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CITY OF MIDDLETON Middleton, Wisconsin FINANCIAL STATEMENTS December 31, 2004 ---PAGE BREAK--- CITY OF MIDDLETON TABLE OF CONTENTS December 31, 2004 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 - 51 Actual - General Fund 52 Schedule of Revenues Compared to Budget - Budget and Actual - General Fund 53 - 54 Schedule of Expenditures Compared to Budget - Budget and Actual - General Fund 55 - 56 Notes to Required Supplementary Information 57 SUPPLEMENTARY INFORMATION Combining Balance Sheet - Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Nonmajor Governmental Funds Combining Statement of Fiduciary Net Assets - Fiduciary Funds Statement of Cash Flows - Component Unit 58 - 59 60 - 61 62 63 ---PAGE BREAK--- To the City Council City of Middleton Middleton, Wisconsin VirchowKrause 8i..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 , 2004, 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 at December 31 , 2004, and the respective changes in financial position and cash flows, where applicable, 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 52 through 57 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 Public Accountants & Consu ltants. An Independent Member of Baker Tilly 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 March 29, 2005 Page 2 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF NET ASSETS December 31, 2004 Prima!1 Government Business- Governmental type Cornponent Activities Activities Totals Unit ASSETS Cash and investments $ 6,336,867 $ 4,314,530 $ 10,651,397 $ 733,413 Receivables (net of allowance for uncollectibles) Taxes 15,076,511 15,076,511 Delinquent taxes 69,725 69,725 Accounts 533,068 643,286 1,176,354 Interest 46,518 39,275 85,793 Loans 35,133 35,133 675,000 Special assessments 119,191 2,231,043 2,350,234 Delinquent special assessments 473 473 Due from other governments 17,151 17,151 Due from primary government 210,010 Due from component unit 2,998,828 2,998,828 Internal balances 900,455 (900,455) Restricted Assets Temporarily Restricted Cash and investments 1,223,261 39,600 1,262,861 2,998,828 Leases receivable from primary government 16,475,000 Other assets 84,830 689,174 774,004 52,510 Capital Assets Land 6,412,939 2,382,607 8,795,546 Right of ways 17,338,287 17,338,287 Construction in progress 6,366,946 6,366,946 Land Improvements 4,130,939 7,291,981 11,422,920 Buildings 9,216,171 208,763 9,424,934 Machinery and equipment 3,782,235 344,074 4,126,309 Infrastructure 19,467,150 32,321,469 51,788,619 Less: Accumulated depreciation (8,168,658) (7,212,874) (15,381,532) Investment in joint ventures (deficit) (431,025) (431,025) Total Assets 85,556,995 42,392,473 127,949,468 21,144,761 LIABILITIES Accounts payable 1,237,234 290,414 1,527,648 2,208 Accrued liabilities 1,119,527 171,483 1,291,010 210,010 Due to other governments 11,833 11,833 Due to primary government 2,998,828 Due to component unit 210,010 210,010 Unearned revenue 14,954,527 14,954,527 675,000 Noncurrent Liabilities Due within one year 6,530,588 874,285 7,404,873 Due in more than one year 60,182,530 10,602,432 70,784,962 16,272,610 Total Liabilities 84,246,249 11,938,614 96,184,863 20,158,656 NET ASSETS Invested in capital assets, net of related debt 9,421,986 23,951,639 33,373,625 Restricted for equipment replacement 39,600 39,600 Restricted for subdivider's deposits 1,351,493 1,351,493 Restricted for park improvements 8,253 8,253 Restricted for police enforcement 20,090 20,090 Restricted for EMS 27,198 27,198 Restricted for library 176,778 176,778 Restricted for economic development 231,913 231,913 Restricted for senior citizens 52,168 52,168 Unrestricted (deficit) (9,979,133) 6,462,620 (3,516,513) 986,105 TOTAL NET ASSETS $ 1,310,746 $ 30,453,859 $ 31,764,605 $ 986,105 See accompanying notes to financial statements. Page 3 ---PAGE BREAK--- CITY OF IVIILJDLETON STATEMENT OF ACTIVITIES For the Year Ended December 31, 2004 Net (Expense) Revenue and Program Revenues Changes in Net Assets Operating Capital Primary Government Charges for Grants and Grants and Governmental Business-type Component Functions/Programs ~enses Services Contributions Contributions Activities Activities Totals Unit Primary Government Governmental Activities General government $ 1,252,594 $ 445,256 $ 29,074 $ - $ (778,264) $ - $ (778,264) $ Public safety 5,005,974 705,922 81,207 (4,218,845) (4,218,845) Public works 3,614,989 569,124 885,544 583,416 (1,576,905) (1,576,905) Leisure activities 4,038,099 327,240 612,600 25,000 (3,073,259) (3,073,259) Conservation and economic development 201,458 13,436 68,733 (119,289) (119,289) Interest and fiscal charges 3,129,608 (3,129,608) (3,129,608) Total Governmental Activities 17,242,722 2,060,978 1,677,158 608,416 (12,896,170) (12,896,170) Business-type Activities Water 1,139,432 1,651,479 131,261 643,308 643,308 Sewer 1,465,846 1,445,178 113,266 92,598 92,598 Pleasant View Golf Course 1,612,514 1,681,506 68,992 68,992 Total Business-type Activities 4,217,792 4,778,163 244,527 804,898 804,898 Total Primary Government $ 21,460,514 $ 6,839,141 $ 1,677,158 $ 852,943 (12,896,170) 804,898 (12,091,272) Component Unit Community Development Authority $ 892,339 $ 66,889 $ - $ (825,450) General Revenues Taxes Property taxes, levied for general purposes and debt service 8,409,455 8,409,455 Property taxes, levied for tax increment districts 4,412,982 4,412,982 Other taxes 554,732 554,732 Cable television franchise fees 176,926 176,926 Intergovernmental revenues not restricted to specific programs 962,646 962,646 Public gifts and/or grants 30,000 30,000 Investment income 167,189 109,793 276,982 846,555 Miscellaneous 2,122,012 2,122,012 Transfers 312,018 (312,018) Total General Revenues and Transfers 17,147,960 (202,225) 16,945,735 846,555 Change in net assets 4,251,790 602,673 4,854,463 21,105 NET ASSETS - Beginning (as restated) (2,941,044) 29,851,186 26,910,142 965,000 NET ASSETS - ENDING $ 1,310,746 $ 30,453,859 $ 31,764,605 $ 986,105 See accompanying notes to financial statements. Page 4 ---PAGE BREAK--- CITY OF MIDDLETON BALANCE SHEET - GOVERNMENTAL FUNDS December 31, 2004 Total Capital Non-Major Governmental General Debt Service TIF District #3 Projects Funds Funds ASSETS Cash and investments $ 3,194,611 $ 15,290 $ 997,467 $ 1,153,979 $ 2,198,781 $ 7,560,128 Receivables (net) Taxes 9,120,704 5,955,807 15,076,511 Delinquent taxes 69,725 69,725 Accounts 336,977 44,222 151,869 533,068 Loans 35,133 35,133 Special assessments 54,345 64,846 119,191 Delinquent special assessments 473 473 Interest 42,628 3,890 46,518 Due from other funds 313,649 41,770 355,419 Due from other governments 17,151 17,151 Due from component unit 2,998,828 2,998,828 Advances to other funds 3,719,381 3,719,381 TOTAL ASSETS $ 16,869,644 $ 15,290 $ 10,052,081 $ 1,239,971 $ 2,354,540 $ 30,531,526 LIABILITIES AND FUND BALANCES Liabilities Accounts payable $ 766,535 $ - $ 709,120 $ 136,005 $ 16,808 $ 1,628,468 Due to other governments 11,833 11,833 Due to other funds 127,597 127,597 Deferred revenue 9,205,295 5,955,807 30,000 15,191,102 Deferred special assessments 54,818 64,846 119,664 Deferred interest income 719,395 719,395 Advances from other funds 1,629,862 1,416,886 3,046,748 Total Liabilities 10,885,473 8,359,635 166,005 1,433,694 20,844,807 Fund Balances Reserved for: Loans receivable 35,133 35,133 Delinquent personal property taxes 69,725 69,725 Advances 2,999,986 2,999,986 Debt service 15,290 1,634,262 1,649,552 Encumbrances 798,736 296,264 1,095,000 Unreserved and designated, reported in: General fund 587,000 587,000 Unreserved and undesignated (deficit), reported in: General fund 2,327,460 2,327,460 Special revenue funds 920,846 920,846 Capital projects funds (775,685) 777,702 2,017 Total Fund Balances 5,984,171 15,290 1,692,446 1,073,966 920,846 9,686,719 TOTAL LIABILITIES AND FUND BALANCES $ 16,869,644 $ 15,290 $ 10,052,081 $ 1,239,971 $ 2,354,540 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. 58,546,009 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. 1,075,635 Investment (deficit) in jOint venture is not a financial resource and, therefore, is not reported in the funds. (431,025) 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. (67,566,592) NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 1,310,746 See accompanying notes to financial statements. Page 5 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS For the Year Ended December 31,2004 Total Capital Non-Major Governmental General Debt Service TIF District #3 Projects Funds Funds REVENUES Taxes $ 8,608,066 $ - $ 4,412,982 $ - $ 356,122 $ 13,377,170 Intergovernmental 2,146,521 274,562 54,989 3,727 2,479,799 Licenses and permits 689,323 689,323 Fines, forfeitures and penalties 231,185 231,185 Public charges for services 754,345 483,828 1,238,173 Intergovernmental charges for services 158,936 158,936 Special assessments 74,236 15,274 89,510 Investment income 159,934 13,546 47,278 10,819 231,577 Miscellaneous 1,674,394 15,300 204,915 267,646 2,162,255 Total Revenues 14,496,940 13,546 4,750,122 259,904 1,137,416 20,657,928 EXPENDITURES Current General government 1,467,562 1,467,562 Public safety 4,658,718 9,987 4,668,705 Public works 1,995,342 1,995,342 Leisure activities 2,417,364 28,013 2,445,377 Conservation and economic development 200,409 1,092,732 1,293,141 Capital Outlay 4,560,120 2,761,322 7,321,442 Debt Service Principal retirement 4,962,198 4,962,198 Interest and fiscal charges 2,260,767 908,733 42,268 3,211,768 Total Expenditures 10,739,395 7,222,965 5,468,853 2,761,322 1,173,000 27,365,535 Excess (deficiency) of revenues over (under) expenditures 3,757,545 (7,209,419) (718,731) (2,501,418) (35,584) (6,707,607) OTHER FINANCING SOURCES (USES) Debt issued 6,580,000 1,910,000 8,490,000 Payment to refunding bond escrow agent (6,552,055) (6,552,055) Transfers in 399,848 7,195,021 201,764 598,052 8,394,685 Transfers out (2,596,021 ) (5,193,582) (293,064) (8,082,667) Total Other Financing Sources (Uses) (2,196,173) 7,222,966 (5,193,582) 2,111,764 304,988 2,249,963 Net Change in Fund Balance 1,561,372 13,547 (5,912,313) (389,654) 269,404 (4,457,644) FUND BALANCES - Beginning (as restated) 4,422,799 1,743 7,604,759 1,463,620 651,442 14,144,363 FUND BALANCES - ENDING $ 5,984,171 $ 15,290 $ 1,692,446 $ 1,073,966 $ 920,846 $ 9,686,719 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 31,2004 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) 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. This is the amount by which payments ($11,514,253 less refunding debt costs of $147,053) exceeded proceeds($8,490,000). 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 $ (4,457,644) 7,321,442 (1,589,460) (841,177) 606,782 140,434 2,877,200 82,014 (63,375) (9,985) 15,099 170,460 CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $ 4,251,790 See accompanying notes to financial statements. Page 7 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF NET ASSETS - PROPRIETARY FUNDS December 31,2004 ASSETS Current Assets Cash and investments Accounts receivable, net Interest receivable Due from other funds Total Current Assets Noncurrent Assets Restricted Assets Other property and investments Special assessments receivable Property held for future use Preliminary engineering Unamortized debt expenses Capital Assets Property and equipment Less: accumulated depreciation Total Capital Assets (Net of Accumulated Depreciation) Total Noncurrent Assets Total Assets Business-Type Activities - Enterprise Funds Pleasant View Golf Water Sewer Course $ 3,263,753 $ 1,050,777 $ - 284,685 357,312 1,289 25,127 14,148 143,104 64,883 3,716,669 1,487,120 1,289 39,600 2,231,043 622,421 47,934 7,250 11,569 19,194,377 13,293,699 10,060,818 {4,409,785) {2,432,546) {370,543) 14,784,592 10,861,153 9,690,275 15,462,197 13,143,365 9,690,275 19,178,866 14,630,485 9,691,564 Totals $ 4,314,530 643,286 39,275 207,987 5,205,078 39,600 2,231,043 622,421 47,934 18,819 42,548,894 {7,212,874) 35,336,020 38,295,837 43,500,915 Page 8 ---PAGE BREAK--- Business-T:il2e Activities - Enterl2rise Funds Pleasant View Golf Water Sewer Course Totals LIABILITIES Current Liabilities Accounts payable $ 42,164 $ 225,415 $ 22,835 $ 290,414 Accrued interest 28,122 18,483 124,878 171,483 Accrued compensated absences 8,319 4,098 11,868 24,285 Due to other funds 355,419 77,190 3,200 435,809 Current portion of long term debt 175,000 140,000 535,000 850,000 Total Current Liabilities 609,024 465,186 697,781 1,771,991 Noncurrent Liabilities Accrued compensated absences 35,130 17,302 52,432 Advances from other funds 672,633 672,633 General obligation debt 1,525,000 1,015,000 8,010,000 10,550,000 Total Noncurrent Liabilities 1,560,130 1,032,302 8,682,633 11,275,065 Total Liabilities 2,169,154 1,497,488 9,380,414 13,047,056 NET ASSETS Invested in capital assets, net of related debt 13,091,842 9,717,722 1,142,075 23,951,639 Restricted for: Equipment replacement 39,600 39,600 Unrestricted (deficit) 3,917,870 3,375,675 (830,925) 6,462,620 TOTAL NET ASSETS $ 17,009,712 $ 13,132,997 $ 311,150 $ 30,453,859 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 31,2004 Business-TX:f2e Activities - Enterf2rise Funds Pleasant View Golf Water Sewer Course Totals OPERATING REVENUES Charges for services $ 1,651,479 $ 1,445,178 $ 1,681,506 $ 4,778,163 Total Operating Revenues 1,651,479 1,445,178 1,681,506 4,778,163 OPERATING EXPENSES Operation and maintenance 675,055 1,199,503 1,015,289 2,889,847 Depreciation 370,574 205,814 195,810 772,198 Total Operating Expenses 1,045,629 1,405,317 1,211,099 3,662,045 Operating Income 605,850 39,861 470,407 1,116,118 NONOPERATING REVENUES (EXPENSES) Investment income 73,168 36,625 109,793 Interest expense (90,003) (58,624) (401,415) (550,042) Amortization of debt issuance costs {3,800) {1,905) {5,705) Total Nonoperating Revenues (Expenses) {20,635) {23,904) {401,415) {445,954) Income before contributions and transfers 585,215 15,957 68,992 670,164 Capital contributions 131,261 113,266 244,527 Transfers out {312,018) {312,018~ Change in Net Assets 404,458 129,223 68,992 602,673 TOTAL NET ASSETS - Beginning 16,605,254 13,003,774 242,158 29,851,186 TOTAL NET ASSETS - ENDING $ 17,009,712 $ 13,132,997 $ 311,150 $ 30,453,859 See accompanying notes to financial statements. Page 10 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF CASH FLOWS- PROPRIETARY FUND TYPES For the Year Ended December 31,2004 Business-T~[le Activities - Enterprise Funds Pleasant View Golf Water Sewer Course Totals CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers $ 1,274,666 $ 1,404,983 $ 1,682,714 $ 4,362,363 Cash received from city for services 371,614 371,614 Cash paid to suppliers for goods and services (433,667) (1,082,222) (451,206) (1,967,095) Cash paid to employees for services (245,350) (104,262) (552,094) (901,706) Net Cash Flows From Operating Activities 967,263 218,499 679,414 1,865,176 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Repayment of advances (130,000) (130,000) Advance from general fund 210,225 210,225 Cash paid for tax equivalent (305,148) (305,148) Net Cash Flows From Noncapital Financing Activities (305,148) 80,225 (224,923) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal paid (170,000) (135,000) (330,000) (635,000) Interest paid (92,820) (60,706) (404,249) (557,775) Capital contributions received (9,602) (9,602) Acquisition and construction of capital assets (182,173) (12,095) (25,390) (219,658) Special assessments received 8,531 8,531 Net Cash Flows From Capital and Related Financing Activities (454,595) (199,270) (759,639) (1,413,504) CASH FLOWS FROM INVESTING ACTIVITIES Investment income 63,875 23,637 87,512 Investments sold and matured 2,515,961 736,665 3,252,626 Marketable securities purchased (2,513,960) (1,009,800) (3,523,760) Net Cash Flows From Investing Activities 65,876 (249,498) (183,622) Net Increase (Decrease) in Cash and Cash Equivalents 273,396 (230,269) 43,127 CASH AND CASH EQUIVALENTS - Beginning of Year 476,397 310,846 787,243 CASH AND CASH EQUIVALENTS - END OF YEAR $ 749,793 $ 80,577 - $ 830,370 Page 11 ---PAGE BREAK--- RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES Operating income Adjustments to Reconcile Operating Income to Net Cash Provided From Operating Activities Depreciation expense Depreciation charged to sewer utility Changes in Noncash Components of Working Capital Accounts receivable Other accounts receivable Due from other funds Inventories Accounts payable Accrued compensated absences Due to other funds Other current liabilities Deferred revenues NET CASH FLOWS FROM OPERATING ACTIVITIES RECONCILIATION OF CASH AND CASH EQUIVALENTS TO THE STATEMENT OF NET ASSETS - PROPRIETARY FUNDS Cash and investments - statement of net assets - proprietary funds Restricted cash and investments - statement of net assets - proprietary funds Less: Non-cash equivalents CASH AND CASH EQUIVALENTS - END OF YEAR NONCASH INVESTING, CAPITAL AND RELATED FINANCING ACTIVITIES Municipality financed additions to utility plant Developer financed additions to utility plant Business-Type Activities - Enterprise Funds Pleasant View Golf Water Sewer Course Totals $ 605,850 $ 39,861 $ 470,407 $ 1,116,118 370,574 205,814 195,810 772,198 45,136 45,136 (14,832) (23,821) 1,208 (37,445) 3,830 2,112 5,942 (24,749) (18,486) (43,235) 3,675 3,675 11,604 17,499 4,867 33,970 (5,988) (9,477) 7,122 (8,343) 4,997 4,997 (13,253) (13,253) (14,584) (14,584) $ 967,263 $ 218,499 $ 679,414 $ 1,865,176 $ 3,263,753 $ 1,050,777 $ - $ 4,314,530 39,600 39,600 (2,513,960) (1,009,800) (3,523,760) $ 749,793 $ 80,577 $ 830,370 $ $ 140,863 $ 421,175 733,460 See accompanying notes to financial statements. Page 12 ---PAGE BREAK--- ASSETS Cash and investments Taxes receivable Accounts receivable Prepaid items CITY OF MIDDLETON STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS December 31, 2004 Due from other governmental units TOTAL ASSETS LIABILITIES Accounts payable Due to other funds Due to other governmental units TOTAL LIABILITIES See accompanying notes to financial statements. Agency Funds $ 16,448,212 8,732,375 112,560 16,394 616 $ 25,310,157 $ 240,735 16,898 25,052,524 $ 25,310,157 Page 13 ---PAGE BREAK--- CITY OF MIDDLETON INDEX TO NOTES TO FINANCIAL STATEMENTS Decem ber 31, 2004 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. Property Held for Future Use 6. Capital Assets 7. Other Assets 8. Compensated Absences 9. Long-Term Obligations/Conduit Debt 10. Claims and Judgments 11. Equity Classifications 12. 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 IV. Detailed Notes on All Funds A. Deposits and Investments B. Receivables C. Restricted Assets D. Capital Assets E. Interfund Receivables/Payables, Advances and Transfers F. Long-Term Obligations G. Lease Disclosures H. Governmental Activities Net Assets/Fund Balances I. Restatement of Net Assets/Fund Balance J. Component Unit V. Other Information A. Employees' Retirement System B. Risk Management C. Commitments and Contingencies D. Joint Ventures Page 15 15 16 18 20 20 21 22 23 23 23 24 24 25 25 26 26 27 27 27 27 28 28 29 29 31 33 33 37 39 43 44 46 47 49 49 49 50 50 Page 14 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the City of Middleton, Wisconsin conform to generally accepted accounting principles as applicable to governmental units. A. REPORTING ENTITY This report includes all of the funds of the City of Middleton. The reporting entity for the city consists of the primary government, organizations for which the primary government is financially accountable, and other organizations for which the nature and significance of their relationship with the primary government are such that their exclusion would cause the reporting entity's financial statements to be misleading or incomplete. The primary government is financially accountable if it appoints a voting majority of the organization's governing body and it is able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to or burdens on the primary government. The primary government may be financially accountable if an organization is fiscally dependent on the primary government. A legally separate, tax exempt organization should be reported as a component unit of a reporting entity if all of the following criteria are met: the economic resources received or held by the separate organization are entirely or almost entirely for the direct benefit of the primary government, its component units, or its constituents; the primary government is entitled to, or has the ability to otherwise access, a majority of the economic resources received or held by the separate organization; the economic resources received or held by an individual organization that the specific primary government, or its component units, is entitled to, or has the ability to otherwise access, are significant to that primary government. Blended component units, although legally separate entities, are, in substance, part of the government's operations and are reported with similar funds of the primary government. The discretely presented component unit is reported in a separate column in the government-wide financial statements (see note below for description) to emphasize that it is legally separate from the primary government. Discretely Presented Component Unit Community Development Authority of the City of Middleton The basic financial statements include the Community Development Authority of the City of Middleton ("CDA") as a component unit. The CDA is a legally separate organization. The board of the CDA is appointed by the mayor. Wisconsin Statutes provide for circumstances whereby the city can impose its will on the CDA and also create a potential financial benefit to or burden on the city. As a component unit, the CDA's financial statements have been presented as a discrete column in the basic financial statements. Separately issued financial statements of the CDA are not prepared. Excluded from the reporting entity: The Middleton Area Development Corporation is a separate legal organization that is not reported in these financial statements. Page 15 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 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 proprietary 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, 2004 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 TID or enterprise fund debt. Tax Incremental District (TID) NO.3 Capital Projects Fund - accounts for expenditures outlined in the TID 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 Economic Development Airport Economic Development Grant Alcohol Awareness Drug Forfeitures Federal Seizures Senior Citizen Tourism Commission Page 17 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (cont.) Fund Financial Statements (cont.) Non-Major Governmental Funds (cont.) Capital Projects Funds - used to account for financial resources to be used for the acquisition or construction of equipment and/or major capital facilities. Southwest Quadrant 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 MJPSISC c. MEASUREMENT Focus, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT PRESENTATION Government-Wide Financial Statements The government-wide statement of net assets and statement of activities are reported using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues are recognized when earned and expenses are recorded when the liability is incurred or economic asset used. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchange-like transactions are recognized when the exchange takes place. Property taxes are recognized as revenues in the year for which they are levied. Taxes receivable for the following year are recorded as receivables and deferred revenue. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider are met. Special assessments are recorded as revenue when earned. Unbilled receivables are recorded as revenues when services are provided. The business-type activities follow all pronouncements of the Governmental Accounting Standards Board, and have elected not to follow Financial Accounting Standards Board pronouncements issued after November 30, 1989. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the city's water and sewer utility and various other functions of the government. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned. Page 18 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 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, 2004 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. 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. Operating expenses for proprietary funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY 1. Deposits and Investments For purposes of the statement of cash flows, the city considers all highly liquid investments with an initial maturity of three months or less when acquired to be cash equivalents. Investment of city funds is restricted by state statutes. Available investments are limited to: 1. Time deposits in any credit union, bank, savings bank or trust company maturing in three years or less. 2. Bonds or securities of any county, city, drainage district, technical college district, village, town, or school district of the state. Also, bonds issued by a local exposition district, a local professional baseball park district, a local professional football stadium district, a local cultural arts district, or by the University of Wisconsin Hospitals and Clinics Authority. 3. Bonds or securities issued or guaranteed by the federal government. 4. The local government investment pool. Page 20 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LiABILITIES, AND NET ASSETS OR EQUITY (cont.) 1. Deposits and Investments (cont.) 5. Any security maturing in seven years or less and having the highest or second highest rating category of a nationally recognized rating agency. 6. Securities of an open-end management investment company or investment trust, subject to various conditions and investment options. 7. Repurchase agreements with public depositories, with certain conditions. 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, 2004, the fair value of the city's share of the LGIP's assets was substantially equal to the amount as reported in these statements. 2. Receivables Property taxes are levied in December on the assessed value as of the prior January 1. In addition to property taxes for the city, taxes are collected for and remitted to the state and county governments as well as the local school district and technical college district. Taxes for all state and local governmental units billed in the current year for the succeeding year are reflected as receivables and due to other taxing units on the accompanying agency fund statement of net assets. Property tax calendar - 2004 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 - 2004 delinquent real estate taxes December 2004 December 2004 January 31, 2005 January 31, 2005 July 31, 2005 January 31, 2005 October 2007 Page 21 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LiABILITIES, AND NET ASSETS OR EQUITY (cont.) 2. Receivables (cont.) 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. 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. 3. Inventories and Prepaid Items Governmental fund inventory items are charged to expenditure accounts when purchased. Year- end inventory was not significant. Proprietary fund inventories are generally used for construction and for operation and maintenance work. They are not for resale. They are valued at cost based on weighted average, and charged to construction, 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. Page 22 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 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. Property Held for Future Use In 2001, the water utility acquired property held for future use. The property is a pre-dug well that is currently not being used. 6. Capital Assets Government-Wide Statements In the government-wide financial statements, fixed assets are accounted for as capital assets. Capital assets are defined by the government as assets with an initial cost of more than $5,000 for general capital assets and $25,000 for infrastructure assets, and an estimated useful life in excess of one year. All capital assets are valued at historical cost, or estimated historical cost if actual amounts are unavailable. Donated fixed assets are recorded at their estimated fair value at the date of donation. Prior to January 2003, infrastructure assets of governmental funds were not capitalized. Upon implementing GASB No. 34, governmental units are required to account for all capital assets, including infrastructure, in the government-wide statements prospectively from the date of implementation. Retroactive reporting of all major general infrastructure assets is encouraged but not required until January 1, 2007, when GASB No. 34 requires the city to retroactively report all major general infrastructure assets acquired since January 1, 1980. For the year ended December 31, 2004, the city has retroactively reported all of the network infrastructure acquired by its governmental fund types. 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. Page 23 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 6. Capital Assets (cont.) Government-Wide Statements (cont.) 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 16-90Years 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. 7. 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. 8. 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. Page 24 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LIABILITIES, AND NET ASSETS OR EQUITY (cont.) 8. Compensated Absences (cont.) 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 cost of those premiums is recognized as an expenditure in the year of retirement. The entire cost is paid by the city. Funding for those costs is provided out of the current operating budget of the city's general fund. Total expenditures for retirees' medical premiums during the year were $69,854. The number of participants currently eligible to receive benefits is 13. The total amount outstanding at year end to be paid in the future is $308,948 and is included in the general fund as an accrued liability. 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, 2004 are determined on the basis of current salary rates and include salary related payments. 9. 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. 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. 10. 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. Page 25 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE I - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) D. ASSETS, LiABILITIES, AND NET ASSETS OR EQUITY (cont.) 11. Equity Classifications Government-Wide Statements Equity is classified as net assets and displayed in three components: a. Invested in capital assets, net of related debt - Consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by the outstanding balances of any bonds, mortgages, notes, or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. 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. 12. Basis for Existing Rates - Proprietary Funds Current water rates were approved by the PSCW on March 15, 1997. Sewer rates are adjusted annually for rate changes from the Madison Metropolitan Sewerage District. The 2004 rates were approved in November 2003 and became effective January 1, 2004. Page 26 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 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 $67,566,592 difference are as follows: Bonds and notes payable Unfunded pension liability Compensated absences Capital leases payable Accrued interest Unamortized debt issuance costs Combined Adjustment for Long-Term Liabilities NOTE III - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY A. BUDGETARY INFORMATION $ 48,659,393 318,346 1,260,379 16,475,000 938,304 (84,830) $ 67,566,592 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. Page 27 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE III - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY (cont.) A. BUDGETARY INFORMATION (cont.) The budgeted amounts presented include any amendments made. The city administrator may authorize transfers of budgeted amounts between departments up to $1,000. Transfers exceeding $1,000 between departments and changes to the overall budget must be approved by a two-thirds council action. There were no supplemental appropriations during the year. Appropriations lapse at year end unless specifically carried over. Budgets are adopted at the departmental level of expenditure. B. EXCESS EXPENDITURES OVER ApPROPRIA nONS The following individual funds experienced excess expenditures over appropriations. Special Revenue Funds Subdivider's deposits Tourism Senior citizen Lost and damaged book Airport Alcohol awareness $ 116,089 726,031 42 22,927 4,761 115 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, 2004, the following individual funds held a deficit balance: Special Revenue Funds Tourism Commission $ 1,330,019 Excess expenditures over revenue. This deficit is anticipated to be funded by room taxes in future years. Page 28 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE IV - DETAILED NOTES ON ALL FUNDS A. DEPOSITS AND INVESTMENTS The city's deposits and investments are categorized to give an indication of the level of custodial credit risk assumed by the entity at year end. Category 1 includes items that are insured or registered or which are collateralized by or evidenced by securities held by the city or its agent in the city's name. Category 2 includes deposits collateralized with securities held by the pledging financial institution's trust department or agent in the city's name, or uninsured and unregistered investments for which the securities are held by the counter party's trust department or agent in the city's name. Category 3 includes uncollateralized deposits, and uninsured and unregistered investments, with securities held by the counterparty or its trust department or agent but not in the city's name. Categor~ 1 2 Local and area banks $ 500,000 $ U.S. government securities Sub-Totals $ 500,000 $ Local government investment pool Madison Community Foundation - pooled funds Mutual funds Petty cash - $ - $ 3 19,584,751 505,074 20,089,825 Total Deposits and Investments - Primary Government Statement of net assets - cash and investments Statement of net assets - restricted cash and investments Statement of net assets - fiduciary funds Total Carrying Amount! Totals Fair Value $ 20,084,751 $ 19,948,167 505,074 505,074 $ 20,589,825 1,634,025 149,387 6,125,392 425 $ 28,362,470 $ 10,651,397 1,262,861 16,448,212 $ 28,362,470 Page 29 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) A. DEPOSITS AND INVESTMENTS (cont.) The city had no significant type of investment during the year not included in the above schedule. 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 amounts in Category 1 above. 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. The Madison Community Foundation ("the Foundation") is a community endowment fund. The Foundation is not registered with the Securities and Exchange Commission. It constitutes a contractual agreement between the city and the Foundation with respect to investment of city assets. The Foundation reports the fair value of its underlying assets annually. At December 31, 2004, the fair value of the Foundation's assets was substantially equal to the city's share as reported above. Fluctuating cash flows during the year due to tax collections, receipt of state aids and/or proceeds from borrowing may have resulted in uninsured balances during the year Significantly exceeding uninsured balances at year end. Page 30 ---PAGE BREAK--- NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) B. RECEIVABLES CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 Receivables as of year end for the government's individual major funds and nonmajor, and fiduciary funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: Nonmajor TI D District Capital Pleasant View and Other General No.3 ~ects Water Sewer Golf Course Funds Totals Receivables: Taxes $ 9,120,704 $ 5,955,807 $ - $ - $ - $ - $ - $ 15,076,511 Delinquent taxes 69,725 69,725 Accounts 539,373 44,222 284,685 357,312 1,289 151,869 1,378,750 Loans 35,133 35,133 Special assessments 54,345 64,846 2,231,043 2,350,234 Delinquent special assessments 473 473 Interest 42,628 25,127 14,148 3,890 85,793 Due from other governments 17,151 17,151 Gross Receivables 9,844,399 6,055,786 44,222 309,812 2,602,503 1,289 155,759 19,013,770 Less: Allowance for uncollectibles (202,396) (202,396) Net Total Receivables $ 9,642,003 $ 6,055,786 $ 44,222 $ 309,812 $ 2,602,503 $ 1,289 $ 155,759 $ 18,811,374 Amounts Not Expected to be Collected Within One Year $ 17,387 $ 30,000 $ - $ - $ - $ $ - $ 47,387 Page 31 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 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 $ 202,396 Total Uncollectibles of the Current Fiscal Year $ 202,396 Governmental funds report deferred revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Property taxes levied for the subsequent year are not earned and cannot be used to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of deferred revenue and unearned revenue reported in the governmental funds were as follows: Unavailable Unearned Totals Property taxes receivable $ $ 14,954,527 $ 14,954,527 Special assessments not yet due 119,665 119,665 EMS receivable 206,575 206,575 Grant revenue 30,000 30,000 Interest income (TIF No.3) 719,395 719,395 Total Deferred/Unearned Revenue for Governmental Funds $ 1,075,635 $ 14,954,527 $ 16,030,162 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, 2004, the city has not exceeded its maximum retention cap. When it does, a liability to the state will be recorded. Page 32 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) C. RESTRICTED ASSETS Replacement Account The sewer utility established an equipment replacement account to be used for significant mechanical equipment replacement as required by the Wisconsin Department of Natural Resources. Following is a list of restricted assets at December 31, 2004: 2004 Restricted assets replacement account $ 39,600 In addition, TIF NO.3 has money set aside in an escrow account used to pay for current and future construction projects within the TIF. The amount of this escrow account as of December 31, 2004 is $1,223,261. D. CAPITAL ASSETS Capital asset activity for the year ended December 31, 2004 was as follows: Beginning Ending Balance* Additions Deletions Balance Governmental Activities Capital Assets Not Being Depreciated: Land $ 6,412,939 $ $ $ 6,412,939 Right of way 17,207,087 131,200 17,338,287 Construction in progress 2,504,313 5,160,727 1,298,094 6,366,946 Total Capital Assets Not Being Depreciated $ 26,124,339 $ 5,291,927 $ 1,298,094 $ 30,118,172 Capital Assets Being Depreciated: Land improvements $ 4,071,843 $ 59,096 $ $ 4,130,939 Buildings 7,918,077 1,298,094 9,216,171 Machinery and equipment 3,351,659 462,017 31,441 3,782,235 Streets - infrastructure 8,660,741 221,367 8,882,108 Storm sewers - infrastructure 5,034,082 246,509 5,280,591 Traffic signals - infrastructure 763,096 763,096 Sidewalks - infrastructure 2,425,318 57,849 2,483,167 Bridges - infrastructure 2,058,188 2,058,188 Total Capital Assets Being Depreciated 34,283,004 2,344,932 31,441 36,596,495 * As restated Page 33 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE IV - DETAILED NOTES ON ALL FUNDS (cant.) D. CAPITAL ASSETS (cant.) 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 Total Accumulated Depreciation Capital Assets, Net of Depreciation $ $ Beginning Balance 708,173 1,379,056 1,585,230 1,563,468 994,632 241,743 817,147 69,473 7,358,922 26,924,082 Depreciation expense was charged to functions as follows: Governmental Activities General government Public safety Public works, which includes the Additions $ 94,566 149,607 286,434 130,492 73,654 29,529 49,084 27,811 841,177 $ 1,503,755 depreciation of streets, storm sewers, traffic signals, sidewalks and bridges Leisure activities Total Governmental Activities Depreciation Expense Deletions $ $ 31,441 31,441 $ $ $ $ Ending Balance 802,739 1,528,663 1,840,223 1,693,960 1,068,286 271,272 866,231 97,284 8,168,658 28,427,837 18,465 69,825 487,526 265,361 841,177 Page 34 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) D. CAPITAL ASSETS (cont.) Beginning Ending Balance Additions Deletions Balance Water Utility Capital assets not being depreciated: Land and land rights $ 99,777 $ - $ $ 99,777 Total Capital Assets Not Being Depreciated 99,777 99,777 Capital assets being depreciated: Source of supply 319,783 319,783 Pumping 1,677,663 1,677,663 Treatment 343,242 343,242 Transmission and distribution 16,028,574 264,154 18,233 16,274,495 Administrative and general assets 464,986 33,647 19,216 479,417 Total Capital Assets Being Depreciated 18,834,248 297,801 37,449 19,094,600 Total Capital Assets 18,934,025 297,801 37,449 19,194,377 Less: Accumulated Depreciation for: Source of supply (207,790) (10,649) (218,439) Pumping (689,495) (68,253) (757,748) Treatment (323,350) (1,922) (325,272) Transmission and distribution (2,441,341) (289,583) 21,058 (2,709,866) Administrative and general assets (368,873) (48,803) 19,216 (398,460) Total Accumulated Depreciation (4,030,849) (419,210) 40,274 (4,409,785) Net Water Plant $ 14,903,176 $ (121,409) $ (2,825) $ 14,784,592 Page 35 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2004 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 11,534,654 113,266 11,647,920 Collection system pumping 1,215,786 1,215,786 Administrative and general assets 347,568 15,595 363,163 Total Capital Assets Being Depreciated 13,098,008 128,861 13,226,869 Total Capital Assets 13,164,838 128,861 13,293,699 Less: Accumulated Depreciation (2,223,232) (209,314) (2,432,546) Net Sewer Plant $ 10,941,606 $ (80,453) $ $ 10,861,153 Beginning Ending Balance Additions Deletions Balance Pleasant View Golf Course Capital assets not being depreciated: Land and land rights $ 2,216,000 $ $ $ 2,216,000 Capital assets being depreciated: Buildings 208,763 208,763 Land improvements 7,291,981 7,291,981 Equipment 315,484 28,590 344,074 Total Capital Assets Being Depreciated 7,816,228 28,590 7,844,818 Total Capital Assets 10,032,228 28,590 10,060,818 Less: Accumulated Depreciation for: Buildings (40,019) (45,238) (85,257) Land improvements (19,125) (38,249) (57,374) Equipment (115,589) (112,323) (227,912) Total Accumulated Depreciation (174,733) (195,810) (370,543) Net Golf Course Plant $ 9,857,495 $ (167,220) $ $ 9,690,275 Total Net Capital Assets: Business Type Activities $ 35,702,277 $ 35,336,020 Page 36 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) D. CAPITAL ASSETS (cont.) Depreciation expense was charged to functions as follows: Business-Type Activities Water Water - charged to sewer Sewer Pleasant View Golf Course Total Business-Type Activities Depreciation Expense E. INTERFUND RECEIVABLES/PAYABLES, ADVANCES AND TRANSFERS $ $ 370,574 52,136 205,814 195,810 824,334 The following is a schedule of interfund receivables and payables including any overdrafts on pooled cash and investment accounts: Receivable Fund General Sewer utility Sewer utility Water utility Water utility Water utility 2004 capital projects Total - Fund Financial Statements Less: Eliminations Payable Fund Water utility $ Pleasant View Golf Course General General Pleasant View Golf Course Sewer utility Water utility Total Government-Wide Financial Statements $ Amount Amount Not Due Within One Year 313,649 $ 1,600 63,283 64,314 1,600 77,190 41,770 _ 563,406 (336,200) _ 227,822 The balances resulted from the time lag between the dates that interfund goods and services are provided or reimbursable expenditures occur, transactions are recorded in the accounting system, and payments between funds are made. All amounts are due within one year. For the statement of net assets, interfund balances which are owed within the governmental activities or business-type activities are netted and eliminated. The general fund advanced funds to TIF District 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, 2004 is $719,395. Page 37 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) E. INTERFUND RECEIVABLES/PAYABLES, ADVANCES AND TRANSFERS (cont.) The general fund has also advanced funds to the Tourism Commission and Pleasant View Golf Course. No repayment schedules have been established on the advances to Pleasant View Golf Course. Interest will be charged on the advances. Repayment of the advances to the Tourism Commission fund will be made over four years at an interest rate of The following is a schedule of interfund advances: Receivable Fund General fund General fund General fund Payable Fund Pleasant View Golf Course Tourism Commission TIF District NO.3 Total - Fund Financial Statements Less: Eliminations Total - Government-Wide Financial Statements Amount $ 672,633 1,416,886 1,629,862 3,719,381 (3,046,748) $ 672,633 Amount Not Due Within One Year $ 672,633 1,416,886 1,629,862 The principal purpose of these interfunds is to finance the deficiency of revenues over expenditures and other financing sources since the fund's inception. For the statement of net assets, interfund balances which are owed within the governmental activities or business-type activities are netted and eliminated. The following is a schedule of amounts due from the component unit to the primary government: TIF NO.3 capital projects fund Component unit - CDA $ 2,998,828 This amount represents the unspent debt proceeds by the CDA that is intended to be spent on capital projects within TIF NO.3. Page 38 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) E. INTERFUND RECEIVABLES/PAYABLES, ADVANCES AND TRANSFERS (cont.) The following is a schedule of interfund transfers: Fund Transferred To Fund Transferred From Amount Principal Pur~ose General Water utility $ 312,018 Payment in lieu of tax General Economic development 87,830 Closing the fund EMS General 40,000 Ambulance purchase Capital projects Library 201,764 Library construction Southwest quadrant TIF District NO.3 554,582 Cost transferred to TIF Debt service fund General 2,556,021 Debt service Debt service fund TIF District NO.3 4,639,000 Debt service Federal seizures Drug forfeitures 3,470 Allocating for allowable uses Total - Fund Financial Statements $ 8,394,685 Governmental Fund Transferred To Fund Transferred From Activities Business-type Activities General Water utility $ 312,018 Generally, transfers are used to move revenues from the fund that collects them to the fund that the budget requires to expend them, move receipts restricted to debt service from the funds collecting the receipts to the debt service fund, and use unrestricted revenues collected in the general fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. F. LONG- TERM OBLIGA nONS Long-term obligations activity for the year ended December 31, 2004 was as follows: GOVERNMENTAL ACTIVITIES Bonds and Notes Payable: General obligation debt Other Liabilities: Unfunded pension liability Vested compensated absences Capital leases Total Other Liabilities Total Governmental Activities Long-Term Liabilities Beginning Balance Increases Decreases Ending Balance Amounts Due Within One Year $ 51,536,593 $ 8,490,000 $ 11,367,200 $ 48,659,393 $ 5,934,514 333,445 23,034 38,133 318,346 36,000 1,197,004 630,504 567,129 1,260,379 560,074 16,475,000 16,475,000 18,005,449 653,538 605,262 18,053,725 596,074 $ 69,542,042 $ 9,143,538 $ 11,972,462 $ 66,713,118 $ 6,530,588 Page 39 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) F. LONG- TERM OBLIGA nONS (cont.) BUSINESS-TYPE ACTIVITIES Bonds and Notes Payable: Beginning Balance Increases Decreases Ending Balance Amounts Due Within One Year General obligation debt $ 12,035,000 $ - $ 635,000 $ 11,400,000 $ 850,000 Other Liabilities: Vested compensated absences Total Business-type Activities Long-Term Liabilities General Obligation Debt 111,272 $ 12,146,272 $ 27,059 61,614 76,717 24,285 27,059 $ 696,614 $ 11,476,717 $ 874,285 All general obligation notes and bonds payable are backed by the full faith and credit of the city. Notes and bonds in the governmental funds will be retired by future property tax levies or tax increments accumulated by the debt service fund. Business-type activities debt is payable by revenues from user fees of those funds or, if the revenues are not sufficient, by future tax levies. In accordance with Wisconsin Statutes, total general obligation indebtedness of the city may not exceed five percent of the equalized value of taxable property within the city's jurisdiction. The debt limit as of December 31,2004, was $100,647,055. Total general obligation debt outstanding at year end was $60,059,393. Governmental Activities General Obligation Debt 1997 General obligation promissory notes 1997 General obligation promissory notes 1998 General obligation promissory notes 1999 General obligation promissory notes 2000 General obligation promissory notes Date of Issue 3-01-97 4-01-97 4-01-98 5-15-99 4-01-00 Final Maturity 3-01-07 3-01-12 9-01-08 3-01-09 3-01-10 Interest Rates 3.95%- 5.15% 3.90%- 5.40% 3.90%- 4.60% 3.50%- 4.40% 4.80%- 5.20% Original Indebted- ness 9,250,000 2,325,000 9,675,000 6,800,000 6,800,000 $ Balance 12-31-04 950,000 305,000 4,350,000 4,550,000 6,200,000 Page 40 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) F. LONG- TERM OBLIGATIONS (cont.) General Obligation Debt (cont.) Date of Governmental Activities Issue General Obligation Debt (cont.) 2001 General obligation promissory notes 3-15-01 2002 General obligation promissory notes 3-15-02 2002 State trust fund loan 11-06-02 2003 General obligation promissory notes 5-01-03 2003 State trust fund loan 1-30-03 2004 General obligation revenue bond 6-15-04 2004 General obligation promissory notes 6-15-04 Total Governmental Activities - General Obligation Debt Date of Business-Type Activities Issue General Obligation Debt 1996 General obligation promissory notes 6-01-96 1997 General obligation promissory notes 4-01-97 1999 General obligation promissory notes 5-15-99 2001 General obligation promissory notes 3-15-01 2002 General obligation promissory notes 3-15-02 2004 General obligation refunding 6-15-04 Total Business-Type Activities - General Obligation Debt Final Maturity: 3-11-11 3-01-12 3-15-19 9-01-13 3-15-19 3-01-12 3-01-14 Final Maturity: 11-01-06 3-01-12 3-01-09 3-11-11 3-01-12 3-01-12 Interest Rates 4.00% - 4.40% 2.125% - 4.50% 5.00% 2.00% - 3.40% 5.00% 2.00% - 4.00% 2.50% - 4.25% Interest Rates 4.00% - 5.15% 3.90%- 5.40% 3.50% - 4.40% 4.00%- 4.80% 2.125% - 4.50% 2.00% - 4.00% Original Indebted- Balance ness 12-31-04 $ 8,000,000 $ 7,200,000 6,250,000 5,700,000 2,170,000 2,113,489 9,980,000 9,945,000 930,000 895,904 4,540,000 4,540,000 1,910,000 1,910,000 $ 48,659,393 Original Indebted- Balance ness 12-31-04 $ 1,365,000 $ 635,000 4,155,000 545,000 500,000 270,000 2,000,000 1,925,000 6,005,000 5,985,000 2,040,000 2,040,000 $ 11,400,000 Page 41 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE IV - DETAILED NOTES ON ALL FUNDS (cant.) F. LONG- TERM OBLIGA TlONS (cant.) General Obligation Debt (cant.) Debt service requirements to maturity are as follows: Governmental Activities Business-Type Activities General Obligation Debt General Obligation Debt Principal Interest Principal Interest 2005 $ 5,934,513 $ 1,831,166 $ 850,000 $ 524,500 2006 6,041,489 1,598,968 900,000 485,185 2007 6,118,814 1,380,422 965,000 433,405 2008 5,491,152 1,153,224 1,020,000 386,802 2009 5,589,562 922,331 1,085,000 336,197 2010 - 2014 18,228,500 1,674,822 4,970,000 886,558 2015 - 2019 1,255,363 194,566 1,610,000 77,706 Totals $ 48,659,393 $ 8,755,499 $ 11,400,000 $ 3,130,353 Totals $ 9,140,179 9,025,642 8,897,641 8,051,178 7,933,090 25,759,880 3,137,635 $ 71,945,245 Estimated payments of accumulated employee benefits and other commitments are not included in the above schedule. Also, the capital lease principal and interest requirements are not included. They are equal to the CDA's lease revenue bonds required payments. See Note IV.J. for the repayment schedule. $15,290 is on deposit in the debt service fund which is available to meet the above debt service requirements as of December 31, 2004. Capital Leases Refer to Note IV.G. Advance Refunding On June 15, 2004, the City of Middleton issued $6,580,000 in general obligation bonds with an average interest rate of 3.49 percent to advance refund $6,405,000 of outstanding general obligation bonds with various average interest rates. The net proceeds of $6,593,711 (after payment of notes and underwriting fees, insurance and other issuance costs) plus an additional $119,000 of city funds were used to purchase U.S. government securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for portions of future debt service payments on the 1996 general obligation notes, 1997 general obligation notes and 1997 general obligation bonds. As a result, these notes and bonds are considered to be defeased and the liability for those bonds has been removed from these financial statements. The cash flow requirements on the refunded bonds and notes prior to the advance refunding was $7,125,673 from 2005 through 2012. The cash flow requirements on the refunding bonds are $11,417,197 from 2005 through 2012. The advance refunding resulted in an economic gain (difference between the present values of the debt service payments on the old and new debt) of $154,467. Page 42 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) F. LONG- TERM OBLIGA nONS (cont.) Other Debt Information Estimated payments of compensated absences are not included in the debt service requirement schedules. The compensated absences liability attributable to governmental activities will be liquidated primarily by the general fund. There are a number of limitations and restrictions contained in the various bond indentures and loan agreements. The city believes it is in compliance with all significant limitations and restrictions, including federal arbitrage regulations. Prior- Year Defeasance of Debt In prior years, the city defeased certain general obligation bonds by placing the proceeds of new bonds into an irrevocable trust to provide for all future debt service payments on the old bonds. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the city's financial statements. At December 31, 2004, $5,845,000 of bonds outstanding are considered defeased. The bonds are callable on November 1, 2006. G. LEASE DISCLOSURES Lessee - Capital Leases The Tax Increment District NO.3 (TIF 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. Tax increment revenues generated by TIF No. 3 are expected to be paid over to the CDA to make the debt payments. Lessee - Operating Leases In March of 2000, the city entered into a 61 month operating lease agreement for golf carts. Annual lease payments total $29,353. 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 43 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 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, 2004 include the following: Governmental Activities Invested in capital assets, net of related debt Land Right of ways Construction in progress Other capital assets, net of accumulated depreciation Less: related long-term debt outstanding (excluding unspent capital related debt proceeds) Total Invested in Capital Assets, Net of Related Debt Restricted: Subdivider's deposits Park improvements Police enforcement EMS Library Economic development Senior citizens Total Restricted Unrestricted (deficit) Total Governmental Activities Net Assets $ 6,412,939 17,338,287 6,366,946 28,427,837 {49,124,023) 9,421,986 1,351,493 8,253 20,090 27,198 176,778 231,913 52,168 1,867,893 {9,979,133) $ 1,310,746 Governmental fund balances reported on the fund financial statements at December 31, 2004 include the following: Reserved Major Funds General Fund Delinquent personal property taxes Advances Total $ 69,725 2,999,986 $ 3,069,711 Page 44 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) H. GOVERNMENTAL ACTIVITIES NET ASSETS/FuND BALANCES (cont.) Governmental Activities (cont.) Reserved (cont.) Major Funds (cont.) Debt Service Fund Debt service TID No.3 Capital Projects Fund Reserved for debt service Reserved for encumbrances Reserved for loans Total 2004 capital projects fund Unreserved - Designated General Fund 2005 budget Unreserved - Undesignated (Deficit) Major Funds General fund TID No.3 capital projects fund Capital projects fund Non-Major Funds (Deficit) Special Revenue Funds Subdividers' deposits Land and park donations Drug evidence Cable TV Youth commission donations EMS Lost and damaged book Library gift EMS equipment replacement Library endowment Economic development Economic development grant Airport Alcohol awareness Drug forfeitures Federal seizures Senior citizen Tourism commission Total $ 15,290 $ 1,634,262 798,736 35,133 $ 2,468,131 $ 296,264 $ 587,000 $ 2,327,460 (775,685) $ 777,702 $1,351,493 8,253 4,501 115,085 5,557 27,198 14,760 23,618 204,280 153,160 231,913 36,816 6,474 6,748 8,841 52,168 (1,330,019) $ 920,846 Page 45 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 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 $ 19,194,377 $ 13,293,699 $ 10,057,618 $ 42,545,694 Accumulated depreciation (4,409,785) (2,432,546) (370,543) (7,212,874) Sub-Total 14,784,592 10,861,153 9,687,075 35,332,820 Less: Current portion of capital related long-term debt 175,000 140,000 535,000 850,000 Long-term portion of capital related long-term debt 1,525,000 1,015,000 8,010,000 10,550,000 Unamortized debt issuance costs (7,250) (11,569) (18,819) Sub-Total 1,692,750 1,143,431 8,545,000 11,381,181 Total Net Assets Invested in Capital Assets, Net of Related Debt $ 13,091,842 $ 9,717,722 $ 1,142,075 $ 23,951,639 Restricted Equipment replacement $ - $ 39,606 $ - $ 39,606 Unrestricted (Deficit) $ 3,917,870 $ 3,375,675 $ (830,925) $ 6,462,620 I. RESTATEMENT OF NET ASSETS/FuND BALANCE Fund balance of the drug forfeiture and drug evidence funds has been restated to record revenue that had been incorrectly added to drug evidence instead of drug forfeiture. Non-major Funds Drug forfeiture Drug evidence Total $ $ 1,833 (1,833) Page 46 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31,2004 NOTE IV - DETAILED NOTES ON ALL FUNDS (cont.) I. RESTATEMENT OF NET ASSETS/FuND BALANCE (cont.) Net assets have been restated due to incorrectly capitalizing work in progress in prior years. Governmental Activities Net Assets - December 31, 2003 (as reported) Less: Construction work in progress contributed to developer Net Assets (Deficit) - January 1, 2004 (as restated) J. COMPONENT UNIT $ 3,059,342 (6,000,386) $ (2,941,044) This report contains the Community Development Authority (CDA), which is included as a component unit. Financial information is presented as a discrete column in the statement of net assets and statement of activities. In addition to the basic financial statements and the preceding notes to financial statements which apply, the following additional disclosures are considered necessary for a fair presentation. a. Basis of Accounting/Measurement Focus The CDA follows the full accrual basis of accounting and the flow of economic resources measurement focus. b. Restricted Cash and Investments The bond ordinance relating to the CDA bonds requires the establishment of certain accounts. These are as follows: Construction fund Capitalized interest Debt reserve fund Total $ 1,364,561 39,213 1,595,054 $ 2,998,828 Page 47 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE IV - DETAILED NOTES ON ALL FUNDS (cant.) J. COMPONENT UNIT (cant.) 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 1-1-04 October 1, 2020. $ 7,375,000 $ 2002 redevelopment lease revenue bonds dated August 15, 2002 with interest at 4.3%-6.65%. Principal payments vary. Bonds mature October 1, 2020. Less: Unamortized debt discount 9,100,000 (215,240) Increases Decreases Balance 12-31-04 - $ - $ 7,375,000 9,100,000 (12,850) (202,390) Totals $ 16,259,760 $ (12,850) $ 16,272,610 Debt service requirements to maturity are as follows: Principal Interest Totals 2005 $ - $ 840,042 $ 840,042 2006 790,000 840,042 1,630,042 2007 815,000 812,532 1,627,532 2008 850,000 781,670 1,631,670 2009 885,000 746,258 1,631,258 2010-2014 5,065,000 3,070,690 8,135,690 2015 - 2019 6,535,000 1,596,784 8,131,784 2020 1,535,000 89,812 1,624,812 Totals $ 16,475,000 $ 8,777,830 $ 25,252,830 Page 48 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 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 5.4% of their salary (2.6% for Executives and Elected Officials, 4.0% for Protective Occupations with Social Security, and 2.4% 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, 2004 was $5,502,866; the employer's total payroll was $6,071,186. The total required contribution for the year ended December 31, 2004 was $664,451 or 12.1 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 31,2003 and 2002 were $586,167 and $513,672, 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, 2004 was $318,346. 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 49 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE V - OTHER INFORMATION (cont.) C. COMMITMENTS AND CONTINGENCIES From time to time, the city is party to various pending claims and legal proceedings. Although the outcome of such matters cannot be forecasted with certainty, it is the opinion of management and the city's legal counsel that the likelihood is remote that most of such claims or proceedings will not have a material adverse effect on the city's financial position or results of operations. However, the city is involved in a claim for refund of personal property taxes that it is vigorously defending. The possibility exists that the city may not be able to collect this receivable. In addition, a claim has been filed that may have an unfavorable outcome. Funding for the operating budget of the city comes from many sources, including property taxes, grants and aids from other units of government, user fees, fines and permits, and other miscellaneous revenues. The State of Wisconsin provides a variety of aid and grant programs which benefit the city. Those aid and grant programs are dependent on continued approval and funding by the Wisconsin governor and legislature, through their budget processes. The State of Wisconsin is currently experiencing budget problems, and is considering numerous alternatives including reducing aid to local governments. Any changes made by the State to funding or eligibility of local aid programs could have a significant impact on the future operating results of the city. The city has received federal and state grants for specific purposes that are subject to review and audit by the grantor agencies. Such audits could lead to requests for reimbursements to the grantor agency for expenditures disallowed under terms of the grants. Management believes such disallowances, if any, would be immaterial. As stated in Note V.D., the city jointly operates the Metropolitan Refuse District, Inc. (District). The District's fund balance at September 30, 2004 is a deficit of $730,552. 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 59%, which amounts to $431,025 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. 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 59% 6 35 Page 50 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO FINANCIAL STATEMENTS December 31, 2004 NOTE V - OTHER INFORMATION (cont.) D. JOINT VENTURES (cont.) Metropolitan Refuse District, Inc. (cont.) 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 $50,150 to the District in 2004. The city has an equity interest (deficit) of $(431,025) at year end. The city will continue to support the District's postclosure care costs in the future. The District's landfill is being monitored for possible groundwater contamination as required by the Wisconsin Department of Natural Resources. The costs for groundwater monitoring are being budgeted for on an annual basis. At the current time it is not possible to determine if extensive contamination has occurred and the effects, if any, on the District's financial statements. Multijurisdictional Public Safety Information System Commission (MJPISC) The City of Fitchburg, City of Sun Prairie, and City of Middleton jOintly operate the Multijurisdictional Public Safety Information System Commission. On March 20, 2003, the City of Middleton, City of Fitchburg, and City of Sun Prairie executed an intergovernmental agreement under authority of Section 66.0301 of the Wisconsin Statutes. The commission adopts its own budget. Net operating costs including debt service are shared by the three communities equally. The department is governed by the Intermunicipal Commission. The commission consists of one representative from each community. The transactions of the commission are not reflected in these financial statements. The city does not have an equity interest in this joint venture. 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 $428,878 to the District in 2004 for operating expenses. The city believes that the District will continue to provide services in the future at similar rates. In 2004, the city also contributed $161,265 for its share of land for a new fire station. The transactions of the District are not reflected in these financial statements. The city does not have an equity interest in this joint venture. Page 51 ---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, 2004 Budgeted Amounts Original Final Actual REVENUES Taxes $ 8,556,585 $ 8,556,585 $ 8,608,066 Intergovernmental 2,156,358 2,156,358 2,146,521 Licenses and permits 443,675 443,675 689,323 Fines, forfeitures and penalties 203,000 203,000 231,185 Public charges for services 831,036 831,036 754,345 Interdepartmental charges for services 149,720 149,720 158,936 Special assessments 25,287 25,287 74,236 Investment income 148,000 148,000 159,934 Miscellaneous 610,984 610,984 1,674,394 Total Revenues 13,124,645 13,124,645 14,496,940 EXPENDITURES Current General government 1,813,012 1,813,012 1,467,562 Public safety 4,614,167 4,614,167 4,658,718 Public works 2,089,695 2,089,695 1,995,342 Leisure activities 2,366,284 2,366,284 2,417,364 Conservation and development 253,966 253,966 200,409 Total Expenditures 11,137,124 11,137,124 10,739,395 Excess of revenues over expenditures 1,987,521 1,987,521 3,757,545 OTHER FINANCING SOURCES (USES) Transfers in 381,000 381,000 399,848 Transfers out {2,556,021) {2,556,021) {2,596,021) Total Other Financing Sources (Uses) {2,175,021) {2,175,021) 196, 173) Net Change in Fund Balance (187,500) (187,500) 1,561,372 FUND BALANCE - Beginning 4,422,799 4,422,799 4,422,799 FUND BALANCE - ENDING $ 4,235,299 $ 4,235,299 $ 5,984,171 See accompanying notes to required supplementary information. Variance with Final Budget $ 51,481 (9,837) 245,648 28,185 (76,691) 9,216 48,949 11,934 1,063,410 1,372,295 345,450 (44,551) 94,353 (51,080) 53,557 397,729 1,770,024 18,848 {40,000) {21,152) 1,748,872 $ 1,748,872 Page 52 ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND SCHEDULE OF REVENUES COMPARED TO BUDGET - BUDGET AND ACTUAL For the Year Ended December 31, 2004 Budgeted Amounts Variance with Original Final Actual Final Budget TAXES General property tax $ 8,409,585 $ 8,409,585 $ 8,409,455 $ (130) Fees in lieu of taxes 25,000 25,000 44,110 19,110 Room tax 120,000 120,000 152,624 32,624 Interest on taxes 2,000 2,000 1,877 (123) TOTALS $ 8,556,585 $ 8,556,585 $ 8,608,066 $ 51,481 INTERGOVERNMENTAL REVENUES Shared taxes from state $ 353,538 $ 353,538 $ 362,878 $ 9,340 State aid - road allotment 876,278 876,278 875,874 (404) State aid - exempt computer aid 233,244 233,244 206,311 (26,933) State aid - fire insurance dues 61,930 61,930 64,876 2,946 State aid - miscellaneous grants 11,000 11,000 10,233 (767) Federal and state aid - other 71,500 71,500 71,605 105 County aid - library 435,060 435,060 441,526 6,466 County aid - signals 10,000 10,000 9,670 (330) County aid - senior citizens 44,851 44,851 47,504 2,653 School district payments for liaison officer 58,957 58,957 56,044 (2,913) TOTALS $ 2,156,358 $ 2,156,358 $ 2,146,521 $ (9,837) LICENSES AND PERMITS Liquor and malt beverage licenses $ 26,500 $ 26,500 $ 40,917 $ 14,417 Operators' licenses 5,000 5,000 7,035 2,035 Contractor's licenses 6,300 6,300 5,780 (520) Alarm licenses 9,000 9,000 6,265 (2,735) Cigarette licenses 250 250 170 (80) Bicycle licenses 200 200 124 (76) Dog and cat licenses 325 325 476 151 Cable TV franchise license 130,000 130,000 130,000 Other miscellaneous licenses 400 400 465 65 Building permits 150,000 150,000 289,557 139,557 Recycling permits 5,000 5,000 4,530 (470) Electrical permits 45,000 45,000 81,517 36,517 Plumbing permits 47,000 47,000 84,010 37,010 Erosion control permits 10,000 10,000 25,785 15,785 Park reservation permits 8,700 8,700 12,692 3,992 TOTALS $ 443,675 $ 443,675 $ 689,323 $ 245,648 FINES, FORFEITURES AND PENAL TIES Court penalties $ 135,000 $ 135,000 $ 146,515 $ 11,515 Parking violations 37,000 37,000 49,635 12,635 Court costs 31,000 31,000 35,035 4,035 TOTALS $ 203,000 $ 203,000 $ 231,185 $ 28,185 See accompanying notes to required supplementary information. Page 53 ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND SCHEDULE OF REVENUES COMPARED TO BUDGET - BUDGET AND ACTUAL (cont) For the Year Ended December 31, 2004 Budgeted Amounts Variance with Original Final Actual Final Budget PUBLIC CHARGES FOR SERVICES Clerk fees $ 15,000 $ 15,000 $ 12,084 $ (2,916) Police special services 19,775 19,775 8,859 (10,916) Police department fees 30,000 30,000 31,900 1,900 Ambulance services 360,000 360,000 308,670 (51,330) EMS fixed cost abatement 53,386 53,386 59,521 6,135 Plan commission charges 10,000 10,000 5,957 (4,043) Senior citizens 25,000 25,000 14,574 (10,426) Swimming pool 224,250 224,250 194,536 (29,714) Summer recreation 51,225 51,225 65,659 14,434 Public works charges 5,000 5,000 24,346 19,346 Other recreation 36,000 36,000 26,540 (9,460) Zoning 1,400 1,400 1,699 299 TOTALS $ 831,036 $ 831,036 $ 754,345 $ (76,691) INTERDEPARTMENTAL CHARGES FOR SERVICES Administration reimbursements - utilities $ 94,000 $ 94,000 $ 103,216 $ 9,216 Administration reimbursements - TIF 50,000 50,000 50,000 Administration reimbursements - Landfill 5,000 5,000 5,000 Administration reimbursements - Fire District 720 720 720 TOTALS $ 149,720 $ 149,720 $ 158,936 $ 9,216 SPECIAL ASSESSMENTS Curb, gutter and sidewalks $ 21,042 $ 21,042 $ 69,890 $ 48,848 Interest on special assessments 4,245 4,245 4,346 101 TOTALS $ 25,287 $ 25,287 $ 74,236 $ 48,949 INVESTMENT INCOME Investment income $ 148,000 $ 148,000 $ 159,934 $ 11,934 MISCELLANEOUS Rent of city buildings and offices $ 101,945 $ 101,945 $ 18,074 $ (83,871) Compensation for loss of fixed assets 24,126 24,126 Refund of prior year's expenditures 25,000 25,000 38,899 13,899 Sale of city property 458,339 458,339 1,563,554 1,105,215 Sale of materials 700 700 4,741 4,041 Pool contribution 25,000 25,000 25,000 TOTALS $ 610,984 $ 610,984 $ 1,674,394 $ 1,063,410 OTHER FINANCING SOURCES Transfer In - Water Utility $ 295,000 $ 295,000 $ 312,018 $ 17,018 Transfer In - Other 86,000 86,000 87,830 1,830 TOTALS $ 381,000 $ 381,000 $ 399,848 $ 18,848 TOTAL REVENUES AND OTHER FINANCING SOURCES $ 13,505,645 $ 13,505,645 $ 14,896,788 $ 1,391,143 See accompanying notes to required supplementary information. Page 54 ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND SCHEDULE OF EXPENDITURES COMPARED TO BUDGET - BUDGET AND ACTUAL For the Year Ended December 31, 2004 Budgeted Amounts Variance with CURRENT EXPENDITURES Original Final Actual Final Budget GENERAL GOVERNMENT Council $ 41,338 $ 41,338 $ 40,255 $ 1,083 Police commission 4,750 4,750 5,014 (264) Landmarks commission 600 600 370 230 Middleton youth commission 20,035 20,035 19,754 281 Municipal court 64,333 64,333 65,704 (1,371) General administration 492,666 492,666 488,512 4,154 Information technology 258,117 258,117 239,283 18,834 Independent auditing 12,000 12,000 20,155 (8,155) Legal counseling 135,000 135,000 150,606 (15,606) Special legal counsel 10,000 10,000 3,038 6,962 Buildings and grounds 105,734 105,734 111,612 (5,878) Illegal taxes and tax refunds 5,000 5,000 5,148 (148) Property and liability insurance 300,000 300,000 300,607 (607) Board of review 375 375 266 109 Additional expenditures - prior years 5,000 5,000 5,000 Emergency preparedness 9,404 9,404 6,103 3,301 Income continuation insurance 16,440 16,440 2,519 13,921 Contingency 322,620 322,620 322,620 Group life insurance 9,600 9,600 8,616 984 TOTALS $ 1,813,012 $ 1,813,012 $ 1,467,562 $ 345,450 PUBLIC SAFETY Police administration $ 395,280 $ 395,280 $ 376,782 $ 18,498 Police patrol 2,289,325 2,289,325 2,410,006 (120,681 ) Training 25,100 25,100 25,068 32 Police uniform allowance and equipment 14,375 14,375 14,942 (567) School patrol 11,727 11,727 11,214 513 Fire suppression 420,887 420,887 428,878 (7,991) Public fire protection 380,000 380,000 371,614 8,386 Building inspector 82,614 82,614 81,227 1,387 Electrical inspector 75,775 75,775 75,827 (52) Plumbing inspection 46,706 46,706 43,440 3,266 Sealer of weights and measures 4,400 4,400 4,400 Erosion control enforcement 10,000 10,000 22,041 (12,041) EMS 576,177 576,177 526,372 49,805 Communications 281,801 281,801 266,907 14,894 TOTALS $ 4,614,167 $ 4,614,167 $ 4,658,718 $ (44,551) See accompanying notes to required supplementary information. Page 55 ---PAGE BREAK--- CITY OF MIDDLETON GENERAL FUND SCHEDULE OF EXPENDITURES COMPARED TO BUDGET - BUDGET AND ACTUAL (cont.) For the Year Ended December 31, 2004 Budgeted Amounts Variance with CURRENT EXPENDITURES Original Final Actual Final Budget PUBLIC WORKS Public works administration $ 429,619 $ 429,619 $ 437,112 $ (7,493) Machinery 189,861 189,861 187,509 2,352 Garage 37,900 37,900 39,690 (1,790) Protective equipment 2,300 2,300 2,176 124 Engineering 523,416 523,416 489,849 33,567 Street maintenance 47,707 47,707 40,356 7,351 Street cleaning 6,000 6,000 6,515 (515) Snow and ice control 45,000 45,000 33,243 11,757 Traffic signs and markings 27,000 27,000 17,914 9,086 Traffic signals 35,300 35,300 32,048 3,252 Street lighting 62,000 62,000 71,849 (9,849) Tree and brush 2,000 2,000 416 1,584 Storm sewers 10,500 10,500 11,050 (550) Mass transit 194,292 194,292 196,949 (2,657) Garbage collection 270,000 270,000 280,279 (10,279) Sanitary landfill 50,500 50,500 50,200 300 Leaf pick-up 61 (61 ) Recycling 156,300 156,300 98,126 58,174 TOTALS $ 2,089,695 $ 2,089,695 $ 1,995,342 $ 94,353 LEISURE ACTIVITIES Library $ 1,101,065 $ 1,101,065 $ 1,172,829 $ (71,764) Senior citizens center 315,336 315,336 281,335 34,001 Recreation administration 45,645 45,645 48,712 (3,067) Swimming pool 249,075 249,075 222,651 26,424 Summer recreation 56,000 56,000 71,711 (15,711) Other recreation 84,910 84,910 93,914 (9,004) Parks 514,253 514,253 526,212 (11,959) TOTALS $ 2,366,284 $ 2,366,284 $ 2,417,364 $ (51,080) CONSERVATION AND DEVELOPMENT Forestry $ - $ - $ 176 $ (176) Water resources 22,880 22,880 14,480 8,400 Conservancy land commission 84,212 84,212 36,169 48,043 Planning commission 146,874 146,874 149,584 (2,710) TOTALS $ 253,966 $ 253,966 $ 200,409 $ 53,557 OTHER FINANCING USES Transfers out - debt service fund $ 2,556,021 $ 2,556,021 $ 2,556,021 $ Transfers out - EMS equipment replacement fund 40,000 (40,000) TOTALS $ 2,556,021 $ 2,556,021 $ 2,596,021 $ (40,000) TOTAL EXPENDITURES AND OTHER FINANCING SOURCES $13,693,145 $13,693,145 $ 13,335,416 $ 357,729 See accompanying notes to required supplementary information. Page 56 ---PAGE BREAK--- CITY OF MIDDLETON NOTES TO REQUIRED SUPPLEMENTARY INFORMATION December 31, 2004 BUDGETARY INFORMATION Budgetary information is derived from the annual operating budget and is presented using generally accepted accounting principles and the modified accrual basis of accounting. Excess expenditures over appropriations are as follows: Amended Budget EXl2enditures Excess General Fund Current Expenditures Police commission $ 4,750 $ 5,014 $ 264 Municipal court 64,333 65,704 1,371 Independent auditing 12,000 20,155 8,155 Legal counseling 135,000 150,606 15,606 Buildings and grounds 105,734 111,612 5,878 Illegal taxes and tax refunds 5,000 5,148 148 Property and liability insurance 300,000 300,607 607 Police patrol 2,289,325 2,410,006 120,681 Police uniform allowance and equipment 14,375 14,942 567 Fire suppression 420,887 428,878 7,991 Electrical inspector 75,775 75,827 52 Erosion control enforcement 10,000 22,041 12,041 Public works administration 429,619 437,112 7,493 Garage 37,900 39,690 1,790 Street cleaning 6,000 6,515 515 Street lighting 62,000 71,849 9,849 Storm sewers 10,500 11,050 550 Mass transit 194,292 196,949 2,657 Garbage collection 270,000 280,279 10,279 Leaf pick-up 61 61 Library 1,101,065 1,172,829 71,764 Recreation administration 45,645 48,712 3,067 Summer recreation 56,000 71,711 15,711 Other recreation 84,910 93,914 9,004 Parks 514,253 526,212 11,959 Forestry 176 176 Planning commission 146,874 149,584 2,710 Page 57 ---PAGE BREAK--- SUPPLEMENTARY INFORMATION ---PAGE BREAK--- ASSETS Cash and investments Accounts receivable Interest receivable Due from other funds TOTAL ASSETS LIABILITIES AND FUND BALANCES Accounts payable Due to other funds Advances from other funds Total Liabilities Fund Balances Unreserved Undesignated (deficit) Total Fund Balances TOTAL LIABILITIES AND FUND BALANCES CITY OF MIDDLETON COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS December 31, 2004 Special Revenue Funds Sub- Land and Youth dividers' Park Drug Cable Commission Deposits Donations Evidence TV Donations EMS $ 1,351,493 $ 8,253 $ 4,501 $ 67,459 $ 5,557 $ 27,198 47,626 $ 1,351,493 8,253 $ 4,501 $ 115,085 $ 5,557 $ 27,198 $ - $ - $ - $ - $ - $ - 1,351,493 8,253 4,501 115,085 5,557 27,198 1,351,493 8,253 4,501 115,085 5,557 27,198 $ 1,351,493 $ 8,253 $ 4,501 $ 115,085 $ 5,557 $ 27,198 Lost and EMS Damaged Library Equipment Book Gift ~Iacement $ 22,807 $ 23,618 $ 200,390 3,890 $ 22,807 $ 23,618 $ 204,280 $ 4,274 $ - $ 4,274 18,533 23,618 204,280 18,533 23,618 204,280 $ 22,807 $ 23,618 $ 204,280 Page 58 ---PAGE BREAK--- ASSETS Cash and investments Accounts receivable Interest receivable Due from other funds TOTAL ASSETS LIABILITIES AND FUND BALANCES Accounts payable Due to other funds Advances from other funds Total Liabilities Fund Balances Unreserved Undesignated (deficit) Total Fund Balances TOTAL LIABILITIES AND FUND BALANCES CITY OF MIDDLETON COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS (cont.) December 31, 2004 S[lecial Revenue Funds Economic Economic Develop- Library Develop- ment Alcohol Drug Federal Endowment ment ~ort Grant Awareness Forfeitures Seizures $ 149,387 $ - $ 30,400 $ 233,487 $ 6,474 $ 6,748 $ 8,841 6,416 $ 149,387 $ - $ 36,816 $ 233,487 $ 6,474 $ 6,748 $ 8,841 $ - $ - $ - $ 1,574 $ - $ - $ - 1,574 149,387 36,816 231,913 6,474 6,748 8,841 149,387 36,816 231,913 6,474 6,748 8,841 $ 149,387 $ - $ 36,816 $ 233,487 $ 6,474 $ 6,748 $ 8,841 Total Nonmajor Senior Tourism Govemmental Citizen Commission Funds $ 52,168 $ - $ 2,198,781 97,827 151,869 3,890 $ 52,168 $ 97,827 $ 2,354,540 $ - $ 10,960 $ 16,808 1,416,886 1,416,886 1,427,846 1,433,694 52,168 (1,330,019) 920,846 52,168 (1,330,019) 920,846 $ 52,168 $ 97,827 $ 2,354,540 Page 59 ---PAGE BREAK--- REVENUES Taxes Intergovernmental Public charges for services Special assessments Investment income Miscellaneous Total Revenues EXPENDITURES Current: Public safety Leisure activities Conservation and development Debt service: Interest and fiscal charges Total Expenditures Excess (deficiency) of revenues over expenditures OTHER FINANCING SOURCES (USES) Transfers In Transfers Out Total Other Financing Sources (Uses) Net change in fund balance FUND BALANCES (DEFICIT) - Beginning of Year FUND BALANCES (DEFICIT) - END OF YEAR CITY OF MIDDLETON COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS For the Year Ended December 31, 2004 Sf2ecial Revenue Funds Sub- Land and Youth dividers' Park Drug Cable Commission Def20sits Donations Evidence TV Donations EMS $ $ $ $ $ $ 3,727 339,243 47,626 5,617 474 8,352 339,243 5,617 474 47,626 8,352 3,727 5,148 11,220 4,603 151,089 151,089 5,148 11,220 4,603 188,154 469 474 36,406 3,749 3,727 188,154 469 474 36,406 3,749 3,727 1,163,339 7,784 4,027 78,679 1,808 23,471 $1,351,493 $ 8,253 $ 4,501 $ 115,085 $ 5,557 $ 27,198 Lost and EMS Damaged Library Equipment Book Gift ~Iacement $ $ $ 54,989 16,276 54,989 16_,276 47,927 3,149 47,927 3,149 7,062 13,127 40,000 40,000 7,062 13,127 40,000 11,471 10,491 164,280 $ 18,533 $ 23,618 $ 204,280 Page 60 ---PAGE BREAK--- CITY OF MIDDLETON COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS For the Year Ended December 31,2004 Capital Project S[lecial Revenue Funds Fund Economic Economic Nonmajor Library Develop- Development Alcohol Drug Federal Senior Tourism Southwest Governmental Endowment ment Air[lort Grant Awareness Forfeitures Seizures Citizen Commission ---.9.uadrant Funds REVENUES Taxes $ $ $ $ $ $ $ $ $ 356,122 $ $ 356,122 Intergovernmental 3,727 Public charges for services 41,028 482,886 Special assessments 15,274 15,274 Investment income 9,602 155 934 1,070 11,761 Miscellaneous 4,252 6,218 13,243 13,047 200,167 267,646 Total Revenues 9,602 155 41,028 934 4,252 6,218 13,243 13,047 556,289 16,344 ~416 EXPENDITURES Current: Public safety 2,115 7,872 9,987 Leisure activities 7,042 28,013 Conservation and development 2,947 9,761 877,859 1,092,732 Debt service: Interest and fiscal charges 42,268 42,268 Total Expenditures 2,947 9,761 2,115 7,872 7,042 920,127 ~OOO Excess (deficiency) of revenues over expenditures 9,6Q~ (2,792) 31,267 934 2,137 6,218 5,371 6,005 (363,838) 16,344 (35,584) OTHER FINANCING SOURCES (USES) Transfers In 3,470 554,582 598,052 Transfers Out (201,764) (87,830) (3,470) (293,064) Total Other Financing Sources (Uses) (201,764) (87,830) (3,470) 3,470 554,582 304,988 Net change in fund balance (192,162) (90,622) 31,267 934 2,137 2,748 8,841 6,005 (363,838) 570,926 269,404 FUND BALANCES (DEFICIT) - Beginning of Year 341,549 90,622 5,549 230,979 4,337 4,000 46,163 (966,181) (570,926) 651,442 FUND BALANCES (DEFICIT) - END OF YEAR $ 149,387 $ $ 36,816 $ 231,913 $ 6,474 $ 6,748 $ 8,841 $ 52,168 $ (1 ,330,019) $ - $ 920,846 Page 61 ---PAGE BREAK--- CITY OF MIDDLETON COMBINING STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS December 31,2004 Fire District Tax Roll Fund MJPSISC ASSETS Cash and investments $16,320,149 $ - $ 128,063 Taxes receivable 8,732,375 Accounts receivable 81,324 31,236 Prepaid items 16,394 Due from other governmental units 616 TOTAL ASSETS $25,052,524 $ 97,718 $ 159,915 LIABILITIES Accounts payable $ - $ 80,820 $ 159,915 Due to other funds 16,898 Due to other governmental units 25,052,524 TOTAL LIABILITIES $25,052,524 $ 97,718 $ 159,915 Totals $ 16,448,212 8,732,375 112,560 16,394 616 $ 25,310,157 $ 240,735 16,898 25,052,524 $ 25,310,157 Page 62 ---PAGE BREAK--- CITY OF MIDDLETON STATEMENT OF CASH FLOWS - COMPONENT UNIT For the Year Ended December 31,2004 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers Cash paid to suppliers for goods and services Net Cash Flows From Operating Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Paid to primary government Interest paid Capital lease payments received Net Cash Flows From Capital and Related Financing Activities Net Decrease in Cash and Cash Equivalents CASH AND CASH EQUIVALENTS - Beginning of Year CASH AND CASH EQUIVALENTS - END OF YEAR RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH FROM OPERATING ACTIVITIES Operating income (loss) Changes in Noncash Components of Working Capital Accounts payable NET CASH FLOWS FROM OPERATING ACTIVITIES NONCASH INVESTING, CAPITAL AND RELATED FINANCING ACTIVITIES: None $ Component Unit - CDA 66,889 (36,926) 29,963 (3,720,823) (840,040) 846,555 (3,714,308) (3,684,345) 7,416,586 $ 3,732,241 $ $ (23,825) (811 ) (24,636) Page 63