VILLAGE OF GRAFTON NOTES TO FINANCIAL STATEMENTS As of and for the Year Ended December 31, 2016 NOTE II - STEWARDSHIP, COMPLIANCE, AND ACCOUNTABILITY (cont.) B. DEFICIT BALANCES Generally accepted accounting principles require disclosure of individual funds that have deficit balances at year end. As of December 31, 2016, the Capital Projects Fund - TID No. 3 had a deficit fund balance of $385,312. The deficit fund balance in TID No. 3 is mainly due to insufficient increment being generated to fund the debt service requirements. Donations are being received from TID No. 2 and TID No. 5 when available. A cash flow analysis has been completed that indicates TID No. 3 will close with a positive fund balance. C. LIMITATIONS ON THE VILLAGE'S TAX LEVY Wisconsin law limits the village's future tax levies. Generally the village is limited to its prior tax levy dollar amount (excluding TIF Districts), increased by the greater of the percentage change in the village's equalized value due to new construction or zero percent. Changes in debt service from one year to the next are generally exempt from this limit with certain exceptions. The village is required to reduce its allowable levy by the estimated amount of fee revenue it collects for certain services, if those services were funded in 2013 by the property tax levy. Levies can be increased above the allowable limits if the amount is approved by referendum. 59