CITY OF DELAVAN TAX INCREMENTAL FINANCING DISTRICT NO.4 Delavan, Wisconsin

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1 TAX INCREMENTAL FINANCING DISTRICT NO.4 Delavan, Wisconsin FINANCIAL STATEMENTS From the Date of Creation Through December 31,2011

2 TAX INCREMENTAL FINANCING DISTRICT NO.4 TABLE OF CONTENTS From Dates of Creation Through December 31, 2011 Accountants' Compilation Report Tax Incremental District No.4 - Balance Sheet Tax Incremental District NO.4 - Historical Summary of Project Costs, Project Revenues and Net Cost to be Recovered Through Tax Increments Tax Incremental District NO.4 - Historical Summary of Sources, Uses, and Status of Funds Notes to Financial Statements Supplemental Information Tax Incremental District No.4 - Detailed Schedule of Sources, Uses, and Status of Funds Tax Incremental District No.4 - Detailed Schedule of Capital Expenditures 11 12

3 'iaker TILLY Baker Tilly Virchow Krause. LLP Ten Terrace Cr. PO Box 7398 Madison. W I rei fax bakerrilly.com ACCOUNTANTS' COMPILATION REPORT To the City Council City of Delavan Delavan, Wisconsin We have compiled the accompanying Balance Sheet, Historical Summary of Project Costs, Project Revenues and Net Cost to be Recovered Through Tax Increments and Historical Summary of Sources, Uses, and Status of Funds of the City of Delavan's Tax Incremental District No. 4 as of and for the year ended December 31, 2011 and from the dates of creation through December 31,2011. We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or provide any assurance about whether the financial statements are in accordance with accounting principles generally accepted in the United States of America. Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements. Our responsibility is to conduct the compilation in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The objective of a compilation is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements. As discussed in Note 1, the financial statements present only the transactions of the Districts and do not purport to, and do not, present fairly the financial position of the City of Delavan as of December 31, 2011, and the changes in its financial position for the year then ended in conformity with accounting principles generally accepted in the United States of America. As described in Note 1, the district adopted the provisions of GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, effective January 1, The supplementary information as listed in the table of contents is presented for purposes of additional analysis and is not a required part of the financial statements. The supplementary information has been compiled from information that is the representation of management. We have not aud ited or reviewed the supplementary information and, accordingly, do not express an opinion or provide any assurance on such supplementary information. ~ al\lnd e pendentmemberof BAKER TILLY I NTERNAT I ONAL Page 1 An Affirmative Anion Equal Opportunity Employer

4 To the City Council City of Delavan Management has omitted the management's discussion and analysis that is required to be presented for purposes of additional analysis. Such missing information, although not a required part of the financial statements, is required by accounting principles generally accepted in the United States of America and is considered to be an essential part of financial reporting for placing the financial statements in an appropriate operational, economical, or historical context. &Juu T ~ V tamovj ~~ UP Madison, Wisconsin February 14, 2012 Page 2

5 TAX INCREMENTAL DISTRICT NO.4 BALANCE SHEET December 31,2011 ASSETS Cash and investments Taxes receivable Special assessments Accounts receivable Restricted assets Cash and investments Capital Projects Fund $ 4,375, , , ,641,130 TOTAL ASSETS $ 9,622,390 LIABILITIES AND FUND BALANCE Liabilities Accounts payable Advances from other funds Deferred revenue Total Liabilities $ 37,103 3,113,941 1,605,524 4,756,568 Fund Balance Restricted for Debt service Impact fees TIF projects Total Fund Balance 3,352, ,112 1,224,692 4,865,822 TOTAL LIABILITIES AND FUND BALANCE $ 9,622,390 See accompanying notes to financial statements and accountants' compilation report. Page 3

6 TAX INCREMENTAL DISTRICT NO.4 HISTORICAL SUMMARY OF PROJECT COSTS, PROJECT REVENUES AND NET COST TO BE RECOVERED THROUGH TAX INCREMENTS For the Year Ended December 31,2011 and From the Date of Creation Through December 31, 2011 Year Ended PROJECT COSTS Administrative expenditures $ 54,935 Capital expenditures 791,808 Finance and legal fees Interest and fiscal charges 488,807 Total Project Costs 1,335,550 From Date of Creation $ 1,079,183 13,299,566 12,871 2,512,498 16,904,118 PROJECT REVENUES Tax increment 1,955,455 Special assessments 128,108 Intergovernmental 997 Public charges for services 705 Investment income 22,124 Premium on debt 52,525 Sale of assets Developer reimbursements Total Project Revenues 2,159,914 7,592, ,108 29, , ,116 82, , ,453 9,788,040 NET COSTS TO BE RECOVERED THROUGH TAX INCREMENTS - DECEMBER 31,2011 $ (824,364) $ 7,116,078 RECONCILIATION OF RECOVERABLE COSTS General obligation debt Less: Fund Balance $ 11,981,900 (4,865,822) NET COSTS TO BE RECOVERED THROUGH TAX INCREMENTS - DECEMBER 31, 2011 $ 7,116,078 See accompanying notes to financial statements and accountants' compilation report. Page 4

7 TAX INCREMENTAL DISTRICT NO.4 HISTORICAL SUMMARY OF SOURCES, USES, AND STATUS OF FUNDS For the Year Ended December 31,2011 and From the Date of Creation Through December 31,2011 Year Ended SOURCES OF FUNDS Tax increment $ 1,955,455 Special assessments 128,108 Intergovernmental 997 Public charges for services 705 Investment income 22,124 Premium on debt 52,525 Sale of assets Developer reimbursements Long-term debt issued 3,360,000 Total Sources of Funds 5,519,914 $ From Date of Creation 7,592, ,108 29, , ,116 82, , ,453 15,766,900 25,554,940 USES OF FUNDS Administrative expenditures 54,935 Capital expenditures 791,808 Finance and legal fees Principal payments 1,060,000 Interest and fiscal charges 488,807 Total Uses of Funds 2,395,550 1,079,183 13,299,566 12,871 3,785,000 2,512,498 20,689,118 Excess of sources of funds over uses of funds 3,124,364 4,865,822 BEGINNING FUND BALANCE 1,741,458 FUND BALANCE - DECEMBER 31, 2011 $ 4,865,822 $ 4,865,822 See accompanying notes to financial statements and accountants' compilation report. Page 5

8 TAX INCREMENTAL FINANCING DISTRICT NO.4 NOTES TO FINANCIAL STATEMENTS December 31,2011 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of the City of Delavan's Tax Incremental District No.4 (the "district") conform to accounting principles as applicable to governmental units and as defined by Wisconsin Statutes Section The City of Delavan uses the criteria set forth by the Governmental Accounting Standards Board to determine the scope of the reporting entity of Tax Incremental District No.4. The accompanying financial statements reflect all the significant operations of the City of Delavan's Tax Incremental District No.4. In February 2009, the GASB issued Statement No Fund Balance Reporting and Governmental Fund Type Definitions. This statement establishes fund balance classifications based primarily on the extent to which the government is bound to honor constraints on the use of the resources reported in each governmental fund as well as establishes additional note disclosures regarding fund balance classification policies and procedures. The district made the decision to implement this standard effective January 1, A. DESCRIPTION OF FUND AND LONG-TERM DEBT This report contains the financial information of the City of Delavan'S Tax Incremental District No.4. The summary statements were prepared from data recorded in the following funds and the city's long-term debt: Capital Projects Fund Detailed descriptions of the purpose of these funds and long-term debt can be found in the City of Delavan's basic financial statements. The data was consolidated for purposes of this report. Therefore, the amounts shown in the accompanying statements will not directly correlate with amounts shown in the basic financial statements of the city. The district was created under the provisions of Wisconsin Statute Section The purpose of that section is to allow a municipality to recover development and improvements costs in a designated area from the property taxes generated on the increased value of the property after the creation date of the district. The tax on the increased value is called a tax increment. The statutes allow the districts to collect tax increments until the net project cost has been fully recovered, or until 23 years after the creation date, whichever occurs first. Project costs uncollected at the dissolution date are absorbed by the City of Delavan. Project costs may be incurred up to five years before the unextended termination date of the district. Creation Date TID No.4 7/8/03 Last Date to Incur Project Costs 7/8/22 Last Year to Collect Increment 2027 Page 6

9 TAX INCREMENTAL FINANCING DISTRICT NO.4 NOTES TO FINANCIAL STATEMENTS December 31,2011 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) B. BASIS OF ACCOUNTING The modified accrual basis of accounting was followed in the preparation of these statements. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual, i.e., 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. Project costs, other than interest on long-term debt, are recorded when the related fund liability is incurred. District increments are recorded as revenues in the year due. Intergovernmental aids and grants are recognized as revenues in the period the related expenditures are incurred, if applicable, when the city is entitled to the aid. Special assessments are recorded as revenues when collected. Annual installments due in future years are accounted for as receivables and deferred revenues. Other general revenues are recognized when received in cash or when measurable and available under the criteria described above. c. USE OF ESTIMATES 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 expenses during the reporting period. Actual results could differ from those estimates. D. MEASUREMENT Focus The measurement focus of all governmental funds is the funds flow concept. Under the funds flow concept, sources and uses of financial resources, including capital outlays, debt proceeds and debt retirements are reflected in operations. Resources not available to finance expenditures and commitments of the current period are recognized as deferred revenue or a reservation of fund equity. Liabilities for claims, judgments, compensated absences and pension contributions which will not be currently liquidated using expendable available financial resources are shown in the long-term debt footnote. The related expenditures are recognized when the liabilities are liquidated. E. PROJECT PLAN BUDGETS The estimated revenues and expenditures of the district are adopted in the project plan. Those estimates are for the entire life of the district, and may not be comparable to interim results presented in this report. Page 7

10 TAX INCREMENTAL FINANCING DISTRICT NO.4 NOTES TO FINANCIAL STATEMENTS December 31,2011 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) F. LONG-TERM DEBT Short-term liabilities are recorded as fund liabilities. All other long-term liabilities are shown in the longterm debt footnote. Proceeds of long-term debt issues not recorded as fund liabilities are reflected as "Sources of Funds" in the operating statement of the recipient fund. Retirement of these issues is reported as an expenditure in the year in which the debt matures or is repaid, whichever is earlier. G. CLAIMS AND JUDGMENTS Claims and judgments are recorded as liabilities if all the conditions of Governmental Accounting Standards Board pronouncements are met. The liability and expenditure for claims and judgments is only reported in governmental funds if it has matured. Claims and judgments are disclosed in the 10,ng-term debt footnote when the related liabilities are incurred. NOTE 2 - CASH AND TEMPORARY INVESTMENTS The district invests its funds in accordance with the provisions of the Wisconsin Statutes (1 m) and (2). 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. The district, as a fund of the city, maintains common cash and investment accounts at the same financial institutions utilized by the city. Federal depository insurance and the State of Wisconsin Guarantee fund insurance apply to the City of Delavan as an individual municipality, and, accordingly, the amount of insured funds is not determinable for the district. NOTE 3 - LONG-TERM DEBT The general obligation notes payable are backed by the full faith and credit of the City of Delavan. The notes were borrowed to finance district expenditures. The general obligation notes will be retired by tax increments accumulated by the debt service fund and operating transfers from the capital projects fund. If those revenues are not sufficient, payments will be made by future tax levies. Page 8

11 TAX INCREMENTAL FINANCING DISTRICT NO.4 NOTES TO FINANCIAL STATEMENTS December 31,2011 NOTE 3 - LONG-TERM DEBT (cont.) Original Date of Due Interest Indebted- Title of Issue Issue Date Rates ness Repaid Balance G.O. Promissory Notes(1) 12/1/03 8/1/ G.O. Promissory Notes(2) 3/1/05 3/1/ G.O. Promissory Notes(3) 5/1/07 9/1/ G.O. Promissory Notes(4) 10/1/08 3/1/ % % $ 1,665, % % 4,775,000 4% 3,336, % % 2,630,000 $ 1,090,000 1,475, ,000 $ 575,000 3,300,000 2,811, ,000 1,935, G.O. Refunding 12/6/11 3/1/ % % Bonds (5) 3,360,000 3,360,000 (1)TIF No. 4's share of the original proceeds of $3,885,000 is 42.86%. (2)TIF No. 4's share of the original proceeds of $7,450,000 is 64.09%. (3)TIF No. 4's share of the original proceeds of $4,900,000 is %. (4)TIF No. 4's share of the original proceeds of $2,630,000 is % (5)TIF No. 4's share of the original proceeds of $3,360,000 is % $ 15,766,900 $ 3,785,000 $ 11,981,900 During 2011, the city issued $3,360,000 in general obligation refunding bonds to advance refund the 2005 general obligation promissory notes. The proceeds are deposited in an account by the city until the call date, which is March 1, The notes are not considered to be defeased and the liability for those notes as well as the new bonds is recorded in the financial statements. Aggregate maturities of all long-term debt relating to the district are as follows: Calendar Year Principal Interest Totals 2012 $ 4,255,000 $ 339,192 $ 4,594, , ,443 1,198, , , , , , , ,005, ,282 1,164, ,301, ,860 3,583, ,085,000 64,894 1,149,894 Totals $ 11,981,900 $ 1,473,996 $ 13,455,896 Page 9

12 TAX INCREMENTAL FINANCING DISTRICT NO.4 NOTES TO FINANCIAL STATEMENTS December 31,2011 NOTE 4 - ADVANCES FROM OTHER FUNDS The water utility fund is advancing funds to the TIF District NO.4. The amount advanced is determined by the borrowing in the utility to finance TID projects. No repayment schedule has been determined for the advances. The utility is charging the TIF District interest on the advance based on the rate of the corresponding debt. Page 10

13 SUPPLEMENTAL INFORMATION

14 TAX INCREMENTAL DISTRICT NO.4 DETAILED SCHEDULE OF SOURCES, USES, AND STATUS OF FUNDS From Date of Creation Through December 31,2011 Project Plan Totals Estimate SOURCES OF FUNDS Tax increment $ $ $ 52,205 $ 78,907 $ 286,999 $1,717,697 $1,647,994 $1,853,032 $1,955,455 $ 7,592,289 $43,331,006 Special assessments 128, ,108 Intergovernmental 484 7,910 10,133 8,413 1, ,015 Public charges for services 44, , ,802 2, ,268 Investment income 7,153 16, , , ,133 53,030 29,365 17,796 22, ,116 Premium on debt 1,983 28,161 52,525 82,669 Sale of assets 3, ,638 24,118 59, ,122 Developer reimbursements 121, ,453 Long-term debt issued 1,665,000 4,775,000 3,336,900 2,630,000 3,360,000 15,766,900 24,625,000 Total Sources of Funds 1,674,136 19,086 5,770, ,437 4,113,962 4,544,780 1,747,116 1,872,807 5,519,914 25,554,940 67,956,006 USES OF FUNDS Administrative expenditures 1, , , ,649 78, ,900 51,480 79,155 54,935 1,079,183 Capital expenditures 1, ,393 2,794,191 1,939,497 3,361, ,218 2,338, , ,808 13,299,566 23,130,000 Finance and legal fees 10,000 2,871 12, ,000 Interest and fiscal charges 26,928 31, , , , , , , ,807 2,512,498 20,041,006 Principal on general obligation debt 255, , , ,000 1,060,000 3,785,000 24,625,000 Total Uses of Funds 40,401 1,244,182 3,256,803 2,306,246 3,953,630 2,038,179 3,770,766 1,683,361 2,395,550 20,689,118 67,956,006 FUND BALANCE - END OF YEAR $ 4,865,822 See accountants' compilation report. Page 11

15 TAX INCREMENTAL DISTRICT NO.4 DETAILED SCHEDULE OF CAPITAL EXPENDITURES From Date of Creation Through December 31,2011 Land acquisition STH 50 improvements Business Park No.6 Mound Road improvements Marsh Road improvements Airport Road improvements North Shore Drive improvements Water storage tank Well Development incentives Unallocated engineering Organization and administration TOTAL PROJECT COSTS Actual $ 1,292,508 3,572,563 1,733,770 1,639,835 2,501, ,808 1,635, ,443 9,755 $ 13,299,566 Project Plan Estimate $ 500,000 5,940,000 2,415,000 4,510,000 2,050,000 2,855,000 1,770,000 1,035,000 1,455, , ,000 $ 23,130,000 See accountants' compilation report. Page 12