Document Middleton_doc_c95ab743e4

CITY OF MIDDLETON Middleton, Wisconsin FINANCIAL STATEMENTS December 31, 2006 ---PAGE BREAK--- CITY OF MIDDLETON TABLE OF CONTENTS December 31, 2006 INDEPENDENT AUDITORS' REPORT BASIC FINANCIAL STATEMENTS Government-Wide Financial Statements Statement of Net Assets Statement of Activities Fund Financial Statements Balance Sheet - Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities Statement of Net Assets - Proprietary Funds Statement of Revenues, Expenses and Changes in Fund Net Assets - Proprietary Funds Statement of Cash Flows - Proprietary Funds Statement of Fiduciary Net Assets - Fiduciary Funds Notes to Financial Statements REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenues, Expenditures, and Changes in Fund Balances - Budget and 1 - 2 3 4 5 6 7 8-9 10 11 - 12 13 14 - 53 Actual - General Fund 54 Schedule of Revenues Compared to Budget - Budget and Actual - General Fund 55 - 56 Schedule of Expenditures Compared to Budget - Budget and Actual - General Fund 57 - 58 Notes to Required Supplementary Information 59 SUPPLEMENTARY INFORMATION Combining Balance Sheet - Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds Combining Statement of Fiduciary Net Assets - Agency Funds Statement of Cash Flows - Component Unit 60 - 61 62 - 63 64 65 ---PAGE BREAK--- To the City Council City of Middleton Middleton , Wisconsin ~ VirchOWKrause &company INDEPENDENT AUDITORS' REPORT We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of Middleton, Wisconsin, as of and for the year ended December 31 , 2006, 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, 2006, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America . The budgetary comparison information on pages 54 through 59 is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Page 1 Virchow, Krause & Company, LLP Certified Pu blic Acco u ntants & Consul tants' An Independent Member of Baker Till y Internationa l ---PAGE BREAK--- To the City Council City of Middleton Middleton, Wisconsin The City of Middleton, Wisconsin, has not presented the management's discussion and analysis that the Governmental Accounting Standards Board has determined is necessary to supplement, although not required to be part of, the basic financial statements. Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the City of Middleton's basic financial statements. The combining financial statements and statement of cash flows - component unit as listed in the table of contents are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining financial statements and statement of cash flows - component unit have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. Madison, Wisconsin August 13,2007 Page 2 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF NET ASSETS December 31, 2006 Prima~ Government Business- Governmental type Component Activities Activities Totals Unit ASSETS Cash and investments $ 12,863,443 $ 5,872,716 $ 18,736,159 $ 442,694 Receivables (net of allowance for uncollectibles) Taxes 18,543,008 18,543,008 Delinquent taxes 99,208 99,208 Accounts 853,837 702,046 1,555,883 Interest 131,943 181,307 313,250 Loans 1,846,281 1,846,281 481,904 Special assessments 2,537,164 2,227,859 4,765,023 Delinquent special assessments 708 708 Due from other governments 7,422 7,422 Due from primary government 203,132 Due from component unit 1,790,291 1,790,291 Internal balances-current 630,562 (630,562) Internal balances-advances 1,008,168 (1,008,168) Restricted Assets Temporarily Restricted Cash and investments 50,100 50,100 1,790,291 Leases receivable from primary government 15,685,000 Other assets 64,870 386,385 451,255 45,842 Capital Assets Land 7,063,959 2,382,607 9,446,566 Right of ways 17,704,605 17,704,605 Construction in progress 383,765 383,765 Land Improvements 5,938,873 7,291,981 13,230,854 Buildings 9,216,171 208,763 9,424,934 Machinery and equipment 3,732,881 431,574 4,164,455 Infrastructure 32,342,698 34,068,615 66,411,313 Less: Accumulated depreciation (10,600,654) (8,297,906) (18,898,560) Investment in joint ventures (deficit) {213,964) {213,964) Total Assets 105,561,474 44,251,082 149,812,556 18,648,863 LIABILITIES Accounts payable 2,946,818 239,646 3,186,464 1,476 Accrued liabilities 643,232 147,791 791,023 203,132 Due to other governments 15,906 15,906 Due to primary government 1,790,291 Due to component unit 203,132 203,132 Unearned revenue 18,417,312 18,417,312 Noncurrent Liabilities Due within one year 7,924,835 760,109 8,684,944 Due in more than one year 53,710,661 10,385,903 64,096,564 15,508,310 Total Liabilities 83,861,896 11,533,449 95,395,345 17,503,209 NET ASSETS Invested in capital assets, net of related debt 19,229,543 26,175,388 45,404,931 Restricted for equipment replacement 50,100 50,100 Restricted for subdivider's deposits 1,273,005 1,273,005 Restricted for park improvements 10,871 10,871 Restricted for police enforcement 15,896 15,896 Restricted for EMS 46,157 46,157 Restricted for library 217,926 217,926 Restricted for economic development 253,558 253,558 Restricted for senior citizens 64,993 64,993 Unrestricted 587,629 6,492,145 7,079,774 1,145,654 TOTAL NET ASSETS $ 21,699,578 $ 32,717,633 $ 54,417,211 $ 1,145,654 See accompanying notes to financial statements. Page 3 ---PAGE BREAK--- Functions/Programs Primary Government Governmental Activities General government Public safety Public works Leisure activities Conservation and economic development Interest and fiscal charges Total Governmental Activities Business-type Activities Water Sewer Pleasant View Golf Course Total Business-type Activities Total Primary Government Component Unit Community Development Authority CITY OF MIDDLETON STATEMENT OF ACTIVITIES For the Year Ended December 31, 2006 Program Revenues Operating Capital Charges for Grants and Grants and Expenses Services Contributions Contributions $ 1,480,082 $ 341,624 $ 59,370 $ - 6,269,072 752,485 92,240 4,183,934 432,254 1,161,476 3,455,199 4,490,809 380,051 647,968 25,000 569,890 55,464 68,733 2,581,761 19,575,548 1,961,878 2,029,787 3,480,199 1,238,974 1,895,565 74,531 1,392,488 1,667,285 31,196 1,560,491 1,551,184 4,191,953 5,114,034 105,727 $ 23,767,501 $ 7,075,912 $ 2,029,787 $ 3,585,926 $ 893,002 $ 22,388 $ - $ General Revenues Taxes Property taxes, levied for general purposes and debt service Property taxes, levied for tax increment districts Other taxes Cable television franchise fees Intergovernmental revenues not restricted to specific programs Public gifts and/or grants Investment income Gain on the sale of capital assets Miscellaneous Transfers Total General Revenues and Transfers Change in net assets NET ASSETS - Beginning (as restated) NET ASSETS - ENDING See accompanying notes to financial statements. Net (Expense) Revenue and Changes in Net Assets Prima~ Government Governmental Business-type Component Activities Activities Totals Unit $ (1,079,088) $ - $ (1,079,088) $ (5,424,347) (5,424,347) 864,995 864,995 (3,437,790) (3,437,790) (445,693) (445,693) (2,581,761) (2,581,761 ) (12,103,684) (12,103,684) 731,122 731,122 305,993 305,993 (9,307) (9,307) 1,027,808 1,027,808 (12,103,684) 1,027,808 (11,075,876) (870,614) 9,296,092 9,296,092 7,893,581 7,893,581 901,803 901,803 204,339 204,339 1,206,030 1,206,030 11,403 11,403 1,159,264 219,341 1,378,605 886,151 1,805,646 1,805,646 409,032 2,000 411,032 80,840 (80,840) 22,968,030 140,501 23,108,531 886,151 10,864,346 1,168,309 12,032,655 15,537 10,835,232 31,549,324 42,384,556 1,130,117 $ 21,699,578 $ 32,717,633 $ 54,417,211 $ 1,145,654 Page 4 ---PAGE BREAK--- CITY OF MIDDLETON BALANCE SHEET-GOVERNMENTAL FUNDS December 31,2006 TIF District Capital General Debt Service NO.3 Projects ASSETS Cash and investments $ 3,989,741 $ - $ 1,526,242 $ 4,031,561 Receivables (net) Taxes 9,876,946 8,666,062 Delinquent taxes 99,208 Accounts 234,228 274,763 140,862 Interest 110,664 13,097 Loans 1,772,029 Special assessments 15,220 2,521,944 Delinquent special assessments 708 Due from other funds 26,628 759,844 25,537 Due from other governments 7,422 Due from component unit 1,790,291 Advances to other funds 2,775,497 TOTAL ASSETS $ 17,136,262 $ - $ 17,324,272 $ 4,197,960 LIABILITIES AND FUND BALANCES Liabilities Accounts payable $ 487,089 $ - $ 2,050,905 $ 375,539 Due to other governments 15,906 Due to other funds 154,819 Deferred revenue 9,783,980 10,668,312 95,000 Deferred special assessments 15,928 2,521,944 Deferred interest income 856,861 Advances from other funds 1,767,328 Total Liabilities 11,314,583 17,008,489 470,539 Fund Balances Reserved for: Loans receivable 1,772,029 Delinquent personal property taxes 99,208 Advances 1,918,636 Debt service 1,613,905 Unreserved and designated, reported in: General fund 427,000 Unreserved and undesignated (deficit), reported in: General fund 3,376,835 Special revenue funds Capital projects funds (3,070,151) 3,727,421 Total Fund Balances 5,821,679 315,783 3,727,421 TOTAL LIABILITIES AND FUND BALANCES $ 17,136,262 $ - $ 17,324,272 $ 4,197,960 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental funds are not financial resources and, therefore, are not reported in the funds. Some receivables that are not currently available are reported as deferred revenue in the fund financial statements but are recognized as revenue when earned in the government-wide statements. Investment (deficit) in joint venture is not a financial resource and, therefore, is not reported in the funds. Some liabilities, including long-term debt, are not due and payable in the current period and, therefore, are not reported in the funds. See Note II.A. NET ASSETS OF GOVERNMENTAL ACTIVITIES See accompanying notes to financial statements. Non-major Total Governmental Governmental Funds Funds $ 3,315,899 $ 12,863,443 18,543,008 99,208 203,984 853,837 8,182 131,943 74,252 1,846,281 2,537,164 708 2,804 814,813 7,422 1,790,291 2,775,497 $ 3,605,121 $ 42,263,615 $ 34,422 $ 2,947,955 15,906 29,432 184,251 20,547,292 2,537,872 856,861 1,767,328 63,854 28,857,465 1,772,029 99,208 1,918,636 1,613,905 427,000 3,376,835 3,541,267 3,541,267 657,270 3,541,267 13,406,150 $ 3,605,121 65,398,533 5,524,713 (213,964) (62,415,854) $ 21,699,578 Page 5 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS For the Year Ended December 31,2006 Non-major Total TIF District Capital Governmental Governmental General Debt Service No.3 Projects Funds Funds REVENUES Taxes $ 9,601,378 $ - $ 7,893,581 $ - $ 596,517 $18,091,476 Intergovernmental 2,484,163 386,602 138,817 40,110 3,049,692 Licenses and permits 594,583 594,583 Fines, forfeitures and penalties 277,533 277,533 Public charges for services 945,663 356,572 1,302,235 Intergovernmental charges for services 311,546 311,546 Special assessments 76,682 614,404 691,086 Investment income 638,132 11,026 551,723 30,833 1,231,714 Miscellaneous 190,266 1,356,553 149,020 124,481 1,820,320 Total Revenues 15,119,946 11,026 10,802,863 287,837 1,148,513 27,370,185 EXPENDITURES Current General government 1,696,989 67,247 1,764,236 Public safety 5,408,482 14,955 5,423,437 Public works 2,386,681 2,386,681 Leisure activities 2,757,753 78,173 2,835,926 Conservation and economic development 309,979 443,968 753,947 Capital Outlay 4,433,369 3,660,012 8,093,381 Debt Service Principal retirement 6,366,490 790,000 7,156,490 Debt issuance costs 76,477 76,477 Interest and fiscal charges 1,767,137 908,773 2,675,910 Total Expenditures 12,559,884 8,133,627 6,132,142 3,736,489 604,343 31,166,485 Excess (deficiency) of revenues over (under) expenditures 2,560,062 (8,122,601 ) 4,670,721 (3,448,652) 544,170 (3,796,300) OTHER FINANCING SOURCES (USES) Debt issued 4,330,000 4,330,000 Premium on debt issued 98,841 98,841 Sale of capital assets 568,518 568,518 Transfers in 295,142 8,122,601 265,571 713,397 9,396,711 Transfers out (3,478,249) (5,656,834) (180,788) (9,315,871 ) Total Other Financing Sources (Uses) (2,614,589) 8,122,601 (5,656,834) 4,694,412 532,609 5,078,199 Net Change in Fund Balance (54,527) (986,113) 1,245,760 1,076,779 1,281,899 FUND BALANCES - Beginning 5,876,206 1,301,896 2,481,661 2,464,488 12,124,251 FUND BALANCES - ENDING $ 5,821,679 $ - $ 315,783 $ 3,727,421 $ 3,541,267 $13,406,150 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 31,2006 Net change in fund balances - total governmental funds Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of net assets the cost of these assets is capitalized and they are depreciated over their estimated useful lives with depreciation expense reported in the statement of activities. Capital outlay is reported as an expenditure in the fund financial statements but is capitalized in the government-wide financial statements Less: Some items are reported as capital outlay but are not capitalized Depreciation is reported in the government-wide statements Capital contributions reported in the government-wide statements (infrastructure) Net book value of assets retired Receivables not currently available are reported as deferred revenue in the fund financial statements but are recognized as revenue when earned in the government-wide financial statements. Debt and lease proceeds provide current financial resources to governmental funds, but issuing these obligations increases long-term liabilities in the statement of net assets. Repayment of principal is an expenditure in the governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. Debt issued Debt retired The proportionate share of the change in net assets related to joint ventures reported in the statement of activities neither provides nor uses current financial resources and is not reported in the fund statements. Some expenses in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds. Compensated absences Debt issuance costs Unfunded pension liability Accrued interest on debt CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES See accompanying notes to financial statements. $ 1,281,899 8,093,381 (3,133,751 ) (1,040,624) 3,192,040 (190,776) (399,010) (4,330,000) 7,156,490 165,518 48,331 (9,980) 17,874 12,954 $ 10,864,346 Page 7 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF NET ASSETS - PROPRIETARY FUNDS December 31, 2006 Business-t~~e Activities - Enter~rise Funds Pleasant View Golf Water Sewer Course Totals ASSETS Current Assets Cash and investments $ 3,496,256 $ 1,681,081 $ 695,379 $ 5,872,716 Accounts receivable, net 322,363 379,253 430 702,046 Interest receivable 117,650 63,657 181,307 Due from other funds 125,962 78,666 204,628 Total Current Assets 4,062,231 2,202,657 695,809 6,960,697 Noncurrent Assets Restricted Assets 50,100 50,100 Other property and investments Special assessments receivable 2,227,859 2,227,859 Property held for future use 301,087 301,087 Preliminary engineering 77,544 77,544 Unamortized debt expenses 7,754 7,754 Capital Assets Property and equipment 20,622,916 13,612,306 10,532,083 44,767,305 Less: accumulated depreciation {5,088,458) {2,841,489) {367,959) {8,297,906) Total Capital Assets (Net of Accumulated Depreciation) 15,534,458 10,770,817 10,164,124 36,469,399 Total Noncurrent Assets 15,913,089 13,056,530 10,164,124 39,133,743 Total Assets 19,975,320 15,259,187 10,859,933 46,094,440 Page 8 ---PAGE BREAK--- Business-t~Qe Activities - EnterQrise Funds Pleasant View Golf Water Sewer Course Totals LIABILITIES Current Liabilities Accounts payable $ 17,977 $ 210,500 $ 11,169 $ 239,646 Accrued interest 21,906 13,528 112,357 147,791 Accrued compensated absences 9,722 4,789 22,394 36,905 Due to other funds 614,427 220,763 835,190 Current portion of long term debt 195,000 155,000 390,000 740,000 Total Current Liabilities 859,032 604,580 535,920 1,999,532 Noncurrent Liabilities Accrued compensated absences 22,852 11,255 34,107 Advances from other funds 1,008,168 1,008,168 General obligation debt 1,145,000 715,000 8,475,000 10,335,000 Total Noncurrent Liabilities 1,167,852 726,255 9,483,168 11,377,275 Total Liabilities 2,026,884 1,330,835 10,019,088 13,376,807 NET ASSETS Invested in capital assets, net of related debt 14,194,458 9,908,571 2,072,359 26,175,388 Restricted for: Equipment replacement 50,100 50,100 Unrestricted (deficit) 3,753,978 3,969,681 (1,231,514) 6,492,145 TOTAL NET ASSETS $ 17,948,436 $ 13,928,352 $ 840,845 $ 32,717,633 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 31,2006 Business-t~~e Activities - Enter~rise Funds Pleasant View Golf Water Sewer Course Totals OPERATING REVENUES Charges for services $ 1,895,565 $ 1,667,285 $ 1,551,184 $ 5,114,034 Total Operating Revenues 1,895,565 1,667,285 1,551,184 5,114,034 OPERATING EXPENSES Operation and maintenance 774,752 1,133,900 1,131,108 3,039,760 Depreciation 388,623 211,322 69,989 669,934 Total Operating Expenses 1,163,375 1,345,222 1,201,097 3,709,694 Operating Income 732,190 322,063 350,087 1,404,340 NONOPERATING REVENUES (EXPENSES) Investment income 142,644 76,697 219,341 Interest expense (72,149) (45,356) (359,394) (476,899) Sale of fixed assets 2,000 2,000 Amortization of debt issuance costs (3,450) (1,910) (5,360) Total Nonoperating Revenues (Expenses) 67,045 29,431 (357,394) (260,918) Income (loss) before contributions and transfers 799,235 351,494 (7,307) 1,143,422 Capital contributions 74,531 31,196 105,727 Transfers in 200,000 200,000 Transfers out (280,840) (280,840) Change in Net Assets 592,926 382,690 192,693 1,168,309 TOTAL NET ASSETS - Beginning 17,355,510 13,545,662 648,152 31,549,324 TOTAL NET ASSETS - ENDING $ 17,948,436 $ 13,928,352 $ 840,845 $ 32,717,633 See accompanying notes to financial statements. Page 10 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF CASH FLOWS- PROPRIETARY FUNDS For the Year Ended December 31,2006 Business-t:il2e Activities - Enterl2rise Funds Pleasant View Golf Water Sewer Course Totals CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 1,651,227 $ 1,654,407 $ 1,551,948 $ 4,857,582 Cash received from city for services 373,144 373,144 Cash paid to suppliers for goods and services (497,969) (1,109,789) (522,907) (2,130,665) Cash paid to employees for services {275,559) {96,577) {606,528) {978,664) Net Cash Flows From Operating Activities 1,250,843 448,041 422,513 2,121,397 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Cash paid for tax equivalent (582,359) (582,359) Operating transfers from other funds 200,000 200,000 Net Cash Flows From Noncapital Financing Activities {582,359) 200,000 {382,359) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal paid (185,000) (145,000) (345,000) (675,000) Interest paid (75,364) (47,741) (366,501) (489,606) Proceeds from debt issued 1,200,000 1,200,000 Acquisition and construction of capital assets (163,807) (9,404) (426,765) (599,976) Special assessments received Net Cash Flows From Capital and Related Financing Activities {424, 171) {202,145) 61,734 {564,582) CASH FLOWS FROM INVESTING ACTIVITIES Investment income 111,354 44,637 155,991 Investments sold and matured 2,826,647 1,440,648 4,267,295 Marketable securities purchased {2,529,020) {1 ,661 ,629) {4,190,649) Net Cash Flows From Investing Activities 408,981 {176,344) 232,637 Net Increase in Cash and Cash Equivalents 653,294 69,552 684,247 1,407,093 CASH AND CASH EQUIVALENTS - Beginning of Year 313,942 11,132 325,074 CASH AND CASH EQUIVALENTS· END OF YEAR $ 967,236 $ 69,552 $ 695,379 $ 1,732,167 Page 11 ---PAGE BREAK--- Business-ty~e Activities - Enter~rise Funds Pleasant View Golf Water Sewer Course Totals RECONCILIATION OF OPERATING INCOME TO NET CASH FLOWS FROM OPERATING ACTIVITIES Operating income $ 732,190 $ 322,063 $ 350,087 $ 1,404,340 Adjustments to Reconcile Operating Income to Net Cash Provided From Operating Activities Depreciation expense 388,623 211,322 69,989 669,934 Depreciation charged to sewer utility 41,397 41,397 Changes in Noncash Components of Working Capital Accounts receivable (1,948) (14,529) 764 (15,713) Other accounts receivable (106) (106) Due from other funds 89,463 1,651 91,114 Accounts payable (4,200) 8,287 5,291 9,378 Accrued compensated absences 5,424 2,673 (3,618) 4,479 Due to other funds {83,426) {83,426) NET CASH FLOWS FROM OPERATING ACTIVITIES $ 1,250,843 $ 448,041 $ 422,513 $ 2,121,397 RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS - PROPRIETARY FUNDS Cash and investments - statement of net assets - proprietary funds $ 3,496,256 $ 1,681,081 $ 695,379 $ 5,872,716 Restricted cash and investments - statement of net assets - proprietary funds 50,100 50,100 Less: Non-cash equivalents {2,529,020) {1,661,629) {4,190,649) CASH AND CASH EQUIVALENTS· END OF YEAR $ 967,236 $ 69,552 $ 695,379 $ 1,732,167 NONCASH INVESTING, CAPITAL AND RELATED FINANCING ACTIVITIES Developer financed additions to utility plant $ 72,731 $ 31,196 $ See accompanying notes to financial statements. Page 12 ---PAGE BREAK--- ASSETS Cash and investments Taxes receivable Accounts receivable CITY OF MIDDLETON STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS December 31,2006 Due from other governmental units TOTAL ASSETS LIABILITIES Accounts payable Due to other governmental units TOTAL LIABILITIES See accompanying notes to financial statements. Agency Funds $ 16,345,155 9,770,159 2,385 95,181 $ 26,212,880 $ 152,057 26,060,823 $ 26,212,880 Page 13 ---PAGE BREAK--- CITY OF MIDDLETON INDEX TO NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2006 NOTE I. Summary of Significant Accounting Policies A. Reporting Entity B. Government-Wide and Fund Financial Statements C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation D. Assets, Liabilities, and Net Assets or Equity 1. Deposits and Investments 2. Receivables 3. Inventories and Prepaid Items 4. Restricted Assets 5. Capital Assets 6. Other Assets 7. Compensated Absences 8. Long-Term Obligations/Conduit Debt 9. Claims and Judgments 10. Equity Classifications 11. Basis for Existing Rates - Proprietary Funds II. Reconciliation of Government-Wide and Fund Financial Statements A. Explanation of Certain Differences Between the Governmental Fund Balance Sheet and the Statement of Net Assets III. Stewardship, Compliance, and Accountability A. Budgetary Information B. Excess Expenditures Over Appropriations C. Deficit Balances D. Limitations on the City's Tax Levy IV. Detailed Notes on All Funds A. Deposits and Investments B. Receivables C. Restricted Assets D. Capital Assets E. Interfund Receivables/Payables, Advances and Transfers F. Long-Term Obligations G. Lease Disclosures H. Governmental Activities Net Assets/Fund Balances I. Component Unit V. Other Information A. Employees' Retirement System B. Risk Management C. Commitments and Contingencies D. Joint Ventures E. Subsequent Event Page 15 15 16 18 20 20 21 23 23 23 24 25 25 26 26 26 27 27 27 27 28 28 28 29 29 32 34 34 38 41 44 45 47 50 50 50 51 52 53 Page 14 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2006 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the City of Middleton, Wisconsin conform to generally accepted accounting principles as applicable to governmental units. The accepted standard-setting body for establishing governmental accounting and financial reporting principles is the Governmental Accounting Standards Board (GASB). A. REPORTING ENTITY This report includes all of the funds of the City of Middleton. The reporting entity for the city consists of the primary government, organizations for which the primary government is financially accountable, and other organizations for which the nature and significance of their relationship with the primary government are such that their exclusion would cause the reporting entity's financial statements to be misleading or incomplete. A legally separate organization should be reported as a component unit if the elected officials of the primary government are financially accountable to the organization. The primary government is financially accountable if it appoints a voting majority of the organization's governing body and it is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to or burdens on the primary government. The primary government may be financially accountable if an organization is fiscally dependent on the primary government. A legally separate, tax exempt organization should be reported as a component unit of a reporting entity if all of the following criteria are met: the economic resources received or held by the separate organization are entirely or almost entirely for the direct benefit of the primary government, its component units, or its constituents; the primary government is entitled to, or has the ability to otherwise access, a majority of the economic resources received or held by the separate organization; the economic resources received or held by an individual organization that the specific primary government, or its component units, is entitled to, or has the ability to otherwise access, are significant to that primary government. Blended component units, although legally separate entities, are, in substance, part of the government's operations and are reported with similar funds of the primary government. The discretely presented component unit is reported in a separate column in the government-wide financial statements (see note below for description) to emphasize that it is legally separate from the primary government. Discretely Presented Component Unit Community Development Authority of the City of Middleton The government-wide financial statements include the Community Development Authority of the City of Middleton ("CDA") as a component unit. The CDA is a legally separate organization. The board of the CDA is appointed by the mayor. Wisconsin Statutes provide for circumstances whereby the city can impose its will on the CDA and also create a potential financial benefit to or burden on the city. As a component unit, the CDA's financial statements have been presented as a discrete column in the basic financial statements. Separately issued financial statements of the CDA are not prepared. Excluded from the reporting entity: The Middleton Area Development Corporation is a separate legal organization that is not reported in these financial statements. Page 15 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2006 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS Government-Wide Financial Statements The statement of net assets and statement of activities display information about the reporting government as a whole. They include all funds of the reporting entity except for fiduciary funds. The statements distinguish between governmental and business-type activities. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange revenues. Business-type activities are financed in whole or in part by fees charged to external parties for goods or services. Likewise, the primary government is reported separately from the legally separate component unit for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. The city does not allocate indirect expenses to functions in the statement of activities. Program revenues include 1) charges to customers or applicants who purchase, use or directly benefit from goods, services, or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not included among program revenues are reported as general revenues. Internally dedicated resources are reported as general revenues rather than as program revenues. Fund Financial Statements Financial statements of the reporting entity are organized into funds, each of which is considered to be a separate accounting entity. Each fund is accounted for by providing a separate set of self-balancing accounts, which constitute its assets, liabilities, net assets/fund equity, revenues, and expenditure/expenses. Separate financial statements are provided for governmental funds and proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Funds are organized as major funds or non-major funds within the governmental and proprietary statements. An emphasis is placed on major funds within the governmental and proprietary categories. A fund is considered major if it is the primary operating fund of the city or meets the following criteria: a. Total assets, liabilities, revenues, or expenditures/expenses of that individual governmental or enterprise fund are at least 10 percent of the corresponding total for all funds of that category or type, and b. The same element of the individual governmental fund or enterprise fund that met the 10 percent test is at least 5 percent of the corresponding total for all governmental and enterprise funds combined. c. In addition, any other governmental or enterprise fund that the city believes is particularly important to financial statement users may be reported as a major fund. Page 16 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2006 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (cont.) Fund Financial Statements (cont.) The city reports the following major governmental funds: Major Governmental Funds General Fund - accounts for the city's primary operating activities. It is used to account for all financial resources except those required to be accounted for in another fund. Debt Service Fund - accounts for resources accumulated and payments made for principal and interest on long-term debt other than TIF or enterprise fund debt. Tax Incremental Financing District (TIF) No.3 Capital Projects Fund - accounts for expenditures outlined in the TIF project plan and related revenues and proceeds from long-term borrowing. Capital Projects Fund - accounts for proceeds from long-term borrowing and other resources to be used for capital improvement projects originally initiated. The city reports the following major enterprise funds: Major Enterprise Funds Water Utility - accounts for operations of the water system Sewer Utility - accounts for operations of the sewer system Pleasant View Golf Course - accounts for operations of the Pleasant View Golf Course The city reports the following non-major governmental funds: Non-Major Governmental Funds Special Revenue Funds - used to account for the proceeds of specific revenue sources (other than major capital projects) that are legally restricted to expenditures for specified purposes. Subdividers' Deposits Land and Park Donations Drug Evidence Cable TV Youth Commission Donations EMS Lost and Damaged Book Library Gift EMS Equipment Replacement Library Endowment Community Awareness Retirement Benefits Airport Economic Development Grant Shop With a Cop Drug Forfeitures Federal Seizures Senior Citizen Tourism Commission National Night Out Page 17 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2006 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (cont.) Fund Financial Statements (cont.) In addition, the city reports the following fund types: Agency funds are used to account for assets held by the city in a trustee capacity or as an agent for individuals, private organizations, and/or other governmental units. Tax Roll Fire District MPSISC c. MEASUREMENT Focus, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION Government-Wide Financial Statements The government-wide statement of net assets and statement of activities are reported using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. Property taxes are recognized as revenues in the year for which they are levied. Taxes receivable for the following year are recorded as receivables and deferred revenue. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider are met. Special assessments are recorded as revenue when earned. Unbilled receivables are recorded as revenues when services are provided. The business-type activities follow all pronouncements of the Governmental Accounting Standards Board, and have elected not to follow Financial Accounting Standards Board pronouncements issued after November 30, 1989. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the city's water and sewer utility and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Page 18 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2006 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) c. MEASUREMENT Focus, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION (cont.) Fund Financial Statements Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recorded when they are both measurable and available. Available means collectible within the current period or soon enough thereafter to be used to pay liabilities of the current period. For this purpose, the city considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on long-term debt, claims, judgments, compensated absences, and pension expenditures, which are recorded as a fund liability when expected to be paid with expendable available financial resources. Property taxes are recorded in the year levied as receivables and deferred revenues. They are recognized as revenues in the succeeding year when services financed by the levy are being provided. Intergovernmental aids and grants are recognized as revenues in the period the city is entitled the resources and the amounts are available. Amounts owed to the city which are not available are recorded as receivables and deferred revenues. Amounts received prior to the entitlement period are also recorded as deferred revenues. Special assessments are recorded as revenues when they become measurable and available as current assets. Annual installments due in future years are reflected as receivables and deferred revenues. Delinquent special assessments being held for collection by the county are reported as receivables and deferred revenue in the general fund. Revenues susceptible to accrual include property taxes, miscellaneous taxes, public charges for services, special assessments and interest. Other general revenues such as fines and forfeitures, inspection fees, recreation fees, and miscellaneous revenues are recognized when received in cash or when measurable and available under the criteria described above. The city reports deferred revenues on its governmental funds balance sheet. Deferred revenues arise from taxes levied in the current year which are for subsequent year's operations. For governmental fund financial statements, deferred revenues arise when a potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period. Deferred revenues also arise when resources are received before the city has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the city has a legal claim to the resources, the liability for deferred revenue is removed from the balance sheet and revenue is recognized. Page 19 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2006 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) c. MEASUREMENT Focus, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION (cont.) Fund Financial Statements (cont.) Proprietary and fiduciary fund financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as described previously in this note. Agency funds follow the accrual basis of accounting and do not have a measurement basis. The enterprise funds follow all pronouncements of the Governmental Accounting Standards Board, and have elected not to follow Financial Accounting Standards Board pronouncements issued after November 30, 1989. The proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the water, sewer, and Pleasant View Golf Course are charges to customers for sales and services. Special assessments are recoded as receivables and contributions when levied. Operating expenses for proprietary funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY 1. Deposits and Investments For purposes of the statement of cash flows, the city considers all highly liquid investments with an initial maturity of three months or less when acquired to be cash equivalents. Investment of city funds is restricted by state statutes. Available investments are limited to: a. Time deposits in any credit union, bank, savings bank or trust company maturing in three years or less. b. Bonds or securities of any county, city, drainage district, technical college district, village, town, or school district of the state. Also, bonds issued by a local exposition district, a lotal professional baseball park district, a local professional football stadium district, a local cultural arts district, or by the University of Wisconsin Hospitals and Clinics Authority. c. Bonds or securities issued or guaranteed by the federal government. d. The local government investment pool. Page 20 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2006 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 1. Deposits and Investments (cont.) e. Any security maturing in seven years or less and having the highest or second highest rating category of a nationally recognized rating agency. f. Securities of an open-end management investment company or investment trust, subject to various conditions and investment options. g. Repurchase agreements with public depositories, with certain conditions. The city has adopted an investment policy that follows the state statute for allowable investments. The city is exposed to custodial credit risk and credit risk for deposits and investments, as well as interest rate risk for investments. The city's investment policy does not address these risks. Investments are stated at fair value, which is the amount at which an investment could be exchanged in a current transaction between willing parties. Fair values are based on quoted market prices. No investments are reported at amortized cost. Adjustments necessary to record investments at fair value are recorded in the operating statement as increases or decreases in investment income. Investment income on commingled investments of municipal accounting funds is allocated based on average balances. The difference between the bank balance and carrying value is due to outstanding checks and/or deposits in transit. The Wisconsin Local Government Investment Pool (LGIP) is part of the State Investment Fund (SIF), and is managed by the State of Wisconsin Investment Board. The SIF is not registered with the Securities and Exchange Commission, but operates under the statutory authority of Wisconsin Chapter 25. The SIF reports the fair value of its underlying assets annually. Participants in the LGIP have the right to withdraw their funds in total on one day's notice. At December 31, 2006, the fair value of the city's share of the LGIP's assets was substantially equal to the amount as reported in these statements. 2. Receivables Property taxes are levied in December on the assessed value as of the prior January 1. In addition to property taxes for the city, taxes are collected for and remitted to the state and county governments as well as the local school district and technical college district. Taxes for all state and local governmental units billed in the current year for the succeeding year are reflected as receivables and due to other taxing units on the accompanying agency fund statement of fiduciary net assets. Page 21 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2006 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LiABILITIES, AND NET ASSETS OR EQUITY (cont.) 2. Receivables (cont.) Property tax calendar - 2006 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 - 2006 delinquent real estate taxes Decem ber 2006 Decem ber 2006 January 31, 2007 January 31, 2007 July 31, 2007 January 31, 2007 October 2009 Accounts receivable have been shown net of an allowance for uncollectible accounts. Delinquent real estate taxes as of July 31 are paid in full by the county, which assumes the collection thereof. No provision for uncollectible accounts receivable has been made for the water and sewer utilities because they have the right by law to place delinquent bills on the tax roll, and other delinquent bills are generally not significant. During the course of operations, transactions occur between individual funds that may result in amounts owed between funds. Short-term interfund loans are reported as "due to and from other funds." Long-term interfund loans (noncurrent portion) are reported as "advances from and to other funds." Interfund receivables and payables between funds within governmental activities are eliminated in the statement of net assets. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide . financial statements as "internal balances". In the governmental fund financial statements, advances to other funds are offset equally by a fund balance reserve account which indicates that they do not constitute expendable available financial resources and, therefore, are not available for appropriation. The city has received federal grant funds for economic development loan programs to various businesses. The city records a loan receivable when the loan has been made and funds have been disbursed. It is the city's policy to record revenue when the initial loan is made from the federal grant funds. The net amount of the loan receivable balance is offset by a reserve for loans receivable. As loans are repaid, the reserve for loans receivable is reduced and the undesignated fund balance is increased. When new loans are made from loan repayments, the reserve for loans receivable is increased and the undesignated fund balance is decreased. Interest received from loan repayments is recognized as revenue when received in cash. Any unspent loan repayments at year end are presented as undesignated fund balance in the governmental fund balance sheet. Page 22 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2006 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 3. Inventories and Prepaid Items Governmental fund inventory items are charged to expenditure accounts when purchased. Year- end inventory was not significant. Proprietary fund inventories are generally used for construction or for operation and maintenance work. They are not for resale. They are valued at cost based on weighted average, and charged to construction and/or for operation and maintenance expense when used. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements. 4. Restricted Assets Mandatory segregations of assets are presented as restricted assets. Such segregations are required by bond agreements and other external parties. Current liabilities payable from these restricted assets are so classified. The excess of restricted assets over current liabilities payable from restricted assets will be used first for retirement of related long-term debt. The remainder, if generated from earnings, is shown as restricted net assets. 5. Capital Assets Government-Wide Statements Capital assets, which include property, plant and equipment, are reported in the government- wide financial statements. Capital assets are defined by the government as assets with an initial cost of more than $5,000 for general capital assets and $25,000 for infrastructure assets, and an estimated useful life in excess of one year. All capital assets are valued at historical cost, or estimated historical cost if actual amounts are unavailable. Donated fixed assets are recorded at their estimated fair value at the date of donation. Prior to January 2003, infrastructure assets of governmental funds were not capitalized. Upon implementing GASB No. 34, governmental units were required to account for all capital assets, including infrastructure, in the government-wide statements prospectively from the date of implementation. The city has retroactively reported all of the network infrastructure acquired by its governmental fund types. Page 23 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2006 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 5. Capital Assets (cont.) Government-Wide Statements (cont.) Additions to and replacements of capital assets of business-type activities are recorded at original cost, which includes material, labor, overhead, and an allowance for the cost of funds used during construction when significant. For tax-exempt debt, the amount of interest capitalized equals the interest expense incurred during construction netted against any interest revenue from temporary investment of borrowed fund proceeds. No net interest was capitalized during the current year. The cost of renewals and betterments relating to retirement units is added to plant accounts. The cost of property replaced, retired or otherwise disposed of, is deducted from plant accounts and, generally, together with removal costs less salvage, is charged to accumulated depreCiation. Depreciation of all exhaustible capital assets is recorded as an allocated expense in the statement of activities, with accumulated depreciation reflected in the statement of net assets. Depreciation is provided over the assets' estimated useful lives using the straight-line method of depreciation. The range of estimated useful lives by type of asset is as follows: Buildings Land Improvements Machinery and Equipment Infrastructure Water Plant Source of Supply Pumping Water Treatment Transmission and Distribution General Sewer Plant Collecting System Collecting System Pumping General Fund Financial Statements 40 Years 30 Years 3 - 15 Years 20 - 50 Years 33 Years 20 - 40 Years 33 - 40 Years 16 - 90 Years 4 - 15 Years 30 - 100 Years 20 - 40 Years 7 - 40 Years In the fund financial statements, capital assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Capital assets used in proprietary fund operations are accounted for the same way as in the government-wide statements. 6. Other Assets In governmental funds, debt issuance costs are recognized as expenditures in the current period. For the government-wide and the proprietary fund type financial statements, debt issuance costs are deferred and amortized over the term of the debt issue. Page 24 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2006 .NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LiABILITIES, AND NET ASSETS OR EQUITY (cont.) 7. Compensated Absences Under terms of employment, employees are granted sick leave and vacations in varying amounts. Only benefits considered to be vested are disclosed in these statements. All vested vacation and sick leave pay is accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, as a result of employee resignations and retirements, or are payable with expendable available resources. The city provides postemployment health insurance benefits for all eligible employees. Eligibility is based on retiring from the city or becoming disabled and being eligible to receive social security benefits or Wisconsin Retirement benefits. The benefits are based on contractual agreements with employee groups, local ordinances, and employee benefit policies. Employees may convert their accumulated sick leave to pay for health care premiums. The entire cost is paid by the city. Funding for those costs is provided by transferring funds from the ·general fund to a special revenue fund. Total expenditures for retirees' medical premiums during the year were $67,247. The number of participants currently eligible to receive benefits is 14. Payments for vacation and sick leave will be made at rates in effect when the benefits are used. Accumulated vacation and sick leave liabilities at December 31, 2006 are determined on the basis of current salary rates and include salary related payments. 8. Long-Term Obligations/Conduit Debt All long-term obligations to be repaid from governmental and business-type resources are reported as liabilities in the government-wide statements. The long-term obligations consist primarily of notes and bonds payable, and accrued compensated absences. Long-term obligations for governmental funds are not reported as liabilities in the fund financial statements. The face value of debts (plus any premiums) are reported as other financing sources and payments of principal and interest are reported as expenditures. The accounting in proprietary funds is the same as it is in the government-wide statements. For the government-wide statements and proprietary fund statements, bond premiums and discounts are deferred and amortized over the life of the issue. Gains or losses on prior refundings are amortized over the remaining life of the old debt, or the life of the new debt, whichever is shorter. The balance at year end for both premiums/discounts and gains/losses, as applicable, is shown as an increase or decrease in the liability section of the statement of net assets. The city may approve the issuance of industrial revenue bonds (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. Page 25 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2006 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LiABILITIES, AND NET ASSETS OR EQUITY (cont.) 9. Claims and Judgments Claims and judgments are recorded as liabilities if all the conditions of Governmental Accounting Standards Board pronouncements are met. Claims and judgments that would normally be liquidated with expendable available financial resources are recorded during the year as expenditures in the governmental funds. If they are not to be liquidated with expendable available financial resources, no liability is recognized in the governmental fund statements. The related expenditure is recognized when the liability is liquidated. Claims and judgments are recorded in the government-wide statements and proprietary funds as expenses when the related liabilities are incurred. There were no significant claims or judgments at year end. 10. Equity Classifications Government-Wide Statements Equity is classified as net assets and displayed in three components: a. Invested in capital assets, net of related debt - Consists of capital assets including restricted capital assets, net of accum ulated depreciation and reduced by the outstanding balances (excluding unspent bond proceeds) of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. b. Restricted net assets - Consists of net assets with constraints placed on their use either by 1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments or, 2) law through constitutional provisions or enabling legislation. c. Unrestricted net assets - All other net assets that do not meet the definition of "restricted" or "invested in capital assets, net of related debt." When both restricted and unrestricted resources are available for use, it is the city's policy to use restricted resources first, then unrestricted resources as they are needed. Fund Statements Governmental fund equity is classified as fund balance. Fund balance is further classified as reserved and unreserved. Unreserved fund balance includes funds set aside by management for specific uses, which are labeled "designated". The balance of unreserved fund balance is labeled "undesignated", which indicates it is available for appropriation. Proprietary fund equity is classified the same as in the government-wide statements. 11. Basis for Existing Rates - Proprietary Funds Current water rates were approved by the PSCW on February 9, 2005. Current sewer rates were approved by the public works committee on November 28, 2005 and became effective January 1, 2006. Sewer rates are adjusted annually for rate changes from Madison Metropolitan Sewerage District. Page 26 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2006 NOTE II - RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS A. EXPLANATION OF CERTAIN DIFFERENCES BETWEEN THE GOVERNMENTAL FUND BALANCE SHEET AND THE STATEMENT OF NET ASSETS The governmental fund balance sheet includes a reconciliation between fund balance - total governmental funds and net assets - governmental activities as reported in the government-wide statement of net assets. One element of that reconciliation explains that "some liabilities, including long-term debt are not due and payable in the current period and, therefore, are not reported in the funds. The details of this $62,415,854 difference are as follows: Bonds and notes payable Unfunded pension liability Compensated absences Capital leases payable Accrued interest Accrued interest - due to component unit Unamortized debt issuance costs Combined Adjustment for Long-Term Liabil ities NOTE III - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. BUDGETARY iNFORMA TlON $ 43,988,388 286,252 1,675,856 15,685,000 642,094 203,132 (64,868) $ 62,415,854 Budgetary information is derived from the annual operating budget and is presented using the same basis of accounting for each fund as described in Note I. C. A budget has been adopted for the general fund, debt service fund, certain special revenue funds, and capital projects funds. Wisconsin Statute 65.90 requires that an annual budget be adopted for all funds. The budgeted amounts presented include any amendments made. The city administrator may authorize transfers of budgeted amounts between departments up to $1,000. Transfers exceeding $1,000 between departments and changes to the overall budget must be approved by a two-thirds council action. Appropriations lapse at year end unless specifically carried over. Budgets are adopted at the departmental level of expenditure. Page 27 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2006 NOTE III - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY (cont.) B. EXCESS EXPENDITURES OVER ApPROPRIA TlONS The following individual funds experienced excess expenditures over appropriations. Excess Budgeted Expenditures Actual Expenditures Expenditures Over Budget Special Revenue Funds Subdivider's deposits Land and park donations Drug evidence Cable TV Youth commission donations Lost and damaged book Library gift Community awareness Retirement benefits Shop with a cop Federal seizures Senior citizen National night out $ $ 310,571 $ 9,934 4,159 61,614 1,071 18,679 1,089 5,131 67,247 2,904 10,796 5,554 1,255 310,571 9,934 4,159 61,614 1,071 18,679 1,089 5,131 67,247 2,904 10,796 5,554 1,255 The city controls expenditures at the departmental level. Some individual departments experienced expenditures which exceeded appropriations. The detail of those items can be found in the city's year-end budget to actual report. C. DEFICIT BALANCES Generally accepted accounting principles require disclosure of individual funds that have deficit balances at year end. As of December 31, 2006, the following individual fund held a deficit balance: Special Revenue Fund Federal seizures $ (2,804) Excess expenditures over revenues. This deficit is anticipated to be funded by miscellaneous revenues. D. LiMITATIONS ON THE CITY'S TAX LEVY As part of Wisconsin's Act 25 (2005), new legislation was passed that limits the city's future tax levies. Generally, the city is limited to its prior tax levy dollar amount (excluding TIF districts). Increased by the greater of the percentage change in the city's equalized value due to new construction, or Changes in debt service from one year to the next are generally exempt from this limit. The levy limit begins with the 2005 levy collected in 2006 and is set to expire after the 2006 levy. Page 28 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2006 NOTE IV - DETAILED NOTES ON ALL FUNDS A. DEPOSITS AND INVESTMENTS The city's cash and investments at year end were comprised of the following: Carrying Bank Associated Value Balance Risks Demand deposits $ 14,031,078 $ 13,763,441 Custodial credit Money market 1,024,614 1,024,614 Custodial credit U.S. agencies 1,079,730 1,081,148 Credit, custodial credit, interest rate Mutual funds 16,282,358 16,282,358 Credit, interest rate Other external investment pool - 180,261 180,261 Credit, interest rate Madison Community Foundation LGIP 2,532,898 2,532,898 Credit, interest rate Petty cash 481 N/A Total Cash and Investments $ 35,131,420 $ 34,864,720 Reconciliation to financial statements Per statement of net assets Unrestricted cash and investments $ 18,736.165 Restricted cash and investments 50,100 Per statement of net assets - Fiduciary Funds Agency 16,345,155 Total Cash and Investments $ 35,131,420 Deposits in each local and area bank are insured by the FDIC in the amount of $100,000 for interest bearing accounts and $100,000 for noninterest bearing accounts. Bank accounts are also insured by the State Deposit Guarantee Fund in the amount of $400,000. However, due to the relatively small size of the Guarantee Fund in relationship to the total deposits covered and other legal implications, recovery of material principal losses may not be significant to individual municipalities. This coverage has not been considered in computing the custodial credit risk. Investments in the local government investment pool are covered under a surety bond issued by Financial Security Assurance, Inc. The bond insures against losses arising from principal defaults on substantially all types of securities acquired by the pool except U.S. Government and agency securities. The bond provides unlimited coverage on principal losses, reduced by any FDIC and State of Wisconsin Guarantee Fund insurance. Page 29 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2006 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) A. DEPOSITS AND INVESTMENTS (cont.) The Madison Community Foundation ("Foundation") is a community endowment fund. The Foundation is not registered with Securities and Exchange Commission. It constitutes a contractual agreement between the city and Foundation with respect to investment of city assets. The Foundation reports the fair value of its underlying assets annually. At December 31, 2006, 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 31,2006, $14,238,089 of the city's total bank balances of $14,788,055 were exposed to custodial credit risk as follows: Uninsured and uncollateralized $ 14,238,089 Investments - For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the city will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. As of December 31, 2006 the city's investments were exposed to custodial credit risk as follows: U.S. Agencies Neither insured nor registered and held by counterparty $ 1,081,148 Page 30 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2006 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) A. DEPOSITS AND INVESTMENTS (cont.) Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. As of December 31, 2006, the city's investments were rated as follows: Standard Fitch Investment Type & Poor's Ratings U.S. agencies AAA N/A Mutual fund - Federated Securities AAA AAA The city also had investments in the following external pools which are not rated: Local Government Investment Pool Madison Community Foundation Interest Rate Risk Moody's Investor Service AAA AAA Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. As of December 31, 2006, the city's investments were as follows: Maturity (In Months) Investment Type Fair Value Less than 6 7-12 12-60 U.S. agencies $ 1,081,148 $ 282,830 The city also had $2,532,898 invested in the local government investment pool, which had a weighted average maturity of 32 days. In addition, the city had $180,261 in another external investment pool (Madison Community Foundation), which is made up primarily of equity securities that do not have a determinable maturity date. Page 31 ---PAGE BREAK--- NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) B. RECEIVABLES CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2006 Receivables as of year end for the government's individual major funds and nonmajor funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: Nonmajor TIF District Capital Pleasant View and Other General NO.3 Projects Water Sewer Golf Course Funds Totals Receivables: Taxes $ 9,876,946 $ 8,666,062 $ - $ - $ - $ - $ - $ 18,543,008 Delinquent taxes 99,208 99,208 Accounts 500,137 274,763 140,862 322,363 379,253 430 151,964 1,769,772 Loans 1,772,029 74,252 1,846,281 Special assessments 15,220 2,521,944 2,537,164 Delinquent special assessments 708 708 Interest 110,664 13,097 117,650 63,657 60,202 365,270 Due from other governments 7,422 7,422 Gross Receivables 10,610,305 13,247,895 140,862 440,013 442,910 430 286,418 25,168,833 Less: Allowance for uncollectibles (265,909) (265,909) Net Total Receivables $ 10,344,396 $ 13,247,895 $ 140,862 $ 440,013 $ 442,910 $ 430 $ 286,418 $ 24,902,924 Amounts Not Expected to be Collected Within One Year $ 7,685 $ 4,207,823 $ - $ - $ - $ - $ 64,545 4,280,053 Page 32 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2006 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) B. RECEIVABLES (cont.) Revenues of the city are reported net of uncollectible amounts. Total uncollectible amounts related to revenues of the current period are as follows: Uncollectibles related to ambulance billings $ 265,909 Total Uncollectibles of the Current Fiscal Year $ 265,909 Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Property taxes levied for the subsequent year are not earned and cannot be used to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue and unearned revenue reported in the governmental funds were as follows: Property taxes receivable for subsequent year Special assessments not yet due Loan receivable Unbilled receivables EMS receivable Grant revenue Interest income (TIF District No.3) Total Deferred/Unearned Revenue for Governmental Funds Unavailable Unearned $ $ 18,417,312 2,537,872 1,741,250 260,000 33,730 95,000 856,861 Totals $ 18,417,312 2,537,872 1,741,250 260,000 33,730 95,000 856,861 $ 5,524,713 $ 18,417,312 $ 23,942,025 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, 2006, the city has not exceeded its maximum retention cap. When it does, a liability to the state will be recorded. Page 33 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2006 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, 2006: 2006 Restricted assets replacement account $ 50,100 D. CAPITAL ASSETS Capital asset activity for the year ended December 31, 2006 was as follows: Governmental Activities Capital assets not being depreciated Land Right of way Construction in progress Total Capital Assets Not Being Depreciated Capital assets being depreciated Land improvements Buildings Machinery and equipment Streets - infrastructure Storm sewers - infrastructure Traffic signals - infrastructure Sidewalks - infrastructure Bridges - infrastructure Rail spur - infrastructure Total Capital Assets Being Depreciated $ Beginning Balance 6,412,939 $ 17,704,605 3,233,719 27,351,263 5,238,880 9,216,171 3,844,406 10,713,545 6,159,515 763,096 2,521,842 2,058,188 432,375 40,948,018 Additions Deletions 651,020 $ 4,000,503 7,234,302 4,651,683 7,234,302 838,693 138,700 201,459 312,984 6,497,077 1,756,974 131,489 282,549 976,260 49,788 10,734,289 451,684 $ Ending Balance 7,063,959 17,704,605 24,768,564 5,938,873 9,216,171 3,732,881 17,210,622 7,916,489 894,585 2,804,391 3,034,448 482,163 51,230,623 Page 34 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2006 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) D. CAPITAL ASSETS (cont.) Governmental Activities (cont.) Less: Accumulated depreciation for Land improvements Buildings Machinery and equipment Streets - infrastructure Storm sewers - infrastructure Traffic signals - infrastructure Sidewalks - infrastructure Bridges - infrastructure Rail spur - infrastructure Total Accumulated Depreciation $ Beginning Balance (961,001 ) (2,406,726) (2,097,445) (1,841,098) (1,159,519) (300,801 ) (916,281 ) (125,096) (12,971) (9,820,938) Additions $ (128,140) (172,449) (299,825) (197,200) (108,803) (32,159) (53,262) (34,321 ) (14,465) (1,040,624) Deletions $ 35,246 $ 225,662 260,908 Ending Balance (1,053,895) (2,579,175) (2,171,608) (2,038,298) (1,268,322) (332,960) (969,543) (159,417) (27,436) (10,600,654) Total Capital Assets, Net of Depreciation $ 58,478,343 $ 14,345,268 $ 7,425,078 $ 65,398,533 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 $ 28,447 107,528 593,938 310,711 $ 1,040,624 Page 35 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2006 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) D. CAPITAL ASSETS (cont.) Water Utility Beginning Balance Additions Deletions Ending Balance Capital assets not being depreciated Land and land rights $ 99,777 - - Capital assets being depreciated Source of supply Pumping Treatment Transmission and distribution Administrative and general assets Total Capital Assets Being Depreciated Total Capital Assets Less: Accumulated depreciation for Source of supply Pumping Treatment Transmission and distribution Administrative and general assets Total Accumulated Depreciation Net Water Plant $ 319,783 1,677,663 343,242 16,955,572 494,450 19,790,710 19,890,487 (229,088) (826,001 ) (327,194) (2,968,701 ) (434,773) (4,785,757) 15,104,730 $ 785,352 57,474 842,826 842,826 (10,553) (58,978) (1,922) (318,602) (52,965) (443,020) 399,806 $ 82,356 28,041 110,397 110,397 112,278 28,041 140,319 (29,922) $ 319,783 1,677,663 343,242 17,658,568 523,883 20,523,139 20,622,916 (239,641 ) (884,979) (329,116) (3,175,025) (459,697) (5,088,458) 15,534,458 Page 36 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2006 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 11,777,473 173,627 2,690 11,948,410 Collection system pumping 1,215,786 1,215,786 Administrative and general assets 369,376 11,904 381,280 Total Capital Assets Being Depreciated 13,362,635 185,531 2,690 13,545,476 Total Capital Assets 13,429,465 185,531 2,690 13,612,306 Less: Accumulated depreciation (2,633,343) (213,822) 5,676 (2,841,489) Net Sewer Plant $ 10,796,122 $ (28,291) $ 2,986 $ 10,770,817 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 Construction in progress 383,765 383,765 Total Capital Assets Not Being Depreciated 2,216,000 383,765 2,599,765 Capital assets being depreciated Land improvements 7,291,981 7,291,981 Buildings 208,763 208,763 Equipment 390,074 46,500 5,000 431,574 Total Capital Assets Being Depreciated 7,890,818 46,500 5,000 7,932,318 Total Capital Assets 10,106,818 430,265 5,000 10,532,083 Less: Accumulated depreciation for Buildings (55,676) (5,219) (60,895) Land improvements (76,499) (19,125) (95,624) Equipment (169,295) (45,645) 3,500 (211,440) Total Accumulated Depreciation (301,470) (69,989) 3,500 (367,959) Net Golf Course Plant $ 9,805,348 $ 360,276 $ (1,500) $ 10,164,124 Total Net Capital Assets - Business Type Activities $ 35,706,200 $ 36,469,399 Page 37 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2006 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 $ $ 388,623 211,322 69,989 669,934 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 General Water utility Water utility Sewer utility Capital projects TIF District NO.3 TIF District NO.3 Drug forfeitures Total - Fund Financial Statements Less: Eliminations Payable Fund Tourism commission General Sewer utility General General Water utility Sewer utility Federal seizures Total Government-Wide Financial Statements $ Amount Amount Not Due Within One Year 26,628 $ 50,616 75,346 78,666 25,537 614,427 145,417 ~2~,8~0_4 _ 1,019,441 (388,879) _ $ 630,562 The balances resulted from the time lag between the dates that interfund goods and services are provided or reimbursable expenditures occur, transactions are recorded in the accounting system, and payments between funds are made. All amounts are due within one year. For the statement of net assets, interfund balances which are owed within the governmental activities or business-type activities are netted and eliminated. Page 38 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2006 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) E. INTERFUND RECEIVABLES/PAYABLES, ADVANCES AND TRANSFERS (cont.) The general fund advanced funds to TIF District No.3 and is charging interest on the advance at a rate which is 2% over the city's cost of funds. No repayment schedule has been established. Interest on the interfund advance is recorded as a deferred revenue in the general fund until paid by the TIF District. Interest costs on the advance are recorded as an expenditure of the TIF District when the expenditure is incurred. Deferred interest income in the general fund at December 31, 2006 is $856,861. The general fund has also advanced funds to the Pleasant View Golf Course. No repayment schedules have been established on the advances to Pleasant View Golf Course. Interest will be charged on the advances. The following is a schedule of interfund advances: Receivable Fund General fund General fund Payable Fund Pleasant View Golf Course TIF District No.3 Total - Fund Financial Statements Less: Eliminations Total - Government-Wide Financial Statements Amount $ 1,008,168 1,767,328 Amount Not Due Within One Year $ 1,008,168 1,767,328 2,775,496 $ 2,775,496 (1,767,328) $ 1,008,168 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 $ 1,790,291 This amount represents the unspent debt proceeds by the CDA that is intended to be spent on capital projects within TIF District No.3 or used for debt payments. Page 39 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2006 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 Water utility $ 280,840 EMS General 40,000 Retirement benefits General 664,107 General Tourism commission 14,302 Drug forfeitures Drug evidence 4,159 Shop with a cop Community awareness 5,131 Debt service fund TIF District NO.3 5,656,834 Debt service fund General 2,424,142 Debt service fund Tourism commission 41,625 Capital projects Subdivider's deposits 115,571 Capital projects General 150,000 Pleasant View Golf Course General 200,000 Subtotal - Fund Financial Statements 9,596,711 Less: Fund eliminations (9,515,871 ) Total Government-Wide Statement of Activities $ 80,840 Government Activity Business-type Activity $ 280,840 Business-type Activity Government Activity (200,000) Total $ 80,840 Principal Purpose Payment in lieu of tax Ambulance purchase Future retirement benefits Expenditure reimbursement Expenditure reimbursement Expenditure reimbursement Debt service Debt service Debt service Capital projects Capital projects Cover operating costs Generally, transfers are used to move revenues from the fund that collects them to the fund that the budget requires to expend them, move receipts restricted to debt service from the funds collecting the receipts to the debt service fund, and use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. Page 40 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2006 NOTE IV - DETAILED NOTES ON ALL FUNDS (cant.) F. LONG-TERM OSLIGA TlONS Long-term obligations activity for the year ended December 31, 2006 was as follows: Beginning Ending Balance Increases Decreases Balance GOVERNMENTAL ACTIVITIES Bonds and Notes Payable: General obligation debt $ 46,024,878 $ 4,330,000 $ 6,366,490 $ 43,988,388 Other Liabilities: Unfunded pension liability 304,126 20,712 38,586 286,252 Vested compensated absences 1,724,187 637,951 686,282 1,675,856 Capital leases 16,475,000 790,000 15,685,000 Total Other Liabilities 18,503,313 658,663 1,514,868 17,647,108 Total Governmental Activities Long-Term Liabilities $ 64,528,191 $ 4,988,663 $ 7,881,358 $ 61,635,496 Beginning Ending Balance Increases Decreases Balance BUSINESS-TYPE ACTIVITIES Bonds and Notes Payable: General obligation debt $ 10,550,000 $ 1,200,000 $ 675,000 $ 11,075,000 Other Liabilities: Vested compensated absences 57,624 31,383 17,995 71,012 Total Business-type Activities Long-Term Liabilities $ 10,607,624 $ 1,231,383 $ 692,995 $ 11,146,012 General Obligation Debt Amounts Due Within One Year $ 6,443,814 36,000 630,021 815,000 1,481,021 $ 7,924,835 Amounts Due Within One Year $ 740,000 20,109 $ 760,109 All general obligation notes and bonds payable are backed by the full faith and credit of the city. Notes and bonds in the governmental funds will be retired by future property tax levies or tax increments. Business-type activities debt is payable by revenues from user fees of those funds or, if the revenues are not sufficient, by future tax levies. In accordance with Wisconsin Statutes, total general obligation indebtedness of the city may not exceed five percent of the equalized value of taxable property within the city's jurisdiction. The debt limit as of December 31, 2006, was $124,734,860. Total general obligation debt outstanding at year end was $55,063,388. Page 41 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2006 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) F. LONG-TERM OBLIGA TlONS (cont.) General Obligation Debt (cont.) Date of Governmental Activities Issue General Obligation Debt 1998 General obligation promissory notes 4-01-98 1999 General obi igation promissory notes 5-15-99 2000 General obligation promissory notes 4-01-00 2001 General obligation prom issory notes 3-15-01 2002 General obligation promissory notes 3-15-02 2002 State trust fund loan 11-06-02 2003 General obligation promissory notes 5-01-03 2003 State trust fund loan 1-30-03 2004 General obligation refunding bond 6-15-04 2004 General obligation promissory notes 6-15-04 2005 General obligation promissory notes 6-01-05 2006 General obligation promissory notes 6-01-06 2006 General obligation promissory notes 12-27-06 Total Governmental Activities - General Obligation Debt Final Maturit~ 9-01-08 3-01-09 3-01-10 3-11-11 3-01-12 3-15-19 9-01-13 3-15-19 3-01-12 3-01-14 12-01-11 12-01-13 12-01-14 Interest Rates 3.90%- 4.60% 3.50% - 4.40% 4.80% - 5.20% 4.00% - 4.40% 2.125% - 4.50% 5.00% 2.00% - 3.40% 5.00% 2.00% - 4.00% 2.50% - 4.25% 3.25% - 3.50% 4.00% - 4.25% 3.75% - 4.00% Original Indebted- Balance ness 12-31-06 $ 9,675,000 $ 1,800,000 6,800,000 2,650,000 6,800,000 5,800,000 8,000,000 5,975,000 6,250,000 5,150,000 2,170,000 1,912,628 9,980,000 8,355,000 930,000 810,760 4,540,000 2,450,000 1,910,000 1,555,000 3,300,000 3,200,000 2,000,000 2,000,000 2,330,000 2,330,000 $ 43,988,388 Page 42 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2006 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) F. LONG- TERM OSLIGA TlONS (cont.) General Obligation Debt (cont.) Business-type Activities General Obligation Debt 1999 General obligation promissory notes 2001 General obligation promissory notes 2002 General obligation promissory notes 2004 General obligation refunding 2006 General obligation Promissory notes Date of Issue 5-15-99 3-15-01 3-15-02 6-15-04 12-27-06 Total Business-type Activities - General Obligation Debt Final Maturity 3-01-09 3-11-11 3-01-12 3-01-12 12-01-14 Debt service requirements to maturity are as follows: Interest Rates 3.50% - 4.40% 4.00% - 4.80% 2.125% - 4.50% 2.00% - 4.00% 3.75% - 4.00% Original Indebted- ness 500,000 2,000,000 6,005,000 2,040,000 1,200,000 Governmental Activities Business-type Activities General Obligation Debt General Obligation Debt Principal Interest Principal Interest 2007 $ 6,443,814 $ 1,687,551 $ 740,000 $ 490,781 2008 6,616,152 1,411,993 795,000 457,358 2009 6,914,562 1,139,320 860,000 416,158 2010 6,793,040 863,270 870,000 373,449 2011 5,776,942 609,397 2,625,000 295,714 2012 - 2016 10,654,169 797,331 5,185,000 697,381 2017 - 2019 789,709 80,251 Totals $ 43,988,388 $ 6,589,113 $ 11,075,000 $ 2,730,841 $ Balance 12-31-06 170,000 1,700,000 5,965,000 2,040,000 1,200,000 $ 11,075,000 Totals $ 9,362,146 9,280,503 9,330,040 8,899,759 9,307,053 17,333,881 869,960 $ 64,383,342 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.1. for the repayment schedule. Page 43 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2006 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) F. LONG-TERM OBLIGA T/ONS (cont.) General Obligation Debt (cont.) Capital Leases Refer to Note IV.G. Other Debt Information The compensated absences liability attributable to governmental activities will be liquidated primarily by the general fund. There are a number of limitations and restrictions contained in the various bond indentures and loan agreements. The city believes it is in compliance with all significant limitations and restrictions, including federal arbitrage regulations. G. LEASE DISCLOSURES Lessee - Capital Leases The Tax Increment District NO.3 (TIF District No.3) is leasing land and other capital assets from the Community Development Authority (CDA). The CDA borrowed $16,475,000 in revenue bonds for these costs in 2002. The annual lease payments to be paid are the same as the CDA's annual debt service payments on the bonds. See Note IV.I.C. for the repayment schedule. Tax increment revenues generated by TIF District NO.3 are expected to be paid over to the CDA to make the debt payments. Lessee - Operating Leases The city has no material outstanding operating leases. Lessor - Capital Leases The city has no material outstanding sales-type or direct financing leases. Lessor - Operating Leases The city does not receive material lease payments from property rented to others. Page 44 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2006 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, 2006 include the following: Governmental Activities Invested in capital assets, net of related debt Land Right of ways Other capital assets, net of accumulated depreciation Less: related long-term debt outstanding (excluding unspent capital related debt proceeds) Total Invested in Capital Assets, Net of Related Debt Restricted Subdivider's deposits Park improvements Police enforcement EMS Library Economic development Senior citizens Total Restricted Unrestricted Total Governmental Activities Net Assets $ 7,063,959 17,704,605 40,629,969 (46,168,990) 19,229,543 1,273,005 10,871 15,896 46,157 217,926 253,558 64,993 1,882,406 587,629 $ 21,699,178 Governmental fund balances reported on the fund financial statements at December 31, 2006 include the following: Reserved Major Funds General Fund Delinquent personal property taxes Advances Total TIF District No.3 Capital Projects Fund Reserved for loans receivable Reserved for debt service Total $ 99,208 1,918,636 $ 2,017,844 $ 1,772,029 1,613,905 $ 3,385,934 Page 45 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2006 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) H. GOVERNMENTAL ACTIVITIES NET ASSETS/FuND BALANCES (cont.) Governmental Activities (cont.) Unreserved - Designated General Fund 2007 budget Unreserved - Undesignated (Deficit) Major Funds General fund TIF District No.3 capital projects fund (deficit) Capital projects fund Non-Major Funds (Deficit) Special Revenue Funds Subdividers' deposits Land and park donations Drug evidence Cable TV Youth commission donations EMS Lost and damaged book Library gift EMS equipment replacement Library endowment Retirement benefits Airport Economic development grant Shop with a cop Drug forfeitures Federal seizures Senior citizen Tourism commission National night out Total $ 427,000 $ 3,376,835 $(3,070,151 ) $ 3,727,421 $ 1,273,005 10,871 830 168,046 2,917 46,157 15,856 37,665 284,280 180,261 912,810 142,016 253,558 12,190 15,066 (2,804) 64,993 121,941 1,609 $ 3,541,267 Page 46 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2006 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) H. GOVERNMENTAL ACTIVITIES NET ASSETS/FuND BALANCES (cont.) Business-type Activities Invested in Capital Assets, Net of Related Debt The following calculations support the net assets invested in capital assets, net of related debt. Pleasant View Golf Water Sewer Course Totals Capital assets $ 20,622,916 $ 13,612,306 $ 10,532,083 $ 44,767,305 Accumulated depreciation (5,088,458 ) (2,841,489) (367,959) (8,297,906) Sub-totals 15,534,458 10,770,817 10,164,124 36,469,399 Less: Current portion of capital related long-term debt (195,000) (155,000) (390,000) (740,000) Long-term portion of capital related long-term debt (1,145,000) (715,000) (8,4 75,000) (10,335,000) Unamortized debt issuance costs 7,754 7,754 Plus: Unspent debt proceeds 773,235 773,235 Sub-totals (1,340,000) (862,246) (8,091,765) (10,294,011 ) Total Net Assets Invested in Capital Assets, Net of Related Debt $ 14,194,458 $ 9,908,571 $ 2,072,359 $ 26,175,388 Restricted Equipment replacement $ $ 50,100 $ - $ 50,100 Unrestricted (Deficit) $ 3,753,978 $ 3,969,681 $ (1,231,514) $ 6,492,145 I. COMPONENT UNIT This report contains the Community Development Authority (CDA), which is included as a component unit. Financial information is presented as a discrete column in the statement of net assets and statement of activities. In addition to the basic financial statements and the preceding notes to financial statements which apply, the following additional disclosures are considered necessary for a fair presentation. a. Basis of Accounting/Measurement Focus The CDA follows the full accrual basis of accounting and the flow of economic resources measurement focus. Page 47 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2006 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) I. COMPONENT UNIT (cont.) b. Restricted Cash and Investments The bond ordinances relating to the CDA bonds requires the establishment of certain accounts. These are as follows: Construction fund Debt reserve fund Total Additional information on the above deposits and investments follows: $ 176,273 1,614,018 $ 1,790,291 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, 2006, the CDA's investments were exposed to custodial credit risk as follows: U.S. Treasuries Neither insured nor registered and held by counterparty $ 1,690,291 Interest Rate Risk Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. As of December 31, 2006, the CDA's investments were as follows: Maturity (In Months) Investment Type Fair Value Less than 6 7 -12 12-60 U.S. Treasuries $ 1,790,291 $ 1,790,291 $ Page 48 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2006 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) I. COMPONENT UNIT (cont.) c. CDA Lease Revenue Bonds 2002 redevelopment lease revenue bonds dated August 15, 2002 with interest at 2.60%-4.75%. Principal payments vary. Bonds mature Balance 1-1-06 Increases Decreases Balance 12-31-06 October 1, 2020. $ 7,375,000 $ - $ 380,000 $ 6,995,000 2002 redevelopment lease revenue bonds dated August 15, 2002 with interest at 4.3%-6.65%. Principal payments vary. Bonds mature October 1, 2020. Less: Unamortized debt discounts 9,100,000 (189,540) 410,000 8,690,000 (12,850) (176,690) Totals $ 16,285,460 $ 777,150 $ 15,508,310 Debt service requirements to maturity are as follows: Principal Interest Totals 2007 $ 815,000 $ 812,532 $ 1,627,532 2008 850,000 781,670 1,631,670 2009 885,000 746,258 1,631,258 2010 920,000 707,030 1,627,030 2011 965,000 664,385 1,629,385 2012 - 2016 5,595,000 2,547,042 8,142,042 2017 - 2020 5,655,000 838,835 6,493,835 Totals $ 15,685,000 $ 7,097,752 $ 22,782,752 There are a number of limitations and restrictions contained in the various bond indentures and agreements. The CDA believes it is in compliance with all significant limitations and restrictions. d. Restatement of Net Assets Net Assets - December 31, 2005 (as reported) Add: To recognize the discounted land sale revenue for land sold in prior years Net Assets - January 1, 2006 (as restated) $ 921,068 209,049 $ 1,130,117 Page 49 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2006 NOTE V - OTHER INFORMATION A. EMPLOYEES' RETIREMENT SYSTEM All eligible city employees participate in the Wisconsin Retirement System (System), a cost- sharing multiple-employer defined benefit public employee retirement system (PERS). All permanent employees expected to work over 600 hours a year are eligible to participate in the System. Covered employees in the General category are required by statute to contribute 5.8% of their salary (2.8% for Executives and Elected Officials, 4.9% for Protective Occupations with Social Security, and 3.3% for Protective Occupations without Social Security) to the plan. Employers generally make these contributions to the plan on behalf of employees. Employers are required to contribute an actuarially determined amount necessary to fund the remaining projected cost of future benefits. The payroll for city employees covered by the system for the year ended December 31, 2006 was $5,981,496; the employer's total payroll was $6,667,064. The total required contribution for the year ended December 31, 2006 was $766,294 or 12.8 percent of covered payroll. Of this amount, 100 percent was contributed by the employer for the current year. Total contributions for the years ending December 31, 2005 and 2004 were $713,812 and $664,451, respectively, equal to the required contributions for each year. Employees who retire at or after age 65 (62 for elected officials and 55 for protective occupation employees) are entitled to receive a retirement benefit. Employees may retire at age 55 (50 for protective occupation employees) and receive actuarially reduced benefits. The factors influencing the benefit are: final average earnings, years of creditable service, and a formula factor. Final average earnings is the average of the employee's three highest year's earnings. Employees terminating covered employment before becoming eligible for a retirement benefit may withdraw their contributions and, by doing so, forfeit all rights to any subsequent benefit. For employees beginning participation on or after January 1, 1990 and no longer actively employed on or after April 24, 1998, creditable service in each of five years is required for eligibility for a retirement annuity. Participants employed prior to 1990 and on or after April 24, 1998 are immediately vested. The System also provides death and disability benefits for employees. Eligibility for and the amount of all benefits is determined under Chapter 40 of Wisconsin Statutes. The System issues an annual financial report which may be obtained by writing to the Department of Employee Trust Funds, P.O. Box 7931, Madison, WI 53707-7931. The pension related debt for the city as of December 31, 2006 was $286,252. This liability was determined in accordance with provisions of GASB Statement No. 27 regarding pension-related debt. Depending on actuarial assumptions, this estimate can vary significantly. B. RISK MANAGEMENT The city is exposed to various risks of loss related to torts; theft of, damage to, or destruction of assets; errors and omissions; workers compensation; and health care of its employees. All of these risks are covered through the purchase of commercial insurance, with minimal deductibles. Settled claims have not exceeded the commercial coverage in any of the past three years. There were no significant reductions in coverage compared to the prior year. Page 50 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2006 NOTE V - OTHER INFORMATION (cont.) C. COMMITMENTS AND CONTINGENCIES From time to time, the city is party to various pending claims and legal proceedings. Although the outcome of such matters cannot be forecasted with certainty, it is the opinion of management and the city's legal counsel that the likelihood is remote that most of such claims or proceedings will not have a material adverse effect on the city's financial position or results of operations. However, the city is involved in a claim for refund of personal property taxes that it is vigorously defending. The possibility exists that the city may not be able to collect this receivable. In addition, a claim has been filed that may have an unfavorable outcome. The city is also involved in negotiations with the Wisconsin Department of Natural Resources (DNR) concerning a possible permit violation. The city has responded to the Department of Natural Resources notice and met with their representatives to determine additional solutions to mitigate the problem. Further investigation is under way. The DNR has not taken any further actions subsequent to the notice of violation. In the event of such further action, a material loss is possible. Funding for the operating budget of the city comes from many sources, including property taxes, grants and aids from other units of government, user fees, fines and permits, and other miscellaneous revenues. The State of Wisconsin provides a variety of aid and grant programs which benefit the city. Those aid and grant programs are dependent on continued approval and funding by the Wisconsin governor and legislature, through their budget processes. The State of Wisconsin is currently experiencing budget problems, and is considering numerous alternatives including reducing aid to local governments. Any changes made by the State to funding or eligibility of local aid programs could have a significant impact on the future operating results of the city. The city has received federal and state grants for specific purposes that are subject to review and audit by the grantor agencies. Such audits could lead to requests for reimbursements to the grantor agency for expenditures disallowed under terms of the grants. Management believes such disallowances, if any, would be immaterial. As stated in Note V.D., the city jOintly operates the Metropolitan Refuse District, Inc. (District). The District's fund balance at September 30, 2006 is a deficit of $368,904. Reporting standards require the city to report its share of the net deficit. The city's proportionate share in the operations of the District is 58%, which amounts to $213,964 of the District's net deficit. The city's share of the net deficit has been reported in the government-wide statement of net assets. See also Note V.D. Page 51 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2006 NOTE V - OTHER INFORMATION (cont.) D. JOINT VENTURES Metropolitan Refuse District, Inc. The City of Middleton and the Villages of Shorewood Hills and Waunakee jOintly operate the local sanitary landfill, which is called the Metropolitan Refuse District, Inc. The landfill stopped accepting waste in 1997. The communities share in the operation of the District based on estimated population as follows: City of Middleton Village of Shorewood Hills Village of Waunakee 58% 6 36 The governing body is made up of citizens from each community. Local representatives are appointed by each city. The governing body has authority to adopt its own budget and control the financial affairs of the District. The city made payments totaling $50,083 to the District in 2006. The city has an equity interest (deficit) of $(213,964) at year end. The city will continue to support the District's postclosure care costs in the future. The District's landfill is being monitored for possible groundwater contamination as required by the Wisconsin Department of Natural Resources. The costs for groundwater monitoring are being budgeted for on an annual basis. At the current time it is not possible to determine if extensive contamination has occurred and the effects, if any, on the District's financial statements. Muitijurisdictional Public Safety Information System Commission (MJPISC) The City of Fitchburg, City of Sun Prairie, and City of Middleton jOintly operate the Multijurisdictional Public Safety Information System Commission. On March 20, 2003, the City of Middleton, City of Fitchburg, and City of Sun Prairie executed an intergovernmental agreement under authority of Section 66.0301 of the Wisconsin Statutes. The commission adopts its own budget. Net operating costs including debt service are shared by the three communities equally. The department is governed by the Intermunicipal Commission. The commission consists of one representative from each community. The transactions of the commission are not reflected in these financial statements. The city does not have an equity interest in this joint venture. Page 52 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2006 NOTE V - OTHER INFORMATION (cont.) D. JOINT VENTURES (cont.) Middleton Fire District The City of Middleton and the Towns of Springfield, Westport and Middleton jointly operate the local fire District, which is called the Middleton Fire District, which provides fire protection. The communities share in the operation of the District based on the ratio of equalized values of each member. The governing body is made up of elected officials from each community. Local representatives are appointed by the municipalities. The governing body has authority to adopt its own budget and control the financial affairs of the District. The city has made payments totaling $518,425 to the District in 2006 for operating expenses. The city believes that the District will continue to provide services in the future at similar rates. The transactions of the District are not reflected in these financial statements. The city does not have an equity interest in this joint venture. E. SUBSEQUENT EVENT On July 10, 2007, the city issued $9,215,000 of Note Anticipation Notes to finance the construction and equipping of a fire station and EMS facility for the Middleton Fire District. Page 53 ---PAGE BREAK--- REQUIRED SUPPLEMENTARY INFORMATION ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL For the Year Ended December 31,2006 Budgeted Amounts Variance with Original Final Actual Final Budget REVENUES Taxes $ 9,526,366 $ 9,526,366 $ 9,601,378 $ 75,012 Intergovernmental 2,423,379 2,423,379 2,484,163 60,784 Licenses and permits 450,440 450,440 594,583 144,143 Fines, forfeitures and penalties 217,000 217,000 277,533 60,533 Public charges for services 758,000 758,000 945,663 187,663 Interdepartmental charges for services 299,420 299,420 311,546 12,126 Special assessments 56,475 56,475 76,682 20,207 Investment income 245,000 245,000 638,132 393,132 Miscellaneous 79,000 79,000 190,266 111,266 Total Revenues 14,055,080 14,055,080 15,119,946 1,064,866 EXPENDITURES Current General government 1,806,882 1,806,882 1,696,989 109,893 Public safety 5,291,609 5,291,609 5,408,482 (116,873) Public works 2,508,004 2,508,004 2,386,681 121,323 Leisure activities 2,785,599 2,785,599 2,757,753 27,846 Conservation and development 316,827 316,827 309,979 6,848 Total Expenditures 12,708,921 12,708,921 12,559,884 149,037 Excess of revenues over expenditures 1,346,159 1,346,159 2,560,062 1,213,903 OTHER FINANCING SOURCES (USES) Sale of capital assets 314,357 314,357 568,518 254,161 Transfers in 313,648 313,648 295,142 (18,506) Transfers out {2,435,164) {2,435,164) {3,478,249) {1,043,085) Total Other Financing Sources (Uses) {1 ,807,159) {1 ,807,159) {2,614,589) {807,430) Net Change in Fund Balance (461,000) (461,000) (54,527) 406,473 FUND BALANCE - Beginning 5,876,206 5,876,206 5,876,206 FUND BALANCE - ENDING $ 5,415,206 $ 5,415,206 $ 5,821,679 $ 406,473 See accompanying notes to required supplementary information. Page 54 ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND SCHEDULE OF REVENUES COMPARED TO BUDGET - BUDGET AND ACTUAL For the Year Ended December 31,2006 Budgeted Amounts Variance with Original Final Actual Final Budget TAXES General property tax $ 9,300,256 $ 9,300,256 $ 9,296,093 $ (4,163) Fees in lieu of taxes 44,110 44,110 44,110 Room tax 180,000 180,000 255,650 75,650 Interest on taxes 2,000 2,000 5,525 3,525 TOTALS 9,526,366 9,526,366 9,601,378 75,012 INTERGOVERNMENTAL REVENUES Shared taxes from state 362,159 362,159 356,856 (5,303) State aid - road allotment 1,158,826 1,158,826 1,158,826 State aid - exempt computer aid 145,840 145,840 143,213 (2,627) State aid - fire insurance dues 71,000 71,000 78,055 7,055 State aid - expenditure restraint 55,770 55,770 55,770 State aid - miscellaneous grants 5,000 5,000 40,613 35,613 Federal and state aid - other 71,500 71,500 71,436 (64) County aid - library 447,000 447,000 457,622 10,622 County aid - signals 4,500 4,500 2,650 (1,850) County aid - senior citizens 47,025 47,025 47,074 49 School district payments for liaison officer 54,759 54,759 72,048 17,289 TOTALS 2,423,379 2,423,379 2,484,163 60,784 LICENSES AND PERMITS Liquor and malt beverage licenses 31,475 31,475 34,478 3,003 Operators' licenses 6,500 6,500 10,325 3,825 Contractor's licenses 6,000 6,000 6,440 440 Alarm licenses 6,265 6,265 5,915 (350) Cigarette licenses 150 150 175 25 Bicycle licenses 100 100 116 16 Dog and cat licenses 450 450 2,031 1,581 Cable TV franchise license 130,000 130,000 130,000 Other miscellaneous licenses 500 500 747 247 Building permits 150,000 150,000 221,961 71,961 Recycling permits 4,500 4,500 4,843 343 Electrical permits 45,000 45,000 63,713 18,713 Plumbing permits 47,000 47,000 62,692 15,692 Erosion control permits 10,000 10,000 34,510 24,510 Park reservation permits 12,500 12,500 16,637 4,137 TOTALS 450,440 450,440 594,583 144,143 FINES, FORFEITURES AND PENALTIES Court penalties 140,000 140,000 185,633 45,633 Parking violations 44,000 44,000 49,055 5,055 Court costs 33,000 33,000 42,845 9,845 TOTALS 217,000 217,000 277,533 60,533 See accompanying notes to required supplementary information. Page 55 ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND SCHEDULE OF REVENUES COMPARED TO BUDGET - BUDGET AND ACTUAL (cont) For the Year Ended December 31, 2006 Budgeted Amounts Variance with Original Final Actual Final Budget PUBLIC CHARGES FOR SERVICES Clerk fees $ 12,000 $ 12,000 $ 18,340 $ 6,340 Police special services 10,000 10,000 13,843 3,843 Police department fees 30,000 30,000 32,655 2,655 Fire false alarms 4,705 4,705 Ambulance services 300,000 300,000 414,928 114,928 EMS fixed cost abatement 63,000 63,000 63,448 448 Plan commission charges 5,000 5,000 45,324 40,324 Senior citizens 19,000 19,000 28,863 9,863 Swimming pool 224,500 224,500 211,884 (12,616) Summer recreation 56,500 56,500 59,077 2,577 Public works charges 5,000 5,000 3,349 (1,651) Other recreation 31,500 31,500 45,547 14,047 Zoning 1,500 1,500 3,700 2,200 TOTALS 758,000 758,000 945,663 187,663 INTERDEPARTMENTAL CHARGES FOR SERVICES Administration reimbursements - utilities 96,820 96,820 108,946 12,126 Administration reimbursements - TIF 195,000 195,000 195,000 Administration reimbursements - Landfill 5,000 5,000 5,000 Administration reimbursements - Fire District 2,600 2,600 2,600 TOTALS 299,420 299,420 311,546 12,126 SPECIAL ASSESSMENTS Curb, gutter and sidewalks 54,000 54,000 75,695 21,695 Interest on special assessments 2,475 2,475 987 (1,488) TOTALS 56,475 56,475 76,682 20,207 INVESTMENT INCOME Investment income 245,000 245,000 638,132 393,132 MISCELLANEOUS Rent of city buildings and offices 18,000 18,000 47,370 29,370 Compensation for loss of fixed assets 8,443 8,443 Refund of prior year's expenditures 32,000 32,000 90,964 58,964 Sale of materials 4,000 4,000 3,489 (511) Pool contribution 25,000 25,000 25,000 Miscellaneous revenue - MADC 15,000 15,000 TOTALS 79,000 79,000 190,266 111,266 OTHER FINANCING SOURCES Sale of capital assets 314,357 314,357 568,518 254,161 Transfer in - Water Utility 313,648 313,648 295,142 {18,506) TOTALS 628,005 628,005 863,660 235,655 TOTAL REVENUES AND OTHER FINANCING SOURCES $ 14,683,085 $ 14,683,085 $ 15,983,606 $ 1,300,521 See accompanying notes to required supplementary information. Page 56 ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND SCHEDULE OF EXPENDITURES COMPARED TO BUDGET - BUDGET AND ACTUAL For the Year Ended December 31, 2006 Budgeted Amounts Variance with Original Final Actual Final Budget GENERAL GOVERNMENT Council $ 41,338 $ 41,338 $ 41,429 $ (91) Police commission 6,000 6,000 3,332 2,668 Landmarks commission 600 600 87 513 Middleton youth commission 23,935 23,935 23,431 504 Board of review 375 375 136 239 Municipal court 61,705 61,705 60,242 1,463 General administration 550,338 550,338 550,239 99 Contracted services 10,000 10,000 9,050 950 Information technology 341,501 341,501 349,484 (7,983) Independent auditing 30,000 30,000 39,157 (9,157) Legal counseling 150,000 150,000 164,231 (14,231) Special legal counsel 5,000 5,000 10,025 (5,025) Buildings and grounds 124,159 124,159 109,122 15,037 Illegal taxes and tax refunds 5,000 5,000 31,256 (26,256) Property and liability insurance 252,500 252,500 255,311 (2,811 ) Income continuation insurance 12,000 12,000 12,509 (509) Contingency 175,431 175,431 175,431 Group life insurance 12,000 12,000 11,750 250 Additional expenditures - prior years 5,000 5,000 26,198 (21,198) TOTALS 1,806,882 1,806,882 1,696,989 109,893 PUBLIC SAFETY Police administration 436,810 436,810 433,910 2,900 Police patrol 2,676,249 2,676,249 2,772,873 (96,624) Code compliance 36,000 36,000 36,997 (997) Training 25,100 25,100 25,841 (741) Police uniform allowance and equipment 24,875 24,875 22,153 2,722 School patrol 12,423 12,423 11,395 1,028 Fire suppression 501,290 501,290 518,425 (17,135) Public fire protection 373,144 373,144 373,144 EMS 623,179 623,179 622,311 868 Building inspector 90,894 90,894 87,496 3,398 Electrical inspector 83,681 83,681 85,201 (1,520) Plumbing inspection 56,401 56,401 56,283 118 Emergency preparedness 4,920 4,920 7,225 (2,305) Sealer of weights and measures 4,400 4,400 4,400 Erosion control enforcement 23,000 23,000 25,441 (2,441 ) Communications 319,243 319,243 325,387 (6,144) TOTALS 5,291,609 5,291,609 5,408,482 (116,873) See accompanying notes to required supplementary information. Page 57 ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND SCHEDULE OF EXPENDITURES COMPARED TO BUDGET - BUDGET AND ACTUAL (cont.) For the Year Ended December 31, 2006 Budgeted Amounts Variance with Original Final Actual Final Budget PUBLIC WORKS Machinery $ 234,004 $ 234,004 $ 188,341 $ 45,663 Garage 46,200 46,200 46,147 53 Public works salaries and fringes 473,313 473,313 502,258 (28,945) Protective equipment 2,700 2,700 2,080 620 Engineering 640,561 640,561 591,708 48,853 Street maintenance 47,968 47,968 45,512 2,456 Street cleaning 6,500 6,500 3,538 2,962 Snow and ice control 47,000 47,000 42,886 4,114 Traffic signals 18,000 18,000 21,783 (3,783) Traffic signs and markings 31,000 31,000 29,784 1,216 Street lighting 75,600 75,600 87,616 (12,016) Tree and brush 2,000 2,000 1,211 789 Storm sewers 10,500 10,500 3,371 7,129 Mass transit 237,040 237,040 200,000 37,040 Garbage collection 375,000 375,000 376,279 (1,279) Sanitary landfill 56,500 56,500 50,080 6,420 Recycling 204,118 204,118 194,087 10,031 TOTALS 2,508,004 2,508,004 2,386,681 121,323 LEISURE ACTIVITIES Library 1,348,539 1,348,539 1,300,325 48,214 Senior citizens center 344,490 344,490 315,590 28,900 Dining center 2,500 2,500 22,032 (19,532) Recreation programs and events 45,645 45,645 59,420 (13,775) Recreation administration 97,661 97,661 100,885 (3,224) Swimming pool 256,925 256,925 239,880 17,045 Summer recreation 61,500 61,500 87,868 (26,368) Parks 628,339 628,339 631,753 (3,414) TOTALS 2,785,599 2,785,599 2,757,753 27,846 CONSERVATION AND DEVELOPMENT Water resources 48,800 48,800 20,611 28,189 Conservancy land commission 86,031 86,031 70,671 15,360 Planning commission 181,996 181,996 218,697 (36,701) TOTALS 316,827 316,827 309,979 6,848 OTHER FINANCING USES Transfers out - debt service fund 2,435,164 2,435,164 2,424,142 11,022 Transfers out - retirement benefits fund 664,107 (664,107) Transfers out - capital projects fund 150,000 (150,000) Transfers out - golf course fund 200,000 (200,000) Transfers out - EMS equipment replacement fund 40,000 (40,000) TOTALS 2,435,164 2,435,164 3,478,249 (1,043,085) TOTAL EXPENDITURES AND OTHER FINANCING SOURCES $ 15,144,085 $ 15,144,085 $ 16,038,133 $ (894,048) See accompanying notes to required supplementary information. Page 58 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO REQUIRED SUPPLEMENTARY INFORMATION December 31, 2006 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 over appropriations are as follows: Original and Amended Budget Ex~enditures Excess General Fund Current Expenditures Council $ 41,338 $ 41,429 $ 91 Information technology 341,501 349,484 7,983 Independent auditing 30,000 39,157 9,157 Legal counseling 150,000 164,231 14,231 Special legal counsel 5,000 10,025 5,025 Illegal taxes and tax refunds 5,000 31,256 26,256 Property and liability insurance 252,500 255,311 2,811 Income continuation insurance 12,000 12,509 509 Additional expenditures - prior years 5,000 26,198 21,198 Police patrol 2,676,249 2,772,873 96,624 Code compliance 36,000 36,997 997 Training 25,100 25,841 741 Fire suppression 501,290 518,425 17,135 Electrical inspector 83,681 85,201 1,520 Emergency preparedness 4,920 7,225 2,305 Erosion control enforcement 23,000 25,441 2,441 Communications 319,243 325,387 6,144 Public works salaries and fringes 473,313 502,258 28,945 Traffic signals 18,000 21,783 3,783 Street lighting 75,600 87,616 12,016 Garbage collection 375,000 376,279 1,279 Dining center 2,500 22,032 19,532 Recreation programs and events 45,645 59,420 13,775 Recreation administration 97,661 100,885 3,224 Summer recreation 61,500 87,868 26,368 Parks 628,339 631,753 3,414 Planning commission 181,996 218,697 36,701 Transfers out - retirement benefits fund 664,107 664,107 Transfers out - capital projects fund 150,000 150,000 Transfers out - golf course fund 200,000 200,000 Transfers out - EMS equipment replacement fund 40,000 40,000 Page 59 ---PAGE BREAK--- SUPPLEMENTARY INFORMATION ---PAGE BREAK--- CITY OF MIDDLETON COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS December 31, 2006 S!:!ecial Revenue Funds Sub- Land and Youth Lost and EMS dividers' Park Drug Cable Commission Damaged Library Equipment Library De!:!osits Donations Evidence TV Donations EMS Book Gift Re!:!lacement Endowment ASSETS Cash arid investments $ 1,285,735 $ 10,871 $ 830 $ 116,026 $ 2,917 $ 46,157 $ 15,232 $ 37,665 $ 276,098 $ 180,261 Accounts receivable 52,020 832 Interest receivable 8,182 Loans receivable Due from other funds TOTAL ASSETS $ 1,285,735 10,871 $ 830 $ 168,046 $ 2,917 $ 46,157 $ 16,064 $ 37,665 $ 284,280 $ 180,261 LIABILITIES AND FUND BALANCES Accounts payable $ 12,730 $ - $ - $ - $ - $ - $ 208 $ $ - $ Due to other funds Total Liabilities 12,730 208 Fund Balances Unreserved Undesignated (deficit) 1,273,005 10,871 830 168,046 2,917 46,157 15,856 37,665 284,280 180,261 Total Fund Balances 1,273,005 10,871 830 168,046 2,917 46,157 15,856 37,665 284,280 180,261 TOTAL LIABILITIES AND FUND BALANCES $ 1,285,735 $ 10,871 $ 830 $ 168,046 $ 2,917 $ 46,157 $ 16,064 $ 37,665 $ 284,280 $ 180,261 Page 60 ---PAGE BREAK--- CITY OF MIDDLETON COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS (cont.) December 31, 2006 S!;!ecial Revenue Funds Economic Total Develop- Nonmajor Retirement ment Shop With Drug Federal Senior Tourism National Governmental Benefits Ai r!;!o rt Grant a CO!;! Forfeitures Seizures Citizen Commission Night Out Funds ASSETS Cash and investments $ 912,810 $ 142,704 $ 197,539 $ 12,190 $ 12,262 $ - $ 64,993 $ - $ 1,609 $ 3,315,899 Accounts receivable 506 150,626 203,984 Interest receivable 8,182 Loans receivable 74,252 74,252 Due from other funds 2,804 2,804 TOTAL ASSETS $ 912,810 $ 143,210 $ 271,791 $ 12,190 $ 15,066 $ - $ 64,993 $ 150,626 $ 1,609 $ 3,605,121 LIABILITIES AND FUND BALANCES Accounts payable $ - $ 1,194 $ 18,233 $ - $ - $ - $ - $ 2,057 $ $ 34,422 Due to other funds 2,804 26,628 29,432 Total Liabilities 1,194 18,233 2,804 28,685 63,854 Fund Balances Unreserved Undesignated (deficit) 912,810 142,016 253,558 12,190 15,066 (2,804) 64,993 121,941 1,609 3,541,267 Total Fund Balances 912,810 142,016 253,558 12,190 15,066 (2,804) 64,993 121,941 1,609 3,541,267 TOTAL LIABILITIES AND FUND BALANCES $ 912,810 $ 143,210 $ 271,791 $ 12,190 $ 15,066 $ - $ 64,993 $ 150,626 $ 1,609 $ 3,605,121 Page 61 ---PAGE BREAK--- CITY OF MIDDLETON COMBINING STATEMENT OF REVENUES. EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS For the Year Ended December 31. 2006 S~ecial Revenue Funds Sub- Land and Youth Lost and EMS dividers' Park Drug Cable Commission Damaged Library Equipment Library Community De~osits Donations Evidence TV Donations EMS Book Gift Re~lacement Endowment Awareness REVENUES Taxes $ - $ $ $ - $ - $ - $ $ $ $ $ Intergovernmental 20.394 13.916 Public charges for services 218.351 34.679 Investment income 21.316 Miscellaneous 14.047 74.339 5.755 Total Revenues 238.745 14.047 74.339 13.916 34.679 5.755 21.316 EXPENDITURES Current: General government Public safety Leisure activities 9.934 61.614 1.071 Conservation and development 195.000 18.679 1.089 Debt service: Interest and fiscal charges Total Expenditures 195.000 9.934 61.614 1.071 18.679 1.089 Excess (deficiency) of revenues over expenditures 43.745 4.113 12.725 (1.071) 13.916 16.000 4.666 21.316 OTHER FINANCING SOURCES (USES) Transfers In 40.000 Transfers Out (115.571) (4.159) (5.131) Total Other Financing Sources (Uses) (115.571) (4.159) 40.000 (5.131) Net change in fund balance (71.826) 4.113 (4.159) 12.725 (1.071) 13.916 16.000 4.666 40.000 21.316 (5.131) FUND BALANCES (DEFICIT) - Beginning of Year 1.344.831 6.758 4.989 155.321 3.988 32.241 (144) 32.999 244.280 158.945 5.131 FUND BALANCES (DEFICIT) - END OF YEAR $1.273.005 $ 10.871 $ 830 $ 168.046 $ 2.917 $ 46.157 $ 15.856 $ 37.665 $ 284.280 $ 180.261 $ Page 62 ---PAGE BREAK--- CITY OF MIDDLETON COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS (con!.) For the Year Ended December 31, 2006 S~ecial Revenue Funds Economic Nonmajor Retirement Development Shop With Drug Federal Senior Tourism National Governmental Benefits Air~ort Grant a Co~ Forfeitures Seizures Citizen Commission Night Out Funds REVENUES Taxes $ - $ $ $ - $ - $ - $ $ 596,517 $ $ 596,517 Intergovernmental 5,800 40,110 Public charges for services 103,542 356,572 Investment income 9,517 30,833 Miscellaneous 3,157 4,925 14,721 5,492 2,045 124,481 Total Revenues 3,157 103,542 9,517 4,925 14,721 607,809 2,045 1,148,513 EXPENDITURES Current: General government 67,247 67,247 Public safety 2,904 10,796 1,255 14,955 Leisure activities 5,554 78,173 Conservation and development 44,616 184,584 443,968 Debt service: Interest and fiscal charges Total Expenditures 67,247 44,616 2,904 10,796 5,554 184,584 1,255 604,343 Excess (deficiency) of revenues over expenditures (64,090) 58,926 9,517 2,021 (10,796) 9,167 423,225 790 544,170 OTHER FINANCING SOURCES (USES) Transfers In 664,107 5,131 4,159 713,397 Transfers Out (55,927) (180,788) Total Other Financing Sources (Uses) 664,107 5,131 4,159 (55,927) 532,609 Net change in fund balance 600,017 58,926 9,517 7,152 4,159 (10,796) 9,167 367,298 790 1,076,779 FUND BALANCES (DEFICIT) - Beginning of Year 312,793 83,090 244,041 5,038 10,907 7,992 55,826 (245,357) 819 2,464,488 FUND BALANCES (DEFICIT) - END OF YEAR $ 912,810 $ 142,016 $ 253,558 $ 12,190 $ 15,066 $ (2,804) $ 64,993 $ 121,941 $ 1,609 $3,541,267 Page 63 ---PAGE BREAK--- CITY OF MIDDLETON COMBINING STATEMENT OF FIDUCIARY NET ASSETS AGENCY FUNDS December 31,2006 Fire Tax Roll District MPSISC Totals ASSETS Cash and investments $ 16,163,534 $ - $ 181,621 $ 16,345,155 Taxes receivable 9,770,159 9,770,159 Accounts receivable 2,385 2,385 Due from other governmental units 95,181 95,181 TOTAL ASSETS $ 25,933,693 $ 95,181 $ 184,006 $ 26,212,880 LIABILITIES Accounts payable $ - $ 88,714 $ 63,343 $ 152,057 Due to other governmental units 25,933,693 6,467 120,663 26,060,823 TOTAL LIABILITIES $ 25,933,693 $ 95,181 $ 184,006 $ 26,212,880 Page 64 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF CASH FLOWS - COMPONENT UNIT For the Year Ended December 31,2006 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from economic loan repayments Ecomonic 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 Decrease in Cash and Cash Equivalents CASH AND CASH EQUIVALENTS - Beginning of Year CASH AND CASH EQUIVALENTS - END OF YEAR RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES Operating income (loss) Changes in Assets and Liabilities Loans receivable Accounts payable NET CASH FLOWS FROM OPERATING ACTIVITIES , RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS - COMPONENT UNIT Cash and investments - statement of net assets - component unit Restricted cash and investments - statement of net assets - component unit CASH AND CASH EQUIVALENTS - END OF YEAR NONCASH INVESTING, CAPITAL AND RELATED FINANCING ACTIVITIES: The CDA has a long-term receivable with accrued interest of $10,456. Component Unit - CDA $ 547 (249,640) 23,219 {64,200) {290,074) 42,467 (377,124) (790,000) (845,967) 840,040 790,000 {383,051 ) (630,658) 2,863,643 $ 2,232,985 $ (15,340) (248,262) {26,472) $ {290,074) $ 442,694 1,790,291 $ 2,232,985 Page 65