Revenue categories with a significant budget variance during 2001 included:
October 14, 2002
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, 2001 is hereby submitted. A summary of significant financial transactions and highlights follows.
General Government Operations
The City ended 2001 operations with an unreserved, undesignated fund balance of $23,628,991 and an unreserved designated fund balance of $2,000,000. That amount was applied to the 2002 Operating Budget. This represents a continuing strong fund balance well within the City's long-term financial goals and indicators.
General Fund Revenue
General Fund revenue exceeded budget by $4,377,553. Actual 2001 revenues
increased by a total of $9,700,300, or 6.29% over 2000. The variations between
budgeted and actual revenues occurred in the following areas:
Revenue categories
with a significant budget variance during 2001 included:
Licenses and
Permits - Building permit revenues continued at a higher-than-anticipated
level. During 2001, building permit revenue was $3,219,850 compared to a budget
of $2,387,000. In 2000 building permit revenue was $3,075,370.
Fines and
Forfeitures - Actual 2001 parking violations totaled $3,334,190 compared to
the budgeted amount of $3,520,000. Traffic
tickets totaled $833,021 compared to the budgeted amount of $1,283,200.
Ordinance violations exceeded its budget amount of $400,000 by $111,538.
Charges for Services - The majority of this favorable variance originates from higher than expected cable franchise fees. Actual fees for 2001 totaled $1,665,618 compared to the budgeted amount of $1,450,000. The remaining favorable variance stems from higher than expected Ambulance fees.
Interest on Investments - Interest income exceeded budget by $151,145. It is difficult to
accurately forecast interest income since it is subject to fluctuating market
rates. Budgeted interest income for 2001 was $4,550,000 compared to actual
interest revenue of $4,701,145.
Other Revenues
- Other revenue exceeded the 2001 budgeted amount of $1,026,000 by $3,128,338.
This is the result of a one-time Wisconsin Retirement Fund credit in the amount
of $2,592,823.
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 55.58% in 1992 to 62.55% in 2001. 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 1992, intergovernmental revenues have remained relatively constant and have, therefore, declined from 27.85% to 20.98% 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 $158,655,495 compared to a budget of $161,450,255 for a
positive variance of $2,794,760. Actual expenditures during 2001 represented a
4.6% increase over the 2000 level of $151,678,647. The increase by function
follows:
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Special Revenue Funds
Library - The 2001 Library expenditure budget was $10,146,719. Of that
amount $8,070,244 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 2001 actual Library expenditures were $9,774,720. The Library ended its year
with a $151,058 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 2001, the City budgeted $20,732,183
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 2001, the City issued a $23,245,000 general obligation note to fund projects
contained in the 2001 Capital Budget. The interest rate on the issue is 4.375%.
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 2001. 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 2001 were $2,122,096. During
2001, $2,484,996 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 12 active TIF districts. Total 2001 incremental taxes from all districts totaled $7,680,117 compared with $6,464,739 in 2000. The total incremental value created within those districts was $358,945,450 as of December 31, 2001.
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 $1,469,221 in 2001 on sales of $14,524,192. From 2000 to 2001, sales increased by 1.35 percent.
Water
Utility Financial Statements
Sewer Utility -
In 2001, the Sewer Utility had a net income of $1,082,889. This compares with
net income for 2000 of $1,269,156. 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 2001 was
$2,723,273.
Sewer
Utility Financial Statements
Parking Utility
- In 2001, the Parking Utility had net income of $307,332. This compares with a
net income for 2000 of $667,801. Revenues in 2001 were $6,947,420. This
represents a 1.64 percent increase over 2000.
Parking
Utility Financial Statements
Transit Utility
- Operating expenses of the Transit Utility, including depreciation, totaled
$40,455,916 in 2001, while operating revenues totaled $8,523,193 resulting in an
operating loss of $31,932,723. The
City of Madison’s operating transfer was $6,436,748 compared to a 2000
transfer of $6,205,753. 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 $7,348,000 in 2001. This figure compares with a cash
contribution of $6,833,340 in 2000.
Transit
Utility Financial Statements
Golf Courses -
In 2001, the municipal golf courses had net income of $408,070 on sales of
$2,515,610 compared with a net income of $232,511 on sales of $2,390,322 in
2000.
Golf
Course Financial Statements
Ice Arenas -
During 2001, ice arena operations incurred a net loss before subsidy of
$241,498. This compares with a 2000 loss of $350,427. Total General Fund cash
support for the ice arenas’ operations and capital contributions was $222,950
in 2001. In 2000, General Fund cash support was $231,375 – a decrease of 3.64
percent.
Ice
Arena Financial Statements
Civic Center – For the first half of 2001, the Civic Center generated $1,975,653 in revenue. As of July 1, 2001, Civic Center operations were transferred to the Madison Cultural Arts District – a discretely presented component unit in the general purpose financial statements.
Civic
Center Financial Statements
Convention Center - Operating revenues were $2,971,523 in 2001. This represents an increase from the $2,537,474 in operating revenues generated in 2000. During 2001, Monona Terrace operations incurred an operating loss before subsidy of $5,031,498.
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 2001, the Motor Equipment Fund realized a net loss of $4,265
compared with a net income of $269,859 in 2000.
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 2001, the Worker’s Compensation fund expended
$2,566,311, which constituted a 19.13 percent increase from 2000 expenditures of
$2,154,143.
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 2001, 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 $239,047,011 at the end of 2001.
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 represents the Business Improvement District and the Madison Cultural Arts 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 districts. Therefore, the districts’ 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.
In 2001, the City created the Madison Cultural Arts District (Arts District). The purpose of the Arts District is to develop the Overture Center, specifically Block 65, into a world-class cultural arts facility while limiting taxpayer contributions. The Arts District is a separate unit of government formed under Chapter 229 of the Wisconsin Statutes.
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 2001, the operating subsidy
provided by the Federal Government amounted to $870,090 compared with $701,687
in 2000.
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
$469,092 in 2001 compared to $462,669 in 2000.
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
$5,326,074 in 2001 compared to $4,800,589 in 2000.
Component
Unit Enterprise Financial Statements
Component
Unit Governmental 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 2000 and 2001 financial statements in
this report have been audited.
Respectfully
submitted,
Dean Brasser
Comptroller