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CITY OF MIDDLETON Middleton, Wisconsin FINANCIAL STATEMENTS Including Independent Auditors' Report Year Ended December 31,2010 ---PAGE BREAK--- INDEPENDENT AUDITORS' REPORT BASIC FINANCIAL STATEMENTS CITY OF MIDDLETON TABLE OF CONTENTS December 31, 2010 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 Actual- General Fund Detailed Schedule of Revenues - Budget and Actual - General Fund Detailed Schedule of Expenditures - Budget and Actual - General Fund Notes to Required Supplementary Information SUPPLEMENTARY INFORMATION Combining Balance Sheet - Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds Combining Statement of Fiduciary Net Assets - Agency Funds Statement of Cash Flows - Component Unit 1-2 3 4 5 6 7 8-9 10 11 -12 13 14 - 50 51 52 - 53 54 - 55 56 57 - 58 59 - 60 61 62 ---PAGE BREAK--- To the City Council City of Middleton Middleton, Wisconsin INDEPENDENT AUDITORS' REPORT ~AKER TILLY Baker Tilly Virchow Krallse. LLP Ten Terrace Ct. PO Box 7398 Madison. WI 53707-7398 tel [PHONE REDACTED] fax [PHONE REDACTED] bakertilly.com 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 31,2010, which collectively comprise the city's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City of Middleton's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Middleton, Wisconsin as of December 31 , 2010, 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 as listed in the table of contents is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. 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. ~ antndependenlmemberOf BAKER TILLY I NTERNATIONAL Page 1 An Affirmative Action Equal Opportunity Employer ---PAGE BREAK--- To the City Council City of Middleton Middleton, Wisconsin 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 November 29, 2011 Page 2 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF NET ASSETS December 31, 2010 Primal}' Government Business- Governmental type Component Activities Activities Totals Unit ASSETS Cash and investments $ 9,100,583 $ 5,571,804 $ 14,672,387 $ 257,718 Receivables (net of allowance for uncollectibles) Taxes 20,915,429 20,915,429 Delinquent taxes 28,628 28,628 Accounts 909,073 699,193 1,608,266 Interest 67,902 67,272 135,174 Loans 1,429,361 1,429,361 524,927 Special assessments 1,773,184 2,204,182 3,977,366 Delinquent special assessments 2,594 2,594 Other 9,270 9,270 Due from other governments 58,003 58,003 Due from primary government 24,167 Due from component unit 1,589,617 1,589,617 Internal balances-current (105,395) 105,395 Internal balances-advances 2,364,780 (2,364,780) Prepaid items 143,623 143,623 Restricted Assets Cash and investments 55,165 55,165 1,589,617 Leases receivable from primary government 1,975,000 Other assets 151,493 301,087 452,580 5,402 Capital Assets Land 7,439,100 2,505,107 9,944,207 154,000 Right of way 18,751,280 18,751,280 Construction in progress 222,123 222,123 Capital assets being depreciated 65,683,097 47,424,777 113,107,874 2,874,692 Less: Accumulated depreCiation (14,378,900) (11,366,354) (25,745,254) (603,547) Investment in joint venture (deficit) (511,842) (511,842) Total Assets 115,633,733 45,212,118 160,845,851 6,801,976 LIABILITIES Accounts payable 1,047,319 358,708 1,406,027 6,544 Accrued liabilities 599,036 105,976 705,012 24,166 Due to other governments Due to primary government 1,589,617 Due to component unit 24,167 24,167 Unearned revenue 20,809,853 16,583 20,826,436 Noncurrent Liabilities Due within one year 8,790,464 970,520 9,760,984 965,000 Due in more than one year 49,198,283 7,003,683 56,201,966 989,154 Total Liabilities 80,469,122 8,455,470 88,924,592 3,574,481 NET ASSETS Invested in capital assets, net of related debt 26,852,456 30,753,530 57,605,986 2,425,145 Restricted for equipment replacement 55,165 55,165 Restricted for subdivider's deposits 1,259,832 1,259,832 Restricted for police enforcement 18,564 18,564 Restricted for EMS 159,514 159,514 Restricted for library 212,245 212,245 Restricted for economic development 290,119 290,119 Restricted for senior citizens 111,771 111,771 Restricted for impact fees 91,386 91,386 Restricted for public lands 205 205 Unrestricted 6,168,519 5,947,953 12,116,472 802,350 TOTAL NET ASSETS $ 35,164,611 $ 36,756,648 $ 71,921,259 $ 3,227,495 See accompanying notes to financial statements. Page 3 ---PAGE BREAK--- Functions/Programs Primary Government Governmental Activities General government Health and human services 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 Prirnary Governrnent Component Unit Community Development Authority CITY OF MIDDLETON STATEMENT OF ACTIVITIES For the Year Ended December 31, 2010 Program Revenues Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions $ 2,492,179 $ 192,663 $ 44,396 $ - 158,318 8,785,916 1,096,310 200,702 54,985 5,020,491 343,020 1,451,219 49,901 4,741,367 366,942 750,539 115,119 1,613,009 22,363 3,156,069 25,967,349 2,021,298 2,446,856 220,005 1,522,331 1,822,183 93,409 1,697,356 1,576,970 83,949 1,769,506 1,799,560 4,989,193 5,198,713 177,358 $ 30,956,542 $ 7,220,011 $ 2,446,856 $ 397,363 $ 795,841 $ 29,479 $ $ General Revenues Taxes Property taxes, levied for general purposes and debt service Property taxes, levied for tax increment district Other taxes Cable television franchise fees Intergovernmental revenues not restricted to specific programs Public gifts and/or grants Investment income Miscellaneous Transfers Total General Revenues and Transfers Change in net assets NET ASSETS - Beginning NET ASSETS - ENDING See accompanying notes to financial statements. Net (Expense) Revenue and Changes in Net Assets PrimaQi Government Governmental Business-type Component Activities Activities Totals Unit $ (2,255,120) $ - $ (2,255,120) $ (158,318) (158,318) (7,433,919) (7,433,919) (3,176,351 ) (3,176,351 ) (3,508,767) (3,508,767) (1,590,646) (1,590,646) (3,156,069) (3,156,069) (21,279,190) (21,279,190) 393,261 393,261 (36,437) (36,437) 30,054 30,054 386,878 386,878 (21,279,190) 386,878 (20,892,312) (766,362) 12,095,210 12,095,210 8,360,806 8,360,806 1,307,476 1,307,476 197,483 197,483 1,180,841 1,180,841 63,680 63,680 529,597 160,741 690,338 573,647 415,496 415,496 379,913 (379,913) 24,530,502 (219,172) 24,311,330 573,647 3,251,312 167,706 3,419,018 (192,715) 31,913,299 36,588,942 68,502,241 3,420,21 ° $ 35,164,611 $ 36,756,648 $ 71,921,259 $ 3,227,495 Page4 ---PAGE BREAK--- CITY OF MIDDLETON BALANCE SHEET - GOVERNMENTAL FUNDS December 31, 201O Non-major TIF District Capital Governmental General Debt Service NO.3 Projects Funds ASSETS Cash and investments $ 288,313 $ $ 2,332,408 $ 2,194,510 $ 4,285,352 Receivables (net) Taxes 12,578,946 8,259,784 76,699 Delinquent taxes 28,628 Accounts 630,726 5,421 272,926 Interest 67,902 Loans 1,385,635 43,726 Special assessments 7,270 1,765,914 Delinquent special assessments 2,594 Due from other funds 96,194 Due from other governments 58,003 Due from component unit 1,589,617 Advances to other funds 2,796,677 Prepaid items 143,623 TOTAL ASSETS $ 16,698,876 $ $ 15,333,358 $ 2,199,931 $ 4,678,703 LIABILITIES AND FUND BALANCES Liabilities Accounts payable $ 637,860 $ $ 1,840 $ 368,803 $ 38,816 Due to other funds 105,395 96,194 Deferred revenue 12,671,082 9,634,784 144,366 Deferred special assessments 9,864 1,765,914 Advances from other funds 431,897 Total Liabilities 13,424,201 96,194 11,402,538 368,803 615,079 Fund Balances Reserved for: Loans receivable 10,635 43,726 Delinquent personal property taxes 28,628 Advances 2,796,677 Debt service 1,589,617 Prepaid items 143,623 Unreserved and undesignated (deficit), reported in: General fund 305,747 Debt service funds (deficit) (96,194) Special revenue funds 4,465,106 Capital projects funds (deficit) 2,330,568 1,831,128 (445,208) Total Fund Balances (deficit) 3,274,675 (96,194) 3,930,820 1,831,128 4,063,624 TOTAL LIABILITIES AND FUND BALANCES $ 16,698,876 $ $ 15,333,358 $ 2,199,931 $ 4,678,703 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. See Note IV.D. 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. See Note IV.B. Investment (deficit) in joint venture is not a financial resource and, therefore, is not reported in the funds. Some liabilities, including long-term debt, are not due and payable in the current period and, therefore, are not reported in the funds. See Note II.A. NET ASSETS OF GOVERNMENTAL ACTIVITIES See accompanying notes to financial statements. Total Governmental Funds $ 9,100,583 20,915,429 28,628 909,073 67,902 1,429,361 1,773,184 2,594 96,194 58,003 1,589,617 2,796,677 143,623 $ 38,910,868 $ 1,047,319 201,589 22,450,232 1,775,778 431,897 25,906,815 54,361 28,628 2,796,677 1,589,617 143,623 305,747 (96,194) 4,465,106 3,716,488 13,004,053 77,716,700 3,416,157 (511,842) (58,460,457) $ 35,164,611 Page 5 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS For the Year Ended December 31,2010 Non-major Total TIF District Capital Governmental Governmental General Debt Service NO.3 Projects Funds Funds REVENUES Taxes $ 12,525,895 $ - $ 8,360,806 $ - $ 876,791 $ 21,763,492 Intergovernmental 2,836,107 590,006 108,963 28,840 3,563,916 Licenses and permits 558,772 54,985 613,757 Fines, forfeitures and penalties 273,886 273,886 Public charges for services 1,187,925 401,004 1,588,929 Intergovernmental charges for services 350,600 350,600 Special assessments 86,193 189,008 275,201 Investment income 182,329 24 240,766 3,836 97,565 524,520 Miscellaneous 140,642 132,263 450 104,401 377,756 Total Revenues 18,142,349 24 9,512,849 113,249 1,563,586 29,332,057 EXPENDITURES Current General government 2,291,470 368,445 170,455 2,830,370 Public safety 7,205,061 5,727 7,210,788 Public works 3,068,521 3,068,521 Health and human services 123,076 123,076 Leisure activities 3,240,748 217,800 3,458,548 Conservation and economic development 405,377 807,000 1,212,377 Capital Outlay 1,019,852 5,210,048 2,480 6,232,380 Debt Service Principal retirement 17,066,937 920,000 17,986,937 Debt issuance costs 140,603 35,340 175,943 Interest and fiscal charges 1,419,359 820,448 32,757 2,272,564 Total Expenditures 16,334,253 18,626,899 3,164,085 5,242,805 1,203,462 44,571,504 Excess (deficiency) of revenues over (under) expenditures 1,808,096 (18,626,875) 6,348,764 (5,129,556) 360,124 (15,239,447) OTHER FINANCING SOURCES (USES) Debt issued 100,000 2,010,000 2,110,000 Refunding bonds issued 10,110,000 11,205,000 21,315,000 Payments to refunded bond escrow agent (11,311,372) (11,311,372) Premium on debt 255,130 255,130 Sale of capital assets 3,518 123,880 127,398 Transfers in 607,279 8,344,838 42,100 405,673 9,399,890 Transfers out (3,284,404) (5,097,278) (58,365) (579,930) (9,019,977) Total Other Financing Sources (Uses) (2,673,607) 18,454,838 (4,724,640) 1,993,735 (174,257) 12,876,069 Net Change in Fund Balance (865,511) (172,037) 1,624,124 (3,135,821 ) 185,867 (2,363,378) FUND BALANCES - Beginning 4,140,186 75,843 2,306,696 4,966,949 3,877,757 15,367,431 FUND BALANCES - ENDING $ 3,274,675 $ (96,194) $ 3,930,820 $ 1,831,128 $ 4,063,624 $ 13,004,053 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 31,2010 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 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 and leases 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 Accrued interest on debt CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES See accompanying notes to financial statements. $ (2,363,378) $ 6,232,380 (2,823,501 ) (1,614,678) (272,707) (23,425,000) 28,226,937 (430,634) (386,788) 116,563 (7,882) 3,251,312 Page 7 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF NET ASSETS - PROPRIETARY FUNDS December 31,2010 ASSETS Current Assets Cash and investments Accounts receivable, net Accrued interest Other accounts receivable Due from other funds Total Current Assets Noncurrent Assets Restricted assets Cash and investments Special assessments receivable Other assets Property held for future use 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 3,135,742 $ 2,435,543 319,613 379,580 54,153 13,119 9,270 46,765 58,630 3,565,543 2,886,872 55,165 2,204,182 301,087 23,935,465 14,476,115 (6,779,211) (3,728,725) 17,156,254 10,747,390 17,457,341 13,006,737 21,022,884 15,893,609 $ Course Totals 519 $ 5,571,804 699,193 67,272 9,270 105,395 6,452,934 55,165 2,204,182 301,087 11,518,304 49,929,884 (858,418) (11,366,354) 10,659,886 38,563,530 10,659,886 41,123,964 10,660,405 47,576,898 Page 8 ---PAGE BREAK--- Business-ttee Activities - Entererise Funds Pleasant View Golf Water Sewer Course Totals LIABILITIES Current Liabilities Accounts payable $ 47,649 $ 266,519 $ 44,540 $ 358,708 Accrued interest 8,870 4,659 92,447 105,976 Accrued compensated absences 25,942 10,832 8,746 45,520 Deferred revenues 16,583 16,583 Current portion of long term debt 240,000 125,000 560,000 925,000 Total Current Liabilities 339,044 407,010 705,733 1,451,787 Noncurrent Liabilities Accrued compensated absences 66,383 31,812 20,488 118,683 Advances from other funds 2,364,780 2,364,780 General obligation debt 255,000 135,000 6,495,000 6,885,000 Total Noncurrent Liabilities 321,383 166,812 8,880,268 9,368,463 Total Liabilities 660,427 573,822 9,586,001 10,820,250 NET ASSETS Invested in capital assets, net of related debt 16,661,254 10,487,390 3,604,886 30,753,530 Restricted for: Equipment replacement 55,165 55,165 Unrestricted (deficit) 3,701,203 4,777,232 (2,530,482) 5,947,953 TOTAL NET ASSETS $ 20,362,457 $ 15,319,787 $ 1,074,404 $ 36,756,648 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 31,2010 Business-t}"[le Activities - Enter[lrise Funds Pleasant View Golf Water Sewer Course Totals OPERATING REVENUES Charges for services $ 1,822,183 $ 1,576,970 $ 1,799,560 $ 5,198,713 Total Operating Revenues 1,822,183 1,576,970 1,799,560 5,198,713 OPERATING EXPENSES Operation and maintenance 1,087,014 1,456,109 1,315,564 3,858,687 Depreciation 406,675 226,209 136,702 769,586 Total Operating Expenses 1,493,689 1,682,318 1,452,266 4,628,273 Operating Income 328,494 (105,348) 347,294 570,440 NONOPERATING REVENUES (EXPENSES) Investment income 106,469 54,272 160,741 Interest expense ~28,642) ~15,038) ~317,240) ~360,920) Total Nonoperating Revenues (Expenses) 77,827 39,234 (317,240) (200,179) Income before contributions and transfers 406,321 (66,114) 30,054 370,261 Capital contributions 93,409 83,949 177,358 Transfers out (369,863) (2,050) (8,000) (379,913) Change in Net Assets 129,867 15,785 22,054 167,706 TOTAL NET ASSETS - Beginning 20,232,590 15,304,002 1,052,350 36,588,942 TOTAL NET ASSETS - ENDING $ 20,362,457 $ 15,319,787 $ 1,074,404 $ 36,756,648 See accompanying notes to financial statements. Page 10 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF CASH FLOWS- PROPRIETARY FUNDS For the Year Ended December 31, 2010 Business-ttpe Activities - Enterprise Funds Pleasant View Golf Water Sewer Course Totals CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 1,518,568 $ 1,583,614 $ 1,803,462 $ 4,905,644 Cash received from city for services 373,144 373,144 Cash paid to suppliers for goods and services (1,008,718) (1,390,171) (753,137) (3,152,026) Cash paid to employees for services (336,098) (85,469) (573,447) (995,014) Net Cash Flows From Operating Activities 546,896 107,974 476,878 1,131,748 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers to other funds (369,863) (2,050) (8,000) (379,913) Advance from general fund 395,706 395,706 Net Cash Flows From Noncapital Financing Activities (369,863) (2,050) 387,706 15,793 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal paid (230,000) (120,000) (520,000) (870,000) Interest paid (30,673) (16,098) (325,040) (371,811) Acquisition and construction of capital assets (582,452) (15,725) (19,025) (617,202) Net Cash Flows From Capital and Related Financing Activities (843,125) (151,823) (864,065) (1,859,013) CASH FLOWS FROM INVESTING ACTIVITIES Investment income 125,664 65,974 191,638 Investments sold and matured 1,907,368 1,243,453 3,150,821 Marketable securities purchased (1,776,639) (658,554) (2,435,193) Net Cash Flows From Investing Activities 256,393 650,873 907,266 Net Increase (Decrease) in Cash and Cash Equivalents (409,699) 604,974 519 195,794 CASH AND CASH EQUIVALENTS - Beginning of Year 568,799 927,180 1,495,979 CASH AND CASH EQUIVALENTS - END OF YEAR $ 159,100 $ 1,532,154 $ 519 $ 1,691,773 Page 11 ---PAGE BREAK--- Business-t~pe Activities - Enterprise Funds Pleasant View Golf Water Sewer Course Totals RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FLOWS FROM OPERATING ACTIVITIES Operating income (loss) $ 328,494 $ (105,348) $ 347,294 $ 570,440 Adjustments to Reconcile Operating Income to Net Cash Provided From Operating Activities Depreciation 406,675 226,209 136,702 769,586 Depreciation charged to sewer utility 43,067 43,067 Changes in Noncash Components of Working Capital Accounts receivable 3,181 (2,738) 3,902 4,345 Other accounts receivable (444) (444) Due from other funds 23,725 9,382 33,107 Accounts payable (15,016) 23,059 8,148 16,191 Accrued compensated absences 48,092 27,900 (19,168) 56,824 Due to other funds (290,878) (70,490) (361,368) NET CASH FLOWS FROM OPERATING ACTIVITIES $ 546,896 $ 107,974 $ 476,878 $ 1,131,748 RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS - PROPRIETARY FUNDS Cash and investments - statement of net assets - proprietary funds $ 3,135,742 $ 2,435,543 $ 519 $ 5,571,804 Restricted cash and investments - statement of net assets - proprietary funds 55,165 55,165 Less: Non-cash equivalents (2,976,642) (958,554) (3,935,196) CASH AND CASH EQUIVALENTS - END OF YEAR $ 159,100 $ 1,532,154 $ 519 $ 1,691,773 NONCASH INVESTING, CAPITAL AND RELATED FINANCING ACTIVITIES Developer financed additions to utility plant $ 93,409 $ 83,949 $ 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, 2010 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 $ 21,772,245 12,816,257 137,902 $ 34,726,404 $ 80,235 34,646,169 $ 34,726,404 Page 13 ---PAGE BREAK--- CITY OF MIDDLETON INDEX TO NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE I. Summary of Significant Accounting Policies A. Reporting Entity B. Government-Wide and Fund Financial Statements C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation D. Assets, Liabilities, and Net Assets or Equity 1. Deposits and Investments 2. Receivables 3. Inventories and Prepaid Items 4. Restricted Assets 5. Capital Assets 6. Other Assets 7. Compensated Absences 8. Long-Term Obligations/Conduit Debt 9. Claims and Judgments 10. Equity Classifications 11. Basis for Existing Rates - Proprietary Funds II. Reconciliation of Government-Wide and Fund Financial Statements A. Explanation of Certain Differences Between the Governmental Fund Balance Sheet and the Statement of Net Assets III. Stewardship, Compliance, and Accountability A. Budgetary Information B. Excess Expenditures Over Appropriations C. Deficit Balances D. Limitations on the City's Tax Levy IV. Detailed Notes on All Funds A. Deposits and Investments B. Receivables C. Restricted Assets D. Capital Assets E. Interfund Receivables/Payables, Advances and Transfers F. Long-Term Obligations G. Lease Disclosures H. Governmental Activities Net Assets/Fund Balances I. Component Unit V. Other Information A. Employees' Retirement System B. Risk Management C. Commitments and Contingencies D. Joint Ventures E. Effect of New Accounting Standards on Current-Period Financial Statements F. SubsequentEven~ 15 15 16 18 20 20 22 23 23 24 25 25 25 26 26 27 27 27 28 28 28 28 29 29 29 31 32 32 35 38 41 42 45 47 47 48 48 49 50 50 Page 14 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2010 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the City of Middleton, Wisconsin conform to generally accepted accounting principles as applicable to governmental units. The accepted standard-setting body for establishing governmental accounting and financial reporting principles is the Governmental Accounting Standards Board (GAS A. REPORTING ENTITY This report includes all of the funds of the City of Middleton. The reporting entity for the city consists of the primary government, organizations for which the primary government is financially accountable, and other organizations for which the nature and significance of their relationship with the primary government are such that their exclusion would cause the reporting entity's financial statements to be misleading or incomplete. A legally separate organization should be reported as a component unit if the elected officials of the primary government are financially accountable to the organization. The primary government is financially accountable if it appoints a voting majority of the organization's governing body and it is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to or burdens on the primary government. The primary government may be financially accountable if an organization is fiscally dependent on the primary government. A legally separate, tax exempt organization should be reported as a component unit of a reporting entity if all of the following criteria are met: the economic resources received or held by the separate organization are entirely or almost entirely for the direct benefit of the primary government, its component units, or its constituents; the primary government is entitled to, or has the ability to otherwise access, a majority of the economic resources received or held by the separate organization; the economic resources received or held by an individual organization that the specific primary government, or its component units, is entitled to, or has the ability to otherwise access, are significant to that primary government. Blended component units, although legally separate entities, are, in substance, part of the government's operations and are reported with similar funds of the primary government. The discretely presented component unit is reported in a separate column in the government-wide financial statements (see note below for description) to emphasize that it is legally separate from the primary government. Discretely Presented Component Unit Community Development Authority of the City of Middleton The government-wide financial statements include the Community Development Authority of the City of Middleton ("CDA") as a component unit. The CDA is a legally separate organization. The board of the CDA is appointed by the mayor. Wisconsin Statutes provide for circumstances whereby the city can impose its will on the CDA and also create a potential financial benefit to or burden on the city. As a component unit, the CDA's financial statements have been presented as a discrete column in the basic financial statements. Separately issued financial statements of the CDA are not prepared. Page 15 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS Government-Wide Financial Statements The statement of net assets and statement of activities display information about the reporting government as a whole. They include all funds of the reporting entity except for fiduciary funds. The statements distinguish between governmental and business-type activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange revenues. Business-type activities are financed in whole or in part by fees charged to external parties for goods or services. Likewise, the primary government is reported separately from the legally separate component unit for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. The city does not allocate indirect expenses to functions in the statement of activities. Program revenues include 1) charges to customers or applicants who purchase, use or directly benefit from goods, services, or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not included among program revenues are reported as general revenues. Internally dedicated resources are reported as general revenues rather than as program revenues. Fund Financial Statements Financial statements of the reporting entity are organized into funds, each of which is considered to be a separate accounting entity. Each fund is accounted for by providing a separate set of self-balancing accounts, which constitute its assets, liabilities, net assets/fund equity, revenues, and expenditure/expenses. Separate financial statements are provided for governmental funds and proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Funds are organized as major funds or non-major funds within the governmental and proprietary statements. An emphasis is placed on major funds within the governmental and proprietary categories. A fund is considered major if it is the primary operating fund of the city or meets the following criteria: a. Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise fund are at least 10% of the corresponding total for all funds of that category or type, and b. The same element of the individual governmental fund or enterprise fund that met the 10% test is at least 5% of the corresponding total for all governmental and enterprise funds combined. c. In addition, any other governmental or enterprise fund that the city believes is particularly important to financial statement users may be reported as a major fund. Page 16 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2010 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (cont.) Fund Financial Statements (cont.) The city reports the following major governmental funds: Major Governmental Funds General Fund - accounts for the city's primary operating activities. It is used to account for all financial resources except those required to be accounted for in another fund. Debt Service Fund - accounts for resources accumulated and payments made for principal and interest on long-term debt other than TIF or enterprise fund debt. Tax Incremental Financing District (TIF) NO.3 Capital Projects Fund - accounts for expenditures outlined in the TIF project plan and related revenues and proceeds from long- term borrowing. Capital Projects Fund - accounts for proceeds from long-term borrowing and other resources to be used for capital improvement projects originally initiated. The city reports the following major enterprise funds: Major Enterprise Funds Water Utility - accounts for operations of the water system Sewer Utility - accounts for operations of the sewer system Pleasant View Golf Course - accounts for operations of the Pleasant View Golf Course The city reports the following non-major governmental funds: Non-Major Governmental Funds Special Revenue Funds - used to account for the proceeds of specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specified purposes. Subdividers' Deposits Land and Park Donations Community Gardens Drug Evidence Cable TV EMS Lost and Damaged Book Library Gift EMS Equipment Replacement Library Endowment Retirement Benefits Airport Big Event Safety Impact Fee Soccer Stadium Youth Commission Donations Economic Development Grant Shop With a Cop Drug Forfeitures Federal Seizures Senior Citizen Tourism Commission National Night Out Community Awareness EMS & Fire Impact Fee Police Special Revenue and Activities EMS Special Revenue and Activities Public Land Special Revenue and Activities Senior Center Special Revenue and Activities Page 17 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (cont.) Fund Financial Statements (cont.) Capital Projects Funds - used to account for financial resources to be used for the acquisition or construction of equipment and/or major capital facilities. TIF District NO.5 Public Works Capital Construction 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 C. MEASUREMENT Focus, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTA TlON 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 unearned 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 guidance 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 31,2010 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) C. MEASUREMENT Focus, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTA TlON (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, 2010 NOTE 1- 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 guidance issued after November 30, 1989. The proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the water, sewer, and Pleasant View Golf Course are charges to customers for sales and services. Special assessments are recoded as receivables and contributions when levied. Operating expenses for proprietary funds include the cost of sales and services, administrative expenses, and depreCiation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY 1. Deposits and Investments For purposes of the statement of cash flows, the city considers all highly liquid investments with an initial maturity of three months or less when acquired to be cash equivalents. Investment of city funds is restricted by state statutes. Available investments are limited to: a. Time deposits in any credit union, bank, savings bank or trust company maturing in three years or less. b. Bonds or securities of any county, city, drainage district, technical college district, village, town, or school district of the state. Also, bonds issued by a local exposition district, a local professional baseball park district, a local professional football stadium district, a local cultural arts district, the University of Wisconsin Hospitals and Clinics Authority, or the Wisconsin Aerospace Authority. c. Bonds or securities issued or guaranteed by the federal government. d. The local government investment pool. Page 20 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 1. Deposits and Investments (cont.) e. Any security maturing in seven years or less and having the highest or second highest rating category of a nationally recognized rating agency. f. Securities of an open-end management investment company or investment trust, subject to various conditions and investment options. g. Repurchase agreements with public depositories, with certain conditions. The city has adopted an investment policy that follows the state statute for allowable investments. The city is exposed to custodial credit risk and credit risk for deposits and investments, as well as interest rate risk for investments. Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations to the city. To minimize credit risk, investments are limited to government agencies, the highest rated commercial paper, AAA rated money funds, and CD's from Wisconsin's highest rated banks. Custodial risk is the risk that, in the event of the failure of a depository financial institution, the city will not be able to recover deposits that are in possession of an outside party. Most institutions do not offer custodial/collateral services for CD's; therefore, investments should be diversified among institutions avoiding concentrations of credit. In addition, investments should be placed only with Wisconsin banks and savings and loans with current credit information kept on file for each institution. Interest rate risk is the risk that changes in interest rates will adversely affect the fair market value of an investment resulting in losses if the investment was liquidated prior to maturity. The investment portfolio should be laddered over a three year maturity schedule. Staggered investment maturities maximize liquidity to meet ongoing operations, and also allow the opportunity for reinvestment. Continual reinvestment allows city funds to ride the yield curve, minimizing interest rate risk for any given period. Investments should be held to maturity eliminating losses and risk from early liquidation. 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. Page 21 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2010 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LiABILITIES, AND NET ASSETS OR EQUITY (cont.) 1. Deposits and Investments (cont.) 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, 2010, the fair value of the city's share of the LGIP's assets was substantially equal to the amount as reported in these statements. See note IV.A for further information. 2. Receivables Property taxes are levied in December on the assessed value as of the prior January 1. In addition to property taxes for the city, taxes are collected for and remitted to the state and county governments as well as the local school district and technical college district. Taxes for all state and local governmental units billed in the current year for the succeeding year are reflected as receivables and due to other taxing units on the accompanying agency fund statement of fiduciary net assets. Property tax calendar - 2010 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 - 2010 delinquent real estate taxes December 2010 December 2010 January 31,2011 January 31, 2011 July31,2011 January 31, 2011 October 2013 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". Page 22 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 2. Receivables (cont.) 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. 3. Inventories and Prepaid Items Governmental fund inventory items are charged to expenditure accounts when purchased. Year-end inventory was not significant. Proprietary fund inventories are generally used for construction or for operation and maintenance work. They are not for resale. They are valued at cost based on weighted average, and charged to construction and/or for operation and maintenance expense when used. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. 4. Restricted Assets Mandatory segregations of assets are presented as restricted assets. Such segregations are required by bond agreements and other external parties. Current liabilities payable from these restricted assets are so classified. The excess of restricted assets over current liabilities payable from restricted assets will be used first for retirement of related long-term debt. The remainder, if generated from earnings, is shown as restricted net assets. Page 23 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 5. Capita! Assets Government-Wide Statements Capital assets, which include property, plant and equipment, are reported in the government-wide financial statements. Capital assets are defined by the government as assets with an initial cost of more than $5,000 for general capital assets and $25,000 for infrastructure assets, and an estimated useful life in excess of one year. Capital assets are generally defined by the utilities as assets with an initial, individual cost of more than $1,000 and an estimated useful life in excess of one year. All capital assets are valued at historical cost or estimated historical cost if actual amounts are unavailable. Donated capital assets are recorded at their estimated fair value at the date of donation. Additions to and replacements of capital assets of business-type activities are recorded at original cost or the fair market value at the time of construction, which includes material, labor, overhead, and an allowance for the cost of funds used during construction when significant. For tax-exempt debt, the amount of interest capitalized equals the interest expense incurred during construction netted against any interest revenue from temporary investment of borrowed 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 I nfrastructu re Water Plant Source of Supply Pumping Water Treatment Transmission and Distribution General Sewer Plant Collecting System Collecting System Pumping General 40 Years 30 Years 3 - 15 Years 20 - 50 Years 34 Years 22 - 31 Years 22 - 30 Years 18 - 77 Years 4 - 17 Years 30 - 100 Years 20 - 40 Years 7 - 40 Years Page 24 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 5. Capital Assets (cont.) Fund Financial Statements In the fund financial statements, capital assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Capital assets used in proprietary fund operations are accounted for the same way as in the government-wide statements. 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. 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 $53,044. The number of participants currently eligible to receive benefits is 17. 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 31,2010 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. Page 25 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LiABILITIES, AND NET ASSETS OR EQUITY (cont.) 8. Long-Term Obligations/Conduit Debt (cont.) 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 (IRB) for the benefit of private business enterprises. IRB'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. 9. Claims and Judgments Claims and judgments are recorded as liabilities if all the conditions of Governmental Accounting Standards Board pronouncements are met. The liability and expenditure for claims and judgments is only reported in governmental fund types if it has matured. Claims and judgments are recorded in the government-wide statements and proprietary funds as expenses when the related liabilities are incurred. There were no significant claims or judgments at year end. 10. Equity Classifications Government-Wide Statements Equity is classified as net assets and displayed in three components: a. Invested in capital assets, net of related debt - Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances (excluding unspent debt proceeds) of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. b. Restricted net 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." Page 26 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 10. Equity Classifications (cont.) Government-Wide Statements (cont.) 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. Reserved fund balance is that portion of fund balance that is not available for the subsequent year's budget due to legal restrictions or resources which are not available for current spending. 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 Billings are rendered and recorded quarterly based on metered usage. The utilities do not accrue revenues beyond billing dates. Water rates were approved by the PSCW on February 9, 2005. New rates became effective March 31, 2011. Sewer rates were approved by the common council effective January 1, 2010. NOTE 11- RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS A. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND BALANCE SHEET AND THE STATEMENT OF NET ASSETS The governmental fund balance sheet includes a reconciliation between fund balance - total governmental funds and net assets - governmental activities as reported in the government-wide statement of net assets. One element of that reconciliation explains that "some liabilities, including long- term debt are not due and payable in the current period and, therefore, are not reported in the funds. The details of this $58,460,457 difference are as follows: Bonds and notes payable Compensated absences Capital leases payable Accrued interest Accrued interest - due to component unit Unamortized debt issuance costs Combined Adjustment for Long-Term Liabilities $ 53,551,919 2,461,828 1,975,000 599,036 24,167 (151,493) $ 58,460,457 Page 27 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE 111- STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. BUDGETARY iNFORMA nON Budgetary information is derived from the annual operating budget and is presented using the same basis of accounting for each fund as described in Note I. C. A budget has been adopted for the general fund, debt service fund, certain special revenue funds, and capital projects funds. Wisconsin Statute 65.90 requires that an annual budget be adopted for all funds. The budgeted amounts presented include any amendments made. The city administrator may authorize transfers of budgeted amounts between departments up to $1,000. Transfers exceeding $1,000 between departments and changes to the overall budget must be approved by a two-thirds council action. Appropriations lapse at year end unless specifically carried over. Budgets are adopted at the departmental level of expenditure. B. EXCESS EXPENDITURES OVER ApPROPRIA nONS The following individual funds experienced excess expenditures over appropriations: Excess Budgeted Actual Expenditures Expenditures Expenditures Over Budget General Fund $ 19,258,087 $ 19,618,657 $ 360,570 Debt Service Funds Debt service fund 10,281,059 18,626,899 8,345,840 The city controls expenditures at the departmental level. Some individual departments experienced expenditures which exceeded appropriations. TID #3 debt service was included in the debt service fund, rather than TID TID #3 debt service was funded by the TID. 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 31,2010, the following individual funds held deficit balances: Debt service $ TIF District No.5 96,194 445,558 Excess expenditures over revenues Excess expenditures over revenues The TIF district deficit is anticipated to be funded with future incremental taxes levied over the life of the district. Beginning October 1, 2004, the life of new districts varies by type of district (20-27 years) and may be extended in some cases. Other fund deficits are anticipated to be funded with future contributions, general tax revenues, long-term borrowing, or transfers from the general fund. Page 28 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2010 NOTE 111- STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY (cont.) D. LIMITATIONS ON THE CITY'S TAX LEW As part of Wisconsin's Act 32 (2011), legislation was passed that limits the city's future tax levies. Generally, the city is limited to its prior tax levy dollar amount (excluding TIF Districts), increased by the greater of the percentage change in the city's equalized value due to new construction or zero percent for the 2011 levy collected in 2012 and thereafter. Changes in debt service from one year to the next are generally exempt from this limit, with certain exceptions. NOTE IV - DETAILED NOTES ON ALL FUNDS A. DEPOSITS AND INVESTMENTS The city's cash and investments at year end were comprised of the following: Demand deposits Money market Mutual funds Other external investment pool - Madison Community Foundation LGIP Petty cash Total Cash and Investments Reconciliation to financial statements Per statement of net assets Unrestricted cash and investments Restricted cash and investments Per statement of net assets - Fiduciary Funds Agency Total Cash and Investments Carrying Value $ 17,835,390 3,156,695 637,953 183,157 14,687,732 475 $ 36,501,402 $ 14,673,992 55,165 21,772,245 $ 36,501,402 Bank Balance $ 17,110,131 3,156,296 637,953 183,157 14,687,732 $ 35,775,269 Associated Risks Custodial credit Custodial credit Credit, interest rate Credit, interest rate Credit, interest rate N/A Deposits in each local and area bank are insured by the FDIC in the amount of $250,000 for interest bearing accounts and unlimited amounts for noninterest bearing accounts. Page 29 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE IV - DETAILED NOTES ON ALL FUNDS A. DEPOSITS AND INVESTMENTS (cont.) 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. The Madison Community Foundation ("Foundation") is a community endowment fund. The Foundation is not registered with Securities and Exchange Commission. It constitutes a contractual agreement between the city and Foundation with respect to investment of city assets. The Foundation reports the fair value of its underlying assets annually. At December 31, 2010, 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, 2010, $6,038,778 of the city's total bank balances were exposed to custodial credit risk as follows: Uninsured and uncollateralized $ 6,038,778 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. The city had no investments exposed to custodial credit risk. Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. As of December 31, 2010, the city's investments were rated as follows: Investment Type Mutual fund - Federated Securities Standard & Poor's AAA Fitch Ratings AAA The city also had investments in the following external pools which are not rated: Local Government Investment Pool Madison Community Foundation Moody's Investor Service AAA Page 30 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) A. DEPOSITS AND INVESTMENTS (cont.) Interest Rate Risk The city also had $14,687,732 invested in the local government investment pool, which had a weighted average maturity of 73 days. In addition, the city had $183,157 in another external investment pool (Madison Community Foundation), which is made up primarily of equity securities that do not have a determinable maturity date. See Note I.D.1. for further information on deposit and investment policies. B. RECEIVABLES All receivables on the balance sheet are expected to be collected within one year except for the following: Nonmajor TIF District and Other NO.3 Sewer Funds Total Amounts Not Expected to be Collected Within One Year $ 3,140,914 $ 2,204,182 $ 43,726 $ 5,388,822 Revenues of the city are reported net of uncollectible amounts. Total uncollectible amounts are as follows: Uncollectibles related to ambulance billings $ 1,002,575 Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Property taxes levied for the subsequent year are not earned and cannot be used to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue and unearned revenue reported in the governmental funds were as follows: Unavailable Unearned Totals Property taxes receivable for subsequent year $ $ 20,809,853 $ 20,809,853 Special assessments not yet due 1,775,778 1,775,778 Loan receivable 1,375,000 1,375,000 EMS receivable 120,639 120,639 Accrued interest/other 77,073 77,073 Park fees receivable 67,667 67,667 Total Deferred/Unearned Revenue for Governmental Funds $ 3,416,157 $ 20,809,853 $ 24,226,010 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 31,2010, the city has not exceeded its maximum retention cap. When it does, a liability to the state will be recorded. Page 31 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE IV - DETAILED NOTES ON ALL FUNDS (cant.) C. RESTRICTED ASSETS Replacement Account The sewer utility established an equipment replacement account to be used for significant mechanical equipment replacement as required by the Wisconsin Department of Natural Resources. Following is a list of restricted assets at December 31,2010: Replacement account $ 55,165 D. CAPITAL ASSETS Capital asset activity for the year ended December 31,2010 was as follows: Beginning Ending Balance Additions Deletions Balance Governmental Activities Capital assets not being depreciated Land $ 7,439,100 $ - $ - $ 7,439,100 Right of way 18,751,280 18,751,280 Construction in progress 7,324,743 222,123 7,324,743 222,123 Total Capital Assets Not Being Depreciated 33,515,123 222,123 7,324,743 26,412,503 Capital assets being depreciated Land improvements 6,805,668 6,805,668 Buildings 8,646,621 9,446,904 18,093,525 Machinery and equipment 4,105,506 263,372 4,368,878 Streets - infrastructure 18,869,574 801,223 157,057 19,513,740 Storm sewers - infrastructure 8,750,194 8,750,194 Traffic signals - infrastructure 1,311,022 1,311,022 Sidewalks - infrastructure 3,079,676 3,079,676 Bridges - infrastructure 3,278,231 3,278,231 Rail spur - infrastructure 482,163 482,163 Total Capital Assets Being Depreciated 55,328,655 10,511,499 157,057 65,683,097 Less: Accumulated depreciation for Land improvements (1,648,081) (215,979) (1,864,060) Buildings (2,693,724) (343,468) (3,037,192) Machinery and equipment (2,131,677) (416,921) (2,548,598) Streets - infrastructure (2,817,877) (290,664) 157,057 (2,951,484) Storm sewers - infrastructure (1,687,483) (175,004) (1,862,487) Traffic signals - infrastructure (454,166) (51,392) (505,558) Sidewalks - infrastructure (1,149,615) (61,594) (1,211,209) Bridges - infrastructure (267,825) (43,600) (311,425) Rail spur - infrastructure {70,831) {16,056) {86,887) Total Accumulated Depreciation {12,921,279) {1,614,678) 157,057 {14,378,900) Total Capital Assets, Net of Depreciation $ 75,922,499 $ 9,118,944 $ 7,324,743 $ 77,716,700 Page 32 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) D. CAPITAL ASSETS (cont.) 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 Beginning Balance Additions Water Utility Capital assets not being depreciated Land and land rights $ 222,277 $ - Construction work in progress 1,008,886 Total Capital Assets Not Being Depreciated 1,231,163 Capital assets being depreciated Source of supply 319,783 461,726 Pumping 1,739,511 1,027,714 Treatment 343,242 Transmission and distribution 19,099,312 107,712 Administrative and general assets 570,890 43,618 Total Capital Assets Being Depreciated 22,072,738 1,640,770 Total Capital Assets 23,303,901 1,640,770 Less: Accumulated depreciation for Source of supply (271,300) (18,171) Pumping (1,037,035) (79,129) Treatment (334,882) (1,922) Transmission and distribution (4,169,168) (339,319) Administrative and general assets (517,404) (11,201) Total Accumulated Depreciation {6,329,789) {449,742) Net Water Plant $ 16,974,112 $ 1,191,028 $ 48,708 395,454 785,281 385,235 $ 1,614,678 Ending Deletions Balance $ - $ 222,277 1,008,886 1,008,886 222,277 781,509 2,767,225 343,242 320 19,206,704 614,508 320 23,713,188 1,009,206 23,935,465 (289,471) (1,116,164) (336,804) 320 (4,508,167) (528,605) 320 {6,779,211) $ 1,008,886 $ 17,156,254 Page 33 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) D. CAPITAL ASSETS (cont.) Beginning Ending Balance Additions Deletions Balance Sewer Utility Capital assets not being depreciated Land and land rights $ 66,830 $ - $ - $ 66,830 Capital assets being depreciated Collection system 12,596,998 83,949 12,680,947 Collection system pumping 1,305,786 14,964 2,900 1,317,850 Administrative and general assets 409,727 761 410,488 Total Capital Assets Being Depreciated 14,312,511 99,674 2,900 14,409,285 Total Capital Assets 14,379,341 99,674 2,900 14,476,115 Less: Accumulated depreciation p,505,416) {226,209) 2,900 {3,728,725) Net Sewer Plant $ 10,873,925 $ (126,535) $ - $ 10,747,390 Beginning Ending Balance Additions Deletions Balance Pleasant View Golf Course Capital assets not being depreciated Land and land rights $ 2,216,000 $ - $ - $ 2,216,000 Total Capital Assets Not Being Depreciated 2,216,000 2,216,000 Capital assets being depreciated Land improvements 7.291,981 7,291,981 Buildings 1.325,553 1,325,553 Equipment 665,745 19,025 684,770 Total Capital Assets Being Depreciated 9,283,279 19,025 9,302,304 Total Capital Assets 11,499,279 19,025 11,518,304 Less: Accumulated depreciation for Buildings (186,836) (41,980) (228,816) Land improvements (152,997) (19,125) (172,122) Equipment p81,883) {75,597) {457,480) Total Accumulated Depreciation {721,716) {136,702) {858,418) Net Golf Course $ 10,777,563 $ {117,677) $ - $ 10,659,886 Total Net Capital Assets- Business Type Activities $ 38,625,600 $ 38,563,530 Page 34 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 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 $ $ 406,675 226,209 136,702 769,586 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/PAYABLES, ADVANCES AND TRANSFERS The following is a schedule of interfund receivables and payables including any overdrafts on pooled cash and investment accounts: Receivable Fund Pa~able Fund Amount General Debt service $ 96,194 Water utility General 46,765 Sewer utility General 58,630 Total - Fund Financial Statements 201,589 Less: Eliminations (96,194) Total Government-Wide Financial Statements $ 105,395 The balances resulted from the time lag between the dates that interfund goods and services are provided or reimbursable expenditures occur, transactions are recorded in the accounting system, and payments between funds are made. All amounts are due within one year. For the statement of net assets, interfund balances which are owed within the governmental activities or business-type activities are netted and eliminated. Page 35 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2010 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) E. INTERFUND RECEIVABLES/PAYABLES, ADVANCES AND TRANSFERS (cont.) The general fund advanced funds to TIF District No.5. 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. The general fund has also advanced funds to the Pleasant View Golf Course. No repayment schedules have been established on the advances to Pleasant View Golf Course. The following is a schedule of interfund advances: Receivable Fund General fund General fund Total - Fund Financial Statements Less: Eliminations Payable Fund Pleasant View Golf Course TIF District No.5 Total - Government-Wide Financial Statements Amount $ 2,364,780 431,897 2,796,677 (431,897) $ 2,364,780 Amount Not Due Within One Year $ 2,364,780 431,897 $ 2,796,677 The principal purpose of these interfunds is to finance costs incurred in these funds rather than borrowing externally. For the statement of net assets, interfund balances which are owed within the governmental activities or business-type activities are netted and eliminated. The following is a schedule of amounts due from the component unit to the primary government: TIF District No.3 capital projects fund Component unit - CDA $ 1,589,617 This amount represents the unspent debt proceeds by the CDA that is intended to be spent on capital projects within TIF District No.3 or used for debt payments. Page 36 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 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 General fund Cable TV $ 239,466 Police special revenue Drug evidence 9,356 and activities Police special revenue Shop with a cop 13,851 and activities Police special revenue Drug forfeitures 3,207 and activities Police special revenue Federal seizures 2,156 and activities National night out Police special revenue 199 and activities Community awareness Police special revenue 8,464 and activities EMS special revenue EMS 66,236 and activities EMS special revenue EMS equipment 1,256 and activities replacement EMS special revenue EMS and fire impact fee 47,751 and activities Public land special revenue Land and park donations 3,301 and activities Public land special revenue Community gardens 10,442 and activities Senior center special Senior citizen 99,359 revenue and activities Senior center special General fund 3,475 revenue and activities Capital projects General fund 30,000 Capital projects Water utility 2,050 Capital projects Sewer utility 2,050 Capital projects Pleasant View golf course 8,000 Big event Tourism commission 74,886 General fund Water utility 367,813 Retirement benefits General fund 3,369 Subdividers' deposits Capital projects 58,365 Debt service fund General fund 3,247,560 Debt service fund TIF District NO.3 5,097,278 Subtotal - Fund Financial Statements 9,399,890 Less: Fund eliminations (9,019,977) Total Government-Wide Statement of Activities $ 379,913 Principal Purpose Close fund Create fund Create fund Create fund Create fund Create fund Create fund Create fund Create fund Create fund Create fund Create fund Create fund Create fund Capital purchase Capital purchase Capital purchase Capital purchase Reimburse expense Payment in lieu of tax Future retirement benefits Project costs Debt service Debt service Page 37 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2010 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) E. INTERFUND RECEIVABLES/PAYABLES, ADVANCES AND TRANSFERS (cont.) Fund Transferred To Government Activity Business-type Activity Total Fund Transferred From Business-type Activity Government Activity Amount $ 379,913 $ 379,913 Principal Purpose Generally, transfers are used to move revenues from the fund that collects them to the fund that the budget requires to expend them, move receipts restricted to debt service from the funds collecting the receipts to the debt service fund, and use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. F. LONG-TERM OBLIGA TlONS Long-term obligations activity for the year ended December 31, 2010 was as follows: Amounts Beginning Ending Due Within Balance Increases Decreases Balance One Year GOVERNMENTAL ACTIVITIES Bonds and Notes Payable: General obligation debt $ 37,193,856 $ 23,425,000 $ 7,066,937 $ 53,551,919 $ 7,013,616 Note anticipation notes 10,000,000 10,000,000 Total Bonds and Notes Payable 47,193,856 23,425,000 17,066,937 53,551,919 7,013,616 Other Liabilities: Vested compensated absences 2,075,040 1,080,652 693,864 2,461,828 811,848 Capital leases 13,135,000 11,160,000 1,975,000 965,000 Total Other Liabilities 15,210,040 1,080,652 11,853,864 4,436,828 1,776,848 Total Governmental Activities Long-Term Liabilities $ 62,403,896 $ 24,505,652 $ 28,920,801 $ 57,988,747 $ 8,790,464 BUSINESS-TYPE ACTIVITIES Bonds and Notes Payable: General obligation debt $ 8,680,000 $ - $ 870,000 $ 7,810,000 $ 925,000 Other Liabilities: Vested compensated absences 107,379 94,380 37,556 164,203 45,520 Total Business-type Activities Long-Term Liabilities $ 8,787,379 $ 94,380 $ 907,556 $ 7,974,203 $ 970,520 General Obligation Debt All general obligation notes and bonds payable are backed by the full faith and credit of the city. Notes and bonds in the governmental funds will be retired by future property tax levies or tax increments. Business-type activities debt is payable by revenues from user fees of those funds or, if the revenues are not sufficient, by future tax levies. Page 38 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) F. LONG-TERM OBLIGA TlONS (cont.) General Obligation Debt (cont.) In accordance with Wisconsin Statutes, total general obligation indebtedness of the city may not exceed 5% of the equalized value of taxable property within the city's jurisdiction. The debt limit as of December 31,2010, was $134,974,305. Total general obligation debt outstanding at year end was $61,361,919. Original Date of Final Interest Indebted- Balance Governmental Activities Issue Maturit:l Rates ness 12-31-10 General Obligation Debt 2002 General obligation promissory notes 3-15-02 3-01-12 2.125% - 4.50% $ 6,250,00 $ 2,700,000 2002 State trust fund loan 11-06-02 3-15-19 5.00% 2,170,000 1,447,304 2003 General obligation promissory notes 5-01-03 9-01-13 2.00% - 3.40% 9,980,000 4,800,000 2003 State trust fund loan 1-30-03 3-15-19 5.00% 930,000 613,511 2004 General obligation refunding bond 6-15-04 3-01-12 2.00% - 4.00% 4,540,000 440,000 2004 General obligation promissory notes 6-15-04 3-01-14 2.50% - 4.25% 1,910,000 815,000 2005 General obligation promissory notes 6-01-05 12-01-11 3.25% - 3.50% 3,300,000 1,000,000 2006 General obligation promissory notes 6-01-06 12-01-13 4.00% - 4.25% 2,000,000 1,200,000 2006 General obligation promissory notes 12-27 -06 12-01-14 3.75% - 4.00% 2,330,000 1,730,000 2008 General obligation refunding bonds 6-02-08 12-01-27 3.00% - 4.00% 6,530,000 6,480,000 2008 General obligation promissory notes 6-09-08 12-01-17 3.50% - 4.00% 2,000,000 2,000,000 2008 General obligation refunding bonds 12-30-08 9-01-21 3.50% - 4.45% 3,550,000 2,475,000 2008 General obligation promissory notes 12-30-08 12-01-17 3.00% - 4.25% 2,750,000 2,650,000 2009 State trust fund loan 8-11-09 3-15-13 3.50% 500,000 376,104 2009 State trust fund loan 10-26-09 3-15-13 3.50% 1,400,000 1,400,000 2010 General obligation refunding bonds 4-15-10 9-01-29 1.45% - 8.50% 10,110,000 10,110,000 2010 General obligation promissory notes 4-15-10 9-01-17 1.20% - 3.80% 2,010,000 2,010,000 2010 Taxable general obligation refunding bonds 11-23-10 9-01-20 .85% - 3.75% 6,580,000 6,580,000 2010 General obligation refunding bonds 11-23-10 9-01-20 2.00% - 4.00% 4,625,000 4,625,000 2010 State trust fund loan 3-09-10 3-15-13 3.50% 100,000 100,000 Total Governmental Activities- General Obligation Debt $ 53,551,919 Page 39 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2010 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) F. LONG-TERM OBLIGA nONS (cont.) General Obligation Debt (cont.) Business-type Activities General Obligation Debt 2002 General obligation promissory notes 2004 General obligation refunding 2006 General obligation promissory notes 2008 General obligation refunding bonds Date of Issue 3-15-02 6-15-04 12-27-06 12-30-08 Total Business-type Activities - General Obligation Debt Final Interest Maturity Rates 3-01-12 2.125% - 4.50% 3-01-12 2.00% - 4.00% 12-01-14 3.75% - 4.00% 9-01-21 3.505 - 4.45% Debt service requirements to maturity are as follows: Original Indebted- Balance ness 12-31-10 $ 6,005,000 $ 4,155,000 2,040,000 755,000 1,200,000 1,200,000 1,700,000 1,700,000 $ 7,810,000 Governmental Activities General Obligation Debt Business-type Activities General Obligation Debt Principal Interest Principal Interest Totals 2011 $ 7,013,616 $ 2,053,564 $ 925,000 $ 331,564 $ 10,323,744 2012 7,912,141 1,646,466 1,000,000 284,564 10,843,171 2013 7,114,412 1,408,247 660,000 245,078 9,427,737 2014 4,046,395 1,226,747 715,000 213,783 6,201,925 2015 3,652,215 1,104,982 775,000 179,125 5,711,322 2016 - 2020 15,048,141 3,763,195 3,435,000 323,381 22,569,717 2021 - 2025 5,050,000 1,719,281 300,000 6,675 7,075,956 2026 - 2029 3,715,000 464,767 4,179,767 Totals $ 53,551,920 $ 13,387,249 $ 7,810,000 $ 1,584,170 $ 76,333,339 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. I. for the repayment schedule. Capital Leases Refer to Note IV. G. Page 40 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) F. LONG-TERM OBLIGA nONS (cont.) Other Debt Information The compensated absences liability attributable to governmental activities will be liquidated primarily by the general fund. Advance Refunding On November 23,2010, the city issued $6,580,000 in taxable general obligation refunding bonds with an average interest rate of 2.96% to advance refund $5,790,000 of outstanding CDA bonds with an average interest rate of 6.325%. The net proceeds of $6,512,628 (after payment of $67,372 in underwriting and other issuance costs) were used to purchase U.S.Government Securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for debt service payments occurring in 2013 and beyond of the 2002 Redevelopment Lease Revenue Bonds of the CDA. As a result, a portion of those bonds are considered to be defeased and the liability for that portion has been removed from the CDA financial statements. The refunding bonds are recorded as a liability on the city's financial statements. The cash flow requirement on the bonds prior to the advance refunding was $10,463,608 from 2010 to 2020. The cash flow requirement after the refunding is $9,822,353 from 2010 to 2020. The advance refunding resulted in an economic gain (difference between the present values of the debt service payments on the old and new debt) of $543,008. On November 23, 2010, the city issued $4,625,000 in general obligation refunding bonds with an average interest rate of 2.54% to advance refund $4,450,000 of outstanding CDA bonds with an average interest rate of 4.375%. The net proceeds of $4,832,952 (after payment of $62,883 in underwriting and other issuance costs and a reoffering premium of $255,130) were used to purchase SLGS. Those securities were deposited in an irrevocable trust with an escrow agent to provide for debt service payments occurring in 2013 and beyond of the 2002 Redevelopment Lease Revenue Bonds of the CDA. As a result, a portion of those bonds are considered to be defeased and the liability for that portion has been removed from the CDA financial statements. The refunding bonds are recorded as a liability on the city's financial statements. The cash flow requirement on the bonds prior to the advance refunding was $7,428,685 from 2010 to 2020. The cash flow requirement after the refunding is $7,235,457 from 2010 to 2020. The advance refunding resulted in an economic gain (difference between the present values of the debt service payments on the old and new debt) of $161,118. G. LEASE DISCLOSURES Lessee - Capital Leases The Tax Increment District NO.3 (TIF District No.3) is leasing land and other capital assets from the Community Development Authority (CDA). The CDA borrowed $16,475,000 in revenue bonds for these costs in 2002. The annual lease payments to be paid are the same as the CDA's annual debt service payments on the bonds. See Note IV. I. for the repayment schedule. Tax increment revenues generated by TIF District NO.3 are expected to be paid over to the CDA to make the debt payments. Page 41 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) H. GOVERNMENTAL ACTIVITIES NET ASSETS/FuND BALANCES Governmental activities net assets reported on the government wide statement of net assets at December 31,2010 include the following: Governmental Activities Invested in capital assets, net of related debt Capital assets, net of accumulated depreciation Less: related long-term debt outstanding (excluding unspent capital related debt proceeds) Total Invested in Capital Assets, Net of Related Debt Restricted Subdivider's deposits Police enforcement EMS Library Economic development Senior citizens Impact fees Public lands Total Restricted Unrestricted Total Governmental Activities Net Assets $ 77,716,700 (50,864,244) 26,852,456 1,259,832 18,564 159,514 212,245 290,119 111,771 91,386 205 2,143,636 6,168,519 $ 35,164,611 Governmental fund balances reported on the fund financial statements at December 31,2010 include the following: Reserved Major Funds General Fund Delinquent personal property taxes Advances Prepaid items Total TIF District NO.3 Capital Projects Fund Reserved for loans receivable Reserved for debt service Total Non-Major Funds Economic Development Grant Special Revenue Fund Reserved for loans receivable $ 28,628 2,796,677 143,623 $ 2,968,928 $ 10,635 1,589,617 $ 1,600,252 $ 43,726 Page 42 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) H. GOVERNMENTAL ACTIVITIES NET ASSETS/FuND BALANCES (cont.) Governmental Activities (cont.) Unreserved - Undesignated (deficit) Major Funds General fund Debt service fund (deficit) TIF District No.3 capital projects fund Capital projects fund Non-Major Funds Special Revenue Funds Subdividers' deposits Lost and damaged book Library gift Library endowment Retirement benefits Airport Big event Safety impact fee Soccer stadium Youth commission donations Economic development grant Tourism commission Police special revenue and activities EMS special revenue and activities Public land special revenue and activities Senior center special revenue and activities Total Capital Projects Funds TIF District No.5 (deficit) Public works capital construction Total $ 305,747 $ (96,194) $ 2,330,568 $ 1,831,128 $ 1,259,832 41,634 29,090 183,155 1,472,285 376,974 5,185 91,386 2,000 7,861 246,393 459,257 18,564 159,514 205 111,771 $ 4,465,106 $ (445,558) 350 $ (445,208) Page 43 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2010 NOTE IV - DETAILED NOTES ON ALL FUNDS (cant.) H. GOVERNMENTAL ACTIVITIES NET ASSETS/FuND BALANCES (cant.) Business-Type Activities Invested in Capital Assets, Net of Related Oebt The following calculations support the net assets invested in capital assets, net of related debt. Capital assets Accumulated depreciation SUb-totals Less: Current portion of capital related long-term debt Long-term portion of capital related long-term debt Sub-totals Total Net Assets Invested in Capital Assets, Net of Related Debt Restricted Equipment replacement Unrestricted (Deficit) $ $ $ $ Water 23,935,465 $ (6,779,211 ) 17,156,254 (240,000) (255,000) (495,000) 16,661,254 $ - $ 3,701,203 $ Pleasant View Golf Sewer Course 14,476,115 $ 11,518,304 $ (3,728,725) (858,418) 10,747,390 10,659,886 (125,000) (560,000) (135,000) (6,495,000) (260,000) (7,055,000) 10,487,390 $ 3,604,886 $ 55,165 $ - $ 4,777,232 $ (2,530,482) $ Totals 49,929,884 (11,366,354) 38,563,530 (925,000) (6,885,000) (7,810,000) 30,753,530 55,165 5,947,953 Page 44 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2010 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) I. COMPONENT UNIT This report contains the Community Development Authority (CDA), which is included as a component unit. Financial information is presented as a discrete column in the statement of net assets and statement of activities. In addition to the basic financial statements and the preceding notes to financial statements which apply, the following additional disclosures are considered necessary for a fair presentation. a. Basis of Accounting/Measurement Focus The CDA follows the full accrual basis of accounting and the flow of economic resources measurement focus. b. Restricted Cash and Investments The bond ordinances relating to the CDA bonds requires the establishment of certain accounts. These are as follows: Debt reserve fund $ 1,589,617 Additional information on the above deposits and investments follows: 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 31,2010, the CDA's investments were exposed to custodial credit risk as follows: u. S. Treasuries Neither insured nor registered and held by counterparty $ 1,589,617 Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Page 45 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE IV - DETAILED NOTES ON ALL FUNDS (cant.) I. COMPONENT UNIT (cant.) b. Restricted Cash and Investments (cant.) Interest Rate Risk (cant.) As of December 31, 2010, the CDA's investments were as follows: Investment Tl'pe Fair Value U.S. Treasuries $ 1,589,617 $ c. Capital Assets Maturity (In Months) Less than 6 1,589,617 Beginning Ending Useful Balance Additions Deletions Balance Lives Land $ 154,000 $ - $ - $ 154,000 Buildings 2,874,692 2,874,692 40 Less: Accumulated depreciation {546,679) {56,868) {603,547) Totals $ 2,482,013 $ (56,868) $ - $ 2,425,145 d. CDA Lease Revenue Bonds Amounts Due Balance Balance in Less Than 1-1-10 Increases Decreases 12-31-10 One Year 2002 redevelopment lease revenue bonds dated August 15, 2002 with interest at 2.60%- 3.90%. Principal payments vary. Bonds mature October 1, 2012. $ 5,785,000 $ - $ 4,880,000 $ 905,000 $ 445,000 2002 redevelopment lease revenue bonds dated August 15, 2002 with interest at 4.3%- 5.875%. Principal payments vary. Bonds mature October 1, 2012. 7,350,000 6,280,000 1,070,000 520,000 Less: Unamortized debt discounts (138,140) (117,294) (20,846) (10,423) Totals $ 12,996,860 $ - $ 11,042,706 $ 1,954,154 $ 954,577 Page 46 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2010 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) I. COMPONENT UNIT (cont.) d. CDA Lease Revenue Bonds (cont.) Debt service requirements to maturity are as follows: Principal Interest Totals 2011 2012 Totals $ $ 965,000 $ 1,010,000 1,975,000 $ 96,665 $ 50,115 146,780 $ There are a number of limitations and restrictions contained in the various bond indentures and agreements. NOTE V - OTHER INFORMATION A. EMPLOYEES' RETIREMENT SYSTEM 1,061,665 1,060,115 2,121,780 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 6.2% of their salary (3.2% for Executives and Elected Officials, 5.5% for Protective Occupations with Social Security, and 3.9% 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 31,2010 was $7,574,253 and the employer's total payroll was $8,429,780. The total required contribution for the year ended December 31, 2010 was $986,206 or 13.0% of covered payroll. Of this amount, 100% was contributed by the employer for the current year. Total contributions for the years ending December 31, 2009 and 2008 were $945,740 and $882,965, respectively, equal to the required contributions for each year. Employees who retire at or after age 65 (62 for elected officials, 54 for protective occupation employees with less than 25 years of service, and 53 for protective occupation employees with more than 25 years of service) 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. Page 47 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2010 NOTE V - OTHER INFORMATION (cont.) A. EMPLOYEES' RETIREMENT SYSTEM (cont.) 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. 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. 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. 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. the city jOintly operates the Metropolitan Refuse District, Inc. (District). The District's fund balance at September 30, 2010 is a deficit of $897,969. Reporting standards require the city to report its share of the net deficit. The city's proportionate share in the operations of the District is 57%, which amounts to $511,842 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 48 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE V - OTHER INFORMATION (cont.) D. JOINT VENTURES Metropolitan Refuse District, Inc. The City of Middleton and the Villages of Shorewood Hills and Waunakee jointly operate the local sanitary landfill, which is called the MetropOlitan Refuse District, Inc. The landfill stopped accepting waste in 1997. The communities share in the operation of the District based on estimated population as follows: City of Middleton Village of Shorewood Hills Village of Waunakee 57% 6 37 The governing body is made up of citizens from each community. Local representatives are appointed by each city. The governing body has authority to adopt its own budget and control the financial affairs of the District. The city made payments totaling $61,560 to the District in 2010. The city has an equity interest (deficit) of $(511,842) 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. Separately issued financial statements of the District are not prepared. Multijurisdictional Public Safety Information System Commission (MJPISC) The City of Fitchburg, City of Sun Prairie, City of Middleton, and City of Verona 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 City of Verona joined the Commission in 2009. 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. Separately issued financial statements of the commission can be obtained from the City of Sun Prairie at 300 East Main Street, Sun Prairie, WI 53590. The city does not have an equity interest in this joint venture. Page 49 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2010 NOTE V - OTHER INFORMATION (cant.) D. JOINT VENTURES (cant.) Middleton Fire District The City of Middleton and the Towns of Springfield, Westport and Middleton jointly operate the local fire District, which is called the Middleton Fire District, which provides fire protection. The communities share in the operation of the District based on the ratio of equalized values of each member. The governing body is made up of elected officials from each community. Local representatives are appointed by the municipalities. The governing body has authority to adopt its own budget and control the financial affairs of the District. The city has made payments totaling $702,437 to the District in 2010 for operating expenses. The transactions of the District are not reflected in these financial statements. The city does not have an equity interest in this joint venture. Separately issued financial statements of the District are not prepared. E. EFFECT OF NEW ACCOUNTING STANDARDS ON CURRENT-PERIOD FINANCIAL STATEMENTS The Governmental Accounting Standards Board (GASB) has approved GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, Statement No. 61, The Financial Reporting Entity: Omnibus, and Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. Application of these standards may restate portions of these financial statements. F. SUBSEQUENT EVENTS On May 9, 2011, the city issued $2,500,000 General Obligation Promissory Notes dated May 9,2011 with interest between 2.0% and 3.0% to finance capital projects. The notes are due September 1, 2018. New water rates became effective March 31, 2011. Page 50 ---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, 2010 Budgeted Amounts Variance with Original Final Actual Final Budget REVENUES Taxes $ 12,476,168 $ 12,476,168 $ 12,525,895 $ 49,727 Intergovernmental 2,792,106 2,792,106 2,836,107 44,001 Licenses and permits 450,400 450,400 558,772 108,372 Fines, forfeitures and penalties 320,000 320,000 273,886 (46,114) Public charges for services 1,184,146 1,184,146 1,187,925 3,779 Interdepartmental charges for services 355,600 355,600 350,600 (5,000) Special assessments 57,000 57,000 86,193 29,193 Investment income 450,000 450,000 182,329 (267,671 ) Miscellaneous 90,700 90,700 140,642 49,942 Total Revenues 18,176,120 18,176,120 18,142,349 (33,771) EXPENDITURES Current General government 2,414,641 2,249,544 2,291,470 (41,926) Public safety 7,176,848 7,027,109 7,205,061 (177,952) Public works 2,925,968 2,987,708 3,068,521 (80,813) Health and human services 123,076 (123,076) Leisure activities 3,357,566 3,441,880 3,240,748 201,132 Conservation and development 375,752 437,871 405,377 32,494 Total Expenditures 16,250,775 16,144,112 16,334,253 (190,141) Excess of revenues over expenditures 1,925,345 2,032,008 1,808,096 (223,912) OTHER FINANCING SOURCES (USES) Sale of capital assets 15,000 15,000 3,518 (11,482) Transfers in 835,630 835,630 607,279 (228,351) Transfers out p,083,975) p,113,975) p,284,404) (170,429) Total Other Financing Sources (Uses) (2,233,345) (2,263,345) (2,673,607) (410,262) Net Change in Fund Balance (308,000) (231,337) (865,511) (634,174) FUND BALANCE - Beginning 4,047,801 4,047,801 4,140,186 92,385 FUND BALANCE - ENDING $ 3,739,801 $ 3,816,464 $ 3,274,675 $ (541,789) See independent auditors' report and accompanying notes to required supplementary information. Page 51 ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND DETAILED SCHEDULE OF REVENUES - BUDGET AND ACTUAL For the Year Ended December 31,2010 Budgeted Amounts Variance with Original Final Actual Final Budget TAXES General property tax $ 12,082,158 $ 12,082,158 $ 12,095,211 $ 13,053 Fees in lieu of taxes 44,110 44,110 44,100 (10) Room tax 344,900 344,900 375,409 30,509 Interest and penalties on taxes 5,000 5,000 11,175 6,175 TOTALS 12,476,168 12,476,168 12,525,895 49,727 INTERGOVERNMENTAL REVENUES Shared taxes from state 311,316 311,316 298,224 (13,092) State aid - road allotment 1,362,276 1,362,276 1,362,276 State aid - exempt computer aid 132,000 132,000 161,586 29,586 State aid - fire insurance dues 75,000 75,000 78,336 3,336 State aid - law enforcement 14,323 14,323 State aid - medical transportation aid 13,000 13,000 State aid - miscellaneous grants 30,000 30,000 1,250 (28,750) Federal and state aid - other 82,895 82,895 85,464 2,569 County aid - library 672,476 672,476 682,846 10,370 County aid - signals 3,000 3,000 3,478 478 County aid - senior citizens 44,693 44,693 45,153 460 School district payments for liaison officer 78,450 78,450 90,171 11,721 TOTALS 2,792,106 2,792,106 2,836,107 44,001 LICENSES AND PERMITS liquor and malt beverage licenses 35,000 35,000 36,627 1,627 Operators' licenses 9,000 9,000 13,600 4,600 Contractor's licenses 6,000 6,000 7,838 1,838 Alarm licenses 9,500 9,500 8,660 (840) Cigarette licenses 300 300 720 420 Bicycle licenses 100 100 134 34 Dog and cat licenses 1,200 1,200 9,794 8,594 Cable TV franchise license 130,000 130,000 197,483 67,483 Other miscellaneous licenses 1,800 1,800 2,120 320 Building permits 163,500 163,500 171,202 7,702 Electrical permits 30,000 30,000 37,902 7,902 Plumbing permits 30,000 30,000 37,880 7,880 Erosion control permits 20,000 20,000 15,440 (4,560) Park reservation permits 14,000 14,000 19,372 5,372 TOTALS 450,400 450,400 558,772 108,372 FINES, FORFEITURES AND PENAL TIES Court penalties 190,000 190,000 163,609 (26,391) Parking violations 50,000 50,000 40,395 (9,605) Court costs 80,000 80,000 69,882 (10,118) TOTALS 320,000 320,000 273,886 (46,114) See independent auditors' report and accompanying notes to required supplementary information. Page 52 ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND DETAILED SCHEDULE OF REVENUES - BUDGET AND ACTUAL (cont) For the Year Ended December 31, 2010 ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND DETAILED SCHEDULE OF EXPENDITURES - BUDGET AND ACTUAL For the Year Ended December 31,2010 Budgeted Amounts Variance with Original Final Actual Final Budget GENERAL GOVERNMENT Council $ 49,605 $ 64,005 $ 71,529 $ (7,524) Police commission 9,000 9,000 684 8,316 Landmarks commission 600 600 600 Middleton youth commission 18,035 18,035 17,191 844 Art committee 3,000 3,000 2,059 941 Municipal court 79,001 78,853 95,208 (16,355) General administration 575,212 578,141 666,945 (88,804) Information technology 478,167 500,520 506,178 (5,658) Board of review 375 375 375 Independent auditing 41,000 44,684 44,684 Legal counseling 205,000 205,000 211,574 (6,574) Special legal counsel 5,000 5,000 85 4,915 Buildings and grounds 140,424 136,226 119,744 16,482 Illegal taxes and tax refunds 5,000 46,135 46,130 5 Property and liability insurance 401,000 375,000 400,405 (25,405) Income continuation insurance 15,000 15,250 15,503 (253) Contingency 370,222 150,598 150,598 Group life insurance 14,000 14,000 14,606 (606) Vision care 26 (26) Bank fees 2,199 (2,199) Miscellaneous 1,510 (1,510) Unreconciled expenditure 74,489 (74,489) Additional expenditures - prior years 5,000 5,122 121 5,001 TOTALS 2,414,641 2,249,544 2,291,470 (41,926) PUBLIC SAFETY Police administration 544,143 543,813 503,856 39,957 Police patrol 3,463,731 3,442,903 3,472,240 (29,337) Code compliance 72,202 70,832 71,988 (1,156) Training 25,000 25,000 57,202 (32,202) Police uniform allowance and equipment 25,000 25,000 17,641 7,359 School patrol 13,069 26,069 13,418 12,651 Fire suppression 662,025 662,025 702,437 (40,412) Public fire protection 373,144 373,144 373,144 EMS 1,241,565 1,069,933 1,272,199 (202,266) Building inspector 106,850 109,056 110,497 (1,441) Electrical inspector 97,412 105,195 94,827 10,368 Plumbing inspection 61,077 76,230 61,730 14,500 Emergency preparedness 4,425 4,425 5,414 (989) Sealer of weights and measures 5,000 5,000 4,400 600 Erosion control enforcement 30,000 30,000 13,335 16,665 Communications 452,205 458,484 430,733 27,751 TOTALS 7,176,848 7,027,109 7,205,061 (177,952) See independent auditors' report and accompanying notes to required supplementary information. Page 54 ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND DETAILED SCHEDULE OF EXPENDITURES - BUDGET AND ACTUAL (cont.) For the Year Ended December 31,2010 Budgeted Amounts Variance with Original Final Actual Final Budget PUBLIC WORKS Machinery $ 304,072 $ 233,000 $ 331,726 $ (98,726) Garage 59,500 58,420 50,202 8,218 Public works salaries and fringes 592,710 750,000 130,935 619,065 Protective equipment 3,500 3,500 3,587 (87) Engineering 636,275 617,338 654,337 (36,999) Street maintenance 15,000 10,539 575,887 (565,348) Street cleaning 5,800 5,800 8,401 (2,601) Snow and ice control 74,000 74,000 64,684 9,316 Traffic signals 19,800 19,800 41,920 (22,120) Traffic signs and markings 32,000 32,000 37,564 (5,564) Street lighting 110,000 110,000 97,421 12,579 Tree and brush 2,000 2,000 672 1,328 Storm sewers 6,000 6,000 9,695 (3,695) Mass transit 311,661 311,661 311,661 Garbage collection 483,000 483,000 480,734 2,266 Sanitary landfill 61,650 61,650 61,650 Recycling 209,000 209,000 207,445 1,555 TOTALS 2,925,968 2,987,708 3,068,521 {80,813) HEALTH AND HUMAN SERVICES Aging 123,076 {123,076) LEISURE ACTIVITIES Library 1,673,822 1,668,031 1,639,461 28,570 Historical society 482 (482) Senior citizens center 400,238 402,347 271,897 130,450 Dining center 2,750 2,750 1,085 1,665 Cable television 8,834 (8,834) Recreation programs and events 59,145 59,145 74,123 (14,978) Recreation administration 110,631 111,067 105,870 5,197 Swimming pool 269,925 269,925 267,085 2,840 Summer recreation 78,445 78,445 71,788 6,657 Parks 762,610 850,170 800,123 50,047 TOTALS 3,357,566 3,441,880 3,240,748 201,132 CONSERVATION AND DEVELOPMENT Water resources 9,000 9,000 7,047 1,953 Conservancy land commission 101,882 101,882 66,507 35,375 Planning commission 264,870 273,489 276,376 (2,887) Other 13,189 (13,189) Forestry 53,500 42,258 11,242 TOTALS 375,752 437,871 405,377 32,494 OTHER FINANCING USES Transfers out - senior center fund 3,475 (3,475) Transfers out - capital projects 30,000 30,000 Transfers out - debt service fund 3,083,975 3,083,975 3,247,560 (163,585) Transfers out - retirement benefits fund 3,369 P,369) TOTALS 3,083,975 3,113,975 3,284,404 {170,429) TOTAL EXPENDITURES AND OTHER FINANCING SOURCES $ 19,334,750 $ 19,258,087 $ 19,618,657 $ (360,570) See independent auditors' report and accompanying notes to required supplementary information. Page 55 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO REQUIRED SUPPLEMENTARY INFORMATION December 31,2010 BUDGETARY INFORMA nON Budgetary information is derived from the annual operating budget and is presented using generally accepted accounting principles and the modified accrual basis of accounting. Excess expenditures and other financing uses over appropriations are as follows: Original Final Actual Budget Budget Expenditures Excess General Fund Current Expenditures Council $ 49,605 $ 64,005 $ 71,529 $ (7,524) Municipal court 79,001 78,853 95,208 (16,355) General administration 575,212 578,141 666,945 (88,804) Information technology 478,167 500,520 506,178 (5,658) Legal counseling 205,000 205,000 211,574 (6,574) Property and liability insurance 401,000 375,000 400,405 (25,405) Income continuation insurance 15,000 15,250 15,503 (253) Group life insurance 14,000 14,000 14,606 (606) Vision care 26 (26) Bank fees 2,199 (2,199) Miscellaneous 1,510 (1,510) Unreconciled expense 74,489 (74,489) Police patrol 3,463,731 3,442,903 3,472,240 (29,337) Code compliance 72,202 70,832 71,988 (1,156) Training 25,000 25,000 57,202 (32,202) Fire suppression 662,025 662,025 702,437 (40,412) EMS 1,241,565 1,069,933 1,272,199 (202,266) Building inspector 106,850 109,056 110,497 (1,441) Emergency preparedness 4,425 4,425 5,414 (989) Machinery 304,072 233,000 331,726 (98,726) Protective equipment 3,500 3,500 3,587 (87) Engineering 636,275 617,338 654,337 (36,999) Street maintenance 15,000 10,539 575,887 (565,348) Street cleaning 5,800 5,800 8,401 (2,601 ) Traffic signals 19,800 19,800 41,920 (22,120) Traffic signs and markings 32,000 32,000 37,564 (5,564) Storm sewers 6,000 6,000 9,695 (3,695) Aging 123,076 (123,076) Historical society 482 (482) Cable television 8,834 (8,834) Recreation programs and events 59,145 59,145 74,123 (14,978) Planning commission 264,870 273,489 276,376 (2,887) Other 13,189 (13,189) Transfers out - senior center fund 3,475 (3,475) Transfers out - debt service fund 3,083,975 3,083,975 3,247,560 (163,585) Transfers out - retirement benefits fund 3,369 (3,369) See Independent Auditors' Report. Page 56 ---PAGE BREAK--- SUPPLEMENTARY INFORMATION ---PAGE BREAK--- CITY OF MIDDLETON COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS December 31, 2010 Seecial Revenue Funds Economic Sub- Land and Lost and EMS Youth Develop- dividers' Park Community Drug Cable Damaged Library Equipment Library Retirement Big Safety Soccer Commission ment Deposits Donations Gardens Evidence TV EMS Book Gift Replacement Endowment Benefits Airport Event Impact Fee Stadium Donations Grant ASSETS Cash and investments $ 1,262,439 $ $ $ $ $ 46,430 $ 29,090 $ $ 183,155 $ 1,473,908 $ 382,116 $ 5,185 $ 91,386 $ 2,000 $ 7,861 $ 246,439 Taxes receivable Accounts receivable 67,667 Loans receivable 43,726 TOTAL ASSETS $ 1,330,106 $ $ $ 46,430 $ 29,090 $ $ - 183,155 1,473,908 $ 382,116 $ 5,185 $ 91,386 L2..2Q£ $ 7,861 $ 290,165 LIABILITIES AND FUND BALANCES Accounts payable $ 2,607 $ $ $ $ $ $ 4,796 $ $ $ $ 1,623 $ 5,142 $ $ $ $ $ 46 Deferred revenue 67,667 Advance from other funds Total Liabilities 70,274 ~ 1,623 5,142 46 Fund Balances Reserved for loans receivable 43,726 Unreserved Undesignated (deficit) 1,259,832 41,634 29,090 183,155 1,472,285 376,974 5,185 91,386 ~ 7,861 246,393 Total Fund Balances 1,259,832 ~ 29,090 183,155 1,472,285 376,974 5,185 91,386 ~QQ. 7,861 290,119 TOTAL LIABILITIES AND FUND BALANCES $ 1,330,106 $ $ ~ ~ $ 183,155 $ 1,473,908 $ 382,116 $ 5,185 $ 91,386 L.1:2.2£ 7,861 $ 290,165 Page 57 ---PAGE BREAK--- CITY OF MIDDLETON COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS (conL) December 31,2010 S~ecial Revenue Funds Ca~ital Projects Funds Total Police Special EMS Special Public Land Senior Center Public Works Nonmajor Shop With Drug Federal Senior Tourism National Community EMS & Fire Revenue and Revenue and Special Revenue Special Revenue TIF District Capital Governmental ~ Forfeitures Seizures Citizen Commission Night Out Awareness Impact Fee Activities Activities and Activities and Activities NO.5 Construction Funds ASSETS Cash and investments $ $ $ $ 264,939 $ $ $ $ 18,564 $ 159,514 $ 205 $ 111,771 $ $ 350 $ 4,285,352 Taxes receivable 76,699 76,699 Accounts receivable 205,259 272,926 Loans receivable 43,726 TOTAL ASSETS $ $ $ 470,198 $ $ $ 18,564 $ 159,514 $ 205 $ 111,771 $ 76,699 $ 350 $ 4,678,703 LIABILITIES AND FUND BALANCES Accounts payable $ $ $ $ $ 10,941 $ $ $ $ $ $ $ $ 13,661 $ $ 38,816 Deferred revenue 76,699 144,366 Advance from other funds 431,897 431,897 Total Liabilities 10,941 522,257 615,079 Fund Balances Reserved for loans receivable 43,726 Unreserved Un designated (deficit) 459,257 18,564 159,514 205 111,771 (445,558) 350 4,019,898 Total Fund Balances 459,257 18,564 159,514 205 111,771 (445,558) 350 4,063,624 TOTAL LIABILITIES AND FUND BALANCES $ $ 470,198 $ $ $ 18,564 $ 159,514 $ 205 $ 111,771 $ 76,699 $ 350 $ 4,678,703 Page 58 ---PAGE BREAK--- CITY OF MIDDLETON COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NON MAJOR GOVERNMENTAL FUNDS For the Year Ended December 31,2010 Special Revenue Funds Sub- Land and Lost and EMS YOUUl Economic dividers' Park Community Drug Cable Damaged Library Equipment Library Retirement Big Safety Soccer Commission Development Deposits Donations Gardens Evidence TV ~ Book ~ Replacement Endowment Benefits ~ ~ Impact Fee Stadium Donations Grant REVENUES Taxes $ $ $ Intergovernmental Licenses and permits 54,985 Public charges for services 249,054 42,919 109,031 Investment income 12,726 601 Miscellaneous ~ ~ ~ ~ Total Revenues 249,054 ~ ~ ~ 109,031 ~ ~ ~ ~ 601 EXPENDITURES Current General government 53,044 Public safety Leisure activities 72,582 49,916 2,880 20,612 Conservation and development 138,232 39,989 Capilal Oullay Tolal Expendilures 138,232 ~ ~ ~ 53,044 39,989 ~ Excess (deficiency) of revenues over expenditures 110,822 ~ (53,044) ~ ~ ~ ~ ~ 601 OTHER FINANCING SOURCES (USES) Transfers In 58,365 3,369 74,886 Transfers oul ~ ~ ~ (239,466) ~ ~ Total Olher Financing Sources (Uses) 58,365 ~ ~ ~ (239,466) ~ ~ 3,369 ~ Net change in fund balance 169,187 (3,301) (10,442) (9,356) (239,466) (66,236) (29,663) (28,626) (1,256) 9,846 (49,675) 69,042 80,072 54,985 2,000 4,873 601 FUND BALANCES (DEFICIT) - Beginning of Year 1,090,645 ~ ~ ~ 239,466 ~ 173,309 1,521,960 307,932 ~ 289,518 FUND BALANCES (DEFICIT) - END OF YEAR $ 1,259,832 $ 41,634 $ 29,090 $ 183,155 $ 1,472,285 $ 376,974 ~ $ 91,386 ~ ~ 290,119 Page 59 ---PAGE BREAK--- CITY OF MIDDLETON COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NON MAJOR GOVERNMENTAL FUNDS (can!.) For the Year Ended December 31,2010 Special Revenue Funds Caeital Proiects Funds Total Police Special EMS Special Public Land Senior Center Public Works Nonmajor Shop With Drug Federal Senior Tourism National Community EMS & F'lre Revenue and Revenue and Special Revenue Special Revenue TI F District Capital Governmental ~ Forfeitures Seizures ~ Commission Night Out Awareness Imeact Fee Activities Activities and Activities and Activities ~ Construction Funds REVENUES Taxes 876,791 $ $ 876,791 Intergovernmental 6,777 22,063 28,840 licenses and permits 54,985 Public charges for services 401,004 Investment income 37,494 46,744 97,565 Miscellaneous 560 4,384 26,727 18,419 ~ 104,401 Total Revenues 877,351 4,384 44,271 26,727 40,482 ~ ~ 1,563,586 EXPENDITURES Current General government 117,411 170,455 Public safety 5,727 5,727 Leisure activities 40,265 31,545 217,800 Conservation and development 628,779 807,000 Capital Outlay ~ 2,480 Total Expenditures 628,779 5,727 40,265 31,545 ~ 1,203,462 Excess (deficiency) of revenues over expenditures 248,572 11,343) 44,271 113,538) 8,937 360,124 OTHER FINANCING SOURCES (USES) Transfers In 199 8,464 28,570 115,243 13,743 102,834 405,673 Transfers out 174,886) ~ (8,663) (579930) Total Other Financing Sources (Uses) 174,886) 199 19,907 115,243 13,743 102,834 (174,257) Net change In fund balance (13,851) (3,207) (2,156) (99,359) 173,686 199 8,464 (47,751) 18,564 159,514 205 111,771 (73,147) 350 185,867 FUND BALANCES (DEFICIT) - Beginning of Year ~ ~ 285,571 ~ 3,877,757 FUND BALANCES (DEFICIT) - END OF YEAR 459,257 18,564 $ 159,514 $ 205 $ 111,771 $ (445,558) ~ $ 4,063,624 Page 60 ---PAGE BREAK--- CITY OF MIDDLETON COMBINING STATEMENT OF FIDUCIARY NET ASSETS AGENCY FUNDS December 31,2010 Fire Tax Roll District ASSETS Cash and investments $ 21,772,245 $ - Taxes receivable 12,816,257 Due from other governmental units 137,902 TOTAL ASSETS $ 34,588,502 $ 137,902 LIABILITIES Accounts payable $ - $ 80,235 Due to other governmental units 34,588,502 57,667 TOTAL LIABILITIES $ 34,588,502 $ 137,902 Totals $ 21,772,245 12,816,257 137,902 $ 34,726,404 $ 80,235 34,646,169 $ 34,726,404 Page 61 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF CASH FLOWS - COMPONENT UNIT For the Year Ended December 31, 2010 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from economic loan repayments Economic and housing loans Cash received from customers Cash paid to suppliers for goods and services Net Cash Flows From Operating Activities CASH FLOWS FROM INVESTING ACTIVITIES Interest received CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Paid to primary government Principal paid Interest paid Capital lease interest received Capital lease principal received Net Cash Flows From Noncapital Financing Activities Net Increase in Cash and Cash Equivalents CASH AND CASH EQUIVALENTS - Beginning of Year CASH AND CASH EQUIVALENTS - END OF YEAR RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES Operating income (loss) Non-cash items included in operating income: Depreciation Changes in Assets and Liabilities Loans receivable Accounts payable NET CASH FLOWS FROM OPERATING ACTIVITIES RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS - COMPONENT UNIT Cash and investments - statement of net assets - component unit Restricted cash and investments - statement of net assets - component unit CASH AND CASH EQUIVALENTS - END OF YEAR NONCASH INVESTING, CAPITAL AND RELATED FINANCING ACTIVITIES: None Component Unit - CDA $ 7,203 (30,000) 29,479 (31,753) (25,071) 12,068 (186,061) (11,160,000) (707,030) 707,030 11,160,000 (186,061) (199,064) 2,046,399 $ 1,847,335 $ (63,165) 56,868 (22,798) 4,024 $ (25,071 ) $ 257,718 1,589,617 $ 1,847,335 Page 62