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CITY OF MIDDLETON Middleton, Wisconsin FINANCIAL STATEMENTS December 31, 2007 ---PAGE BREAK--- CITY OF MIDDLETON TABLE OF CONTENTS December 31, 2007 INDEPENDENT AUDITORS' REPORT BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Assets Statement of Activities Fund Financial Statements Balance Sheet - Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities Statement of Net Assets - Proprietary Funds Statement of Revenues, Expenses and Changes in Fund Net Assets - Proprietary Funds Statement of Cash Flows - Proprietary Funds Statement of Fiduciary Net Assets - Fiduciary Funds Notes to Financial Statements REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and 1 - 2 3 4 5 6 7 8-9 10 11 - 12 13 14 - 53 Actual - General Fund 54 Schedule of Revenues Compared to Budget - Budget and Actual - General Fund 55 - 56 Schedule of Expenditures Compared to Budget - Budget and Actual - General Fund 57 - 58 Notes to Required Supplementary Information 59 SUPPLEMENTARY INFORMATION Combining Balance Sheet - Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds Combining Statement of Fiduciary Net Assets - Agency Funds Statement of Cash Flows - Component Unit 60 - 61 62 - 63 64 65 ---PAGE BREAK--- To the City Council City of Middleton Middleton, Wisconsin ~ VirchowKrause &company INDEPENDENT AUDITORS' REPORT We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Middleton, Wisconsin, as of and for the year ended December 31, 2007, which collectively comprise the city's basic financial statements as listed in the table of contents . These financial statements are the responsibility of the City of Middleton's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements . An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation . We believe that our audit provides a reasonable basis for our 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 remain ing fund information of the City of Middleton, Wisconsin as of December 31, 2007, and the respective changes in financial position and , where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. The budgetary comparison information on pages 54 through 59 is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board . We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information . However, we did not audit the information and express no opinion on it. Page 1 Virchow, Krause & Company, LLP Certified Pub lic Accountants & Consul tants. An I ndependent Membe r of Baker Tilly Inte rn ationa l ---PAGE BREAK--- To the City Council City of Middleton Middleton, Wisconsin The City of Middleton, Wisconsin, has not presented the management's discussion and analysis that the Governmental Accounting Standards Board has determined is necessary to supplement, although not required to be part of, the basic financial statements. Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the City of Middleton's basic financial statements. The combining financial statements and statement of cash flows - component unit as listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining financial statements and statement of cash flows - component unit have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. Madison, Wisconsin July 8,2008 Page 2 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF NET ASSETS December 31, 2007 Prima!}: Government Business- Governmental type Component Activities Activities Totals Unit ASSETS Cash and investments $ 19,137,163 $ 5,717,946 $ 24,855,109 $ 460,129 Receivables (net of allowance for uncollectibles) Taxes 20,321,636 20,321,636 Delinquent taxes 158,810 158,810 Accounts 706,038 732,863 1,438,901 Interest 152,414 80,271 232,685 6,861 Loans 1,749,262 1,749,262 513,195 Special assessments 2,342,977 2,204,182 4,547,159 Delinquent special assessments 1,740 1,740 Due from other governments 10,046 10,046 Due from primary government 195,418 Due from component unit 1,792,890 1,792,890 Internal balances-current (4,308) 4,308 Internal balances-advances 1,427,174 (1,427,174) Prepaid items 1,674 1,674 Restricted Assets Temporarily Restricted Cash and investments 54,000 54,000 1,792,890 Leases receivable from primary government 14,870,000 Other assets 54,888 446,368 501,256 42,508 Capital Assets Land 7,439,100 2,382,607 9,821,707 Right of way 18,620,870 18,620,870 Construction in progress 3,145,540 3,145,540 Capital assets being depreciated 53,547,211 44,892,018 98,439,229 Less: Accumulated depreciation (11,378,133) (9,060,044) (20,438,177) Investment in joint ventures (deficit) (147,283) (147,283) Total Assets 119,079,709 46,027,345 165,107,054 17,881,001 LIABILITIES Accounts payable 2,924,431 290,370 3,214,801 1,653 Accrued liabilities 647,106 143,866 790,972 195,418 Due to other governments 12,149 12,149 Due to primary government 1,792,890 Due to component unit 195,418 195,418 Unearned revenue 20,212,196 20,212,196 Noncurrent Liabilities Due within one year 17,360,092 830,954 18,191,046 837,150 Due in more than one year 46,118,748 9,558,919 55,677,667 13,869,010 Total Liabilities 87,470,140 10,824,109 98,294,249 16,696,121 NET ASSETS Invested in capital assets, net of related debt 25,502,361 27,885,425 53,387,786 Restricted for equipment replacement 54,000 54,000 Restricted for debt service 21,389 21,389 Restricted for subdivider's deposits 1,664,414 1,664,414 Restricted for park improvements 36,887 36,887 Restricted for police enforcement 19,668 19,668 Restricted for EMS 57,791 57,791 Restricted for library 244,077 244,077 Restricted for economic development 270,369 270,369 Restricted for senior citizens 72,776 72,776 Unrestricted 3,719,837 7,263,811 10,983,648 1,184,880 TOTAL NET ASSETS $ 31,609,569 $ 35,203,236 $ 66,812,805 $ 1,184,880 See accompanying notes to financial statements. Page 3 ---PAGE BREAK--- Functions/Programs Primary Government Governmental Activities General government Public safety Public works Leisure activities Conservation and economic development Interest and fiscal charges Total Governmental Activities Business-type Activities Water Sewer Pleasant View Golf Course Total Business-type Activities Total Primary Government Component Unit Community Development Authority CITY OF MIDDLETON STATEMENT OF ACTIVITIES Forthe Year Ended December 31, 2007 Program Revenues Operating Capital Charges for Grants and Grants and ~enses Services Contributions Contributions $ 1,673,565 $ 131,895 $ 38,776 $ - 5,845,401 842,061 83,950 5,148,225 560,963 1,254,940 3,217,850 4,275,003 371,664 684,753 221,068 974,133 42,334 2,530,545 20,446,872 1,948,917 2,062,419 3,438,918 1,223,625 1,938,538 920,253 1,483,887 1,705,956 602,712 1,763,948 1,823,770 4,471,460 5,468,264 1,522,965 $ 24,918,332 $ 7,417,181 $ 2,062,419 $ 4,961,883 $ 872,317 $ 23,442 $ - $ General Revenues Taxes Property taxes, levied for general purposes and debt service Property taxes, levied for tax increment district Other taxes Cable television franchise fees Intergovernmental revenues not restricted to specific programs Public gifts and/or grants Investment income Miscellaneous Transfers Total General Revenues and Transfers Change in net assets NET ASSETS - Beginning NET ASSETS - ENDING See accompanying notes to financial statements. Net (Expense) Revenue and Changes in Net Assets Prima!y Government Governmental Business-type Component Activities Activities Totals Unit $ (1,502,894) $ - $ (1,502,894) $ (4,919,390) (4,919,390) (114,472) (114,472) (2,997,518) (2,997,518) (931,799) (931,799) (2,530,545) (2,530,545) (12,996,618) (12,996,618) 1,635,166 1,635,166 824,781 824,781 59,822 59,822 2,519,769 2,519,769 (12,996,618) 2,519,769 (10,476,849) (848,875) 9,717,518 9,717,518 8,283,514 8,283,514 965,882 965,882 218,140 218,140 1,463,512 1,463,512 56,973 56,973 1,420,594 259,088 1,679,682 851,804 487,222 487,222 36,297 293,254 (293,254) 22,906,609 (34,166) 22,872,443 888,101 9,909,991 2,485,603 12,395,594 39,226 ~699,578 32,717,633 54,417,211 1,145,654 $ 31,609,569 $ 35,203,236 $ 66,812,805 $ 1,184,880 Page 4 ---PAGE BREAK--- CITY OF MIDDLETON BALANCE SHEET - GOVERNMENTAL FUNDS December 31,2007 TIF District Capital General Debt Service NO.3 Projects ASSETS Cash and investments $ 3,537,486 $ 526,462 $ 1,464,958 $ 9,227,596 Receivables (net) Taxes 10,427,976 9,893,660 Delinquent taxes 158,810 Accounts 188,196 295,305 Interest 118,476 25,430 Loans 1,684,716 Special assessments 10,041 2,332,936 Delinquent special assessments 1,740 Due from other funds 106,878 Due from other governments 10,046 Due from component unit 1,792,890 Advances to other funds 2,563,236 Prepaid items 1,674 TOTAL ASSETS $ 17,017,681 $ 526,462 $ 17,194,590 $ 9,629,779 LIABILITIES AND FUND BALANCES Liabilities Accounts payable $ 784,657 $ - $ 234,801 $ 1,732,600 Due to other governments 12,149 Due to other funds 111,186 Deferred revenue 10,335,402 11,549,910 269,863 Deferred special assessments 11,781 2,332,936 Deferred interest income 225,594 Advances from other funds 1,136,062 Total Liabilities 11,480,769 15,253,709 2,002,463 Fund Balances Reserved for: Loans receivable 1,684,716 Prepaid items 1,674 Delinquent personal property taxes 158,810 Advances 2,337,642 Debt service 526,462 1,608,636 Encumbrances 5,031,424 Unreserved and designated, reported in: General fund 550,000 Unreserved and undesignated (deficit), reported in: General fund 2,488,786 Special revenue funds Capital projects funds (1,352,471 ) 2,595,892 Total Fund Balances 5,536,912 526,462 1,940,881 7,627,316 TOTAL LIABILITIES AND FUND BALANCES $ 17,017,681 $ 526,462 $ 17,194,590 $ 9,629,779 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental funds are not financial resources and, therefore, are not reported in the funds. Some receivables that are not currently available are reported as deferred revenue in the fund financial statements but are recognized as revenue when earned in the government-wide statements. Investment (deficit) in jOint venture is not a financial resource and, therefore, is not reported in the funds. Some liabilities, including long-term debt, are not due and payable in the current period and, therefore, are not reported in the funds. See Note II.A. NET ASSETS OF GOVERNMENTAL ACTIVITIES See accompanying notes to financial statements. Non-major Governmental Funds $ 4,380,661 222,537 8,508 64,546 4,358 $ 4,680,610 $ 172,373 4,358 176,731 4,503,879 4,503,879 $ 4,680,610 Total Governmental Funds $ 19,137,163 20,321,636 158,810 706,038 152,414 1,749,262 2,342,977 1,740 111,236 10,046 1,792,890 2,563,236 1,674 $ 49,049,122 $ 2,924,431 12,149 115,544 22,155,175 2,344,717 225,594 1,136,062 28,913,672 1,684,716 1,674 158,810 2,337,642 2,135,098 5,031,424 550,000 2,488,786 4,503,879 1,243,421 20,135,450 71,374,588 4,513,290 (147,283) (64,266,476) $ 31,609,569 Page 5 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS For the Year Ended December 31,2007 Non-major Total TIF District Capital Governmental Governmental General Debt Service No.3 Projects Funds Funds REVENUES Taxes $ 10,039,209 $ - $ 8,283,514 $ - $ 644,191 $ 18,966,914 Intergovernmental 2,532,286 600,309 120,787 21,874 3,275,256 Licenses and permits 680,667 88,140 768,807 Fines, forfeitures and penalties 290,914 1,588 292,502 Public charges for services 1,018,546 1,032,737 2,051,283 Intergovernmental charges for services 365,886 365,886 Special assessments 68,529 189,008 257,537 Investment income 1,452,495 402,328 226,462 51,947 2,133,232 Miscellaneous 92,559 371,898 13,850 91,244 569,551 Total Revenues 16,541,091 9,847,057 361,099 1,931,721 28,680,968 EXPENDITURES Current General government 1,857,444 65,807 1,923,251 Public safety 5,809,136 9,787 5,818,923 Public works 2,790,695 2,790,695 Leisure activities 3,012,811 297,316 3,310,127 Conservation and economic development 353,725 555,075 908,800 Capital Outlay 874,953 5,748,409 6,623,362 Debt Service Principal retirement 6,443,815 815,000 7,258,815 Debt issuance costs 14,558 14,558 Interest and fiscal charges 1,689,732 887,716 2,577,448 Total Expenditures 13,823,811 8,133,547 2,577,669 5,762,967 927,985 31,225,979 Excess (deficiency) of revenues over (under) expenditures 2,717,280 (8,133,547) 7,269,388 (5,401,868) 1,003,736 (2,545,011 ) OTHER FINANCING SOURCES (USES) Debt issued 9,215,000 9,215,000 Sale of capital assets 7,734 7,734 Transfers in 293,254 8,660,009 313,225 290,876 9,557,364 Transfers out (3,061,358) (5,644,290) (226,462) (332,000) (9,264,110) Total Other Financing Sources (Uses) (2,760,370) 8,660,009 (5,644,290) 9,301,763 (41,124) 9,515,988 SPECIAL ITEM Retirement prior service (241,677) (241,677) Net Change in Fund Balance (284,767) 526,462 1,625,098 3,899,895 962,612 6,729,300 FUND BALANCES - Beginning 5,821,679 315,783 3,727,421 3,541,267 13,406,150 FUND BALANCES - ENDING $ 5,536,912 $ 526,462 $ 1,940,881 $ 7,627,316 $ 4,503,879 $ 20,135,450 See accompanying notes to financial statements. Page 6 ---PAGE BREAK--- CITY OF MIDDLETON RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the Year Ended December 31, 2007 Net change in fund balances - total governmental funds Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of net assets the cost of these assets is capitalized and they are depreCiated over their estimated useful lives with depreCiation expense reported in the statement of activities. Capital outlay is reported as an expenditure in the fund financial statements but is capitalized in the government-wide financial statements Less: Some items are reported as capital outlay but are not capitalized Depreciation is reported in the government-wide statements Capital contributions reported in the government-wide statements (infrastructure) Net book value of assets retired Receivables not currently available are reported as deferred revenue in the fund financial statements but are recognized as revenue when earned in the government-wide financial statements. Debt and lease proceeds provide current financial resources to governmental funds, but issuing these obligations increases long-term liabilities in the statement of net assets. Repayment of principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. Debt issued Debt retired The proportionate share of the change in net assets related to joint ventures reported in the statement of activities neither provides nor uses current financial resources and is not reported in the fund statements. 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 Debt issuance costs Unfunded pension liability Accrued interest on debt CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES See accompanying notes to financial statements. $ 6,729,300 $ 6,623,362 (2,090,764) (1,223,024) 2,813,355 (146,874) (1,011,423) (9,215,000) 7,258,815 66,681 (173,411) (9,980) 286,252 2,702 9,909,991 Page 7 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF NET ASSETS - PROPRIETARY FUNDS December 31, 2007 ASSETS Current Assets Cash and investments Accounts receivable, net Interest receivable Due from other funds Total Current Assets Noncurrent Assets Restricted assets Cash and investments Special assessments receivable Other assets Property held for future use Preliminary engineering Unamortized debt expenses Capital assets Property and equipment Less: Accumulated depreciation Total Capital Assets (Net of Accumulated Depreciation) Total Noncurrent Assets Total Assets $ Business-type Activities - Enterprise Funds Pleasant View Golf Water Sewer Course 3,665,244 $ 2,052,702 $ - 338,614 391,369 2,880 59,454 20,817 124,813 60,082 4,188,125 2,524,970 2,880 54,000 2,204,182 301,087 139,437 5,844 21,670,974 14,139,293 11,464,358 (5,513,592) (3,058,993) (487,459) 16,157,382 11,080,300 10,976,899 16,597,906 13,344,326 10,976,899 20,786,031 15,869,296 10,979,779 Totals $ 5,717,946 732,863 80,271 184,895 6,715,975 54,000 2,204,182 301,087 139,437 5,844 47,274,625 (9,060,044) 38,214,581 40,919,131 47,635,106 Page 8 ---PAGE BREAK--- Business-t~~e Activities - Enter~rise Funds Pleasant View Golf Water Sewer Course Totals LIABILITIES Current Liabilities Accounts payable $ 38,190 $ 218,300 $ 33,880 $ 290,370 Accrued interest 18,482 10,980 114,404 143,866 Accrued compensated absences 4,891 2,409 28,654 35,954 Due to other funds 106,878 73,709 180,587 Current portion of long term debt 205,000 160,000 430,000 795,000 Total Current Liabilities 373,441 465,398 606,938 1,445,777 Noncurrent Liabilities Accrued compensated absences 12,676 6,243 18,919 Advances from other funds 1,427,174 1,427,174 General obligation debt 940,000 555,000 8,045,000 9,540,000 Total Noncurrent Liabilities 952,676 561,243 9,472,174 10,986,093 Total Liabilities 1,326,117 1,026,641 10,079,112 12,431,870 NET ASSETS Invested in capital assets, net of related debt 15,012,382 10,371,144 2,501,899 27,885,425 Restricted for: Equipment replacement 54,000 54,000 Unrestricted (deficit) 4,447,532 4,417,511 (1,601,232) 7,263,811 TOTAL NET ASSETS $ 19,459,914 $ 14,842,655 $ 900,667 $ 35,203,236 See accompanying notes to financial statements. Page 9 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS - PROPRIETARY FUNDS For the Year Ended December 31,2007 Business-t:t~e Activities - Enter~rise Funds Pleasant View Golf Water Sewer Course Totals OPERATING REVENUES Charges for services $ 1,938,538 $ 1,705,956 $ 1,823,770 $ 5,468,264 Total Operating Revenues 1,938,538 1,705,956 1,823,770 5,468,264 OPERATING EXPENSES Operation and maintenance 763,793 1,226,435 1,259,926 3,250,154 Depreciation 397,536 217,504 119,500 734,540 Total Operating Expenses 1,161,329 1,443,939 1,379,426 3,984,694 Operating Income 777,209 262,017 444,344 1,483,570 NONOPERATING REVENUES (EXPENSES) Investment income 169,566 89,522 259,088 Interest expense (62,296) (38,038) (384,522) (484,856) Amortization of debt issuance costs {1 ,910) (1,910) Total Nonoperating Revenues (Expenses) 107,270 49,574 (384,522) (227,678) Income (loss) before contributions and transfers 884,479 311,591 59,822 1,255,892 Capital contributions 920,253 602,712 1,522,965 Transfers out (293,254) (293,254) Change in Net Assets 1,511,478 914,303 59,822 2,485,603 TOTAL NET ASSETS - Beginning 17,948,436 13,928,352 840,845 32,717,633 TOTAL NET ASSETS - ENDING $ 19,459,914 $ 14,842,655 $ 900,667 $ 35,203,236 See accompanying notes to financial statements. Page 10 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF CASH FLOWS- PROPRIETARY FUNDS For the Year Ended December 31, 2007 Business-t:ipe Activities - Enterprise Funds Pleasant View Golf Water Sewer Course Totals CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 1,603,480 $ 1,712,424 $ 1,821,320 $ 5,137,224 Cash received from city for services 373,144 373,144 Cash paid to suppliers for goods and services (489,010) (1,125,589) (559,545) (2,174,144) Cash paid to employees for services {269,308) {102,075) {671,409) {1,042,792) Net Cash Flows From Operating Activities 1,218,306 484,760 590,366 2,293,432 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Advance from general fund 419,006 419,006 Cash paid for tax equivalent (280,840) (280,840) Net Cash Flows From Noncapital Financing Activities {280,840) 419,006 138,166 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal paid (195,000) (155,000) (390,000) (740,000) Interest paid (65,720) (40,586) (382,475) (488,781) Acquisition and construction of capital assets (737,320) (145,417) (932,276) (1,815,013) Capital contributions received 1,800 75,725 77,525 Special assessments received 23,677 23,677 Net Cash Flows From Capital and Related Financing Activities {996,240) {241 ,601 ) p,704,751) {2,942,592) CASH FLOWS FROM INVESTING ACTIVITIES Investment income 227,762 132,362 360,124 Investments sold and matured 1,400,266 1,176,363 2,576,629 Marketable securities purchased {2,076,937) {911,883) {2,988,820) Net Cash Flows From Investing Activities {448,909) 396,842 {52,067) Net Increase in Cash and Cash Equivalents (507,683) 640,001 (695,379) (563,061) CASH AND CASH EQUIVALENTS - Beginning of Year 967,236 69,552 695,379 1,732,167 CASH AND CASH EQUIVALENTS - END OF YEAR $ 459,553 $ 709,553 $ - $ 1,169,106 Page 11 ---PAGE BREAK--- RECONCILIATION OF OPERATING INCOME TO NET CASH FLOWS FROM OPERATING ACTIVITIES Operating income Adjustments to Reconcile Operating Income to Net Cash Provided From Operating Activities Depreciation expense Depreciation charged to sewer utility Changes in Noncash Components of Working Capital Accounts receivable Other accounts receivable Due from other funds Accounts payable Accrued compensated absences Due to other funds NET CASH FLOWS FROM OPERATING ACTIVITIES RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS - PROPRIETARY FUNDS Cash and investments - statement of net assets - proprietary funds Restricted cash and investments - statement of net assets - proprietary funds Less: Non-cash equivalents CASH AND CASH EQUIVALENTS - END OF YEAR NONCASH INVESTING, CAPITAL AND RELATED FINANCING ACTIVITIES Developer financed additions to utility plant Business-ty~e Activities - Enter~rise Funds Pleasant View Golf Water Sewer Course $ 777,209 $ 262,017 $ 444,344 397,536 217,504 119,500 41,865 (10,853) (12,116) (2,450) (7,198) 14,272 18,584 20,482 7,800 22,712 (15,007) (7,392) 6,260 (1,637) $ 1,218,306 $ 484,760 $ 590,366 $ 3,665,244 $ 2,052,702 $ - 54,000 (3,205,691 ) (1,397,149) $ 459,553 $ 709,553 $ - $ 920,253 $ 526,987 See accompanying notes to financial statements. Totals $ 1,483,570 734,540 41,865 (25,419) (7,198) 32,856 50,994 (16,139) (1,637) $ 2,293,432 $ 5,717,946 54,000 (4,602,840) $ 1,169,106 Page 12 ---PAGE BREAK--- ASSETS Cash and investments Taxes receivable CITY OF MIDDLETON STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS December 31, 2007 Due from other governmental units TOTAL ASSETS LIABILITIES Accounts payable Due to other governmental units TOTAL LIABILITIES See accompanying notes to financial statements. Agency Funds $ 16,828,659 11,379,637 67,593 $ 28,275,889 $ 84,344 28,191,545 $ 28,275,889 Page 13 ---PAGE BREAK--- CITY OF MIDDLETON INDEX TO NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE I. Summary of Significant Accounting Policies A. Reporting Entity B. Government-Wide and Fund Financial Statements C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation D. Assets, Liabilities, and Net Assets or Equity 1. Deposits and Investments 2. Receivables 3. Inventories and Prepaid Items 4. Restricted Assets 5. Capital Assets 6. Other Assets 7. Compensated Absences 8. Long-Term Obligations/Conduit Debt 9. Claims and Judgments 10. Equity Classifications 11. Basis for Existing Rates - Proprietary Funds II. Reconciliation of Government-Wide and Fund Financial Statements A. Explanation of Certain Differences Between the Governmental Fund Balance Sheet and the Statement of Net Assets III. Stewardship, Compliance, and Accountability A. Budgetary Information B. Excess Expenditures Over Appropriations C. Deficit Balances D. Limitations on the City's Tax Levy IV. Detailed Notes on All Funds A. Deposits and Investments B. Receivables C. Restricted Assets D. Capital Assets E. Interfund Receivables/Payables, Advances and Transfers F. Long-Term Obligations G. Lease Disclosures H. Governmental Activities Net Assets/Fund Balances I. Component Unit V. Other Information A. Employees' Retirement System B. Risk Management C. Commitments and Contingencies D. Joint Ventures E. Subsequent Events Page 15 15 16 18 20 20 21 23 23 23 24 25 25 26 26 26 27 27 27 27 28 28 28 29 29 32 34 34 38 41 44 45 47 50 50 50 51 52 52 Page 14 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the City of Middleton, Wisconsin conform to generally accepted accounting principles as applicable to governmental units. 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. 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 a 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; the primary government is entitled to, or has the ability to otherwise access, a majority of the economic resources received or held by the separate organization; 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. The discretely presented component unit is reported in a separate column in the government-wide financial statements (see note below for description) to emphasize that it is legally separate from the primary government. Discretely Presented Component Unit Community Development Authority of the City of Middleton The government-wide financial statements include the Community Development Authority of the City of Middleton ("CDA") as a component unit. The CDA is a legally separate organization. The board of the CDA is appointed by the mayor. Wisconsin Statutes provide for circumstances whereby the city can impose its will on the CDA and also create a potential financial benefit to or burden on the city. As a component unit, the CDA's financial statements have been presented as a discrete column in the basic financial statements. Separately issued financial statements of the CDA are not prepared. Excluded from the reporting entity: The Middleton Area Development Corporation is a separate legal organization that is not reported in these financial statements. Page 15 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS Government-Wide Financial Statements The statement of net assets and statement of activities display information about the reporting government as a whole. They include all funds of the reporting entity except for fiduciary funds. The statements distinguish between governmental and business-type activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange revenues. Business-type activities are financed in whole or in part by fees charged to external parties for goods or services. Likewise, the primary government is reported separately from the legally separate component unit for which the primary government is finanCially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. The city does not allocate indirect expenses to functions in the statement of activities. Program revenues include 1) charges to customers or applicants who purchase, use or directly benefit from goods, services, or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not included among program revenues are reported as general revenues. Internally dedicated resources are reported as general revenues rather than as program revenues. Fund Financial Statements Financial statements of the reporting entity are organized into funds, each of which is considered to be a separate accounting entity. Each fund is accounted for by providing a separate set of self-balancing accounts, which constitute its assets, liabilities, net assets/fund equity, revenues, and expenditure/expenses. Separate financial statements are provided for governmental funds and proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Funds are organized as major funds or non-major funds within the governmental and proprietary statements. An emphaSis is placed on major funds within the governmental and proprietary categories. A fund is considered major if it is the primary operating fund of the city or meets the following criteria: a. Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise fund are at least 10% 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. Page 16 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (cont.) Fund Financial Statements (cont.) The city reports the following major governmental funds: Major Governmental Funds General Fund - accounts for the city's primary operating activities. It is used to account for all financial resources except those required to be accounted for in another fund. Debt Service Fund - accounts for resources accumulated and payments made for principal and interest on long-term debt other than TIF or enterprise fund debt. Tax Incremental Financing District (TIF) No.3 Capital Projects Fund - 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 capital improvement projects originally initiated. The city reports the following major enterprise funds: Major Enterprise Funds Water Utility - accounts for operations of the water system Sewer Utility - accounts for operations of the sewer system Pleasant View Golf Course - accounts for operations of the Pleasant View Golf Course The city reports the following non-major governmental funds: Non-Major Governmental Funds SpeCial Revenue Funds - used to account for the proceeds of specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specified purposes. Subdividers' Deposits Land and Park Donations Drug Evidence Cable TV Youth Commission Donations EMS Lost and Damaged Book Library Gift EMS Equipment Replacement Library Endowment Retirement Benefits Airport Economic Development Grant Shop With a Cop Drug Forfeitures Federal Seizures Senior Citizen Tourism Commission National Night Out Page 17 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (cont.) Fund Financial Statements (cont.) In addition, the city reports the following fund types: Agency funds are used to account for assets held by the city in a trustee capacity or as an agent for individuals, private organizations, and/or other governmental units. Tax Roll Fire District MPSISC c. MEASUREMENT Focus, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION Government-Wide Financial Statements The government-wide statement of net assets and statement of activities are reported using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. Property taxes are recognized as revenues in the year for which they are levied. Taxes receivable for the following year are recorded as receivables and deferred revenue. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider are met. Special assessments are recorded as revenue when earned. Unbilled receivables are recorded as revenues when services are provided. The business-type activities follow all pronouncements of the Governmental Accounting Standards Board, and have elected not to follow Financial Accounting Standards Board pronouncements issued after November 30, 1989. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the city's water and sewer utility and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Page 18 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) c. MEASUREMENT Focus, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION (cont.) Fund Financial Statements Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recorded when they are both measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. For this purpose, the city considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on long-term debt, claims, judgments, compensated absences, and pension expenditures, which are recorded as a fund liability when expected to be paid with expendable available financial resources. Property taxes are recorded in the year levied as receivables and deferred revenues. They are recognized as revenues in the succeeding year when services financed by the levy are being provided. Intergovernmental aids and grants are recognized as revenues in the period the city is entitled the resources and the amounts are available. Amounts owed to the city which are not available are recorded as receivables and deferred revenues. Amounts received prior to the entitlement period are also recorded as deferred revenues. Special assessments are recorded as revenues when they become measurable and available as current assets. Annual installments due in future years are reflected as receivables and deferred revenues. Delinquent special assessments being held for collection by the county are reported as receivables and deferred revenue in the general fund. Revenues susceptible to accrual include property taxes, miscellaneous taxes, public charges for services, special assessments and interest. Other general revenues such as fines and forfeitures, inspection fees, recreation fees, and miscellaneous revenues are recognized when received in cash or when measurable and available under the criteria described above. The city reports deferred revenues on its governmental funds balance sheet. Deferred revenues arise from taxes levied in the current year which are for subsequent year's operations. For governmental fund financial statements, deferred revenues arise when a potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. Deferred revenues also arise when resources are received before the city has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the city has a legal claim to the resources, the liability for deferred revenue is removed from the balance sheet and revenue is recognized. Page 19 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) C. MEASUREMENT Focus, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION (cont.) Fund Financial Statements (cont.) Proprietary and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as described previously in this note. Agency funds follow the accrual basis of accounting and do not have a measurement basis. The enterprise funds follow all pronouncements of the Governmental Accounting Standards Board, and have elected not to follow Financial Accounting Standards Board pronouncements issued after November 30, 1989. The proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the water, sewer, and Pleasant View Golf Course are charges to customers for sales and services. Special assessments are recoded 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. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY 1. Deposits and Investments For purposes of the statement of cash flows, the city considers all highly liquid investments with an initial maturity of three months or less when acquired to be cash equivalents. Investment of city funds is restricted by state statutes. Available investments are limited to: a. Time deposits in any credit union, bank, savings bank or trust company maturing in three years or less. b. Bonds or securities of any county, city, drainage district, technical college district, village, town, or school district of the state. Also, bonds issued by a local exposition district, a local professional baseball park district, a local professional football stadium district, a local cultural arts district, or by the University of Wisconsin Hospitals and Clinics Authority. c. Bonds or securities issued or guaranteed by the federal government. d. The local government investment pool. Page 20 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 1. Deposits and Investments (cont.) e. Any security maturing in seven years or less and having the highest or second highest rating category of a nationally recognized rating agency. f. Securities of an open-end management investment company or investment trust, subject to various conditions and investment options. g. 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 investment policy does not address these risks. Investments are stated at fair value, which is the amount at which an investment could be exchanged in a current transaction between willing parties. Fair values are based on quoted market prices. No investments are reported at amortized cost. Adjustments necessary to record investments at fair value are recorded in the operating statement as increases or decreases in investment income. Investment income on commingled investments of municipal accounting funds is allocated based on average balances. The difference between the bank balance and carrying value is due to outstanding checks and/or deposits in transit. The Wisconsin Local Government Investment Pool (LGIP) is part of the State Investment Fund (SIF), and is managed by the State of Wisconsin Investment Board. The SIF is not registered with the Securities and Exchange Commission, but operates under the statutory authority of Wisconsin Chapter 25. The SIF reports the fair value of its underlying assets annually. Participants in the LGIP have the right to withdraw their funds in total on one day's notice. At December 31, 2007, the fair value of the city's share of the LGIP's assets was substantially equal to the amount as reported in these statements. 2. Receivables Property taxes are levied in December on the assessed value as of the prior January 1. In addition to property taxes for the city, taxes are collected for and remitted to the state and county governments as well as the local school district and technical college district. Taxes for all state and local governmental units billed in the current year for the succeeding year are reflected as receivables and due to other taxing units on the accompanying agency fund statement of fiduciary net assets. Page 21 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 2. Receivables (cont.) Property tax calendar - 2007 tax roll: Lien date and levy date Tax bills mailed Payment in full, or First installment due Second installment due Personal property taxes in full Tax sale - 2007 delinquent real estate taxes December 2007 December 2007 January 31, 2008 January 31, 2008 July 31, 2008 January 31, 2008 October 2010 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 assets. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances". In the governmental fund financial statements, advances to other funds are offset equally by a fund balance reserve account which indicates that they do not constitute expendable available financial resources and, therefore, are not available for appropriation. The city has received federal grant funds for economic development loan programs to various businesses. The city records a loan receivable when the loan has been made and funds have been disbursed. It is the city's policy to record revenue when the initial loan is made from the federal grant funds. The net amount of the loan receivable balance is offset by a reserve for loans receivable. As loans are repaid, the reserve for loans receivable is reduced and the undesignated fund balance is increased. When new loans are made from loan repayments, the reserve for loans receivable is increased and the undesignated fund balance is decreased. Interest received from loan repayments is recognized as revenue when received in cash. Any unspent loan repayments at year end are presented as undesignated fund balance in the governmental fund balance sheet. Page 22 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 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 or 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 for 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 excess of restricted assets over current liabilities payable from restricted assets will be used first for retirement of related long-term debt. The remainder, if generated from earnings, is shown as restricted net assets. 5. 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. All capital assets are valued at historical cost, or estimated historical cost if actual amounts are unavailable. Donated fixed assets are recorded at their estimated fair value at the date of donation. Prior to January 2003, infrastructure assets of governmental funds were not capitalized. Upon implementing GASB No. 34, governmental units were required to account for all capital assets, including infrastructure, in the government-wide statements prospectively from the date of implementation. The city has retroactively reported all of the network infrastructure acquired by its governmental fund types. Page 23 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 5. Capital Assets (cont.) Government-Wide Statements (cont.) Additions to and replacements of capital assets of business-type activities are recorded at original cost, which includes material, labor, overhead, and an allowance for the cost of funds used during construction when significant. For tax-exempt debt, the amount of interest capitalized equals the interest expense incurred during construction netted against any interest revenue from temporary investment of borrowed fund proceeds. No net interest was capitalized during the current year. The cost of renewals and betterments relating to retirement units is added to plant accounts. The cost of property replaced, retired or otherwise disposed of, is deducted from plant accounts and, generally, together with removal costs less salvage, is charged to accumulated depreciation. 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 assets. Depreciation is provided over the assets' estimated useful lives using the straight-line method of depreciation. The range of estimated useful lives by type of asset is as follows: Buildings Land Improvements Machinery and Equipment Infrastructure Water Plant Source of Supply Pumping Water Treatment Transmission and Distribution General Sewer Plant Collecting System Collecting System Pumping General Fund Financial Statements 40 Years 30 Years 3 - 15 Years 20 - 50 Years 33 Years 20 - 40 Years 33 - 40 Years 16 - 90 Years 4 - 15 Years 30 - 100 Years 20 - 40 Years 7 - 40 Years 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. 6. Other Assets In governmental funds, debt issuance costs are recognized as expenditures in the current period. For the government-wide and the proprietary fund type financial statements, debt issuance costs are deferred and amortized over the term of the debt issue. Page 24 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 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 fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements, or are payable with expendable available resources. The city provides postemployment health insurance benefits for all eligible employees. Eligibility is based on retiring from the city or becoming disabled and being eligible to receive social security benefits or Wisconsin Retirement benefits. The benefits are based on contractual agreements with employee groups, local ordinances, and employee benefit policies. Employees may convert their accumulated sick leave to pay for health care premiums. The entire cost is paid by the city. Funding for those costs is provided by transferring funds from the general fund to a special revenue fund. Total expenditures for retirees' medical premiums during the year were $65,807. The number of participants currently eligible to receive benefits is 14. 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, 2007 are determined on the basis of current salary rates and include salary related payments. 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, and accrued compensated absences. Long-term obligations for governmental funds are not reported as liabilities in the fund financial statements. The face value of debts (plus any premiums) are reported as other financing sources and payments of principal and interest are reported as expenditures. The accounting in proprietary funds is the same as it is in the government-wide statements. 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 refundings 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/discounts and gains/losses, as applicable, is shown as an increase or decrease in the liability section of the statement of net assets. The city may approve the issuance of industrial revenue bonds (IRS) for the benefit of private business enterprises. IRS's are secured by mortgages or revenue agreements on the associated projects, and do not constitute indebtedness of the city. Accordingly, the bonds are not reported as liabilities in the accompanying financial statements. No industrial revenue bonds were outstanding as of the end of the year. Page 25 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 9. Claims and Judgments Claims and judgments are recorded as liabilities if all the conditions of Governmental Accounting Standards Board pronouncements are met. Claims and judgments that would normally be liquidated with expendable available financial resources are recorded during the year as expenditures in the governmental funds. If they are not to be liquidated with expendable available financial resources, no liability is recognized in the governmental fund statements. The related expenditure is recognized when the liability is liquidated. Claims and judgments are recorded in the government-wide statements and proprietary funds as expenses when the related liabilities are incurred. There were no significant claims or judgments at year end. 10. Equity Classifications Government-Wide Statements Equity is classified as net assets and displayed in three components: a. Invested in capital assets, net of related debt - Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances (excluding unspent bond proceeds) of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. b. Restricted net assets - Consists of net assets with constraints placed on their use either by 1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments or, 2) law through constitutional provisions or enabling legislation. c. Unrestricted net assets - All other net assets that do not meet the definition of "restricted" or "invested in capital assets, net of related debt." When both restricted and unrestricted resources are available for use, it is the city's policy to use restricted resources first, then unrestricted resources as they are needed. Fund Statements Governmental fund equity is classified as fund balance. Fund balance is further classified as reserved and unreserved. Unreserved fund balance includes funds set aside by management for specific uses, which are labeled "designated". The balance of unreserved fund balance is labeled "undesignated", which indicates it is available for appropriation. Proprietary fund equity is classified the same as in the government-wide statements. 11. Basis for Existing Rates - Proprietary Funds Current water rates were approved by the PSCW on February 9, 2005. Current sewer rates were approved by the public works committee on November 28, 2005 and became effective January 1, 2007. Sewer rates are adjusted for rate changes from Madison Metropolitan Sewerage District. Page 26 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE" - RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS A. EXPLANA TlON OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND BALANCE SHEET AND THE STATEMENT OF NET ASSETS The governmental fund balance sheet includes a reconciliation between fund balance - total governmental funds and net assets - governmental activities as reported in the government-wide statement of net assets. One element of that reconciliation explains that "some liabilities, including long-term debt are not due and payable in the current period and, therefore, are not reported in the funds. The details of this $64,124,439 difference are as follows: Bonds and notes payable Compensated absences Capital leases payable Accrued interest Accrued interest - due to component unit Unamortized debt issuance costs Combined Adjustment for Long-Term Liabilities NOTE III - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. BUDGETARY iNFORMA TlON $ 46,759,573 1,849,267 14,870,000 647,106 195,418 (54,888) $ 64,266,476 Budgetary information is derived from the annual operating budget and is presented using the same basis of accounting for each fund as described in Note I. C. A budget has been adopted for the general fund, debt service fund, certain special revenue funds, and capital projects funds. Wisconsin Statute 65.90 requires that an annual budget be adopted for all funds. The budgeted amounts presented include any amendments made. The city administrator may authorize transfers of budgeted amounts between departments up to $1,000. Transfers exceeding $1,000 between departments and changes to the overall budget must be approved by a two-thirds council action. Appropriations lapse at year end unless specifically carried over. Budgets are adopted at the departmental level of expenditure. Page 27 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE III - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY (cont.) B. EXCESS EXPENDITURES OVER ApPROPRIA TlONS The following individual funds experienced excess expenditures over appropriations. Budgeted Expenditures Actual Expenditures Excess Expenditures Over Budget General Fund $ 13,792,197 $ 14,065,488 $ 273,291 Special Revenue Funds Subdivider's deposits Land and park donations Drug evidence Cable TV Youth commission donations Lost and damaged book Library gift Library endowment Retirement benefits Shop with a cop Federal seizures Senior citizen National night out 498,301 26,852 2,816 16,817 822 13,411 1,498 10,985 65,807 4,101 1,554 3,950 1,316 498,301 26,852 2,816 16,817 822 13,411 1,498 10,985 65,807 4,101 1,554 3,950 1,316 The city controls expenditures at the departmental level. Some individual departments experienced expenditures which exceeded appropriations. The detail of those items can be found in the city's year-end budget to actual report. C. DEFICIT BALANCES Generally accepted accounting principles require disclosure of individual funds that have deficit balances at year end. As of December 31, 2007, the following individual fund held a deficit balance: Special Revenue Fund Federal seizures $ 4,358 Excess expenditures over revenues. This deficit is anticipated to be funded by miscellaneous revenues. D. LiMITATIONS ON THE CITY'S TAX LEVY As part of Wisconsin's Act 20 (2007), 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 3.86% for the 2007 levy collected in 2008 and 2% for the 2008 levy collected in 2009. Changes in debt service from one year to the next are generally exempt from this limit. The levy limit is set to expire after the 2008 levy. Page 28 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE IV - DETAILED NOTES ON ALL FUNDS A. DEPOSITS AND INVESTMENTS The city's cash and investments at year end were comprised of the following: Demand deposits Money market U.S. agencies Mutual funds Other external investment pool - Madison Community Foundation LGIP Petty cash Total Cash and Investments Reconciliation to financial statements Per statement of net assets Unrestricted cash and investments Restricted cash and investments Per statement of net assets - Fiduciary Funds Agency Total Cash and Investments Carrying Value $ 16,360,338 780,038 402,006 19,807,604 199,655 4,187,652 475 $ 41,737,768 $ 24,855,109 54,000 16,828,659 $ 41,737,768 Bank Associated Balance Risks $ 16,835,063 Custodial credit 780,038 Custodial credit 402,006 Credit, custodial credit, interest rate 19,807,604 Credit, interest rate 199,655 Credit, interest rate 4,187,652 Credit, interest rate N/A $ 42,212,018 Deposits in each local and area bank are insured by the FDIC in the amount of $100,000 for interest bearing accounts and $100,000 for noninterest bearing accounts. Bank accounts are also insured by the State Deposit Guarantee Fund in the amount of $400,000. However, due to the relatively small size of the Guarantee Fund in relationship to the total deposits covered and other legal implications, recovery of material principal losses may not be significant to individual municipalities. This coverage has not been considered in computing the custodial credit risk. Investments in the local government investment pool are covered under a surety bond issued by Financial Security Assurance, Inc. The bond insures against losses arising from principal defaults on substantially all types of securities acquired by the pool except U.S. Government and agency securities. The bond provides unlimited coverage on principal losses, reduced by any FDIC and State of Wisconsin Guarantee Fund insurance. Page 29 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) A. DEPOSITS AND INVESTMENTS (cont.) The Madison Community Foundation ("Foundation") is a community endowment fund. The Foundation is not registered with Securities and Exchange Commission. It constitutes a contractual agreement between the city and Foundation with respect to investment of city assets. The Foundation reports the fair value of its underlying assets annually. At December 31, 2007, the fair value of the Foundation's assets was substantially equal to the city's share as reported above. 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, 2007, $16,285,097 of the city's total bank balances of $16,835,063 were exposed to custodial credit risk as follows: Uninsured and uncollateralized $ 16,285,097 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 investments or collateral securities that are in the possession of an outside party. As of December 31, 2007, the city's investments were exposed to custodial credit risk as follows: U.S. Agencies Neither insured nor registered and held by counterparty $ 780,038 Page 30 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) A. DEPOSITS AND INVESTMENTS (cont.) Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. As of December 31, 2007, the city's investments were rated as follows: Standard Fitch Investment Type & Poor's Ratings U.S. agencies AAA N/A Mutual fund - Federated Securities AAA AAA The city also had investments in the following external pools which are not rated: Local Government Investment Pool Madison Community Foundation Interest Rate Risk Moody's Investor Service AAA AAA Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. As of December 31, 2007, the city's investments were as follows: Maturity (In Months) Investment Type Fair Value Less than 6 7-12 12-63 U.S. agencies $ 402,006 $ 2,038 $ 99,875 The city also had $4,187,652 invested in the local government investment pool, which had a weighted average maturity of 56 days. In addition, the city had $199,655 in another external investment pool (Madison Community Foundation), which is made up primarily of equity securities that do not have a determinable maturity date. See Note I.D.1. for further information on deposit and investment policies. Page 31 ---PAGE BREAK--- NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) B. RECEIVABLES CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 Receivables as of year end for the government's individual major funds and nonmajor funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: Nonmajor TIF District Capital Pleasant View and Other General No.3 Projects Water Sewer Golf Course Funds Totals Receivables: Taxes $ 10,427,976 $ 9,893,660 $ - $ - $ - $ - $ - $ 20,321,636 Delinquent taxes 158,810 158,810 Accounts 378,182 295,305 338,614 391,369 2,880 222,537 1,628,887 Loans 1,684,716 64,546 1,749,262 Special assessments 10,041 2,332,936 2,204,182 4,547,159 Delinquent special assessments 1,740 1,740 Interest 118,476 25,430 59,454 20,817 8,508 232,685 Due from other governments 10,046 10,046 Gross Receivables 11,105,271 13,936,742 295,305 398,068 2,616,368 2,880 295,591 28,650,225 Less: Allowance for uncollectibles (189,986) (189,986) Net Total Receivables $ 10,915,285 $ 13,936,742 $ 295,305 $ 398,068 $ 2,616,368 $ 2,880 $ 295,591 $ 28,460,239 Amounts Not Expected to be Collected Within One Year $ - $ 4,539,894 $ - $ - $ 2,204,182 $ - $ 64,546 $ 6,808,622 Page 32 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) B. RECEIVABLES (cont.) Revenues of the city are reported net of uncollectible amounts. Total uncollectible amounts related to revenues of the current period are as follows: Uncollectibles related to ambulance billings $ 189,986 Total Uncollectibles of the Current Fiscal Year $ 189,986 Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Property taxes levied for the subsequent year are not earned and cannot be used to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue and unearned revenue reported in the governmental funds were as follows: Unavailable Unearned Totals Property taxes receivable for subsequent year $ $ 20,212,196 $ 20,212,196 Special assessments not yet due 2,344,717 2,344,717 Loan receivable 1,656,250 1,656,250 EMS receivable 16,866 16,866 Grant revenue 269,863 269,863 Interest income (TIF District No.3) 225,594 225,594 Total Deferred/Unearned Revenue for Governmental Funds $ 4,513,290 $ 20,212,196 $ 24,725,486 For economic development loans, the city is limited by the Wisconsin Department of Commerce to the amount of program income from economic development loans that it may retain and loan to other businesses. Program income includes the principal and interest received from economic development loans repayments. Based upon its current population, the city may retain $750,000. At December 31, 2007, the city has not exceeded its maximum retention cap. When it does, a liability to the state will be recorded. Page 33 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) C. RESTRICTED ASSETS Replacement Account The sewer utility established an equipment replacement account to be used for significant mechanical equipment replacement as required by the Wisconsin Department of Natural Resources. Following is a list of restricted assets at December 31, 2007: 2007 Restricted assets replacement account $ 54,000 D. CAPITAL ASSETS Capital asset activity for the year ended December 31, 2007 was as follows: Beginning Ending Balance Additions Deletions Balance Governmental Activities Capital assets not being depreciated Land $ 7,063,959 $ 375,141 $ $ 7,439,100 Right of way 17,704,605 916,265 18,620,870 Construction in progress 3,145,540 3,145,540 Total Capital Assets Not Being Depreciated 24,768,564 4,436,946 29,205,510 Capital assets being depreciated Land improvements 5,938,873 200,395 13,753 6,125,515 Buildings 9,216,171 168,531 9,047,640 Machinery and equipment 3,732,881 448,608 388,476 3,793,013 Streets - infrastructure 17,210,622 1,215,965 21,659 18,404,928 Storm sewers - infrastructure 7,916,489 751,592 8,668,081 Traffic signals - infrastructure 894,585 894,585 Sidewalks - infrastructure 2,804,391 210,067 3,014,458 Bridges - infrastructure 3,034,448 82,380 3,116,828 Rail spur - infrastructure 482,163 482,163 Total Capital Assets Being Depreciated 51,230,623 2,909,007 592,419 53,547,211 Page 34 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) D. CAPITAL ASSETS (cont.) Governmental Activities (cont.) Less: Accumulated depreciation for Land improvements Buildings Machinery and equipment Streets - infrastructure Storm sewers - infrastructure Traffic signals - infrastructure Sidewalks - infrastructure Bridges - infrastructure Rail spur - infrastructure Total Accumulated Depreciation $ Beginning Balance (1,053,895) (2,579,175) (2,171,608) (2,038,298) (1,268,322) (332,960) (969,543) (159,417) {27,436) {10,600,654) Additions $ (203,339) (194,490) (293,772) (257,304) (133,888) (32,159) (58,188) (35,419) {14,465) {1,223,024) $ Total Capital Assets, Net of Depreciation $ 65,398,533 $ 6,122,929 $ Depreciation expense was charged to functions as follows: Governmental Activities General government Public safety Public works, which includes the depreciation Deletions 13,753 $ 7,913 407,635 16,244 445,545 Ending Balance (1,243,481 ) (2,765,752) (2,057,745) (2,279,358) (1,402,210) (365,119) (1,027,731) (194,836) {41,901) {11 ,378, 133) 146,874 $ 71,374,588 $ 24,959 124,411 of streets, storm sewers, traffic signals, sidewalks, bridges and rail spur Leisure activities 660,658 412,996 Total Governmental Activities Depreciation Expense $ 1,223,024 Page 35 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) D. CAPITAL ASSETS (cont.) Water Utility Beginning Balance Additions Deletions Ending Balance Capital assets not being depreciated Land and land rights $ 99,777 - - Capital assets being depreciated Source of supply Pumping Treatment Transmission and distribution Administrative and general assets Total Capital Assets Being Depreciated Total Capital Assets Less: Accumulated depreciation for Source of supply Pumping Treatment Transmission and distribution Administrative and general assets Total Accumulated Depreciation Net Water Plant $ 319,783 1,677,663 343,242 17,658,568 523,883 20,523,139 20,622,916 (239,641 ) (884,979) (329,116) (3,175,025) {459,697) {5,088,458) 15,534,458 $ 8,605 500 1,040,271 10,300 9,982 1,058,858 10,800 1,058,858 10,800 (10,553) (59,140) 500 (1,922) (328,423) 10,300 {35,896) {435,934) 10,800 622,924 $ - $ 319,783 1,685,768 343,242 18,688,539 533,865 21,571,197 21,670,974 (250,194) (943,619) (331,038) (3,493,148) {495,593) {5,513,592) 16,157,382 Page 36 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) D. CAPITAL ASSETS (cont.) Beginning Balance Additions Sewer Utility Capital assets not being depreciated Land and land rights $ 66,830 $ - Capital assets being depreciated Collection system 11,948,410 436,987 Collection system pumping 1,215,786 90,000 Administrative and general assets 381,280 Total Capital Assets Being Depreciated 13,545,476 526,987 Total Capital Assets 13,612,306 526,987 Less: Accumulated depreciation {2,841,489) (217,504) Net Sewer Plant $ 10,770,817 $ 309,483 Beginning Balance Additions Pleasant View Golf Course Capital assets not being depreciated Land and land rights $ 2,216,000 $ - Construction in progress 383,765 Total Capital Assets Not Being Depreciated 2,599,765 Capital assets being depreciated Land improvements 7,291,981 Buildings 208,763 1,116,790 Equipment 431,574 199,250 Total Capital Assets Being Depreciated 7,932,318 1,316,040 Total Capital Assets 10,532,083 1,316,040 Less: Accumulated depreciation for Buildings (60,895) (41,980) Land improvements (95,624) (19,124) Equipment {211,440) {58,396) Total Accumulated Depreciation {367,959) (119,500) Net Golf Course $ 10,164,124 $ 1,196,540 Total Net Capital Assets - Business Type Activities $ 36,469,399 Ending Deletions Balance $ - $ 66,830 12,385,397 1,305,786 381,280 14,072,463 14,139,293 p,058,993) $ - $ 11,080,300 Ending Deletions Balance $ - $ 2,216,000 383,765 383,765 2,216,000 7,291,981 1,325,553 630,824 9,248,358 383,765 11,464,358 (102,875) (114,748) {269,836) {487,459) $ 383,765 $ 10,976,899 $ 38,214,581 Page 37 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) D. CAPITAL ASSETS (cont.) Depreciation expense was charged to functions as follows: Business-type Activities Water Sewer Pleasant View Golf Course Total Business-type Activities Depreciation Expense $ $ 397,536 217,504 119,500 734,540 Depreciation expense is different from additions because of joint metering, salvage cost of removal, internal allocations, and cost associated with the disposal of assets. E. INTERFUND RECEIVABLES/PA YABLES, ADVANCES AND TRANSFERS The following is a schedule of interfund receivables and payables including any overdrafts on pooled cash and investment accounts: Receivable Fund Payable Fund Amount Drug forfeitures Federal seizures $ 4,358 Water utility General 51,104 Water utility Sewer utility 73,709 Sewer utility General 60,082 Capital projects Water utility 106,878 Total - Fund Financial Statements 296,131 Less: Eliminations (291,823) Total Government-Wide Financial Statements $ 4,308 The balances resulted from the time lag between the dates that interfund goods and services are provided or reimbursable expenditures occur, transactions are recorded in the accounting system, and payments between funds are made. All amounts are due within one year. For the statement of net assets, interfund balances which are owed within the governmental activities or business-type activities are netted and eliminated. Page 38 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) E. INTERFUND RECEIVABLES/PAYABLES, ADVANCES AND TRANSFERS (cont.) The general fund advanced funds to TIF District NO.3 and is charging interest on the advance at a rate which is 2% over the city's cost of funds. No repayment schedule has been established. Interest on the interfund advance is recorded as a deferred revenue in the general fund until paid by the TIF District. Interest costs on the advance are recorded as an expenditure of the TIF District when the expenditure is incurred. Deferred interest income in the general fund at December 31, 2007 is $225,594. The general fund has also advanced funds to the Pleasant View Golf Course. No repayment schedules have been established on the advances to Pleasant View Golf Course. Interest will be charged on the advances. The following is a schedule of interfund advances: Receivable Fund General fund General fund Payable Fund Pleasant View Golf Course TIF District No.3 Total - Fund Financial Statements Less: Eliminations Total - Government-Wide Financial Statements Amount $ 1,427,174 1,136,062 Amount Not Due Within One Year $ 1,427,174 1,136,062 2,563,236 $ 2,563,236 (1,136,062) $ 1,427,174 The principal purpose of these interfunds is to finance costs incurred in these funds rather than borrowing externally. For the statement of net assets, interfund balances which are owed within the governmental activities or business-type activities are netted and eliminated. The following is a schedule of amounts due from the component unit to the primary government: TIF District NO.3 capital projects fund Component unit - CDA $ 1,792,890 This amount represents the unspent debt proceeds by the CDA that is intended to be spent on capital projects within TIF District No.3 or used for debt payments. Page 39 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) E. INTERFUND RECEIVABLES/PAYABLES, ADVANCES AND TRANSFERS (cont.) The following is a schedule of interfund transfers: Principal Fund Transferred To Fund Transferred From Amount Purpose General Water utility $ 293,254 Payment in lieu of tax EMS General 40,000 Ambulance purchase Retirement benefits General 250,876 Future retirement benefits Debt service fund TIF District No.3 5,331,065 Debt service Debt service fund General 2,770,482 Debt service Debt service fund Tourism commission 332,000 Debt service Debt service fund Capital projects 226,462 Debt service Capital projects TIF District No.3 313,225 Capital projects Subtotal - Fund Financial Statements 9,557,364 Less: Fund eliminations (9,264,110) Total Government-Wide Statement of Activities $ 293,254 Government Activity Business-type Activity $ 293,254 Business-type Activity Government Activity Total $ 293,254 Generally, transfers are used to move revenues from the fund that collects them to the fund that the budget requires to expend them, move receipts restricted to debt service from the funds collecting the receipts to the debt service fund, and use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. Page 40 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) F. LONG-TERM OSLIGA TlONS Long-term obligations activity for the year ended December 31, 2007 was as follows: Beginning Ending Balance Increases Decreases Balance GOVERNMENTAL ACTIVITIES Bonds and Notes Payable: General obligation debt $ 43,988,388 $ $ 6,443,815 $ 37,544,573 Note anticipation notes 9,215,000 9,215,000 Total Bonds and Notes Payable 43,988,388 9,215,000 6,443,815 46,759,573 Other Liabilities: Unfunded pension liability 286,252 286,252 Vested compensated absences 1,675,856 803,432 630,021 1,849,267 Capital leases 15,685,000 815,000 14,870,000 Total Other Liabilities 17,647,108 803,432 1,731,273 16,719,267 Total Governmental Activities Long-Term Liabilities $ 61,635,496 $ 10,018,432 $ 8,175,088 $ 63,478,840 Beginning Ending Balance Increases Decreases Balance BUSINESS-TYPE ACTIVITIES Bonds and Notes Payable: General obligation debt $ 11,075,000 $ $ 740,000 $ 10,335,000 Other Liabilities: Vested compensated absences 71,012 3,970 20,109 54,873 Total Business-type Activities Long-Term Liabilities $ 11,146,012 $ 3,970 $ 760,109 $ 10,389,873 General Obligation Debt Amounts Due Within One Year $ 6,616,152 9,215,000 15,831,152 678,940 850,000 1,528,940 $ 17,360,092 Amounts Due Within One Year $ 795,000 35,954 $ 830,954 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. In accordance with Wisconsin Statutes, total general obligation indebtedness of the city may not exceed five percent of the equalized value of taxable property within the city's jurisdiction. The debt limit as of December 31, 2007, was $135,685,325. Total general obligation debt outstanding at year end was $57,094,573. Page 41 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) F. LONG-TERM OBLIGA TIONS (cont.) General Obligation Debt (cont.) Date of Governmental Activities Issue General Obligation Debt 1998 General obligation promissory notes 4-01-98 1999 General obligation promissory notes 5-15-99 2000 General obligation promissory notes 4-01-00 2001 General obligation promissory notes 3-15-01 2002 General obligation promissory notes 3-15-02 2002 State trust fund loan 11-06-02 2003 General obligation prom issory notes 5-01-03 2003 State trust fund loan 1-30-03 2004 General obligation refunding bond 6-15-04 2004 General obligation promissory notes 6-15-04 2005 General obligation promissory notes 6-01-05 2006 General obligation promissory notes 6-01-06 2006 General obligation promissory notes 12-27-06 Total Governmental Activities - General Obligation Debt Final Maturit~ 9-01-08 3-01-09 3-01-10 3-11-11 3-01-12 3-15-19 9-01-13 3-15-19 3-01-12 3-01-14 12-01-11 12-01-13 12-01-14 Interest Rates 3.90% - 4.60% 3.50%- 4.40% 4.80% - 5.20% 4.00%- 4.40% 2.125% - 4.50% 5.00% 2.00% - 3.40% 5.00% 2.00% - 4.00% 2.50% - 4.25% 3.25% - 3.50% 4.00% - 4.25% 3.75% - 4.00% Original Indebted- Balance ness 12-31-07 $ 9,675,000 $ 800,000 6,800,000 2,000,000 6,800,000 4,800,000 8,000,000 5,250,000 6,250,000 4,750,000 2,170,000 1,804,604 9,980,000 7,510,000 930,000 764,969 4,540,000 1,080,000 1,910,000 1,355,000 3,300,000 3,100,000 2,000,000 2,000,000 2,330,000 2,330,000 $ 37,544,573 Page 42 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) F. LONG- TERM OSLIGA TlONS (cont.) General Obligation Debt (cont.) Business-type Activities General Obligation Debt 1999 General obligation promissory notes 2001 General obligation promissory notes 2002 General obligation promissory notes 2004 General obligation refunding 2006 General obligation Promissory notes Date of Issue 5-15-99 3-15-01 3-15-02 6-15-04 12-27-06 Total Business-type Activities - General Obligation Debt Final Maturity 3-01-09 3-11-11 3-01-12 3-01-12 12-01-14 Debt service requirements to maturity are as follows: Interest Rates 3.50%- 4.40% 4.00%- 4.80% 2.125% - 4.50% 2.00% - 4.00% 3.75% - 4.00% $ Original Indebted- ness 500,000 2,000,000 6,005,000 2,040,000 1,200,000 Governmental Activities Business-type Activities General Obligation Debt General Obligation Debt Principal Interest Principal Interest 2008 $ 6,616,152 $ 1,411,993 $ 795,000 $ 457,358 2009 6,914,562 1,139,320 860,000 416,158 2010 6,793,040 863,270 870,000 373,449 2011 5,776,942 609,397 2,625,000 295,714 2012 5,616,032 578,827 1,000,000 211,314 2013 - 2017 5,288,636 469,302 4,185,000 486,067 2018 - 2019 539,209 40,767 Totals $ 37,544,573 $ 5,112,876 $ 10,335,000 $ 2,240,060 $ Balance 12-31-07 115,000 1,700,000 5,575,000 1,745,000 1,200,000 $ 10,335,000 Totals $ 9,280,503 9,330,040 8,899,759 9,307,053 7,406,173 10,429,005 579,976 $ 55,232,509 Estimated payments of accumulated employee benefits and other commitments are not included in the above schedule. The note anticipation notes are included in the next section. Also, the capital lease principal and interest requirements are not included. They are equal to the CDA's lease revenue bonds required payments. See Note IV.1. for the repayment schedule. Page 43 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) F. LONG- TERM OBLIGA nONS (cont.) Note Anticipation Notes Note anticipation notes at December 31, 2007, consist of the following: Original Governmental Activities Date of Final Interest Indebted- Note Antici~ation Notes Issue Maturit~ Rate ness Note anticipation notes - general obligation 7-10-07 7-01-08 4.00% $ 9,215,000 Balance 12-31-07 $ 9,215,000 These notes were issued to finance the cost of the new fire/EMS building and were refinanced on June 2, 2008. See Note V.E. regarding this subsequent event. Capital Leases Refer to Note IV.G. Other Debt Information The compensated absences liability attributable to governmental activities will be liquidated primarily by the general fund. There are a number of limitations and restrictions contained in the various bond indentures and loan agreements. The city believes it is in compliance with all significant limitations and restrictions, including federal arbitrage regulations. G. LEASE DISCLOSURES Lessee - Capital Leases The Tax Increment District NO.3 (TIF District No.3) is leasing land and other capital assets from the Community Development Authority (CDA). The CDA borrowed $16,475,000 in revenue bonds for these costs in 2002. The annual lease payments to be paid are the same as the CDA's annual debt service payments on the bonds. See Note IV.l.c. for the repayment schedule. Tax increment revenues generated by TIF District NO.3 are expected to be paid over to the CDA to make the debt payments. Lessee - Operating Leases The city has no material outstanding operating leases. Lessor - Capital Leases The city has no material outstanding sales-type or direct financing leases. Lessor - Operating Leases The city does not receive material lease payments from property rented to others. Page 44 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) H. GOVERNMENTAL ACTIVITIES NET ASSETS/FUND BALANCES Governmental activities net assets reported on the government wide statement of net assets at December 31, 2007 include the following: Governmental Activities Invested in capital assets, net of related debt Capital assets, net of accumulated depreciation Less: related long-term debt outstanding (excluding unspent capital related debt proceeds) Total Invested in Capital Assets, Net of Related Debt Restricted Debt service Subdivider's deposits Park improvements Police enforcement EMS Library Economic development Senior citizens Total Restricted Unrestricted Total Governmental Activities Net Assets $ 71,374,588 (45,872,227) 25,502,361 21,389 1,664,414 36,887 19,668 57,791 244,077 270,369 72,776 2,387,371 3,719,837 $ 31,609,569 Governmental fund balances reported on the fund financial statements at December 31, 2007 include the following: Reserved Major Funds General Fund Prepaid items Delinquent personal property taxes Advances Total Debt Service Fund Debt service TIF District No.3 Capital Projects Fund Reserved for loans receivable Reserved for debt service Total Capital Projects Fund Reserved for encumbrances $ 1,674 158,810 2,337,642 $ 2,498,126 $ 526,462 $ 1,684,716 1,608,636 $ 3,293,352 $ 5,031,424 Page 45 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) H. GOVERNMENTAL ACTIVITIES NET ASSETS/FuND BALANCES (cont.) Governmental Activities (cont.) Unreserved - Designated General Fund 2008 budget Unreserved - Undesignated (Deficit) Major Funds General fund TIF District No.3 capital projects fund (deficit) Capital projects fund Non-Major Funds (Deficit) Special Revenue Funds Subdividers' deposits Land and park donations Drug evidence Cable TV Youth commission donations EMS Lost and damaged book Library gift EMS equipment replacement Library endowment Retirement benefits Airport Economic development grant Shop with a cop Drug forfeitures Federal seizures Senior citizen Tourism commission National night out Total $ 550,000 $ 2,488,786 $(1,352,471 ) $ 2,595,892 $ 1,664,414 38,887 3,014 239,369 2,095 57,791 35,651 41,657 324,280 202,420 1,102,471 199,063 270,369 13,117 16,654 (4,358) 72,776 222,896 1,313 $ 4,503,879 Page 46 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) H. GOVERNMENTAL ACTIVITIES NET ASSETS/FuND BALANCES (cont.) Business-type Activities Invested in Capital Assets, Net of Related Debt The following calculations support the net assets invested in capital assets, net of related debt. Pleasant View Golf Water Sewer Course Totals Capital assets $ 21,670,974 $ 14,139,293 $ 11,464,358 $ 47,274,625 Accumulated depreciation (5,513,592) (3,058,993) (487,459) (9,060,044) Sub-totals 16,157,382 11,080,300 10,976,899 38,214,581 Less: Current portion of capital related long-term debt (205,000) (160,000) . (430,000) (795,000) Long-term portion of capital related long-term debt (940,000) (555,000) (8,045,000) (9,540,000) Unamortized debt issuance costs 5,844 5,844 Sub-totals (1,145,000) (709,156) (8,475,000) (10,329,156) Total Net Assets Invested in Capital Assets, Net of Related Debt $ 15,012,382 $ 10,371,144 $ 2,501,899 $ 27,885,425 Restricted Equipment replacement $ $ 54,000 $ - $ 54,000 Unrestricted (Deficit) $ 4,447,532 $ 4,417,511 $ (1,601,232) $ 7,263,811 I. 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 assets and statement of activities. In addition to the basic financial statements and the preceding notes to financial statements which apply, the following additional disclosures are considered necessary for a fair presentation. a. Basis of Accounting/Measurement Focus The CDA follows the full accrual basis of accounting and the flow of economic resources measurement focus. Page 47 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) I. COMPONENT UNIT (cont.) b. Restricted Cash and Investments The bond ordinances relating to the CDA bonds requires the establishment of certain accounts. These are as follows: Construction fund Debt reserve fund Total Additional information on the above deposits and investments follows: $ 183,967 1,608,923 $ 1,792,890 The investments of the CDA in U.S. treasuries have associated risks of custodial credit risk and interest rate risk. Custodial Rate Risk Investments - for an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the CDA will not be able to recover the value of its investments or collateral securities that are in possession of an outside party. As of December 31, 2007, the CDA's investments were exposed to custodial credit risk as follows: U.S. Treasuries Neither insured nor registered and held by counterparty $ 1,692,890 Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. As of December 31, 2007, the CDA's investments were as follows: Maturity (In Months) Investment Type Fair Value Less than 6 7-12 12-60 U.S. Treasuries $ 1,792,890 $ 1,792,890 $ $ Page 48 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) I. COMPONENT UNIT (cont.) c. CDA Lease Revenue Bonds 2002 redevelopment lease revenue bonds dated August 15, 2002 with interest at 2.60%-4.75%. Principal payments vary. Bonds mature Balance 1-1-07 Increases Decreases Balance 12-31-07 Amounts Due in Less Than One Year October 1, 2020. $ 6,995,000 $ - $ 390,000 $ 6,605,000 $ 405,000 2002 redevelopment lease revenue bonds dated August 15, 2002 with interest at 4.3%- 6.65%. Principal payments vary. Bonds mature October 1, 2020. Less: Unamortized debt discounts 8,690,000 (176,690) 425,000 (12,850) 8,265,000 445,000 (163,840) (12,850) Totals $ 15,508,310 $ 802,150 $ 14,706,160 Debt service requirements to maturity are as follows: Principal Interest Totals 2008 $ 850,000 $ 781,670 $ 1,631,670 2009 885,000 746,258 1,631,258 2010 920,000 707,030 1,627,030 2011 965,000 664,384 1,629,384 2012 1,010,000 617,836 1,627,836 2013-2017 5,885,000 2,253,128 8,138,128 2018 - 2020 4,355,000 514,908 4,869,908 Totals $ 14,870,000 $ 6,285,214 $ 21,155,214 There are a number of limitations and restrictions contained in the various bond indentures and agreements. The CDA believes it is in compliance with all significant limitations and restrictions. Page 49 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE V - OTHER INFORMATION A. EMPLOYEES' RETIREMENT SYSTEM All eligible city employees participate in the Wisconsin Retirement System (System), a cost- sharing multiple-employer defined benefit public employee retirement system (PERS). All permanent employees expected to work over 600 hours a year are eligible to participate in the System. Covered employees in the General category are required by statute to contribute 5.9% of their salary (2.9% for Executives and Elected Officials, 5.0% for Protective Occupations with Social Security, and 3.3% for Protective Occupations without Social Security) to the plan. Employers generally make these contributions to the plan on behalf of employees. Employers are required to contribute an actuarially determined amount necessary to fund the remaining projected cost of future benefits. The payroll for city employees covered by the system for the year ended December 31, 2007 was $6,601,173; the employer's total payroll was $7,288,634. The total required contribution for the year ended December 31, 2007 was $885,304 or 13.4% of covered payroll. Of this amount, 100% was contributed by the employer for the current year. Total contributions for the years ending December 31, 2006 and 2005 were $766,294 and $713,812, respectively, equal to the required contributions for each year. Employees who retire at or after age 65 (62 for elected officials and 55 for protective occupation employees) are entitled to receive a retirement benefit. Employees may retire at age 55 (50 for protective occupation employees) and receive actuarially reduced benefits. The factors influencing the benefit are: final average earnings, years of creditable service, and a formula factor. Final average earnings is the average of the employee's three highest year's earnings. Employees terminating covered employment before becoming eligible for a retirement benefit may withdraw their contributions and, by doing so, forfeit all rights to any subsequent benefit. For employees beginning participation on or after January 1, 1990 and no longer actively employed on or after April 24, 1998, creditable service in each of five years is required for eligibility for a retirement annuity. Participants employed prior to 1990 and on or after April 24, 1998 are im mediately vested. The System also provides death and disability benefits for employees. Eligibility for and the amount of all benefits is determined under Chapter 40 of Wisconsin Statutes. The System issues an annual financial report which may be obtained by writing to the Department of Employee Trust Funds, P.O. Box 7931, Madison, WI 53707-7931. During 2007, the city paid off its pension-related liability. The total amount of the payment was $241,677. This is reported as a special item in the statement of revenues, expenditures and changes in fund balances - governmental funds. B. RISK MANAGEMENT The city is exposed to various risks of loss related to torts; theft of, damage to, or destruction of assets; errors and omissions; workers compensation; and health care of its employees. All of these risks are covered through the purchase of commercial insurance, with minimal deductibles. Settled claims have not exceeded the commercial coverage in any of the past three years. There were no significant reductions in coverage compared to the prior year. Page 50 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE V - OTHER INFORMATION (cont.) C. COMMITMENTS AND CONTINGENCIES From time to time, the city is party to various pending claims and legal proceedings. Although the outcome of such matters cannot be forecasted with certainty, it is the opinion of management and the city's legal counsel that the likelihood is remote that most of such claims or proceedings will not have a material adverse effect on the city's financial position or results of operations. However, the city is involved in a claim for refund of personal property taxes that it is vigorously defending. The possibility exists that the city may not be able to collect this receivable. In addition, a claim has been filed that may have an unfavorable outcome. Funding for the operating budget of the city comes from many sources, including property taxes, grants and aids from other units of government, user fees, fines and permits, and other miscellaneous revenues. The State of Wisconsin provides a variety of aid and grant programs which benefit the city. Those aid and grant programs are dependent on continued approval and funding by the Wisconsin governor and legislature, through their budget processes. The State of Wisconsin is currently experiencing budget problems, and is considering numerous alternatives including reducing aid to local governments. Any changes made by the State to funding or eligibility of local aid programs could have a significant impact on the future operating results of the city. The city has received federal and state grants for specific purposes that are subject to review and audit by the grantor agencies. Such audits could lead to requests for reimbursements to the grantor agency for expenditures disallowed under terms of the grants. Management believes such disallowances, if any, would be immaterial. As stated in Note V.D., the city jointly operates the Metropolitan Refuse District, Inc. (District). The District's fund balance at September 30, 2007 is a deficit of $258,392. 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 57%, which amounts to $147,283 of the District's net deficit. The city's share of the net deficit has been reported in the government-wide statement of net assets. See also Note V.D. Page 51 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE V - OTHER INFORMATION (cont.) D. JOINT VENTURES Metropolitan Refuse District, Inc. The City of Middleton and the Villages of Shorewood Hills and Waunakee jointly operate the local sanitary landfill, which is called the Metropolitan Refuse District, Inc. The landfill stopped accepting waste in 1997. The communities share in the operation of the District based on estimated population as follows: City of Middleton Village of Shorewood Hills Village of Waunakee 57% 6 37 The governing body is made up of citizens from each community. Local representatives are appointed by each city. The governing body has authority to adopt its own budget and control the financial affairs of the District. The city made payments totaling $72,675 to the District in 2007. The city has an equity interest (deficit) of $(147,283) at year end. The city will continue to support the District's postclosure care costs in the future. The District's landfill is being monitored for possible groundwater contamination as required by the Wisconsin Department of Natural Resources. The costs for groundwater monitoring are being budgeted for on an annual basis. At the current time it is not possible to determine if extensive contamination has occurred and the effects, if any, on the District's financial statements. Multijurisdictional Public Safety Information System Commission (MJPISC) The City of Fitchburg, City of Sun Prairie, and City of Middleton jointly operate the Multijurisdictional Public Safety Information System Commission. On March 20, 2003, the City of Middleton, City of Fitchburg, and City of Sun Prairie executed an intergovernmental agreement under authority of Section 66.0301 of the Wisconsin Statutes. The commission adopts its own budget. Net operating costs including debt service are shared by the three communities equally. The department is governed by the Intermunicipal Commission. The commission consists of one representative from each community. The transactions of the commission are not reflected in these financial statements. The city does not have an equity interest in this joint venture. Page 52 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2007 NOTE V - OTHER INFORMATION (cont.) D. JOINT VENTURES (cont.) Middleton Fire District The City of Middleton and the Towns of Springfield, Westport and Middleton jointly operate the local fire District, which is called the Middleton Fire District, which provides fire protection. The communities share in the operation of the District based on the ratio of equalized values of each member. The governing body is made up of elected officials from each community. Local representatives are appointed by the municipalities. The governing body has authority to adopt its own budget and control the financial affairs of the District. The city has made payments totaling $560,061 to the District in 2007 for operating expenses. The city believes that the District will continue to provide services in the future at similar rates. The transactions of the District are not reflected in these financial statements. The city does not have an equity interest in this joint venture. E. SUBSEQUENT EVENTS The city issued $6,530,000 general obligation refunding bonds, Series 2008A, to refund a portion of the 2007 note anticipation notes. The refunding bonds were dated June 2, 2008 and are due December 1, 2027 with an average interest rate of 3.917%. The city issued $2,000,000 general obligation promissory notes dated June 2, 2008 and are due December 1, 2017 with an average interest rate of 3.829%. Page 53 ---PAGE BREAK--- REQUIRED SUPPLEMENTARY INFORMATION ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31,2007 Budgeted Amounts Variance with Original Final Actual Final Budget REVENUES Taxes $ 10,005,947 $ 10,005,947 $ 10,039,209 $ 33,262 Intergovernmental 2,526,856 2,526,856 2,532,286 5,430 Licenses and permits 478,465 478,465 680,667 202,202 Fines, forfeitures and penalties 241,000 241,000 290,914 49,914 Public charges for services 904,600 904,600 1,018,546 113,946 Interdepartmental charges for services 302,600 302,600 365,886 63,286 Special assessments 67,000 67,000 68,529 1,529 Investment income 1,250,000 1,250,000 1,452,495 202,495 Miscellaneous 135,000 135,000 92,559 {42,441 ) Total Revenues 15,911,468 15,911,468 16,541,091 629,623 EXPENDITURES Current General government 1,989,225 1,989,225 1,857,444 131,781 Public safety 5,721,248 5,721,248 5,809,136 (87,888) Public works 2,718,452 2,718,452 2,790,695 (72,243) Leisure activities 2,995,349 2,995,349 3,012,811 (17,462) Conservation and development 367,923 367,923 353,725 14,198 Total Expenditures 13,792,197 13,792,197 13,823,811 {31,614) Excess of revenues over expenditures 2,119,271 2,119,271 2,717,280 598,009 OTHER FINANCING SOURCES (USES) Sale of capital assets 7,734 7,734 Transfers in 295,000 295,000 293,254 (1,746) Transfers out {2,841,271) {2,841,271) {3,061,358) {220,087) Total Other Financing Sources (Uses) {2,546,271 ) {2,546,271 ) {2,760,370) {214,099) Net Change in Fund Balance (427,000) (427,000) (43,090) 383,910 SPECIAL ITEM Retirement prior service {241,677) 241,677 FUND BALANCE - Beginning 5,821,679 5,821,679 5,821,679 406,473 FUND BALANCE - ENDING $ 5,394,679 $ 5,394,679 $ 5,536,912 $ 1,032,060 See accompanying notes to required supplementary information. Page 54 ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND SCHEDULE OF REVENUES COMPARED TO BUDGET - BUDGET AND ACTUAL For the Year Ended December 31, 2007 Budgeted Amounts Variance with Original Final Actual Final Budget TAXES General property tax $ 9,714,837 $ 9,714,837 $ 9,717,518 $ 2,681 Fees in lieu of taxes 44,110 44,110 44,110 Room tax 244,000 244,000 276,082 32,082 Interest on taxes 3,000 3,000 1,499 (1,501 ) TOTALS 10,005,947 10,005,947 10,039,209 33,262 INTERGOVERNMENTAL REVENUES Shared taxes from state 364,067 364,067 353,610 (10,457) State aid - road allotment 1,248,631 1,248,631 1,248,542 (89) State aid - exempt computer aid 135,000 135,000 137,289 2,289 State aid - fire insurance dues 85,000 85,000 72,099 (12,901) State aid - miscellaneous grants 10,000 10,000 23,060 13,060 Federal and state aid - other 71,400 71,400 71,364 (36) County aid - library 505,700 505,700 512,295 6,595 County aid - signals 6,000 6,000 2,398 (3,602) County aid - senior citizens 45,625 45,625 46,075 450 School district payments for liaison officer 55,433 55,433 65,554 10,121 TOTALS 2,526,856 2,526,856 2,532,286 5,430 LICENSES AND PERMITS Liquor and malt beverage licenses 33,000 33,000 37,592 4,592 Operators' licenses 9,000 9,000 9,000 Contractor's licenses 6,000 6,000 5,750 (250) Alarm licenses 6,265 6,265 6,300 35 Cigarette licenses 150 150 180 30 Bicycle licenses 100 100 114 14 Dog and cat licenses 450 450 3,042 2,592 Cable TV franchise license 130,000 130,000 130,000 Other miscellaneous licenses 500 500 1,217 717 Building permits 150,000 150,000 263,973 113,973 Recycling permits 4,500 4,500 3,754 (746) Electrical permits 50,000 50,000 79,988 29,988 Plumbing permits 50,000 50,000 81,545 31,545 Erosion control permits 25,000 25,000 44,050 19,050 Park reservation permits 13,500 13,500 14,162 662 TOTALS 478,465 478,465 680,667 202,202 FINES, FORFEITURES AND PENAL TIES Court penalties 160,000 160,000 182,412 22,412 Parking violations 32,000 32,000 43,223 11,223 Court costs 49,000 49,000 65,279 16,279 TOTALS 241,000 241,000 290,914 49,914 See accompanying notes to required supplementary information. Page 55 ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND SCHEDULE OF REVENUES COMPARED TO BUDGET - BUDGET AND ACTUAL (cont) For the Year Ended December 31, 2007 Budgeted Amounts Variance with Original Final Actual Final Budget PUBLIC CHARGES FOR SERVICES Clerk fees $ 10,000 $ 10,000 $ 16,238 $ 6,238 Police special services 10,000 10,000 14,803 4,803 Police department fees 30,000 30,000 25,883 (4,117) Fire false alarms 2,000 2,000 (2,000) Ambulance services 415,000 415,000 445,436 30,436 EMS fixed cost abatement 65,000 65,000 77,701 12,701 Plan commission charges 15,000 15,000 33,535 18,535 Senior citizens 19,000 19,000 22,884 3,884 Swimming pool 224,250 224,250 217,905 (6,345) Summer recreation 63,850 63,850 56,635 (7,215) Public works charges 3,500 3,500 64,292 60,792 Other recreation 44,500 44,500 41,034 (3,466) Zoning 2,500 2,500 2,200 {300) TOTALS 904,600 904,600 1,018,546 113,946 INTERDEPARTMENTAL CHARGES FOR SERVICES Administration reimbursements - utilities 100,000 100,000 163,286 63,286 Administration reimbursements - TIF 195,000 195,000 195,000 Administration reimbursements - Landfill 5,000 5,000 5,000 Administration reimbursements - Fire District 2,600 2,600 2,600 TOTALS 302,600 302,600 365,886 63,286 SPECIAL ASSESSMENTS Curb, gutter and sidewalks 65,000 65,000 67,411 2,411 Interest on special assessments 2,000 2,000 1,118 {882) TOTALS 67,000 67,000 68,529 1,529 INVESTMENT INCOME Investment income 550,000 550,000 752,495 202,495 Interest on advances 700,000 700,000 700,000 TOTALS 1,250,000 1,250,000 1,452,495 202,495 MISCELLANEOUS Rent of city buildings and offices 60,000 60,000 26,776 (33,224) Compensation for loss of fixed assets 15,325 15,325 Refund of prior year's expenditures 32,000 32,000 34,566 2,566 Sale of materials 3,000 3,000 892 (2,108) Pool contribution 25,000 25,000 (25,000) Miscellaneous revenue - MADC 15,000 15,000 15,000 TOTALS 135,000 135,000 92,559 {42,441 ) OTHER FINANCING SOURCES Sale of capital assets 7,734 7,734 Transfer in - Water Utility 295,000 295,000 293,254 {1,746) TOTALS 295,000 295,000 300,988 5,988 TOTAL REVENUES AND OTHER FINANCING SOURCES $ 16,206,468 $ 16,206,468 $ 16,842,079 $ 635,611 See accompanying notes to required supplementary information. Page 56 ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND SCHEDULE OF EXPENDITURES COMPARED TO BUDGET - BUDGET AND ACTUAL For the Year Ended December 31,2007 Budgeted Amounts Variance with Original Final Actual Final Budget GENERAL GOVERNMENT Council $ 41,338 $ 41,338 $ 41,638 $ (300) Police commission 6,000 6,000 3,669 2,331 Landmarks commission 600 600 300 300 Middleton youth commission 23,935 23,935 24,371 (436) Art committee 3,000 3,000 2,013 987 Board of review 375 375 305 70 Municipal court 73,242 73,242 73,539 (297) General administration 585,700 585,700 634,202 (48,502) Contracted services 500 (500) Information technology 424,050 424,050 429,479 (5,429) Independent auditing 33,000 33,000 37,650 (4,650) Legal counseling 160,000 160,000 195,990 (35,990) Special legal counsel 5,000 5,000 3,247 1,753 Buildings and grounds 126,941 126,941 124,912 2,029 Illegal taxes and tax refunds 5,000 5,000 5,000 Property and liability insurance 261,000 261,000 250,315 10,685 Income continuation insurance 12,000 12,000 13,225 (1,225) Contingency 211,044 211,044 211,044 Group life insurance 12,000 12,000 12,877 (877) Additional expenditures - prior years 5,000 5,000 4,212 788 TOTALS 1,989,225 1,989,225 1,857,444 131,781 PUBLIC SAFETY Police administration 468,254 468,254 472,227 (3,973) Police patrol 2,868,983 2,868,983 2,945,558 (76,575) Code compliance 84,690 84,690 75,722 8,968 Training 31,900 31,900 29,934 1,966 Police uniform allowance and equipment 24,875 24,875 18,887 5,988 School patrol 12,423 12,423 10,541 1,882 Fire suppression 563,627 563,627 560,061 3,566 Public fire protection 373,144 373,144 373,144 EMS 667,407 667,407 711,012 (43,605) Building inspector 92,418 92,418 92,070 348 Electrical inspector 84,913 84,913 84,951 (38) Plumbing inspection 64,638 64,638 68,438 (3,800) Emergency preparedness 5,720 5,720 3,221 2,499 Sealer of weights and measures 4,600 4,600 4,400 200 Erosion control enforcement 23,000 23,000 30,340 (7,340) Communications 350,656 350,656 328,630 22,026 TOTALS 5,721,248 5,721,248 5,809,136 (87,888) See accompanying notes to required supplementary information. Page 57 ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND SCHEDULE OF EXPENDITURES COMPARED TO BUDGET - BUDGET AND ACTUAL (cont.) For the Year Ended December 31,2007 Budgeted Amounts Variance with Original Final Actual Final Budget PUBLIC WORKS Machinery $ 248,034 $ 248,034 $ 196,073 $ 51,961 Garage 51,500 51,500 46,041 5,459 Public works salaries and fringes 488,601 488,601 578,506 (89,905) Protective equipment 3,300 3,300 3,082 218 Engineering 689,589 689,589 722,618 (33,029) Street maintenance 46,000 46,000 38,139 7,861 Street cleaning 6,300 6,300 5,254 1,046 Snow and ice control 60,000 60,000 81,350 (21,350) Traffic signals 19,400 19,400 21,950 (2,550) Traffic signs and markings 33,000 33,000 47,452 (14,452) Street lighting 85,000 85,000 84,334 666 Tree and brush 2,200 2,200 220 1,980 Storm sewers 10,500 10,500 5,603 4,897 Mass transit 283,603 283,603 283,598 5 Garbage collection 397,500 397,500 392,587 4,913 Sanitary landfill 72,675 72,675 72,675 Recycling 221,250 221,250 211,213 10,037 TOTALS 2,718,452 2,718,452 2,790,695 (72,243) LEISURE ACTIVITIES Library 1,439,513 1,439,513 1,457,814 (18,301 ) Historical society 550 (550) Senior citizens center 358,393 358,393 326,380 32,013 Dining center 3,000 3,000 16,512 (13,512) Recreation programs and events 55,645 55,645 65,080 (9,435) Recreation administration 110,584 110,584 103,137 7,447 Swimming pool 261,425 261,425 261,107 318 Summer recreation 72,000 72,000 76,633 (4,633) Parks 694,789 694,789 705,598 (10,809) TOTALS 2,995,349 2,995,349 3,012,811 (17,462) CONSERVATION AND DEVELOPMENT Water resources 48,800 48,800 40,644 8,156 Conservancy land commission 96,671 96,671 91,843 4,828 Planning commission 222,452 222,452 221,238 1,214 TOTALS 367,923 367,923 353,725 14,198 OTHER FINANCING USES Transfers out - debt service fund 2,841,271 2,841,271 2,770,482 70,789 Transfers out - retirement benefits fund 250,876 (250,876) Transfers out - EMS equipment replacement fund 40,000 (40,000) TOTALS 2,841,271 2,841,271 3,061,358 (220,087) SPECIAL ITEM Retirement prior service 241,677 (241,677) TOTAL EXPENDITURES AND OTHER FINANCING SOURCES $ 16,633,468 $ 16,633,468 $ 17,126,846 $ (493,378) See accompanying notes to required supplementary information. Page 58 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO REQUIRED SUPPLEMENTARY INFORMATION December 31, 2007 BUDGETARY INFORMA TlON Budgetary information is derived from the annual operating budget and is presented using generally accepted accounting principles and the modified accrual basis of accounting. Excess expenditures and other financing uses over appropriations are as follows: Original and Amended Budget Ex~enditures Excess General Fund Current Expenditures Council $ 41,338 $ 41,638 $ 300 Middleton Youth Commission 23,935 24,371 436 Municipal court 73,242 73,539 297 General administration 634,202 585,700 48,502 Contracted services 500 500 Information technology 424,050 429,479 5,429 Independent auditing 33,000 37,650 4,650 Legal counseling 160,000 195,990 35,990 Income continuation insurance 12,000 13,225 1,225 Group life insurance 12,000 12,877 877 Police administration 468,254 472,227 3,973 Police patrol 2,868,983 2,945,558 76,575 EMS 667,407 711,012 43,605 Electrical inspector 84,913 84,951 38 Plumbing inspector 64,638 68,438 3,800 Erosion control enforcement 23,000 30,340 7,340 Public works salaries and fringes 488,601 578,506 89,905 Engineering 689,589 722,618 33,029 Snow and ice control 60,000 81,350 21,350 Traffic signals 19,400 21,950 2,550 Traffic signs and markings 33,000 47,452 14,452 Library 1,439,513 1,457,814 18,301 Historical society 550 550 Dining center 3,000 16,512 13,512 Recreation program and events 55,645 65,080 9,435 Summer recreation 72,000 76,633 4,633 Parks 694,789 705,598 10,809 Transfers out - retirement benefits fund 250,876 250,876 Transfers out - EMS equipment replacement fund 40,000 40,000 Page 59 ---PAGE BREAK--- SUPPLEMENTARY INFORMATION ---PAGE BREAK--- CITY OF MIDDLETON COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS December 31,2007 S~ecial Revenue Funds Sub- Land and Youth Lost and EMS dividers' Park Drug Cable Commission Damaged Library Equipment Library De~osits Donations Evidence TV Donations EMS Book Gift Re~lacement Endowment ASSETS Cash and investments $ 1,766,350 $ 38,887 $ 3,014 $ 186,391 $ 2,095 $ 57,791 $ 38,466 $ 41,657 $ 315,772 $ 202,420 Accounts receivable 52,978 I nterest receivable 8,508 Loans receivable Due from other funds TOTAL ASSETS $ 1,766,350 38,887 $ 3,014 $ 239,369 $ 2,095 $ 57,791 $ 38,466 $ 41,657 $ 324,280 $ 202,420 LIABILITIES AND FUND BALANCES Accounts payable $ 101,936 $ - $ - $ - $ - $ - $ 2,815 $ - $ - $ Due to other funds Total Liabilities 101,936 2,815 Fund Balances Unreserved Undesignated (deficit) 1,664,414 38,887 3,014 239,369 2,095 57,791 35,651 41,657 324,280 202,420 Total Fund Balances 1,664,414 38,887 3,014 239,369 2,095 57,791 35,651 41,657 324,280 202,420 TOTAL LIABILITIES AND FUND BALANCES $ 1,766,350 $ 38,887 $ 3,014 $ 239,369 $ 2,095 $ 57,791 $ 38,466 $ 41,657 $ 324,280 $ 202,420 Page 60 ---PAGE BREAK--- CITY OF MIDDLETON COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS (cont.) December 31, 2007 S[!ecial Revenue Funds Economic Total Develop- Nonmajor Retirement ment Shop With Drug Federal Senior Tourism National Governmental Benefits Air[!ort Grant a CO[! Forfeitures Seizures Citizen Commission Ni9ht Out Funds ASSETS Cash and investments $ 1,102,471 $ 198,740 $ 206,973 $ 13,117 $ 12,296 $ - $ 72,776 $ 120,132 $ 1,313 $ 4,380,661 Accounts receivable 4,416 165,143 222,537 Interest receivable 8,508 Loans receivable 64,546 64,546 Due from other funds 4,358 4,358 TOTAL ASSETS $ 1,102,471 $ 203,156 $ 271,519 $ 13,117 $ 16,654 $ - $ 72,776 $ 285,275 $ 1,313 $ 4,680,610 LIABILITIES AND FUND BALANCES Accounts payable $ - $ 4,093 $ 1,150 $ - $ - $ - $ - $ 62,379 $ - $ 172,373 Due to other funds 4,358 4,358 Total Liabilities 4,093 1,150 4,358 62,379 176,731 Fund Balances Unreserved Undesignated (deficit) 1,102,471 199,063 270,369 13,117 16,654 (4,358) 72,776 222,896 1,313 4,503,879 Total Fund Balances 1,102,471 199,063 270,369 13,117 16,654 (4,358) 72,776 222,896 1,313 4,503,879 TOTAL LIABILITIES AND FUND BALANCES $ 1,102,471 $ 203,156 $ 271,519 $ 13,117 $ 16,654 $ - $ 72,776 $ 285,275 $ 1,313 $ 4,680,610 Page 61 ---PAGE BREAK--- CITY OF MIDDLETON COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS For the Year Ended December 31,2007 Seecial Revenue Funds Sub- Land and Youth Lost and EMS dividers' Park Drug Cable Commission Damaged library Equipment library Deeosits Donations Evidence TV Donations EMS Book Gift Reelacement Endowment REVENUES Taxes $ $ - $ - $ $ $ $ $ $ $ Intergovernmental 5,000 6,674 licenses and permits 88,140 Fines, forfeitures and penalties Public charges for services 889,710 33,206 Investment income 1,992 33,144 Miscellaneous 54,868 2,968 5,490 Total Revenues 889,710 54,868 5,000 88,140 11,634 33,206 5,490 33,144 EXPENDITURES Current: General government Public safety 2,816 Leisure activities 26,852 16,817 822 13,411 1,498 10,985 Conservation and development 498,301 Total Expenditures 498,301 26,852 2,816 16,817 822 13,411 1,498 10,985 Excess (deficiency) of revenues over expenditures 391,409 28,016 2,184 71,323 (822) 11,634 19,795 3,992 22,159 OTHER FINANCING SOURCES (USES) Transfers In 40,000 Transfers Out Total Other Financing Sources (Uses) 40,000 Net change in fund balance 391,409 28,016 2,184 71,323 (822) 11,634 19,795 3,992 40,000 22,159 FUND BALANCES (DEFICIT) - Beginning of Year 1,273,005 10,871 830 168,046 2,917 46,157 15,856 37,665 284,280 180,261 FUND BALANCES (DEFICIT) - END OF YEAR $1,664,414 $ 38,887 $ 3,014 $ 239,369 $ 2,095 $ 57,791 $ 35,651 $ 41,657 $ 324,280 $ 202,420 Page 62 ---PAGE BREAK--- CITY OF MIDDLETON COMBINING STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS (cont.) For the Year Ended December 31.2007 S~ecial Revenue Funds Total Economic Nonmajor Retirement Development Shop With Drug Federal Senior Tourism National Governmental Benefits Air~ort Grant aCo~ Forfeitures Seizures Citizen Commission Night Out Funds REVENUES Taxes $ - $ $ $ - $ $ $ $ 644.191 $ $ 644.191 Intergovernmental 4.000 6.200 21.874 Licenses and permits 88.140 Fines. forfeitures and penalties 1.588 1.588 Public charges for services 109.821 1.032.737 Investment income 16.811 51.947 Miscellaneous 4.592 5.028 11.733 5.545 1.020 91.244 Total Revenues 4.592 113.821 16.811 5.028 1.588 11.733 655.936 1.020 1.931.721 EXPENDITURES Current: General government 65.807 65.807 Public safety 4.101 1.554 1.316 9.787 Leisure activities 3.950 222.981 297.316 Conservation and development 56.774 555.075 Total Expenditures 65.807 56.774 4.101 1.554 3.950 222.981 1.316 927.985 Excess (deficiency) of revenues over expenditures (61.215) 57.047 16.811 927 1.588 (1.554) 7.783 432.955 (296) 1.003.736 OTHER FINANCING SOURCES (USES) Transfers In 250.876 290.876 Transfers Out (332.000) (332,000) Total Other Financing Sources (Uses) 250.876 (332.000) (41.124) Net change in fund balance 189.661 57.047 16.811 927 1.588 (1.554) 7.783 100.955 (296) 962.612 FUND BALANCES (DEFICIT) - Beginning of Year 912.810 142.016 253.558 12.190 15.066 (2.804) 64.993 121.941 1.609 3.541.267 FUND BALANCES (DEFICIT) - END OF YEAR $1.102,471 $ 199.063 $ 270.369 $ 13.117 $ 16.654 $ ~4.358) $ 72.776 $ 222.896 $ 1.313 $4.503.879 Page 63 ---PAGE BREAK--- CITY OF MIDDLETON COMBINING STATEMENT OF FIDUCIARY NET ASSETS AGENCY FUNDS December 31,2007 Fire Tax Roll District MPSISC Totals ASSETS Cash and investments $ 16,568,842 $ - $ 259,817 $ 16,828,659 Taxes receivable 11,379,637 11,379,637 Due from other governmental units 67,593 67,593 TOTAL ASSETS $ 27,948,479 $ 67,593 $ 259,817 $ 28,275,889 LIABILITIES Accounts payable $ - $ 57,883 $ 26,461 $ 84,344 Due to other governmental units 27,948,479 9,710 233,356 28,191,545 TOTAL LIABILITIES $ 27,948,479 $ 67,593 $ 259,817 $ 28,275,889 Page 64 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF CASH FLOWS - COMPONENT UNIT For the Year Ended December 31,2007 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from economic loan repayments Economic and housing loans Cash received from customers Cash paid to suppliers for goods and services Net Cash Flows From Operating Activities CASH FLOWS FROM INVESTING ACTIVITIES Interest received CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Received from primary government Principal paid Interest paid Capital lease interest received Capital lease principal received Net Cash Flows From Noncapital Financing Activities Net Increase in Cash and Cash Equivalents CASH AND CASH EQUIVALENTS - Beginning of Year CASH AND CASH EQUIVALENTS - END OF YEAR RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES Operating income (loss) Changes in Assets and Liabilities Loans receivable Accounts payable NET CASH FLOWS FROM OPERATING ACTIVITIES RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS - COMPONENT UNIT Cash and investments - statement of net assets - component unit Restricted cash and investments - statement of net assets - component unit CASH AND CASH EQUIVALENTS - END OF YEAR NONCASH INVESTING, CAPITAL AND RELATED FINANCING ACTIVITIES: The CDA has a long-term receivable with accrued interest of $10,456. Component Unit - CDA $ 7,327 (27,640) 59,739 {51,139) {11,713) 29,148 2,599 (815,000) (812,530) 812,530 815,000 2,599 20,034 2,232,985 $ 2,253,019 $ 8,422 (20,313) 178 $ {11,713) $ 460,129 1,792,890 $ 2,253,019 Page 65