Document Middleton_doc_8d712f3bca

CITY OF MIDDLETON Middleton, Wisconsin FINANCIAL STATEMENTS December 31, 2005 ---PAGE BREAK--- CITY OF MIDDLETON TABLE OF CONTENTS December 31, 2005 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 - Fiduciary 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, 2005, 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 aud it provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in al l material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Middleton, Wisconsin at December 31, 2005, 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 53 through 58 is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not aud it the information and express no opinion on it. Page 1 V irchow, Krause & Company, LLP Certified Public Accountants & Consultants. An Independent Member of Baker Tilly International ---PAGE BREAK--- To the City Council City of Middleton Middleton, Wisconsin The City of Middleton, Wisconsin, has not presented the management's discussion and analysis that the Governmental Accounting Standards Board has determined is necessary to supplement, although not required to be part of, the basic financial statements. Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the City of Middleton's basic financial statements. The combining financial statements and statement of cash flows - component unit as listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining financial statements and statement of cash flows - component unit have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. Madison, Wisconsin March 3, 2006 Page 2 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF NET ASSETS December 31, 2005 Prima~ Government Business- Governmental type Component Activities Activities Totals Unit ASSETS Cash and investments $ 8,606,516 $ 4,552,769 $ 13,159,285 $ 696,228 Receivables (net of allowance for uncollectibles) Taxes 17,854,312 17,854,312 Delinquent taxes 92,416 92,416 Accounts 520,121 684,427 1,204,548 Interest 51,176 117,957 169,133 Loans 1,856,749 1,856,749 689,071 Special assessments 3,148,667 2,227,859 5,376,526 Delinquent special assessments 450 450 Due from other governments 619 619 Due from primary government 210,010 Due from component unit 2,167,415 2,167,415 Internal balances 1,147,180 (1,147,180) Restricted Assets Temporarily Restricted Cash and investments 1,000,201 39,600 1,039,801 2,167,415 Leases receivable from primary government 16,475,000 Other assets 74,850 383,179 458,029 49,176 Capital Assets Land 6,412,939 2,382,607 8,795,546 Right of ways 17,704,605 17,704,605 Construction in progress 3,233,719 3,233,719 Land Improvements 5,238,880 7,291,981 12,530,861 Buildings 9,216,171 208,763 9,424,934 Machinery and equipment 3,844,406 390,074 4,234,480 Infrastructure 22,648,561 33,153,345 55,801,906 Less: Accumulated depreciation (9,820,938) (7,720,570) (17,541,508) Investment in joint ventures (deficit) (379,482) (379,482) Total Assets 94,619,533 42,564,811 137,184,344 20,286,900 LIABILITIES Accounts payable 679,128 247,365 926,493 27,947 Accrued liabilities 648,252 160,498 808,750 210,010 Due to other governments 12,755 12,755 Due to primary government 2,167,415 Due to component unit 210,010 210,010 Unearned revenue 17,705,965 17,705,965 675,000 Noncurrent Liabilities Due within one year 7,878,771 675,000 8,553,771 Due in more than one year 56,649,420 9,932,624 66,582,044 16,285,460 Total Liabilities 83,784,301 11,015,487 94,799,788 19,365,832 NET ASSETS Invested in capital assets, net of related debt 8,080,693 25,169,314 33,250,007 Restricted for equipment replacement 39,600 39,600 Restricted for subdivider's deposits 1,344,831 1,344,831 Restricted for park improvements 6,758 6,758 Restricted for police enforcement 23,888 23,888 Restricted for EMS 32,241 32,241 Restricted for library 191,944 191,944 Restricted for economic development 244,041 244,041 Restricted for senior citizens 55,826 55,826 Unrestricted (deficit) 855,010 6,340,410 7,195,420 921,068 TOTAL NET ASSETS $ 10,835,232 $ 31,549,324 $ 42,384,556 $ 921,068 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 For the Year Ended December 31, 2005 Program Revenues Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions $ 1,369,670 $ 467,275 $ 41,396 $ - 5,511,533 562,837 78,103 3,352,342 398,880 1,014,439 5,560,171 3,696,638 384,080 656,872 25,000 760,089 17,282 68,733 2,639,595 17,329,867 1,830,354 1,859,543 5,585,171 1,172,200 1,921,436 119,060 1,409,814 1,646,790 129,553 1,570,555 1,783,884 4,152,569 5,352,110 248,613 $ 21,482,436 $ 7,182,464 $ 1,859,543 $ 5,833,784 $ 932,688 $ 20,987 $ - $ General Revenues Taxes Property taxes, levied for general purposes and debt service Property taxes, levied for tax increment districts Other taxes Cable television franchise fees Intergovernmental revenues not restricted to specific programs Public gifts and/or grants Investment income Miscellaneous Special item - Impairment of assets Transfers Total General Revenues, Special Items and Transfers Change in net assets NET ASSETS - Beginning (as restated) 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 $ (860,999) $ - $ (860,999) $ (4,870,593) (4,870,593) 3,621,148 3,621,148 (2,630,686) (2,630,686) (674,074) (674,074) (2,639,595) (2,639,595) (8,054,799) (8,054,799) 868,296 868,296 366,529 366,529 213,329 213,329 1,448,154 1,448,154 (8,054,799) 1,448,154 (6,606,645) (911,701 ) 8,981,464 8,981,464 5,955,807 5,955,807 735,688 735,688 190,729 190,729 1,291,497 1,291,497 13,848 13,848 403,788 132,331 536,119 846,664 527,026 527,026 (321,334) (321,334) 287,359 (287,359) 18,387,206 (476,362) 17,910,844 846,664 10,332,407 971,792 11,304,199 (65,037) 502,825 30,577,532 31,080,357 986,105 $ 10,835,232 $ 31,549,324 $ 42,384,556 $ 921,068 Page 4 ---PAGE BREAK--- CITY OF MIDDLETON BALANCE SHEET - GOVERNMENTAL FUNDS December 31,2005 Capital General Debt Service TIF District #3 Projects ASSETS Cash and investments $ 3,438,261 $ - $ 956,234 $ 2,527,063 Receivables (net) Taxes 9,456.788 8,397,524 Delinquent taxes 92,416 Accounts 235,568 83,687 Interest 47,286 Loans 1,856,749 Special assessments 32,920 3,115,747 Delinquent special assessments 450 Due from other funds 219,329 Due from other governments 619 Due from component unit 2,167,415 Advances to other funds 3,071,896 TOTAL ASSETS $ 16,595,533 $ - $ 16,493,669 $ 2,610,750 LIABILITIES AND FUND BALANCES Liabilities Accounts payable $ 390,959 $ - $ 156,157 $ 71,718 Due to other governments 12,755 Due to other funds 80,317 Deferred revenue 9,413,798 10,221,274 57,371 Deferred special assessments 33,370 3,115,747 Deferred interest income 788,128 Advances from other funds 1,698,595 Total Liabilities 10,719,327 15,191,773 129,089 Fund Balances Reserved for: Loans receivable 1,856,749 Delinquent personal property taxes 92,416 Advances 2,283,768 Debt service 1,605,257 Unreserved and designated, reported in: General fund 461,000 Unreserved and undesignated (deficit), reported in: General fund 3,039,022 Special revenue funds Capital projects funds (2,160,110) 2,481,661 Total Fund Balances 5,876,206 1,301,896 2,481,661 TOTAL LIABILITIES AND FUND BALANCES $ 16,595,533 $ - $ 16,493,669 $ 2,610,750 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 IIA NET ASSETS OF GOVERNMENTAL ACTIVITIES See accompanying notes to financial statements. Non-major Governmental Funds $ 2,685,159 200,866 3,890 $ 2,889,915 $ 60,294 365,133 425,427 2,464,488 2,464,488 $ 2,889,915 Total Governmental Funds $ 9,606,717 17,854,312 92,416 520,121 51,176 1,856,749 3,148,667 450 219,329 619 2,167,415 3,071,896 $ 38,589,867 $ 679,128 12,755 80,317 19,692,443 3,149,117 788,128 2,063,728 26,465,616 1,856,749 92,416 2,283.768 1,605,257 461,000 3,039,022 2,464,488 321,551 12,124,251 58,478,343 5,923,723 (379,482) (65,311,603) $ 10,835,232 Page 5 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS For the Year Ended December 31,2005 Non-major Total Capital Governmental Governmental General Debt Service TIF District #3 Projects Funds Funds REVENUES Taxes $ 9,236,204 $ - $ 5,955,807 $ - $ 480,947 $ 15,672,958 Intergovernmental 2,264,171 484,360 131,348 50,657 2,930,536 Licenses and permits 563,567 563,567 Fines, forfeitures and penalties 229,778 229,778 Public charges for services 843,413 521,550 1,364,963 Intergovernmental charges for services 158,034 158,034 Special assessments 56,983 56,983 Investment income 352,978 1,902 95,797 18,576 469,253 Miscellaneous 145,303 125,360 225,470 81,663 577,796 Total Revenues 13,850,431 1,902 6,661,324 356,818 1,153,393 22,023,868 EXPENDITURES Current General government 1,551,257 1,551,257 Public safety 4,992,904 14,447 5,007,351 Public works 2,174,952 2,174,952 Leisure activities 2,550,279 37,348 2,587,627 Conservation and economic development 310,771 670,074 980,845 Capital Outlay 1,019,179 1,452,377 2,471,556 Debt Service Principal retirement 5,934,515 5,934,515 Interest and fiscal charges 1,832,191 908,773 40,675 2,781,639 Total Expenditures 11,580,163 7,766,706 1,927,952 1,452,377 762,544 23,489,742 Excess (deficiency) of revenues over (under) expenditures 2,270,268 (7,764,804) 4,733,372 (1,095,559) 390,849 (1,465,874) OTHER FINANCING SOURCES (USES) Debt issued 2,500,000 800,000 3,300,000 Premium on debt issued 36,254 36,254 Issuance costs (33,000) (33,000) Transfers in 287,359 7,749,514 352,793 8,389,666 Transfers out (2,978,385) (5,123,922) (8,102,307) Total Other Financing Sources (Uses) (2,691,026) 7,749,514 (5,123,922) 2,503,254 1,152,793 3,590,613 Net Change in Fund Balance (420,758) (15,290) (390,550) 1,407,695 1,543,642 2,124,739 FUND BALANCES - Beginning (as restated) 6,296,964 15,290 1,692,446 1,073,966 920,846 9,999,512 FUND BALANCES - ENDING $ 5,876,206 $ - $ 1,301,896 $ 2,481,661 $ 2,464,488 $ 12,124,251 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 31,2005 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. $ 2,124,739 2,471,556 (1,491,961 ) (931,213) 706,969 (15,270) 4,848,088 (3,300,000) 5,934,515 51,543 (151,015) (9,980) 14,220 80,216 $ 10,332,407 Page 7 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF NET ASSETS - PROPRIETARY FUNDS December 31,2005 ASSETS Current Assets Cash and investments Accounts receivable, net Interest receivable Due from other funds Total Current Assets Noncurrent Assets Restricted Assets Other property and investments Special assessments receivable 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 $ 3,140,589 $ 1,394,121 $ 11,132 318,509 364,724 1,194 86,360 31,597 158,772 80,317 3,704,230 1,870,759 12,326 46,527 2,227,859 301,087 68,978 3,450 9,664 19,890,487 13,429,465 10,106,818 (4,785,757) (2,633,343) (301,470) 15,104,730 10,796,122 9,805,348 15,478,245 -n;U80~172---9~8U5~348- 19,182,475 14,950,931 9,817,674 Totals $ 4,545,842 684,427 117,957 239,089 5,587,315 46,527 2,227,859 301,087 68,978 13,114 43,426,770 (7,720,570) 35,706,200 ···--38~363~765-- 43,951,080 Page 8 ---PAGE BREAK--- Business-T:i~e Activities - Enter~rise Funds Pleasant View Golf Water Sewer Course Totals LIABILITIES Current Liabilities Accounts payable $ 30,365 $ 202,213 $ 14,787 $ 247,365 Accrued interest 25,121 15,913 119,464 160,498 Accrued compensated absences 8,481 4,177 17,103 29,761 Due to other funds 219,329 158,772 378,101 Current portion of long term debt 185,000 145,000 570,000 900,000 Total Current Liabilities 468,296 526,075 721,354 1,715,725 Noncurrent Liabilities Accrued compensated absences 18,669 9,194 27,863 Advances from other funds 1,008,168 1,008,168 General obligation debt 1,340,000 870,000 7,440,000 9,650,000 Total Noncurrent Liabilities 1,358,669 879,194 8,448,168 10,686,031 Total Liabilities 1,826,965 1,405,269 9,169,522 12,401,756 NET ASSETS Invested in capital assets, net of related debt 13,583,180 9,790,786 1,795,348 25,169,314 Restricted for: Equipment replacement 46,527 46,527 Unrestricted (deficit) 3,772,330 3,708,349 (1,147,196) 6,333,483 TOTAL NET ASSETS $ 17,355,510 $ 13,545,662 $ 648,152 $ 31,549,324 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, 2005 Business-!y~e Activities - Enter~rise Funds Pleasant View Golf Water Sewer Course Totals OPERATING REVENUES Charges for services $ 1,921,436 $ 1,646,790 $ 1,783,884 $ 5,352,110 Total Operating Revenues 1,921,436 1,646,790 1,783,884 5,352,110 OPERATING EXPENSES Operation and maintenance 710,810 1,147,502 1,135,652 2,993,964 Depreciation 376,223 208,562 54,600 639,385 Total Operating Expenses 1,087,033 1,356,064 1,190,252 3,633,349 Operating Income 834,403 290,726 593,632 1,718,761 NONOPERATING REVENUES (EXPENSES) Investment income 86,195 46,136 132,331 Interest expense (81,367) (51,845) (380,303) (513,515) Amortization of debt issuance costs (3,800) (1,905) (5,705) Total Nonoperating Revenues (Expenses) 1,028 (7,614) (380,303) (386,889) Income before contributions, transfers, and special items 835,431 283,112 213,329 1,331,872 Capital contributions 119,060 129,553 248,613 Transfers out (287,359) (287,359) Impairment of Assets (321,334) (321,334) Change in Net Assets 345,798 412,665 213,329 971,792 TOTAL NET ASSETS - Beginning (as restated) 17,009,712 13,132,997 434,823 30,577,532 TOTAL NET ASSETS - ENDING $17,355,510 $ 13,545,662 $ 648,152 $ 31 ,549,324 See accompanying notes to financial statements. Page 10 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF CASH FLOWS- PROPRIETARY FUND TYPES For the Year Ended December 31,2005 Business-t:t~e Activities - Enter~rise Funds Pleasant View Golf Water Sewer Course Totals CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 1,477,194 $ 1,623,944 $ 1,783,979 $ 4,885,117 Cash received from city for services 373,220 373,220 Cash paid to suppliers for goods and services (490,539) (992,275) (550,185) (2,032,999) Cash paid to employees for services (254,146) (104,876) (591,480) (950,502) Net Cash Flows From Operating Activities 1,105,729 526,793 642,314 2,274,836 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Advance from general fund 335,535 335,535 Cash paid for tax equivalent (313,649) (313,649) Net Cash Flows From Noncapital Financing Activities (313,649) 335,535 21,886 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal paid (175,000) (140,000) (535,000) (850,000) Interest paid (84,368) (54,415) (385,717) (524,500) Capital contributions received (refunded) (22,014) (22,014) Acquisition and construction of capital assets (658,647) (13,978) (46,000) (718,625) Special assessments received 3,184 3,184 Net Cash Flows From Capital and Related Financing Activities (940,029) (205,209) (966,717) (2,111,955) CASH FLOWS FROM INVESTING ACTIVITIES Investment income 24,785 28,687 53,472 Investments sold and matured 2,513,960 1,009,800 3,523,760 Marketable securities purchased (2,826,647) (1,440,648) (4,267,295) Net Cash Flows From Investing Activities (287,902) (402,161) (690,063) Net Increase (Decrease) in Cash and Cash Equivalents (435,851) (80,577) 11,132 (505,296) CASH AND CASH EQUIVALENTS - Beginning of Year 749,793 80,577 830,370 CASH AND CASH EQUIVALENTS - END OF YEAR $ 313,942 $ - $ 11,132 $ 325,074 Page 11 ---PAGE BREAK--- Business-t~~e Activities - Enter~rise Funds Pleasant View Golf Water Sewer Course Totals RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES Operating income $ 834,403 $ 290,726 $ 593,632 $ 1,718,761 Nonoperating revenue 177 177 Adjustments to Reconcile Operating Income to Net Cash Provided From Operating Activities Depreciation expense 376,223 208,562 54,600 639,385 Depreciation charged to sewer utility 46,323 46,323 Changes in Noncash Components of Working Capital Accounts receivable (36,364) (7,412) 95 (43,681) Other accounts receivable 2,540 2,540 Due from other funds (81,582) (15,434) (97,016) Accounts payable (17,576) (23,202) (8,048) (48,826) Accrued compensated absences (16,299) (8,029) 5,235 (19,093) Due to other funds {2,116) 81,582 {3,200) 76,266 NET CASH FLOWS FROM OPERATING ACTIVITIES $ 1,105,729 $ 526,793 $ 642,314 $ 2,274,836 RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS· PROPRIETARY FUNDS Cash and investments - statement of net assets - proprietary funds $ 3,140,589 $ 1,394,121 $ 11,132 $ 4,545,842 Restricted cash and investments - statement of net assets - proprietary funds 46,527 46,527 Less: Non-cash equivalents {2,826,647) {1,440,648) {4,267,295) CASH AND CASH EQUIVALENTS· END OF YEAR $ 313,942 $ $ 11,132 $ 325,074 NONCASH INVESTING, CAPITAL AND RELATED FINANCING ACTIVITIES Impairment of assets $ {321,334) $ - $ Developer financed additions to utility plant $ 154,264 $ 129,553 $ See accompanying notes to financial statements. Page 12 ---PAGE BREAK--- ASSETS Cash and investments Taxes receivable CITY OF MIDDLETON STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS December 31,2005 Due from other governmental units TOTAL ASSETS LIABILITIES Accounts payable Due to other governmental units TOTAL LIABILITIES See accompanying notes to financial statements. Agency Funds $ 15,769,290 9,599,230 58,408 $ 25,426,928 $ 225,882 25,201,046 $ 25,426,928 Page 13 ---PAGE BREAK--- CITY OF MIDDLETON INDEX TO NOTES TO FINANCIAL STATEMENTS December 31, 2005 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. Restatement of Net Assets/Fund Balances J. Component Unit V. Other Information A. Employees' Retirement System B. Risk Management C. Commitments and Contingencies D. Joint Ventures E. Asset Impairment F. Subsequent Event 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 40 44 44 47 47 50 50 50 51 52 53 53 Page 14 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the City of Middleton, Wisconsin conform to generally accepted accounting principles as applicable to governmental units. A. REPORTING ENTITY This report includes all of the funds of the City of Middleton. The reporting entity for the city consists of the primary government, organizations for which the primary government is financially accountable, and other organizations for which the nature and significance of their relationship with the primary government are such that their exclusion would cause the reporting entity's financial statements to be misleading or incomplete. 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 basic financial statements include the Community Development Authority of the City of Middleton ("CDA") as a component unit. The CDA is a legally separate organization. The board of the CDA is appointed by the mayor. Wisconsin Statutes provide for circumstances whereby the city can impose its will on the CDA and also create a potential financial benefit to or burden on the city. As a component unit, the CDA's financial statements have been presented as a discrete column in the basic financial statements. Separately issued financial statements of the CDA are not prepared. Excluded from the reporting entity: The Middleton Area Development Corporation is a separate legal organization that is not reported in these financial statements. Page 15 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 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 percent of the corresponding total for all funds of that category or type, and b. The same element of the individual governmental fund or enterprise fund that met the 10 percent test is at least 5 percent of the corresponding total for all governmental and enterprise funds combined. c. In addition, any other governmental or 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, 2005 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) #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 Alcohol Awareness Drug Forfeitures Federal Seizures Senior Citizen Tourism Commission National Night Out Page 17 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 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, 2005 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, 2005 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: 1. Time deposits in any credit union, bank, savings bank or trust company maturing in three years or less. 2. Bonds or securities of any county, city, drainage district, technical college district, village, town, or school district of the state. Also, bonds issued by a local exposition district, a local professional baseball park district, a local professional football stadium district, a local cultural arts district, or by the University of Wisconsin Hospitals and Clinics Authority. 3. Bonds or securities issued or guaranteed by the federal government. 4. The local government investment pool. Page 20 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQu/Ty(cont.) 1. Deposits and Investments (cont.) 5. Any security maturing in seven years or less and having the highest or second highest rating category of a nationally recognized rating agency. 6. Securities of an open-end management investment company or investment trust, subject to various conditions and investment options. 7. Repurchase agreements with public depositories, with certain conditions. 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, 2005, 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 net assets. Page 21 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 2. Receivables (cont.) Property tax calendar - 2005 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 - 2005 delinquent real estate taxes Decem ber 2005 Decem ber 2005 January 31, 2006 January 31, 2006 July 31, 2006 January 31, 2006 October 2008 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, 2005 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 or operation and maintenance expense when used. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. 4. Restricted Assets Mandatory segregations of assets are presented as restricted assets. Such segregations are required by bond agreements and other external parties. Current liabilities payable from these restricted assets are so classified. The 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 In the government-wide financial statements, fixed assets are accounted for as capital assets. Capital assets are defined by the government as assets with an initial cost of more than $5,000 for general capital assets and $25,000 for infrastructure assets, and an estimated useful life in excess of one year. All capital assets are valued at historical cost, or estimated historical cost if actual amounts are unavailable. Donated fixed assets are recorded at their estimated fair value at the date of donation. Prior to January 2003, infrastructure assets of governmental funds were not capitalized. Upon implementing GASB No. 34, governmental units 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, 2005 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, 2005 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 $61,900. The number of participants currently eligible to receive benefits is 12. 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, 2005 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 pri\~ate 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, 2005 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 of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets, less any unspent debt proceeds. 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 4, 2004 and became effective January 1, 2005. Sewer rates are adjusted annually for rate changes from Madison Metropolitan Sewerage District. Page 26 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 NOTE II - 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 $65,311,603 difference are as follows: Bonds and notes payable Unfunded pension liability Compensated absences Capital leases payable Accrued interest Unamortized debt issuance costs Combined Adjustment for Long-Term Liabilities NOTE III - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. BUDGETARY iNFORMA TlON $ 46,024,878 304,126 1,724,187 16,475,000 858,262 (74,850) $ 65,311,603 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. There were no supplemental appropriations during the year. Appropriations lapse at year end unless specifically carried over. Budgets are adopted at the departmental level of expenditure. Page 27 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2005 NOTE III - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY (cont.) B. EXCESS EXPENDITURES OVER ApPROPRIA TlONS The following individual funds experienced excess expenditures over appropriations. Excess Budgeted Actual Expenditures Expenditures Expenditures Over Budget Special Revenue Funds Subdivider's deposits Tourism $ $ 379,803 $ 379,803 Senior citizen Lost and damaged book Land and parks Cable TV Library gift Alcohol awareness Youth commission 179,479 5,000 20,000 4,500 15,000 4,000 2,500 231,150 51,671 7,112 2,112 45,063 25,063 6,598 2,098 20,493 5,493 22,599 18,599 4,452 1,952 1,669 1,669 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, 2005, the following individual funds held a deficit balance: Special Revenue Funds Tourism Commission Lost and damaged book fund $ (245,357) Excess expenditures over revenue. (144) Excess expenditures over revenue. These deficits are anticipated to be funded by room taxes in future years and library charges for services, respectively. D. LIMITATIONS ON THE CITY'S TAX LEVY As part of Wisconsin's Act 25 (2005), new 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 Changes in debt service from one year to the next are generally exempt from this limit. The levy limit begins with the 2005 levy collected in 2006 and is set to expire after the 2006 levy. Page 28 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 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: Carrying Bank Associated Value Balance Risks Demand deposits $ 13,264,056 $ 13,563,883 Custodial credit Money market 859,213 859,213 Custodial credit U.S. agencies 779,780 773,175 Credit, custodial credit, interest rate Mutual funds 14,329,667 14,329,667 Credit, interest rate Other external investment pool - 158,946 158,946 Credit, interest rate Madison Community Foundation LGIP 576,289 576,289 Credit, interest rate Petty cash 425 N/A Total Cash and Investments $ 29,968,376 $ 30,261,173 Reconciliation to financial statements Per statement of net assets Unrestricted cash and investments $ 13,159,285 Restricted cash and investments 1,039,801 Per statement of net assets - Fiduciary Funds Agency 15,769,290 Total Cash and Investments $ 29,968,376 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, 2005 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) A. DEPOSITS AND INVESTMENTS (cont.) The Madison Community Foundation ("the 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 the Foundation with respect to investment of city assets. The Foundation reports the fair value of its underlying assets annually. At December 31, 2005, 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, 2005, $14,007,838 of the city's total bank balances of $14,423,096 were exposed to custodial credit risk as follows: Uninsured and uncollateralized $ 14,007,838 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, 2005 the city's investments were exposed to custodial credit risk as follows: U.S. Agencies Neither insured nor registered and held by counterparty $ 773,175 Page 30 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) A. DEPOSITS AND INVESTMENTS (cont.) Credit Risk As of December 31, 2005, 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 As of December 31, 2005, the city's investments were as follows: Moody's Investor Service AAA AAA Maturity (In Months) Investment Type Fair Value Less than 6 7-12 12-60 U.S. agencies $ 773,175 $ 198,594 $ 296 ,250 3=3=1 The city also had $576,289 invested in the local government investment pool, which had a weighted average maturity of 32 days and $158,946 in another external investment pool (Madison Community Foundation), which had an average maturity of 394 days. Page 31 ---PAGE BREAK--- NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) B. RECEIVABLES CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 Receivables as of year end for the government's individual major funds and nonmajor, and fiduciary funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: Nonmajor TIF District Capital Pleasant View and Other General #3 Projects Water Sewer Golf Course Funds Totals Receivables: Taxes $ 9,456,788 $ 8,397,524 $ - $ - $ - $ - $ - $ 17,854,312 Delinquent taxes 92,416 92,416 Accounts 429,211 83,687 318,509 364,724 1,194 200,866 1,398,191 Loans 1,856,749 1,856,749 Special assessments 32,920 3,115,747 3,148,667 Delinquent special assessments 450 450 Interest 47,286 86,360 31,597 3,890 169,133 Due from other governments 619 619 Gross Receivables 10,059,690 13,370,020 83,687 404,869 396,321 1,194 204,756 24,520,537 Less: Allowance for uncollectibles (193,643) (193,643) Net Total Receivables $ 9,866,047 $ 13,370,020 $ 83,687 $ 404,869 $ 396,321 $ 1,194 $ 204,756 $ 24,326,894 Amounts Not Expected to be Collected Within One Year $ 23,104 $ 4,667,325 $ - $ - $ - $ - $ - $ 4,690,429 Page 32 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 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 $ 193,643 Total Uncollectibles of the Current Fiscal Year $ 193,643 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: Property taxes receivable for subsequent year Special assessments not yet due Loan receivable EMS receivable Grant revenue Interest income (TIF District Total Deferred/Unearned Revenue for Governmental Funds Unavailable Unearned $ $ 17,705,965 3,149,117 1,823,750 90,957 71,771 788,128 Totals $ 17,705,965 3,149,117 1,823,750 90,957 71,771 788,128 $ 5,923,723 $ 17,705,965 $ 23,629,688 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, 2005, 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, 2005 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, 2005: 2005 Restricted assets replacement account $ 39,600 In addition, TIF District #3 has money set aside in an escrow account used to pay for current and future construction projects within the TIF. The amount of this escrow account as of December 31, 2005 is $1,000,201. D. CAPITAL ASSETS Capital asset activity for the year ended December 31, 2005 was as follows: Beginning Ending Balance Additions Deletions Balance Governmental Activities Capital assets not being depreciated Land $ 6,412,939 $ $ $ 6,412,939 Right of way 17,338,287 366,318 17,704,605 Construction in progress 6,366,946 741,023 3,874,250 3,233,719 Total Capital Assets Not Being Depreciated 30,118,172 1,107,341 3,874,250 27,351,263 Capital assets being depreciated Land improvements 4,130,939 1,107,941 5,238,880 Buildings 9,216,171 9,216,171 Machinery and equipment 3,782,235 164,121 101,950 3,844,406 Streets - infrastructure 8,882,108 1,831,437 10,713,545 Storm sewers - infrastructure 5,280,591 878,924 6,159,515 Traffic signals - infrastructure 763,096 763,096 Sidewalks - infrastructure 2,483,167 38,675 2,521,842 Bridges - infrastructure 2,058,188 2,058,188 Rail spur 432,375 432,375 Total Capital Assets Being Depreciated 36,596,495 4,453,473 101,950 40,948,018 Page 34 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 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' (866,435) (2,212,236) (1,900,702) (1,693,960) (1,068,286) (271,272) (866,231 ) (97,284) (8,976,406) Additions $ (94,566) (194,490) (283,424) (147,138) (91,233) (29,529) (50,050) (27,812) {12,971 ) (931,213) Deletions $ - $ 86,681 86,681 Ending Balance (961,001 ) (2,406,726) (2,097,445) (1,841,098) (1,159,519) (300,801) (916,281 ) (125,096) (12,971) (9,820,938) Total Capital Assets, Net of Depreciation $ 57,738,261 $ 4,629,601 $ 3,889,519 $ 58,478,343 , as restated Depreciation expense was charged to functions as follows: Governmental Activities General government Public safety Public works, which includes the depreciation of streets, storm sewers, traffic signals, sidewalks, bridges and rail spur Leisure activities Total Governmental Activities Depreciation Expense $ $ 24,318 97,726 510,785 298,384 931,213 Page 35 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) D. CAPITAL ASSETS (cont.) Beginning Ending Balance Additions Deletions Balance Water Utility Capital assets not being depreciated Land and land rights $ 99,777 $ - $ - $ 99,777 Total Capital Assets Not Being Depreciated 99,777 99,777 Capital assets being depreciated Source of supply 319,783 319,783 Pumping 1,677,663 1,677,663 Treatment 343,242 343,242 Transmission and distribution 16,274,495 715,177 34,100 16,955,572 Administrative and general assets 479,417 22,798 7,765 494,450 Total Capital Assets Being Depreciated 19,094,600 737,975 41,865 19,790,710 Total Capital Assets 19,194,377 737,975 41,865 19,890,487 Less: Accumulated depreciation for Source of supply (218,439) (10,649) (229,088) Pumping (757,748) (68,253) (826,001) Treatment (325,272) (1,922) (327,194) Transmission and distribution (2,709,866) (297,644) 38,809 (2,968,701) Administrative and general assets (398,460) (44,078) 7,765 (434,773) Total Accumulated Depreciation (4,409,785) (422,546) 46,574 ( 4,785,757) Net Water Plant $ 14,784,592 $ 315,429 $ (4,709) $ 15,104,730 Page 36 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2005 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 11,647,920 129,553 Collection system pumping 1,215,786 Administrative and general assets 363,163 13,978 Total Capital Assets Being Depreciated 13,226,869 143,531 Total Capital Assets 13,293,699 143,531 Less: Accumulated depreciation (2,432,546) (208,562) Net Sewer Plant $ 10,861,153 $ (65,031) Beginning Balance' Additions Pleasant View Golf Course Capital assets not being depreciated Land and land rights $ 2,216,000 $ - Capital assets being depreciated Buildings 208,763 Land improvements 7,291,981 Equipment 344,074 46,000 Total Capital Assets Being Depreciated 7,844,818 46,000 Total Capital Assets 10,060,818 46,000 Less: Accumulated depreciation for Buildings (50,457) (5,219) Land improvements (57,374) (19,125) Equipment {139,039) PO,256) Total Accumulated Depreciation {246,870) {54,600) Net Golf Course Plant $ 9,813,948 $ {8,600) Total Net Capital Assets - Business Type Activities $ 35,459,693 , as restated Ending Deletions Balance $ - $ 66,830 11,777,473 1,215,786 369,376 7,765 7,765 7,765 $ - $ Deletions $ - $ 13,362,635 13,429,465 (2,633,343) 10,796,122 Ending Balance 2,216,000 208,763 7,291,981 390,074 7,890,818 10,106,818 (55,676) (76,499) (169,295) pOi ,470) $ $ 9,805,348 $ 35,706,200 Page 37 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 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 $ $ 376,223 208,562 54,600 639,385 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 General Sewer utility Water utility Total - Fund Financial Statements Less: Eliminations Payable Fund Water utility General Sewer utility Total Government-Wide Financial Statements $ $ Amount Amount Not Due Within One Year 219,329 $ 80,317 158,772 _ 458,418 (319,406) _ 139,012 The balances resulted from the time lag between the dates that interfund goods and services are provided or reimbursable expenditures occur, transactions are recorded in the accounting system, and payments between funds are made. All amounts are due within one year. For the statement of net assets, interfund balances which are owed within the governmental activities or business-type activities are netted and eliminated. The general fund advanced funds to TIF District #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, 2005 is $788,128. Page 38 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) E. INTERFUND RECEIVABLES/PA YABLES, ADVANCES AND TRANSFERS (cont.) The general fund has also advanced funds to the Tourism Commission and 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. Repayment of the advances to the Tourism Commission fund will be made over four years at an interest rate of The following is a schedule of interfund advances: Receivable Fund General fund General fund General fund Payable Fund Pleasant View Golf Course Tourism Commission TIF District #3 Total - Fund Financial Statements Less: Eliminations Total - Government-Wide Financial Statements Amount $ 1,008,168 365,133 1,698,595 Amount Not Due Within One Year $ 1,008,168 115,133 1,698,595 3,071,896 $ 2,821,896 (2,063,728) $ 1,008,168 The principal purpose of these interfunds is to finance the deficiency of revenues over expenditures and other financing sources since the fund's inception. For the statement of net assets, interfund balances which are owed within the governmental activities or business-type activities are netted and eliminated. The following is a schedule of amounts due from the component unit to the primary government: TIF District #3 capital projects fund Component unit - CDA $ 2,167,415 This amount represents the unspent debt proceeds by the CDA that is intended to be spent on capital projects within TIF District Page 39 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) E. INTERFUND RECEIVABLES/PAYABLES, ADVANCES AND TRANSFERS (cont.) The following is a schedule of interfund transfers: Fund Transferred To Fund Transferred From Amount Principal Purpose General Water utility $ 287,359 Payment in lieu of tax Retirement benefits General 312,793 EMS General 40,000 Ambulance purchase Debt service fund General 2,625,592 Debt service Debt service fund TIF District #3 5,123,922 Debt service Total - Fund Financial Statements $ 8,389,666 Governmental Fund Transferred To Fund Transferred From Activities Business-type Activities General Water utility $ 287,359 ) Generally, transfers are used to move revenues from the fund that collects them to the fund that the budget requires to expend them, move receipts restricted to debt service from the funds collecting the receipts to the debt service fund, and use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. F. LONG-TERM OBLIGA TIONS Long-term obligations activity for the year ended December 31, 2005 was as follows: GOVERNMENTAL ACTIVITIES Bonds and Notes Payable: General obligation debt Other Liabilities: Unfunded pension liability Vested compensated absences' Capital leases Total Other Liabilities Total Governmental Activities Long-Term Liabilities Beginning Balance Increases Decreases Ending Balance Amounts Due Within One Year $ 48,659,393 $ 3,300,000 $ 5,934,515 $ 46,024,878 $ 6,366,489 318,346 1,573,172 16,475,000 18,366,518 22,005 711,089 1,045,887 36,225 560,074 596,299 304,126 1,724,187 16,475,000 18,503,313 36,000 686,282 790,000 1,512,282 $ 67,025,911 $ 4,345,887 $ 6,530,814 $ 64,528,191 $ 7,878,771 * Beginning balance changed due to restatement. See Note IV.1. Page 40 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) F. LONG-TERM OBLIGATIONS (cont.) BUSINESS-TYPE ACTIVITIES Bonds and Notes Payable: Beginning Balance Increases Decreases Ending Balance Amounts Due Within One Year General obligation debt $ 11,400,000 $ - $ 850,000 $ 10,550,000 $ 675,000 Other Liabilities: Vested compensated absences Total Business-type Activities Long-Term Liabilities General Obligation Debt 76,717 $ 11,476,717 $ 17,764 36,857 57,624 17,764 $ 886,857 $ 10,607,624 $ 675,000 All general obligation notes and bonds payable are backed by the full faith and credit of the city. Notes and bonds in the governmental funds will be retired by future property tax levies or tax increments accumulated by the debt service fund. Business-type activities debt is payable by revenues from user fees of those funds or, if the revenues are not sufficient, by future tax levies. In accordance with Wisconsin Statutes, total general obligation indebtedness of the city may not exceed five percent of the equalized value of taxable property within the city's jurisdiction. The debt limit as of December 31,2005, was $116,547,310. Total general obligation debt outstanding at year end was $56,574,878. Governmental Activities General Obligation Debt 1997 General obligation prom issory notes 1998 General obligation prom issory notes 1999 General obligation prom issory notes 2000 General obligation promissory notes Date of Issue 4-01-97 4-01-98 5-15-99 4-01-00 Final Maturity 3-01-12 9-01-08 3-01-09 3-01-10 Interest Rates 3.90% - 5.40% 3.90% - 4.60% 3.50% - 4.40% 4.80% - 5.20% Original Indebted- ness $ 2,325,000 $ 9;675,000 6,800,000 6,800,000 Balance 12-31-05 155,000 2,800,000 3,600,000 6,000,000 Page 41 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) F. LONG-TERM OBLIGA TIONS (cont.) General Obligation Debt (cont.) Original Date of Final Interest Indebted- Balance Governmental Activities Issue Maturitx: Rates ness 12-31-05 General Obligation Debt (cont.) 2001 General obligation prom issory notes 3-15-01 3-11-11 4.00% - 4.40% $ 8,000,000 $ 6,800,000 2002 General obligation promissory notes 3-15-02 3-01-12 2.125% - 4.50% 6,250,000 5,425,000 2002 State trust fund loan 11-06-02 3-15-19 5.00% 2,170,000 2,015,508 2003 General obligation promissory notes 5-01-03 9-01-13 2.00% - 3.40% 9,980,000 9,300,000 2003 State trust fund loan 1-30-03 3-15-19 5.00% 930,000 854,370 2004 General obligation refunding bond 6-15-04 3-01-12 2.00% - 4.00% 4,540,000 3,865,000 2004 General obligation promissory notes 6-15-04 3-01-14 2.50% - 4.25% 1,910,000 1,910,000 2005 General obligation promissory notes 6-01-05 12-01-11 3.25% - 3.50% 3,300,000 3,300,000 Total Governmental Activities - General Obligation Debt $ 46,024,878 Original Date of Final Interest Indebted- Balance Business-type Activities Issue Maturitx: Rates ness 12-31-05 General Obligation Debt 1996 General obi igation prom issory notes 6-01-96 11-01-06 4.00% - 5.15% $ 7,875,000 $ 335,000 1997 General obligation promissory notes 4-01-97 3-01-12 3.90% - 5.40% 4,155,000 280,000 1999 General obligation promissory notes 5-15-99 3-01-09 3.50% - 4.40% 500,000 220,000 2001 General obligation promissory notes 3-15-01 3-11-11 4.00% - 4.80% 2,000,000 1,700,000 2002 General obligation promissory notes 3-15-02 3-01-12 2.125% - 4.50% 6,005,000 5,975,000 2004 General obligation refunding 6-15-04 3-01-12 2.00% - 4.00% 2,040,000 2,040,000 Total Business-type Activities - General Obligation Debt $ 10,550,000 Page 42 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) F. LONG-TERM OSLIGA TIONS (cont.) General Obligation Debt (cont.) Debt service requirements to maturity are as follows: Governmental Activities Business-type Activities General Obligation Debt General Obligation Debt Principal Interest Principal Interest 2006 $ 6,366,489 $ 1,766,109 $ 675,000 $ 489,606 2007 6,443,814 1,478,171 740,000 446,781 2008 6,216,152 1,238,543 795,000 409,358 2009 6,414,562 981,370 860,000 368,158 2010 6,293,040 724,820 870,000 325,449 2011 - 2015 13,262,675 1,052,991 5,775,000 683,762 2016 - 2020 1,028,146 131,798 835,000 19,831 Totals $ 46,024,878 $ 7,373,802 $ 10,550,000 $ 2,742,945 Totals $ 9,297,204 9,108,766 8,659,053 8,624,090 8,213,309 20,774,428 2,014,775 $ 66,691,625 Estimated payments of accumulated employee benefits and other commitments are not included in the above schedule. Also, the capital lease principal and interest requirements are not included. They are equal to the CDA's lease revenue bonds required payments. See Note IV.J. for the repayment schedule. Capital Leases Refer to Note IV.G. Other Debt Information Estimated payments of compensated absences are not included in the debt service requirement schedules. The compensated absences liability attributable to governmental activities will be liquidated primarily by the general fund. There are a number of limitations and restrictions contained in the various bond indentures and loan agreements. The city believes it is in compliance with all significant limitations and restrictions, including federal arbitrage regulations. Prior-Year Defeasance of Debt In prior years, the city defeased certain general obligation bonds by placing the proceeds of new bonds into an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the city's financial statements. At December 31, 2005, $6,025,000 of bonds outstanding are considered defeased. Of the bonds considered defeased, $2,845,000 are callable on October 1, 2006 and $3,180,000 are callable on March 1, 2006. Page 43 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) G. LEASE DISCLOSURES Lessee - Capital Leases The Tax Increment District No.3 (TIF District 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.J.C. for the repayment schedule. Tax increment revenues generated by TIF District #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. H. GOVERNMENTAL ACTIVITIES NET ASSETS/FuND BALANCES Governmental activities net assets reported on the government wide statement of net assets at December 31, 2005 include the following: Governmental Activities Invested in capital assets, net of related debt Land Right of ways Construction in progress Other capital assets, net of accumulated depreciation Less: related long-term debt outstanding (excluding unspent capital related debt proceeds) Total Invested in Capital Assets, Net of Related Debt Restricted Subdivider's deposits Park improvements Police enforcement EMS Library Economic development Senior citizens Total Restricted Unrestricted (deficit) Total Governmental Activities Net Assets $ 6,412,939 17,704,605 3,233,719 31,127,080 (50,397,650) 8,080,693 1,344,831 6,758 23,888 32,241 191,944 244,041 55,826 1,899,529 855,010 $ 10,835,232 Page 44 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) H. GOVERNMENTAL ACTIVITIES NET ASSETS/FuND BALANCES (cont.) Governmental Activities (cont.) Governmental fund balances reported on the fund financial statements at December 31, 2005 include the following: Reserved Major Funds General Fund Delinquent personal property taxes Advances Total TIF District #3 Capital Projects Fund Reserved for loans receivable Reserved for debt service Total Unreserved - Designated General Fund 2006 budget Unreserved - Undesignated (Deficit) Major Funds General fund TIF District #3 capital projects fund 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 $ 92,416 2,283,768 $ 2,376,184 $1,856,749 1,605,257 $ 3,462,006 $ 461,000 $ 3,039,022 $(2,160,110) $ 2,481,661 $ 1,344,831 6,758 4,989 155,321 3,988 32,241 (144) 32,999 244,280 158,945 312,793 83,090 Page 45 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) H. GOVERNMENTAL ACTIVITIES NET ASSETS/FuND BALANCES (cont.) Governmental Activities (cont.) Unreserved - Undesignated (Deficit) (cont.) Non-Major Funds (Deficit) (cont.) Special Revenue Funds (cont.) Economic development grant Alcohol awareness Drug forfeitures Federal seizures Senior citizen Tourism commission National night out Total Business-type Activities Invested in Capital Assets, Net of Related Debt $ 244,041 10,169 10,907 7,992 55,826 (245,357) 819 $ 2,464,488 The following calculations support the net assets invested in capital assets, net of related debt. Pleasant View Golf Water Sewer Course Totals Capital assets $ 19,890,487 $ 13,429,465 $ 10,106,818 $ 43,426,770 Accumulated depreciation (4,785,757) (2,633,343 ) (301,470) (7,720,570) Sub-totals 15,104,730 10,796,122 9,805,348 35,706,200 Less: Current portion of capital related long-term debt 185,000 145,000 570,000 900,000 Long-term portion of capital related long-term debt 1,340,000 870,000 7,440,000 9,650,000 Unamortized debt issuance costs (3,450 ) (9,664 ) (13,114) Sub-totals 1,521,550 1,005,336 8,010,000 10,536,886 Total Net Assets Invested in Capital Assets, Net of Related Debt $ 13,583,180 $ 9,790,786 $ 1,795,348 $ 25,169,314 Restricted Equipment replacement $ - $ 39,600 $ - $ 39,600 Unrestricted (Deficit) $ 3,772,330 $ 3,715,276 $ {1 ,147,196) $ 6,340,410 Page 46 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) I. RESTATEMENT OF NET ASSETS/FuND BALANCES Following are restatements to net assets of the governmental activities and business-type activities and fund balance of the general fund. Governmental Activities Net Assets - December 31, 2004 (as reported) Less: Additional depreciation related to prior years Net Assets (Deficit) - January 1, 2005 (as restated) Business-type Activities Net Assets - December 31, 2004 (as reported) Add: Depreciation incorrectly recorded in prior years Net Assets - January 1, 2005 (as restated) General Fund Fund balance - December 31, 2004 (as reported) Add: Retirement benefits accrued in prior years that should not be a fund liability Fund Balance - January 1, 2005 (as restated) Pleasant View Golf Course Net assets - December 31, 2004 Add: Depreciation incorrectly recorded in prior years Net Assets - January 1, 2005 (as restated) J. COMPONENT UNIT $ 1,310,746 (807,921 ) $ 502,825 $ 30,453,859 123,673 $ 30,577,532 $ 5,984,171 312,793 $ 6,296,964 $ 311,150 123,673 $ 434,823 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. Page 47 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) J. COMPONENT UNIT (cont.) a. Basis of Accounting/Measurement Focus The CDA follows the full accrual basis of accounting and the flow of economic resources measurement focus. b. Restricted Cash and Investments The bond 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: $ 562,158 1,605,257 $ 2,167,415 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, 2005, the CDA's investments were exposed to custodial credit risk as follows: U.S. Treasuries Neither insured nor registered and held by counterparty $ 2,067,415 Interest Rate Risk As of December 31, 2005, the CDA's investments were as follows: Maturity (In Months) Investment Type Fair Value Less than 6 7-12 12-60 U.S. Treasuries $ 2,167,415 $ 2,167,415 $ Page 48 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) J. 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 1-1-05 Increases Decreases Balance 12-31-05 October 1, 2020. $ 7,375,000 $ - $ - $ 7,375,000 2002 redevelopment lease revenue bonds dated August 15, 2002 with interest at 4.3%-6.65%. Principal payments vary. Bonds mature October 1, 2020. Less: Unamortized debt discounts 9,100,000 (202,390) 9,100,000 (12,850) (189,540) Totals $ 16,272,610 $ (12,850) $ 16,285,460 Debt service requirements to maturity are as follows: Principal Interest Totals 2006 $ 790,000 $ 840,042 $ 1,630,042 2007 815,000 812,532 1,627,532 2008 850,000 781,670 1,631,670 2009 885,000 746,258 1,631,258 2010 920,000 707,030 1,627,030 2011-2015 5,320,000 2,819,324 8,139,324 2016 - 2020 6,895,000 1,230,932 8,125,932 Totals $ 16,475,000 $ 7,937,788 $ 24,412,788 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, 2005 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 5.6% of their salary (2.6% for Executives and Elected Officials, 4.5% for Protective Occupations with Social Security, and 3.2% 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, 2005 was $5,624,463; the employer's total payroll was $6,260,800. The total required contribution for the year ended December 31, 2005 was $713,812 or 12.7 percent of covered payroll. Of this amount, 100 percent was contributed by the employer for the current year. Total contributions for the years ending December 31,2004 and 2003 were $664,451 and $586,167, respectively, equal to the required contributions for each year. Employees who retire at or after age 65 (62 for elected officials and 55 for protective occupation employees) are entitled to receive a retirement benefit. Employees may retire at age 55 (50 for protective occupation employees) and receive actuarially reduced benefits. The factors influencing the benefit are: final average earnings, years of creditable service, and a formula factor. Final average earnings is the average of the employee's three highest year's earnings. Employees terminating covered employment before becoming eligible for a retirement benefit may withdraw their contributions and, by doing 'so, forfeit all rights to any subsequent benefit. For employees beginning partiCipation on or after January 1, 1990 and no longer actively employed on or after April 24, 1998, creditable service in each of five years is required for eligibility for a retirement annuity. Participants employed prior to 1990 and on or after April 24, 1998 are immediately vested. The System also provides death and disability benefits for employees. Eligibility for and the amount of all benefits is determined under Chapter 40 of Wisconsin Statutes. The System issues an annual financial report which may be obtained by writing to the Department of Employee Trust Funds, P.O. Box 7931, Madison, WI 53707-7931. The pension related debt for the city as of December 31, 2005 was $304,126. This liability was determined in accordance with provisions of GASB Statement No. 27 regarding pension-related debt. Depending on actuarial assumptions, this estimate can vary significantly. B. RISK MANAGEMENT The city is exposed to various risks of loss related to torts; theft of, damage to, or destruction of assets; errors and omissions; workers compensation; and health care of its employees. All of these risks are covered through the purchase of commercial insurance, with minimal deductibles. Settled claims have not exceeded the commercial coverage in any of the past three years. There were no significant reductions in coverage compared to the prior year. Page 50 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 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. The city is also involved in negotiations with the Wisconsin Department of Natural Resources concerning a possible permit violation. The city. has responded to the Department of Natural Resources notice and met with their representatives to determine additional solutions to mitigate the problem. Further investigation is under way. The DNR has not taken any further actions subsequent to the notice of violation. In the event of such further action, a material loss is possible. 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, 2005 is a deficit of $650,028. 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 58%, which amounts to $379,482 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 Decem ber 31, 2005 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 58% 6 36 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 $59,985 to the District in 2005. The city has an equity interest (deficit) of $(379,482) 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. Muitijurisdictional Public Safety Information System Commission (MJPISC) The City of Fitchburg, City of Sun Prairie, and City of Middleton jointly operate the Multijurisdictional Public Safety Information System Commission. On March 20, 2003, the City of Middleton, City of Fitchburg, and City of Sun Prairie executed an intergovernmental agreement under authority of Section 66.0301 of the Wisconsin Statutes. The commission adopts its own budget. Net operating costs including debt service are shared by the three communities equally. The department is governed by the Intermunicipal Commission. The commission consists of one representative from each community. The transactions of the commission are not reflected in these financial statements. The city does not have an equity interest in this joint venture. Middleton Fire District The City of Middleton and the Towns of Springfield, Westport and Middleton jointly operate the local fire District, which is called the Middleton Fire District, which provides fire protection. The communities share in the operation of the District based on the ratio of equalized values of each member. Page 52 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2005 NOTE V - OTHER INFORMATION (cont.) D. JOINT VENTURES (cont.) Middleton Fire District (cont.) 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 $414,787 to the District in 2005 for operating expenses. The city believes that the District will continue to provide services in the future at similar rates. In 2005, the city also contributed $256,950 for its share of land and for a new fire truck. 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. ASSET IMPAIRMENT During 2005, the service utility of water utility property held for future use became impaired as a result of the application of GASB No. 42 - Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries as applied to capital assets that have had a decline in service utility. The financial statements include an impairment loss of $321,334. F. SUBSEQUENT EVENT Rate Adjustment The sewer utility has implemented a 3.3% rate increase for service beginning January 1, 2006. 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 31,2005 Budgeted Amounts Variance with Original Final Actual Final Budget REVENUES Taxes $ 9,189,154 $ 9,189,154 $ 9,236,204 $ 47,050 Intergovernmental 2,281,956 2,281,956 2,264,171 (17,785) Licenses and permits 446,850 446,850 563,567 116,717 Fines, forfeitures and penalties 211,000 211,000 229,778 18,778 Public charges for services 827,311 827,311 843,413 16,102 Interdepartmental charges for services 126,600 126,600 158,034 31,434 Special assessments 12,062 12,062 56,983 44,921 Investment income 192,000 192,000 352,978 160,978 Miscellaneous 91,000 91,000 145,303 54,303 Total Revenues 13,377,933 13,377,933 13,850,431 472,498 EXPENDITURES Current General government 1,878,587 1,757,078 1,551,257 205,821 Public safety 4,762,016 4,789,696 4,992,904 (203,208) Public works 2,235,078 2,247,009 2,174,952 72,057 Leisure activities 2,499,405 2,528,584 2,550,279 (21,695) Conservation and development 274,955 292,674 310,771 {18,097) Total Expenditures 11,650,041 11,615,041 11,580,163 34,878 Excess of revenues over expenditures 1,727,892 1,762,892 2,270,268 507,376 OTHER FINANCING SOURCES (USES) Transfers in 327,898 327,898 287,359 (40,539) Transfers out {2,642,790) {2,642,790) {2,978,385) {335,595) Total Other Financing Sources (Uses) {2,314,892) {2,314,892) {2,691,026) {376,134) Net Change in Fund Balance (587,000) (552,000) (420,758) 131,242 FUND BALANCE - Beginning (as restated) 6,296,964 6,296,964 6,296,964 FUND BALANCE - ENDING $ 5,709,964 $ 5,744,964 $ 5,876,206 $ 131,242 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 31,2005 Budgeted Amounts Variance with Original Final Actual Final Budget TAXES General property tax $ 8,972,054 $ 8,972,054 $ 8,981,464 $ 9,410 Fees in lieu of taxes 44,100 44,100 44,110 10 Room tax 171,000 171,000 206,120 35,120 Interest on taxes 2,000 2,000 4,510 2,510 TOTALS $ 9,189,154 $ 9,189,154 $ 9,236,204 $ 47,050 INTERGOVERNMENTAL REVENUES Shared taxes from state $ 361,465 $ 361,465 $ 362,040 $ 575 State aid - road allotment 1,007,675 1,007,675 1,007,675 State aid - exempt computer aid 185,000 185,000 187,372 2,372 State aid - fire insurance dues 64,876 64,876 68,250 3,374 State aid - miscellaneous grants 22,725 22,725 13,168 (9,557) Federal and state aid - other 71,500 71,500 71,453 (47) County aid - library 445,418 445,418 444,462 (956) County aid - signals 10,000 10,000 6,764 (3,236) County aid - senior citizens 47,500 47,500 47,496 County aid - ambulance 7,200 7,200 (7,200) School district payments for liaison officer 58,597 58,597 55,491 (3,106) TOTALS $ 2,281,956 $ 2,281,956 $ 2,264,171 $ {17,785) LICENSES AND PERMITS Liquor and malt beverage licenses $ 30,100 $ 30,100 $ 33,578 $ 3,478 Operators' licenses 5,000 5,000 8,050 3,050 Contractor's licenses 5,500 5,500 7,760 2,260 Alarm licenses 9,000 9,000 5,890 (3,110) Cigarette licenses 150 150 170 20 Bicycle licenses 200 200 68 (132) Dog and cat licenses 450 450 343 (107) Cable TV franchise license 130,000 130,000 130,000 Other miscellaneous licenses 450 450 570 120 Building permits 150,000 150,000 200,158 50,158 Recycling permits 4,500 4,500 4,710 210 Electrical permits 45,000 45,000 59,474 14,474 Plumbing permits 47,000 47,000 64,545 17,545 Erosion control permits 10,000 10,000 35,050 25,050 Park reservation permits 9,500 9,500 13,201 3,701 TOTALS $ 446,850 $ 446,850 $ 563,567 $ 116,717 FINES, FORFEITURES AND PENALTIES Court penalties $ 140,000 $ 140,000 $ 145,310 $ 5,310 Parking violations 38,000 38,000 51,358 13,358 Court costs 33,000 33,000 33,110 110 TOTALS $ 211,000 $ 211,000 $ 229,778 $ 18,778 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 31,2005 Budgeted Amounts Variance with Original Final Actual Final Budget PUBLIC CHARGES FOR SERVICES Clerk fees $ 12,000 $ 12,000 $ 14,328 $ 2,328 Police special services 10,000 10,000 12,223 2,223 Police department fees 30,000 30,000 20,307 (9,693) Fire false alarms 9,000 9,000 2,292 (6,708) Ambulance services 361,561 361,561 348,672 (12,889) EMS fixed cost abatement 61,500 61,500 62,095 595 Plan commission charges 5,000 5,000 7,822 2,822 Senior citizens 19,000 19,000 11,883 (7,117) Swimming pool 224,250 224,250 240,057 15,807 Summer recreation 53,500 53,500 64,326 10,826 Public works charges 5,000 5,000 16,279 11,279 Other recreation 34,500 34,500 41,429 6,929 Zoning 2,000 2,000 1,700 (300) TOTALS $ 827,311 $ 827,311 $ 843,413 $ 16,102 INTERDEPARTMENTAL CHARGES FOR SERVICES Administration reimbursements - utilities $ 94,000 $ 94,000 $ 115,434 $ 21,434 Administration reimbursements - TIF 25,000 25,000 25,000 Administration reimbursements - CDA 10,000 10,000 Administration reimbursements - Landfill 5,000 5,000 5,000 Administration reimbursements - Fire District 2,600 2,600 2,600 TOTALS $ 126,600 $ 126,600 $ 158,034 $ 31,434 SPECIAL ASSESSMENTS Curb, gutter and sidewalks $ 10,732 $ 10,732 $ 53,715 $ 42,983 Interest on special assessments 1,330 1,330 3,268 1,938 TOTALS $ 12,062 $ 12,062 $ 56,983 $ 44,921 INVESTMENT INCOME Investment income $ 192,000 $ 192,000 $ 352,978 $ 160,978 MISCELLANEOUS Rent of city buildings and offices $ 12,000 $ 12,000 $ 29,396 $ 17,396 Compensation for loss of fixed assets 9,556 9,556 Refund of prior year's expenditures 30,000 30,000 32,634 2,634 Sale of city property 20,000 20,000 46,683 26,683 Sale of materials 4,000 4,000 2,034 (1,966) Pool contribution 25,000 25,000 25,000 TOTALS $ 91,000 $ 91,000 $ 145,303 $ 54,303 OTHER FINANCING SOURCES Transfer In - Water Utility $ 327,898 $ 327,898 $ 287,359 $ (40,539) TOTAL REVENUES AND OTHER FINANCING SOURCES $ 13,705,831 $ 13,705,831 $ 14,137,790 $ 431,959 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, 2005 Budgeted Amounts Variance with CURRENT EXPENDITURES Original Final Actual Final Budget GENERAL GOVERNMENT Council $ 41,338 $ 41,338 $ 41,£39 $ (301) Police commission 4,750 4,750 11,648 (6,898) Landmarks commission 600 600 600 Middleton youth commission 23,935 23,935 24,141 (206) Board of review 375 375 78 297 Municipal court 68,578 69,478 67,965 1,513 General administration 480,715 497,429 485,149 12,280 Information technology 313,240 313,240 310,052 3,188 Independent auditing 15,000 15,000 33,952 (18,952) Legal counseling 146,000 146,000 157,005 (11,005) Special legal counsel 5,000 5,000 1,511 3,489 Buildings and grounds 120,556 120,556 111,277 9,279 Illegal taxes and tax refunds 5,000 5,000 4,999 1 Property and liability insurance 330,000 330,000 280,509 49,491 Income continuation insurance 11,500 11,500 11,185 315 Contingency 296,000 156,877 156,877 Group life insurance 11,000 11,000 9,600 1,400 Additional expenditures - prior years 5,000 5,000 547 4,453 TOTALS $ 1,878,587 $ 1,757,078 $ 1,551,257 $ 205,821 PUBLIC SAFETY Police administration $ 391,483 $ 401,566 $ 458,005 $ (56,439) Police patrol 2,394,228 2,396,459 2,562,292 (165,833) Training 25,100 25,100 27,605 (2,505) Police uniform allowance and eqUipment 14,375 14,375 17,915 (3,540) School patrol 12,061 12,061 9,769 2,292 Fire suppression 459,215 459,215 414,787 44,428 Public fire protection 390,000 390,000 373,222 16,778 EMS 573,165 582,835 577,946 4,889 Building inspector 84,509 86,363 86,931 (568) Electrical inspector 77,417 80,373 79,198 1,175 Plumbing inspection 47,149 48,035 49,274 (1,239) Emergency preparedness 4,920 4,920 4,919 1 Sealer of weights and measures 4,400 4,400 4,400 Erosion control enforcement 10,000 10,000 29,418 (19,418) Communications 273,994 273,994 297,223 (23,229) TOTALS $ 4,762,016 $ 4,789,696 $ 4,992,904 $ (203,208) 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, 2005 Budgeted Amounts Variance with CURRENT EXPENDITURES Original Final Actual Final Budget PUBLIC WORKS Machinery $ 204,443 $ 204,443 $ 177,651 $ 26,792 Garage 48,700 48,700 44,844 3,856 Public works administration 450,004 451,633 453,729 (2,096) Protective equipment 2,700 2,700 3,154 (454) Engineering 591,631 601,933 607,955 (6,022) Street maintenance 44,000 44,000 49,793 (5,793) Street cleaning 6,500 6,500 4,795 1,705 Snow and ice control 45,000 45,000 53,168 (8,168) Traffic signals 31,500 31,500 21,548 9,952 Traffic signs and markings 24,000 30,000 27,526 2,474 Street lighting 68,000 62,000 78,950 (16,950) Tree and brush 2,000 2,000 836 1,164 Storm sewers 10,500 10,500 9,015 1,485 Mass transit 204,200 204,200 197,205 6,995 Garbage collection 310,000 310,000 283,097 26,903 Sanitary landfill 56,500 56,500 59,985 (3,485) Recycling 135,400 135,400 101,701 33,699 TOTALS $ 2,235,078 $ 2,247,009 $ 2,174,952 $ 72,057 LEISURE ACTIVITIES Library $ 1,225,508 $ 1,242,162 $ 1,275,228 $ (33,066) Museum 286 (286) Senior citizens center 317,241 321,740 285,187 36,553 Recreation administration 45,645 45,645 52,190 (6,545) Swimming pool 256,925 256,925 246,171 10,754 Summer recreation 56,000 56,000 64,506 (8,506) Other recreation 87,981 89,648 98,942 (9,294) Parks 510,105 516,464 527,769 (11,305) TOTALS $ 2,499,405 $ 2,528,584 $ 2,550,279 $ (21,695) CONSERVATION AND DEVELOPMENT Water resources $ 43,800 $ 43,800 $ 33,867 $ 9,933 Conservancy land commission 79,531 79,531 94,944 (15,413) Planning commission 151,624 169,343 181,960 (12,617) TOTALS $ 274,955 $ 292,674 $ 310,771 $ (18,097) OTHER FINANCING USES Transfers out - debt service fund $ 2,642,790 $ 2,642,790 $ 2,625,592 $ 17,198 Transfers out - retirement benefits fund 312,793 (312,793) Transfers out - EMS equipment replacement fund 40,000 (40,000) TOTALS $ 2,642,790 $ 2,642,790 $ 2,978,385 $ (335,595) TOTAL EXPENDITURES AND OTHER FINANCING SOURCES $ 14,292,831 $ 14,257,831 $ 14,558,548 $ (300,717) See accompanying notes to required supplementary information. Page 58 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO REQUIRED SUPPLEMENTARY INFORMATION Decem ber 31, 2005 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 over appropriations are as follows: Amended Budget Ex~enditures Excess General Fund Current Expenditures Council $ 41,338 $ 41,639 $ 301 Police commission 4,750 11,648 6,898 Middleton youth commission 23,935 24,141 206 Independent auditing 15,000 33,952 18,952 Legal counseling 146,000 157,005 11,005 Police administration 401,566 458,005 56,439 Police patrol 2,396,459 2,562,292 165,833 Training 25,100 27,605 2,505 Police uniform allowance and eqUipment 14,375 17,915 3,540 Building inspector 86,363 86,931 568 Plumbing inspector 48,035 49,274 1,239 Erosion control enforcement 10,000 29,418 19,418 Communications 273,994 297,223 23,229 Public works administration 451,633 453,729 2,096 Engineering 601,933 607,955 6,022 Street maintenance 44,000 49,793 5,793 Snow and ice control 45,000 53,168 8,168 Street lighting 62,000 78,950 16,950 Sanitary landfill 56,500 59,985 3,485 Library 1,242,162 1,275,228 33,066 Museum 286 286 Recreation administration 45,645 52,190 6,545 Summer recreation 56,000 64,506 8,506 Other recreation 89,648 98,942 9,294 Parks 516,464 527,769 11,305 Conservancy land commission 79,531 94,944 15,413 Planning commission 169,343 181,960 12,617 Page 59 ---PAGE BREAK--- SUPPLEMENTARY INFORMATION ---PAGE BREAK--- CITY OF MIDDLETON COMBINING BALANCE SHEET - NON MAJOR GOVERNMENTAL FUNDS December 31, 2005 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 $ 1,367,761 $ 6,758 $ 4,989 $ 106,148 $ 3,988 $ 32,241 $ 3,207 $ 32,999 $ 240,390 $ 158,945 Accounts receivable 49,173 Interest receivable 3,890 TOTAL ASSETS $ 1,367,761 6,758 $ 4,989 $ 155,321 $ 3,988 $ 32,241 $ 3,207 $ 32,999 $ 244,280 $ 158,945 LIABILITIES AND FUND BALANCES Accounts payable $ 22,930 $ - $ - $ - $ - $ - $ 3,351 $ - $ - $ Advances from other funds Total Liabilities 22,930 3,351 Fund Balances Unreserved Undesignated (deficit) 1,344,831 6,758 4,989 155,321 3,988 32,241 (144) 32,999 244,280 . 158,945 Total Fund Balances 1,344,831 6,758 4,989 155,321 3,988 32,241 (144) 32,999 244,280 158,945 TOTAL LIABILITIES AND FUND BALANCES $ 1,367,761 $ 6,758 $ 4,989 $ 155,321 $ 3,988 $ 32,241 $ 3,207 $ 32,999 $ 244,280 $ 158,945 Page 60 ---PAGE BREAK--- CITY OF MIDDLETON COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS (cont.) December 31,2005 S[!ecial Revenue Funds Economic Total Develop- Nonmajor Retirement ment Alcohol Drug Federal Senior Tourism National Governmental Benefits Air[!ort Grant Awareness Forfeitures Seizures Citizen Commission Night Out Funds ASSETS Cash and investments $ 312,793 $ 83,553 $ 245,553 $ 10,169 $ 10,907 $ 7,992 $ 55,947 $ $ 819 $ 2,685,159 Accounts receivable 151,693 200,866 Interest receivable 3,890 TOTAL ASSETS $ 312,793 $ 83,553 $ 245,553 $ 10,169 $ 10,907 $ 7,992 $ 55,947 $ 151,693 $ 819 $ 2,889,915 LIABILITIES AND FUND BALANCES Accounts payable $ - $ 463 $ 1,512 $ - $ - $ - $ 121 $ 31,917 $ - $ 60,294 Advances from other funds 365,133 365,133 Total Liabilities 463 1,512 121 397,050 425,427 Fund Balances Unreserved Undesignated (deficit) 312,793 83,090 244,041 10,169 10,907 7,992 55,826 (245,357) 819 2,464,488 Total Fund Balances 312,793 83,090 244,041 10,169 10,907 7,992 55,826 (245,357) 819 2,464,488 TOTAL LIABILITIES AND FUND BALANCES $ 312,793 $ 83,553 $ 245,553 $ 10,169 $ 10,907 $ 7,992 $ 55,947 $ 151,693 $ 819 $ 2,889,915 Page 61 ---PAGE BREAK--- CITY OF MIDDLETON COMBINING STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES - NON MAJOR GOVERNMENTAL FUNDS For the Year Ended December 31. 2005 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 REVENUES Taxes $ $ $ - $ $ $ $ $ $ $ Intergovernmental 17.114 4.143 Public charges for services 356.027 60.729 26.386 Investment income 6.448 Miscellaneous 5.103 488 100 900 31.980 3.110 Total Revenues 373.141 5.103 488 60.729 100 5.043 26.386 31.980 9.558 EXPENDITURES Current: Public safety Leisure activities 6.598 20.493 1.669 Conservation and development 379.803 45.063 22.599 Debt service: Interest and fiscal charges Total Expenditures 379.803 6.598 20.493 1.669 45.063 22.599 Excess (deficiency) of revenues over expenditures (6.662) (1.495) 488 40.236 (1.569) 5.043 (18.677) 9.381 9.558 OTHER FINANCING SOURCES (USES) Debt issued Transfers In 40.000 Total Other Financing Sources (Uses) 40.000 Net change in fund balance (6.662) (1.495) 488 40.236 (1.569) 5.043 (18.677) 9.381 40.000 9.558 FUND BALANCES (DEFICIT) - Beginning of Year (Restated) 1.351.493 8.253 4.501 115.085 5.557 27.198 18.533 23.618 204.280 149.387 FUND BALANCES (DEFICIT) - END OF YEAR $1.344.831 $ 6.758 $ 4.989 $ 155.321 $ 3.988 $ 32.241 $ ~144) $ 32.999 $ 244.280 $ 158.945 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, 2004 Sl2ecial Revenue Funds Economic Nonmajor Retirement Development Alcohol Drug Federal Senior Tourism National Governmental Benefits Airl20rt Grant Awareness Forfeitures Seizures Citizen Commission Night Out Funds REVENUES Taxes $ $ - $ - $ $ $ - $ $ 480,947 $ - $ 480,947 Intergovernmental 29,400 50,657 Public charges for services 78,408 521,550 Investment income 12,128 18,576 Miscellaneous 8,147 4,159 9,146 10,770 5,465 2,295 81,663 Total Revenues 78,408 12,128 8,147 4,159 9,146 10,770 515,812 2,295 1,153,393 EXPENDITURES Current: Public safety 4,452 9,995 14,447 Leisure activities 7,112 1,476 37,348 Conservation and development 32,134 190,475 670,074 Debt service: Interest and fiscal charges 40,675 40,675 Total Expenditures 32,134 4,452 9,995 7,112 231,150 1,476 762,544 Excess (deficiency) of revenues over expenditures 46,274 12,128 3,695 4,159 (849) 3,658 284,662 819 390,849 OTHER FINANCING SOURCES (USES) Debt issued 800,000 800,000 Transfers In 312,793 352,793 Total Other Financing Sources (Uses) 312,793 800,000 1,152,793 Net change in fund balance 312,793 46,274 12,128 3,695 4,159 (849) 3,658 1,084,662 819 1,543,642 FUND BALANCES (DEFICIT) - Beginning of Year 36,816 231,913 6,474 6,748 8,841 52,168 (1,330,019) 920,846 FUND BALANCES (DEFICIT) - END OF YEAR $ 312,793 $ 83,090 $ 244,041 $ 10,169 $ 10,907 $ 7,992 $ 55,826 $ ~245,357) $ 819 $2,464,488 Page 63 ---PAGE BREAK--- CITY OF MIDDLETON COMBINING STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS December 31,2005 Fire District Tax Roll Fund ASSETS Cash and investments $15,467,314 $ 13,027 $ Taxes receivable 9,599,230 Due from other governmental units 58,408 TOTAL ASSETS $25,066,544 $ 71,435 $ LIABILITIES Accounts payable $ - $ 71,435 $ Due to other governmental units 25,066,544 TOTAL LIABILITIES $25,066,544 $ 71,435 $ MPSISC Totals 288,949 $ 15,769,290 9,599,230 58,408 288,949 $ 25,426,928 154,447 $ 225,882 134,502 25,201,046 288,949 $ 25,426,928 Page 64 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF CASH FLOWS - COMPONENT UNIT For the Year Ended December 31, 2005 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers Cash paid to suppliers for goods and services Net Cash Flows From Operating Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Paid to primary government Interest paid Interest received Net Cash Flows From Capital and Related Financing Activities Net Decrease in Cash and Cash Equivalents CASH AND CASH EQUIVALENTS - Beginning of Year CASH AND CASH EQUIVALENTS - END OF YEAR RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES Operating income (loss) Changes in Noncash Components of Working Capital Accounts receivable 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: None $ $ $ $ $ Component Unit - CDA 6,915 (50,725) (43,810) (831,413) (840,040) 846,665 (824,788) (868,598) 3,732,241 2,863,643 (55,477) (14,072) 25,739 (43,810) 696,228 2,167,415 $ 2,863,643 Page 65