Revenue categories with a significant budget variance during 2000 included:
October 30, 2001
Mayor Susan
J.M. Bauman
210 Martin Luther King, Jr. Blvd.
Room 403
Madison, WI 53709
Dear Mayor
Bauman:
The Annual Financial Report of the City of Madison, Wisconsin, for the year
ended December 31, 2000 is hereby submitted. A summary of significant
financial transactions and highlights follows.
General Fund revenue exceeded budget by $5,278,514. Actual 2000 revenues
increased by a total of $9,210,674, or 6.35% over 1999. The variations between
budgeted and actual revenues occurred in the following areas:
Revenue categories with a significant budget variance during 2000 included:
Licenses and Permits
- Building permit revenues continued at a higher-than-anticipated level. During
2000, building permit revenue was $3,075,370 compared to a budget of $2,000,000.
In 1999 building permit revenue was $2,529,765.
Fines and Forfeitures
- Actual 2000 parking violations totaled $3,346,348 compared to the budgeted
amount of $3,000,000.
Charges for Services
- The majority of this favorable variance originates from higher than expected
cable franchise fees. Actual fees for 2000 totaled $1,481,305 compared to the
budgeted amount of $1,100,000. The remaining favorable variance stems from
higher than expected charges for Engineering and other services.
Interest on Investments - Interest income exceeded budget by $2,872,597. It is difficult to
accurately forecast interest income since it is subject to fluctuating market
rates. Budgeted interest income for 2000 was $4,200,000 compared to 1999 actual
interest revenue of $3,861,789.
Other Revenues -
Other revenue fell short of the 2000 budgeted amount of $1,280,000 by $242,604.
This is the result of lower than anticipated TIF reimbursements.
Property Taxes and
Intergovernmental Revenues – Property taxes remain the primary revenue
source for City operations and have continued to grow as a percentage of total
revenues, from 53.02% in 1991 to 61.85% in 2000.
This increasing reliance upon the property tax comes as a result of the
stagnation in state and federal general revenue sources during the same period.
Since 1991, intergovernmental revenues have remained relatively constant
and have, therefore, declined from 29.45% to 21.52% of total general fund
revenues.
The growth in property tax collections during this decade has been matched by a corresponding strong growth in the local tax base. The City mill rate has declined, as a result, in each of the last 9 years.
General Fund Expenditures
Total General Fund
expenditures were $151,678,647 compared to a budget of $153,088,996 for a
positive variance of $1,410,349. Actual expenditures during 2000 represented a
3.7% increase over the 1999 level of $146,245,328. The increase by function
follows:
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Significant budget variances include:
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(General Fund Financial Statements)
Special Revenue Funds
Library - The 2000 Library expenditure budget was $9,255,876. Of that
amount $7,383,625 was funded by the property tax. The remainder comes from
revenue collected from other communities, Dane County and grants. By adopted
policy, any unspent funds at year-end remain in the Library Fund for future use.
In 2000 actual Library expenditures were $9,086,090. The Library ended its year
with a $345,267 favorable net budget variance.
(Special Revenue Funds
Financial Statements)
Debt Service Fund
In accordance with GAAP, the City maintains a Debt Service Fund for the
accounting of debt service requirements. In 2000, the City budgeted $19,197,757
for the General Fund payment toward debt service. Overall, the City’s debt
service and debt management policies have contributed to the City’s continued
Aaa rating. Those policies center on maintaining low ratios of outstanding debt
to debt limits and debt service as a percent of operating budget in conjunction
with relatively short-term (10 year) debt.
The ratio of General Fund debt service payments to total expenditures follows:
The City’s general
outstanding debt as a percentage of assessed value for the last two years is:
In 2000, the City issued a
$25,000,000 general obligation note to fund projects contained in the 2000
Capital Budget. The interest rate on the issue is 5.50%.
(Debt Service Fund
Financial Statements)
Capital Project Funds
Capital Improvement Funds - Capital improvement funds are used to account
for the proceeds from general obligation bonds and notes, and for direct
appropriations from the general fund to approved capital improvement projects.
Amounts borrowed for capital improvements are used only for the purpose(s)
stated in the bond ordinance or resolution. Upon completion of a project,
unexpended funds are restricted for use to pay off any outstanding debt against
the project. If there is no outstanding debt, the funds are lapsed to general
fund surplus and can be appropriated for other uses. The monies not currently in
use on capital improvement projects are invested in short-term securities. All
interest earned from investments is credited to the general fund unless
specified otherwise by the Common Council.
The City of Madison had
approximately 60 active capital improvement funds during 2000. For statement
purposes, these funds have been grouped into eight categories (major streets,
park improvements, etc.).
Special Assessment
Improvement Funds - Special assessments and special charges are levied for
improvements made and services provided by the City to private real property.
Payments of assessments may be made in total or on a 5, 8 or 15-year installment
basis, with interest rates ranging from 6 percent to 10 percent.
Funds are transferred from
the Special Assessment Fund to various Capital Improvement Funds to finance
projects that are assessable wholly or in part to the property owners. Revenues
for 2000 were $2,205,794. During 2000, $2,591,848 was transferred to various
capital projects.
Tax Incremental
Financing Funds - A tax incremental financing (TIF) district represents a
development zone designated by the Common Council. The City spends funds within
the zone to promote private development. The underlying assumption of tax
incremental financing is that without the City’s participation, no development
would take place. The revenues generated from the increase in property values
(incremental revenues) are used to recover the City’s investment. Allowable
costs include direct and indirect expenditures, imputed staff time and interest
expense. After the City has recovered its investment or an average of 18 years
has elapsed, the district is dissolved. The increased property values are then
added to the general tax base.
At year-end, the City had
13 active TIF districts. Total 2000 incremental taxes from all districts totaled
$6,464,739 compared with $5,875,185 in 1999. The total incremental value created
within those districts was $287,984,150 as of December 31, 2000.
(Capital Projects Funds
Financial Statements)
Enterprise Fund Operations
Enterprise funds are
established to account for the financing of activities of governmental units,
which render service on a user-fee basis to the general public. Enterprise funds
are generally employed only in those instances where the cost of services, as
well as the revenue derived, can be readily identified. It is the policy of the
City of Madison to subsidize enterprise operations for budgeted operating losses
incurred during the year, exclusive of depreciation.
The City’s enterprise
funds are operated on the full accrual accounting basis. Current accounting
principles dictate that accounting for enterprise operations be the same as if
the operation were privately owned. The purpose of this accounting method is to
present the financial status of these activities in a manner comparable to that
used for private enterprises. The full operating statement, therefore, includes
such items as depreciation, debt service, and payments in lieu of taxes, where
applicable.
Comments pertaining to
specific enterprise operations follow.
Water Utility - The
Madison Water Utility had a net income of $2,364,243 in 2000 on sales of
$14,330,732. From 1999 to 2000, sales increased by 2.2 percent.
(Water Utility Financial
Statements)
Sewer Utility - In
2000, the Sewer Utility had a net income of $1,269,156. This compares with net
income for 1999 of $2,087,914. The landfill remediation fee collected from Sewer
ratepayers was transferred to the landfill capital project fund to contribute
toward the costs of bringing City landfills in conformance with governmental
regulations. The amount of the fee collected in 2000 was $2,675,163.
(Sewer Utility Financial
Statements)
Parking Utility - In
2000, the Parking Utility had net income of $667,801. This compares with a net
income for 1999 of $592,913. Revenues in 2000 were $6,835,417. This represents a
3.24 percent increase over 1999.
(Parking Utility
Financial Statements)
Transit Utility -
Operating expenses of the Transit Utility, including depreciation, totaled
$37,108,478 in 2000, while operating revenues totaled $7,582,417 resulting in an
operating loss of $29,526,061. The City of Madison’s operating transfer was
$6,205,753 compared to a 1999 transfer of $5,143,439. The balance of the loss
was paid by state, federal and other municipal operating assistance. The City of
Madison’s total cash contribution to the Transit Utility, including operating
subsidy and capital contribution, was $6,833,340 in 2000. This figure compares
with a cash contribution of $5,996,094 in 1999.
(Transit Utility
Financial Statements)
Golf Courses - In
2000, the municipal golf courses had net income of $232,511 on sales of
$2,390,322 compared with a net income of $367,843 on sales of $2,491,554 in
1999.
(Golf Course Financial
Statements)
Ice Arenas - During
2000, ice arena operations incurred a net loss before subsidy of $350,427. This
compares with a 1999 loss of $273,250. Total General Fund cash support for the
ice arenas’ operations and capital contributions was $231,375 in 2000. In
1999, General Fund cash support was $176,462 - an increase of 31.11 percent.
(Ice Arena Financial
Statements)
Civic Center - In
2000, total income generated from the facilities at the Civic Center was
$3,189,434. This compares with the total income of $3,193,475 generated in 1999
for a decrease of less than one percent.
During 2000, the Civic
Center operations incurred an operating loss before City subsidy of $1,786,150
compared with the 1999 loss of $1,461,001. General Fund support for the Civic
Center amounted to $1,341,031 in 2000 and $1,299,903 in 1999.
(Civic Center Financial
Statements)
Convention Center -
Operating revenues were $2,537,474 in 2000. This represents an increase from the
$2,136,437 in operating revenues generated in 1999. During 2000, Monona Terrace
operations incurred an operating loss before subsidy of $5,012,129.
(Convention Center
Financial Statements)
Internal Service Funds
Internal service funds are
established to account for services and supplies furnished by an agency to other
agencies of the same governmental unit. They are distinguished from general
support agencies such as Personnel, Attorney, Accounting, etc., which are
accounted for in the General Fund. The quantity of service furnished by an
internal service fund is readily quantifiable and is controlled by the user
agency.
The City of Madison
utilized internal service funds for the following three agencies:
Motor Equipment -
All City motor vehicles (except those owned by the Transit Utility, Water
Utility) are maintained by the central garage. User agencies are billed for
vehicle usage based on miles driven or hours in service. These billing rates are
adjusted periodically to reflect increases in fuel, vehicle costs and
maintenance charges. Beginning in 1982, the replacement reserve, which normally
was transferred to the General Fund for vehicle purchases, remained within Motor
Equipment. In 2000, the Motor Equipment Fund realized net income of $269,859
compared with a net income of $274,695 in 1999.
(Motor Equipment Fund
Financial Statements)
City Insurance - The
office of Risk Management has been established as an internal service fund. The
responsibility of Risk Management is to provide insurance coverage for all City
agencies. An appropriate charge is billed to the user agencies for the cost of
this service.
The statements present
current year billings and expenses, but do not include salary or fringe benefit
costs. These outlays are included in the Comptroller’s Office expenditures in
the General Fund.
(Insurance Fund
Financial Statements)
Worker’s Compensation
- A Worker’s Compensation fund has been established as an internal service
fund. Prior to 1995, the City self-administered its Worker’s Compensation
program. However, in 1995, the City contracted with a third party administrator
and an appropriate charge is billed to the user agencies for the cost of this
service. In 2000, the Worker’s Compensation fund expended $2,154,143, which
constituted an 8.21 percent decrease from 1999 expenditures of $2,346,746.
(Worker’s Compensation
Fund Financial Statements)
Trust and Agency Funds
Trust and agency funds are
established to account for revenue from sources other than taxes or enterprise
operations that have been designated by the Common Council for specific uses.
These funds are also utilized to account for money received from third parties
and held by the City in the capacity of trustee, custodian or agent to ensure
that funds are utilized as directed by the donor.
There are three common
types of trust funds: expendable, nonexpendable and investment. The entire
balance of an expendable trust fund may be utilized by the City for the purposes
designated. Disbursements from nonexpendable funds are restricted to the income
that is earned by the fund. The principal must remain intact. There are also
several variations of this, such as a fund where half of the earnings can be
utilized and the other half is added to the principal until the fund reaches a
certain balance. The accumulated balance may then be utilized for the intended
purpose. Investment trusts are accounted for in essentially the same manner as
proprietary funds since capital maintenance is crucial.
As of the end of 2000, 19
trust and agency funds were in existence. One such fund is Forest Hill Cemetery
Perpetual Care, which the City owns and operates. Sales of cemetery lots are
treated as revenue to the General Fund. In addition to the sale price of lots,
the City charges a perpetual care fee. Revenue from the fee is placed in a trust
fund. Earnings from the fund may be used to offset maintenance costs.
Beginning in 1999, the
portion of the annual tax collection for other entities (Dane County, School
Districts, etc.) is accounted for in an agency fund; it was previously accounted
for in the General Fund.
Total assets held in trust
were $232,823,291 at the end of 2000.
(Trust and Agency Funds
Financial Statements)
Account Groups
Account groups have been
established to record general fixed assets and long-term debt. The general fixed
asset account group is used to record all assets not used in proprietary fund
operations (i.e., enterprise or internal service funds) or accounted for in
trust funds. The long-term debt account group is used to account for all debt
intended to be financed from governmental funds.
(General Fixed Asset
Account Group Financial Statements)
(General Long-Term Debt
Account Group Financial Statements)
Component Units
The City of Madison has two component units.
The Governmental component unit was created in 2000 and represents the
Business Improvement District. The
Enterprise component unit represents the Community Development Authority. Component units are legally separate organizations from the
City; however, state statutes provide for circumstances where the City can
impose its will on the district. Therefore,
the district’s financial information has been presented in discrete columns in
the financial statements.
The Business Improvement
District (BID) is an area of contiguous commercial properties that was created,
in accordance with Wisconsin Statute 66.1109, to establish a plan and a funding
mechanism to maintain and promote the area.
Each participant is assessed annually to finance the operating of the
district. Expenditures may only be
made in accordance with the plan.
The Community Development
Authority (CDA) of the City of Madison operates several types of public housing
projects throughout the City of Madison. The types of projects are Conventional
Low Rent Public Housing, Section 8 New Construction, and the Section 8
Certificate and Voucher programs.
The Low Rent Public Housing
Projects are owned and operated by the CDA for qualified low rent tenants. Rents
are based upon the tenants’ ability to pay, up to a maximum of 30 percent of
their adjusted monthly income. In 2000, the operating subsidy provided by the
Federal Government amounted to $701,687 compared with $586,110 in 1999.
Section 8 New Construction
projects are owned and operated by the CDA. In these projects, the tenants’
rents are also based upon the ability to pay up to a maximum of 30 percent of
their adjusted monthly income. The federal Department of Housing and Urban
Development (HUD) enters into contracts with the CDA to pay the difference
between the fair market rent and the amount the tenant pays. This subsidy was
$462,669 in 2000 compared to $494,894 in 1999.
Under the Section 8
Certificate and Voucher programs, HUD contracts to pay eligible landlords the
difference between the fair market rent and what the tenant can afford to pay,
up to a maximum of 30 percent of their adjusted monthly income. The CDA
administers these programs by certifying eligible tenants, inspecting rental
units and contracting with approved landlords. The total subsidy amounted to
$4,800,589 in 2000 compared to $4,871,652 in 1999.
(Community Development
Authority Financial Statements)
(Business Improvement
District Financial Statements)
Accounting Systems and Reporting
The City’s accounting
records for general government operations, special revenue funds, debt service,
capital project funds, and expendable trust and agency funds are maintained on a
modified accrual basis, with property tax revenues being recorded when earned
and expenditures (except interest on long-term debt) being recorded when
incurred. Accounting records for the City’s utilities, nonexpendable trust
funds, internal service funds and other enterprise operations are maintained on
a full accrual basis.
Budgetary control is
maintained by a formal appropriation and encumbrance system. Encumbrances are
made against appropriation balances for purchase orders prior to their release
to vendors, except in the special revenue fund. Purchase orders which exceed
appropriation balances are not released until additional appropriations are made
available or until a budgetary transfer is approved.
An independent Certified
Public Accounting firm audits all of the City’s books of account, financial
records and transactions. The 1999 and 2000 financial statements in this report
have been audited.
Respectfully submitted,
Dean Brasser
Comptroller
