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CITY OF MUSKEGON
CITY COMMISSION WORKSESSION
Monday, April 7, 2008
5:30 p.m.
City Commission Chambers
AGENDA
1. 2007 Audit Review. (Finance)
2. Roadway Changes to Facilitate Bike Path on Lakeshore Drive.
3. Any Other Business
4. Adjournment
City of Muskegon
City Commission Worksession
April 7, 2008
City Commission Chambers
5:30 PM
MINUTES
2008-32
Present: Commissioners Warmington, Gawron, Spataro, Wisneski, Shepherd, Gawron (arrived
at 5:45 p.m.), Carter, and Wierenga.
Absent: None.
2007 Audit Review (Finance)
Eric VanDop, of Brickley Delong, gave an overview of the 2007 audit. Mr. VanDop stated that
staff did a great job. The Mayor also thanked city staff.
Roadway Changes to Facilitate Bike Path on Lakeshore Drive
Mohammad Al-Shatel, City Engineer, presented a power point presentation for proposed
roadway changes for a bike path on Lakeshore Drive.
Pros are as follows:
Establish a trail connection between Lakeshore Trail to the new trail along Muskegon Lake to
McCracken
Cost will be less than $100,000
It will preserve on-street parking
There is no need for additional right-of-way
Cons are as follows:
It will be a street bike lane
Eliminates the left tum lane
The terminus points do not provide for a margin of error
Easterly movement bikers will be traveling along parked vehicles
Proposed bike lane is a new concept for residents which may cause confusion
Commissioners requested that staff look further into the proposal and report to Commission.
Any Other Business
Commissioner Gawron indicated that the City Commission will be voting on Community
Development Block Grant funds tomorrow and ask that the board consider adopting the
administration recommendations and include Commissioner Carter's recommendation from a
previous meeting.
Paul Veltkamp, 592 W Muskegon, Muskegon voiced concern regarding the removal of
streelights on Webster Avenue.
Adiournrnent
Motion by Commissioner Carter, seconded by Commissioner Shepherd to adjourn at 6:40
p.m.
MOTION PASSES
~ ,--..,:,\ ~ y -'.,_
Ann Marie Becker, MMC
¼,I.A, JL,"
City Clerk
,. / p I f 7 I~_,-,,_.,.- _ / -- "'-
l EOION
"\ rr
TWo ~ downtown
-
03
streets
By Robert c_ Burns
1:0 oe u1mm1:u -~- f'1,,./
~t1 1 ':".i,•t_:.;.,'f•••; •=:.:...:.:_· 1Twenty ml{!• ~ill@@r Moh;mimed Al-Shatel.
bburns@muskegonchronicle.com ' ., block streetlights By Al-Shatei's ealc11.b1t!olli,
~t~ on Muskegon removing the 20 streetlights will
MUSKEGON - Now that Muskeg-
on's Webster and Muskegon avenues Awnue - shown cost the-city about $13,000. But it will
save the city about $3,600 a year in
are no longer the eq_uivalent of here-and enetgy costs.
urban freeways, it's time to discon- Webster Avenue
IN nect some of the freeway lighting, between Fourth
Al-Shatel listed several other
advantages to the change, including
By action of the Muskegon City and Ninth streets removal of illumination some resi-
ire's liquor Commission Monday, 20 streetlights will soon be dents might find undesirable, the
will be removed from mid-b11lck
1e revoked locations along a flve-block section
removed. possible discouragement of some
through traffic, less clutter along
of Muskegon and Webster between Chronlcle photo narrow terraces, and fewer light
,skegon City Fourth and Ninth streets. • Robert C. Bums poles to worry about during storms.
growing cho- That's the residential portion of
ng a downtown One possible disadvantage: com-
what used to be the downtown U.S. Spring streets. Many residents hlid urged the city plaints from some homeowners who .
lquor license 31 Business Route before that des- Last November, Muskegon and to turn the streets back into·the resi- associate safety with illumination.
ignation was shifted to Shoreline Webster. avenues were converted dential neighborhood streets they City commissioners weighed
tat45E.
.ble criminal Drive last July. back to the two-way streets they were back then. The removal of mid- those choices as well as a third
ily sold beer All existing street.lWits will were until the late 1950s, and park- b lock streetlights conforms to the option of de-energizing some lights
1onNeiger- remain along the much more com- ing was again allowed on both sides lighting standards of most other res- before voting to reduce lighting in
' night of Dec. mercial section between Fourth and of the two streets. idential streets in the city, said City the residential section only.
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L/1'1'-fu 72-7-q9o'I>
Finance
Administration
Memo
To: City Commission
From: Finance Director
Date: April 2, 2008
Re: 2007 Auditors Review - Monday April 7th
As noted in previous communications, printing and distribution of the City's 2007
Comprehensive Annual Financial Report (CAFR) will be delayed until June (possibly
May). We are delaying the CAFR so that we can incorporate information from the
12/31107 MERS actuarial valuations. Normally, year-old actuarial data would be
used; however, this is not possible this year due to the transition from local pension
funds to MERS during 2006-07.
Nonetheless, the auditors have concluded their fieldwork and we thought it better for
them to provide their summary of results at this time rather than waiting until June.
Attached is the Management Discussion and Analysis together with selected
financial statements from the 2007 CAFR that the auditors will focus on in their
comments.
Please let me know if you have any questions.
Thank you.
• Page 1
0 \FINANCEIPAUL\MyDocumenls\MEMO - CITY COMMISSION 2007 Audit Presentation.doc
MANAGEMENT'S DISCUSSION AND ANALYSIS
This section of the City of Muskegon's annual financial report presents our discussion
and analysis of the City's financial performance during the fiscal year ended December
31, 2007. Please read it in conjunction with the City's financial statements, which follow
this section.
FINANCIAL HIGHLIGHTS
• The assets of the City of Muskegon exceeded its liabilities by $131,868,102 as of
December 31, 2007. Of the total net assets, $18,143,248 (13.8%) was
unrestricted and may be used to meet the City's ongoing obligations to citizens
and creditors.
• The City's total combined net assets increased $2,346,908 during 2007. This
increase is primarily the result of tight budget controls and investment in capital
assets.
• The City's governmental funds reported combined ending fund balance of
$12,233,731, a decrease of $998,380 from the Figure A-1, Required Components of the
prior year. Most of the change results from City's Annual Financial Report
spending down proceeds from long-term debt --------------------,
issued in the prior year for construction of the new '
~~~-
..--- _..l..____
Central Fire Station. 1/uu«ujemeut 'a Basic Required
v--. Financial Supplementary
Information
Statements
• The City's general fund reported a total fund balance ad
of $2,920,632, an increase of $230,593 over the prior A""(<f,u
year. The City also maintained a budget stabilization
(or "rainy day") fund that reported a $1.75 million
fund balance of at December 31, 2007, an increase
of $250,000 from 2006. , .
, ' ''
OVERVIEW OF THE FINANCIAL STATEMENTS ?/,tu
Government-Wide Fund
Financial Financial
Statements
'"Me
Statements
This annual report consists of three parts-management's ?imwdd
Stateme,tU
discussion and analysis (this section), the basic financial
statements, and required supplementary information. The
basic financial statements include two kinds of statements
that present different views of the City: Detail
Summary~
• The first two statements are government-wide financial statements that provide
both long-term and short-term information about the City's overall financial status.
• The remaining statements are fund financial statements that focus on individual
parts of the government, reporting individual City operations in greater detail than
the government-wide statements.
• The governmental funds statements tell how general government services
were financed in the short-term as well as what remains available for future
spending.
• Proprietary fund statements offer short- and long-term financial information
about activities the City operates like private businesses.
• Fiduciary fund statements provide information about the financial relationships
in which the City acts solely as a trustee or agent for the benefit of others, to
whom the resources in question belong.
The financial statements also include detailed notes that explain some of the
jn formation jn th 8 ~-F-,.-,-,-,A---,-.M-,j-,-,-F,-,-,,-ce-,-,-,,-.-,-C-ity-•,-G-,-v-ec_o_m_e_ot_-W_id-,-,-o,-F-,-"-'-,-F-io-..-,-,,-1~s1-,-,,-m-,o-,-,- - - - - -
fin an cia I statements fund Statements
- __1_~----
overnmen t\V'd G overnmen t aIF un d s p ' tarv Fun ds F"d uciary F u nd
and provide additional _l)J!_l!_
T
0
g(_s
1<11ements
' EntireGCily govemment jThe activities of the City
' Activities
--~~nc
the City '
Instances in which the
- s -----
data. The statements (except fiduciary funds)
and the City's component
that arc not proprietary or
fiduciary
operates similar to private
businesses.
City is the trustee or
agent for someone else's
Scope
are followed by a units resources
section of required
• Kfifrrnenc of nef assets -- •-earance·sncer ---- -----
·• Sia!enient ol net assets • Statement ol fiduciary
supplementary net assets
information that further Required financial • Statement of activities • Statement of revenues,
expenditures & changes
• Statement ofrevem1es,
expenses and changes in
• Statement of changes
in fiduciary net assets
statem ems
explains and supports in fund balances fund net assets
the information in the
: • Statement of cash flows :Accmal accounting and _____
Accozmtillg basis Accrual accounting and tModificd accrual Accrual accounting and
financial statements. and 111eas11reme111 economic resources focus !acco1mting and current economic resources foclls ecm1omic resources focus
{!_;c11s Ifinancial resources focus
------ -All assets and liabilities,
Figure A-1 shows how !Only assets expect-eiU! Al! assets and liabilities, All a:,sets and liabilities,
both financial and capital, !be used up and liabilities both fmancial and capital, both short-tenn and long-
the required parts of Type of
short-tenn and long-term !that come due during the and short-tenn and long- tenn; the City's funds do
asset/liability
term not currently contain
this annual report are i1!formalio11
:year or soon thereafter;
no capital assets included capital assets, although
arranged and related to Revenues for which~;sh All revenues and expenses
Lh_ev can
AH revenues and
------
All reve1111es and
one another. expenses during year, is received during or soon during year, regardless of expenses durITTg year,
regardless of when ca~h after the end of the year; when cash is received or regardless ufll'hen cash
1)•pe of is received or paid expenditures when goods paid is received or paid
Figure A-2 summarizes il!flowlouiflow
il!formalio11
or services have been
received and payment is
the major features of due during the year or
soon thereafter
the City's financial
statements, including the portion of the City government they cover and the types of
information they contain. The remainder of this overview section of management's
discussion and analysis explains the structure and contents of each of the statements.
Government-Wide Statements
The government-wide statements report information about the City as a whole using
accounting methods similar to those used by private-sector companies. The statement
of net assets includes all of the government's assets and liabilities. All of the current
year's revenues and expenses are accounted for in the statement of activities
regardless of when cash is received or paid.
The two government-wide statements report the City's net assets and how they have
changed. Net assets-the difference between the City's assets and liabilities-is one
way to measure the City's overall financial health or position. Over time, increases or
decreases in the City's net assets are an indicator of whether its financial health is
improving or deteriorating, respectively. However, to assess the overall health of the
City, one needs to consider additional nonfinancial factors such as changes in the City's
tax base.
The government-wide financial statements include not only the City of Muskegon itself
(known as the primary government), but also legally separate component units for which
the City is financially accountable. Financial information for these component units is
reported separately from the financial information presented for the primary government
itself.
The government-wide financial statements of the City include the governmental
activities. Most of the City's basic services are included here, such as general
government, public safety, highways and streets, sanitation, economic development,
parks and recreation, and interest on long-term debt. Income taxes, federal grants,
property taxes and revenues from the State of Michigan finance most of these activities.
Also included in the government-wide statements are the City's business-type activities:
water, sewer and marina operations.
Fund Financial Statements
The fund financial statements provide more detailed information about the City's major
funds-not the City as a whole. Funds are accounting devices that the City uses to
keep track of specific sources of funding and spending for particular purposes.
• Some funds are required by State law or other legal requirements.
• The City Commission establishes other funds to control and manage money for
particular purposes or to show that it is properly using certain taxes and grants.
The City has the following kinds of funds:
• Governmental funds-Most of the City's basic services are included in
governmental funds, which focus on (1) how cash and other financial assets that
can readily be converted to cash flow in and out and (2) the balances left at year-
end that are available for spending. Consequently, the governmental fund
statements provide a detailed short-term view that helps the user determine
whether there are more or fewer financial resources that can be spent in the near
future to finance the City's programs. Because this information does not
encompass the additional long-term focus of the government-wide statements, we
provide additional information on the subsequent page of the governmental funds
statements that explain the relationship (or differences) between them.
• Proprietary funds-Services for which the City charges customers a fee are
generally reported in proprietary funds. The City uses three proprietary funds:
water, sewer, and marina. Proprietary funds, like the government-wide
statements, provide both long-term and short-term financial information.
• We use internal service funds to report activities that provide supplies and services
for the City's other programs and activities.
• Fiduciary funds-The City is the trustee, or fiduciary, for certain funds. It is also
responsible for other assets that-because of a trust arrangement-can be used
only for the trust beneficiaries. The City is responsible for ensuring that the assets
reported in these funds are used for their intended purposes. All of the City's
fiduciary activities are reported in a separate statement of fiduciary net assets and
a statement of changes in fiduciary net assets. We exclude these activities from
the City's government-wide financial statements because the City cannot use
these assets to finance its operations.
• Component units - Finally, the City of Muskegon's Comprehensive Annual
Financial report includes five component units: the Downtown Development
Authority (DOA), the Tax Increment Finance Authority (TIFA) and, three Local
Development Finance Authorities (LDFAs). Component units are separate legal
entities for which the City of Muskegon has some level of financial accountability.
The component units of the City exist primarily for the issuance and repayment of
debt to finance projects in specific areas of the City. Accordingly, they are
discussed below under the Capital Assets and Debt Administration heading.
FINANCIAL ANALYSIS OF THE CITY AS A WHOLE
Net assets. The Statement of Net Assets provides an overview of the City's assets,
liabilities and net assets. Over time this can provide a good indicator of the City's fiscal
health. The total net assets of the City were $131,868,102 as of December 31, 2007.
This is an increase of $2,346,908 over reported net assets for the prior year, as
restated. A summary of the City's net assets follows:
City's Net Assets
(In thousands of dollars)
Total
Governmental Business-Type Percentage
Actlvities Activities Total Change
2007 2006 2007 2006 2007 2006 2007-2006
Current and other assets $25,758 $27,617 $9,542 $9,804 $35,300 $37,421 -5.7%
Capital assets 78,496 78,137 60,994 62,036 139,490 140,173 -0.5%
Total Assets 104,254 105,754 70,536 71,840 174,790 177,594 -1.6%
Long-term liabilities 9,083 10,043 19,337 21,629 28,420 31,672 -10.3%
Other liabilities 11,463 13,365 3,039 3,036 14,502 16,401 -11.6%
Total Liabilities 20,546 23,408 22,376 24,665 42,922 48,073 -10.7%
Net Assets
Invested in capita! assets,
net of related debt 68,060 68,189 39,357 39,442 107,417 107,631 -0.2%
Restricted 5,485 5,378 822 822 6,307 6,200 1.7%
Unrestricted 10,163 8,779 7,981 6,911 18,144 15,690 15.6%
Total Net Assets $83,708 $82,346 $48,160 $47,175 $131,868 $129,521 1.8%
The bulk of the City's net assets ($107,416,592 or 81%) reflect investment in capital
infrastructure assets less the remaining balance of debt issued to acquire those assets.
Infrastructure assets are used to provide public services to citizens and are not
available for spending. Another 4.8% ($6,308,262) of the City's net assets are legally
restricted as to use. The remaining net assets ($18,143,248) are unrestricted and may
be used to meet the City's operating needs and ongoing obligations.
Changes in net assets. The City's total revenues were $46,768,399. Just over a third of the
City's revenue stream came from
Figure A-3
charges to users of specific Gty of Mlskegon
services such as water or sewer Sources of Revenue for Fiscal Year 2007
(See Figure A-3). Another
eighteen percent came from ~atir,g & cap;tal &ants
various grants from the state and IB%
federal governments and thirty-
four percent was from local
property and income taxes. The ln::oTe Taxes
remainder was comprised of state '7%
revenues and various other OU,e< State~e
sources such as interest income.
4%
""
The total cost of all City programs
and services during 2007 was
$44,421,491, an increase of $1,862,908 from 2006. Seventy-five percent of these costs
were for governmental activities such as police and fire protection, streets, parks, and
general administration. The remainder represents business-type activities operated by
the City, specifically, water, sewer and marina operations.
The difference between the City's total revenues and expenses ($2,346,908) represents
the increase in total net assets for 2007. The following table (Changes in City's Net
Assets) further breaks down the change in total net assets into year-to-year changes in
individual revenue and expense categories:
Changes in City's Net Assets
(In thousands of dollars)
Total
Governmental Business-Type Percentage
Activities Activities Total Change
2007 2006 2007 2006 2007 2006 2007-2006
Program revenues
Charges for services $4,109 $4,967 $12,030 $11,413 $16,139 $16,380 -1.5%
Operating grants and contributions 5,229 5,093 5,229 5,093 2.7%
Capital grants and contributions 3,348 5,360 711 3,348 6,071 -44.9%
General revenues
Property taxes 8,014 7,847 8,014 7,847 2.1%
Income taxes 7,758 7,674 7,758 7,674 1.1%
State shared revenues 4,475 4,674 4,475 4,674 -4.3%
All other 1,634 1,263 170 122 1,804 1,385 30.3%
Total revenues 34 567 36 878 12 200 12 246 46 767 49124 -4.8%
Governmental actlvlties expenses
PubHc representation 925 904 925 904 2.3%
Administrative seNices 784 733 784 733 7.0%
Financial services 2,205 2,062 2,205 2,062 6.9%
Public safety 12,802 13,059 12,802 13,059 -2.0%
Public works 2,989 3,089 2,989 3,089 -3.2%
Highways, streets and bridges 7,272 5,672 7,272 5,672 28.2%
Community and economic development 3,054 3,383 3,054 3,383 -9.7%
Culture and recreation 2,433 2,465 2,433 2,465 -1.3%
General administration 358 1,144 358 1,144 -68.7%
Interest on long-term debt 343 207 343 207 65.7%
Business-type activities expenses
Water 5,795 4,500 5,795 4,500 28.8%
Sewer 5,067 5,007 5,067 5,007 1.2%
Marina 393 333 393 333 18.0%
Total expenses 33165 32 718 11 255 9 840 44 420 42 558 4.4%
Change in net assets before transfers 1,402 4,160 945 2,406 2,347 6,566 -64.3%
Transfers 40 540 40 540
Change in net assets 1,362 3,620 985 2,946 2,347 6,566 -64.3%
Net assets at beginning of year 82,346 80,351 47,175 44,229 129,521 124,580 32.0%
Restatement at January 1 (1,625) (1,625)
Net assets at end of year $83,708 $82,346 $48,160 $47,175 $131,868 $129,521 1.8%
Net assets for governmental activities increased $1,361,278 primarily due to strong
local income and property tax collections and continued tight cost controls. Business-
type activities saw an increase in net assets of $985,630, down from last year's
increase of $2,945,927.
Governmental Activities
The following table (Net Cost of Selected City Functions) presents the cost of each of
the City's largest functions as well as each function's net cost (total cost less fees
generated by the activities and intergovernmental aid specifically related to the
function). The net cost reflects the portion of costs funded by local tax dollars and other
general resources.
• The operational cost of all governmental activities during 2007 was $33,166,525.
• The net cost that City taxpayers paid for these activities through local taxes was
$15,771,809, or 48% of the total.
• The remaining cost was paid by user charges to those who directly benefit from
the programs or by state and federal grants and contributions
Net Cost of Selected City Functions
(in thousands of dollars)
Total Cost of Net Cost of
Services % Change Services % Change
2007 2006 2007 2006
Governmental activities
Public safety $12,802 $13,059 -2.0% $11,476 $11,678 -1.7%
Community and economic development 3,054 3,383 -9.7% 620 675 -8.1%
Culture and recreation 2,433 2,465 -1.3% 1,801 425 323.8%
Highways, streets and bridges 7,272 5,672 28.2% 773 (1,508) -151.3%
Public works 2,989 3,090 -3.3% 2,554 2,454 4.1%
All other 4,615 5,049 -8.6% 3,257 3,575 -8.9%
Total governmental activities $33,165 $32,718 1.4% $20,481 $17,299 18.4%
Business-Type Activities
The financial goal of the City's business-type activities (i.e. water, sewer and marina
operations) is to operate on a more or less "break-even" basis without making
significant profit or needing general tax subsidies. For 2007 this goal was achieved with
the City's total business-type activities realizing an overall increase in net assets of
$985,630.
Most of the increase ($873,278) is attributable to water fund operations which
experienced strong sales and lower than anticipated costs in 2007. Sewer fund net
assets increased $92,803 as higher than expected wastewater treatment costs largely
offset the effects of a mid-year user rate increase. Marina and launch ramp fund net
assets decreased $73,740 as the struggling economy continued to impact boating
activity in the area.
FINANCIAL ANALYSIS OF THE CITY'S FUNDS
The fund financial statements provide detailed information about the major City funds,
not the City as a whole. The City's major funds for 2007 were the general fund, the
major and local street funds, and the public improvement fund.
General Fund Highlights
The general fund receives the most public attention since it is where local tax revenues
are accounted for and where the most visible municipal services such as police, fire and
parks are funded. The City reforecasts its general fund budget on a quarterly basis to
take into account changing economic conditions and policy priorities. The following
table shows the general fund year-end fund balance for the last five years:
Fund Balance as a% of
Year-End Fund Year-to-Year% Prior Year's Prior Year Expenditures
Year Balance Change Expenditures and (Policy Target= 10%)
Other Uses
2007 $2,920,632 +8.6% $24,498,778 11.92%
2006 2,690,039 +6.8% 23,658,227 11.37%
2005 2,519,605 +3.0% 23,388,020 10.77%
2004 2,445,191 +0.5% 23,705,334 10.31%
2003 2,431,418 -13.4% 23,971,536 10.14%
Actual 2007 general fund expenditures were $714,309 less than the final amended
budget amount. Most of this variance resulted from budgeted contingency reserves that
were not used and from position vacancies and other operating savings as the City
continued to manage its way through a difficult economy. Significant budget
amendments made during the year included:
• City Attorney - amended to account for legal costs incurred as result of several
development initiatives.
• Parks Maintenance - amended to increased maintenance costs resulting from
completion of the lakeshore bike trail system.
• Capital Outlay - amended to account for necessary improvements to the police
locker room not foreseen in the original budget.
General fund revenues for 2007 were $652,643 higher than the final amended budget.
This positive variance is almost entirely attributable to higher than expected local
income tax collections.
The favorable variances on both the revenue and expenditure sides of the budget
allowed the City to make several year-end transfers to other funds including: $250,000
to the budget stabilization fund, $300,000 the sidewalk replacement fund, $200,000 to
the major street fund and, $150,000 to the state grants fund.
Major and Local Street Fund Highlights
The major and local street funds account for all of the city's street construction and
maintenance activities. Primary funding comes from the State of Michigan. During
2007, the fund balance of the major street fund increased $461,032 due to a $200,000
transfer from the general fund and higher than anticipated grant revenues. The local
street fund balance increased $741,680 during 2007 due mostly to the unanticipated
early payoff of a large special assessment.
Public Improvement Fund Highlights
The public improvement fund is used to account for the financing of large scale general-
purpose projects not readily accounted for in other funds. Resources come from the
sale of land, annual transfers from the general fund and periodic issuance of long-term
debt. In 2007, the fund balance of the public improvement fund decreased $2,691,274
as proceeds from bonds issued in late 2006 were spent on construction of a new
downtown fire station.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
At the end of 2007, the City and its component units had invested $139,775,629 in a
variety of capital assets, including land, equipment, buildings, water and sewer lines,
and vehicles. Note D of the notes to the basic financial statements provides detailed
information on the City's capital asset investment.
The City's largest capital asset project during 2007 was construction of a new $4.0
million Central Fire Station.
Long-Term Debt
At year-end 2007, the City had $31,974,002 in bonds and other long-term obligations
outstanding. This represents a decrease of 10% from the prior year. The City did not
issue new debt during 2007.
Bond Ratings
Additional information concerning the City's long-term debt is The City's limited full faith
presented in Note I to the basic financial statements. and credit bonds (i.e. bonds
guaranteed by the City's
general taxing powers)
presently carry a Standard &
Poors rating of "A".
City's Long Term Debt - Bonds and Other Obligations
In thousands of dollars
Total
Governmental Business-Type Percentage
Activities Activities Total Change
2007 2006 2007 2006 2007 2006 2007-2006
Due within one year $1,224 $1,468 $2,330 $2,308 $3,554 $3,776 -5.9%
Due in more than one year 9 083 10 043 19 337 21 629 28 420 31 672 -10.3%
Total bonds & other obligations $10,307 $11,511 $21,667 $23,937 $31,974 $35,448 -9.8%
In addition to direct City debt, component units such as the Downtown Development
Authority (ODA) and Local Development Finance Authority (LDFA) had outstanding debt
totaling $8,543,719 at year-end as shown in the table below. Debt issued by these
component units typically is secured by the limited full faith and credit of the City and so
is an important consideration in assessing the City's overall fiscal health. Additional
information concerning component units' long-term debt is presented in Note I to the
basic financial statements and is summarized as follows:
Component Unit Long Term Debt- Bonds and Other Obligations
(In thousands of dollars)
Total
Downtown Local Development Percentage
Finance Authority Finance Authority Total Change
2007 2006 2007 2006 2007 2006 2007-2006
Due within one year $210 $200 $80 $80 $ 290 $ 280 3.6%
Due in more t:han one year 3 695 3 905 4 559 4 638 8 254 8 543 -3.4%
Total bonds & other obligations $3,905 $4,105 $4,639 $4,718 $8,544 $8,823 -3.2%
ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES
The City's fiscal year 2008 capital budget anticipates spending $8,408,250 for capital
projects, principally street improvements, water and sewer system improvements, and
scheduled equipment replacements. These improvements will be funded through grants
and revenues generated by operations. For 2008, the only new debt anticipated is a
$250,000 low interest loan from the State of Michigan for cleanup of a brownfield site.
Although the loan will be made to the City, it will be secured and repaid by the private
developer of the brownfield site.
From an operations standpoint, the City's 2008 budget plan is to maintain current
service levels with no new expenditure initiatives.
To fund operations, the City depends on five major sources of revenue: local income
taxes, local property taxes, state-shared revenues, state street funds, and water and
sewer utility fees. Together, these five income sources account for about three-quarters
of the City's total revenues. Meaningful discussion of the City's financial outlook needs
to center on these major income sources.
Local Income Tax
The City income tax was approved by voters in 1993 and now is the primary source of
funding for police, fire, parks and other general operations. The income tax rate is 1%
on City residents and ½ of 1% on non-residents working in the City. The income tax
provides key advantages for core cities such as Muskegon. First, it allows the City to
regionalize its tax structure by taxing non-residents who work here and use City
services. Second, it allows the City to benefit from development occurring outside City
limits because City residents employed by non-City employers pay income taxes.
Finally, the income tax generates revenue from employees working at hospitals,
churches, government agencies, colleges and other institutions traditionally exempt
from paying property taxes. This is particularly important for Muskegon since six of the
ten largest income tax sources are such institutions.
Income tax revenues increased from $7,425,173 in 2006 to $7,618,461 for 2007
(+2.6%). For 2008, the City is conservatively estimating income tax revenues at
$6,900,000. The following table shows the makeup of the City's income tax base:
Number of 2007 Percent of Average Average
Category Payers Amount Paid Total Amount Paid Amount Paid
2007 2006
City Resident 7,308 $2,903,361 39% $ 397 $ 391
Non-Resident 13,983 3,548,550 48% 254 248
Corporate 1,850 1,166,550 13% 631 539
Total 23,141 $7,618,461 100% $ 329 $316
Local Property Tax
The City's 2007 property tax millage consisted of 11 mills: 8.5 mills for general
operations and 2.5 mills levied for sanitation. City charter authorizes a general
operating millage up to 10 mills and state law permits a maximum sanitation millage of 3
mills. Millage rates are applied to the taxable value of property in the City to arrive at
the City's property tax levy. As shown below, the City's property values have grown
modestly over the last few years. For 2008, the City is projecting $7,708,000 in property
taxes, a 4.9% increase over the $7,345,550 collected in 2007.
Percent
Year Real Personal Total Change
2007 $739,050,597 $143,249,691 $882,300,288 +3.1%
2006 706,285,650 149,374,300 855,659,950 +2.9%
2005 673,785,278 158,140,600 831,925,878 +0.3%
2004 661,233,389 168,106,228 829,339,617 -1.2%
2003 661,692,712 177,348,400 839,041,112 +1.6%
State Shared Revenues
State shared sales tax revenues represent about twenty-percent of total general fund
revenue. The City's state shared revenue allocation is made up of two approximately
equal parts. The constitutional component is a fixed percentage of total stale sales tax
collections that is allocated to cities on a per capita basis and that cannot be reduced by
the legislature. The statutory component is determined by a complex formula and is
subject to adjustment through the State's budget process. Both constitutional and
statutory components depend, of course, on overall state sales tax collections. Over
the last several years, state shared revenues have fallen sharply due to the faltering
economy and to executive order budget cuts in the statutory share. The City's recent
state shared revenue history is summarized below:
State Shared Percent
Year Revenues Change
2007 $4,475,462 -1.8%
2006 4,556,801 -0.1%
2005 4,592,852 -1.1%
2004 4,645,348 -5.9%
2003 4,938,861 -7.8%
Continued erosion of the state shared revenue component constitutes the single biggest
threat to the stability of City finances at this time. Due to the local income tax,
Muskegon is somewhat less dependent on this revenue source than most Michigan
cities.
For 2008, the City projects $4,487,972 based on current information available from the
state. This is little changed from the $4,475,462 received during 2007.
Street Funds
The State also returns to the City a share of gasoline tax revenues to help fund
maintenance and construction of major and local streets within the City. These
revenues have not suffered to the extent that general state sales tax revenues have:
Street Revenues Percent
Year from State Change
2007 $3,288,098 -0.2%
2006 3,297,183 -0.7%
2005 3,319,131 -4.1%
2004 3,459,503 +9.2%
2003 3,166,406 -1.7%
For 2008, the City is projecting a modest increase in street funds from the State of
Michigan.
Water and Sewer Fees
From a government-wide entity perspective, combined water and sewer fees represent
the City's largest income stream totaling $11,509,536 in 2007. Charges to customers
are based on the amount of metered services used times rates periodically set by the
City Commission. During 2007, sewer rates were increased as result of higher
wastewater treatment and debt service charges enacted by Muskegon County. A
further sewer rate increase may be needed in 2008 as Muskegon County embarks on a
costly sewer forcemain replacement project.
CONTACTING THE CITY'S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, and
investors and creditors with a general overview of the City's finances and to
demonstrate the City's accountability for the money it receives. If you have questions
about this report, need additional financial information, or wish to obtain separate
financial statements for the City's component units, contact the City's Finance
Department at (231) 724-6713 or by e-mail (finance@shorelinecity.com).
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
General Fund
For the year ended December 31, 2007
(with comparative actual amounts for the year ended December 31, 2006)
2007 2006
Variance with
final budget-
Budgeted amounts A(:'.,! positive
Original Final <--:. JY Actual {!_"!~_gative) Actual
REVENUES
Taxes ,:;;~i+
City income tax $ 6,980,000 $ ,a:tt'o,ooo ~1s, 7,618,461 $ 618,461 $ 7,425,173
Property taxes 7,361,472 _,,i/()'7,353,521 '"":t'.:'?>7,345,550 (7,971) 7,142,298
Industrial facilities taxes ?
351,8-8 .7
, _.,/,,';/ 35J,8-8 ? "'hi> ?
,;,,364,6_8 12,800 396,366
Payments in lieu of taxes 89,000 { / ,.,89,-000 91,393 2,393 88,871
Delinquent chargeback collected 12,000 ';'~\i\- .,,,_z:{:_£'.f2,ooo (12,000)
Total taxes "-"'~ ,,,J4~806,349 15,420,032 613,683 15,052,708
·,>'
,,
Licenses and pennits
Business licenses 3:2,025 (475) 33,656
Liquor licenses 37,000 (500) 36,452
Cable TV fees 297,200 1,700 285,124
Housing licenses 81,640 6,640 55,623
Rental property registration 695 (805) 12,980
Burial permits 117,703 (2,297) 118,399
Building permits 325,000 348,349 23,349 306,791
Electrical pennits 105,000 106,607 1,607 76,535
Plumbing permits 35,000 34,540 (460) 34,367
Mechanical permits 52,500 52,500 56,016 3,516 45,978
Cat licenses 2,500 2,850 3,740 890 3,115
Police gun registration 3 3 3
Total licenses and pennits 1,015,000 1,082,353 1,115,518 33,165 1,009,023
Intergovernmental revenues
Federal grants 88,325 84,993 84,162 (831) 172,881
State
Grants 18,000 18,500 18,373 (127) 18,302
State shared revenue 4,628,616 4,479,345 4,475,462 (3,883) 4,556,801
Total intergovernmental revenues - state 4,646,616 4,497,845 4,493,835 (4,010) 4,575,103
Local 60,000 60,000 60,000
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
General Fund
For the year ended December 31, 2007
(with comparative actual amounts for the year ended December 31, 2006)
2007 2006
Variance with
final budget-
Budgeted amounts <<'t· positive
Original Final "'✓ Actual (negative) Actual
Charges for services
Tax administration fees $ 216,541 $ 212,530 $ (970) $ 219,172
Utility administration fees 180,000 I 80,000 180,000
Downtown Development Authority administration fees (5,000) 5,000
Reimbursement for elections (58) 13,762
Indirect cost reimbursements 1,024,932 1,045,539
Site plan review fee 5,870 (130) 5,650
Sale of cemetery lots 38,182 (I 8) 27,190
Police miscellaneous 120,470 26,470 97,093
Police impound fees 43,234 (1,766) 49,206
Landlord's alert fee 220 (80) 355
Fire protection-state property 87,601 (20,399) 121,131
Zoning fees 10,362 1,362 13,352
Clerk fees 3,115 (385) 3,330
Clerk fees - passport fees 8,240 (260) 2.520
Tax abatement application fees 16,411 (589) 10,080
Treasurer fees 61,277 (28,723) 73,030
False alarm fees 12,000 12,525 525 14,130
Miscellaneous cemetery income 22,000 20,536 (1,464) 22,772
Senior transit program fees 9,000 9,254 254 10,13 I
Fire miscellaneous 5,000 3,494 (1,506) 3,763
Sanitation stickers 110,000 84,735 (25,265) 87,263
Lot cleanup fees 115,000 70,987 (44,013) 74,581
Reimbursements - lot mowing and demolitions 50,000 40,000 55,484 15,484 65,994
Special events reimbursements 115,000 120,000 92,041 (27,959) 96,691
Recreation program fees 30,000 40,000 41,457 1,457 78,877
Total charges for services 2,207,373 2,338,032 2,224,999 (113,033) 2,320,612
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
General Fund
For the year ended December 31, 2007
(with comparative actual amounts for the year ended December 31, 2006)
2007 2006
Variance with
final budget-
positive
Original Final Actual (negative) Actual
Fines and forfeitures :'\\J.:i>_r
Income tax - penalty and interest $ 200,000 $ ,;i,o;ooo'<; , $ 240,315 $ 10,315 $ 192,822
Late fees on current taxes 38,931 (36,069) 35,701
Interest on !ate invoices 2,151 151 2,112
Parking fines 13,354 (6,646) 87,060
Court fines 190,651 651 208,356
Total fines and forfeitures 585,402 (31,598) 526,05 l
Interest and rental income
Investment earnings 456,224 131,224 416,856
Flea market 22,064 (6,936) 20,736
Farmers' market 40,325 2,825 34,719
City right of way rental 4,400 4,400
Arena events 137,977
Advertising 2,000 (2,000) 284
Fire station lease - Central Dispatch 6,180 6,180
Parking rentals 2,700 2,800 100 2,800
McGraft park rentals 45,000 42,114 (2,886) 44,008
Other park rentals 29,000 302.920 1,920 30,403
Total interest and rental income 480,780 605,027 124,247 692,183
Other
Sale of land and assets 1,000 1,000 (1,000)
Police sale and auction proceeds 1,500 1,500 (1,500)
CDBG program reimbursements 188,000 205,000 225,149 20,149 240,!43
Contributions 11,000 52,000 50,499 (1,501) 17,992
Contribution - Veteran's Park maintenance 17,250 17,250 18,328 1,078 17,977
Community Foundation for Muskegon County 13,000 3,000 (10,000) 11,675
Miscellaneous reimbursements 1,000 1,000 (1,000)
Miscellaneous and sundry 15,000 29,000 53,794 24,794 11,894
Total other 234,750 319,750 350,770 31,020 299,681
Total revenues 24,047,264 24,227,102 24,939,745 652,643 24,648,242
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
General Fund
For the year ended December 31, 2007
(with comparative actual amounts for the year ended December 31, 2006)
2007 2006
Variance with
final budget-
Bud_£eted amounts positive
Ori_£inal Final Actual (ne_£ative) Actual
EXPENDITURES
Current
Public representation services
City commission $ 86,156 80,462 $ 3,661 $ 88,670
City promotions and public relations 9,029 12,729 11,696 1,033 5,402
City manager Z,6,800 213,848 6,952 209,693
Contributions to outside agencies <''C; ?,;:_.187,824 180,880 6,944 176,013
City attorney '\!:-·,, ,'.•' 440,000 440.434 (434) 424,117
Total public representation services \/94.5,476 927,320 18,156 903,895
Administrative services
Administration 126,444 5,281 159,841
City clerk 312,042 277,610 34,432 297,542
Civil service 188,609 163,761 24,848 175,899
Julia Hackley internships 5,374 5,374 4,350
Affirmative action 78,232 71,724 6,508 32,157
Total administrative services 715,982 644,913 71,069 669,789
Financial services
Finance administration 421,292 420,922 423,512 (2,590) 430,314
Assessing 427,490 454,800 459,837 (5,037) 442.617
Arena administration 175,300 175,300 269,434 (94,134) 141,032
Income tax administration 358,668 381,668 373,433 8,235 335,776
Information systems 349,989 356,089 364,246 (8,157) 315,066
City treasurer 346,522 346)22 341,057 ~ 391,775
Total financial services 2,079,261 2,135,301 2,231,519 (96,2 I 8) 2,056,580
Public safety
Police department 8,470,172 8,307,989 8,235,772 72,217 8,232,492
Fire department 3,759,363 3,777,363 3,652,524 124,839 3,719,404
Fire safety inspections 1,014,248 1,017,548 966,136 51,412 994,574
Total public safety 13,243,783 13,102,900 12,854,432 248,468 12,946,470
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
General Fund
For the year ended December 31, 2007
(with comparative actual amounts for the year ended December 31, 2006)
2007 2006
Variance with
final budget-
Bud_£eted amounts positive
_____ Original ____ Final ,,/ Actual (negative) Actual
Public works
Street lighting $ 572,325 $ ,i~p;OOD'z,;\ $ 593,486 $ (3,486) $ 563,184
Community event support 34,750 '32,600 '-</.X,\ 28,837 3,763 25,456
Senior citizen transit 54,306 57,708 "<si \ 59,824 (2,116) 51,039
General sanitation
Recycling
Storm water management
1,664,506
163,368
16,991
i,1!1)~~:
,;:16,991
"I,~:~: :
16,991
16,518
(331)
1,650,354
159,751
16,384
City hall maintenance 256,988 256,581 407 264,247
Total public works "?('183,661 2,768,906 14,755 2,730,415
Community and economic development
Planning, zoning and economic development 462,113 39,452 437,715
Environmental services 332,766 20,485 325,496
Edison Landing subsidy I 00,000
--
Total community and economic development 954,816 894,879 59,937 763,211
Culture and recreation
Parks maintenance 1,353,670 1,340,824 12,846 1,231,852
McGraft park maintenance 50,000 46,376 3,624 69,399
General and inner city recreation 266,744 264,522 2,222 299,460
Cemeteries maintenance 572,581 545,975 26,606 528,446
Graffiti removal 4,792 4,792 3,213 1,579 2,751
Parking operations 7,500 7,500 6,605 895 13,522
Farmers' market and flea market 37,826 42,500 43,578 (1,078) 45,405
Total culture and recreation 2,181,609 2,297,787 2,251,093 46,694 2,190,835
Other governmental functions
Insurance premiums 347,304 351,270 350,385 885 334,748
Other 400,000 350,000 350,000 222,802
Total other governmental functions 747,304 701,270 350,385 350,885 557,550
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
General Fund
For the year ended December 31, 2007
(with comparative actual amounts for the year ended December 31, 2006)
2007 2006
Variance with
final budget-
Budgeted amounts <h:5 positive
Original Final :,·;:/ Actual {negative) Actual
Debt service
Interest and fees $ 261,194 $
.,~Jp,tob''t .- -•~- 2os,ss9 $ 1,141 $ 3,336
Capital outlay 65,000
"~?,,
,, ' 65.578 (578) 5,435
__ .-,-, _,.-
_ ""''·-
Total expenditures 23,874,740 /.:':';)Y 23,912,193 23'j97,884 7I4,309 22,827,516
]77 574
' ,,c,,j/
"-:-'; \,, ·-ti,;'14 909
Excess of revenues over expenditures 1,741,861 1,366,952 1,820,726
-, - "(,<~'~/' _, '
OTHER FINANCING SOURCES (USES)
"--<
Transfers in 91,658 (133,342) 20,970
Transfers out (1,602,926) (904,880) (1,671,262)
Total other financing sources (uses) (1,5 I 1,268) (1,038,222) (1,650,292)
Net change in fund balance $ (I 58,1_37)_ 230,593 $ 388,730 170,434
Fund balance at beginning of year 2,690,039 2,519,605
Fund balance at end of year $ 2,9291~?_2 ___ $ 2,690,039
Note: Both budgets and actual figures are prepared geperally accepted accounting principles.
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
Major Street and Trunkline Fund
For the year ended December 31, 2007
Variance with
final budget-
Budfe1ed amounts positive
Original Final Actual (negative)
REVENUES
Intergovernmental revenues
Federal $ 264,700 ,. >;? 1,254,700 S 1,108,348 £ (146,352)
State 4,143,269 '},i 4,143,269 3,825,191 (J 18,078)
Charges for services 300,000 ' ~""'",.175,000 370,376 195,376
Investment earnings ~.;JJ 5,000 116,227 1,227
Other 'iso,ooo 272_:291 22,291
"-'/
Total revenues 5,937;969 5,692,433 (245,536)
EXPENDITURES
Current
Highways, streets and bridges 4,392,900 4,462,763 (69,863)
Debt service
Principal 639,750 640,000 (250)
Interest and fees 28,387 28,638 (25 I)
Total expenditures 5,061,037 5, 131,40 I (70,364)
Excess of revenues over expenditures 27,378 876,932 561,032 (315,900)
OTHER FINANCING SOURCES (USES)
Transfers in 200,000 200,000
Transfers out (600,000) (300,000) 300,000
Total other financing sources (uses) (600,000) (I 00,000) 500,000
Net change in fund balance $ 27,378 $ 276,932 461,032 $ 184,100
Fund balance at January 1, 2007 708,102
Fund balance at December 31, 2007 $ 1,169,134
Note: Both budgets and actual figures are prepared in accordance with generally accepted accounting principles.
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
Local Street Fund
For the year ended December 31, 2007
Variance with
final budget•
Bud_g_eted amounts positive
Ori~inal ,,Final Actual (negative)
REVENUES
Intergovernmental revenues
,,,,<)::~:)'.\-,,
Federal $ 1,300,000 (j;Y $ '<<l),5)5,000 $ 192,000 $ (1,323,000)
,_ ' ,. _. _,:,,_ _
State 844,79.7;;, ~4,797 846,397 1,600
,':.;,,C/ '-' ·••
Charges for services 5;000 l 6;000 13,382 (2,618)
/';-.. / ""Y"
Investment earnings ,,r;,ooo <i 25,000 243,947 218,947
Other \:'!Ji;ooo,i / 600,000 708,106 108,106
Total revenues 3,000,797 2,003,832 (996,965)
EXPENDJTURES
Current
Highways, streets and bridges 3,263,000 2,042,152 1,220,848
Excess of revenues over (under) expenditures (262,203) (38,320) 223,883
OTHER FINANCJNG SOURCES
Transfers in 480,000 1,080,000 780,000 (300,000)
Net change in fund balance $ 28,360 $ 817,797 741,680 $ (76,117)
Fund balance at January l, 2007 648,230
Fund balance at December 31, 2007 $ 1,389,910
Note: Both budgets and actual figures are prepared in accordance with generally accepted accounting principles.
City of Muskegon
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS
Proprietary Funds
For the year ended December 31, 2007
Governmental
Activities -
Business-type Activities - Enterprise Funds Internal
Marina and Service
Sewer Water Launch Ramp Total Funds
OPERA TING REVENUES
Charges for services s 5,091,215 $ 6,418,321 $ 248,004 $ 11,757,540 $ 8,087,546
Other 87,880 150,907\,, 33,675 272,462 148,155
;, ,.,,,,
Total operating revenues 5,179,095 6,569:"7'.t8 281,679 12,030,002 8,235,70 I
;'..',,>,
OPERATING EXPENSES
Administration
Insurance premiums and claims
<:Ji"' -;:\tl>·· ··\.' -
22,680 814,376 290,568
3,967,287
Wastewater treatment '\;' ,
4,138,818
Filtration plant operations .-.-l~J 18.009 '0'', 1,418,009
Water distribution -;\'it',491,337 1,491,337
Other operations 241,760 241,760 2,850,308
Depreciation and amortization j}
1,784,768 131,017 2,575,690 568,841
•s;~,v•
Total operating expenses 5,189,417 395,457 10,679,990 7,677,004
''ii:~
Operating income (loss) 1,379,811 (113,778) 1,350,012 558,697
NON OPERATING REVENUES (EXPENSES)
Investment earnings 136,511 38 170,594 145,290
Gain on sale of capital assets 12,000
Interest expense (642.594) (667,815)
Total nonoperating revenue (expenses) (506,083) 38 (497,221) 157,290
Income (loss) before transfers 92,803 873,728 (113,740) 852,791 715,987
Transfers in 40,000 40,000 28,046
---
Change in net assets 92,803 873,728 (73,740) 892,791 744,033
Net assets at January 1, 2007 14,450,264 28,915,964 1,403,359 __6_,009,699
Net assets at December 31, 2007 $ 14,543,067 $ 29,789,692 $ 2,329,619 $ 6,753,732
Adjustments to reflect the consolidation of internal service fund activities
related to enterprise funds 92,839
Change in net assets of business-type activities 985,630
'
The accompanying notes are an integral part ofthis statement.
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