheet. Deferred inflows of resources arise from taxes levied in the current year which are for the subsequent year’s operations, special assessments to be collected in future years and loans receivable to be collected in future years. For governmental fund financial statements, deferred inflows of resources arise when a potential revenue does not meet both the “measurable” and “available” criteria for recognition in the current period. Unearned 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 unearned revenue or deferred inflow of resources is removed from the balance sheet and revenue is recognized. 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. Agency funds follow the accrual basis of accounting and do not have a measurement basis. 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 Utility, Sewer Utility, Stormwater Utility, the Middleton Utility District, Pleasant View Golf Course, and the Airport Utility are charges to customers for sales and services. Special assessments are recorded as receivables and contributions when levied. 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. All Financial Statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America require management to make estimates and assumptions that affect the reported amounts of assets, deferred outflows of resources, liabilities, deferred inflows of resources 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. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 34 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, and Net Position or Equity 1. Cash 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 authorized to transact business in the state 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, the University of Wisconsin Hospitals and Clinics Authority, or the Wisconsin Aerospace Authority. 3. Bonds or securities issued or guaranteed by the federal government. 4. The local government investment pool. 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. The City has adopted an investment policy that follows the state statute for allowable investments. The City is exposed to custodial credit risk and credit risk for deposits and investments, as well as interest rate risk for investments. The City’s policies with respect to these risks are as follows: Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations to the City. To minimize credit risk, investments are limited to government agencies, the highest rated commercial paper, AAA rated money market funds, and CD’s from Wisconsin’s highest rated banks. Custodial risk is the risk that, in the event of the failure of a depository financial institution, the City will not be able to recover deposits that are in possession of an outside party. Most institutions do not offer custodial/collateral services for CD’s; therefore, investments should be diversified among institutions avoiding concentrations of credit. In addition, investments should be placed only with Wisconsin financial institutions with current credit information kept on file for each institution. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 35 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, and Net Position or Equity (Continued) 1. Cash and Investments (Continued) Interest rate risk is the risk that changes in interest rates will adversely affect the fair market value of an investment resulting in losses if the investment was liquidated prior to maturity. The investment portfolio should be laddered over a three-year maturity schedule. Staggered investment maturities maximize liquidity to meet ongoing operations, and also allow the opportunity for reinvestment. Continual reinvestment allows City funds to ride the yield curve, minimizing interest rate risk for any given period. Investments should be held to maturity eliminating losses and risk from early liquidations. 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. The City has investments in the Local Government Investment Pool (LGIP) and certificates of deposits (CDs) which 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 fund balance. The difference between the bank balance and carrying value is due to outstanding checks and/or deposits in transit. The Wisconsin 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, 2016, 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 in the accompanying agency fund statement of fiduciary net position. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 36 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, and Net Position or Equity (Continued) 2. Receivables (Continued) Property tax calendar - 2016 tax roll: Lien date and levy date December 2016 Tax bills mailed December 2016 Payment in full, or January 31, 2017 First installment due January 31, 2017 Second installment due July 31, 2017 Personal property taxes in full January 31, 2017 Tax deed - 2016 delinquent real estate taxes October 2019 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, and other delinquent bills are generally not significant. 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 position. 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 General Fund financial statements, advances to other funds are offset equally by a fund balance nonspendable account which indicates that they do not constitute expendable available resources and, therefore, are not available for appropriation. The City has received federal grant funds for economic development loan programs to various businesses. It is the City’s policy to record revenue and expenditure when the initial loan is made from the federal grant funds. The City records a loan receivable and deferred inflows of resources when the loan has been made and funds have been disbursed. As loans are repaid, the receivable is reduced and revenue is recorded. Interest received from loan repayments is recognized as revenue when received in cash. Any unspent loan repayments at year end are presented as restricted fund balance in the governmental fund balance sheet. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 37 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, and Net Position or Equity (Continued) 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 and/or 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. 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 remainder, if generated from earnings, is shown as restricted net position. 5. Pensions For purposes of measuring the net pension liability (asset), deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Wisconsin Retirement System (WRS) and additions to/deductions from WRS’ fiduciary net position have been determined on the same basis as they are reported by WRS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. 6. Capital Assets Government-Wide Statements Capital assets, which include property, plant, and equipment, are reported in the government- wide financial statements. 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. Capital assets are generally defined by the utilities as assets with an initial, individual cost of more than $1,000 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 capital assets are recorded at their estimated fair value at the date of donation. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 38 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, and Net Position or Equity (Continued) 6. Capital Assets (Continued) Government-Wide Statements (Continued) Additions to and replacements of capital assets of business-type activities are recorded at original cost or the fair value at the time of construction, 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 funds. 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. Depreciation of all exhaustible capital assets is recorded as an allocated expense in the statement of activities, with accumulated depreciation reflected in the statement of net position. 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 40 Years Land improvements 30 Years Machinery and equipment 3-15 Years Infrastructure 20-50 Years Water Plant Source of supply 34 Years Pumping 22-31 Years Water treatment 22-30 Years Transmission and distribution 18-77 Years General 4-17 Years Sewer Plant Collecting system 30-77 Years Collecting system pumping 20-40 Years General 7-40 Years Fund Financial Statements In the fund financial statements, capital assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Capital assets used in proprietary fund operations are accounted for the same way as in the government-wide statements. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 39 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, and Net Position or Equity (Continued) 7. 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 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. 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, 2015 are determined on the basis of current salary rates and include salary-related payments. 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. 8. 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, landfill post-closure liability, 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 are reported as other financing sources, premium or discount on debt is reported as other financing sources or uses, 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. For the government-wide statements and proprietary fund statements, bond premiums and discounts are deferred and amortized over the life of the issue. Gains or losses on prior debt refunding are amortized over the remaining life of the old debt, or the life of the new debt, whichever is shorter. The balance at year-end for both premiums and discounts is shown as an increase or decrease in the liability section of the statement of net position. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 40 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, and Net Position or Equity (Continued) 8. Long-Term Obligations/Conduit Debt (Continued) The City has approved the issuance of an industrial development revenue bond (IDRB) for the benefit of private business enterprises. IDRB’s are secured mortgages or revenue agreements on the associated projects, and do not constitute indebtedness of the City. Accordingly, the bonds are not recorded as liabilities in the accompanying financial statements. The total amount of IRDB’s outstanding at the end of the year is $4.972 million, made up of one issue. 9. Claims and Judgments Claims and judgments are recorded as liabilities if all the conditions of Governmental Accounting Standards Board pronouncements are met. The liability and expenditure for claims and judgments is only reported in governmental fund types if it has matured. 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. 10. Equity Classifications Government-Wide Statements Equity is classified as net position and displayed in three components: a. Net investment in capital assets - Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances (excluding unspent debt proceeds) of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. b. Restricted net position - Consists of net position with constraints placed on their use 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 position - All other net position 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. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 41 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) D. Assets, Liabilities, and Net Position or Equity (Continued) 10. Equity Classifications (Continued) Fund Statements In the governmental fund financial statements, governmental funds report nonspendable fund balance for amounts that cannot be spent because they are either: Not in spendable form; or Legally or contractually required to be maintained intact. Restricted fund balance is reported when constraints placed on the use of resources are either: Externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments; or Imposed by law through constitutional provisions or enabling legislation Committed fund balance is reported for amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the Common Council. Assigned fund balance is reported for amounts that are constrained by the City management’s intent to be used for specific purposes, but is neither restricted nor committed. Unassigned fund balance is the residual classification for the General Fund or deficit balances in other funds. When restricted, committed, assigned, and unassigned amounts are available for use, it is the City’s policy to use restricted resources first, then committed resources, then assigned resources, then unassigned resources as they are needed. 11. Basis for Existing Rates - Proprietary Funds Billings are rendered and recorded quarterly based on metered usage. The utilities do not accrue revenues beyond billing dates. Water rates were approved by the Public Service Commission of Wisconsin and became effective July 1, 2015. Sewer rates were approved by the Common Council effective December 15, 2015. Stormwater Utility rates were approved by the Common Council effective July 1, 2015. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 42 NOTE 2 - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY Budgetary Information 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 1. A budget has been adopted for the General Fund, Debt Service Fund, certain special revenue funds, and capital project funds. Wisconsin Statute Section 65.90 requires that an annual budget be adopted for all funds. The budgeted amounts presented include any amendments made. The City may authorize transfers of budgeted amounts between departments up to $1,000. Transfers exceeding $1,000 between departments and changes in the overall budget must be approved by a two-thirds vote of the City Council. Appropriations lapse at year-end unless specifically carried over. Excess Expenditures over Appropriations The following individual funds experienced excess expenditures over appropriations: Excess Budgeted Actual Expenditures Expenditures Expenditures Over Budget General Fund: Health and Human Services 452,723 $ 473,469 $ 20,746 $ Police Activities 5,000 8,000 3,000 Public Land Activities 100,000 417,778 317,778 Senior Center Activities 20,000 25,924 5,924 Library Fund 1,938,421 1,985,774 47,353 Public Works Capital Construction 3,656,225 3,669,000 12,775 TIF 5 Fund 723,015 1,431,998 708,983 The legal level of budget control is the function level in the General Fund and total expenditures in all other funds. The City controls expenditures at the departmental level for management purposes. TIF District No. 3 debt service was included in the Debt Service Fund, rather than TIF District No. 3. TIF District No. 3 debt service was funded by TIF. The detail of those items can be found in the City’s year-end budget to actual report. Limitations on the City’s Tax Levy As part of Wisconsin’s Act 32 (2011), legislation was passed that limits the City’s future tax levies. Generally, the City is limited to its prior tax levy dollar amount (excluding TIF Districts), increased by the greater of the percentage change in the City’s equalized value due to new construction or zero percent for the 2012 levy collected in 2013 and thereafter. Changes in debt service from one year to the next are generally exempt from this limit, with certain exceptions. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 43 NOTE 3 - DETAILED NOTES ON ALL FUNDS A. Cash and Investments The City's cash and investments at year-end were comprised of the following: Carrying Bank Associated Value Balance Risks Petty cash 1,100 $ - $ Demand deposits: Noninterest bearing 1,165,486 1,166,054 Custodial credit Interest bearing 32,554,975 32,791,754 Custodial credit Certificates of deposit 5,547,951 5,547,951 Custodial credit Total deposits 39,268,412 39,505,759 Investments: Madison Community Foundation 219,765 219,765 Custodial credit Local Government Investment Pool (LGIP) 10,292,470 10,292,470 Credit, interest rate Total investments 10,512,235 10,512,235 Total cash and investments 49,781,747 $ 50,017,994 $ Reconciliation to the statement of net position: Unrestricted cash and investments 30,311,362 $ Restricted cash and investments 60,820 Fiduciary funds - Agency Fund 18,717,665 49,089,847 Cash and investments held for component unit: Unrestricted 691,900 Total cash and investments 49,781,747 $ The City’s library had $219,765 in an endowment fund at the Madison Community Foundation, which is pooled with all other investments of the Foundation. The Foundation has variance power over the funds in the endowment. Deposits in each local bank are insured by the FDIC in the amount of $250,000 for demand deposits and $250,000 for time and savings deposits. 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 custodial credit risk. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 44 NOTE 3 - DETAILED NOTES ON ALL FUNDS (Continued) A. Cash and Investments (Continued) Custodial Credit Risk Deposits - Custodial credit risk is the risk that in the event of a financial institution failure, the City’s deposits may not be returned to the City. As of December 31, 2016, $2,868,684 of the City’s total bank balances of $39,505,759 was exposed to custodial credit risk as uninsured and uncollateralized. Investments - For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investment or collateral securities that are in the possession of an outside party. The City had no investments exposed to custodial credit risk. Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The City had investments in the following external pools which are not rated: Local Government Investment Pool Interest Rate Risk The City had $10,292,470 invested in the local government investment pool, which had a weighted average maturity of 61 days. The City had $5,547,951 invested in certificate of deposits with a weighted average maturity of 348 days. Fair Value Measurements The City uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The City follows an accounting standard that defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and requires expanded disclosures about fair value measurements. In accordance with this standard, the City has categorized its investments, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Financial assets and liabilities recorded on the combined statements of financial position are categorized based on the inputs to the valuation techniques as follows: ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 45 NOTE 3 - DETAILED NOTES ON ALL FUNDS (Continued) A. Cash and Investments (Continued) Fair Value Measurements (Continued) Level 1 – Financial assets and liabilities are valued using inputs that are unadjusted quoted prices in active markets accessible at the measurement date of identical financial assets and liabilities. Level 2 – Financial assets and liabilities are valued based on quoted prices for similar assets, or inputs that are observable, either directly or indirectly for substantially the full term through corroboration with observable market data. Level 3 – Financial assets and liabilities are valued using pricing inputs which are unobservable for the asset, inputs that reflect the reporting entity’s own assumptions about the assumptions market participants and would use in pricing the asset. The City has the following recurring fair value measurements as of December 31, 2016: 1. The City has only one asset that is subject to fair value measurement. The City has used the fair value of its pro-rata share of the investment pool held by the Foundation to determine the fair value of the beneficial interest. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 46 NOTE 3 - DETAILED NOTES ON ALL FUNDS (Continued) B. Deferred Inflows of Resources and Unearned Revenue Governmental funds report deferred inflows of resources in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds report deferred inflows of resources for the subsequent year’s tax levy. Governmental funds report a liability 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 inflows of resources reported in the governmental funds were as follows: Unavailable Tax Levy Total Property taxes - $ 24,526,061 $ 24,526,061 $ Special assessments 797,189 - 797,189 Other receivables 5,267 - 5,267 802,456 $ 24,526,061 $ 25,328,517 $ For economic development loans, the City is limited by the Wisconsin Economic Development Corporation 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, 2016, the City has not exceeded its maximum retention cap. When it does, a liability to the state will be recorded. C. Restricted Assets Replacement Account The sewer utility establishes an equipment replacement account to be used for significant mechanical equipment replacement as required by the Wisconsin Department of Natural Resources. The balance in the equipment replacement fund at December 31, 2016 was $60,820. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 47 NOTE 3 - DETAILED NOTES ON ALL FUNDS (Continued) D. Capital Assets Capital asset activity for the year ended December 31, 2016 was as follows: Beginning Ending Balance Additions Deletions Balance Governmental activities Capital assets not being depreciated: Land 7,448,053 $ - $ 1,546,149 $ 5,901,904 $ Right of way 18,751,280 104,637 - 18,855,917 Construction in progress 57,265 258,967 57,265 258,967 Total capital assets not being depreciated 26,256,598 363,604 1,603,414 25,016,788 Capital assets being depreciated: Land improvements 7,516,039 598,738 - 8,114,777 Buildings 28,615,012 199,958 745,292 28,069,678 Machinery and equipment 5,557,410 1,158,360 358,171 6,357,599 Streets-infrastructure 27,525,683 1,702,683 - 29,228,366 Storm sewers-infrastructure 9,294,846 328,264 - 9,623,110 Traffic signals-infrastructure 1,654,059 11,727 - 1,665,786 Sidewalks-infrastructure 4,154,083 426,797 - 4,580,880 Bridges-infrastructure 3,278,231 77,511 - 3,355,742 Fiber Optic-infrastructure - 31,625 - 31,625 Rail spur-infrastructure 482,163 - - 482,163 Total capital assets being depreciated 88,077,526 4,535,663 1,103,463 91,509,726 Less: accumulated depreciation for: Land improvements 3,458,124 405,484 - 3,863,608 Buildings 4,965,642 696,300 37,264 5,624,678 Machinery and equipment 3,922,615 546,665 334,365 4,134,915 Streets-infrastructure 4,597,347 436,244 - 5,033,591 Storm sewers-infrastructure 2,762,170 192,462 - 2,954,632 Traffic signals-infrastructure 783,974 66,631 - 850,605 Sidewalks-infrastructure 1,549,316 91,618 - 1,640,934 Bridges-infrastructure 529,975 44,743 - 574,718 Fiber Optic-infrastructure - 633 - 633 Rail spur-infrastructure 167,247 16,072 - 183,319 Total accumulated depreciation 22,736,410 2,496,852 371,629 24,861,633 Capital assets being depreciated, net of depreciation 65,341,116 2,038,811 731,834 66,648,093 Total capital assets, net of depreciation 91,597,714 $ 2,402,415 $ 2,335,248 $ 91,664,881 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 48 NOTE 3 - DETAILED NOTES ON ALL FUNDS (Continued) D. Capital Assets (Continued) Beginning Ending Balance Additions Deletions Balance Water Utility Capital assets not being depreciated: Land and land rights 222,277 $ - $ - $ 222,277 $ Total capital assets not being depreciated 222,277 - - 222,277 Capital assets being depreciated: Source of supply 781,509 168,214 - 949,723 Pumping 2,800,898 - - 2,800,898 Treatment 458,602 6,818 - 465,420 Transmission and distribution 23,164,322 1,089,432 144,634 24,109,120 Administrative and general assets 910,153 1,324,981 - 2,235,134 Total capital assets being depreciated 28,115,484 2,589,445 144,634 30,560,295 Less: accumulated depreciation for: Source of supply 418,421 28,565 - 446,986 Pumping 1,586,357 98,984 - 1,685,341 Treatment 349,604 8,396 - 358,000 Transmission and distribution 6,136,584 356,128 144,634 6,348,078 Administrative and general assets 677,482 81,084 - 758,566 Total accumulated depreciation 9,168,448 573,157 144,634 9,596,971 Capital assets being depreciated, net of depreciation 18,947,036 2,016,288 - 20,963,324 Total capital assets, net of depreciation 19,169,313 $ 2,016,288 $ - $ 21,185,601 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 49 NOTE 3 - DETAILED NOTES ON ALL FUNDS (Continued) D. Capital Assets (Continued) Beginning Ending Balance Additions Deletions Balance Sewer Utility Capital assets not being depreciated: Land and land rights 66,830 $ - $ - $ 66,830 $ Construction in progress 305,353 - 305,353 - Total capital assets not being depreciated 372,183 - 305,353 66,830 Capital assets being depreciated: Collection system 14,076,258 279,014 7,059 14,348,213 Collection system pumping 1,348,798 377,569 - 1,726,367 Administrative and general assets 532,552 415,164 - 947,716 Total capital assets being depreciated 15,957,608 1,071,747 7,059 17,022,296 Less: accumulated depreciation 4,969,896 315,285 7,059 5,278,122 Capital assets being depreciated, net of depreciation 10,987,712 756,462 - 11,744,174 Total capital assets, net of depreciation 11,054,542 $ 756,462 $ - $ 11,811,004 $ ` 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: Land improvements 7,315,236 168,053 - 7,483,289 Buildings 1,325,553 - - 1,325,553 Equipment 711,549 168,043 63,397 816,195 Total capital assets being depreciated 9,352,338 336,096 63,397 9,625,037 Less: accumulated depreciation for: Land improvements 269,297 19,900 - 289,197 Buildings 441,041 42,445 - 483,486 Equipment 524,488 53,384 49,160 528,712 Total accumulated depreciation 1,234,826 115,729 49,160 1,301,395 Capital assets being depreciated, net of depreciation 8,117,512 220,367 14,237 8,323,642 Total capital assets, net of depreciation 10,333,512 $ 220,367 $ 14,237 $ 10,539,642 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 50 NOTE 3 - DETAILED NOTES ON ALL FUNDS (Continued) D. Capital Assets (Continued) Beginning Ending Balance Additions Deletions Balance Nonmajor Enterprise Funds Capital assets not being depreciated: Land and land rights 1,935,149 $ 1,546,149 $ - $ 3,481,298 $ Construction in progress 504,807 578,977 469,284 614,500 Total capital assets not being depreciated 2,439,956 2,125,126 469,284 4,095,798 Capital assets being depreciated: Land improvements 739,658 605,019 - 1,344,677 Buildings - 708,028 - 708,028 Vehicles and equipment - 82,623 - 82,623 Total capital assets being depreciated 739,658 1,395,670 - 2,135,328 Less: accumulated depreciation for: Land improvements 96,637 67,517 - 164,154 Buildings - 18,632 - 18,632 Vehicles and equipment - 8,996 - 8,996 Total accumulated depreciation 96,637 95,145 - 191,782 Capital assets being depreciated, net of depreciation 643,021 1,300,525 - 1,943,546 Total capital assets, net of depreciation 3,082,977 $ 3,425,651 $ 469,284 $ 6,039,344 $ Total business-type activities capital assets, net of depreciation 43,640,344 $ 6,418,768 $ 483,521 $ 49,575,591 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 51 NOTE 3 - DETAILED NOTES ON ALL FUNDS (Continued) D. Capital Assets (Continued) Depreciation expense was charged to functions as follows: Governmental activities General government 46,080 $ Public safety 503,399 Public works, which includes the depreciation of streets, storm sewers, traffic signals, sidewalks, bridges, and rail spur 1,278,298 Conservation and development 136,639 Leisure activities 532,436 Total governmental activities depreciation expense 2,496,852 $ Business-type activities Water Utility: Depreciation 573,157 $ Depreciation charged to Sewer Utility operation and maintenance expenses (12,977) 560,180 Sewer Utility: Depreciation 315,285 Depreciation charged to Sewer Utility operation and maintenance expenses 12,977 328,262 Pleasant View Golf Course 115,729 Nonmajor Enterprise Funds 95,145 Total business-type activities depreciation expense 1,099,316 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 52 NOTE 3 - DETAILED NOTES ON ALL FUNDS (Continued) E. Interfund Receivables/Payables and Transfers The following is a schedule of interfund receivables and payables reported in due to and due from other funds in the financial statements, including any overdrafts on pooled cash and investment accounts. Receivable Fund Payable Fund Amount General Fund Nonmajor Governmental Funds 4,668 $ Water Utility General Fund 50,508 Sewer Utility General Fund 13,540 Stomwater Utility General Fund 3,341 Total fund financial statements 72,057 $ For the statement of net position, interfund balances, which are owed within the governmental activities or business-type activities, are netted and eliminated. 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. The City of Middleton, Wisconsin General Fund and TIF District No. 3 have provided internal financing to the Pleasant View Golf Course, TIF District No. 5, and the Middleton Utility District. No repayment schedules have been established on the advances to the Pleasant View Golf Course and these amounts are not expected to be paid within one year. The principal purpose of these advances is to finance costs internally rather than borrowing externally. For the statement of net position, interfund balances which are owed within the governmental activities or business-type activities are netted and eliminated. The following is a schedule of interfund advances. Receivable Fund Payable Fund Amount General Fund Pleasant View Golf Course 2,594,780 $ TIF District No. 3 TIF District No. 5 2,048,999 TIF District No. 3 Pleasant View Golf Course 2,144,290 TIF District No. 3 Middleton Utility District - Nonmajor Enterprise Fund 460,256 Total fund financial statements 7,248,325 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 53 NOTE 3 - DETAILED NOTES ON ALL FUNDS (Continued) E. Interfund Receivables/Payables and Transfers (Continued) The following is a schedule of interfund transfers: Nonmjor Nonmajor Debt Capital Water Enterprise Governmental Transfer Out Fund General Service Projects Utility Funds Funds Total General - $ 3,566,319 $ 1,323,655 $ - $ - $ 1,328,607 $ 6,218,581 $ TDF District No. 3 - 2,108,833 - - - - 2,108,833 Capital Projects Fund - 1,095,355 402,407 - - - 1,497,762 Water Utility 488,046 - - - - - 488,046 Sewer Utility - - 4,554 17,027 - - 21,581 Nonmajor Governmental Funds - 257,170 179,343 - 142,496 99,390 678,399 Totals 488,046 $ 7,027,677 $ 1,909,959 $ 17,027 $ 142,496 $ 1,427,997 $ 11,013,202 $ Transfer In Fund 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 to debt service from the funds collecting the receipts to the debt service fund, and use unrestricted revenue collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. The transfer from the Water Utility to the General Fund is for payment in lieu of property taxes. For the statement of activities, interfund transfers within the governmental activities or business-type activities are netted and eliminated. The City created an Airport Utility through action of the City Council. Capital assets were contributed from the Governmental Activities to the Airport Utility. On the statement of revenues, expenses, and changes in net position for the Airport Utility the assets were recognized as capital contributions in the amount of $2,254,177 from the City. The capital contribution from the City was eliminated of the Government-wide statement of activities as a transfer. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 54 NOTE 3 - DETAILED NOTES ON ALL FUNDS (Continued) F. Long-Term Obligations Long-term obligations activity for the year ended December 31, 2016 was as follows: Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year Governmental activities Bonds and notes payable: General obligation debt 50,730,000 $ 6,000,000 $ 9,400,000 $ 47,330,000 $ 5,953,611 $ Debt premium and discount 670,887 133,867 106,986 697,768 90,987 Landfill post-closure liability 612,584 64,526 - 677,110 - 52,013,471 6,198,393 9,506,986 48,704,878 6,044,598 Other liabilities: Net pension liability (asset) (1,718,300) 2,902,200 - 1,183,900 - Other postemployment benefits 72,412 117,472 56,556 133,328 57,000 Vested compensated absences 4,114,625 1,250,051 929,457 4,435,219 929,000 Total other liabilities 2,468,737 4,269,723 986,013 5,752,447 986,000 Total governmental activities long-term liabilities 54,482,208 $ 10,468,116 $ 10,492,999 $ 54,457,325 $ 7,030,598 $ Business-type activities Bonds and notes payable: General obligation debt 2,645,000 $ - $ 945,000 $ 1,700,000 $ 300,000 $ Debt premium 4,613 - 4,613 - - 2,649,613 - 949,613 1,700,000 300,000 Other liabilities: Net pension liability (asset) (182,320) 265,791 - 83,471 - Vested compensated absences 412,779 97,106 49,400 460,485 49,000 Total other liabilities 412,779 97,106 49,400 460,485 49,000 Total business-type activities long-term liabilities 2,880,072 $ 362,897 $ 999,013 $ 2,243,956 $ 349,000 $ General Obligation Debt 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. 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. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 55 NOTE 3 - DETAILED NOTES ON ALL FUNDS (Continued) F. Long-Term Obligations (Continued) General Obligation Debt (Continued) The following general obligation debt was issued in 2016: $2,100,000 State Trust Fund Loan On March 14, 2016, the City of Middleton, Wisconsin issued $2,100,000 in a State Trust Fund Loan. The proceeds of the loan will be used to finance expenditures of Tax Incremental District No. 5. The loan will bear interest at a stated interest rate of 3.75%, with the final principal payment due March 15, 2034. $3,900,000 General Obligation Refunding Bonds On May 23, 2016, the City of Middleton, Wisconsin issued $3,900,000 General Obligation Refunding Bonds. The proceeds of the bonds will be used for the purpose of advance refunding $3,720,000 of the General Obligation Refunding Bonds, Series 2008A, dated June 2, 2008. The refunding bonds will bear interest at a rate of 2.00%, with the final principal payment being due February 1, 2027. The refunding resulted in a reduction of total debt service over 12 years by $450,467 and to obtain an economic gain (difference between the present values of the debt service payments on the old and new debt) of $300,400. Legal Debt Margin In accordance with Wisconsin Statutes, total general obligation indebtedness of the City may not exceed 5% of the equalized value of taxable property within the City’s jurisdiction. The debt limit as of December 31, 2016, was $157,188,345. Total general obligation debt outstanding at year end was $49,030,000. The City was in compliance with the legal debt limitation as of December 31, 2016. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 56 NOTE 3 - DETAILED NOTES ON ALL FUNDS (Continued) F. Long-Term Obligations (Continued) General Obligation Debt (Continued) Date of Final Interest Original Balance Type Issue Maturity Rates Amount 12/31/16 Governmental Activities General Obligation Debt 2008 General obligation refunding bonds 06/02/08 12/01/27 3.00%-4.00% 6,530,000 $ 840,000 $ 2010 General obligation refunding bonds 04/15/10 09/01/29 1.45%-8.5% 10,110,000 7,850,000 2010 General obligation promissory notes 04/15/10 09/01/17 1.20%-3.80% 2,010,000 160,000 2010 Taxable general obligation refunding bonds 11/23/10 09/01/20 .85%-3.75% 6,580,000 3,255,000 2010 General obligation refunding bonds 11/23/10 09/01/20 2.00%-4.00% 4,625,000 2,395,000 2011 General obligation promissory notes 05/09/11 09/01/19 2.00%-3.00% 2,500,000 1,600,000 2012 Taxable general obligation promissory notes 05/12/12 03/01/19 .46%-1.85% 2,540,000 1,120,000 2012 General obligation promissory notes 05/12/12 09/01/20 2.00%-2.25% 2,015,000 1,045,000 2012 General obligation promissory notes 12/28/12 09/01/21 1.00%-2.00% 4,500,000 2,990,000 2012 General obligation refunding bonds 12/28/12 09/01/32 1.05%-3.80% 5,110,000 5,110,000 2013 General obligation promissory notes 12/23/13 02/01/23 2.00%-3.00% 4,000,000 3,245,000 2014 General obligation promissory notes 12/09/14 08/01/22 2.00%-3.00% 2,000,000 1,505,000 2015 General obligation promissory notes 12/08/15 09/01/30 2.00%-3.00% 6,500,000 6,500,000 2015 General obligation promissory notes 12/08/15 02/01/23 2.00% 3,000,000 2,770,000 2015 General obligation promissory notes 12/21/15 08/01/17 2.00% 1,875,000 945,000 2016 General obligation refunding bonds 05/23/16 02/01/27 2.00% 3,900,000 3,900,000 2016 State trust fund loan 03/14/16 03/15/34 3.75% 2,100,000 2,100,000 Total governmental activities- general obligation debt 47,330,000 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 57 NOTE 3 - DETAILED NOTES ON ALL FUNDS (Continued) F. Long-Term Obligations (Continued) General Obligation Debt (Continued) Date of Final Interest Original Balance Type Issue Maturity Rates Indebtedness 12/31/16 Business-type Activities General Obligation Debt 2008 General obligation refunding bonds 12/30/08 09/01/21 3.505%-4.45% 1,700,000 $ 1,700,000 $ Total business-type activities - general obligation debt 1,700,000 $ Debt service requirements to maturity are as follows: Principal Interest Principal Interest Totals 2017 5,953,611 $ 1,592,742 $ 300,000 $ 66,875 $ 7,913,228 $ 2018 5,671,963 1,445,769 300,000 54,125 7,471,857 2019 5,525,224 1,137,607 400,000 39,250 7,102,081 2020 5,008,418 982,606 400,000 22,050 6,413,074 2021 3,307,110 830,702 300,000 6,675 4,444,487 2022-2026 12,657,825 2,915,686 - - 15,573,511 2027-2031 8,042,578 1,002,059 - - 9,044,637 2032-2034 1,163,271 58,920 - - 1,222,191 Totals $ 47,330,000 $ 9,966,090 $1,700,000 $ 188,975 $59,185,065 Governmental Business-type Long-Term Debt Long-Term Debt Estimated payments of accumulated employee benefits and other commitments are not included in the above schedule. The compensated absences liability attributable to governmental activities will be liquidated primarily by the General Fund. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 58 NOTE 3 - DETAILED NOTES ON ALL FUNDS (Continued) G. Governmental Activities Net Position/Fund Balances Governmental Activities Governmental activities net position reported on the government wide statement of net position at December 31, 2016 includes the following: Net investment in capital assets: Capital assets, net of accumulated depreciation $ 91,664,881 Less: related long-term debt (excluding unspent capital related debt proceeds) (47,459,535) Total invested in capital assets, net of related debt 44,205,346 Restricted: Community development 12,070,553 Library 325,334 Impact fees 1,919,883 Tourism 1,726,759 Senior center 164,769 16,207,298 Unrestricted 9,130,412 Total governmental activities net position 69,543,056 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 59 NOTE 3 - DETAILED NOTES ON ALL FUNDS (Continued) G. Governmental Activities Net Position/Fund Balances (Continued) Governmental Fund Balances (Continued) Governmental fund balances reported on the fund financial statements at December 31, 2016 include the following: TIF Debt District Capital General Service No. 3 Projects Nonmajor Total Nonspendable: Prepaid items 159,135 $ - $ - $ - $ - $ 159,135 $ Advances to other funds 2,594,780 - - - - 2,594,780 Noncurrent receivables 104,029 - - - - 104,029 2,857,944 - - - - 2,857,944 Restricted: Debt service - 24,120 - - - 24,120 Community development - - 9,143,261 - 2,154,328 11,297,589 Library - - - - 325,334 325,334 Capital improvements - - - 292,797 - 292,797 Impact fees - - - - 1,919,883 1,919,883 Tourism - - - - 1,726,759 1,726,759 Senior center - - - - 164,769 164,769 - 24,120 9,143,261 292,797 6,291,073 15,751,251 Committed: Library - - - - 45,395 45,395 Assigned: Post employment benefits 1,560,685 - - - - 1,560,685 Public safety - fire 401,413 - - - - 401,413 Public safety - EMS 336,000 - - - - 336,000 Other 1,785,619 - - - - 1,785,619 4,083,717 - - - - 4,083,717 Unassigned 5,134,962 - - - (8,002) 5,126,960 Total fund balances 12,076,623 $ 24,120 $ 9,143,261 $ 292,797 $ 6,328,466 $ 27,865,267 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 60 NOTE 3 - DETAILED NOTES ON ALL FUNDS (Continued) G. Governmental Activities Net Position/Fund Balances (Continued) Business-Type Activities Business-type activities net position reported on the government-wide and proprietary funds statement of net position at December 31, 2016 include the following: Pleasant Nonmajor View Golf Proprietary Water Sewer Course Funds Totals Capital assets 30,782,572 $ 17,089,126 $ 11,841,037 $ 6,231,126 $ 65,943,861 $ Accumulated depreciation (9,596,971) (5,278,122) (1,301,395) (191,782) (16,368,270) Subtotals 21,185,601 11,811,004 10,539,642 6,039,344 49,575,591 Less capital related long-term debt - - 1,700,000 - 1,700,000 Net investment in capital assets 21,185,601 11,811,004 8,839,642 6,039,344 47,875,591 Restricted for equipment replacement - 60,820 - - 60,820 Unrestricted (deficit) 4,017,784 3,723,944 (4,803,597) 145,873 3,084,004 Total business-type activities net position 25,203,385 $ 15,595,768 $ 4,036,045 $ 6,185,217 $ 51,020,415 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 61 NOTE 3 - DETAILED NOTES ON ALL FUNDS (Continued) H. Component Unit 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 position 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. Basis of Accounting/Measurement Focus The CDA follows the full accrual basis of accounting and the flow of economic resources measurement focus. Capital Assets Beginning Ending Useful Balance Additions Deletions Balance Lives Land 154,000 $ - $ - $ 154,000 $ - Buildings 2,874,692 58,805 - 2,933,497 40 years Less: Accumulated depreciation (918,389) (65,433) - (983,822) - Totals 2,110,303 $ (6,628) $ - $ 2,103,675 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 62 NOTE 4 - OTHER INFORMATION A. Employees’ Retirement System General Information about the Pension Plan Plan Description - The WRS is a cost-sharing multiple-employer defined benefit pension plan. WRS benefits and other plan provisions are established by Chapter 40 of the Wisconsin Statutes. Benefit terms may only be modified by the legislature. The retirement system is administered by the Wisconsin Department of Employee Trust Funds (ETF). The system provides coverage to all eligible State of Wisconsin, local government and other public employees. All employees, initially employed by a participating WRS employer on or after July 1, 2011, and expected to work at least 1200 hours a year (880 hours for teachers and school district educational support employees) and expected to be employed for at least one year from employee’s date of hire are eligible to participate in the WRS. Vesting - 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, and prior to July 1, 2011, are immediately vested. Participants who initially became WRS eligible on or after July 1, 2011, must have five years of creditable service to be vested. Benefits Provided - Employees who retire at or after age 65 (54 for protective occupation employees, 62 for elected officials and State executive participants) are entitled to receive an unreduced retirement benefit. 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 participant's three highest years' earnings. Creditable service is the creditable current and prior service expressed in years or decimal equivalents of partial years for which a participant receives earnings and makes contributions as required. The formula factor is a standard percentage based on employment category. Employees may retire at age 55 (50 for protective occupation employees) and receive reduced benefits. Employees terminating covered employment before becoming eligible for a retirement benefit may withdraw their contributions and forfeit all rights to any subsequent benefits. The WRS also provides death and disability benefits for employees. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 63 NOTE 4 - OTHER INFORMATION (Continued) A. Employees’ Retirement System (Continued) General Information about the Pension Plan (Continued) Post-Retirement Adjustments - The Employee Trust Funds Board may periodically adjust annuity payments from the retirement system based on annual investment performance in accordance with s. 40.27, Wis. Stat. An increase (or decrease) in annuity payments may result when investment gains (losses), together with other actuarial experience factors, create a surplus (shortfall) in the reserves, as determined by the system’s consulting actuary. Annuity increases are not based on cost of living or other similar factors. For Core annuities, decreases may be applied only to previously granted increases. By law, Core annuities cannot be reduced to an amount below the original, guaranteed amount (the floor) set at retirement. The Core and Variable annuity adjustments granted during recent years are as follows: Year Core Fund Adjustment Variable Fund Adjustment 2006 0.8% 3.0% 2007 3.0% 10.0% 2008 6.6% 0.0% 2009 -2.1% -42.0% 2010 -1.3% -22.0% 2011 -1.2% 11.0% 2012 -7.0% -7.0% 2013 -9.6% 9.0% 2014 4.7% 25.0% 2015 2.9% 2.0% Contributions - Required contributions are determined by an annual actuarial valuation in accordance with Chapter 40 of the Wisconsin Statutes. The employee required contribution is one-half of the actuarially determined contribution rate for general category employees, including teachers, and Executives and Elected Officials. Required contributions for protective employees are the same rate as general employees. Employers are required to contribute the remainder of the actuarially determined contribution rate. The employer may not pay the employee required contribution unless provided for by an existing collective bargaining agreement. During the reporting period, the WRS recognized $764,194 in contributions from the employer. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 64 NOTE 4 - OTHER INFORMATION (Continued) A. Employees’ Retirement System (Continued) Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions Contribution rates as of December 31, 2016 are: Employee Category Employee Employer General 6.8% 6.8% Executive & Elected officials 7.7% 7.7% Protective with Social Security 6.8% 9.5% Protective without Social Security 6.8% 13.1% At December 31, 2016, the City reported a liability of $1,267,371 for its proportionate share of the net pension liability. The net pension liability was measured as of December 31, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of December 31, 2014 rolled forward to December 31, 2015. No material changes in assumptions or benefit terms occurred between the actuarial valuation date and the measurement date. The City’s proportion of the net pension liability was based on the City’s share of contributions to the pension plan relative to the contributions of all participating employers. At December 31, 2015, the City’s proportion was 0.07799302%, which was an increase of 0.00061483% from its proportion measured as of December 31, 2014. For the year ended December 31, 2016, the City recognized pension expense of $1,516,448. At December 31, 2016, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources Differences between expected and actual experience 214,403 $ 2,667,162 $ Changes in assumptions 886,708 - Net differences between projected and actual earnings on pension plan investments 5,188,981 - Changes in proportion and differences between employer contributions and proportionate share of contributions - 41,323 Employer contributions subsequent to the measurement date 756,875 - Total 7,046,967 $ 2,708,485 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 65 NOTE 4 - OTHER INFORMATION (Continued) A. Employees’ Retirement System (Continued) Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued) The $756,875 reported as deferred outflows related to pension resulting from the WRS Employer’s contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended December 31, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pension will be recognized in pension expense as follows: Deferred Outflows Deferred Inflows Year ended December 31: of Resources of Resources 2017 1,633,154 $ 657,010 $ 2018 1,633,154 657,010 2019 1,633,154 657,010 2020 1,362,263 651,734 2021 28,367 85,721 Thereafter - - Actuarial Assumption - The total pension liability in the December 31, 2015, actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement: Actuarial Valuation Date: December 31, 2014 Measurement Date of Net Pension Liability (Asset): December 31, 2015 Actuarial Cost Method: Entry Age Asset Valuation Method: Fair Market Value Long-Term Expected Rate of Return: 7.2% Discount Rate: 7.2% Salary Increases Inflation: 3.2% Seniority/Merit: 0.2% - 5.6% Mortality: Wisconsin 2012 Mortality Table Post-retirement Adjustments*: 2.1% * No post-retirement adjustment is guaranteed. Actual adjustments are based on recognized investment return, actuarial experience and other factors. 2.1% is the assumed annual adjustment based on the investment return assumption and the post-retirement discount rate. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 66 NOTE 4 - OTHER INFORMATION (Continued) A. Employees’ Retirement System (Continued) Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued) Actuarial assumptions are based upon an experience study conducted in 2012 using experience from 2009 – 2011. The total pension liability for December 31, 2015 is based upon a roll-forward of the liability calculated from the December 31, 2014 actuarial valuation. Long-term Expected Return on Plan Assets - The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the table on the following table: Destination Long-Term Long-Term Current Asset Target Asset Expected Nominal Expected Real Core Fund Asset Class Allocation % Allocation% Rate of Return % Rate of Return % U.S. Equities 27.00% 23.00% 7.60% 4.70% International Equities 24.50% 22.00% 8.50% 5.60% Fixed Income 27.50% 37.00% 4.40% 1.60% Inflation Sensitive Assets 10.00% 20.00% 4.20% 1.40% Real Estate 7.00% 7.00% 6.50% 3.60% Private Equity/Debt 7.00% 7.00% 9.40% 6.50% Multi-Asset 4.00% 4.00% 6.70% 3.80% Total Core Fund 107.00% 120.00% 7.40% 4.50% Variable Fund Asset Class U.S. Equities 70.00% 70.00% 7.60% 4.70% International Equities 30.00% 30.00% 8.50% 5.60% Total Variable Fund 100.00% 100.00% 7.90% 5.00% New England Pension Consultants Long Term US CPI (Inflation) Forecast: 2.75% Asset Allocations are managed within established ranges, target percentages may differ from actual allocations Single Discount Rate - A single discount rate of 7.20% was used to measure the total pension liability. This single discount rate was based on the expected rate of return on pension plan investments of 7.20% and a long term bond rate of 3.56%. Because of the unique structure of WRS, the 7.20% expected rate of return implies that a dividend of approximately 2.1% will always be paid. For purposes of the single discount rate, it was assumed that the dividend ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 67 NOTE 4 - OTHER INFORMATION (Continued) A. Employees’ Retirement System (Continued) would always be paid. The projection of cash flows used to determine this single discount rate assumed that plan member contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on these assumptions, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments (including expected dividends) of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued) Sensitivity of the Utilities’ allocation of the City’s Proportionate Share of the Net Pension Liability (Asset) - The following presents the City’s proportionate share of the net pension liability (asset) calculated using the discount rate of 7.20 percent, as well as what the City’s proportionate share of the net pension liability (asset) would be if it were calculated using a discount rate that is 1-percentage-point lower (6.20 percent) or 1-percentage-point higher (8.20 percent) than the current rate: 1% Decrease to Current Discount 1% Increase to Discount Rate Rate Discount Rate (6.20%) (7.20%) (8.20%) City's proportionate share of the net pension liability (asset) 8,889,367 $ 1,267,371 $ (4,685,543) $ Detailed information about the pension plan’s fiduciary net position is available in separately issued financial statements available at http://legis.wisconsin.gov/lab/ and reference report number 15-11. Payables to the Pension Plan The City reported payables to WRS of $232,216 for the City’s share. 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; worker’s 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 have been no significant reductions in insurance coverage to the prior year. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 68 NOTE 4 - OTHER INFORMATION (Continued) C. Other Postemployment Benefits The City provides a single-employer defined benefit healthcare plan. The plan allows eligible retirees to remain on the City’s health care plan which covers both active and retired members. Under the current arrangement the retiree is responsible for 100 percent of the medical and dental premiums. Benefit provisions were established through collective bargaining contracts for represented employees and by City policy for nonrepresented employees. To be eligible for these benefits the retiree must have retired under the provisions of the Wisconsin Retirement System, with 20 years of service to the City, not employed in another capacity that offers health insurance, and is not currently eligible for Medicare. The Plan does not issue stand-alone financial statements. The City pays these post-employment benefits on a pay-as-you-go basis; accordingly no liability is recognized within the fund financial statements. However, a liability is recorded for the unfunded liability on the government-wide financial statements on a go forward basis as allowed under Government Accounting Standards Board Statement No. 45. The City’s annual OPEB cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The following table shows the components of the City’s annual OPEB cost for the year, the amount actually contributed to the plan (pay-as-you-go basis), and the changes in the City’s net OPEB obligation: Annual Required Contribution 117,453 $ Interest on Net OPEB Obligation 2,897 Actuarial Adjustment to ARC (2,878) Annual OPEB Cost (expense) 117,472 Contributions made (56,556) Increase in net OPEB Obligation 60,916 Net OPEB Liability - beginning of the year 72,412 Net OPEB Liability - end of year 133,328 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 69 NOTE 4 - OTHER INFORMATION (Continued) C. Other Postemployment Benefits (Continued) The City’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB liability for the current year and the two preceding years are as follows: Percentage of Fiscal Year Annual Annual OPEB Net OPEB Ended OPEB Cost Cost Contributed Liability 12/31/2016 117,472 $ 48.14% 133,328 $ 12/31/2015 117,453 38.35% 72,412 12/31/2014 - 0.00% - The funded status as of December 31, 2015, the most recent actuarial valuation date, was zero percent funded. The actuarial accrued liability for benefits was $1,128,865 and the actuarial value of assets was resulting in an unfunded actuarial liability (UAAL) of $1,128,865. The covered payroll (annual payroll of active employees covered by the plan) was $7,030,820, and the ration of the UAAL to the covered payroll is 16.06%. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend amounts determined regarding the funded status of the plan and the annual required contributions of the Employer, and are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The retiree healthcare valuation was based on the level percentage amortization method. Calculations are based on the types of benefits provided under the terms of the substantive plan at the time of each valuation and on the pattern of sharing costs between the employer and plan members to that point. In addition, the projection of benefits for financial reporting purposes does not explicitly incorporate the potential effects of legal or contractual funding limitations on the pattern of cost sharing between the employer and plan members in the future. Actuarial calculations reflect a long-term perspective. Consistent with that perspective, actuarial methods and assumptions used include techniques that are designed to reduce short-term volatility in actuarial accrued liabilities and the actuarial value of assets. The OPEB valuation uses a discount rate assumption of 4.0 percent based on the City’s actuarial valuation. The healthcare cost trends rate is 7.5 percent initially, and reduced by decrements to the ultimate rate of 5.0 percent in 18 years. The actuarial accrued liability for the benefits is amortized over an open period of 30 years. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 70 NOTE 4 - OTHER INFORMATION (Continued) D. Commitments and Contingencies From time to time, the City becomes party to 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 not have a material adverse effect on the City’s financial position. Expenditures of the City’s Tax Increment Districts are subject to review and audit in accordance with State Statute 66.1105 by an independent audit firm. The City has allocated certain expenditures for administration, public safety, public lands administration, and transit services which were reimbursed to the City’s General Fund. For 2016, these costs amount to approximately $1.577 million. Review by the Wisconsin Department of Revenue or the overlapping taxation districts could result in a portion of these expenditures being disallowed. The City has entered into various development agreements in connection with the Tax Increment Districts. Under the terms of these agreements, the City has made commitments for development incentives or reimbursements. As of January 1, 2016, the City had outstanding commitments of $12.4 million. During the year, the City committed to an additional $24.9 million, and satisfied $3.3 million. As of December 31, 2016, the City has remaining commitments of $36.7 million pending satisfaction of the underlying agreements. E. Tax Abatements The City of Middleton, Wisconsin enters into agreements with developers under the provisions of Wisconsin Statutes 66.1105 “Tax Increment Law,” which allows the City to rebate taxes generated under a specific developer agreement in order to incentive economic development. As of December 31, 2016, the City maintains and operates Tax Increment District No. 3 and Tax Increment District No. 5, which are presented in the financial statements as capital projects funds. Amount of Amount of Percentage of Taxes Rebated Taxes Collected Total Taxes during the during the Rebated during TID Purpose Fiscal Year Fiscal Year the Fiscal Year 3 Rebate of taxes for the promotion of economic development 1,166,961 $ 1,282,408 $ 91.00% 5 Rebate of taxes for the promotion of economic development 27,387 58,555 46.77% Total rebate of taxes for the promotion of eceonomic development 1,194,348 $ 1,340,963 $ 89.07% The City has not made any commitments as part of the agreements other than to reduce taxes. The City is not subject to any tax abatement agreements entered into by other governmental entities. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 71 NOTE 4 - OTHER INFORMATION (Continued) F. Joint Ventures Metropolitan Refuse District, Inc. The Cities of Middleton, Monona, Verona and the Villages of Shorewood Hills and Waunakee are members of the Metropolitan Refuse District, Inc. (District), which owns and operates the closed local sanitary landfill. The landfill stopped accepting waste at the end of 1996. The three member communities share in the operational costs of the District based on estimated population, with the 2016 percentages as follows: City of Middleton 35% City of Monona 16% City of Verona 21% Village of Shorewood Hills 3% Village of Waunakee 26% The District is made up of member from each community. For the City, the corporate member is the Mayor or the Mayor’s appointed designee. For each of the Villages, the corporate member is the Village President or the Village President’s appointed designee. At the annual meeting, members appoint directors and officers as the governing body. The governing body has authority to adopt its own budget and control of financial affairs of the District. The District’s fund balance at December 31, 2016 is a deficit of $1,209,125. 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 56%, which amounts to $677,110 of the District’s net deficit. The City’s share of the net deficit has been reported in the government-wide statement of net position as landfill post- closure cost. The City made payments totaling $79,630 to the District in 2016. The City will continue to support the District’s postclosure care costs in the future. The District’s closed 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. Separately issued financial statements of the District are not prepared. ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO FINANCIAL STATEMENTS December 31, 2016 72 NOTE 4 - OTHER INFORMATION (Continued) F. Joint Ventures (Continued) Multijurisdictional Public Safety Information System Commission (MJPISC) The City of Fitchburg, City of Sun Prairie, City of Middleton, City of Verona, and the City of Monona jointly operate the Multijurisdictional Public Safety Information System Commission. On March 20, 2003, the City of Middleton, City of Fitchburg, and the City of Sun Prairie executed an intergovernmental agreement under authority of Section 66.0301 of the Wisconsin Statutes. The City of Verona and the City of Monona joined the Commission in 2009. The Commission adopts its own budget. Net operating costs including debt service are shared by the five 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. Separately issued financial statements of the Commission can be obtained from the City of Sun Prairie at 300 East Main Street, Sun Prairie, Wisconsin 53590. 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 operations 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 $829,692 to the District in 2016 for operating expenses. The transactions of the District are not reflected in these financial statements. The City does not have an equity interest in the joint venture. Separately issued financials statements of the District are not prepared. This information is an integral part of the accompanying financial statements. ---PAGE BREAK--- REQUIRED SUPPLEMENTARY INFORMATION ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – BUDGET AND ACTUAL – GENERAL FUND For the Year Ended December 31, 2016 The accompanying notes are an integral part of the required supplementary information. 73 Variance with Original Final Actual Final Budget REVENUES Taxes 17,019,234 $ 17,019,234 $ 17,027,636 $ 8,402 $ Intergovernmental 2,166,589 2,157,889 2,318,777 160,888 Licenses and permits 740,898 740,898 1,153,102 412,204 Fines, forfeitures, and penalties 315,000 315,000 262,164 (52,836) Public charges for services 1,314,687 1,286,187 1,364,157 77,970 Interdepartmental charges for services 1,919,823 1,919,823 1,946,971 27,148 Special assessments 104,000 104,000 212,815 108,815 Investment income 40,917 60,917 160,442 99,525 Miscellaneous 90,445 70,445 107,179 36,734 Total revenues 23,711,593 23,674,393 24,553,243 878,850 EXPENDITURES Current: General government 3,158,482 2,945,736 2,773,516 172,220 Public safety 8,558,448 8,558,448 8,462,228 96,220 Public works 3,679,770 3,679,770 3,614,347 65,423 Health and human services 460,003 452,723 473,469 (20,746) Leisure activities 1,657,451 1,657,451 1,471,862 185,589 Conservation and development 795,968 795,968 758,985 36,983 Total expenditures 18,310,122 18,090,096 17,554,407 535,689 Excess of revenues over expenditures 5,401,471 5,584,297 6,998,836 1,414,539 OTHER FINANCING SOURCES (USES) Sale of capital assets - - - - Transfers in 400,000 400,000 488,046 88,046 Transfers out (6,572,686) (5,687,533) (6,218,581) (531,048) Total other financing sources (uses) (6,172,686) (5,287,533) (5,730,535) (443,002) Net change in fund balance (771,215) 296,764 1,268,301 971,537 FUND BALANCE - Beginning of Year 10,808,322 10,808,322 10,808,322 - FUND BALANCE - End of Year 10,037,107 $ 11,105,086 $ 12,076,623 $ 971,537 $ Budgeted Amounts ---PAGE BREAK--- The accompanying notes are an integral part of the required supplementary information. 74 Actuarial UAAL as a Actuarial Accrued Unfunded Percentage Actuarial Value of Liability (ALL) AAL Funded Covered of Covered Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll Date (b-a) (a/b) 12/31/2016 - $ 1,128,865 $ 1,128,865 $ 0.00% 7,030,820 $ 16.06% 12/31/2015 - 1,128,865 1,128,865 0.00% 7,030,820 16.06% 12/31/2014 - 2,862,888 2,862,888 0.00% 8,946,525 32.00% 2016 2015 City's proportion of the net pension liability (asset) 0.07799302% 0.07737819% City's proportionate share of the net pension liability (asset) 1,267,371 $ (1,900,620) $ City's covered - employee payroll 9,708,670 $ 9,162,017 $ Plan fiduciary net position as a percentage of the total pension liability (asset) 98.20% 102.74% 2016 2015 Contractually required contributions 764,194 $ 753,137 $ Contributions in relation to the contractually required contributions 764,194 $ 753,137 $ Contribution deficiency (excess) - $ - $ City's covered - employee payroll 9,708,670 $ 9,162,017 $ Contributions as a percentage of covered - employee payroll 7.87% 8.22% CITY OF MIDDLETON, WISCONSIN CITY OF MIDDLETON, WISCONSIN Schedule of the City's Proportionate Share of the Net Pension Liability (Asset) Wisconsin Retirement System December 31, 2016 December 31, 2016 December 31, 2016 Wisconsin Retirement System Schedule of the City's Contributions CITY OF MIDDLETON, WISCONSIN Schedule of OPEB Funding Progress ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN NOTES TO REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended December 31, 2015 75 NOTE 1 - BUDGETARY INFORMATION Budgetary information is derived from the annual operating budget and is presented using the same basis of accounting for each fund as described in the notes to the financial statements. A budget has been adopted for the General Fund, Debt Service Fund, certain special revenue funds, and capital project funds. Wisconsin Statute Section 65.90 requires that an annual budget be adopted for all funds. The budgeted amounts presented include any amendments made. The City may authorize transfers of budgeted amounts between departments up to $1,000. Transfers exceeding $1,000 between departments and changes in the overall budget must be approved by a two-thirds vote of the City Council. Appropriations lapse at year-end unless specifically carried over. NOTE 2 - EXCESS EXPENDITURES OVER APPROPRIATIONS The following functions experienced excess expenditures over appropriations: Excess Budgeted Actual Expenditures Expenditures Expenditures Over Budget General Fund: Health and Human Services 452,723 $ 473,469 $ 20,746 $ Police Activities 5,000 8,000 3,000 Public Land Activities 100,000 417,778 317,778 Senior Center Activities 20,000 25,924 5,924 Library Fund 1,938,421 1,985,774 47,353 Public Works Capital Construction 3,656,225 3,669,000 12,775 TIF 5 Fund 723,015 1,431,998 708,983 The legal level of budget control is the function level in the General Fund and total expenditures in all other funds. The City controls expenditures at the departmental level for management purposes. TIF District No. 3 debt service was included in the Debt Service Fund, rather than TIF District No. 3. TIF District No. 3 debt service was funded by TIF. The detail of those items can be found in the City’s year-end budget to actual report. NOTE 3 – WISCONSIN RETIREMENT SYSTEM Changes of Benefit Terms – There were no changes of benefit terms for any participating employer in WRS. Changes of Assumptions – There were no changes in the assumptions. This information is an integral part of the required supplementary information. ---PAGE BREAK--- SUPPLEMENTARY INFORMATION ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN DETAILED SCHEDULE OF REVENUES – BUDGET AND ACTUAL GENERAL FUND For the Year Ended December 31, 2016 76 Variance with Original Final Actual Final Budget TAXES General property tax 16,386,134 $ 16,386,134 $ 16,386,134 $ - $ Omitted taxes 10,000 10,000 - (10,000) Fees in lieu of taxes 44,100 44,100 44,100 - Room tax 577,000 577,000 586,922 9,922 Interest and penalties on taxes 2,000 2,000 10,480 8,480 Total taxes 17,019,234 17,019,234 17,027,636 8,402 INTERGOVERNMENTAL Shared taxes from state 571,923 571,923 274,721 (297,202) Expenditure restraint aid - - 305,312 305,312 State aid - road allotment 1,083,506 1,083,506 1,082,975 (531) State aid - exempt computer aid 210,000 210,000 346,413 136,413 State aid - fire insurance dues 98,491 98,491 107,919 9,428 State aid - local aid - police school liason officer 80,000 80,000 78,043 (1,957) Federal and state aid - other 55,250 55,250 52,345 (2,905) County aid - signals 9,500 9,500 20,072 10,572 County aid - senior citizens 49,219 49,219 50,977 1,758 County aid - youth center 8,700 - - - Total intergovernmental 2,166,589 2,157,889 2,318,777 160,888 LICENSES AND PERMITS Liquor and malt beverage licenses 34,000 34,000 39,440 5,440 Operators' licenses 12,000 12,000 21,890 9,890 Alarm licenses 9,000 9,000 8,580 (420) Cigarette licenses 500 500 630 130 Dog and cat licenses 4,000 4,000 3,162 (838) Cable TV franchise license 175,000 175,000 258,069 83,069 Other miscellaneous licenses 1,300 1,300 2,710 1,410 Building permits 264,222 264,222 441,998 177,776 Electrical permits 67,343 67,343 111,959 44,616 Plumbing permits 64,839 64,839 114,976 50,137 Erosion control permits 15,320 15,320 33,927 18,607 Other permits - - 4,810 4,810 Other miscellaneous fees 38,374 38,374 37,904 (470) Zoning permits 20,000 20,000 31,808 11,808 Park reservation permits 35,000 35,000 41,239 6,239 Total licenses and permits 740,898 740,898 1,153,102 412,204 FINES, FORFEITURES, AND PENALTIES Court penalties 200,000 200,000 143,823 (56,177) Parking violations 40,000 40,000 37,260 (2,740) Court costs 75,000 75,000 81,081 6,081 Total fines, forfeitures, and penalties 315,000 315,000 262,164 (52,836) Budgeted Amounts ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN DETAILED SCHEDULE OF REVENUES – BUDGET AND ACTUAL GENERAL FUND (CONTINUED) For the Year Ended December 31, 2016 77 PUBLIC CHARGES FOR SERVICES Clerk fees 13,000 $ 13,000 $ 20,275 $ 7,275 $ Police special services - - 40 40 Police department fees 9,000 9,000 12,622 3,622 Ambulance services 920,749 920,749 889,979 (30,770) Plan commission charges 17,000 17,000 15,000 (2,000) Senior citizens 26,500 26,500 32,442 5,942 Swimming pool 173,000 173,000 194,042 21,042 Acquatic concession revenue 31,248 31,248 33,133 1,885 Summer recreation 50,836 50,836 42,362 (8,474) Fall-Winter-Spring recreation 10,000 10,000 40,420 30,420 Hubbard Art Center Program 24,854 24,854 66,738 41,884 Public works charges - - 1,712 1,712 Administration reimbursements - Recycling 20,000 10,000 12,672 2,672 Donations - - 2,720 2,720 Other charges for services 18,500 - - - Total public charges for services 1,314,687 1,286,187 1,364,157 77,970 INTERDEPARTMENTAL CHARGES FOR SERVICES Administration reimbursements - Utilities 133,500 133,500 135,000 1,500 Administration reimbursements - Metro - - 25,648 25,648 Administrative reimbursements - TIF 1,576,530 1,576,530 1,576,530 - EMS fixed cost abatement 202,193 202,193 202,193 - Administration reimbursements - Landfill 5,000 5,000 5,000 - Administration reimbursements - Fire District 2,600 2,600 2,600 - Total interdepartmental charges for services 1,919,823 1,919,823 1,946,971 27,148 SPECIAL ASSESSMENTS Curb, gutter, and sidewalks 104,000 104,000 212,815 108,815 Interest on special assessments - - - - Total special assessments 104,000 104,000 212,815 108,815 INVESTMENT INCOME 40,917 40,917 140,442 99,525 MISCELLANEOUS REVENUES Polar express track lease 20,000 20,000 20,000 - Credit card rebate 25,945 25,945 42,226 16,281 Insurance recoveries - - 7,101 7,101 Rent of city property 20,000 20,000 - (20,000) Sale of materials 2,000 2,000 833 (1,167) Miscellaneous 22,000 22,000 56,521 34,521 Interlocking ignition device 500 500 498 Total commercial revenues 90,445 90,445 127,179 36,734 OTHER FINANCING SOURCES Transfer in - Water Utility 400,000 400,000 488,046 88,046 Total other financing sources 400,000 400,000 488,046 88,046 TOTAL REVENUES AND OTHER FINANCING SOURCES 24,111,593 $ 24,074,393 $ 25,041,289 $ 966,896 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN DETAILED SCHEDULE OF EXPENDITURES – BUDGET AND ACTUAL GENERAL FUND For the Year Ended December 31, 2016 78 Variance with Original Final Actual Final Budget GENERAL GOVERNMENT Council 67,038 $ 67,038 $ 66,167 $ 871 $ Boards and commissions 67,658 10,350 9,259 1,091 General administration 299,515 299,515 246,683 52,832 Municipal court 111,235 111,235 85,645 25,590 Finance 643,679 689,088 703,457 (14,369) General administration - sick leave - - 193,771 (193,771) Information technology 684,855 684,855 690,234 (5,379) Legal counseling 227,000 227,000 269,745 (42,745) Buildings and grounds 91,250 91,250 86,720 4,530 Illegal taxes and tax refunds 10,080 10,080 - 10,080 General contingency 472,422 255,832 - 255,832 Risk management and insurance 395,800 395,800 332,118 63,682 Bank fees - - 197 (197) Miscellaneous 87,950 103,693 89,520 14,173 Total general government 3,158,482 2,945,736 2,773,516 172,220 PUBLIC SAFETY Police department 5,243,904 5,243,904 5,180,288 63,616 Fire suppression 829,423 829,423 829,692 (269) Public fire protection 485,000 485,000 437,391 47,609 EMS 1,636,472 1,636,472 1,632,139 4,333 Building inspector 317,711 317,711 333,760 (16,049) Emergency preparedness 45,938 45,938 48,958 (3,020) Total public safety 8,558,448 8,558,448 8,462,228 96,220 PUBLIC WORKS Machinery 770,266 770,266 738,747 31,519 Street maintenance 1,470,372 1,470,372 1,462,938 7,434 Snow and ice control 1,000 1,000 - 1,000 Street lighting 119,000 119,000 120,134 (1,134) Storm sewers 52,000 52,000 40,306 11,694 Mass transit 410,551 410,551 410,554 Garbage collection 510,000 510,000 497,132 12,868 Sanitary landfill 80,000 80,000 79,630 370 Recycling 266,581 266,581 264,906 1,675 Total public works 3,679,770 3,679,770 3,614,347 65,423 HEALTH AND HUMAN SERVICES Senior center 460,003 452,723 473,469 (20,746) LEISURE ACTIVITIES Recreation facilities 287,544 287,544 274,230 13,314 Recreation administration 392,741 392,741 347,143 45,598 Libraries - - 23 (23) Public lands 977,166 977,166 850,466 126,700 Total leisure activities 1,657,451 1,657,451 1,471,862 185,589 Budgeted Amounts ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN DETAILED SCHEDULE OF EXPENDITURES – BUDGET AND ACTUAL GENERAL FUND (CONTINUED) For the Year Ended December 31, 2016 79 CONSERVATION AND DEVELOPMENT Sustainability committee 13,250 13,250 9,891 3,359 Forestry 231,292 231,292 230,392 900 Water resources 35,624 35,624 20,882 14,742 Conservancy lands 168,719 168,719 145,073 23,646 Planning 338,083 338,083 336,385 1,698 Other 9,000 9,000 16,362 (7,362) Total conservation and development 795,968 795,968 758,985 36,983 OTHER FINANCING USES Transfers out - Nonmajor Funds - Other 20,108 20,108 78,608 (58,500) Transfer out - Capital Projects Fund 836,107 851,107 1,323,655 (472,548) Transfers out - Library Fund 1,194,532 1,249,999 1,249,999 - Transfers out - Debt Service Fund 4,521,939 3,566,319 3,566,319 - Total other financing uses 6,572,686 5,687,533 6,218,581 (531,048) TOTAL EXPENDITURES AND OTHER FINANCING USES 24,882,808 $ 23,777,629 $ 23,772,988 $ 4,641 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN COMBINING BALANCE SHEET – NONMAJOR GOVERNMENTAL FUNDS December 31, 2016 80 Lost and Safety Economic Subdividers' Damaged Library Library Library Impact Fee Development Deposits Books Gift Endowment Fund Airport and Other Grant ASSETS Cash and investments 2,748,368 $ 45,666 $ 16,318 $ 250,109 $ 98,819 $ - $ 883,970 $ 278,163 $ Accounts receivable - - - - - - - - TOTAL ASSETS 2,748,368 $ 45,666 $ 16,318 $ 250,109 $ 98,819 $ - $ 883,970 $ 278,163 $ LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable 8,518 $ 271 $ - $ - $ 39,912 $ - $ - $ - $ Due to other funds - - - - - - - Deposits 863,685 - - - - - - - Total liabilities 872,203 271 - - 39,912 - - - FUND BALANCES Restricted 1,876,165 - 16,318 250,109 58,907 - 883,970 278,163 Committed - 45,395 - - - - - - Unassigned - - - - - - - - Total fund balances 1,876,165 45,395 16,318 250,109 58,907 - 883,970 278,163 TOTAL LIABILITIES AND FUND BALANCES 2,748,368 $ 45,666 $ 16,318 $ 250,109 $ 98,819 $ - $ 883,970 $ 278,163 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN COMBINING BALANCE SHEET – NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) December 31, 2016 81 Total Nonmajor Tourism Police EMS Public Land Youth Center Senior Center Governmental Commission Activities Activities Activities Activities Activities Funds ASSETS Cash and investments 1,650,689 $ - $ 31,032 $ 1,251,170 $ - $ 164,932 $ 7,419,236 $ Accounts receivable 345,179 - - 5,550 - - 350,729 TOTAL ASSETS 1,995,868 $ - $ 31,032 $ 1,256,720 $ - $ 164,932 $ 7,769,965 $ LIABILITIES AND FUND BALANCES LIABILITIES Accounts payable 269,109 $ - $ - $ 251,839 $ 3,334 $ 163 $ 573,146 $ Due to other funds - 1,952 - - 2,716 - 4,668 Deposits - - - - - - 863,685 Total liabilities 269,109 1,952 - 251,839 6,050 163 1,441,499 FUND BALANCES Restricted 1,726,759 - 31,032 1,004,881 - 164,769 6,291,073 Committed - - - - - - 45,395 Unassigned - (1,952) - - (6,050) - (8,002) Total fund balances 1,726,759 (1,952) 31,032 1,004,881 (6,050) 164,769 6,328,466 TOTAL LIABILITIES AND FUND BALANCES 1,995,868 $ - $ 31,032 $ 1,256,720 $ - $ 164,932 $ 7,769,965 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – NONMAJOR GOVERNMENTAL FUNDS December 31, 2016 82 Lost and Safety Economic Subdividers' Damaged Library Library Library Impact Fee Development Deposits Books Gift Endowment Fund Airport and Other Grant REVENUES Taxes - $ - $ - $ - $ - $ - $ - $ - $ Intergovernmental - - - - 792,005 - - - Licenses and permits 434,609 - - - - - 464,593 - Public charges for services 148,947 20,677 900 - 15,959 - - - Contributions - - 4,636 8,881 - - 240 - Investment income - - - 16,643 - - - 1,226 Miscellaneous - - - - 9 - - 1,000 Total revenues 583,556 20,677 5,536 25,524 807,973 - 464,833 2,226 EXPENDITURES Current: General Government - - - - - - - - Health and Human Services - - - - - - - - Leisure activities - 1,895 814 15,671 1,995,779 - 375 - Conservation and development - - - - - - - Capital outlay 88,489 - - - 4,758 - - - Total expenditures 88,489 1,895 814 15,671 2,000,537 - 375 - Excess of revenues over (under) expenditures 495,067 18,782 4,722 9,853 (1,192,564) - 464,458 2,226 OTHER FINANCING SOURCES (USES) Transfers in - - - - 1,249,999 - - 93,280 Transfers out - - - - - (142,496) (350,450) - Net change in fund balances 495,067 18,782 4,722 9,853 57,435 (142,496) 114,008 95,506 FUND BALANCES - BEGINNING OF YEAR 1,381,098 26,613 11,596 240,256 1,472 142,496 769,962 182,657 FUND BALANCES - END OF YEAR 1,876,165 $ 45,395 $ 16,318 $ 250,109 $ 58,907 $ - $ 883,970 $ 278,163 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES – NONMAJOR GOVERNMENTAL FUNDS (CONTINUED) December 31, 2016 83 Total Senior Nonmajor Tourism Police EMS Public Land Youth Center Center Governmental Commission Activities Activities Activities Activities Activities Funds REVENUES Taxes 1,369,480 $ - $ - $ - $ - $ - $ 1,369,480 $ Intergovernmental 28,598 - 4,355 - 7,969 18,958 851,885 Licenses and permits - - - - - - 899,202 Public charges for services - - - 1,292,167 2,577 - 1,481,227 Contributions - - - 68,243 - 10,877 92,877 Investment income - - - - - - 17,869 Miscellaneous 1,348 - - - - - 2,357 Total revenues 1,399,426 - 4,355 1,360,410 10,546 29,835 4,714,897 EXPENDITURES Current: General Government 145,181 - - - - - 145,181 Health and Human Services - - - - - 30,108 30,108 Leisure activities - - - 66,073 61,314 - 2,141,921 Conservation and development 1,078,231 - - 9,442 - - 1,087,673 Capital outlay - 25,188 41,379 350,756 - - 510,570 Total expenditures 1,223,412 25,188 41,379 426,271 61,314 30,108 3,915,453 Excess of revenues over (under) expenditures 176,014 (25,188) (37,024) 934,139 (50,768) (273) 799,444 OTHER FINANCING SOURCES (USES) Transfers in - - - 40,000 44,718 - 1,427,997 Transfers out - - - (185,453) - - (678,399) Net change in fund balances 176,014 (25,188) (37,024) 788,686 (6,050) (273) 1,549,042 FUND BALANCES - BEGINNING OF YEAR 1,550,745 23,236 68,056 216,195 - 165,042 4,779,424 FUND BALANCES - END OF YEAR 1,726,759 $ (1,952) $ 31,032 $ 1,004,881 $ (6,050) $ 164,769 $ 6,328,466 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN COMBINING BALANCE SHEET – CAPITAL PROJECTS FUND December 31, 2016 84 Public Works Public Lands General TIF District Capital Capital Capital No. 5 Construction Construction Projects Total ASSETS Cash and investments 1,325,982 $ 790,589 $ 29,545 $ 721,518 $ 2,867,634 $ Taxes receivable 857,583 - - - 857,583 Receivables - 44,412 5,787 - 50,199 Due from other funds - - - - - Total assets 2,183,565 $ 835,001 $ 35,332 $ 721,518 $ 3,775,416 $ LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES LIABILITIES Accounts payable 3,119 $ 501,666 $ 10,894 $ 60,358 $ 576,037 $ Advances from other funds 2,048,999 - - - 2,048,999 Total liabilities 2,052,118 501,666 10,894 60,358 2,625,036 DEFERRED INFLOWS OF RESOURCES Subsequent year tax levy 857,583 - - - 857,583 Other receivable - - - - - Total deferred inflows 857,583 - - - 857,583 FUND BALANCES Restricted (726,136) 333,335 24,438 661,160 292,797 TOTAL LIABILITIES DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES 2,183,565 $ 835,001 $ 35,332 $ 721,518 $ 3,775,416 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE – CAPITAL PROJECTS FUND December 31, 2016 85 Public Works Public Lands General TIF District Capital Capital Capital No. 5 Construction Construction Projects Total REVENUES Taxes 472,884 $ - $ - $ - $ 472,884 $ Intergovernmental 24,018 24,412 15,787 7,000 71,217 Investment and interest income 43 1 - - 44 Miscellaneous - 30,002 27,552 5,683 63,237 Total revenues 496,945 54,415 43,339 12,683 607,382 EXPENDITURES Current: General government 150 - - - 150 Public Works - 150 - - 150 Conservation and development 2,127,387 - - - 2,127,387 Capital outlay 27,631 2,648,587 954,916 818,028 4,449,162 Debt service Interest and fiscal charges 3,500 - - - 3,500 Total expenditures 2,158,668 2,648,737 954,916 818,028 6,580,349 Excess of revenues over (under) expenditures (1,661,723) (2,594,322) (911,577) (805,345) (5,972,967) OTHER FINANCING SOURCES (USES) Long-term debt issued 2,100,000 - - - 2,100,000 Proceeds from sale of capital asset - 1,660,656 - - 1,660,656 Transfers in - 1,333,241 - 576,718 1,909,959 Transfers out (497,394) (891,858) (47,941) (60,569) (1,497,762) Net change in fund balances (59,117) (492,283) (959,518) (289,196) (1,800,114) FUND BALANCES - BEGINNING OF YEAR (667,019) 825,618 983,956 950,356 2,092,911 FUND BALANCES - END OF YEAR (726,136) $ 333,335 $ 24,438 $ 661,160 $ 292,797 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN COMBINING STATEMENT OF NET POSITION – NONMAJOR PROPRIETARY FUNDS December 31, 2016 86 Middleton ASSETS Stormwater Utility District Airport Totals Current Assets: Cash and investments 336,035 $ - $ 228,939 $ 564,974 $ Accounts receivable 70,250 18,217 - 88,467 Due from other funds 3,341 - - 3,341 Total current assets 409,626 18,217 228,939 656,782 Noncurrent Assets: Capital assets: Property and equipment 3,888,676 - 2,342,450 6,231,126 Less: Accumulated depreciation (163,589) - (28,193) (191,782) Total capital assets, net 3,725,087 - 2,314,257 6,039,344 Total noncurrent assets 3,725,087 - 2,314,257 6,039,344 Total assets 4,134,713 18,217 2,543,196 6,696,126 LIABILITIES Current Liabilities: Accounts payable - - 50,653 50,653 Total current liabilities - - 50,653 50,653 Noncurrent Liabilities: Advances from other funds - 460,256 - 460,256 Total noncurrent liabilities - 460,256 - 460,256 Total liabilities - 460,256 50,653 510,909 NET POSITION Net investment in capital assets 3,725,087 - 2,314,257 6,039,344 Unrestricted 409,626 (442,039) 178,286 145,873 Total net position 4,134,713 $ (442,039) $ 2,492,543 $ 6,185,217 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION – NONMAJOR PROPRIETARY FUNDS December 31, 2016 87 Middleton Stormwater Utility District Airport Total OPERATING REVENUES Charges for services and sales 273,046 $ - $ 117,586 $ 390,632 $ Miscellaneous - 18,217 6,425 24,642 Total operating revenues 273,046 18,217 124,011 415,274 OPERATING EXPENSES Operation and maintenance - 237,284 71,651 308,935 Depreciation 66,952 - 28,193 95,145 Total operating expenses 66,952 237,284 99,844 404,080 Operating income (loss) 206,094 (219,067) 24,167 11,194 NONOPERATING REVENUES (EXPENSES) Investment income - - - - Interest expense - - - - Total nonoperating revenues (expenses) - - - - Income (loss) before capital contributions and transfers 206,094 (219,067) 24,167 11,194 CAPITAL CONTRIBUTIONS 709,062 - 2,325,880 3,034,942 TRANSFERS IN - - 142,496 142,496 Change in net position 915,156 (219,067) 2,492,543 3,188,632 NET POSITION - BEGINNING OF YEAR 3,219,557 (222,972) - 2,996,585 NET POSITION - END OF YEAR 4,134,713 $ (442,039) $ 2,492,543 $ 6,185,217 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN COMBINING STATEMENT OF CASH FLOWS – NONMAJOR PROPRIETARY FUNDS December 31, 2016 88 Middleton Stormwater Utility District Airport Totals CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 273,894 $ (18,217) $ 124,011 $ 379,688 $ Payments to suppliers for goods and services (3,341) (357,937) (20,998) (382,276) Net cash provided (used) by operating activities 270,553 (376,154) 103,013 (2,588) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfer from other funds - - 142,496 142,496 Advance from TIF No. 3 - 60,256 - 60,256 Net cash provided by noncapital financing activities - 60,256 142,496 202,752 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets - - (16,570) (16,570) Net cash used by capital and related financing activities - - (16,570) (16,570) Net increase (decrease) in cash and cash equivalents 270,553 (315,898) 228,939 183,594 CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 65,482 315,898 - 381,380 CASH AND CASH EQUIVALENTS - END OF YEAR 336,035 $ - $ 228,939 $ 564,974 $ ---PAGE BREAK--- CITY OF MIDDLETON, WISCONSIN COMBINING STATEMENT OF CASH FLOWS – NONMAJOR PROPRIETARY FUNDS (CONTINUED) December 31, 2016 89 Nonmajor Fund Middleton Stormwater Utility District Airport Totals Reconciliation of operating income (loss) to net cash provided (used) by operating activities: Operating income (loss) 206,094 $ (219,067) $ 24,167 $ 11,194 $ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation expense 66,952 - 28,193 95,145 Depreciation charged to sewer utility - - - - Changes in noncash components of working capital: Accounts receivable 848 (18,217) - (17,369) Special assessments receivable - - - - Due from other funds (3,341) - - (3,341) Accounts payable - (138,870) 50,653 (88,217) Pension activity - - - - Accrued compensated absences - - - - Net cash provided (used) by operating activities 270,553 $ (376,154) $ 103,013 $ (2,588) $ Reconciliation of cash and cash equivalents to the statement of net position - proprietary funds Cash and investments 336,035 $ - $ 228,939 $ 564,974 $ NONCASH INVESTING, CAPITAL, AND RELATED FINANCING ACTIVITIES Developer financed additions to Utility capital assets 709,062 $ - $ - $ 709,062 $ City financed additions to Utility capital assets - - 2,325,880 -