|October 30, 2001|
Mayor Susan J.M. Bauman
210 Martin Luther King Jr Blvd. Rm 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 Government Operations
The City ended 2000 operations with an unreserved, undesignated fund balance of $17,476,672 and an unreserved designated fund balance of $2,445,128. Of that amount, $1,500,000 was applied to the 2001 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 $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:|
|Significant budget variances include:|
|General Fund Financial Statements|
Special Revenue Funds
Wisconsin State Statutes and Generally Accepted Accounting Principles GAAP mandate that revenues “earmarked” for specific purposes be accounted for in a separate “Special Revenue Fund.” The six Special Revenue Funds established by the City are: Library Fund, Urban Development Action Grant UDAG Fund, Community Development Block Grant CDBG Fund, Revolving Loans Fund, Other Grants Fund and Other Restricted 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 purposes 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 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
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.