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City of Muskegon,
Michigan
Comprehensive Annual
Financial Report
For The Year Ended December 31, 2008
www.shorelinecity.com
CITY OF MUSKEGON,
MICHIGAN
COMPREHENSIVE
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED
DECEMBER 31, 2008
Prepared By
FINANCIAL SERVICES DIVISION
Timothy Paul
Director of Finance
Elizabeth Lewis Derrick Smith
Assistant Finance Director City Treasurer
Kenneth Grant James Maurer
Income Tax Administrator Information Systems Director
Kathy Coleman Matt Lee
Accounts Payable Payroll
Cover Photo: Cormorant resting at Heritage Landing in Downtown Muskegon (Courtesy of Donna Mayol)
www.shorelinecity.com
City of Muskegon
TABLE OF CONTENTS
INTRODUCTORY SECTION
Letter of Transmittal .................................................................................................................................. 5
Certificate of Achievement for Excellence in Financial Reporting ......................................................... 12
Organization Chart ................................................................................................................................... 13
List of Principal Officials......................................................................................................................... 14
FINANCIAL SECTION
Independent Auditors’ Report.................................................................................................................. 17
Management’s Discussion and Analysis.................................................................................................. 19
Basic Financial Statements
Government-wide Financial Statements
Statement of Net Assets (Deficits) .................................................................................................... 32
Statement of Activities ...................................................................................................................... 33
Fund Financial Statements
Governmental Funds
Balance Sheet ................................................................................................................................. 34
Reconciliation of the Governmental Funds Balance Sheet
to the Statement of Net Assets .................................................................................................... 35
Statement of Revenues, Expenditures and Changes
in Fund Balances ......................................................................................................................... 36
Reconciliation of the Governmental Funds Statement of Revenues,
Expenditures and Changes in Fund Balances to the Statement of
Activities ..................................................................................................................................... 37
Proprietary Funds
Statement of Net Assets ................................................................................................................. 38
Statement of Revenues, Expenses and Changes in Fund Net Assets ............................................. 39
Statement of Cash Flows ................................................................................................................ 40
Fiduciary Funds
Statement of Fiduciary Assets and Liabilities ................................................................................ 41
Component Units
Statement of Net Assets (Deficits) .................................................................................................... 42
Statement of Activities ...................................................................................................................... 43
Notes to Financial Statements .............................................................................................................. 44
Required Supplementary Information
Budgetary Comparison Schedule—General Fund ................................................................................ 72
Budgetary Comparison Schedule—Major Street and Trunkline Fund ................................................. 78
Schedule of Funding Progress .............................................................................................................. 79
1
City of Muskegon
TABLE OF CONTENTS
Other Supplemental Information
Other Governmental Funds
Description of Other Governmental Funds ....................................................................................... 82
Combining Balance Sheet ................................................................................................................. 84
Combining Statement of Revenues, Expenditures and Changes in
Fund Balances ................................................................................................................................ 85
Other Special Revenue Funds
Combining Balance Sheet .............................................................................................................. 86
Combining Statement of Revenues, Expenditures and Changes in
Fund Balances ............................................................................................................................. 87
Budgetary Comparison Schedule—Other Special Revenue Funds ............................................... 88
Other Capital Projects Funds
Combining Balance Sheet .............................................................................................................. 90
Combining Statement of Revenues, Expenditures and Changes in
Fund Balances (Deficit) .............................................................................................................. 91
Internal Service Funds
Description of Internal Service Funds ............................................................................................... 93
Combining Statement of Net Assets.................................................................................................. 94
Combining Statement of Revenues, Expenses and
Changes in Fund Net Assets .......................................................................................................... 95
Combining Statement of Cash Flows ................................................................................................ 96
Fiduciary Funds
Description of Fiduciary Funds ......................................................................................................... 97
Agency Funds
Combining Statement of Assets and Liabilities ............................................................................. 98
Statement of Changes in Assets and Liabilities ............................................................................. 99
Component Units
Description of Component Units ..................................................................................................... 101
Combining Balance Sheet ............................................................................................................... 102
Reconciliation of the Governmental Funds Balance Sheet
to the Statement of Net Assets (Deficits) ..................................................................................... 103
Combining Statement of Revenues, Expenditures and Changes
in Fund Balances (Deficit) ........................................................................................................... 104
Reconciliation of the Governmental Funds Statement of Revenues,
Expenditures and Changes in Fund Balances to the Statement of
Activities ..................................................................................................................................... 105
Schedule of Indebtedness ................................................................................................................... 107
2
City of Muskegon
TABLE OF CONTENTS
STATISTICAL SECTION
Financial Trends
Net Assets by Component .................................................................................................................. 114
Changes in Net Assets ........................................................................................................................ 115
Fund Balances of Governmental Funds .............................................................................................. 116
Changes in Fund Balances of Governmental Funds ........................................................................... 117
Revenue Capacity
Governmental Activities Revenues by Source ................................................................................... 118
Taxable, Assessed and Equalized and Estimated Actual Valuation of Property ................................ 119
Principal Property Taxpayers ............................................................................................................. 120
Property Tax Rates – Direct and Overlapping Government Units ..................................................... 121
Property Tax Levies and Collections .................................................................................................. 122
Segmented Data on Income Tax Filers, Rates and Liability .............................................................. 123
Debt Capacity
Ratio of Outstanding Debt by Type .................................................................................................... 124
Direct and Overlapping Debt .............................................................................................................. 125
Legal Debt Margin Information.......................................................................................................... 126
Revenue Bond Coverage .................................................................................................................... 127
Demographic and Economic Information
Demographic and Economic Statistics ............................................................................................... 128
Principal Employers............................................................................................................................ 129
Operation Information
Full-time Equivalent Government Employees ................................................................................... 130
Operating Indicators by Function/Program ........................................................................................ 131
Capital Asset Statistics by Function/Program .................................................................................... 132
SINGLE AUDIT OF FEDERAL FINANCIAL ASSISTANCE PROGRAMS
Independent Auditors’ Report on Internal Control over Financial
Reporting and on Compliance and Other Matters Based on an
Audit of Financial Statements Performed in Accordance with
Government Auditing Standards ..................................................................................................... 134
Independent Auditors’ Report on Compliance with Requirements Applicable
to Each Major Program and Internal Control over Compliance in
Accordance with OMB Circular A-133 .......................................................................................... 136
Schedule of Expenditures of Federal Awards ...................................................................................... 138
Schedule of Findings and Questioned Costs ........................................................................................ 141
Client Documents
Summary Schedule of Prior Audit Findings ................................................................................... 144
Corrective Action Plan .................................................................................................................... 145
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Affirmative
Action
(231)724-6703
FAX (231)722-
1214
Cemetery
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City Manager
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FAX (231)722-
1214
April 8, 2008
Civil Service
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Honorable Mayor and Members of the
Clerk
(231)724-6705 City Commission
FAX (231)724- City of Muskegon
4178
Muskegon, Michigan 49443
Comm. &
Neigh. Services
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FAX (231)726-
2501
Ladies and Gentlemen:
Finance
(231)724-6713 We are pleased to present to you the Comprehensive Annual Financial Report (CAFR) for
FAX (231)724- the City of Muskegon, Michigan, for the year ended December 31, 2008. This report
6768
includes the City’s audited financial statements in accordance with the requirements of
Fire Department state law. The financial statements are presented in conformity with accounting principles
(231)724-6792
FAX (231)724- generally accepted in the United States of America (GAAP), and audited in accordance
6985
with generally accepted auditing standards by a firm of licensed certified public
Income Tax accountants. This annual report is formatted to comply with the financial reporting model
(231)724-6770
FAX (231)724- developed by the Government Accounting Standards Board (GASB) Statement 34.
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Inspection GAAP requires that management provide a narrative introduction, overview, and analysis
Services to accompany the basic financial statements in the form of Management’s Discussion and
(231)724-6715
FAX (231)728- Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and
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should be read in conjunction with the financial statements. The City of Muskegon’s
Leisure Services MD&A can be found immediately following the independent auditor’s report.
(231)724-6704
FAX (231)724-
1196
The Comprehensive Annual Financial Report is prepared by the City’s Finance
Mayor’s Office
(231)724-6701 Department and responsibility for both the accuracy of the data presented and the
FAX (231)722- completeness and fairness of the presentation, including all disclosures, rests with the
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City. We believe the data as presented is accurate in all material respects; that it is
Planning/Zoning
(231)724-6702
presented in a manner designed to set forth fairly the financial position and results of
FAX (231)724- operation of the City as measured by the financial activity of its various funds and
6790
component units; and that all disclosures necessary to enable the reader to gain the
Police maximum understanding of the City’s finances have been included. Brickley DeLong,
Department
(231)724-6750 P.C., Certified Public Accountants, performed the independent audit of all accounts of the
FAX (231)722- City as required by state law and their report and unqualified opinion is presented as the
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first component of the financial section of this report.
Public Works
(231)724-4100
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Treasurer
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FAX (231)724-
6768
City of Muskegon, 933 Terrace Street, P.O. Box 536, Muskegon, MI 49443-0536
http://www.shorelinecity.com
5
THE CITY AND THE REGION
The City of Muskegon is located in Western Michigan on the shores of Lake Michigan. The City covers
eighteen square miles and, with a population of approximately 40,000, is the largest city on the eastern
shore of Lake Michigan. The City is located in Muskegon County and is part of the Muskegon-Norton
Shores MSA.
Muskegon is home to many outstanding sports, recreation and cultural activities:
• Michigan Adventure Amusement Park, located north of the city, is the largest amusement park in
Michigan. The recent extension of City water to the amusement park is expected to spur further
development in and around the amusement park.
• Muskegon is home to both a professional hockey team (UHL Muskegon Lumberjacks) and a
professional arena football team (Muskegon Thunder). Both teams play in the 5,000 seat L. C.
Walker Arena in downtown Muskegon.
• Muskegon is the eastern terminus for the high speed cross-lake ferry. Connecting Muskegon
with Milwaukee, Wisconsin, the service ferries 100,000-plus passengers each season between the
two cities.
• Muskegon is home to the annual Miss Michigan pageant.
• Pere Marquette beach is nationally recognized as one of the best beaches in the nation and is
the only beach in Michigan to receive and maintain the Blue Wave Certification by the Clean
Beaches Council. The Blue Wave certification identifies the nation's cleanest, safest and most
environmentally well-managed beaches.
• Muskegon is home to successful summertime festivals that attract tens of thousands of visitors to
the community. These include Muskegon Summer Celebration which brings top name musical
groups to town for 11 days of waterfront music celebration and the Bike Time festival which attracts
thousands of motorcycle enthusiasts to the city each July.
• Muskegon is the cultural hub for West Michigan with numerous museums and live performances.
The Muskegon Museum of Art has one of the best art collections in the Midwest, and the Muskegon
County Museum provides insight into the area’s history. The former residences of Muskegon’s
lumber barons, Charles H. Hackley and Thomas Hume, proudly display the glory of the Victorian
ages. The Fire Barn Museum takes visitors back to a 1890s Muskegon Fire Station. The West Shore
Symphony and Muskegon Civic Theater bring the stage of The Frauenthal Center for the Performing
Arts to life throughout the year.
• Muskegon is home to three historic museum ships that attract thousands of visitors each year:
• USS Silversides, a rare surviving World War II submarine maintained in pristine condition;
• LST-393, a landing craft used in the D-day invasion and one of only two such vessels
remaining in existence; and the
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• Milwaukee Clipper, a Great Lakes passenger ship built before the Titanic that for many years
served as a cross-lake ferry between Muskegon and Milwaukee.
The City operates under a Commission-Manager form of government and provides a full range of
traditional municipal services. These include police and fire protection, parks and recreation activities,
public works operations, water and sewer services, solid waste collection, community development and
general administrative support services. The City also provides treated water to several surrounding
communities on a wholesale basis.
COMPONENT UNITS
The City has four discretely presented component unit types. These entities are discretely presented in
the financial statements as the governing boards of the component units are appointed and approved
by the City’s governing board:
• The Downtown Development Authority (DDA) which exists primarily for the purpose of financing
redevelopment activities in the City’s downtown area. The DDA has issued bonds that are repaid
through tax increment revenues generated by development within the Authority’s boundaries.
• The Tax Increment Finance Authority (TIFA), which exists primarily for the purpose of financing
redevelopment activities in a sub-section of the City’s downtown area. The TIFA generates tax
increment revenues through development within the Authority’s boundaries.
• The Local Development Finance Authority issues bonds for development activities in the City’s
industrial park and high-tech park areas. Bonds are repaid through tax increment revenues
generated by development within the Authority’s boundaries. The City has created four separate
local development finance authority districts under the aegis of the Local Development Finance
Authority (LDFA). Only one of these four districts has debt outstanding at this time.
• The Brownfield Redevelopment Authority (BRA), which exists primarily for the purpose of
financing redevelopment of designated environmental brownfields. The BRA generates tax
increment revenues through development within the it’s boundaries.
LOCAL ECONOMIC CONDITION AND OUTLOOK
Muskegon is fortunate to have a diverse local economy. The manufacturing sector is strong in the
areas of aerospace, chemicals, plastics, paper products, metals and castings, office furniture and
automotive parts. The City of Muskegon also benefits from being home to large government,
corrections, healthcare, and educational employers. Local income tax withholdings remitted by these
employers provide stability to City finances in times of economic weakness.
The current economic crisis has impacted Muskegon, but not to the extent it has other Michigan
communities. According to the W.E. Upjohn Institute’s local economic forecast for 2009-10:
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• Muskegon County’s employment trends have deteriorated slightly in the last two years but are
still above the state’s;
• Muskegon’s manufacturing sector is doing better than the nation’s and well above the state’s
trend;
• Muskegon MSA’s private services employment growth is above the nation’s and the state’s.
MAJOR INITIATIVES AND ACCOMPLISHMENTS
Among the City's major initiatives and accomplishments in 2008 were the following:
• Development activity in the City’s downtown was very active with several major projects reaching
completion:
• Construction was completed on the new $3.0 million headquarters building for the Muskegon
Area Chamber of Commerce;
• Construction was completed on a $3.5 million office building anchored by a local engineering
and architectural firm;
• The $2.0 million renovation of the former National City Bank Building was substantially
completed with the opening of a new bar/restaurant;
• Work progressed on construction of Baker College’s new $11.0 million culinary arts training
facility which is to open for students in June 2009;
• Two condominiums in the Heritage Square “live-work” development were completed. A total
of twenty-two units are planned for this downtown development;
• Plans were unveiled for the $5.0 million renovation of the 8-story former Comerica Bank
building into residential condominium units.
• A major West Michigan auto dealership began work on a $12 million expansion of its facilities
encompassing GM, Honda and Hyundai brands. The City is assisted in this project with the creation
of a Brownfield Redevelopment Authority and securing a low-interest state loan to help finance
environmental work.
• A new 50,000 square foot distribution center was completed by a local plastics company.
OTHER INFORMATION
INTERNAL ACCOUNTING CONTROLS
The City’s management is responsible for establishing and maintaining an internal control structure that
is designed to ensure adequate protection of the City’s assets from loss, theft, or misuse, and adequate
accounting data to allow for preparation of financial statements in conformity with generally accepted
accounting principles. The internal control structure is designed to provide reasonable, but not absolute
assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the
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costs of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and
benefits requires estimates and judgments by management.
All internal control evaluations occur within the above framework. We believe that the City’s internal
accounting controls adequately safeguard assets and provide reasonable assurances of proper
recording of financial transactions.
BUDGETARY CONTROL
Budgetary control is maintained through an annual budget resolution passed by the City Commission.
Budgetary control at the functional level is maintained by review of estimated expenditures prior to
making purchases. Encumbrances are not recorded in the City’s funds. The City does, however, utilize
an informal monitoring system to facilitate budgetary control over proposed purchases. Essentially, this
system entails the use of on-line budgetary information that details year-to-date “actual versus
budgeted” expenditure comparisons by budget category. This information is accessible to appropriate
personnel to enable them to ascertain the budget status of an expenditure category prior to authorizing
additional purchases.
DEBT ADMINISTRATION
At December 31, 2008, the total of City bonds and contractual debt outstanding (including discretely
presented component unit debt) was $37,542,753. During 2008, the City agreed to a $500,000 long
term loan from the State of Michigan to help fund environmental cleanup work. The loan will be repaid
by developers of brownfield sites located within the City. No other long term debt was issued in 2008.
Standard & Poor’s has affirmed the City’s general obligation debt rating of A. Also, during the year the
City was notified that the rating on it’s water system debt was upgraded by Standard & Poor’s from A-
to AA-.
CASH MANAGEMENT AND INVESTMENTS
Temporarily idle cash from the City’s various funds is invested through management of a common
pooled cash and investments system. Maturity of investments are timed to meet the City’s cash needs.
Investment instruments generally consisted of U.S. Treasury Bills and Notes, government agency
securities, high quality commercial paper and liquid money-market funds. Daily liquidity needs are
managed by investments in liquid short-term funds of all cash not needed in the common checking
account to cover checks and other debits presented to the bank for payment that day. The City has
contracted with MBIA Municipal Investors Service Corporation to provide full-time, non-discretionary
management of the City’s operating funds portfolio.
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PENSIONS AND OTHER POST-EMPLOYMENT BENEFITS
The City has transferred administrative responsibility for defined benefit pensions to the statewide
Municipal Employees Retirement System (MERS) of Michigan. This was done to achieve the
economies of scale and investment diversification that the $6 billion MERS program offers. A parallel
effort has been to reduce the City’s retirement funding liabilities and volatility by replacing defined
benefit pensions with a defined contribution model. This goal has been achieved and, all new
employees hired by the City are now covered by a defined contribution retirement program.
The City also provides post-retirement healthcare benefits for retirees and their dependents. Since
1987, the City has had an actuarial valuation of its post employment healthcare obligation prepared
annually and has followed a program of prefunding the obligation in the same manner as its pension
obligations. In 2005, the City implemented the requirements of GASB statements 43 and 45 –
“Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions.”
RISK MANAGEMENT
During 2008, the City continued participation in the Michigan Municipal Risk Management Authority
(MMRMA), an intergovernmental cooperative self-insurance program. The MMRMA offers secure
liability and property insurance coverage with premium stability and broad coverage at a competitive
price. The City is insured up to $15 million with a $100,000 deductible per occurrence for general, auto,
public official and law enforcement liability. During 2008, the City incurred losses of $393,983
(including reserves). Since the City began participating in the MMRMA program in March 1986, total
losses paid (including expenses but excluding reinsurance recoveries) have been $8,245,336.
SINGLE AUDIT
The City is required to have an annual single audit in conformity with the provisions of the Single Audit
Act Amendments of 1996 and U.S. Office of Management and Budget Circular A-133, “Audits of State,
Local Governments and Non-Profit Organizations”. Information related to the single audit, including the
schedule of federal awards, findings and questioned costs, and auditors’ reports on internal control over
financial reporting and compliance with certain laws, regulations and grants are included herein. The
financial activities related to the single audit requirements, such as the Community Development Block
Grant Program, are also included in this financial report.
AWARDS
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a
Certificate of Achievement for Excellence in Financial Reporting to the City of Muskegon for its
Comprehensive Annual Financial Report for the year ended December 31, 2007. This marked the
twenty-third consecutive year that the City has received this prestigious award. In order to be awarded
a Certificate of Achievement, a governmental unit must publish an easily readable and efficiently
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organized Comprehensive Annual Financial Report, whose contents conform to program standards.
Such reports must satisfy both generally accepted accounting principles and applicable legal
requirements.
A Certificate of Achievement is valid for a period of one year only. We believe our current report
continues to conform to the Certificate of Achievement Program requirements, and we are submitting it
to the GFOA to determine its eligibility for another certificate.
ACKNOWLEDGEMENTS
We would like to thank the members of the City Commission for their continued interest and support in
conducting the financial affairs of the City in a responsible and progressive manner and for their efforts
in working for the betterment of the Muskegon community. We would also like to thank the many City
employees who participate in the preparation of this report.
Respectfully submitted,
Bryon L. Mazade Timothy J. Paul
City Manager Director of Finance
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Citizens of Muskegon
The 7-member
Commission
The Citizens of The 7-member
appoints various
Muskegon elect Commission
Boards and
this Commission appoints the City
Commissions
Attorney
Various Boards & 7-Member City
City Attorney
Commissions Commission
The 7-member
Commission
appoints the City
Manager
City Manager
Administrative Services Financial Services
Division Division
Leisure Services
Public Safety Division
Division
Community & Economic
Public Works Division
Development Division
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COMPREHENSIVE ANNUAL FINANCIAL REPORT
CITY OF MUSKEGON, MICHIGAN
LIST OF PRINCIPAL OFFICIALS
December 31, 2008
ELECTED OFFICIALS
Mayor-Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Steve Warmington
At Large
Vice Mayor-Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . .Stephen J. Gawron
At Large
Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chris Carter
Ward 1
Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Clara Shepherd
Ward 2
Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lawrence O. Spataro
Ward 3
Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Steve Wisneski
Ward 4
Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Sue Wierengo
At Large
APPOINTED OFFICIALS
City Manager. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Bryon L. Mazade
City Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . John C. Schrier
Director of Finance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Timothy J. Paul
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FINANCIAL SECTION
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BRICKLEY DELONG
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS’ REPORT
April 8, 2009
City Commission
City of Muskegon
Muskegon, Michigan
We have audited the accompanying financial statements of the governmental activities, the business-type
activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining
fund information of the City of Muskegon as of and for the year ended December 31, 2008, which
collectively comprise the City's basic financial statements as listed in the table of contents. These financial
statements are the responsibility of the City of Muskegon's management. Our responsibility is to express
opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government Auditing Standards, issued
by the Comptroller General of the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective
financial position of the governmental activities, the business-type activities, the aggregate discretely
presented component units, each major fund, and the aggregate remaining fund information of the City of
Muskegon, as of December 31, 2008, and the respective changes in financial position, and cash flows, where
applicable, thereof for the year then ended in conformity with accounting principles generally accepted in the
United States of America.
The management's discussion and analysis and budgetary comparison information on pages 19 -30 and 72 -
79 are not a required part of the basic financial statements but are supplementary information required by
accounting principles generally accepted in the United States of America. We have applied certain limited
procedures, which consisted principally of inquiries of management regarding the methods of measurement
and presentation of the required supplementary information. However, we did not audit the information and
express no opinion on it.
316 Morris Ave., Suite 500 • P.O. Box 999 • Muskegon, MI 49443 907 S. State Street • P.O. Box 331 • Hart, MI 49420
17
PHONE (231) 726-5800 • FAX (231) 722-0260 PHONE (231) 873-1040 • FAX (231) 873-0602
BRICKLEY DELONG
City Commission
April 8, 2009
Page 2
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City of Muskegon’s basic financial statements. The introductory section, combining and
individual nonmajor fund financial statements, and statistical section are presented for purposes of additional
analysis and are not a required part of the basic financial statements. The accompanying schedule of
expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of
Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit
Organizations, and is also not a required part of the basic financial statements of the City of Muskegon. The
combining and individual nonmajor fund financial statements and the schedule of expenditures of federal
awards have been subjected to the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken
as a whole. The introductory and statistical sections have not been subjected to the auditing procedures
applied in the audit of the basic financial statements and, accordingly, we express no opinion on them.
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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, 2008. 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 $132,305,830 as of
December 31, 2008. Of the total net assets, $17,484,037 (13.2%) 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 $437,728 during 2008. This
increase is primarily the result of higher property tax and income tax revenues.
• The City’s governmental funds reported combined ending fund balance of
$10,271,440, a decrease of $1,962,291 from the Figure A-1, Required Components of the
prior year. Most of the change results from capital City’s Annual Financial Report
spending for street improvements.
• The City’s General Fund reported a total fund
balance of $2,383,725, a decrease of $536,907 from
the prior year. The decrease is attributed to higher
operating costs for public safety functions and
additional general fund transfers made to fund street
improvements.
• The City also maintains a Budget Stabilization (or
“rainy day”) Fund that reported a $2.0 million fund
balance of at December 31, 2008, an increase of
$250,000 from 2007.
OVERVIEW OF THE FINANCIAL STATEMENTS
This annual report consists of three parts—management’s
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.
• 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.
19
• 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
information in the Figure A-2. Major Features of the City's Government-Wide and Fund Financial Statements
financial statements Fund Statements
and provide additional Type of Statements EntireGovernment-Wide
City government
Governmental Funds
The activities of the City
Proprietary Funds
Activities the City
Fiduciary Funds
Instances in which the
data. The statements (except fiduciary funds)
and the City's component
that are 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
Statement of net assets Balance sheet Statement of net assets Statement of fiduciary
supplementary net assets
Statement Statement of changes
information that further Required financial Statement of activities expenditures
Statement of revenues,
& changes
of revenues,
expenses and changes in in fiduciary net assets
statements
explains and supports in fund balances fund net assets
Statement of cash flows
the information in the Accounting basis Accrual accounting and Modified accrual Accrual accounting and Accrual accounting and
financial statements. and
focus
measurement economic resources focus accounting and current
financial resources focus
economic resources focus economic resources focus
Figure A-1 shows how All assets and liabilities, Only assets expected to All assets and liabilities, All assets and liabilities,
both financial and capital, be used up and liabilities both financial and capital, both short-term and long-
the required parts of asset/liability
Type of
short-term and long-term that come due during the and short-term and long- term; the City's funds do
this annual report are information year or soon thereafter;
no capital assets included
term not currently contain
capital assets, although
arranged and related to All revenues and Revenues for which cash All revenues and expenses
they can
All revenues and
one another. expenses during year, is received during or soon during year, regardless of expenses during year,
regardless of when cash after the end of the year; when cash is received or regardless of when cash
Type of is received or paid expenditures when goods paid is received or paid
Figure A-2 summarizes inflow/outflow
information
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
20
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
21
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 six component units: the Downtown Development
Authority (DDA), the Tax Increment Finance Authority (TIFA), three Local
Development Finance Authorities (LDFAs) and, the newly created Brownfield
Redevelopment Authority (BRA). 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 $132,305,830 as of December 31, 2008.
This is an increase of $437,728 over reported net assets for the prior year. A summary
of the City’s net assets follows:
22
City's Net Assets
(In Thousands of Dollars)
Governmental Business-Type Percentage
Activities Activities Total Change
2008 2007 2008 2007 2008 2007 2008-2007
Current and other assets $26,501 $27,904 $8,824 $10,603 $35,325 $38,507 -8.26%
Capital assets 77,490 76,350 60,002 59,933 137,492 136,283 0.89%
Total Assets 103,991 104,254 68,826 70,536 172,817 174,790 -1.13%
Long-term liabilities 9,000 9,083 18,240 19,337 27,240 28,420 -4.15%
Other liabilities 11,160 11,463 2,111 3,039 13,271 14,502 -8.49%
Total Liabilities 20,160 20,546 20,351 22,376 40,511 42,922 -5.62%
Net Assets
Invested in capital assets,
net of related debt 69,565 68,060 40,877 39,357 110,442 107,417 2.82%
Restricted 3,557 5,485 822 822 4,379 6,307 -30.57%
Unrestricted 10,709 10,163 6,776 7,981 17,485 18,144 -3.63%
Total Net Assets $83,831 $83,708 $48,475 $48,160 $132,306 $131,868 0.33%
The bulk of the City’s net assets ($110,441,556 or 83%) represent investments 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 3.3% ($4,380,237) of the City’s net assets are legally
restricted as to use. The remaining net assets ($17,484,037) 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 $47,088,679, up 0.7% from
2007. One-third of the City’s revenue stream came from charges to users of specific
services such as water or sewer. Another nineteen percent came from grants from the
state and federal governments and thirty-five percent was from local property and
income taxes. The remainder was comprised of state revenues and other sources such
as investment income.
The total cost of all City programs and services during 2008 was $46,650,951, an
increase of $2,229,460 from 2007. Seventy-five percent of these costs were for
governmental activities such as police and fire protection, streets, parks, and general
administration. The remaining twenty-five percent represents the costs of the City’s
business-type activities, specifically, water, sewer and marina operations.
The difference between the City’s total revenues and expenses ($437,728) represents
the increase in total net assets for 2008. 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:
23
Changes in City’s Net Assets
(In thousands of dollars)
Governmental Business-Type Percentage
Activities Activities Total Change
2008 2007 2008 2007 2008 2007 2008-2007
Program revenues
Charges for services $3,877 $4,109 $11,817 $12,030 $15,694 $16,139 -2.76%
Operating grants and contributions 5,367 5,229 - - 5,367 5,229 2.64%
Capital grants and contributions 3,445 3,348 - - 3,445 3,348 2.90%
General revenues
Property taxes 8,349 8,014 - - 8,349 8,014 4.18%
Income taxes 8,118 7,758 - - 8,118 7,758 4.64%
State shared revenues 4,488 4,475 - - 4,488 4,475 0.29%
All other 1,519 1,634 109 170 1,628 1,804 -9.76%
Total revenues 35,163 34,567 11,926 12,200 47,089 46,767 0.69%
Governmental activities expenses
Public representation 987 925 - - 987 925 6.70%
Administrative services 783 784 - - 783 784 -0.13%
Financial services 2,292 2,205 - - 2,292 2,205 3.95%
Public safety 13,956 12,802 - - 13,956 12,802 9.01%
Public works 3,019 2,989 - - 3,019 2,989 1.00%
Highways, streets and bridges 7,265 7,272 - - 7,265 7,272 -0.10%
Community and economic development 3,175 3,054 - - 3,175 3,054 3.96%
Culture and recreation 2,624 2,433 - - 2,624 2,433 7.85%
General administration 575 358 - - 575 358 60.61%
Interest on long-term debt 324 343 - - 324 343 -5.54%
Business-type activities expenses
Water - - 5,801 5,795 5,801 5,795 0.10%
Sewer - - 5,503 5,067 5,503 5,067 8.60%
Marina and Launch Ramp - - 347 393 347 393 -11.70%
Total expenses 35,000 33,165 11,651 11,255 46,651 44,420 5.02%
Change in net assets before transfers 163 1,402 275 945 438 2,347 -81.34%
Transfers (40) (40) 40 40 - - -
Change in net assets 123 1,362 315 985 438 2,347 -81.34%
Net assets at beginning of year 83,708 82,346 48,160 47,175 131,868 129,521 1.81%
Net assets at end of year $83,831 $83,708 $48,475 $48,160 $132,306 $131,868 0.33%
Net assets for governmental activities increased slightly ($123,388) as economic
conditions slowed income tax and other revenue growth. Business-type activities saw
an increase in net assets of $314,340, down from last year’s increase of $985,630.
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 2008 was $34,999,188.
• The net cost that City taxpayers paid for these activities through local taxes was
$16,466,907, or 47% of the total.
24
• 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
2008 2007 2008 2007 2008-2007
Governmental activities
Public safety $13,956 $12,802 9.0% $12,670 $11,476 10.4%
Community and economic development 3,175 3,054 4.0% 742 620 19.7%
Culture and recreation 2,624 2,433 7.9% 2,157 1,801 19.8%
Highways, streets and bridges 7,265 7,272 -0.1% 495 773 -36.0%
Public works 3,019 2,989 1.0% 2,610 2,554 2.2%
All other 4,961 4,615 7.5% 3,636 3,257 11.6%
Total governmental activities $35,000 $33,165 5.5% $22,310 $20,481 8.9%
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 2008, the City’s total business-
type activities realized an overall increase in net assets of $314,340.
Most of the increase is attributable to Water Fund operations. Despite a decline in
water sales, operating costs in this fund were lower than anticipated resulting in
increased net assets. Sewer Fund net assets decreased $185,902 due both to higher
wastewater treatment costs and the aforementioned drop in metered water sales.
Marina and Launch Ramp Fund net assets decreased $57,217 primarily due to
depreciation charges on state-funded dock improvements.
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 2008 were the General Fund and the
Major Street and Trunkline 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.
25
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
2008 $2,383,725 -18.4% $ 24,800,810 9.61%
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%
Actual 2008 General Fund expenditures were $85,266 more than the final amended
budget amount. Most of this variance resulted from higher than anticipated public
safety costs. Significant budget amendments made during the year included:
• Police and Fire – amended to account for higher costs resulting from labor
contract settlements and the completion of a revised actuarial valuation of retiree
healthcare costs.
• Parks Maintenance – amended to reflect increased costs for maintaining bike
trail system and Shoreline Drive landscaping.
• Transfers to Other Funds – amended to account for year-end transfers of
resources to the Budget Stabilization ($250,000), Major Streets ($200,000),
Sidewalk Replacement ($150,000) funds.
General Fund revenues for 2008 were $86,130 lower than the final amended budget.
This variance is primarily attributable to a six-month delay in the payment of two large
invoices for city services. The national economic crisis that emerged in the fourth
quarter of 2008 impacted the City’s General Fund. Income tax collections, which had
been strong for most of the year, fell off in the fourth quarter and came in under the
amended budget projection. Finally, the City made a $250,000 year-end transfer to it’s
Budget Stabilization (“rainy day”) Fund in anticipation of further national economic
troubles.
As a result, the City’s General Fund ended 2008 with a fund balance that decreased
from the prior year and fell slightly short of the policy target (10% of prior year
expenditures).
Major Street and Trunkline Fund Highlights
The Major Street and Trunkline Fund accounts for all of the City’s street construction
and maintenance activities on its primary road system. Primary funding comes from the
State of Michigan. During 2008, the fund balance of the Major Street and Trunkline
Fund decreased $884,222 as a result of an aggressive street construction program
using local dollars to leverage state and federal highway grants.
26
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
At the end of 2008, the City and its component units had invested $140,810,959 in a
variety of capital assets, including land, streets, 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 projects during 2008 were for street improvement
projects.
Long-Term Debt
Bond Ratings
At year-end 2008, the City had $29,288,465 in bonds and
other long-term obligations outstanding. This represents a The City’s limited full faith and
decrease of 8.4% from the prior year. During 2008 the City credit bonds (i.e. bonds
guaranteed by the City’s
agreed to a $500,000 loan from the State of Michigan to fund taxing powers) presently carry
environmental cleanup work on Brownfield redevelopment a Standard & Poors rating of
sites. The debt will be repaid by developers who elect to “A”. Water System bonds are
rated “AA-“.
access the funds through the City. No other new debt was
issued during 2008.
Additional information concerning the City’s long-term debt is presented in Note I to the
basic financial statements.
City’s Long Term Debt – Bonds and Other Obligations
(In thousands of dollars)
Total
Governmental Business-Type Percentage
Activities Activities Total Change
2008 2007 2008 2007 2008 2007 2008-2007
Due within one year $ 909 $1,224 $1,139 $2,330 $2,048 $3,554 -42.4%
Due in more than one year 9,000 9,083 18,241 19,337 27,241 28,420 -4.1%
Total bonds & other obligations $9,909 $10,307 $19,380 $21,667 $29,289 $31,974 -8.4%
In addition to direct City debt, component units such as the Downtown Development
Authority (DDA) and Local Development Finance Authority (LDFA) had outstanding debt
totaling $8,254,288 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:
27
Component Unit Long Term Debt – Bonds and Other Obligations
(In thousands of dollars)
Total
Downtown Local Development Percentage
Finance Authority Finance Authority Total Change
2008 2007 2008 2007 2008 2007 2008-2007
Due within one year $220 $210 $80 $80 $ 300 $ 290 3.4%
Due in more than one year 3,475 3,695 4,479 4,559 7,954 8,254 -3.6%
Total bonds & other obligations $3,695 $3,905 $4,559 $4,639 $8,254 $8,544 -3.4%
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
The City’s fiscal year 2009 capital budget anticipates spending $7,744,155 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. No new debt issuance is anticipated in 2009.
From an operations standpoint, the City’s 2009 budget plan is to maintain current
service levels with no new major 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 $7,618,461 in 2007 to $7,694,780 for 2008
(+1.0%). For 2009, the City has revised the income tax revenue estimate at
$7,100,000. The following table shows the makeup of the City’s income tax base:
28
Average Average
Category Number of 2008 Percent of Amount Paid Amount Paid
Payers Amount Paid Total 2008 2007
City Resident 7,266 $ 2,905,997 38% $ 400 $397
Non-Resident 13,482 3,551,774 46% 263 254
Corporate 1,850 1,237,009 16% 669 631
Total 22,598 $7,694,780 100% $ 341 $329
Local Property Tax
The City’s 2008 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 2009, the City is projecting $7,787,372 in property
taxes, a 1.6% increase over the $7,666,645 collected in 2008.
Total Percent Estimated
Year Assessed Value Change Actual Value
2008 $890,119,700 1.26% $1,780,239,400
2007 879,002,488 4.81% 1,758,004,976
2006 838,661,200 2.53% 1,677,322,400
2005 817,933,079 0.22% 1,635,866,158
2004 816,137,300 -0.99% 1,632,274,600
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 state 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. The
City’s recent state shared revenue history is summarized below:
State Shared Percent
Year Revenues Change
2008 $4,487,698 +0.3%
2007 4,475,462 -1.8%
2006 4,556,801 -0.1%
2005 4,592,852 -1.1%
2004 4,645,348 -5.9%
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,
29
Muskegon is somewhat less dependent on this revenue source than most Michigan
cities.
For 2009, the City projects $4,450,000 based on current information available from the
state. This is little changed from the $4,487,698 received during 2008.
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
2008 $3,199,930 -2.7%
2007 3,288,098 -0.2%
2006 3,297,183 -0.7%
2005 3,319,131 -4.1%
2004 3,459,503 +9.2%
For 2009, the City is projecting no material change 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 $11,268,140 in 2008. Charges to customers
are based on the amount of metered services used times rates periodically set by the
City Commission. During 2008, sewer rates were increased (to be effective January 1,
2009) as result of higher wastewater treatment and debt service charges enacted by
Muskegon County. Further sewer rate increases may be needed in 2009 due to the
potential shutdown of a major industrial sewer customer.
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).
30
FINANCIAL STATEMENTS
31
City of Muskegon
STATEMENT OF NET ASSETS (DEFICITS)
December 31, 2008
ASSETS
Governmental Business-type Component
activities activities Total units
CURRENT ASSETS
Cash and investments $ 12,259,062 $ 3,318,190 $ 15,577,252 $ 62,794
Receivables 10,306,820 3,103,040 13,409,860 645,170
Due from other governmental units 2,627,630 71,019 2,698,649 -
Internal balances (1,286,178) 1,286,178 - -
Due from component units 17,863 - 17,863 -
Inventories 11,552 116,710 128,262 -
Prepaid items 405,476 35,074 440,550 -
Total current assets 24,342,225 7,930,211 32,272,436 707,964
NONCURRENT ASSETS
Restricted assets - 822,559 822,559 -
Capital assets, net
Nondepreciable 19,450,718 2,731,783 22,182,501 400,000
Depreciable 58,038,888 57,268,940 115,307,828 2,920,630
Bond issuance costs, net 132,596 72,698 205,294 104,931
Special assessments receivable 1,834,821 - 1,834,821 -
Notes receivable 192,199 - 192,199 -
Total noncurrent assets 79,649,222 60,895,980 140,545,202 3,425,561
Total assets 103,991,447 68,826,191 172,817,638 4,133,525
32
LIABILITIES AND NET ASSETS (DEFICITS)
CURRENT LIABILITIES
Accounts payable and accrued liabilities 1,711,569 572,619 2,284,188 43,700
Due to other governmental units - 399,226 399,226 -
Due to primary government - - - 17,863
Unearned revenue 8,539,929 - 8,539,929 645,170
Bonds and other obligations, due within one year 909,000 1,139,000 2,048,000 300,000
Total current liabilities 11,160,498 2,110,845 13,271,343 1,006,733
NONCURRENT LIABILITIES
Bonds and other obligations, less amounts due within one year 8,999,807 18,240,658 27,240,465 7,954,288
Total liabilities 20,160,305 20,351,503 40,511,808 8,961,021
NET ASSETS (DEFICITS)
Invested in capital assets, net of related debt 69,564,935 40,876,621 110,441,556 (1,133,727)
Restricted for:
Streets and highways 2,216,393 - 2,216,393 -
Debt service - 822,559 822,559 -
Perpetual care
Expendable 60,813 - 60,813 -
Non-expendable 1,280,472 - 1,280,472 -
Unrestricted 10,708,529 6,775,508 17,484,037 (3,693,769)
Total net assets (deficits) $ 83,831,142 $ 48,474,688 $ 132,305,830 $ (4,827,496)
The accompanying notes are an integral part of this statement.
City of Muskegon
STATEMENT OF ACTIVITIES
For the year ended December 31, 2008
Net (Expense) Revenue and Changes in Net Assets
Program Revenue Primary Government
Charges for Operating grants Capital grants Governmental Business-type Component
Functions/Programs Expenses services and contributions and contributions activities activities Total units
Primary government
Governmental activities
Public representation services $ 986,696 $ 188,467 $ - $ - $ (798,229) $ - $ (798,229) $ -
Administrative services 782,362 257,850 1,500 - (523,012) - (523,012) -
Financial services 2,292,430 726,572 50,000 - (1,515,858) - (1,515,858) -
Public safety 13,955,811 1,217,616 68,323 - (12,669,872) - (12,669,872) -
Public works 3,019,411 382,072 - 27,646 (2,609,693) - (2,609,693) -
Highways, streets and bridges 7,265,438 301,955 3,167,741 3,300,831 (494,911) - (494,911) -
Community and economic development 3,174,508 297,854 2,018,321 116,480 (741,853) - (741,853) -
Culture and recreation 2,623,501 405,520 61,267 - (2,156,714) - (2,156,714) -
General administration 574,955 99,494 - - (475,461) - (475,461) -
Interest on long-term debt 324,076 - - - (324,076) - (324,076) -
Total governmental activities 34,999,188 3,877,400 5,367,152 3,444,957 (22,309,679) - (22,309,679) -
Business-type activities
Sewer 5,503,144 5,326,787 - - - (176,357) (176,357) -
Water 5,800,977 6,240,060 - - - 439,083 439,083 -
Marina and Launch Ramp 347,642 250,266 - - - (97,376) (97,376) -
Total business-type activities 11,651,763 11,817,113 - - - 165,350 165,350 -
Total primary government $ 46,650,951 $ 15,694,513 $ 5,367,152 $ 3,444,957 (22,309,679) 165,350 (22,144,329) -
33
Component units
Local Development Finance Authority I $ - $ - $ - $ - - - - -
Local Development Finance Authority II - - - - - - - -
Local Development Finance Authority III 381,787 - - 225,000 - - - (156,787)
Downtown Development Authority 607,483 - - - - - - (607,483)
Tax Increment Finance Authority 50,000 - - - - - - (50,000)
Brownfield Redevelopment Authority 17,863 - - - - - - (17,863)
Total component units $ 1,057,133 $ - $ - $ 225,000 - - - (832,133)
General revenues
Property taxes 8,349,341 - 8,349,341 601,404
Income taxes 8,117,566 - 8,117,566 -
Cable franchises 304,812 - 304,812 -
Grants and contributions not restricted to specific programs 4,487,698 - 4,487,698 -
Unrestricted investment earnings 730,142 108,990 839,132 2,936
Miscellaneous 160,460 - 160,460 -
Gain on sale of capital asset 323,048 - 323,048 384,787
Transfers (40,000) 40,000 - -
Total general revenues and transfers 22,433,067 148,990 22,582,057 989,127
Change in net assets 123,388 314,340 437,728 156,994
Net assets (deficit) at January 1, 2008 83,707,754 48,160,348 131,868,102 (4,984,490)
Net assets (deficit) at December 31, 2008 $ 83,831,142 $ 48,474,688 $ 132,305,830 $ (4,827,496)
The accompanying notes are an integral part of this statement.
City of Muskegon
BALANCE SHEET
Governmental Funds
December 31, 2008
Major Street Other Total
General and Trunkline governmental governmental
Fund Fund funds funds
ASSETS
Cash and investments $ 3,498,120 $ - $ 5,355,891 $ 8,854,011
Receivables
Accounts and loans 425,302 28,194 628,619 1,082,115
Property taxes 5,841,950 - - 5,841,950
Income taxes 1,008,725 - - 1,008,725
Special assessments - 1,114,182 1,059,199 2,173,381
Due from other governmental units 820,181 438,612 1,352,318 2,611,111
Due from other funds - - 1,722,200 1,722,200
Due from component units - - 17,863 17,863
Prepaid items 204,819 14,870 7,025 226,714
Total assets $ 11,799,097 $ 1,595,858 $ 10,143,115 $ 23,538,070
LIABILITIES AND FUND BALANCES
Liabilities
Accounts payable $ 549,184 $ 41,477 $ 88,118 $ 678,779
Accrued liabilities 536,698 44,212 46,312 627,222
34
Due to other funds - 288,986 1,183,827 1,472,813
Deferred revenue 8,329,490 936,271 1,222,055 10,487,816
Total liabilities 9,415,372 1,310,946 2,540,312 13,266,630
Fund balances
Reserved for:
Prepaid items 204,819 14,870 7,025 226,714
Long-term loans receivable - - 192,199 192,199
Capital projects - - 2,580,714 2,580,714
Perpetual care 10,000 - 1,270,472 1,280,472
Unreserved
Designated, reported in capital projects funds - - 992,736 992,736
Undesignated, reported in
General Fund 2,168,906 - - 2,168,906
Special revenue funds - 270,042 2,498,844 2,768,886
Permanent funds - - 60,813 60,813
Total fund balances 2,383,725 284,912 7,602,803 10,271,440
Total liabilities and fund balances $ 11,799,097 $ 1,595,858 $ 10,143,115 $ 23,538,070
The accompanying notes are an integral part of this statement.
City of Muskegon
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS
December 31, 2008
Total fund balance—governmental funds $ 10,271,440
Amounts reported for governmental activities in the Statement of Net Assets
are different because:
Capital assets used in governmental activities are not financial resources and
are not reported in the governmental funds.
Cost of capital assets $ 120,701,318
Accumulated depreciation (45,427,826) 75,273,492
Bond issuance costs are not capitalized and amortized in the governmental funds.
Bond issuance costs 210,974
Accumulated amortization (78,378) 132,596
Other receivables in governmental activities are not reported in the
governmental funds. 748,066
35
Accrued interest in governmental activities is not reported in the
governmental funds. (63,600)
Special assessment revenue is not recognized until it is receivable in the current
period and therefore is shown as deferred revenue in the governmental funds. 1,834,821
Long-term liabilities in governmental activities are not due and payable in the
current period and are not reported in the governmental funds.
Bonds and notes payable (8,461,227)
Compensated absences (1,349,324) (9,810,551)
Internal service funds are used by management to charge the costs of certain activities
to individual funds. The assets and liabilities of the internal service funds are reported
with governmental activities in the Statement of Net Assets. 5,444,878
Net assets of governmental activities in the Statement of Net Assets $ 83,831,142
The accompanying notes are an integral part of this statement.
City of Muskegon
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
Governmental Funds
For the year ended December 31, 2008
Major Street Other Total
General and Trunkline governmental governmental
Fund Fund funds funds
REVENUES
Taxes $ 15,728,859 $ - $ - $ 15,728,859
Licenses and permits 1,089,187 - - 1,089,187
Intergovernmental revenues
Federal 40,622 1,662,437 2,744,798 4,447,857
State 4,515,399 3,002,489 996,290 8,514,178
Local 50,000 - - 50,000
Charges for services 2,239,607 87,620 136,748 2,463,975
Fines and forfeitures 559,686 - 10,840 570,526
Interest and rental income 569,937 70,691 220,887 861,515
Other 526,431 248,582 328,338 1,103,351
Total revenues 25,319,728 5,071,819 4,437,901 34,829,448
EXPENDITURES
Current
Public representation services 987,229 - - 987,229
Administrative services 632,513 - - 632,513
Financial services 2,298,830 - - 2,298,830
Public safety 13,683,731 - 70,663 13,754,394
Public works 2,831,177 - - 2,831,177
36
Highways, streets and bridges - 5,756,135 3,312,558 9,068,693
Community and economic development 1,077,312 - - 1,077,312
Culture and recreation 2,378,772 - 15,259 2,394,031
Other governmental functions 462,341 - 100,000 562,341
Debt service
Principal 45,000 390,000 564,148 999,148
Interest and fees 230,833 6,093 73,506 310,432
Capital outlay 174,755 - 2,644,833 2,819,588
Total expenditures 24,802,493 6,152,228 6,780,967 37,735,688
Excess of revenues over (under) expenditures 517,235 (1,080,409) (2,343,066) (2,906,240)
OTHER FINANCING SOURCES (USES)
Proceeds from sale of capital assets - - 375,723 375,723
Long-term debt issued - - 500,000 500,000
Transfers in 243,904 200,000 1,033,813 1,477,717
Transfers out (1,298,046) (3,813) (107,632) (1,409,491)
Total other financing sources (uses) (1,054,142) 196,187 1,801,904 943,949
Net change in fund balances (536,907) (884,222) (541,162) (1,962,291)
Fund balances at January 1, 2008 2,920,632 1,169,134 8,143,965 12,233,731
Fund balances at December 31, 2008 $ 2,383,725 $ 284,912 $ 7,602,803 $ 10,271,440
The accompanying notes are an integral part of this statement.
City of Muskegon
RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES
For the year ended December 31, 2008
Net change in fund balances—total governmental funds $ (1,962,291)
Amounts reported for governmental activities in the Statement of Activities are
different because:
Governmental funds report outlays for capital assets and bond issuance costs as expenditures; in the Statement
of Activities, these costs are depreciated and amortized over their estimated useful lives, respectively.
Depreciation and amortization expense $ (4,038,764)
Capital outlay 5,473,828 1,435,064
Debt proceeds are other financing source in the governmental funds, but the proceeds
increase long-term debt in the Statement of Net Assets. (500,000)
Revenue reported in the Statement of Activities that does not provide current
financial resources are not reported as revenue in the governmental funds. 223,066
Repayment of principal on long-term debt is an expenditure in the governmental funds, but
37
the repayment reduces long-term liabilities in the Statement of Net Assets. 998,173
Interest expense on long-term debt is recorded in the Statement of Activities
when incurred, but is not reported in the governmental funds until paid. (800)
Compensated absences are reported on the accrual method in the Statement
of Activities and reported as expenditures when financial resources are
used in the governmental funds. (91,832)
Governmental funds recognize special assessments as revenue as they become current,
however they are recognized in full when levied in the Statement of Net Assets. (167,108)
The internal service funds are used by management to charge the costs of certain activities to
individual funds. The net change of the internal service funds is reported with governmental
activities. 189,116
Change in net assets of governmental activities $ 123,388
The accompanying notes are an integral part of this statement.
City of Muskegon
STATEMENT OF NET ASSETS
Proprietary Funds
December 31, 2008
ASSETS
Governmental
Activities -
Business-type Activities - Enterprise Funds Internal
Marina and Service
Sewer Water Launch Ramp Total Funds
CURRENT ASSETS
Cash and investments $ - $ 3,232,652 $ 85,538 $ 3,318,190 $ 3,405,050
Accounts receivable 1,636,899 1,455,389 10,752 3,103,040 1,592,669
Due from other governmental units - 66,674 4,345 71,019 16,519
Inventories 25,694 91,016 - 116,710 11,552
Prepaid items 14,021 20,090 963 35,074 178,762
Total current assets 1,676,614 4,865,821 101,598 6,644,033 5,204,552
NONCURRENT ASSETS
Restricted assets - 822,559 - 822,559 -
Capital assets
Land 16,188 103,500 22,562 142,250 65,000
Land improvements - - 1,888,965 1,888,965 121,648
Buildings, improvements and systems 19,154,152 61,732,790 2,322,488 83,209,430 1,559,334
Machinery and equipment 39,722 1,563,598 - 1,603,320 7,417,363
Construction in progress 812,398 1,777,135 - 2,589,533 -
Less accumulated depreciation (6,565,912) (20,812,342) (2,054,521) (29,432,775) (6,947,231)
Net capital assets 13,456,548 44,364,681 2,179,494 60,000,723 2,216,114
Bond issuance costs, net - 72,698 - 72,698 -
38
Total noncurrent assets 13,456,548 45,259,938 2,179,494 60,895,980 2,216,114
Total assets 15,133,162 50,125,759 2,281,092 67,540,013 7,420,666
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES
Accounts payable 44,930 326,498 5,781 377,209 300,622
Accrued liabilities 29,406 165,211 793 195,410 41,345
Due to other governmental units 373,751 25,475 - 399,226 -
Due to other funds 249,387 - - 249,387 -
Bonds and other obligations, due within one year 11,600 1,127,000 400 1,139,000 16,000
Total current liabilities 709,074 1,644,184 6,974 2,360,232 357,967
NONCURRENT LIABILITIES
Bonds and other obligations, less amounts due within one year 66,923 18,172,019 1,716 18,240,658 82,256
Total liabilities 775,997 19,816,203 8,690 20,600,890 440,223
NET ASSETS
Invested in capital assets, net of related debt 13,456,547 25,240,580 2,179,494 40,876,621 2,216,114
Restricted for debt service - 822,559 - 822,559 -
Unrestricted 900,618 4,246,417 92,908 5,239,943 4,764,329
Total net assets $ 14,357,165 $ 30,309,556 $ 2,272,402 46,939,123 $ 6,980,443
Adjustment to reflect the consolidation of internal service fund activities
related to enterprise funds 1,535,565
Net assets of business-type activities $ 48,474,688
The accompanying notes are an integral part of this statement.
City of Muskegon
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS
Proprietary Funds
For the year ended December 31, 2008
Governmental
Activities -
Business-type Activities - Enterprise Funds Internal
Marina and Service
Sewer Water Launch Ramp Total Funds
OPERATING REVENUES
Charges for services $ 5,201,800 $ 6,066,340 $ 242,787 $ 11,510,927 $ 7,803,575
Other 124,987 173,720 7,479 306,186 92,824
Total operating revenues 5,326,787 6,240,060 250,266 11,817,113 7,896,399
OPERATING EXPENSES
Administration 330,080 490,694 22,440 843,214 300,360
Insurance premiums and claims - - - - 3,832,770
Wastewater treatment 4,647,049 - - 4,647,049 -
Filtration plant operations - 1,383,957 - 1,383,957 -
Water distribution - 1,531,444 - 1,531,444 -
Other operations - - 195,516 195,516 3,000,115
Bad debts 2,214 1,808 - 4,022 -
Depreciation and amortization 532,656 1,797,889 130,582 2,461,127 559,875
Total operating expenses 5,511,999 5,205,792 348,538 11,066,329 7,693,120
Operating income (loss) (185,212) 1,034,268 (98,272) 750,784 203,279
39
NONOPERATING REVENUES (EXPENSES)
Investment earnings 11,860 96,075 1,055 108,990 103,129
Gain on sale of capital assets - - - - 28,529
Interest expense (12,550) (610,479) - (623,029) -
Total nonoperating revenue (expenses) (690) (514,404) 1,055 (514,039) 131,658
Income (loss) before transfers (185,902) 519,864 (97,217) 236,745 334,937
Transfers in - - 40,000 40,000 28,046
Transfers out - - - - (136,272)
Change in net assets (185,902) 519,864 (57,217) 276,745 226,711
Net assets at January 1, 2008 14,543,067 29,789,692 2,329,619 6,753,732
Net assets at December 31, 2008 $ 14,357,165 $ 30,309,556 $ 2,272,402 $ 6,980,443
Adjustments to reflect the consolidation of internal service fund activities
related to enterprise funds 37,595
Change in net assets of business-type activities $ 314,340
The accompanying notes are an integral part of this statement.
City of Muskegon
STATEMENT OF CASH FLOWS
Proprietary Funds
For the year ended December 31, 2008
Governmental
Activities -
Business-type Activities - Enterprise Funds Internal
Marina and Service
Sewer Water Launch Ramp Total Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 4,949,503 $ 5,890,410 $ 243,754 $ 11,083,667 $ 161,274
Receipts from interfund services provided 34,868 165,605 - 200,473 7,803,575
Payments to suppliers (3,478,874) (1,454,718) (103,425) (5,037,017) (6,372,465)
Payments to employees (751,866) (1,164,003) (95,178) (2,011,047) (961,276)
Payments for interfund services used (620,785) (681,913) (21,177) (1,323,875) (679,326)
Net cash provided by (used for) operating activities 132,846 2,755,381 23,974 2,912,201 (48,218)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers in - - 40,000 40,000 28,046
Transfers out - - - - (136,272)
Interfund borrowing 249,387 - - 249,387 -
Net cash provided by (used for) noncapital financing activities 249,387 - 40,000 289,387 (108,226)
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Purchases of capital assets (602,806) (1,768,200) - (2,371,006) (259,430)
Principal paid on capital debt (546,278) (1,080,000) - (1,626,278) -
Interest paid on capital debt (12,550) (600,377) - (612,927) -
Proceeds from sale of capital assets - - - - 35,229
Net cash used for capital and related financing activities (1,161,634) (3,448,577) - (4,610,211) (224,201)
40
CASH FLOW FROM INVESTING ACTIVITIES
Investment earnings 11,860 96,075 1,055 108,990 103,129
Net increase (decrease) in cash and investments (767,541) (597,121) 65,029 (1,299,633) (277,516)
Cash and investments at January 1, 2008 767,541 4,652,332 20,509 5,440,382 3,682,566
Cash and investments at December 31, 2008 $ - $ 4,055,211 $ 85,538 $ 4,140,749 $ 3,405,050
Reconciliation of cash and investments to the statement of net assets
Cash and investments $ - $ 3,232,652 $ 85,538 $ 3,318,190 $ 3,405,050
Restricted cash and investments - 822,559 - 822,559 -
$ - $ 4,055,211 $ 85,538 $ 4,140,749 $ 3,405,050
Reconciliation of operating income (loss) to net cash provided by (used for)
operating activities
Operating income (loss) $ (185,212) $ 1,034,268 $ (98,272) $ 750,784 $ 203,279
Adjustments to reconcile operating income (loss) to net cash provided by
(used for) operating activities
Depreciation and amortization expense 532,656 1,797,889 130,582 2,461,127 559,875
Bad debt expense 2,214 1,808 - 4,022 -
Change in assets and liabilities
Receivables, net (382,477) (209,527) (6,512) (598,516) (958,397)
Inventories 3,007 19,575 - 22,582 11,783
Prepaid items (1,365) (1,470) (232) (3,067) (18,649)
Accounts payable 153,880 114,499 (234) 268,145 138,205
Accrued liabilities 10,143 (1,661) (1,358) 7,124 15,686
Net cash provided by (used for) operating activities $ 132,846 $ 2,755,381 $ 23,974 $ 2,912,201 $ (48,218)
The accompanying notes are an integral part of this statement.
City of Muskegon
STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES
Fiduciary Funds
December 31, 2008
Agency
Funds
ASSETS
Cash and investments $ 11,120,832
Receivables
Accounts 2,767
Property taxes 14,393,066
Total assets $ 25,516,665
LIABILITIES
41
Accounts payable $ 193,101
Due to other governmental units 25,141,666
Deposits held for others 181,898
Total liabilities $ 25,516,665
The accompanying notes are an integral part of this statement.
City of Muskegon
STATEMENT OF NET ASSETS (DEFICITS)
Discretely Presented Component Units
December 31, 2008
ASSETS
Local Local Local Tax
Development Development Development Downtown Increment Brownfield
Finance Finance Finance Development Finance Redevelopment
Authority I Authority II Authority III Authority Authority Authority Total
CURRENT ASSETS
Cash and investments $ 347 $ 25,092 $ 8,753 $ 14,619 $ 13,983 $ - $ 62,794
Property taxes receivable - - 68,380 518,996 53,773 4,021 645,170
Total current assets 347 25,092 77,133 533,615 67,756 4,021 707,964
NONCURRENT ASSETS
Capital assets, net
Nondepreciable - - 400,000 - - - 400,000
Depreciable - - 2,920,630 - - - 2,920,630
Net capital assets - - 3,320,630 - - - 3,320,630
Bond issuance costs, net - - 104,931 - - - 104,931
Total noncurrent assets - - 3,425,561 - - - 3,425,561
42
Total assets 347 25,092 3,502,694 533,615 67,756 4,021 4,133,525
LIABILITIES AND NET ASSETS (DEFICITS)
CURRENT LIABILITIES
Accrued liabilities - - 33,300 10,400 - - 43,700
Due to primary government - - - - - 17,863 17,863
Deferred revenue - - 68,380 518,996 53,773 4,021 645,170
Bonds and other obligations, due within one year - - 80,000 220,000 - - 300,000
Total current liabilities - - 181,680 749,396 53,773 21,884 1,006,733
NONCURRENT LIABILITIES
Bonds and other obligations, less amounts due
within one year - - 4,479,288 3,475,000 - - 7,954,288
Total liabilities - - 4,660,968 4,224,396 53,773 21,884 8,961,021
NET ASSETS (DEFICITS)
Invested in capital assets, net of related debt - - (1,133,727) - - - (1,133,727)
Unrestricted 347 25,092 (24,547) (3,690,781) 13,983 (17,863) (3,693,769)
Total net assets (deficits) $ 347 $ 25,092 $ (1,158,274) $ (3,690,781) $ 13,983 $ (17,863) $ (4,827,496)
The accompanying notes are an integral part of this statement.
City of Muskegon
STATEMENT OF ACTIVITIES
Discretely Presented Component Units
For the year ended December 31, 2008
Program
Revenue Net (Expense) Revenue and Changes in Net Assets
Local Local Local Tax
Capital grants Development Development Development Downtown Increment Brownfield
and Finance Finance Finance Development Finance Redevelopment
Functions/Programs Expenses contributions Authority I Authority II Authority III Authority Authority Authority Total
Local Development Finance Authority I
Economic development $ - $ - $ - $ - $ - $ - $ - $ - $ -
Local Development Finance Authority II
Economic development - - - - - - - - -
Local Development Finance Authority III
Economic development 178,821 - - - (178,821) - - - (178,821)
Interest on long-term debt 202,966 225,000 - - 22,034 - - - 22,034
Total Local Development Finance Authority III 381,787 225,000 - - (156,787) - - - (156,787)
Downtown Development Authority
Distributions to other taxing authorities 468,641 - - - - (468,641) - - (468,641)
Interest on long-term debt 138,842 - - - - (138,842) - - (138,842)
Total Downtown Development Authority 607,483 - - - - (607,483) - - (607,483)
43
Tax Increment Finance Authority
Economic development 50,000 - - - - - (50,000) - (50,000)
Brownfield Redevelopment Authority
Economic development 17,863 - - - - - - (17,863) (17,863)
Total discretely presented component units $ 1,057,133 $ 225,000 - - (156,787) (607,483) (50,000) (17,863) (832,133)
General revenues
Property taxes - - 38,249 505,697 57,458 - 601,404
Unrestricted investment income 12 699 1,126 926 173 - 2,936
Miscellaneous - - - 384,787 - - 384,787
Total general revenues 12 699 39,375 891,410 57,631 - 989,127
Change in net assets 12 699 (117,412) 283,927 7,631 (17,863) 156,994
Net assets (deficits) at January 1, 2008 335 24,393 (1,040,862) (3,974,708) 6,352 - (4,984,490)
Net assets (deficits) at December 31, 2008 $ 347 $ 25,092 $ (1,158,274) $ (3,690,781) $ 13,983 $ (17,863) $ (4,827,496)
The accompanying notes are an integral part of this statement.
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
December 31, 2008
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the City of Muskegon (City) have been prepared in conformity with accounting
principles generally accepted in the United States of America (GAAP) as applied to government units. The
Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing
governmental accounting and financial reporting principles. The more significant of the City's accounting
policies are described below.
Reporting Entity
The City of Muskegon was incorporated October 6, 1919, under the provisions of the Home Rule Act of the
State of Michigan. The City is a municipal corporation governed by an elected mayor and six-member City
Commission and is administered by a city manager appointed by the City Commission. The accompanying
financial statements present the government and its component units, entities for which the government is
considered to be financially accountable. Blended component units, although legally separate entities, are, in
substance, part of the government's operations. Each discretely presented component unit is reported in a
separate column in the government-wide financial statements (see note below for description) to emphasize
that it is legally separate from the government. Each discretely presented component unit has a December 31
fiscal year end.
Blended Component Unit
Building Authority. The Authority is governed by a three-member board comprised of the City Manager, City
Attorney and City Finance Director. For financial reporting purposes, the Building Authority is reported as if
it were part of the City’s operations since its sole purpose is to acquire and lease property to the City.
Currently, there is no outstanding Building Authority indebtedness.
Discretely Presented Component Units
Downtown Development Authority (DDA). The Authority’s sole purpose is the collection of property
tax incremental revenues, the issuance and repayment of debt and the construction of public facilities
to promote and facilitate economic growth in the downtown district. Members of the DDA are
appointed by the City Commission and the Authority is fiscally dependent on the City since the City
Commission approves the DDA budget and must approve any debt issuance. The DDA is presented
as a governmental fund type.
Tax Increment Finance Authority (TIFA). The Authority’s sole purpose is the collection of property tax
incremental revenues and promotion of economic development activities (including issuance of debt) in a
sub-section of the downtown district. Members of the TIFA are appointed by the City Commission and the
Authority is fiscally dependent on the City since the City Commission approves the TIFA budget and must
approve any debt issuance. The TIFA is presented as a governmental fund type.
Local Development Finance Authority (LDFA). The City has created three separate local development
finance authority districts under the aegis of the LDFA to promote and facilitate economic growth in the Port
City Industrial Park, the Medendorp Industrial Park, and the SmartZone Hi-Tech Park. The LDFA’s sole
purpose is the collection of property tax incremental revenues and the construction of public facilities within
the districts. Members of the LDFA are appointed by the City Commission and the Authority is fiscally
dependent on the City since the City Commission approves budgets and must approve any debt issuance. The
LDFA districts are presented as governmental fund types.
44
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Reporting Entity—Continued
Discretely Presented Component Units—Continued
Brownfield Redevelopment Authority (BRA). The Authority’s sole purpose is the collection of property tax
incremental revenues and promotion of environmental remediation (including issuance of debt) in designated
brownfield areas. Members of the BRA are appointed by the City Commission and the Authority is fiscally
dependent on the City since the City Commission approves the BRA budget and must approve any debt
issuance. The BRA is presented as a governmental fund type.
Complete financial statements of the component units can be obtained from their administrative offices,
933 Terrace Street, Muskegon, Michigan 49443.
Related Organizations
The following organizations are related to the City’s financial reporting entity:
Muskegon Hospital Finance Authority. The Muskegon Hospital Finance Authority was created by the City of
Muskegon in accordance with the laws of the State of Michigan. Members of the Hospital Finance Authority
are appointed by the City but the City is not financially accountable for the Authority and therefore the
Authority is excluded from the accompanying financial statements. The Hospital Finance Authority’s sole
purpose is to issue tax-exempt debt for the benefit of Mercy Health Partners Hospital which is located within
the City. The Authority has no assets or financial activity and does not prepare financial statements. The
Hospital Finance Authority has no taxing power. As of December 31, 2008, there was no outstanding debt
issued by the Hospital Finance Authority. The City is not obligated in any manner for repayment of debt
issued by the Hospital Finance Authority, as any debt is payable solely from contractual payments from the
hospitals.
Muskegon Housing Commission. The Muskegon Housing Commission was created by the City of Muskegon
in accordance with the laws of the State of Michigan. Members of the Housing Commission are appointed by
the City but the City is not financially accountable for the Commission and therefore the Commission is
excluded from the accompanying financial statements. The Housing Commission’s main purpose is to
administer activities that provide adequate housing facilities for low-income families and the elimination of
housing conditions that are detrimental to the public peace, health, safety, and welfare. The Commission’s
policy is to prepare its financial statements on the basis prescribed by the Department of Housing and Urban
Development. Accordingly, the summary information below (which is required by federal regulations), is not
intended to present financial position and results of operations in conformity with generally accepted
accounting principles. Summary financial information for the fiscal year ended September 30, 2007, the date
of its latest audited financial statements is as follows:
Total assets $ 5,205,916
Total liabilities (164,799)
Total net assets $ 5,041,117
Total operating income $ 325,031
Total operating expenses (1,995,453)
Total nonoperating revenues 1,619,065
Change in net assets $ (51,357)
45
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Government-Wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net assets and the statement of changes in net
assets) report information on all of the nonfiduciary activities of the primary government and its component
units. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are
reported separately from business-type activities, which rely to a significant extent on fees and charges for
support. Likewise, the primary government is reported separately from certain legally separate component
units for which the primary government is financially accountable.
The statement of activities demonstrates the degree to which the direct expenses of a given function or
segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific
function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or
directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and
contributions that are restricted to meeting the operational or capital requirement of a particular function or
segment. Taxes and other items not properly included among program revenues are reported instead as
general revenues.
Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds,
even though the latter are excluded from the government-wide financial statements. Major individual
governmental funds and major individual enterprise funds are reported as separate columns in the fund
financial statements.
Measurement Focus, Basis of Accounting and Financial Statement Presentation
The government-wide financial statements are reported using the economic resources measurement focus and
the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements excepting
agency funds which have no measurement focus. Revenues are recorded when earned and expenses are
recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are
recognized as revenues in the year for which they are levied. Grants and similar items are recognized as
revenue as soon as all eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the current financial resources measurement focus
and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable
and available. Revenues are considered to be available when they are collectible within the current period or
soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers
revenues to be available if they are collected within 60 days of the end of the current fiscal period.
Reimbursements due for expenditure-driven grants are accrued as revenue at the time the expenditures are
made, or when received in advance, deferred until expenditures are made. Expenditures generally are
recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as
well as expenditures related to compensated absences and claims and judgments, are recorded only when
payment is due.
Income taxes, property taxes, franchise taxes, licenses and interest associated with the current fiscal period are
all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal
period. Only the portion of special assessments receivable due within 60 days of the end of the current fiscal
period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are
considered to be measurable and available only when cash is received by the government.
46
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Measurement Focus, Basis of Accounting and Financial Statement Presentation—Continued
The City reports the following major governmental funds:
The General Fund is the government's primary operating fund. It accounts for all financial
resources of the general government, except those required to be accounted for in another fund.
The Major Street and Trunkline Fund accounts for gas and weight tax allocations to the City by
the Michigan Department of Transportation for construction and maintenance of major streets
within the City.
The City reports the following three major proprietary funds:
The Sewer Fund accounts for user charges and for operating expenses and debt service of the
City’s sewer system.
The Water Fund accounts for user charges and for operating expenses and debt service of the
City’s water system.
The Marina and Launch Ramp Fund accounts for user fees collected and operating expenses for
the Hartshorn Marina and boat launch ramp facilities.
Additionally, the City reports the following fund types:
Internal Service Funds account for internal engineering services for City projects; the purchase,
operation, and depreciation of all City owned equipment; the payment of insurance claims and
benefits; and the operation, maintenance, and depreciation of the City’s public service building to
other funds of the government on a cost reimbursement basis.
The Agency Funds are used to account for assets held by the City as an agent for another
organization or individual.
Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally
are followed in both the government-wide and proprietary fund financial statements to the extent that those
standards do not conflict with or contradict guidance of the Government Accounting Standards Board.
Governments also have the option of following subsequent private-sector guidance for their business-type
activities and enterprise funds, subject to this same limitation. The City has elected not to follow
subsequent private-sector guidance.
As a general rule the effect of interfund activity has been eliminated from the government-wide financial
statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the City's
water and sewer function and various other functions of the government. Elimination of these charges would
distort the direct costs and program revenues reported for the various functions concerned.
47
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Measurement Focus, Basis of Accounting and Financial Statement Presentation—Continued
Amounts reported as program revenues include 1) charges to customers or applicants for goods, services or
privileges provided, 2) operating grants and contributions and 3) capital grants and contributions, including
special assessments. Internally dedicated resources are reported as general revenues rather than as program
revenues. Likewise, general revenues include all taxes.
Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues
and expenses generally result from providing services and producing and delivering goods in connection with
a proprietary fund's principal ongoing operations. The principal operating revenues are charges to customers
for sales and services. The enterprise funds also recognize as operating revenue the portion of tap fees
intended to recover the cost of connecting new customers to the system. Operating expenses for proprietary
funds include the cost of sales and services, administrative expenses and depreciation on capital assets. All
revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.
When both restricted and unrestricted resources are available for use, it is the City's policy to use restricted
resources first, then unrestricted resources as they are needed.
Assets, Liabilities and Net Assets or Equity
Deposits and Investments
The City's cash and cash equivalents are considered to be cash on hand, demand deposits and short-term
investments with original maturities of three months or less from the date of acquisition.
The City reports its investments in accordance with GASB Statement No. 31, Accounting and Financial
Reporting for Certain Investments and for External Investment Pools. Under this standard, certain
investments are valued at fair value as determined by quoted market prices or by estimated fair values when
quoted market prices are not available. The standard also provides that certain investments are valued at cost
(or amortized cost) when they are of a short-term duration, the rate of return is fixed, and the City intends to
hold the investment until maturity.
The City has adopted an investment policy in compliance with State of Michigan statutes. Those statutes
authorize the City to invest in obligations of the United States, certificates of deposit, prime commercial
paper, securities guaranteed by United States agencies or instrumentalities, United States government or
federal agency obligation repurchase agreements, bankers acceptances, state-approved investment pools and
certain mutual funds.
The City maintains a cash and investment pool that is available for use by all funds and component units.
Each fund type’s or component unit’s portion of this pool is displayed on the combined balance sheet as “cash
and investments”. Cash overdrafts represent a deficit position in the pooled account and have been classified
as amounts due to other funds.
48
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Assets, Liabilities and Net Assets or Equity—Continued
Deposits and Investments—Continued
For the purpose of the statement of cash flows, the City considers all assets held in the cash and investment
pool to be cash and cash equivalents because the investments are not identifiable to the specific funds and the
assets can be withdrawn at any time, similar to a demand deposit account.
In accordance with State law, interest earned in the Budget Stabilization Fund is recorded in the General
Fund.
Receivables and Payables
Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of
the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of interfund loans)
or "advances to/from other funds" (i.e., the non-current portion of interfund loans). All other outstanding
balances between funds are reported as "due to/from other funds". Any residual balances outstanding
between the governmental activities and business-type activities are reported in the government-wide
financial statements as "internal balances".
Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve
account in applicable governmental funds to indicate that they are not available for appropriation and are not
expendable available financial resources.
All trade and property tax receivables are shown net of allowance for uncollectibles.
The City bills and collects its own property taxes and also collects taxes for the county, school and State of
Michigan. Taxes are levied on each December 1 on the taxable valuation of property (as defined by state
statutes) located in the Local Governmental Unit as of the preceding December 31. Uncollectible real
property taxes as of the following March 1 are turned over by the City to the County for collection. The
County advances the City all these delinquent real property taxes. The delinquent personal property taxes
remain the responsibility of the City. Taxes levied on December 1 are recorded as receivables and deferred
revenue. Taxes are recognized as revenue (and become available for appropriation) in the calendar year
following the levy.
The 2007 state taxable value for real/personal property of the City totaled approximately $711,134,000 of
which approximately $18,473,000 was captured by the component units. The ad valorem taxes levied
consisted of 8.5, 2.5, and .0685 mills for the City's general operating, sanitation, and community promotion
purposes. These amounts are recognized in the General Fund with captured amounts shown in the TIFA,
LDFA, and DDA component units.
Inventories and Prepaid Items
All inventories are valued at cost using the first-in/first-out (FIFO) method. Inventories of governmental
funds are recorded as expenditures when consumed rather than when purchased.
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid
items in both government-wide and fund financial statements.
49
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Assets, Liabilities and Net Assets or Equity—Continued
Restricted Assets
Certain proceeds of the Water Fund revenue bonds, as well as certain resources set aside for their repayment,
are classified as restricted assets on the statement of net assets because their use is limited by applicable bond
covenants.
Capital Assets
Capital assets, which include property, plant, equipment and infrastructure assets (e.g., roads, bridges,
sidewalks and similar items), are reported in the applicable governmental or business-type activities columns
in the government-wide financial statements. Capital assets are defined by the government as assets with an
initial, individual cost of more than $10,000 and an estimated useful life in excess of two years. Such assets
are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets
are recorded at estimated fair market value at the date of donation.
The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend
assets lives are not capitalized.
Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest
incurred during the construction phase of capital assets of business-type activities is included as part of the
capitalized value of the assets constructed.
In the case of the initial capitalization of general infrastructure assets (i.e., those reported by governmental
activities) the City chose to include all such items regardless of their acquisition date or amount. The City
was able to obtain the historical cost of the initial reporting of these assets by recording the actual costs
incurred by the City.
Property, plant and equipment of the primary government, as well as the component units, is depreciated
using the straight-line method over the following estimated useful lives:
Assets Years
Land improvements 5-25
Leasehold improvements 10-25
Buildings and improvements 25-50
Water and sewage mains 40-100
Furniture, vehicles and equipment 5-20
Infrastructure 15-50
Shared improvements 20
50
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Assets, Liabilities and Net Assets or Equity—Continued
Compensated Absences
City employees are granted vacation and sick leave in varying amounts based on length of service and
employee group. Unused vacation and sick leave days are paid to employees upon termination under limits
that vary by employee group. The liability for these compensated absences is accrued when incurred in the
government-wide and proprietary fund financial statements. The current portion of this debt is estimated
based on historical trends. A liability for these amounts is reported in the governmental funds only if they
have matured, for example, as a result of employee resignations and retirements.
Long-Term Obligations
In the government-wide financial statements and proprietary fund types in the fund financial statements, long-
term debt and other long-term obligations are reported as liabilities in the applicable governmental activities,
business-type activities or proprietary fund type statement of net assets. Bond premiums and discounts as
well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest
method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs
are reported as deferred charges and amortized over the term of the related debt.
In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as
bond issuance costs, during the current period. The face amount of debt issued is reported as other financing
sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt
issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt
proceeds received, are reported as debt service expenditures.
Fund Equity
In the fund financial statements, governmental funds report reservations of fund balance for amounts that
are not available for appropriation or are legally restricted by outside parties for use for a specific
purpose. Designations of fund balance represent tentative management plans that are subject to change.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect certain reported amounts and
disclosures.
Comparative Data
Comparative total data for the prior year have been presented in selected sections of the accompanying
financial statements in order to provide an understanding of changes in the City’s financial position and
operations. However, comparative (i.e. presentation of prior year’s totals by fund type) data has not been
presented in each of the statements since its inclusion would make the statements unduly complex and
difficult to read. Also, certain items in the 2007 financial statements have been reclassified to conform to
the 2008 presentation.
51
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE B—STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
Budgetary Information
Annual budgets are adopted on a basis consistent with generally accepted accounting principles for the
general fund and all special revenue funds. All annual appropriations lapse at fiscal year end.
The City follows these procedures in establishing the budgetary information provided in the financial
statements:
a. Prior to September 1, the City Manager submits to the City Commission a proposed
operating budget for the fiscal year commencing the following January 1. The
operating budget includes proposed expenditures and the means of financing them.
b. Public hearings are conducted at City Hall to obtain public comments.
c. Prior to September 25, the budget is legally adopted by the City Commission.
d. Supplemental appropriations, when required to provide for additional expenditures,
are matched by additional anticipated revenues or an appropriation of available fund
balance and must be approved by the City Commission.
The appropriated budget is prepared by fund, function and department. The City Manager may transfer
line-item budget amounts within departments. Transfers of appropriations between departments require
the approval of the City Commission. The legal level of budgetary control is the department level for the
General Fund and the total expenditure or “fund” level for all other funds. The City Commission made
several supplemental budgetary appropriations throughout the year.
Excess of Expenditures Over Appropriations
During the year ended December 31, 2008, actual expenditures exceeded appropriations for city attorney by
$49,053, police department by $138,620 and fire department by $144,768 in the General Fund. In the Major
Street and Trunkline and Local Street funds, total actual expenditures exceeded appropriations by $420,135
and 891,357, respectively. These over-expenditures were funded with available fund balance.
Fund Deficits
As of December 31, 2008, the BRA Fund had an unreserved fund deficit of $17,863 and the HOME Fund had
an unreserved fund deficit of $316,838. The deficits will be eliminated through future operations.
52
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE C—DEPOSITS AND INVESTMENTS
As of December 31, 2008, the City had the following investments:
Weighted
average
maturity
Fair value (Months) Moody's Percent
Investment Type
Money market funds $ 20,060,944 1.7 AAA 73.8 %
US Agency obligations 4,073,806 11.9 AAA 15.0
US Treasury notes 3,063,594 10.8 not rated 11.3
Total fair value $ 27,198,344 100.0 %
Portfolio weighted average maturity 4.3
Interest rate risk. The City has a formal investment policy that limits investment maturities as a means of
managing its exposure to fair value losses arising from increasing interest rates. At least 10% of the City’s
total portfolio must be in instruments maturing in 30 days or less and the weighted average maturity cannot be
over three years. US Agency obligations, federal instrumentality securities and time certificates of deposit
cannot have a final maturity exceeding five years, repurchase agreements cannot have a final maturity
exceeding one year, commercial paper cannot have a final maturity exceeding 270 days and eligible bankers’
acceptances cannot have a final maturity exceeding 180 days.
Credit risk. State law limits investments in commercial paper and corporate bonds to the two highest
classifications issued by nationally recognized statistical rating organizations. The City has no investment
policy that would further limit its investment choices.
Concentration of credit risk. Concentration of credit risk is the risk of loss attributed to the magnitude of
the City investment in a single issuer, by diversifying the investment portfolio so that the impact of potential
losses from any one type of security or issuer will be minimized. The City has a concentration of credit risk
policy that limits investment in commercial paper, eligible bankers acceptances and time certificates of
deposit to 25% each of the total portfolio. More than 5 percent of the City’s investments are in U.S. Agency
obligations issued by the Federal Home Loan Bank which comprise 5.61 percent of the City’s investments.
53
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE C—DEPOSITS AND INVESTMENTS—Continued
Custodial credit risk - deposits. In the case of deposits, this is the risk that in the event of a bank failure, the
City's deposits may not be returned to it. As of December 31, 2008, $245,799 of the City's bank balance of
$495,799 was exposed to custodial credit risk because it was uninsured and uncollateralized. The City’s
investment policy sets certain credit requirements that a bank must meet for the City to deposit funds in it.
Custodial credit risk - investments. This is the risk that, in the event of the failure of the counterparty, the
City will not be able to recover the value of its investments or collateral securities that are in the possession of
an outside party. The City has a custodial credit risk policy for investments that requires that all investments
that are held with a third-party for safekeeping be in the City’s name.
Foreign currency risk. The City is not authorized to invest in investments which have this type of risk.
Restricted Assets
Restrictions are placed on assets by bond ordinance and City Commission action. At December 31, 2008,
restricted cash and investments in the Water Fund of $822,559 were restricted by bond ordinance.
NOTE D—CAPITAL ASSETS
Capital asset activity for the year ended December 31, 2008 was as follows:
Balance Balance
January 1, December 31,
2008 Additions Deductions 2008
Governmental activities:
Capital assets, not being depreciated:
Land $ 12,371,063 $ 25,650 $ - $ 12,396,713
Construction in progress 5,051,872 5,104,722 3,102,589 7,054,005
Total capital assets, not being depreciated 17,422,935 5,130,372 3,102,589 19,450,718
Capital assets, being depreciated:
Land improvements 4,118,319 - - 4,118,319
Leasehold improvements 304,365 - - 304,365
Buildings and improvements 20,815,694 150,683 - 20,966,377
Furniture, vehicles and equipment 11,605,170 452,203 205,260 11,852,113
Infrastructure 65,331,684 3,102,589 838,403 67,595,870
Shared improvements 5,576,901 - - 5,576,901
Total capital assets, being depreciated 107,752,133 3,705,475 1,043,663 110,413,945
54
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE D—CAPITAL ASSETS—Continued
Balance Balance
January 1, December 31,
2008 Additions Deductions 2008
Governmental activities—Continued
Less accumulated depreciation:
Land improvements $ 383,980 $ 136,536 $ - $ 520,516
Leasehold improvements 78,153 28,096 - 106,249
Buildings and improvements 12,467,262 436,587 - 12,903,849
Furniture, vehicles and equipment 8,919,960 613,643 198,560 9,335,043
Infrastructure 25,615,612 3,093,063 838,403 27,870,272
Shared improvements 1,360,283 278,845 - 1,639,128
Total accumulated depreciation 48,825,250 4,586,770 1,036,963 52,375,057
Total capital assets, being
depreciated, net 58,926,883 (881,295) 6,700 58,038,888
Capital assets, net $ 76,349,818 $ 4,249,077 $ 3,109,289 $ 77,489,606
Business-type activities:
Capital assets, not being depreciated:
Land $ 142,250 $ - $ - $ 142,250
Construction in progress 2,056,632 2,100,532 1,567,631 2,589,533
Total capital assets, not being depreciated 2,198,882 2,100,532 1,567,631 2,731,783
Capital assets, being depreciated:
Land improvements 1,888,965 - - 1,888,965
Buildings and systems 81,641,799 1,567,631 - 83,209,430
Machinery and equipment 1,332,845 270,475 - 1,603,320
Total capital assets, being depreciated 84,863,609 1,838,106 - 86,701,715
Less accumulated depreciation:
Land improvements 1,599,720 37,609 - 1,637,329
Buildings and systems 24,850,628 2,195,950 - 27,046,578
Machinery and equipment 679,610 69,258 - 748,868
Total accumulated depreciation 27,129,958 2,302,817 - 29,432,775
Total capital assets, being
depreciated, net 57,733,651 (464,711) - 57,268,940
Capital assets, net $ 59,932,533 $ 1,635,821 $ 1,567,631 $ 60,000,723
55
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE D—CAPITAL ASSETS—Continued
Depreciation
Depreciation expense was charged to functions as follows:
Governmental activities:
Administrative services $ 52,978
Public safety 111,910
Public works 74,350
Highways, streets and bridges 3,449,023
Community and economic development 75,717
Culture and recreation 255,663
General administration 7,254
Internal Service Fund depreciation is charged to the
various programs based on their usage of the assets 559,875
$ 4,586,770
Business-type activities:
Water $ 1,792,218
Sewer 380,017
Marina and Launch Ramp 130,582
$ 2,302,817
Balance Balance
January 1, December 31,
2008 Additions Deductions 2008
Component units:
Capital assets, not being depreciated:
Land $ 400,000 $ - $ - $ 400,000
Capital assets, being depreciated:
Building and improvements 3,798,258 - - 3,798,258
Less accumulated depreciation:
Buildings and improvements 704,980 172,648 - 877,628
Total accumulated depreciation 704,980 172,648 - 877,628
Total capital assets, being
depreciated, net 3,093,278 (172,648) - 2,920,630
Capital assets, net $ 3,493,278 $ (172,648) $ - $ 3,320,630
Depreciation
Depreciation expense was charged to economic development.
56
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE E—ACCESS RIGHTS
Access rights activity for the year ended December 31, 2008 was as follows:
Balance Balance
January 1, December 31,
2008 Additions Deductions 2008
Business-type activities
Access rights $ 1,679,026 $ - $ 1,679,026 $ -
Less accumulated amortization 1,526,387 152,639 1,679,026 -
Access rights, net $ 152,639 $ (152,639) $ - $ -
Amortization
Amortization expense was charged to sewer.
NOTE F—BOND ISSUANCE COSTS
Bond issuance cost activity for the year ended December 31, 2008 was as follows:
Balance Balance
January 1, December 31,
2008 Additions Deductions 2008
Governmental activities:
Bond issuance costs $ 210,974 $ - $ - $ 210,974
Less accumulated amortization 66,509 11,869 - 78,378
Bond issuance costs, net $ 144,465 $ (11,869) $ - $ 132,596
Business-type activities:
Bond issuance costs $ 270,814 $ - $ - $ 270,814
Less accumulated amortization 184,153 13,963 - 198,116
Bond issuance costs, net $ 86,661 $ (13,963) $ - $ 72,698
Amortization
Amortization expense was charged to functions as follows:
Governmental Activities:
Interest on long-term debt $ 11,869
Business-type Activities:
Water $ 13,963
57
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE G—INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS
The composition of interfund balances as of December 31, 2008 is as follows:
Due to/from other funds:
Receivable Fund Payable Fund Amount
Budget Stabilization Fund Major Street and Trunkline Fund $ 288,986
Budget Stabilization Fund Community Development
Block Grant Fund 589,072
Budget Stabilization Fund HOME Rehabilitation Fund 404,904
Budget Stabilization Fund Lead Abatement Fund 189,851
Budget Stabilization Fund Sewer Fund 249,387
$ 1,722,200
The outstanding balances between funds result from the payable funds having negative positions in the City’s
cash and investment pool.
The BRA component unit owes the Budget Stabilization Fund $17,863 as a result of having a negative
position in the City’s cash and investment pool.
Interfund transfers:
Transfers in Amount Transfers out Amount
General Fund $ 243,904 Public Improvement Fund $ 50,000
Cemetery Fund 57,632
General Insurance Fund 136,272
243,904 243,904
Major Street and Trunkline Fund 200,000 General Fund 1,298,046
Local Street Fund 480,000
Budget Stabilization Fund 250,000
Sidewalk Replacement Fund 150,000
Public Improvement Fund 150,000
Marina and Launch Ramp Fund 40,000
General Insurance Fund 28,046
1,298,046 1,298,046
State Grant Fund 3,813 Major Street and Trunkline Fund 3,813
$ 1,545,763 $ 1,545,763
Each year, the General Fund transfers funds to the Major Street and Trunkline Fund, Local Street Fund,
Sidewalk Replacement Fund and Public Improvement Fund to finance capital improvements. Other transfers
between funds are made to meet grant matching requirements or other operational needs.
58
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE H—DEFERRED REVENUE
Governmental funds report deferred revenue in connection with receivables for revenues that are not
considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue
recognition in connection with resources that have been received, but not yet earned. At the end of the current
fiscal year, the various components of deferred revenue reported in the governmental funds were as follows:
Unavailable Unearned
Property taxes $ - $ 8,216,424
Receivables 113,066 323,505
Special assessments 1,834,821 -
Total deferred revenue for governmental funds $ 1,947,887 $ 8,539,929
NOTE I—LONG-TERM DEBT
Summary of Changes in Long-Term Liabilities
The following is a summary of long-term liabilities activity for the City for the year ended December 31,
2008.
Balance Balance
January 1, December 31, Due within
2008 Additions Reductions 2008 one year
Governmental activities:
General obligation debt $ 5,383,382 $ - $ 44,025 $ 5,339,357 $ 50,000
Intergovernmental
contractual obligations 1,136,900 500,000 220,000 1,416,900 297,000
Michigan Transportation
Fund obligations 390,000 - 390,000 - -
Special assessment obligations 1,545,000 - 290,000 1,255,000 260,000
Installment purchase
agreement 504,118 - 54,148 449,970 56,000
Compensated absences 1,347,929 1,527,625 1,427,974 1,447,580 246,000
Governmental activity
long-term liabilities $ 10,307,329 $ 2,027,625 $ 2,426,147 $ 9,908,807 $ 909,000
59
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE I—LONG-TERM DEBT—Continued
Summary of Changes in Long-Term Liabilities—Continued
Balance Balance
January 1, December 31, Due within
2008 Additions Reductions 2008 one year
Business-type activities:
Revenue obligation $ 20,268,590 $ - $ 1,071,790 $ 19,196,800 $ 1,110,000
Intergovernmental
contractual obligations 1,221,207 - 1,221,207 - -
Compensated absences 176,876 165,036 159,054 182,858 29,000
Business-type activity
long-term liabilities $ 21,666,673 $ 165,036 $ 2,452,051 $ 19,379,658 $ 1,139,000
Component units:
Revenue obligations $ 1,000,000 $ - $ - $ 1,000,000 $ -
General obligation debt 7,543,719 - 289,431 7,254,288 300,000
Component unit long-
term liabilities $ 8,543,719 $ - $ 289,431 $ 8,254,288 $ 300,000
Governmental activities:
General obligation debt:
$5,400,000 Limited Tax General Obligation Bonds of
2006 payable in annual installments of $45,000 to
$350,000 through October 1, 2032; interest at 4% to 4.2% $ 5,355,000
Less bond discount (15,643)
Intergovernmental contractual obligations:
$1,276,900 Non-interest bearing State of Michigan urban land
assembly loan of 1999 payable in annual installments of
$200,000 to $276,900 through October 31, 2009 276,900
$700,000 Non-interest bearing State of Michigan urban land
assembly loan of 2005 payable in annual installments of
$20,000 to $120,000 through September 1, 2015 640,000
$500,000 State of Michigan Brownfield Redevelopment loan
of 2008 payable in annual installments of $54,572 from
March 18, 2010 through March 18, 2019; including interest at 2% 500,000
60
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE I—LONG-TERM DEBT—Continued
Summary of Changes in Long-Term Liabilities—Continued
Governmental activities:—Continued
Special assessment obligations:
$1,495,000 Special assessment improvement bonds of
1998; final payment of $60,000 due April 1, 2009;
interest at 4% $ 60,000
$825,000 Special assessment improvement bonds of 2000
payable in annual installments of $70,000 to $85,000
through April 1, 2010; interest at 4.9% to 5% 155,000
$1,575,000 Capital improvement bonds of 2003 payable
in annual installments of $115,000 to $150,000
through June 1, 2016; interest at 3.13% to 4.05% 1,040,000
Installment purchase agreement:
$605,824 Note payable to bank in annual installments of
$54,148 to $72,658 through April 1, 2015; interest at
3.83% 449,970
8,461,227
Compensated absences 1,447,580
$ 9,908,807
Business-type activities:
Revenue obligations:
$5,465,000 Water supply system bonds of 1993 payable
in two installments of $450,000 from May 1, 2012 through
May 1, 2013; interest at 4.5% $ 900,000
Less bond discount (7,833)
$9,575,000 Water supply system bonds of 1999 payable
in annual installments of $130,000 to $800,000 through
May 1, 2019; interest at 4.10% to 4.75% 6,175,000
Less bond discount (40,367)
$13,900,000 Drinking Water State Revolving Fund loan
of 2004 payable in annual installments of $600,000 to
$840,000 through October 1, 2025; interest at 2.13% 12,170,000
19,196,800
Compensated absences 182,858
$ 19,379,658
61
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE I—LONG-TERM DEBT—Continued
Summary of Changes in Long-Term Liabilities—Continued
Component units:
Revenue obligations:
$1,000,000 Non-interest bearing Downtown Development
Authority promissory note to Muskegon County payable
August 30, 2019 $ 1,000,000
General obligation debt:
$4,005,000 Downtown Development Authority tax
increment refunding bonds of 2001 payable in annual
installments of $220,000 to $335,000 through June 1, 2018;
interest at 4.2% to 5% 2,695,000
$4,725,000 Local Development Finance Authority
tax increment bonds of 2002 payable in annual installments
of $80,000 to $400,000 through November 1, 2025; interest
at 3.63% to 4.85% 4,565,000
Less bond discount (5,712)
$ 8,254,288
For governmental activities, claims and judgments and compensated absences are generally liquidated by the
General Fund.
The special assessment bonds are backed by the limited full faith and credit of the City.
In 2005, the County of Muskegon began making improvements to the regional sewer treatment facilities. The
project was funded with $17,500,000 bonds issued through the State of Michigan Clean Water Revolving
Fund Loan Program. The County operates the system and makes payments on the bonds with user charges to
the local units. The City has pledged its limited tax full faith and credit for the payment of its portion of the
debt should user charges collected by the County be insufficient to make the debt payments. The City’s
portion of the debt on December 31, 2008 was approximately $5,917,000. The City is unaware of any
circumstances that would cause a shortfall in the near future.
62
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE I—LONG-TERM DEBT—Continued
The $4,725,000 Local Development Finance Authority (LDFA) tax increment bonds of 2002 are partially
guaranteed by the Community Foundation for Muskegon County. If LDFA tax increment revenues are not
sufficient to cover debt service costs in any year, the Foundation has agreed to pay one-half of such shortfall,
up to $75,000 annually. This commitment extends through December 31, 2016.
The City was in compliance in all material respects with all the revenue bond ordinances at December 31,
2008.
Annual debt service requirements to maturity for debt outstanding as of December 31, 2008 follows:
Year ending Governmental activites Business-type activities Component units
December 31, Principal Interest Principal Interest Principal Interest
2009 $ 663,371 $ 277,183 $ 1,110,000 $ 567,463 $ 300,000 $ 320,219
2010 393,466 264,040 1,150,000 533,023 310,000 307,811
2011 417,083 261,898 1,185,000 496,787 320,000 294,604
2012 425,632 251,369 1,220,000 458,514 425,000 280,834
2013 434,311 240,350 1,260,000 418,422 500,000 262,268
2014-2018 1,414,505 1,045,433 6,975,000 1,426,121 3,200,000 931,336
2019-2023 1,603,502 830,195 4,680,000 446,657 2,595,000 354,156
2024-2028 1,725,000 503,180 1,665,000 53,231 610,000 44,864
2029-2032 1,400,000 146,650 - - - -
$ 8,476,870 $ 3,820,298 $ 19,245,000 $ 4,400,218 $ 8,260,000 $ 2,796,092
Annual debt service requirements to maturity by type of debt as of December 31, 2008 follows:
General Obligation Debt Revenue Obligations
Year ending Governmental Component Business-type Component
December 31, activities units activities units
2009 $ 267,345 $ 620,219 $ 1,677,463 $ -
2010 285,345 617,811 1,683,023 -
2011 282,545 614,604 1,681,787 -
2012 279,745 705,834 1,678,514 -
2013 276,945 762,268 1,678,422
2014-2018 1,342,725 4,131,336 8,401,121 -
2019-2023 2,379,125 1,949,156 5,126,657 1,000,000
2024-2028 2,228,180 654,864 1,718,231 -
2029-2032 1,546,650 - - -
$ 8,888,605 $ 10,056,092 $ 23,645,218 $ 1,000,000
63
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE I—LONG-TERM DEBT—Continued
Installment
Purchase Special
Intergovernmental Agreement Assessment
Year ending Governmental Governmental Governmental
December 31, activities activities activities
2009 $ 296,900 $ 72,624 $ 303,685
2010 74,572 72,838 224,751
2011 174,572 73,059 148,805
2012 174,572 73,291 149,393
2013 174,572 73,534 149,610
2014-2018 512,859 147,835 456,519
2019-2023 54,572 - -
2024-2028 - - -
2029-2032 - - -
$ 1,462,619 $ 513,181 $ 1,432,763
NOTE J—DESIGNATED FUND BALANCE
Unreserved fund balances designated for specific purposes as of December 31, 2008 were as follows:
Public Improvement Fund
Designated for fire equipment replacement $ 807,062
Designated for Pere Marquette Park improvements 35,674
842,736
State Grants Fund
Designated for Smither Ryerson grant match 150,000
$ 992,736
64
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE K—OTHER INFORMATION
Risk Management
The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets;
errors and omissions; injuries to employees and natural disasters. The City manages its liability and property
risk by participating in the Michigan Municipal Risk Management Authority (MMRMA), a public entity risk
pool providing property and liability coverage to its participating members. The City pays an annual
premium to MMRMA for its insurance coverage. The MMRMA is self-sustaining through member
premiums and provides, subject to certain deductibles, occurrence-based casualty coverage for each incident
and occurrence-based property coverage to its members by internally assuring certain risks and reinsuring
risks through commercial companies. A $100,000 deductible is maintained to place the responsibility for
small charges with the City. Settled claims resulting from these risks have not exceeded insurance coverage
in any of the past three fiscal years. Changes in the fund’s claim liability amount in 2008 and 2007 were as
follows:
Current year
Balance claims and Balance
Year ended at beginning changes in Claims at end
December 31, of year estimates payments of year
2008 $ 44,125 $ 269,792 $ 133,564 $ 180,353
2007 90,394 108,961 155,230 44,125
The City manages its workers' compensation risk by participating in the Michigan Municipal Workers'
Compensation Fund (MMWCF), a public entity risk pool providing workers' compensation coverage to its
participating members. The City pays an annual premium to MMWCF for its workers' compensation
coverage. The MMWCF is self-sustaining through member premiums and provides statutory workers'
compensation coverage to its members by internally assuring certain risks and reinsuring risks through
commercial companies. Settled claims resulting from these risks have not exceeded insurance coverage in
any of the past three fiscal years.
The City is self-insured for employee health care benefits for those employees selecting the City plan over
other options. Under this plan, the General Insurance Fund provides coverage for up to a maximum of
$350,000 per covered individual’s lifetime. As of December 31, 2008, the claims liability including incurred
but not reported claims was $18,875. A liability was recorded in the accompanying financial statements for
the estimated claims liability. The claims liability was based on past experience, a review of pending claims
and other social and economic factors. The above estimate was not discounted and there were no outstanding
claims for which annuity contracts have been purchased in the claimant’s name. No significant reductions in
insurance coverage were made in the last fiscal year. Settled claims have not exceeded the commercial
coverage in any of the past three fiscal years. Changes in the fund’s claim liability amount in 2008 and 2007
were as follows:
Current year
Balance claims and Balance
Year ended at beginning changes in Claims at end
December 31, of year estimates payments of year
2008 $ 20,735 $ 1,055,901 $ 1,057,761 $ 18,875
2007 103,901 1,350,547 1,433,713 20,735
65
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE K—OTHER INFORMATION—Continued
Contingencies
Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor
agencies, principally the federal government. Any disallowed claims, including amounts already
collected, may constitute a liability to the applicable funds. The amount, if any, of expenditures that may
be disallowed by the grantor cannot be determined at this time, although the City expects such amounts, if
any, to be immaterial.
The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently
determinable, in the opinion of the City's counsel the resolution of these matters will not have a material
adverse effect on the financial condition of the City.
Commitments
At December 31, 2008, the City had entered into various agreements for construction projects and capital
purchases. Below is a summary of those agreements:
Remaining
Fund Project Spent-to-date commitment
General Police department men's locker room $ - $ 92,474
Public Improvement Richard's Park building demolition - 82,600
Water Radio meter reading devices - 1,240,000
Equipment New backhoe - 65,810
Leases
The City leases an office facility under a noncancelable operating lease that expires June 2012 with the
option by the tenant to renew the term of the lease for five successive periods of five years each. The City
received rental income of $45,450 for the year ended December 31, 2008. The future minimum rental
income for this lease is as follows:
Year ending
December 31, Amount
2009 $ 32,171
2010 34,396
2011 34,058
2012 16,860
$ 117,485
66
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE L—PENSION PLANS
Defined Benefit Pension Plan
Plan Description. The City has an agent multiple-employer defined benefit pension plan with the
Municipal Employees Retirement System (MERS). The Plan provides retirement and disability benefits,
annual cost-of-living adjustments, and death benefits to Plan members and beneficiaries. Act No. 427 of
the Public Acts of 1984 of the State of Michigan assigns the authority to establish and amend the benefit
provisions of the plans that participate in MERS to the respective employer entities; that authority rests
with the City. A copy of the complete financial report and required supplemental information can be
obtained by writing to:
City of Muskegon
933 Terrace Street
Muskegon, MI 49443
Funding Policy. City employees are required to contribute 5 to 6 percent to the Plan depending on
employee contract. The City is required to contribute at an actuarially-determined rate depending upon
employee group from 4.7 to 10.13 percent of annual covered payroll depending on the plan. The
contributions requirements of plan members and the City are established and may be amended by MERS.
Annual Pension Cost. For the year ended December 31, 2008, the City’s annual pension cost was
approximately $1,167,000 was equal to the City’s required and actual contribution.
Trend Information
Approximate Percentage
Annual Pension of APC Net Pension
Year ended Cost (APC) Contributed Obligation
12/31/07 $ 819,000 100 % $ -
12/31/08 1,167,000 100 -
The required contribution was determined as part of the December 31, 2006 actuarial valuation using the
entry age actuarial cost method. The actuarial assumptions included (a) 8 percent investment rate of
return (net of administrative expenses), (b) projected salary increases ranging from 0 percent to 4.5
percent, and (c) 4.5 percent per year compounded annually attributable to inflation. The actuarial value of
plan assets was determined using techniques that smooth the effects of short-term volatility in the market
value of investments over a five-year period. The plan’s unfunded actuarial accrued liability is being
amortized as a level percentage of projected payroll on an open basis. The remaining amortization period
at December 31, 2007 was 28 years which will be reduced by one year in each of the next eight valuations
until reaching 20 years after which the 20 year period will be reestablished with each annual actuarial
valuation.
67
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE L—PENSION PLANS—Continued
Defined Benefit Pension Plan—Continued
Funding Status and Funding Progress. As of December 31, 2007, the most recent actuarial valuation
date, the plan was 104 percent funded. The actuarial accrued liability for benefits was approximately
$83,118,000, and the actuarial value of assets was approximately $86,157,000, resulting in an unfunded
actuarial accrued liability (UAAL) of approximately a negative $3,039,000. The covered payroll (annual
payroll of active employees covered by the plan) was approximately $12,684,000, and the ratio of the
UAAL to the covered payroll was a negative 24 percent due to the plan being overfunded.
The schedule of funding progress, presented as RSI following the notes to the financial statements,
presents multiyear trend information about whether the actuarial value of the plan assets is increasing or
decreasing over time relative to the actuarial accrued liability for benefits.
Defined Contribution Pension Plan
The City also maintains a defined contribution plan offered by MERS and administered by the ICMA
Retirement Corporation (ICMA), an independent third party. In a defined contribution plan, benefits depend
solely on amounts contributed to the plan plus investments. Depending on employee group, the Plan covers
all City employees hired after January 2005 to July 2006 and those hired earlier who elected to convert from
the defined benefit plan. The City is required to contribute 3 percent to 10 percent of a qualified employees’
annual compensation each year depending on employee group. Qualified employees are required to
contribute 0 percent to 6 percent of annual compensation depending on employee group. For the year ended
December 31, 2008, City and employee contributions were approximately $78,000 and $42,000, respectively.
Deferred Compensation Plan
The City offers its employees a deferred compensation plan created in accordance with Internal Revenue
Code Section 457. The Plan, available to all full-time employees at their option, permits participants to defer
a portion of their salary until future years. The deferred compensation is not available to participants until
termination, retirement, death, or unforeseeable emergency.
The Plan has created a trust for the exclusive benefit of the Plan’s participants and beneficiaries under rules
provided by Internal Revenue Code Section 401(f).
68
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE M—OTHER POST-EMPLOYMENT BENEFITS
Plan Description. The City has a retiree healthcare funding vehicle administered Municipal Employees
Retirement System (MERS), an agent multiple-employer postemployment healthcare plan (OPEB). The
retiree healthcare funding vehicle is established under the authority of section 115 of the IRS code and is
exempt from taxation. The Plan provides health insurance to eligible retirees and their spouses. Act No.
149 of the Public Acts of 1999 of the State of Michigan assigns the authority to establish and amend the
benefit provisions of the plans that participate in MERS to the respective employer entities; that authority
rests with the City. A copy of the complete financial report and required supplemental information can be
obtained by writing to:
City of Muskegon
933 Terrace Street
Muskegon, MI 49443
Funding Policy. Plan members are not required to contribute to the Plan. The City is required to
contribute the annual required contribution of the employer (ARC) at an actuarially-determined rate
which varies upon employee group from 3.9 to 9.4 percent of covered wages. The ARC represents a
level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize
any unfunded liabilities (or funding excess) over a period not to exceed thirty years. The contribution
requirements of plan members and the City are established and may be amended by MERS.
Annual OPEB Cost. For the year ended December 31, 2008, the City’s OPEB cost (expense) of
approximately $1,476,000 was equal to the City’s ARC and actual contribution.
Trend Information
Approximate
Annual Required Percentage
Contribution of ARC Net ARC
Year ended (ARC) Contributed Obligation
12/31/07 $ 1,326,000 100 % $ -
12/31/08 1,476,000 100 -
69
City of Muskegon
NOTES TO FINANCIAL STATEMENTS—CONTINUED
December 31, 2008
NOTE M—OTHER POST-EMPLOYMENT BENEFITS—Continued
Actuarial Methods and Assumptions. Actuarial valuations of an ongoing plan involve estimates of the value
of reported amounts and assumptions about the probability of occurrence of events far into the future.
Examples include assumptions about future employment, mortality, and the healthcare cost trend. Actuarially
determined amounts are subject to continual revision as actual results are compared with past expectations
and new estimates are made about the future.
Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as
understood by the employer and Plan members) and include the types of benefits provided at the time of each
valuation and the historical pattern of Plan members not contributing to the Plan. The actuarial methods and
assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial
accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the
calculations.
The required contribution was determined as part of the December 31, 2006 actuarial valuation using the
entry age actuarial cost method. The actuarial assumptions included (a) 8 percent investment rate of
return (net of administrative expenses), (b) an annual healthcare trend rate of 11 percent initially, reduced
by decrements to an ultimate rate of 4.5 percent after 10 years. Both rates assume include a 4.5 percent
inflation assumption. The Plan’s unfunded actuarial accrued liability is being amortized as a level
percentage of projected payroll on a closed basis. The remaining amortization period at December 31,
2007 is 30 years.
Funded Status and Progress. As of December 31, 2007, the most recent actuarial valuation date, the plan was
46.5 percent funded. The actuarial accrued liability for benefits was approximately $29,722,000, and the
actuarial value of assets was approximately $13,831,000, resulting in an unfunded actuarial liability (UAAL)
of approximately $15,891,000. The covered payroll (annual payroll of active employees covered by the plan)
was approximately $13,290,000, and the ratio of the UAAL to the covered payroll was 120 percent.
The schedule of funding progress, presented as required supplementary information following the notes to the
financial statements, presents multiyear trend information that shows whether the actuarial value of plan
assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.
NOTE N—SUBSEQUENT EVENTS
Subsequent to year-end, the City approved various contracts for street improvements, vehicle purchases, and
park improvements for approximately $357,000, $194,000, and $49,000, respectively.
70
REQUIRED SUPPLEMENTARY INFORMATION
71
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
General Fund
For the year ended December 31, 2008
(with comparative actual amounts for the year ended December 31, 2007)
2008 2007
Variance with
final budget-
Budgeted amounts positive
Original Final Actual (negative) Actual
REVENUES
Taxes
City income tax $ 6,900,000 $ 7,750,000 $ 7,694,780 $ (55,220) $ 7,618,461
Property taxes 7,708,000 7,708,000 7,666,645 (41,355) 7,345,550
Industrial facilities taxes 270,731 255,455 276,203 20,748 364,628
Payments in lieu of taxes 89,000 91,225 91,225 - 91,393
Delinquent chargeback collected 10,000 2,000 6 (1,994) -
Total taxes 14,977,731 15,806,680 15,728,859 (77,821) 15,420,032
Licenses and permits
Business licenses 33,000 32,000 32,314 314 32,025
72
Liquor licenses 35,000 38,957 38,957 - 37,000
Cable TV fees 300,000 300,000 304,812 4,812 297,200
Rental property registration 100,000 55,000 61,600 6,600 82,335
Burial permits 120,000 105,000 86,515 (18,485) 117,703
Building permits 250,000 360,000 353,042 (6,958) 348,349
Electrical permits 95,000 95,000 98,914 3,914 106,607
Plumbing permits 40,000 41,000 41,711 711 34,540
Mechanical permits 52,500 67,000 68,002 1,002 56,016
Cat licenses 2,500 2,500 3,315 815 3,740
Police gun registration - - 5 5 3
Total licenses and permits 1,028,000 1,096,457 1,089,187 (7,270) 1,115,518
Intergovernmental revenues
Federal grants 45,718 46,173 40,622 (5,551) 84,162
State
Grants 28,000 27,702 27,701 (1) 18,373
State shared revenue 4,487,972 4,462,634 4,487,698 25,064 4,475,462
Total intergovernmental revenues - State 4,515,972 4,490,336 4,515,399 25,063 4,493,835
Local 50,000 50,000 50,000 - 60,000
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
General Fund
For the year ended December 31, 2008
(with comparative actual amounts for the year ended December 31, 2007)
2008 2007
Variance with
final budget-
Budgeted amounts positive
Original Final Actual (negative) Actual
Charges for services
Tax administration fees $ 278,634 $ 278,634 $ 315,261 $ 36,627 $ 212,530
Utility administration fees 180,000 180,000 180,000 - 180,000
Reimbursement for elections 13,000 12,006 12,006 - 22,042
Indirect cost reimbursements 1,016,979 1,016,979 1,021,500 4,521 1,024,932
Site plan review fee 4,000 4,200 4,245 45 5,870
Sale of cemetery lots 27,400 26,000 21,233 (4,767) 38,182
Police miscellaneous 94,000 119,000 97,255 (21,745) 120,470
Police impound fees 45,000 45,000 39,375 (5,625) 43,234
Landlord's alert fee 300 300 290 (10) 220
Fire protection-state property 80,000 80,000 127,589 47,589 87,601
Zoning fees 8,000 8,300 8,360 60 10,362
73
Clerk fees 3,500 6,000 5,550 (450) 3,115
Clerk fees - passport fees 10,000 7,500 7,830 330 8,240
Tax abatement application fees 10,000 14,000 11,711 (2,289) 16,411
Treasurer fees 90,000 50,000 43,279 (6,721) 61,277
False alarm fees 12,000 12,000 10,415 (1,585) 12,525
Miscellaneous cemetery income 22,000 22,000 19,282 (2,718) 20,536
Senior transit program fees 9,000 10,000 10,149 149 9,254
Fire miscellaneous 7,000 15,000 14,699 (301) 3,494
Sanitation stickers 75,000 77,000 81,702 4,702 84,735
Lot cleanup fees 70,000 82,000 63,733 (18,267) 70,987
Reimbursements - lot mowing and demolitions 70,000 70,000 85,905 15,905 55,484
Special events reimbursements 120,000 128,344 15,278 (113,066) 92,041
Recreation program fees 45,000 45,000 42,960 (2,040) 41,457
Total charges for services 2,290,813 2,309,263 2,239,607 (69,656) 2,224,999
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
General Fund
For the year ended December 31, 2008
(with comparative actual amounts for the year ended December 31, 2007)
2008 2007
Variance with
final budget-
Budgeted amounts positive
Original Final Actual (negative) Actual
Fines and forfeitures
Income tax - penalty and interest $ 200,000 $ 275,000 $ 284,629 $ 9,629 $ 240,315
Late fees on current taxes 75,000 40,000 28,158 (11,842) 38,931
Interest on late invoices 2,000 2,000 1,774 (226) 2,151
Parking fines 120,000 120,000 90,360 (29,640) 113,354
Court fines 175,000 185,000 154,765 (30,235) 190,651
Total fines and forfeitures 572,000 622,000 559,686 (62,314) 585,402
Interest and rental income
Investment earnings 305,000 260,000 374,527 114,527 456,224
Flea market 29,000 29,000 27,880 (1,120) 22,064
74
Farmers' market 32,000 41,000 39,519 (1,481) 40,325
City right of way rental 4,400 6,800 6,800 - 4,400
Advertising 2,000 123 123 - -
Fire station lease - Central Dispatch 35,000 43,000 45,450 2,450 6,180
Parking rentals 2,500 2,800 2,800 - 2,800
McGraft park rentals 45,000 45,000 39,043 (5,957) 42,114
Other park rentals 29,000 35,000 33,795 (1,205) 30,920
Total interest and rental income 483,900 462,723 569,937 107,214 605,027
Other
Sale of land and assets 1,000 17,500 14,488 (3,012) -
Police sale and auction proceeds 1,500 300 277 (23) -
CDBG program reimbursements 339,169 334,669 329,756 (4,913) 225,149
Fisherman's Landing reimbursement 10,000 14,900 15,066 166 -
Contributions 11,000 51,000 50,224 (776) 50,499
Contribution - Veteran's Park maintenance 17,250 18,000 15,400 (2,600) 18,328
Community Foundation for Muskegon County - 34,857 37,543 2,686 3,000
Miscellaneous reimbursements 1,000 - - - -
Miscellaneous and sundry 15,000 51,000 63,677 12,677 53,794
Total other 395,919 522,226 526,431 4,205 350,770
Total revenues 24,360,053 25,405,858 25,319,728 (86,130) 24,939,745
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
General Fund
For the year ended December 31, 2008
(with comparative actual amounts for the year ended December 31, 2007)
2008 2007
Variance with
final budget-
Budgeted amounts positive
Original Final Actual (negative) Actual
EXPENDITURES
Current
Public representation services
City commission $ 83,128 $ 88,500 $ 86,777 $ 1,723 $ 80,462
City promotions and public relations 10,935 11,235 8,183 3,052 11,696
City manager 218,527 229,024 225,563 3,461 213,848
Contributions to outside agencies 184,324 189,403 186,153 3,250 180,880
City attorney 426,338 431,500 480,553 (49,053) 440,434
Total public representation services 923,252 949,662 987,229 (37,567) 927,320
Administrative services
Administration 130,461 46,416 38,672 7,744 126,444
75
City clerk 333,051 333,251 319,548 13,703 277,610
Civil service 180,555 187,777 186,372 1,405 163,761
Julia Hackley internships - 8,000 7,988 12 5,374
Affirmative action 77,924 81,441 79,933 1,508 71,724
Total administrative services 721,991 656,885 632,513 24,372 644,913
Financial services
Finance administration 431,098 439,804 445,660 (5,856) 423,512
Assessing 431,366 466,366 470,280 (3,914) 459,837
Arena administration 235,000 241,850 241,602 248 269,434
Income tax administration 380,443 404,971 404,309 662 373,433
Information systems 358,656 368,688 347,762 20,926 364,246
City treasurer 418,156 411,522 389,217 22,305 341,057
Total financial services 2,254,719 2,333,201 2,298,830 34,371 2,231,519
Public safety
Police department 8,412,756 8,667,000 8,805,620 (138,620) 8,235,772
Fire department 3,471,316 3,691,836 3,836,604 (144,768) 3,652,524
Fire safety inspections 1,011,807 1,048,408 1,041,507 6,901 966,136
Total public safety 12,895,879 13,407,244 13,683,731 (276,487) 12,854,432
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
General Fund
For the year ended December 31, 2008
(with comparative actual amounts for the year ended December 31, 2007)
2008 2007
Variance with
final budget-
Budgeted amounts positive
Original Final Actual (negative) Actual
Public works
Street lighting $ 634,000 $ 634,000 $ 643,477 $ (9,477) $ 593,486
Community event support 31,100 38,600 32,345 6,255 28,837
Senior citizen transit 61,368 61,368 59,621 1,747 59,824
General sanitation 1,653,479 1,656,864 1,628,953 27,911 1,649,488
Recycling 168,179 168,179 164,568 3,611 163,699
Storm water management 16,991 17,827 17,754 73 16,991
City hall maintenance 267,714 283,375 284,459 (1,084) 256,581
Total public works 2,832,831 2,860,213 2,831,177 29,036 2,768,906
Community and economic development
Planning, zoning and economic development 505,274 528,250 523,927 4,323 462,113
76
Environmental services 391,382 413,500 403,385 10,115 332,766
Edison Landing subsidy 150,000 150,000 150,000 - 100,000
Total community and economic development 1,046,656 1,091,750 1,077,312 14,438 894,879
Culture and recreation
Parks maintenance 1,321,663 1,434,182 1,455,040 (20,858) 1,340,824
McGraft park maintenance 55,200 53,750 58,134 (4,384) 46,376
General and inner city recreation programs 276,612 299,648 314,042 (14,394) 264,522
Cemeteries maintenance 527,196 527,196 498,350 28,846 545,975
Graffiti removal 4,644 6,144 3,940 2,204 3,213
Parking operations 7,269 7,269 5,431 1,838 6,605
Farmers' market and flea market 46,500 44,700 43,835 865 43,578
Total culture and recreation 2,239,084 2,372,889 2,378,772 (5,883) 2,251,093
Other governmental functions
Insurance premiums 368,834 391,978 386,191 5,787 350,385
Other 400,000 200,000 76,150 123,850 -
Total other governmental functions 768,834 591,978 462,341 129,637 350,385
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
General Fund
For the year ended December 31, 2008
(with comparative actual amounts for the year ended December 31, 2007)
2008 2007
Variance with
final budget-
Budgeted amounts positive
Original Final Actual (negative) Actual
Debt service
Principal $ 45,000 $ 45,000 $ 45,000 $ - $ -
Interest and fees 219,145 230,833 230,833 - 208,859
Total debt service 264,145 275,833 275,833 - 208,859
Capital outlay 134,000 177,572 174,755 2,817 65,578
Total expenditures 24,081,391 24,717,227 24,802,493 (85,266) 23,197,884
Excess of revenues over expenditures 278,662 688,631 517,235 (171,396) 1,741,861
OTHER FINANCING SOURCES (USES)
77
Transfers in 345,000 246,272 243,904 (2,368) 91,658
Transfers out (698,046) (1,298,046) (1,298,046) - (1,602,926)
Total other financing sources (uses) (353,046) (1,051,774) (1,054,142) (2,368) (1,511,268)
Net change in fund balance $ (74,384) $ (363,143) (536,907) $ (173,764) 230,593
Fund balance at beginning of year 2,920,632 2,690,039
Fund balance at end of year $ 2,383,725 $ 2,920,632
Note: Both budgets and actual figures are prepared in accordance with generally accepted accounting principles.
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
Major Street and Trunkline Fund
For the year ended December 31, 2008
Variance with
final budget-
Budgeted amounts positive
Original Final Actual (negative)
REVENUES
Intergovernmental revenues
Federal $ 1,623,000 $ 1,623,000 $ 1,662,437 $ 39,437
State 2,930,818 3,240,818 3,002,489 (238,329)
Charges for services 40,000 75,000 87,620 12,620
Investment earnings 100,000 50,000 70,691 20,691
Other 250,000 250,000 248,582 (1,418)
Total revenues 4,943,818 5,238,818 5,071,819 (166,999)
EXPENDITURES
Current
Highways, streets and bridges 4,714,904 5,336,000 5,756,135 (420,135)
Debt service
Principal 390,000 390,000 390,000 -
78
Interest and fees 6,093 6,093 6,093 -
Total expenditures 5,110,997 5,732,093 6,152,228 (420,135)
Excess of revenues under expenditures (167,179) (493,275) (1,080,409) (587,134)
OTHER FINANCING SOURCES (USES)
Transfers in - 200,000 200,000 -
Transfers out - - (3,813) (3,813)
Total other financing sources (uses) - 200,000 196,187 (3,813)
Net change in fund balance $ (167,179) $ (293,275) (884,222) $ (590,947)
Fund balance at January 1, 2008 1,169,134
Fund balance at December 31, 2008 $ 284,912
Note: Both budgets and actual figures are prepared in accordance with generally accepted accounting principles.
City of Muskegon
Required Supplemental Information
SCHEDULE OF FUNDING PROGRESS
For the year ended December 31, 2008
MUNICIPAL EMPLOYEES RETIREMENT SYSTEM (MERS) PENSION PLAN
SCHEDULE OF FUNDING PROGRESS
(Dollar amounts in thousands)
Actuarial UAAL as a
Accrued percentage
Actuarial Actuarial Liability Unfunded of
valuation value of (AAL) AAL Funded Covered covered
date assets Entry Age (UAAL) ratio payroll payroll
12/31/07 $ 86,157 $ 83,118 $ (3,039) 104 % $ 12,684 (24) %
79
MUNICIPAL EMPLOYEES RETIREMENT SYSTEM (MERS) OTHER POSTEMPLOYMENT BENEFITS PLAN
SCHEDULE OF FUNDING PROGRESS
(Dollar amounts in thousands)
Actuarial UAAL as a
Accrued percentage
Actuarial Actuarial Liability Unfunded of
valuation value of (AAL) AAL Funded Covered covered
date assets Entry Age (UAAL) ratio payroll payroll
12/31/07 $ 13,831 $ 29,722 $ 15,891 46.5 % $ 13,290 120 %
Additional actuarial data is not available from MERS and will be provided in subsequent years.
80
OTHER SUPPLEMENTAL INFORMATION
81
DESCRIPTION OF
OTHER GOVERNMENTAL FUNDS
Special Revenue Funds
The special revenue funds are used to account for the proceeds of special revenue sources that are
legally restricted to expenditures for specific purposes.
Local Street – to account for gas and weight allocations to the City by the Michigan Department
of Transportation for construction and maintenance of local streets within the City.
Criminal Forfeitures – to account for receipts generated through the sale of assets seized through
criminal court proceedings.
Budget Stabilization – to account for funds appropriated from the City’s General Fund for the
purpose of mitigating adverse affects on the City's budget from downturns in the business cycle.
Farmers’ Market Improvement – to account for funds allocated for maintenance and
improvements to the City’s farmers’ market facility.
Tree Replacement – to account for contributions and other revenues earmarked for tree
replacement throughout the City.
Capital Projects Funds
Capital projects funds are used to account for financial resources to be used for the acquisition or
construction of major capital facilities other than those financed by proprietary funds and trust
funds.
Public Improvement – to account for grants, private contributions, sale of property and other
resources used to finance various capital projects.
Sidewalk Replacement – to account for resources allocated for a multi-year city-wide sidewalk
replacement program.
Michcon Remediation – to account for reimbursements received from Michcon Gas Company for
environmental remediation of their former downtown site.
EDC Revolving Loan – to account for funds received upon repayment of Urban Development
Action Grant loans and subsequently reloaned to small business enterprises.
Community Development Block Grant – to account for categorical grants received from the U. S.
Department of Housing and Urban Development for the construction of major city public
improvements and the rehabilitation of residential housing and other qualifying expenditures.
State Grants – to account for grant revenues received from the State of Michigan and earmarked
for the purpose of improvements and/or rehabilitation of City property, environmental
remediation at lakeshore sites or new infrastructure in the City’s downtown.
82
DESCRIPTION OF
OTHER GOVERNMENTAL FUNDS—CONTINUED
Capital Projects Funds—Continued
HOME Rehabilitation – to account for grant revenues received from the U. S. Department of
Housing and Urban Development for the purpose of providing housing assistance to low and
moderate income households in the City.
Arena Capital Improvements – to account for ticket revenue collections earmarked for large
capital improvements and repairs to the L.C. Walker Arena.
Lead Abatement – to account for grant revenues received from the U. S. Department of Housing
and Urban Development for the purpose of abatement of lead from homes in the City.
Permanent Funds
Permanent funds are used to report resources that are legally restricted to the extent that only
earnings, not principal, may be used for purposes that support the reporting government’s
programs.
Cemetery Perpetual Care – to account for charges for services collected and investment income
earned and to account for transfers to the General Fund to partially cover cemetery care expenses.
83
City of Muskegon
COMBINING BALANCE SHEET
Other Governmental Funds
December 31, 2008
Permanent
Total other Special Capital Fund -
governmental Revenue Projects Cemetery
funds Funds Funds Perpetual Care
ASSETS
Cash and investments $ 5,355,891 $ 455,945 $ 3,591,005 $ 1,308,941
Receivables
Accounts and loans (net of allowance for uncollectibles) 628,619 - 606,275 22,344
Special assessments 1,059,199 655,473 403,726 -
Due from other governmental units 1,352,318 378,360 973,958 -
Due from other funds 1,722,200 1,722,200 - -
Due from component units 17,863 17,863 - -
Prepaid items 7,025 7,025 - -
Total assets $ 10,143,115 $ 3,236,866 $ 5,574,964 $ 1,331,285
LIABILITIES AND FUND BALANCES
Liabilities
Accounts payable $ 88,118 $ 59,795 $ 28,323 $ -
84
Accrued liabilities 46,312 35,651 10,661 -
Due to other funds 1,183,827 - 1,183,827 -
Deferred revenue 1,222,055 635,551 586,504 -
Total liabilities 2,540,312 730,997 1,809,315 -
Fund balances
Reserved for:
Prepaid items 7,025 7,025 - -
Long-term loans receivable 192,199 - 192,199 -
Capital projects 2,580,714 - 2,580,714 -
Perpetual care 1,270,472 - - 1,270,472
Unreserved
Designated, reported in capital projects funds 992,736 - 992,736 -
Undesignated, reported in
Special revenue funds 2,498,844 2,498,844 - -
Permanent funds 60,813 - - 60,813
Total fund balances 7,602,803 2,505,869 3,765,649 1,331,285
Total liabilities and fund balances $ 10,143,115 $ 3,236,866 $ 5,574,964 $ 1,331,285
City of Muskegon
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
Other Governmental Funds
For the year ended December 31, 2008
Permanent
Total other Special Capital Fund -
governmental Revenue Projects Cemetery
funds Funds Funds Perpetual Care
REVENUES
Intergovernmental revenues
Federal $ 2,744,798 $ 750,927 $ 1,993,871 $ -
State 996,290 967,402 28,888 -
Charges for services 136,748 1,045 115,396 20,307
Fines and forfeitures 10,840 10,840 - -
Investment earnings 220,887 47,655 139,201 34,031
Other 328,338 82,547 245,791 -
Total revenues 4,437,901 1,860,416 2,523,147 54,338
EXPENDITURES
Current
Public safety 70,663 70,663 - -
Highways, streets and bridges 3,312,558 3,312,558 - -
Culture and recreation 15,259 15,259 - -
85
Other governmental functions 100,000 - 100,000 -
Debt service
Principal 564,148 - 564,148 -
Interest and fees 73,506 - 73,506 -
Capital outlay 2,644,833 - 2,644,833 -
Total expenditures 6,780,967 3,398,480 3,382,487 -
Excess of revenues over (under) expenditures (2,343,066) (1,538,064) (859,340) 54,338
OTHER FINANCING SOURCES (USES)
Proceeds from sale of capital assets 375,723 - 375,723 -
Long-term debt issued 500,000 - 500,000 -
Transfers in 1,033,813 730,000 303,813 -
Transfers out (107,632) - (50,000) (57,632)
Total other financing sources (uses) 1,801,904 730,000 1,129,536 (57,632)
Net change in fund balances (541,162) (808,064) 270,196 (3,294)
Fund balances at January 1, 2008 8,143,965 3,313,933 3,495,453 1,334,579
Fund balances at December 31, 2008 $ 7,602,803 $ 2,505,869 $ 3,765,649 $ 1,331,285
City of Muskegon
COMBINING BALANCE SHEET
Other Special Revenue Funds
December 31, 2008
Total other Farmers'
special revenue Local Criminal Budget Market Tree
funds Street Forfeitures Stabilization Improvement Replacement
ASSETS
Cash and investments $ 455,945 $ 81,632 $ 86,769 $ 259,937 $ 17,565 $ 10,042
Special assessments receivable 655,473 655,473 - - - -
Due from other governmental units 378,360 378,360 - - - -
Due from other funds 1,722,200 - - 1,722,200 - -
Due from component units 17,863 - - 17,863 - -
Prepaid items 7,025 7,025 - - - -
Total assets $ 3,236,866 $ 1,122,490 $ 86,769 $ 2,000,000 $ 17,565 $ 10,042
LIABILITIES AND FUND BALANCES
Liabilities
Accounts payable $ 59,795 $ 54,882 $ 4,913 $ - $ - $ -
Accrued liabilities 35,651 35,651 - - - -
86
Deferred revenue 635,551 635,551 - - - -
Total liabilities 730,997 726,084 4,913 - - -
Fund balances
Reserved for prepaid items 7,025 7,025 - - - -
Unreserved 2,498,844 389,381 81,856 2,000,000 17,565 10,042
Total fund balances 2,505,869 396,406 81,856 2,000,000 17,565 10,042
Total liabilities and fund balances $ 3,236,866 $ 1,122,490 $ 86,769 $ 2,000,000 $ 17,565 $ 10,042
City of Muskegon
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
Other Special Revenue Funds
For the year ended December 31, 2008
Total other Farmers'
special revenue Local Criminal Budget Market Tree
funds Street Forfeitures Stabilization Improvement Replacement
REVENUES
Intergovernmental revenues
Federal $ 750,927 $ 747,927 $ - $ - $ - $ 3,000
State 967,402 965,402 - - - 2,000
Charges for services 1,045 - - - - 1,045
Fines and forfeitures 10,840 - 10,840 - - -
Investment earnings 47,655 43,178 3,518 - 710 249
Other 82,547 82,547 - - - -
Total revenues 1,860,416 1,839,054 14,358 - 710 6,294
EXPENDITURES
Current
Public safety 70,663 - 70,663 - - -
87
Highways, streets and bridges 3,312,558 3,312,558 - - - -
Culture and recreation 15,259 - - - 9,900 5,359
Total expenditures 3,398,480 3,312,558 70,663 - 9,900 5,359
Excess of revenues over (under) expenditures (1,538,064) (1,473,504) (56,305) - (9,190) 935
OTHER FINANCING SOURCES
Transfers in 730,000 480,000 - 250,000 - -
Net change in fund balances (808,064) (993,504) (56,305) 250,000 (9,190) 935
Fund balances at January 1, 2008 3,313,933 1,389,910 138,161 1,750,000 26,755 9,107
Fund balances at December 31, 2008 $ 2,505,869 $ 396,406 $ 81,856 $ 2,000,000 $ 17,565 $ 10,042
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
Other Special Revenue Funds
For the year ended December 31, 2008
Local Street Criminal Forfeitures Budget Stabilization
Variance - Variance - Variance -
Final positive Final positive Final positive
budget Actual (negative) budget Actual (negative) budget Actual (negative)
REVENUES
Intergovernmental revenues
Federal $ 71,927 $ 747,927 $ 676,000 $ - $ - $ - $ - $ - $ -
State 818,344 965,402 147,058 - - - - - -
Charges for services 5,000 - (5,000) - - - - - -
Fines and forfeitures - - - 16,000 10,840 (5,160) - - -
Investment earnings 25,000 43,178 18,178 3,000 3,518 518 - - -
Other 120,000 82,547 (37,453) - - - - - -
Total revenues 1,040,271 1,839,054 798,783 19,000 14,358 (4,642) - - -
EXPENDITURES
Current
Public safety - - - 63,000 70,663 (7,663) - - -
Highways, streets and bridges 2,421,201 3,312,558 (891,357) - - - - - -
Culture and recreation - - - - - - - - -
88
Total expenditures 2,421,201 3,312,558 (891,357) 63,000 70,663 (7,663) - - -
Excess of revenues over (under) expenditures (1,380,930) (1,473,504) (92,574) (44,000) (56,305) (12,305) - - -
OTHER FINANCING SOURCES
Transfers in 480,000 480,000 - - - - 250,000 250,000 -
Net change in fund balances $ (900,930) (993,504) $ (92,574) $ (44,000) (56,305) $ (12,305) $ 250,000 250,000 $ -
Fund balances at January 1, 2008 1,389,910 138,161 1,750,000
Fund balances at December 31, 2008 $ 396,406 $ 81,856 $ 2,000,000
City of Muskegon
BUDGETARY COMPARISON SCHEDULE—CONTINUED
Other Special Revenue Funds
For the year ended December 31, 2008
Farmers' Market Improvement Tree Replacement
Variance - Variance -
Final positive Final positive
budget Actual (negative) budget Actual (negative)
REVENUES
Intergovernmental revenues
Federal $ - $ - $ - $ 3,000 $ 3,000 $ -
State - - - 2,000 2,000 -
Charges for services - - - 400 1,045 645
Fines and forfeitures - - - - - -
Investment earnings 700 710 10 500 249 (251)
Other - - - - - -
Total revenues 700 710 10 5,900 6,294 394
EXPENDITURES
89
Current
Public safety - - - - - -
Highways, streets and bridges - - - - - -
Culture and recreation 13,000 9,900 3,100 5,900 5,359 541
Total expenditures 13,000 9,900 3,100 5,900 5,359 541
Excess of revenues over (under) expenditures (12,300) (9,190) 3,110 - 935 935
OTHER FINANCING SOURCES
Transfers in - - - - - -
Net change in fund balances $ (12,300) (9,190) $ 3,110 $ - 935 $ 935
Fund balances at January 1, 2008 26,755 9,107
Fund balances at December 31, 2008 $ 17,565 $ 10,042
City of Muskegon
COMBINING BALANCE SHEET
Other Capital Projects Funds
December 31, 2008
Total other EDC Community Arena
capital projects Public Sidewalk Michcon Revolving Development State HOME Capital Lead
funds Improvement Replacement Remediation Loan Block Grant Grants Rehabilitation Improvements Abatement
ASSETS
Cash and investments $ 3,591,005 $ 1,981,268 $ 885,515 $ 216,137 $ 117,957 $ - $ 289,535 $ - $ 100,593 $ -
Receivables
Accounts and loans (net of
allowance for uncollectibles) 606,275 6,267 - - 20,946 405,123 171,253 - 2,686 -
Special assessments 403,726 - 403,726 - - - - - - -
Due from other governmental units 973,958 - - - - 478,803 188,759 88,727 - 217,669
Total assets $ 5,574,964 $ 1,987,535 $ 1,289,241 $ 216,137 $ 138,903 $ 883,926 $ 649,547 $ 88,727 $ 103,279 $ 217,669
LIABILITIES AND FUND BALANCES (DEFICIT)
Liabilities
Accounts payable $ 28,323 $ 1,409 $ - $ - $ - $ 467 $ - $ 153 $ - $ 26,294
Accrued liabilities 10,661 - - - - 8,629 - 508 - 1,524
Due to other funds 1,183,827 - - - - 589,072 - 404,904 - 189,851
Deferred revenue 586,504 1,000 299,746 - - 285,758 - - - -
Total liabilities 1,809,315 2,409 299,746 - - 883,926 - 405,565 - 217,669
Fund balances (deficit)
90
Reserved for:
Long-term loans receivable 192,199 - - - 20,946 - 171,253 - - -
Capital projects 2,580,714 1,142,390 989,495 216,137 117,957 - 328,294 (316,838) 103,279 -
Unreserved
Designated for approved projects 992,736 842,736 - - - - 150,000 - - -
Total fund balances (deficit) 3,765,649 1,985,126 989,495 216,137 138,903 - 649,547 (316,838) 103,279 -
Total liabilities and fund balances (deficit) $ 5,574,964 $ 1,987,535 $ 1,289,241 $ 216,137 $ 138,903 $ 883,926 $ 649,547 $ 88,727 $ 103,279 $ 217,669
City of Muskegon
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICIT)
Other Capital Projects Funds
For the year ended December 31, 2008
Total other EDC Community Arena
capital projects Public Sidewalk Michcon Revolving Development State HOME Capital Lead
funds Improvement Replacement Remediation Loan Block Grant Grants Rehabilitation Improvements Abatement
REVENUES
Intergovernmental revenues
Federal $ 1,993,871 $ - $ - $ - $ - $ 870,951 $ - $ 219,254 $ - $ 903,666
State 28,888 - - - - - 28,888 - - -
Charges for services 115,396 80,087 - - - - - - 35,309 -
Investment earnings 139,201 76,446 50,225 6,034 2,921 1,118 - - 2,457 -
Other 245,791 - 120,301 - 37,592 11,473 50,000 - - 26,425
Total revenues 2,523,147 156,533 170,526 6,034 40,513 883,542 78,888 219,254 37,766 930,091
EXPENDITURES
Current
Other governmental functions 100,000 100,000 - - - - - - - -
Debt service
Principal 564,148 274,148 290,000 - - - - - - -
Interest and fees 73,506 18,271 55,235 - - - - - - -
Capital outlay 2,644,833 310,056 3,381 - 22,866 943,038 83,256 340,934 11,211 930,091
Total expenditures 3,382,487 702,475 348,616 - 22,866 943,038 83,256 340,934 11,211 930,091
Excess of revenues over (under) expenditures (859,340) (545,942) (178,090) 6,034 17,647 (59,496) (4,368) (121,680) 26,555 -
91
OTHER FINANCING SOURCES (USES)
Proceeds from sale of capital assets 375,723 280,031 - - - 59,496 - 36,196 - -
Long-term debt issued 500,000 - - - - - 500,000 - - -
Transfers in 303,813 150,000 150,000 - - - 3,813 - - -
Transfers out (50,000) (50,000) - - - - - - - -
Total other financing sources (uses) 1,129,536 380,031 150,000 - - 59,496 503,813 36,196 - -
Net change in fund balances 270,196 (165,911) (28,090) 6,034 17,647 - 499,445 (85,484) 26,555 -
Fund balances (deficit) at January 1, 2008 3,495,453 2,151,037 1,017,585 210,103 121,256 - 150,102 (231,354) 76,724 -
Fund balances (deficit) at December 31, 2008 $ 3,765,649 $ 1,985,126 $ 989,495 $ 216,137 $ 138,903 $ - $ 649,547 $ (316,838) $ 103,279 $ -
92
DESCRIPTION OF
INTERNAL SERVICE FUNDS
Internal service funds are used to account for the financing of goods or services provided by one
department to other departments of a governmental unit or to other governments on a cost-
reimbursement basis.
A list and description of internal service funds maintained by the City follows:
Engineering Services – to account for salary, benefit and other costs related to the provision of
internal engineering services for City projects; to account for charges to the user funds and
projects to cover those expenses.
Equipment – to account for the purchase, operation, maintenance and depreciation of all City-
owned vehicles and equipment; to account for charges to the user funds and departments to cover
those expenses.
General Insurance – to account for the payment of claims and benefits, excess liability premiums
and operating expenses; to account for charges to other funds and departments to cover the
expenses.
Public Service Building – to account for the operation, maintenance and depreciation of the City's
Public Service Building; to account for charges to the user funds and departments to cover these
expenses.
93
City of Muskegon
COMBINING STATEMENT OF NET ASSETS
Internal Service Funds
December 31, 2008
ASSETS
Total internal Engineering General Public Service
service funds Services Equipment Insurance Building
CURRENT ASSETS
Cash and investments $ 3,405,050 $ 132,074 $ 2,472,676 $ 325,669 $ 474,631
Accounts receivable 1,592,669 3,290 15,701 1,573,678 -
Due from other governmental units 16,519 - - 16,519 -
Inventories 11,552 - 11,552 - -
Prepaid items 178,762 1,312 19,612 156,282 1,556
Total current assets 5,204,552 136,676 2,519,541 2,072,148 476,187
NONCURRENT ASSETS
Capital assets
Land 65,000 - - - 65,000
Land improvements 121,648 - - - 121,648
Buildings and improvements 1,559,334 - - - 1,559,334
Machinery and equipment 7,417,363 26,355 7,356,319 - 34,689
Less accumulated depreciation (6,947,231) (26,355) (5,888,067) - (1,032,809)
94
Total noncurrent assets 2,216,114 - 1,468,252 - 747,862
Total assets 7,420,666 136,676 3,987,793 2,072,148 1,224,049
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES
Accounts payable 300,622 2,447 71,708 199,688 26,779
Accrued liabilities 41,345 10,972 21,272 1,037 8,064
Bonds and other obligations, due within one year 16,000 3,800 8,000 200 4,000
Total current liabilities 357,967 17,219 100,980 200,925 38,843
NONCURRENT LIABILITIES
Bonds and other obligations, less amounts due within one year 82,256 17,763 42,369 1,088 21,036
Total liabilities 440,223 34,982 143,349 202,013 59,879
NET ASSETS
Invested in capital assets 2,216,114 - 1,468,252 - 747,862
Unrestricted 4,764,329 101,694 2,376,192 1,870,135 416,308
Total net assets $ 6,980,443 $ 101,694 $ 3,844,444 $ 1,870,135 $ 1,164,170
City of Muskegon
COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS
Internal Service Funds
For the year ended December 31, 2008
Total internal Engineering General Public Service
service funds Services Equipment Insurance Building
OPERATING REVENUES
Charges for services $ 7,803,575 $ 457,581 $ 2,703,727 $ 4,060,997 $ 581,270
Other 92,824 2,979 82,079 450 7,316
Total operating revenues 7,896,399 460,560 2,785,806 4,061,447 588,586
OPERATING EXPENSES
Administration 300,360 81,564 102,708 73,212 42,876
Insurance premiums and claims 3,832,770 - - 3,832,770 -
Other operations 3,000,115 421,904 2,072,302 46,398 459,511
Depreciation 559,875 - 489,712 - 70,163
Total operating expenses 7,693,120 503,468 2,664,722 3,952,380 572,550
Operating income (loss) 203,279 (42,908) 121,084 109,067 16,036
95
NONOPERATING REVENUES
Investment earnings 103,129 3,693 57,756 30,784 10,896
Gain on sale of capital assets 28,529 - 28,529 - -
Total nonoperating revenues 131,658 3,693 86,285 30,784 10,896
Income (loss) before transfers 334,937 (39,215) 207,369 139,851 26,932
Transfers in 28,046 - - 28,046 -
Transfers out (136,272) - - (136,272) -
Change in net assets 226,711 (39,215) 207,369 31,625 26,932
Net assets at January 1, 2008 6,753,732 140,909 3,637,075 1,838,510 1,137,238
Net assets at December 31, 2008 $ 6,980,443 $ 101,694 $ 3,844,444 $ 1,870,135 $ 1,164,170
City of Muskegon
COMBINING STATEMENT OF CASH FLOWS
Internal Service Funds
For the year ended December 31, 2008
Total internal Engineering General Public Service
service funds Services Equipment Insurance Building
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 161,274 $ 71,814 $ 81,694 $ 450 $ 7,316
Receipts from interfund services provided 7,803,575 457,581 2,703,727 4,060,997 581,270
Payments to suppliers (6,372,465) (139,188) (1,423,381) (4,543,119) (266,777)
Payments to employees (961,276) (279,287) (466,648) (24,512) (190,829)
Payments for interfund services used (679,326) (78,966) (260,848) (296,954) (42,558)
Net cash provided by (used for) operating activities (48,218) 31,954 634,544 (803,138) 88,422
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers in 28,046 - - 28,046 -
Transfers out (136,272) - - (136,272) -
Net cash used for noncapital financing activities (108,226) - - (108,226) -
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Purchases of capital assets (259,430) - (259,430) - -
Proceeds from sale of capital assets 35,229 - 35,229 - -
Net cash used for capital and related financing activities (224,201) - (224,201) - -
96
CASH FLOW FROM INVESTING ACTIVITIES
Investment earnings 103,129 3,693 57,756 30,784 10,896
Net increase (decrease) in cash and investments (277,516) 35,647 468,099 (880,580) 99,318
Cash and investments at January 1, 2008 3,682,566 96,427 2,004,577 1,206,249 375,313
Cash and investments at December 31, 2008 $ 3,405,050 $ 132,074 $ 2,472,676 $ 325,669 $ 474,631
Reconciliation of operating income (loss) to net cash provided by (used for)
operating activities
Operating income (loss) $ 203,279 $ (42,908) $ 121,084 $ 109,067 $ 16,036
Adjustments to reconcile operating income (loss) to net cash provided by
(used for) operating activities
Depreciation expense 559,875 - 489,712 - 70,163
Change in assets and liabilities
Receivables, net (958,397) 68,835 (385) (1,026,847) -
Inventories 11,783 - 11,783 - -
Prepaid items (18,649) (74) 1,510 (19,995) (90)
Accounts payable 138,205 260 2,061 134,828 1,056
Accrued liabilities 15,686 5,841 8,779 (191) 1,257
Net cash provided by (used for) operating activities $ (48,218) $ 31,954 $ 634,544 $ (803,138) $ 88,422
DESCRIPTION OF
FIDUCIARY FUNDS
Fiduciary funds are used to account for assets held by a government in a trustee capacity for
individuals, private organizations, other governments or other funds.
A list and description of the fiduciary funds maintained by the City follows:
AGENCY FUNDS are used to account for assets held as an agent for another organization or
individual.
Collector – to account for the collections and disbursement of funds to other entities and
individuals and to account for payroll withholdings and their remittance to the appropriate
governmental agencies.
Current Tax – to account for levy, collection and payment of taxes levied for the general and
other funds of the City, county and public school districts.
Rehab Loan Escrow – to account for deposits made by housing rehabilitation program
participants and their expenditures for the intended purposes.
97
City of Muskegon
COMBINING STATEMENT OF ASSETS AND LIABILITIES
Agency Funds
December 31, 2008
Total Current Rehab Loan
agency funds Collector tax Escrow
ASSETS
Cash and investments $ 11,120,832 $ 1,163,589 $ 9,957,243 $ -
Receivables
Accounts 2,767 2,767 - -
Property taxes 14,393,066 - 14,393,066 -
Total assets $ 25,516,665 $ 1,166,356 $ 24,350,309 $ -
LIABILITIES
Accounts payable $ 193,101 $ 193,101 $ - $ -
98
Due to other governmental units 25,141,666 822,530 24,319,136 -
Deposits held for others 181,898 150,725 31,173 -
Total liabilities $ 25,516,665 $ 1,166,356 $ 24,350,309 $ -
City of Muskegon
STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
Agency Funds
For the year ended December 31, 2008
Balance Balance
January 1, December 31,
COLLECTOR FUND 2008 Additions Deductions 2008
ASSETS
Cash and investments $ 1,062,271 $ 16,469,530 $ 16,368,212 $ 1,163,589
Accounts receivable 2,767 283,976 283,976 2,767
Total assets $ 1,065,038 $ 16,753,506 $ 16,652,188 $ 1,166,356
LIABILITIES
Accounts payable $ 179,063 $ 11,786,985 $ 11,772,947 $ 193,101
Due to other governmental units 715,267 2,045,096 1,937,833 822,530
Deposits held for others 170,708 2,951,589 2,971,572 150,725
Total liabilities $ 1,065,038 $ 16,783,670 $ 16,682,352 $ 1,166,356
CURRENT TAX FUND
ASSETS
Cash and investments $ 5,198,237 $ 34,172,795 $ 29,413,789 $ 9,957,243
Property taxes receivable 13,913,118 26,310,204 25,830,256 14,393,066
Total assets $ 19,111,355 $ 60,482,999 $ 55,244,045 $ 24,350,309
LIABILITIES
Due to other governmental units $ 19,086,166 $ 26,310,204 $ 21,077,234 $ 24,319,136
Due to other funds - 7,789,825 7,789,825 -
Due to component units - 447,884 447,884 -
99
Deposits held for others 25,189 104,830 98,846 31,173
Total liabilities $ 19,111,355 $ 34,652,743 $ 29,413,789 $ 24,350,309
REHAB LOAN ESCROW FUND
ASSETS
Cash and investments $ - $ 1,687 $ 1,687 $ -
LIABILITIES
Accounts payable $ - $ 1,687 $ 1,687 $ -
ALL AGENCY FUNDS
ASSETS
Cash and investments $ 6,260,508 $ 50,644,012 $ 45,783,688 $ 11,120,832
Receivables
Accounts 2,767 283,976 283,976 2,767
Property taxes 13,913,118 26,310,204 25,830,256 14,393,066
Total assets $ 20,176,393 $ 77,238,192 $ 71,897,920 $ 25,516,665
LIABILITIES
Accounts payable $ 179,063 $ 11,788,672 $ 11,774,634 $ 193,101
Due to other governmental units 19,801,433 28,355,300 23,015,067 25,141,666
Due to other funds - 7,789,825 7,789,825 -
Due to component units - 447,884 447,884 -
Deposits held for others 195,897 3,056,419 3,070,418 181,898
Total liabilities $ 20,176,393 $ 51,438,100 $ 46,097,828 $ 25,516,665
100
DESCRIPTION OF
DISCRETELY PRESENTED COMPONENT UNITS
A list and description of the discretely presented component units maintained by the City are as
follows:
Downtown Development Authority – to account for the collection of tax increment revenues, the
issuance and repayment of debt and the construction of public facilities to promote and facilitate
economic growth in the downtown.
Local Development Finance Authority – to account for the collection of tax increment revenues
and the construction of public facilities. Three separate local development finance authority
districts have been created:
Local Development Finance Authority I – to promote and facilitate economic growth in
the Port City Industrial Park.
Local Development Finance Authority II – to promote and facilitate economic growth in
the Medendorp Industrial Park.
Local Development Finance Authority III – to promote and facilitate economic growth
in the SmartZone Hi-Tech Park.
Tax Increment Finance Authority – to account for the collection of tax increment revenues, the
issuance and repayment of debt to promote and facilitate economic growth in a sub section of the
downtown.
Brownfield Redevelopment Authority – to account for the collection of tax increment revenues
for environmental remediation in designated brownfield areas.
101
City of Muskegon
COMBINING BALANCE SHEET
Discretely Presented Component Units
December 31, 2008
Total discretely Local Local Local
presented Development Development Development Downtown Tax Increment Brownfield
component Finance Finance Finance Development Finance Redevelopment
units Authority I Authority II Authority III Authority Authority Authority
ASSETS
Cash and investments $ 62,794 $ 347 $ 25,092 $ 8,753 $ 14,619 $ 13,983 $ -
Property taxes receivable 645,170 - - 68,380 518,996 53,773 4,021
Total assets $ 707,964 $ 347 $ 25,092 $ 77,133 $ 533,615 $ 67,756 $ 4,021
LIABILITIES AND FUND BALANCES (DEFICITS)
Liabilities
Due to primary government $ 17,863 $ - $ - $ - $ - $ - $ 17,863
Deferred revenue 645,170 - - 68,380 518,996 53,773 4,021
Total liabilities 663,033 - - 68,380 518,996 53,773 21,884
Fund balances (deficits)
Unreserved 44,931 347 25,092 8,753 14,619 13,983 (17,863)
Total liabilities and fund balances (deficits) $ 707,964 $ 347 $ 25,092 $ 77,133 $ 533,615 $ 67,756 $ 4,021
102
City of Muskegon
RECONCILIATION OF THE GOVERNMENTAL FUNDS
BALANCE SHEET TO THE STATEMENT OF NET ASSETS (DEFICITS)
Discretely Presented Component Units
December 31, 2008
Total fund balance—governmental funds $ 44,931
Amounts reported for governmental activities in the Statement of Net Assets
are different because:
Capital assets used in governmental activities are not financial resources
and therefore are not reported as assets in the governmental funds.
Capital assets $ 4,198,258
Accumulated depreciation (877,628) 3,320,630
103
Bond issuance costs are not capitalized and amortized in the
governmental funds.
Bond issuance costs 141,966
Accumulated amortization (37,035) 104,931
Accrued interest in governmental activities is not reported in the
governmental funds. (43,700)
Long-term liabilities, including bonds and notes payable, are not due
and payable in the current period and therefore are not reported
as liabilities in the governmental funds. (8,254,288)
Net assets of governmental activities in the Statement of Net Assets (Deficits) $ (4,827,496)
City of Muskegon
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICIT)
Discretely Presented Component Units
For the year ended December 31, 2008
Total discretely Local Local Local
presented Development Development Development Downtown Tax Increment Brownfield
component Finance Finance Finance Development Finance Redevelopment
units Authority I Authority II Authority III Authority Authority Authority
REVENUES
Property taxes $ 601,404 $ - $ - $ 38,249 $ 505,697 $ 57,458 $ -
Intergovernmental revenues - Local 250,000 - - 150,000 100,000 - -
Investment earnings 2,936 12 699 1,126 926 173 -
Other 359,787 - - 75,000 284,787 - -
Total revenues 1,214,127 12 699 264,375 891,410 57,631 -
EXPENDITURES
Current
Community and economic development 536,504 - - - 468,641 50,000 17,863
Debt service
Principal 290,000 - - 80,000 210,000 - -
Interest and fees 342,439 - - 202,897 139,542 - -
Total expenditures 1,168,943 - - 282,897 818,183 50,000 17,863
104
Net change in fund balances 45,184 12 699 (18,522) 73,227 7,631 (17,863)
Fund balances (deficit) at January 1, 2008 (253) 335 24,393 27,275 (58,608) 6,352 -
Fund balances (deficit) at December 31, 2008 $ 44,931 $ 347 $ 25,092 $ 8,753 $ 14,619 $ 13,983 $ (17,863)
City of Muskegon
RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES
Discretely Presented Component Units
For the year ended December 31, 2008
Net change in fund balances—total governmental funds $ 45,184
Amounts reported for governmental activities in the Statement of Activities are
different because:
Governmental funds report outlays for capital assets and bond issuance costs as
expenditures; in the Statement of Activities, these costs are depreciated and
amortized over their estimated useful lives, respectively.
Depreciation and amortization expense (178,821)
105
Repayment of principal on long-term debt is an expenditure in the governmental funds,
but the repayment reduces long-term liabilities in the Statement of Net Assets. 289,431
Interest expense on long-term debt is recorded in the Statement of Activities when
incurred, but is not reported in the governmental funds until paid. 1,200
Change in net assets of governmental activities $ 156,994
106
SCHEDULE OF INDEBTEDNESS
107
City of Muskegon
SCHEDULE OF INDEBTEDNESS
December 31, 2008
Annual
Date Amount Interest Date of Interest
of Issue of Issue Rate Maturity 2007 2008 Payable
Business-Type Activities Bonds and Loans Payable:
Water supply system bonds 10/1/1993 $ 5,465,000 0.00% 05/01/08 $ - $ - $ -
($7,833 unamortized discount) 0.00% 05/01/09 - - 40,500
0.00% 05/01/10 - - 40,500
0.00% 05/01/11 - - 40,500
4.50% 05/01/12 450,000 450,000 30,375
4.50% 05/01/13 450,000 450,000 10,121
900,000 900,000 161,996
Water supply system bonds 3/2/1999 $ 9,575,000 4.05% 05/01/08 490,000 - -
($40,367 unamortized discount) 4.10% 05/01/09 510,000 510,000 268,350
4.20% 05/01/10 535,000 535,000 246,660
4.30% 05/01/11 555,000 555,000 223,493
4.35% 05/01/12 130,000 130,000 208,733
4.40% 05/01/13 155,000 155,000 202,495
4.50% 05/01/14 635,000 635,000 184,798
4.55% 05/01/15 665,000 665,000 155,381
4.60% 05/01/16 695,000 695,000 124,268
4.65% 05/01/17 730,000 730,000 91,310
4.75% 05/01/18 765,000 765,000 56,169
4.75% 05/01/19 800,000 800,000 19,000
6,665,000 6,175,000 1,780,657
Drinking Water State Revolving 3/2/2004 $ 13,900,000 2.13% 10/01/08 590,000 - -
Fund (DWSRF) 2.13% 10/01/09 600,000 600,000 258,613
2.13% 10/01/10 615,000 615,000 245,863
2.13% 10/01/11 630,000 630,000 232,794
2.13% 10/01/12 640,000 640,000 219,406
2.13% 10/01/13 655,000 655,000 205,806
2.13% 10/01/14 670,000 670,000 191,888
2.13% 10/01/15 685,000 685,000 177,650
2.13% 10/01/16 695,000 695,000 163,094
2.13% 10/01/17 710,000 710,000 148,325
2.13% 10/01/18 725,000 725,000 133,238
2.13% 10/01/19 745,000 745,000 117,831
2.13% 10/01/20 760,000 760,000 102,000
2.13% 10/01/21 775,000 775,000 85,850
2.13% 10/01/22 790,000 790,000 69,382
2.13% 10/01/23 810,000 810,000 52,594
2.13% 10/01/24 825,000 825,000 35,381
2.13% 10/01/25 840,000 840,000 17,850
12,760,000 12,170,000 2,457,565
Contractual obligation for 11/6/2002 $ 6,990,000
County wastewater debt retirement 5.00% 07/01/08 1,221,207 - -
1,221,207 - -
TOTAL BUSINESS-TYPE ACTIVITIES BONDS AND LOANS PAYABLE $ 21,546,207 $ 19,245,000 $ 4,400,218
108
City of Muskegon
SCHEDULE OF INDEBTEDNESS - CONTINUED
December 31, 2008
Annual
Date Amount Interest Date of Interest
of Issue of Issue Rate Maturity 2007 2008 Payable
Governmental Activities Bonds and Loans Payable:
Installment purchase contract 7/26/2005 $ 605,824 3.83% 04/01/08 $ 54,148 $ - $ -
of 2005 (firetrucks) 3.83% 04/01/09 56,471 56,471 16,153
3.83% 04/01/10 58,894 58,894 13,944
3.83% 04/01/11 61,420 61,420 11,639
3.83% 04/01/12 64,055 64,055 9,236
3.83% 04/01/13 66,803 66,803 6,731
3.83% 04/01/14 69,669 69,669 4,117
3.83% 04/01/15 72,658 72,658 1,391
504,118 449,970 63,211
Special assessment improvement 10/1/1998 $ 1,495,000 4.00% 04/01/08 95,000 - -
bonds of 1998 (sidewalks) 4.00% 04/01/09 60,000 60,000 1,200
155,000 60,000 1,200
Special assessment improvement 12/1/2000 $ 825,000 4.80% 04/01/08 85,000 - -
bonds of 2000 (sidewalks) 4.90% 04/01/09 85,000 85,000 5,583
5.00% 04/01/10 70,000 70,000 1,746
240,000 155,000 7,329
Capital improvement bonds 3/1/2003 $ 1,575,000 2.88% 06/01/08 110,000 - -
of 2003 (sidewalks) 3.13% 06/01/09 115,000 115,000 36,902
3.50% 06/01/10 120,000 120,000 33,005
3.50% 06/01/11 120,000 120,000 28,805
3.70% 06/01/12 125,000 125,000 24,393
3.80% 06/01/13 130,000 130,000 19,610
3.90% 06/01/14 135,000 135,000 14,508
4.00% 06/01/15 145,000 145,000 8,975
4.05% 06/01/16 150,000 150,000 3,038
1,150,000 1,040,000 169,234
Capital improvement bonds 10/24/2006 $ 5,400,000 4.00% 10/01/08 45,000 - -
of 2006 (fire station, recreation) 4.00% 10/01/09 50,000 50,000 217,345
($15,643 unamortized discount) 4.00% 10/01/10 70,000 70,000 215,345
4.00% 10/01/11 70,000 70,000 212,545
4.00% 10/01/12 70,000 70,000 209,745
4.00% 10/01/13 70,000 70,000 206,945
4.00% 10/01/14 70,000 70,000 204,145
4.00% 10/01/15 70,000 70,000 201,345
4.00% 10/01/16 70,000 70,000 198,545
4.00% 10/01/17 70,000 70,000 195,745
4.00% 10/01/18 70,000 70,000 192,945
4.00% 10/01/19 295,000 295,000 190,145
4.00% 10/01/20 305,000 305,000 178,345
4.00% 10/01/21 315,000 315,000 166,145
4.00% 10/01/22 315,000 315,000 153,545
4.00% 10/01/23 320,000 320,000 140,945
4.00% 10/01/24 340,000 340,000 128,145
4.00% 10/01/25 345,000 345,000 114,545
4.00% 10/01/26 345,000 345,000 100,745
4.10% 10/01/27 345,000 345,000 86,945
4.10% 10/01/28 350,000 350,000 72,800
4.10% 10/01/29 350,000 350,000 58,450
4.20% 10/01/30 350,000 350,000 44,100
4.20% 10/01/31 350,000 350,000 29,400
4.20% 10/01/32 350,000 350,000 14,700
5,400,000 5,355,000 3,533,605
109
City of Muskegon
SCHEDULE OF INDEBTEDNESS - CONTINUED
December 31, 2008
Annual
Date Amount Interest Date of Interest
of Issue of Issue Rate Maturity 2007 2008 Payable
Governmental Activities Bonds and Loans Payable:
State of Michigan urban land 12/15/1999 $ 1,276,900 0.00% 10/31/08 200,000 - -
assembly loan 0.00% 10/31/09 276,900 276,900 -
476,900 276,900 -
State of Michigan urban land 8/1/2005 $ 700,000 0.00% 09/01/08 20,000 - -
assembly loan 0.00% 09/01/09 20,000 20,000 -
0.00% 09/01/10 20,000 20,000 -
0.00% 09/01/11 120,000 120,000 -
0.00% 09/01/12 120,000 120,000 -
0.00% 09/01/13 120,000 120,000 -
0.00% 09/01/14 120,000 120,000 -
0.00% 09/01/15 120,000 120,000 -
660,000 640,000 -
State of Michigan 8/1/2005 $ 500,000 0.00% 03/18/10 - 54,572 -
environmental assessment loan 2.00% 03/18/11 - 45,663 8,909
2.00% 03/18/12 - 46,577 7,995
2.00% 03/18/13 - 47,508 7,064
2.00% 03/18/14 - 48,458 6,114
2.00% 03/18/15 - 49,427 5,144
2.00% 03/18/16 - 50,416 4,156
2.00% 03/18/17 - 51,424 3,148
2.00% 03/18/18 - 52,453 2,119
2.00% 03/18/19 - 53,502 1,070
- 500,000 45,718
Michigan transportation fund refunding bond 10/1/2002 $ 2,245,000 3.13% 06/01/08 390,000 - -
390,000 - -
TOTAL GOVERNMENTAL ACTIVITIES BONDS AND LOANS PAYABLE $ 8,976,018 $ 8,476,870 $ 3,820,298
TOTAL PRIMARY GOVERNMENT BONDS AND LOANS PAYABLE $ 30,522,225 $ 27,721,870 $ 8,220,516
110
City of Muskegon
SCHEDULE OF INDEBTEDNESS - CONTINUED
December 31, 2008
Annual
Date Amount Interest Date of Interest
of Issue of Issue Rate Maturity 2007 2008 Payable
Discretely Presented Component Unit Bonds and Loans Payable:
Downtown Development Authority 8/10/1989 $ 1,000,000 0.00% 08/30/19 $ 1,000,000 $ 1,000,000 $ -
promissory note to Muskegon County 1,000,000 1,000,000 -
Downtown Development Authority 9/1/2001 $ 4,005,000 4.00% 06/01/08 210,000 - -
refunding bonds 4.20% 06/01/09 220,000 220,000 120,472
4.25% 06/01/10 230,000 230,000 110,964
4.35% 06/01/11 240,000 240,000 100,857
4.45% 06/01/12 245,000 245,000 90,187
4.55% 06/01/13 260,000 260,000 78,821
4.65% 06/01/14 270,000 270,000 66,628
4.75% 06/01/15 280,000 280,000 53,700
4.85% 06/01/16 300,000 300,000 39,775
5.00% 06/01/17 315,000 315,000 24,625
5.00% 06/01/18 335,000 335,000 8,375
2,905,000 2,695,000 694,404
Local Development Finance Authority 11/1/2002 $ 4,725,000 3.50% 11/01/08 80,000 - -
Smartzone Bonds 3.63% 11/01/09 80,000 80,000 199,747
($5,712 unamortized discount) 3.88% 11/01/10 80,000 80,000 196,847
3.88% 11/01/11 80,000 80,000 193,747
4.00% 11/01/12 180,000 180,000 190,647
3.90% 11/01/13 240,000 240,000 183,447
4.05% 11/01/14 305,000 305,000 174,087
4.05% 11/01/15 325,000 325,000 161,736
4.15% 11/01/16 340,000 340,000 148,572
4.25% 11/01/17 355,000 355,000 134,462
4.35% 11/01/18 375,000 375,000 119,376
4.45% 11/01/19 395,000 395,000 103,062
4.60% 11/01/20 400,000 400,000 85,486
4.60% 11/01/21 255,000 255,000 67,086
4.60% 11/01/22 265,000 265,000 55,356
4.85% 11/01/23 280,000 280,000 43,166
4.85% 11/01/24 295,000 295,000 29,586
4.85% 11/01/25 315,000 315,000 15,278
4,645,000 4,565,000 2,101,688
TOTAL DISCRETELY PRESENTED COMPONENT UNIT BONDS AND LOANS PAYABLE $ 8,550,000 $ 8,260,000 $ 2,796,092
TOTAL REPORTING ENTITY BONDS AND LOANS PAYABLE $ 39,072,225 $ 35,981,870 $ 11,016,608
111
112
Statistical Section
This part of the City of Muskegon’s Comprehensive Annual Financial Report presents detailed
information as a context for understanding what the information in the financial statements,
note disclosures, and required supplementary information says about the City’s overall
financial health.
Contents Page
Financial Trends
These schedules contain trend information to help the reader understand how the
City’s financial performance and well-being have changed over time. 114
Revenue Capacity
These schedules contain information to help the reader assess the factors affecting
the City’s ability to generate its property and sales taxes. 118
Debt Capacity
These schedules present information to help the reader assess the affordability of
the City’s current levels of outstanding debt and the City’s ability to issue additional
debt in the future. 124
Demographic and Economic Information
These schedules offer demographic and economic indicators to help the reader
understand the environment within which the City’s financial activities take place
and to help make comparisons over time and with other governments. 128
Operating Information
These schedules contain information about the City’s operations and resources to help
the reader understand how the City’s financial information relates to the services the
City provides and the activities it performs. 130
Sources: Unless otherwise noted, the information in these schedules is derived form the Comprehensive Annual
Financial Reports for the relevant year. The City implemented Statement 34 in 2002; schedules presenting
government-wide information include information beginning in that year.
113
City of Muskegon
NET ASSETS BY COMPONENT
Last Six Fiscal Years
2003 2004 2005 (a) 2006 2007 2008
Governmental Activities
Invested in Capital Assets, net of related debt $ 32,120,134 $ 40,663,844 $ 67,119,658 $ 68,189,021 $ 68,059,626 $ 69,564,935
Restricted 5,674,787 5,209,654 5,420,482 5,378,669 5,485,703 3,557,678
Unrestricted 9,286,551 7,407,355 7,811,489 8,778,786 10,162,425 10,708,529
Total Governmental Net Assets $ 47,081,472 $ 53,280,853 $ 80,351,629 $ 82,346,476 $ 83,707,754 $ 83,831,142
Business-type Activities
Invested in Capital Assets, net of related debt $ 27,808,792 $ 31,609,016 $ 36,742,669 $ 39,441,912 $ 39,356,966 $ 40,876,621
Restricted 822,559 822,559 822,559 822,559 822,559 822,559
Unrestricted 10,488,022 8,647,716 6,663,563 6,910,247 7,980,823 6,775,508
114
Total Business-type Activities Net Assets $ 39,119,373 $ 41,079,291 $ 44,228,791 $ 47,174,718 $ 48,160,348 $ 48,474,688
Primary Government
Invested in Capital Assets, net of related debt $ 59,928,926 $ 72,272,860 $ 103,862,327 $ 107,630,933 $ 107,416,592 $ 110,441,556
Restricted 6,497,346 6,032,213 6,243,041 6,201,228 6,308,262 4,380,237
Unrestricted 19,774,573 16,055,071 14,475,052 15,689,033 18,143,248 17,484,037
Total Primary Government Net Assets $ 86,200,845 $ 94,360,144 $ 124,580,420 $ 129,521,194 $ 131,868,102 $ 132,305,830
(a) In 2005, the City began reporting historic infrastructure assets as required by GASB 34.
SOURCE: The information in these schedules (unless otherwise noted) is derived from the comprehensive annual financial
reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide
information include information start that year. Certain other information has not been presented previously. Reported numbers
begin with the year for which information believed to be accurate is available.
City of Muskegon
CHANGES IN NET ASSETS
Last Six Fiscal Years
2003 2004 2005 2006 2007 2008
EXPENSES
Governmental Activities
Public representation $ 887,496 $ 866,669 $ 885,365 $ 904,109 $ 925,124 $ 986,696
Administrative services 1,227,407 1,132,229 803,783 732,715 783,713 782,362
Financial services 1,842,653 1,809,136 1,872,159 2,061,836 2,205,041 2,292,430
Public safety 11,583,282 12,164,389 12,481,826 13,059,358 12,802,488 13,955,811
Public works 2,947,194 2,847,755 2,853,497 3,089,522 2,989,433 3,019,411
Highways, streets and bridges 3,483,032 3,879,462 5,910,307 5,672,590 7,272,288 7,265,438
Community and economic development 3,371,472 2,652,497 3,693,187 3,383,157 3,054,087 3,174,508
Culture and recreation 3,042,315 2,468,059 2,504,692 2,464,567 2,433,020 2,623,501
General administration 1,601,112 1,725,225 1,608,108 1,143,963 358,225 574,955
Interest on long-term debt 223,717 193,021 170,814 206,768 343,106 324,076
Total Governmental Activities Expenses 30,209,680 29,738,442 32,783,738 32,718,585 33,166,525 34,999,188
Business-type Activities
Water 4,538,186 4,122,822 4,181,855 4,500,578 5,795,279 5,800,977
Sewer 3,416,372 3,745,156 3,953,838 5,006,594 5,066,693 5,503,144
Marina and launch ramp 325,401 351,705 343,599 332,826 392,994 347,642
Total Business-type Activities Expenses 8,279,959 8,219,683 8,479,292 9,839,998 11,254,966 11,651,763
Total Primary Government Expenses $ 38,489,639 $ 37,958,125 $ 41,263,030 $ 42,558,583 $ 44,421,491 $ 46,650,951
PROGRAM REVENUES
Governmental Activities
Charges for Services
Public representation $ 204,435 $ 210,238 $ 195,316 $ 202,939 $ 199,759 $ 188,467
Administrative services 292,665 314,028 311,529 306,964 287,011 257,850
Financial services 591,174 645,166 537,445 728,332 744,109 726,572
Public safety 1,162,175 1,098,793 1,116,755 1,134,686 1,224,062 1,217,616
Public works 266,045 452,606 467,849 588,566 407,569 382,072
Highways, streets and bridges 273,893 555,018 267,689 263,423 372,133 301,955
Community and economic development 977,448 414,543 815,980 762,220 356,051 297,854
Culture and recreation 1,026,822 1,151,687 1,141,865 809,228 454,154 405,520
General administration 122,447 200,434 314,658 170,240 64,366 99,494
Operating grants and contributions 5,613,628 6,008,978 6,017,421 5,093,355 5,229,279 5,367,152
Capital grants and contributions 10,494,617 5,785,604 5,894,358 5,360,014 3,347,680 3,444,957
Total Governmental Program Revenues 21,025,349 16,837,095 17,080,865 15,419,967 12,686,173 12,689,509
Business-type Activities
Water 4,131,126 4,977,320 6,912,719 6,342,110 6,569,228 6,240,060
Sewer 4,057,743 4,083,591 4,149,187 4,803,702 5,179,095 5,326,787
Marina and launch ramp 274,258 266,981 248,460 267,412 281,679 250,266
Operating grants and contributions - - - - - -
Capital grants and contributions 256,612 657,521 100,373 710,641 - -
Total Business-type program revenues 8,719,739 9,985,413 11,410,739 12,123,865 12,030,002 11,817,113
Total Primary Government program revenues $ 29,745,088 $ 26,822,508 $ 28,491,604 $ 27,543,832 $ 24,716,175 $ 24,506,622
NET (EXPENSE) REVENUE
Governmental Activities (9,184,331) (12,901,347) (15,702,873) (17,298,618) (20,480,352) (22,309,679)
Business-type Activities 439,780 1,765,730 2,931,447 2,283,867 775,036 165,350
Total Primary Government net expense $ (8,744,551) $ (11,135,617) $ (12,771,426) $ (15,014,751) $ (19,705,316) $ (22,144,329)
GENERAL REVENUES AND OTHER CHANGES IN NET ASSETS
Governmental Activities
Property taxes $ 7,029,393 $ 6,962,453 $ 7,670,384 $ 7,846,707 $ 8,014,102 $ 8,349,341
Income taxes 6,644,708 7,326,811 7,238,552 7,673,696 7,757,707 8,117,566
Franchise fees 265,532 - 286,265 285,124 297,200 304,812
Grants and contributions not restricted for specific programs 4,938,861 4,645,348 4,627,915 4,674,157 4,475,462 4,487,698
Unrestricted investment earnings 281,492 170,094 420,595 832,300 1,247,520 730,142
Miscellaneous 109,620 68,405 70,402 64,645 88,035 160,460
Gain on sale of capital asset 62,992 70,886 300,037 81,372 1,604 323,048
Transfers - (142,420) (80,000) (540,000) (40,000) (40,000)
Total Governmental Program Revenues 19,332,598 19,101,577 20,534,150 20,918,001 21,841,630 22,433,067
Business-type Activities
Unrestricted investment earnings 71,628 51,768 138,053 122,060 170,594 108,990
Gain on sale of capital asset (88,767) - - - - -
Transfers - 142,420 80,000 540,000 40,000 40,000
Total Business-type program revenues (17,139) 194,188 218,053 662,060 210,594 148,990
Total Primary Government program revenues $ 19,315,459 $ 19,295,765 $ 20,752,203 $ 21,580,061 $ 22,052,224 $ 22,582,057
CHANGE IN NET ASSETS
Governmental Activities 10,148,267 6,200,230 4,831,277 3,619,383 1,361,278 123,388
Business-type Activities 422,641 1,959,918 3,149,500 2,945,927 985,630 314,340
Total Primary Government $ 10,570,908 $ 8,160,148 $ 7,980,777 $ 6,565,310 $ 2,346,908 $ 437,728
SOURCE: The information in these schedules (unless otherwise noted) is derived from the comprehensive annual financial reports for the relevant year.
The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information start that year. Certain other
information has not been presented previously. Reported numbers begin with the year for which information believed to be accurate is available.
115
City of Muskegon
FUND BALANCE OF GOVERNMENTAL FUNDS
Last Ten Fiscal Years
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
General fund
Reserved $ 38,993 $ 78,998 $ 75,337 $ 173,696 $ 110,642 $ 74,349 $ 79,356 $ 177,076 $ 180,410 $ 214,819
Unreserved 1,459,883 2,872,737 3,087,031 2,634,300 2,320,776 2,370,842 2,440,249 2,512,963 2,740,222 2,168,906
Total general fund $ 1,498,876 $ 2,951,735 $ 3,162,368 $ 2,807,996 $ 2,431,418 $ 2,445,191 $ 2,519,605 $ 2,690,039 $ 2,920,632 $ 2,383,725
All other governmental funds
Reserved $ 2,265,315 $ 2,562,867 $ 2,533,419 $ 2,309,214 $ 1,159,364 $ 1,187,662 $ 2,915,106 $ 7,044,394 $ 4,130,995 $ 4,065,280
Unreserved, reported in:
Special revenue funds 5,361,411 4,900,500 4,579,430 3,785,857 3,254,746 2,692,431 2,910,285 3,030,096 4,462,015 2,768,886
Debt service - - - - 153,955 - - - - -
Capital project funds 2,848,138 2,361,991 2,143,770 1,614,636 3,849,868 2,187,667 1,239,763 390,282 635,676 992,736
Permanent funds 26,834 60,779 91,707 102,837 63,798 22,896 22,890 77,300 84,413 60,813
Total all other governmental funds $ 10,501,698 $ 9,886,137 $ 9,348,326 $ 7,812,544 $ 8,481,731 $ 6,090,656 $ 7,088,044 $ 10,542,072 $ 9,313,099 $ 7,887,715
SOURCE: The information in these schedules (unless otherwise noted) is derived from the comprehensive annual financial reports for the relevant year. The City
116
implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information start that year.
City of Muskegon
CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS
Last Ten Fiscal Years
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Revenues
Taxes $ 12,090,941 $ 12,969,769 $ 12,996,607 $ 13,607,863 $ 13,306,798 $ 13,767,040 $ 14,521,769 $ 15,052,708 $ 15,420,032 $ 15,728,859
Intergovernmental 10,070,273 16,045,805 15,847,954 15,473,320 18,879,071 15,448,865 15,445,949 14,703,371 12,752,363 13,012,035
Charges for services 2,706,390 3,149,195 2,847,201 3,010,798 3,307,607 3,437,220 3,147,066 2,938,246 2,722,894 2,463,975
Other 3,848,561 4,528,702 4,965,889 3,872,459 3,629,983 3,828,223 4,134,604 3,758,956 4,618,149 3,624,579
Total revenues 28,716,165 36,693,471 36,657,651 35,964,440 39,123,459 36,481,348 37,249,388 36,453,281 35,513,438 34,829,448
Expenditures
Public representation 727,900 807,496 903,378 985,107 889,188 869,342 886,717 903,895 927,320 987,229
Administrative services 727,016 759,653 717,680 816,581 785,966 704,667 748,588 669,789 644,913 632,513
Financial services 1,549,115 1,585,890 1,679,979 1,797,662 1,846,558 1,829,276 1,905,714 2,056,580 2,231,519 2,298,830
Public safety 10,343,279 11,110,085 11,136,752 11,514,151 11,439,487 12,277,677 12,624,532 13,002,233 12,902,815 13,754,394
Public works 2,738,257 2,668,788 2,678,089 2,680,695 2,731,241 2,543,512 2,661,073 2,730,415 2,768,906 2,831,177
Highways, streets and bridges 4,896,257 7,894,893 8,309,998 8,816,305 11,800,017 8,654,931 9,531,840 8,023,539 6,504,915 6,414,453
Community and economic development 1,338,643 931,336 948,756 971,335 987,097 797,072 784,396 763,211 894,879 1,077,312
Culture and recreation 2,329,065 2,345,712 2,637,586 2,610,935 2,624,275 2,259,699 2,197,276 2,190,835 2,254,117 2,394,031
Other governmental functions 1,698,394 1,252,351 1,441,234 1,798,345 1,589,572 1,708,868 1,603,292 1,139,148 350,385 562,341
117
Debt service
Principal 2,186,334 1,420,462 1,425,741 1,345,000 1,270,000 1,335,000 1,115,000 1,189,785 1,241,921 999,148
Interest and issuance costs 502,852 380,123 367,317 316,255 230,907 201,447 166,071 271,233 324,577 310,432
Capital outlay 2,754,575 6,212,205 5,338,105 4,721,155 4,496,631 6,139,597 3,734,082 6,066,783 5,683,657 5,473,828
Total expenditure 31,791,687 37,368,994 37,584,615 38,373,526 40,690,939 39,321,088 37,958,581 39,007,446 36,729,924 37,735,688
Excess of revenues over (under) expenditures (3,075,522) (675,523) (926,964) (2,409,086) (1,567,480) (2,839,740) (709,193) (2,554,165) (1,216,486) (2,906,240)
Other financing sources (uses)
Transfers in 1,799,463 2,367,561 2,713,591 2,059,336 2,740,742 3,342,612 1,839,631 2,358,509 1,926,538 1,477,717
Transfers out (1,964,092) (2,336,039) (2,403,591) (2,047,491) (2,740,742) (3,233,369) (1,947,677) (2,926,554) (1,994,584) (1,409,491)
Bonds issued 1,276,900 825,000 - 106,807 1,578,009 - 1,061,900 5,626,331 - 500,000
Sale of capital assets 247,361 356,299 289,786 400,280 282,080 483,544 827,141 1,120,341 286,152 375,723
Total other financing sources (uses) 1,359,632 1,212,821 599,786 518,932 1,860,089 592,787 1,780,995 6,178,627 218,106 943,949
Net change in fund balances $ (1,715,890) $ 537,298 $ (327,178) $ (1,890,154) $ 292,609 $ (2,246,953) $ 1,071,802 $ 3,624,462 $ (998,380) $ (1,962,291)
Debt service as a percentage of noncapital
expenditures 9.26% 5.78% 5.56% 4.94% 4.15% 4.63% 3.74% 4.44% 5.05% 4.06%
SOURCE: The information in these schedules (unless otherwise noted) is derived from the comprehensive annual financial reports for the relevant year. The City
implemented GASB Statement 34 in 2002; schedules presenting government-wide information include information start that year.
City of Muskegon
GOVERNMENTAL ACTIVITIES REVENUES BY SOURCE
Last Ten Fiscal Years
Property % of Income % of Intergo- % of Charges for % of Licenses % of Fines % of Interest % of % of %
Year Tax Total Tax Total vernmental Total Service Total and Permits Total and Fees Total and Rent Total Other Total Total Change
1999 $ 5,665,792 19.7% $ 6,425,149 22.4% $ 10,070,273 35.1% $ 2,706,390 9.4% $ 1,015,777 3.5% $ 277,369 1.0% $ 1,035,556 3.6% $ 1,519,859 5.3% $ 28,716,165 -
2000 5,891,198 16.1% 7,078,571 19.3% 16,045,805 43.7% 3,149,195 8.6% 1,030,830 2.8% 338,677 0.9% 1,142,700 3.1% 2,016,495 5.5% 36,693,471 27.8%
2001 6,176,436 16.8% 6,820,171 18.6% 15,847,954 43.2% 2,847,201 7.8% 1,014,598 2.8% 350,557 1.0% 914,214 2.5% 2,686,520 7.3% 36,657,651 -0.1%
2002 6,915,254 19.2% 6,692,609 18.6% 15,473,320 43.0% 3,010,798 8.4% 947,428 2.6% 393,314 1.1% 662,513 1.8% 1,869,204 5.2% 35,964,440 -1.9%
2003 6,764,443 17.3% 6,542,355 16.7% 18,879,071 48.3% 3,307,607 8.5% 1,108,780 2.8% 471,682 1.2% 516,482 1.3% 1,533,039 3.9% 39,123,459 8.8%
2004 6,733,653 18.5% 7,033,387 19.3% 15,448,865 42.3% 3,437,220 9.4% 1,139,014 3.1% 622,165 1.7% 435,152 1.2% 1,631,892 4.5% 36,481,348 -6.8%
2005 7,438,382 20.0% 7,083,023 19.0% 15,445,949 41.5% 3,147,066 8.4% 1,047,981 2.8% 648,300 1.7% 684,165 1.8% 1,754,158 4.7% 37,249,024 2.1%
2006 7,627,535 20.9% 7,425,173 20.4% 14,703,371 40.3% 2,938,246 8.1% 1,009,023 2.8% 544,902 1.5% 1,139,466 3.1% 1,065,565 2.9% 36,453,281 -2.1%
2007 7,801,571 22.0% 7,618,461 21.5% 12,752,363 35.9% 2,722,894 7.7% 1,115,518 3.1% 606,545 1.7% 1,348,819 3.8% 1,547,267 4.4% 35,513,438 -2.6%
2008 8,034,079 23.1% 7,694,780 22.1% 13,012,035 37.4% 2,463,975 7.1% 1,089,187 3.1% 570,526 1.6% 861,515 2.5% 1,103,351 3.2% 34,829,448 -1.9%
SOURCE: The information in these schedules (unless otherwise noted) is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB Statement 34 in 2002; schedules
presenting government-wide information include information start that year.
118
City of Muskegon
Taxable, Assessed and Equalized and Estimated Actual Valuation of Property
Last Ten Fiscal Years
Taxable Valuation of Property
Ad Valorem Assessment Roll Industrial and Commercial Facilities Assessment Roll
Total Industrial Industrial Commercial Total Taxable Value
Real Personal Total Real Personal Real Total Taxable As a Percent
Year Residential Agriculture Commercial Industrial Property Property Ad Valorem Property Property Property IFT and CFT Valuation Actual
1999 $ 228,357,868 $ 90,793 $ 102,769,542 $ 105,450,555 $ 436,668,758 $ 117,367,700 $ 554,036,458 $ 19,540,064 $ 62,560,600 $ - $ 82,100,664 $ 636,137,122 94.06%
2000 239,166,390 86,218 111,996,740 105,150,150 456,399,498 125,766,500 582,165,998 20,340,926 54,398,400 - 74,739,326 656,905,324 90.85%
2001 259,245,700 160,831 117,380,175 104,812,046 481,598,752 150,081,900 631,680,652 15,928,671 61,421,700 - 77,350,371 709,031,023 87.40%
2002 277,504,213 163,166 129,199,142 103,473,256 510,339,777 125,589,450 635,929,227 10,786,400 61,521,500 - 72,307,900 708,237,127 86.36%
2003 295,311,699 163,844 124,679,713 101,987,394 522,142,650 124,833,198 646,975,848 9,114,034 51,183,000 - 60,297,034 707,272,882 85.80%
2004 309,291,380 167,357 123,303,933 103,175,554 535,938,224 115,456,493 651,394,717 7,564,826 51,056,856 - 58,621,682 710,016,399 87.00%
2005 322,359,014 164,935 126,046,550 104,163,650 552,734,149 109,273,769 662,007,918 7,235,276 47,458,411 - 54,693,687 716,701,605 87.62%
2006 341,365,730 - 132,415,743 105,982,619 579,764,092 103,282,670 683,046,762 6,062,774 44,389,891 - 50,452,665 733,499,427 87.46%
2007 364,789,125 - 143,991,195 109,089,684 617,870,004 111,824,925 729,694,929 5,433,443 31,408,300 - 36,841,743 766,536,672 87.21%
2008 376,414,856 160,219 140,833,691 109,931,336 627,340,102 114,100,484 741,440,586 5,747,358 24,617,400 - 30,364,758 771,805,344 86.71%
Assessed and Equalized Valuation of Property
Ad Valorem Assessment Roll Industrial and Commercial Facilities Assessment Roll
119
Total Industrial Industrial Commercial Total Estimated
Real Personal Total Real Personal Real Total Assessed Actual
Year Residential Agriculture Commercial Industrial Property Property Ad Valorem Property Property Property IFT and CFT Valuation Value
1999 $ 263,233,400 $ 100,700 $ 107,881,200 $ 105,577,900 $ 476,793,200 $ 117,367,700 $ 594,160,900 $ 19,589,800 $ 62,560,600 $ - $ 82,150,400 $ 676,311,300 $ 1,352,622,600
2000 292,740,000 110,700 122,567,000 106,499,200 521,916,900 125,766,500 647,683,400 20,988,600 54,398,400 - 75,387,000 723,070,400 1,446,140,800
2001 336,150,700 173,600 136,833,700 109,888,900 583,046,900 150,081,900 733,128,800 16,676,500 61,421,700 - 78,098,200 811,227,000 1,622,454,000
2002 358,727,850 173,600 152,324,900 110,440,500 621,666,850 125,597,200 747,264,050 11,272,200 61,521,500 - 72,793,700 820,057,750 1,640,115,500
2003 383,845,613 181,300 144,310,700 110,600,499 638,938,112 124,840,700 763,778,812 9,333,500 51,183,000 - 60,516,500 824,295,312 1,648,590,624
2004 384,783,400 184,800 141,579,300 114,496,500 641,044,000 115,591,300 756,635,300 7,717,000 51,785,000 - 59,502,000 816,137,300 1,632,274,600
2005 397,915,080 200,800 142,436,699 112,694,600 653,247,179 109,280,200 762,527,379 7,481,500 47,924,200 - 55,405,700 817,933,079 1,635,866,158
2006 420,608,600 - 149,948,800 113,890,900 684,448,300 103,288,100 787,736,400 6,454,200 44,470,600 - 50,924,800 838,661,200 1,677,322,400
2007 448,120,317 - 160,361,200 121,432,880 729,914,397 111,829,191 841,743,588 5,850,600 31,408,300 - 37,258,900 879,002,488 1,758,004,976
2008 466,633,100 194,800 156,596,000 121,810,900 745,234,800 114,104,600 859,339,400 6,162,900 24,617,400 - 30,780,300 890,119,700 1,780,239,400
City of Muskegon
Principal Property Taxpayers
December 31, 2008
2008 1999
Percent of Percent of
Taxable Total Taxable Taxable Total Taxable
Taxpayer Valuation Rank Valuation Valuation Rank Valuation
Consumers Energy $ 75,043,646 1 9.7% $ 62,900,184 1 9.9%
Sappi/S.D. Warren Company 31,731,470 2 4.1% 58,596,490 2 9.2%
Johnson Technology 8,459,248 3 1.1% 8,043,400 5 1.3%
ADAC Plastics Inc 7,002,406 4 0.9% 6,769,252 8 1.1%
ESCO Company 6,662,507 5 0.9% 5,949,800 9 0.9%
DTE Energy (formerly MichCon). 5,170,300 6 0.7% 8,315,526 3 1.3%
Coles Quality Foods 5,011,120 7 0.6% 5,886,935 10 0.9%
120
Honeywell Inc 4,988,400 8 0.6% - 0.0%
Lorin Industries 4,685,934 9 0.6% - 0.0%
Faram Muskegon LLC 4,675,500 10 0.6% - 0.0%
Brunswick Corp - 0.0% 7,887,267 6 1.2%
Muskegon Properties - 0.0% 8,100,139 4 1.3%
Bekaert Steel Wire - 0.0% 6,935,016 7 1.1%
Total - 10 Largest 153,430,531 19.9% 179,384,009 28.2%
Total - All Other 618,374,813 80.1% 456,753,113 71.8%
$ 771,805,344 100.0% $ 636,137,122 100.0%
Source: Muskegon County Equalization Department; City of Muskegon Treasurer's Office
City of Muskegon
Property Tax Rates - Direct and Overlapping Government Units
Property Tax Rates Per $1,000 Taxable Valuation
Last Ten Fiscal Years
City-Wide Rates
Total Library
Year Operating Promotion Sanitation City District
1999 7.0000 0.0880 3.0000 10.0880 0.9947
2000 7.0000 0.0859 3.0000 10.0859 0.9947
2001 7.0000 0.0792 3.0000 10.0792 2.4000
2002 7.0000 0.0786 3.0000 10.0786 2.4000
2003 7.5000 0.0774 2.5000 10.0774 2.4000
2004 8.5000 0.0768 2.5000 11.0768 2.4000
2005 8.5000 0.0755 2.5000 11.0755 2.4000
2006 8.5000 0.0732 2.5000 11.0732 2.4000
2007 8.5000 0.0685 2.5000 11.0685 2.4000
2008 8.5000 0.0682 2.5000 11.0682 2.4000
Overlapping - County-Wide Rates
Muskegon Intermediate Special Vocational Community
Year County School Education Education College
1999 6.6550 0.4698 2.3486 - 2.2523
2000 6.6256 0.4675 2.3374 - 2.2417
2001 6.5799 0.4640 2.3202 - 2.2233
2002 6.6957 0.4599 2.2997 1.0000 2.2037
2003 6.7957 0.4597 2.2983 1.0000 2.2037
2004 6.7957 0.4597 2.2983 1.0000 2.2037
2005 6.7757 0.4597 2.2983 1.0000 2.2037
2006 6.7557 0.4597 2.2987 0.9996 2.2037
2007 6.7357 0.4597 2.2987 0.9996 2.2037
2008 6.6957 0.4597 2.2987 0.9996 2.2037
Overlapping - School District Grand Total
State Non-
Year Operating Debt Total Education Homestead Homestead
1999 18.0000 7.0000 25.0000 6.0000 35.8084 53.8084
2000 18.0000 7.0000 25.0000 6.0000 35.7528 53.7528
2001 18.0000 7.0000 25.0000 6.0000 37.0666 55.0666
2002 18.0000 7.0000 25.0000 6.0000 38.1376 56.1376
2003 18.0000 7.0000 25.0000 5.0000 37.2348 55.2348
2004 18.0000 7.0000 25.0000 6.0000 39.2342 57.2342
2005 18.0000 7.0000 25.0000 6.0000 39.2129 57.2129
2006 18.0000 7.0000 25.0000 6.0000 39.1906 57.1906
2007 18.0000 7.0000 25.0000 6.0000 39.1659 57.1659
2008 18.0000 5.5000 23.5000 6.0000 37.6256 55.6256
121
City of Muskegon
PROPERTY TAX LEVIES AND COLLECTIONS
Last Ten Fiscal Years
Charge backs
Total Current Percent Delinquent On Uncollected Outstanding Outstanding Percent of
Fiscal Tax Tax Of Levy Tax Total Tax Delinquent Delinquent Delinquent Delinquent
Year Levy Collections Collected Collections Collections Taxes Personal Specific Taxes to Levy
1999 $ 6,925,862 $ 6,185,473 89.3% $ 632,875 $ 6,818,348 $ 46,219 $ 89,309 $ 10,148 2.10%
2000 7,378,653 6,631,358 89.9% 382,839 7,014,197 47,117 60,847 7,845 1.57%
2001 7,449,191 6,625,670 88.9% 88,768 6,714,438 24,866 184,894 5,496 2.89%
2002 7,922,898 7,036,846 88.8% 123,906 7,160,752 30,056 168,666 15,700 2.71%
2003 8,095,194 7,201,599 89.0% 710,353 7,911,952 27,338 154,843 20,856 2.51%
2004 8,292,451 7,230,231 87.2% 772,545 8,002,776 36,179 82,305 22,655 1.70%
2005 8,121,734 6,920,960 85.2% 1,027,932 7,948,892 28,156 78,641 21,100 1.57%
2006 8,207,019 7,231,508 88.1% 885,675 8,117,183 13,461 65,297 24,539 1.26%
122
2007 8,542,477 7,509,102 87.9% 949,754 8,458,856 - 67,586 20,748 1.03%
2008 8,466,096 7,219,540 85.3% 1,135,738 8,355,278 36,917 73,430 37,388 1.75%
SOURCE: City of Muskegon Treasurer' Office
City of Muskegon
SEGMENTED DATA ON INCOME TAX FILERS, RATES AND LIABILITY
Most recent Year and Eight Years Previous
Fiscal Year 2008 Fiscal Year 2000
Taxable Income per Return # of % of Total Total Taxable % of Total # of % of Total Total Taxable % of Total
Individual and Joint Returns Returns Returns Filed Income Tax Dollars Tax Dollars Returns Returns Filed Income Tax Dollars Tax Dollars
Resident Taxpayers:
(City resident income, after exemptions, exclusions and deductions is taxed at a flat rate of 1%.)
$2,500 or less 1,070 5% $ 975,237 $ 9,752 0% 1,179 5% $ 1,029,474 $ 10,295 0%
$2,501-$7,500 878 4% 5,977,332 59,773 1% 1,169 5% 6,827,297 68,273 1%
$7,501-$25,000 2,237 10% 49,146,862 491,469 6% 2,704 10% 52,426,935 524,269 7%
$25,001-$50,000 1,904 8% 96,344,230 963,442 13% 2,394 9% 101,907,814 1,019,078 14%
$50,001-$100,000 997 4% 92,426,073 924,261 12% 986 4% 88,566,998 885,670 13%
More than $100,000 180 1% 45,729,965 457,300 6% 142 1% 40,253,382 402,534 6%
Subtotal 7,266 32% $ 290,599,699 $ 2,905,997 38% 8,574 33% $ 291,011,900 $ 2,910,119 41%
Non-Residents Taxpayers:
123
(Non-residents are taxed at a rate of 0.5% on income earned within the City.)
$2,500 or less 2,084 9% $ 1,197,966 $ 8,521 0% 1,939 8% 1,428,558 $ 9,525 0%
$2,501-$7,500 1,346 6% 6,389,890 45,446 1% 1,665 6% 7,901,142 52,677 1%
$7,501-$25,000 3,179 14% 51,410,002 365,645 5% 4,208 16% 68,958,300 459,742 6%
$25,001-$50,000 3,759 17% 137,600,200 978,659 13% 4,917 19% 177,165,226 1,181,151 17%
$50,001-$100,000 2,495 11% 163,822,200 1,165,159 15% 2,102 8% 135,900,236 906,039 13%
More than $100,000 619 3% 138,961,800 988,343 13% 527 2% 118,501,368 790,042 11%
Subtotal 13,482 60% $ 499,382,058 $ 3,551,773 46% 15,358 60% $ 509,854,830 $ 3,399,176 48%
All Other Returns
(Mostly corporate returns which pay at a rate of 1% on income earned in City and partnerships which pay based on partners residence status.)
Subtotal 1,850 8% $ 1,237,009 16% 1,850 7% $ 769,276 11%
Total 22,598 100% $ 7,694,779 100% 25,782 100% $ 7,078,571 100%
NOTE: Due to confidentiality issues, the names of the ten largest income tax payers are not available. The categories presented are intended to provide alternative information regarding sources of the City's revenue.
SOURCE: City of Muskegon Income Tax Department. The information in these schedules (unless otherwise noted) is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB
Statement 34 in 2002; schedules presenting government-wide information include information starting that year. Certain other information has not been presented previously. Reported numbers begin with the year for which
information believed to be accurate is available.
City of Muskegon
RATIO OF OUTSTANDING DEBT BY TYPE
Last Ten Fiscal Years
Governmental Activities Business-Type Activities
General
Obligation Special Total Percent of
Limited Tax Assessment Governmental Revenue Intergovernmental Total Business- Total Primary Personal Per
Year Bonds Bonds State Loans Activities Bonds Contactual Debt State Loans Type Activities Government Income Capita
1999 $ 6,281,203 $ 2,560,000 $ 1,276,900 $ 10,118,103 $ 10,860,000 $ 10,551,497 $ - $ 21,411,497 $ 31,529,600 5.5% 783
2000 5,335,741 2,910,000 1,276,900 9,522,641 10,510,000 9,235,090 - 19,745,090 29,267,731 5.0% 730
2001 4,425,000 2,395,000 1,276,900 8,096,900 10,140,000 8,262,203 - 18,402,203 26,499,103 4.4% 661
2002 3,735,000 1,835,000 1,276,900 6,846,900 9,750,000 7,038,014 - 16,788,014 23,634,914 3.8% 589
2003 4,565,000 1,460,000 1,126,900 7,151,900 9,345,000 5,886,923 - 15,231,923 22,383,823 3.6% 562
2004 3,700,000 1,140,000 976,900 5,816,900 8,925,000 4,779,656 8,483,766 22,188,422 28,005,322 4.4% 703
2005 3,615,824 865,000 1,282,976 5,763,800 8,490,000 3,606,017 13,900,000 25,996,017 31,759,817 4.8% 797
2006 8,246,039 615,000 1,356,900 10,217,939 8,035,000 2,454,101 13,335,000 23,824,101 34,042,040 5.0% 855
2007 7,444,118 395,000 1,136,900 8,976,018 7,565,000 1,221,207 12,760,000 21,546,207 30,522,225 4.5% 766
2008 6,844,970 215,000 1,416,900 8,476,870 7,075,000 - 12,170,000 19,245,000 27,721,870 4.1% 696
124
NOTE: None of the debt issued by the City is payable through the levy of property tax millages.
SOURCE: The information in these schedules (unless otherwise noted) is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB
Statement 34 in 2002; schedules presenting government-wide information include information start that year.
City of Muskegon
DIRECT AND OVERLAPPING DEBT
December 31, 2008
Total Debt City General
Name of Governmental Unit Outstanding Self Supporting Taxes
Direct Debt
City of Muskegon:
Revenue Bonds $ 19,245,000 $ 19,245,000 $ -
Special Assessment Bonds 215,000 215,000 -
Capital Improvement Bonds 6,395,000 - 6,395,000
Intergovernmental Bonds 1,416,900 - 1,416,900
Act 99 Installment Purchase 449,970 - 449,970
Component Unit Debt:
Downtown Development Authority 3,695,000 3,695,000 -
Local Development Finance Authority 4,565,000 4,565,000 -
Total City Direct Debt $ 35,981,870 $ 27,720,000 $ 8,261,870
City Share as
Gross Percent of Gross Net
Overlapping Debt
Muskegon School Distict $ 26,914,736 94.51% $ 25,437,117
Orchard View School Distict 45,714,667 26.26% 12,004,672
Reeths Puffer School Distict 64,854,053 10.35% 6,712,394
Muskegon Intermediate School District - 15.70% -
Muskegon County 23,615,000 15.72% 3,712,278
Muskegon Community College 16,490,000 15.72% 2,592,228
Total Overlapping Debt $ 177,588,456 50,458,689
Total City Direct and Overlapping Debt $ 58,720,559
Details regarding the city's outstanding debt can be found in the notes to the financial statements.
SOURCE: Municipal Advisory Council of Michigan and City of Muskegon Finance Department. The information
in these schedules (unless otherwise noted) is derived from the comprehensive annual financial reports for the
relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide
information include information start that year.
125
City of Muskegon
LEGAL DEBT MARGIN INFORMATION
Last Ten Fiscal Years
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Debt Limit $ 59,416,090 $ 64,768,340 $ 73,312,880 $ 74,726,405 $ 76,377,881 $ 75,663,530 $ 76,252,738 $ 78,773,640 $ 84,174,359 $ 85,933,940
Total net debt applicable to limit 4,122,747 3,502,641 7,232,900 11,066,900 9,726,900 9,191,900 9,918,800 16,142,939 15,591,018 15,481,870
Legal debt margin $ 55,293,343 $ 61,265,699 $ 66,079,980 $ 63,659,505 $ 66,650,981 $ 66,471,630 $ 66,333,938 $ 62,630,701 $ 68,583,341 $ 70,452,070
Total net debt applicable to the limit as 6.94% 5.41% 9.87% 14.81% 12.74% 12.15% 13.01% 20.49% 18.52% 18.02%
a percentage of debt limit
Legal Debt Margin Calculation for 2008:
Assessed Valuation: $ 859,339,400
Legal Debt Limit (10% ) 85,933,940
Total Indebtedness: 35,981,870
126
Debt not Subject to Limitation:
Paid by Special Assessment (1,255,000)
Revenue Bonds (19,245,000)
Debt Subject to Limitation 15,481,870
Legal Debt Margin $ 70,452,070
SOURCE: The information in these schedules (unless otherwise noted) is derived from the comprehensive annual financial reports for the relevant year. The City implemented GASB
Statement 34 in 2002; schedules presenting government-wide information include information start that year. Certain other information has not been presented previously. Reported
numbers begin with the year for which information believed to be accurate is available.
City of Muskegon
REVENUE BOND COVERAGE
Water Supply System
Last Ten Fiscal Years
Direct Net Revenue Debt Service Requirements
Fiscal Gross Operating Available For
Year Revenue (a) Expenses (b) Debt Service Principal Interest Total Coverage
1999 $ 3,579,929 $ 2,463,597 $ 1,116,332 $ 215,000 $ 409,391 $ 624,391 1.79
2000 3,936,337 2,576,864 1,359,473 350,000 494,206 844,206 1.61
2001 4,263,107 3,203,080 1,060,027 370,000 471,301 841,301 1.26
2002 4,051,015 3,030,959 1,020,056 390,000 453,666 843,666 1.21
2003 4,183,015 3,539,690 643,325 405,000 417,559 822,559 0.78
2004 5,016,267 3,186,067 1,830,200 420,000 411,867 831,867 2.20
2005 7,017,844 3,197,232 3,820,612 435,000 418,549 853,549 4.48
2006 6,424,971 3,172,882 3,252,089 1,020,000 662,774 1,682,774 1.93
2007 6,705,739 3,404,649 3,301,090 1,045,000 632,036 1,677,036 1.97
2008 6,336,135 3,407,903 2,928,232 1,080,000 600,377 1,680,377 1.74
Sewage Disposal System
Direct Net Revenue Debt Service Requirements
Fiscal Gross Operating Available For
Year Revenue (a) Expenses (b) Debt Service Principal Interest Total Coverage
1999 $ 3,740,179 $ 2,417,775 $ 1,322,404 $ 495,963 $ 237,636 $ 733,599 1.80
2000 4,089,381 2,236,111 1,853,270 421,516 216,776 638,292 2.90
2001 3,991,295 2,656,382 1,334,913 399,933 197,169 597,102 2.24
2002 4,039,448 2,726,975 1,312,473 458,918 137,622 596,540 2.20
2003 4,077,482 2,649,454 1,428,028 473,329 132,214 605,543 2.36
2004 4,096,412 3,038,939 1,057,473 455,179 110,520 565,699 1.87
2005 4,182,115 3,128,119 1,053,996 522,956 114,388 637,344 1.65
2006 4,842,901 4,270,296 572,605 511,626 63,233 574,859 1.00
2007 5,213,140 4,435,211 777,929 506,822 25,221 532,043 1.46
2008 5,338,647 4,979,343 359,304 546,278 12,550 558,828 0.64
For years in which "revenue bond coverage" is less than 1.00, the shortfall was made up either by use of net assets or by transfer in.
(a) "Gross Revenue" equals total operating revenues plus interest income.
(b) "Direct Operating Expenses" equal total operating expenses net of depreciation expense.
SOURCE: The information in these schedules (unless otherwise noted) is derived from the comprehensive annual financial reports for
the relevant year. The City implemented GASB Statement 34 in 2002; schedules presenting government-wide information include
information start that year. Certain other information has not been presented previously. Reported numbers begin with the year for
which information believed to be accurate is available.
127
City of Muskegon
DEMOGRAPHIC AND ECONOMIC STATISTICS
Last Ten Fiscal Years
Fiscal Pesonal Per Capita Median Public School Building Permits
Year Population Income Income Age Enrollment Number Value Unemployment
1999 40,283 $ 575,362,089 $ 14,283 30.8 6,954 886 $ 18,913,173 6.2%
2000 40,105 587,140,208 14,640 32.3 6,788 859 39,494,923 6.1%
2001 40,105 601,818,713 15,006 32.3 6,761 893 26,052,549 9.3%
2002 40,105 616,864,181 15,381 32.3 6,603 1,008 39,705,174 12.1%
2003 39,825 627,871,373 15,766 32.3 6,327 1,061 21,369,545 13.9%
2004 39,825 643,568,157 16,160 32.3 6,088 1,152 37,963,075 11.1%
2005 39,825 659,657,361 16,564 32.3 5,862 966 30,041,025 9.0%
2006 39,825 676,148,795 16,978 32.3 5,625 1,063 27,328,144 8.6%
2007 39,825 693,052,515 17,402 32.3 5,534 941 36,129,064 9.5%
2008 39,825 710,378,828 17,838 32.3 5,361 946 23,001,998 11.5%
128
SOURCE: US Census Bureau, Muskegon Area Intermediate School Distrct (MAISD), City of Muskegon Inspections Department
City of Muskegon
PRINCIPAL EMPLOYERS
Current Year and Nine Years Ago
2008 1999
Percentage Percentage
of total of total
City City
Employer Employees Rank employment Employees Rank employment
Mercy General Health Partners 1,714 1 9.5% 1,458 1 8.0%
State of Michigan 1,064 2 5.9% 901 5 4.9%
County of Muskegon 852 3 4.7% 1,000 3 5.5%
Muskegon Public Schools 743 4 4.1% 975 4 5.3%
ADAC Plastics 494 5 2.7% 231 10 1.3%
Johnson Technology 481 6 2.7% - - 0.0%
Verizon 350 7 1.9% 763 6 4.2%
129
City of Muskegon 270 8 1.5% - - 0.0%
Sappi Fine Paper (Formerly SD Warren) 200 9 1.1% 348 8 1.9%
Brunswick 174 10 1.0% 553 7 3.0%
Hackley Hospital - - 0.0% 1,183 2 6.5%
SPX - - 0.0% 300 9 1.6%
SOURCE: City of Muskegon; Muskegon Area First; Michigan Department of Energy,
Energy Labor & Economic Growth
City of Muskegon
BUDGETED FULL-TIME CITY GOVERNMENT POSITIONS BY DEPARTMENT
Last Ten Fiscal Years
Department 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Administration 1.70 1.70 1.70 1.50 1.50 1.50 1.50 1.50 1.50 1.50
Affirmative Action 1.00 1.00 1.00 1.50 1.50 1.50 1.50 1.50 1.50 1.50
Cemetaries 3.52 3.52 3.52 3.52 3.52 3.52 3.25 3.00 3.25 3.25
City Assessors Office 5.50 - - - - - - - - -
City Clerk & Elections 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00
City Commission 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25
City Hall Maintenance 1.23 1.20 1.20 1.25 1.20 1.00 1.00 1.00 1.00 1.00
City Manager's Office 2.05 2.05 3.05 2.75 1.75 1.75 1.75 1.75 1.75 1.75
City Treasurer's Office 6.50 6.00 6.00 6.00 6.00 5.00 5.00 5.00 4.00 5.00
Civil Service 2.00 2.00 2.00 3.00 3.00 2.00 2.00 2.00 2.00 2.00
Community Event Support - - 0.60 0.20 0.20 - - - - -
Environmental Services 16.00 5.00 4.00 4.00 4.00 3.50 2.00 2.00 2.00 2.00
Farmers Market 0.12 0.12 0.12 0.12 0.12 0.12 - - - -
Finance Administration 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00
Fire 46.00 44.00 44.00 44.00 43.00 41.00 40.00 38.00 38.00 38.00
Fire Safety Inspections - 13.00 13.00 12.00 13.00 12.00 10.00 12.00 12.00 12.00
Forestry 2.68 2.68 2.68 2.18 1.93 0.93 - - - -
General Recreation 0.78 0.78 0.78 0.78 2.24 1.24 1.00 1.17 1.33 1.66
130
Income Tax Administration 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00
Information Systems 2.00 3.00 3.00 4.00 4.00 4.00 3.00 3.00 3.00 3.00
Inner City Recreation 1.46 1.46 1.46 1.46 - - - - - -
Parking 0.30 0.30 0.30 0.30 0.30 - - - - -
Parks 10.03 10.03 11.53 11.53 10.53 9.68 8.48 8.25 8.15 8.15
Planning, Zoning & Economic Development 8.00 8.00 7.50 7.50 7.50 6.50 6.00 6.00 6.00 6.00
Police 102.00 102.00 102.00 102.00 96.00 94.00 94.00 94.00 94.00 94.00
Sanitation 2.10 2.10 1.10 1.25 1.25 1.10 1.10 1.00 1.00 1.00
MVH-Major Streets 13.35 13.35 13.75 14.70 15.30 15.45 15.25 16.00 17.75 15.75
MVH-Local Streets 7.20 7.20 7.40 7.20 7.20 7.00 7.00 7.00 7.00 6.00
MVH-State Trunklines 1.60 1.60 1.60 1.60 1.60 2.00 2.00 2.00 - -
Highway Non-Chargeables 0.20 0.20 - - - - - - - -
Street Lighting 0.10 0.10 0.10 0.10 - - - - - -
Walker Arena 0.12 0.12 0.12 0.12 0.12 0.12 - - - -
Community Development 6.00 6.00 5.00 5.00 5.00 5.00 4.00 4.00 4.00 4.00
Home Program 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
Sewer Maintenance 14.40 14.40 14.40 14.40 15.15 14.55 15.05 16.00 16.20 15.20
Water Filtration 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00
Water Maintenance 16.15 16.15 15.65 15.65 15.65 15.15 14.65 13.00 12.50 13.50
Hartshorn Marina Fund 0.79 0.79 0.79 0.79 0.79 0.79 0.67 0.73 0.67 0.34
Public Service Building 3.30 3.30 3.30 3.30 3.30 3.65 3.85 3.45 3.45 3.45
Engineering 8.90 8.90 9.40 9.35 9.40 7.70 7.70 7.45 7.45 7.45
Equipment 8.67 7.70 7.70 7.70 7.70 8.00 8.00 8.95 8.25 8.25
320.00 314.00 314.00 315.00 308.00 294.00 284.00 284.00 282.00 280.00
SOURCE: City of Muskegon Finance Department
City of Muskegon
OPERATING INDICATORS BY FUNCTION/PROGRAM
Last Ten Fiscal Years
Function/Program 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Administrative Services
Elections
Number of registered voters 23,369 23,100 23,457 23,931 23,904 25,261 25,918 26,028 26,345 27,678
Number of votes cast:
Last general election 9,029 12,054 12,054 8,916 8,916 14,169 14,169 10,410 10,410 15,271
Last city election 3,069 3,069 3,840 3,840 4,325 4,325 4,022 4,022 1,101 1,101
Percentage of registered voters voting:
Last general election 39% 52% 51% 37% 37% 56% 55% 40% 40% 55%
Last city election 13% 13% 16% 16% 18% 17% 16% 15% 4% 4%
Financial Services
Property Tax Bills N/A 15,854 15,804 15,586 15,428 15,403 15,404 15,354 15,376 15,350
Income Tax Returns N/A N/A N/A 25,135 25,043 24,378 23,884 23,493 23,141 22,598
Paper Check Issued to Vendors 3,957 3,850 3,922 4,012 3,784 3,405 3,205 3,248 3,347 3,346
Electronic Payments to Vendors 496 571 662 651 746 752 828 800 772 763
131
Public Safety
Fire Protection
Number of firefighter and officer positions 45 45 45 44 42 41 41 41 41 41
Number of emergency calls 3,823 3,693 3,818 3,878 3,656 4,116 4,206 4,092 4,171 4,298
Police Protection
Number of sworn officer positions 91 91 91 85 83 83 83 84 84 84
Part I (Major) Crimes 4,011 3,537 3,429 3,504 2,971 3,360 3,303 3,495 2,997 3,107
Public Works
Refuse Collected (Tons per Year) 12,078 12,211 11,718 11,420 11,780 11,925 11,074 11,192 10,375 10,401
Recyclables Collected (Tons per Year) 815 897 838 808 775 779 588 559 629 626
Water & Sewer
Number of consumers 14,917 14,917 14,917 14,917 14,917 14,917 14,455 14,412 14,364 13,131
Average daily water consumption (GPD) 9,269,000 8,498,000 9,877,000 9,453,000 9,453,000 8,870,000 9,582,000 8,998,000 9,314,000 8,879,000
Water main breaks repaired 11 13 12 12 19 10 5 13 21 34
Sewer flows (Millions Gallons per Year) 2,070 1,718 1,994 1,477 1,387 1,475 1,700 2,040 1,945 2,181
Sewer Service Calls 716 925 799 661 624 568 638 605 598 533
SOURCE: City of Muskegon Departments
City of Muskegon
CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM
Last Ten Fiscal Years
Function/Program 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Public Safety
Fire Protection
Number of stations 3 3 3 3 3 3 3 3 3 3
Police Protection
Number of stations 1 1 1 1 1 1 1 1 1 1
Highways, Streets and Bridges
Miles of Streets 197.56 197.51 197.52 197.39 197.96 196.95 196.95 197.48 197.79 197.79
Number of streetlights 3,085 3,115 3,111 3,114 3,123 3,111 3,159 3,159 3,134 3,134
Culture and Recreation
Number of parks (acres) 611 611 612 612 701 701 701 701 701 701
Lake Michigan beaches (acres) 119 119 119 119 119 119 119 119 119 119
Hockey/Entertainment Arena 1 1 1 1 1 1 1 1 1 1
Sewer
Sanitary sewers (miles) 174.16 174.97 175.01 175.33 175.33 178.02 179.41 175.74 177.04 177.04
132
Storm sewers (miles) 177.30 177.97 178.29 178.57 178.57 178.61 179.23 180.48 183.25 183.60
Water
Water mains (miles) 191.62 192.30 192.60 193.09 193.66 194.14 194.14 194.15 195.63 195.58
SOURCE: City of Muskegon Departments
SINGLE AUDIT OF FEDERAL FINANCIAL ASSISTANCE PROGRAMS
133
BRICKLEY DELONG
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED
IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
April 8, 2009
City Commission
City of Muskegon
Muskegon, Michigan
We have audited the financial statements of the City of Muskegon as of and for the year ended December 31,
2008 and have issued our report thereon dated April 8, 2009. We conducted our audit in accordance with
auditing standards generally accepted in the United States of America and the standards applicable to
financial audits contained in Government Auditing Standards issued by the Comptroller General of the United
States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered the City of Muskegon’s internal control over financial
reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the
financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of
Muskegon’s internal control over financial reporting. Accordingly, we do not express an opinion on the
effectiveness of the City of Muskegon’s internal control over financial reporting.
Our consideration of internal control over financial reporting was for the limited purpose described in the
preceding paragraph and would not necessarily identify all deficiencies in internal control over financial
reporting that might be significant deficiencies or material weaknesses. However, as discussed below, we
identified certain deficiencies in internal control over financial reporting that we consider to be significant
deficiencies.
A control deficiency exists when the design operation of a control does not allow management or employees,
in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely
basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely
affects the entity’s ability to initiate, authorize, record, process or report financial data reliably in accordance
with generally accepted accounting principles such that there is more than a remote likelihood that a
misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or
detected by the entity’s internal control. We consider the deficiencies described in the accompanying
Schedule of Findings and Responses, as Findings 1 - 2, to be significant deficiencies in internal control over
financial reporting.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in
more than a remote likelihood that a material misstatement of the financial statements will not be prevented or
detected by the entity’s internal control.
316 Morris Ave., Suite 500 • P.O. Box 999 • Muskegon, MI 49443 907 S. State St. • P.O. Box 331 • Hart, MI 49420
PHONE (231) 726-5800 • FAX (231) 722-0260 PHONE (231) 873-1040 • FAX (231) 873-0602
134
BRICKLEY DELONG
City Commission
April 8, 2009
Page 2
Internal Control Over Financial Reporting—Continued
Our consideration of the internal control over financial reporting was for the limited purpose described in the
first paragraph of this section and would not necessarily identify all deficiencies in the internal control that
might be significant deficiencies and, considered to be material weaknesses. However, of the significant
deficiencies described above, we consider Findings 1 and 2 to be material weaknesses.
Compliance
As part of obtaining reasonable assurance about whether the City of Muskegon’s financial statements are free
of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements, noncompliance with which could have a direct and material effect on the
determination of financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results
of our tests disclosed no instances of noncompliance or other matters that are required to be reported under
Government Auditing Standards.
The City of Muskegon’s responses to the findings identified in our audit are described in the accompanying
Schedule of Findings and Responses. We did not audit the City of Muskegon’s responses and, accordingly,
we express no opinion on them.
This report is intended solely for the information and use of the City Commission, management, and federal
awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other
than these specified parties.
135
BRICKLEY DELONG
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE WITH REQUIREMENTS
APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER
COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133
April 8, 2009
City Commission
City of Muskegon
Muskegon, Michigan
Compliance
We have audited the compliance of the City of Muskegon with the types of compliance requirements
described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that
are applicable to each of its major federal programs for the year ended December 31, 2008. The City of
Muskegon’s major federal programs are identified in the Summary of Auditors’ Results section of the
accompanying Schedule of Findings and Responses. Compliance with the requirements of laws, regulations,
contracts, and grants applicable to each of its major federal programs is the responsibility of the City of
Muskegon’s management. Our responsibility is to express an opinion on the City of Muskegon’s compliance
based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United
States of America; the standards applicable to financial audits contained in Government Auditing Standards
issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local
Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan
and perform the audit to obtain reasonable assurance about whether noncompliance with the types of
compliance requirements referred to above that could have a direct and material effect on a major federal
program occurred. An audit includes examining, on a test basis, evidence about the City of Muskegon’s
compliance with those requirements and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not
provide a legal determination on the City of Muskegon’s compliance with those requirements.
In our opinion, the City of Muskegon complied, in all material respects, with the requirements referred to
above that are applicable to each of its major federal programs for the year ended December 31, 2008.
However, the results of our auditing procedures disclosed an instance of noncompliance with those
requirements, which is required to be reported in accordance with OMB Circular A-133 and which is
described as Finding 3 in the accompanying Schedule of Findings and Responses.
Internal Control Over Compliance
The management of the City of Muskegon is responsible for establishing and maintaining effective internal
control over compliance with requirements of laws, regulations, contracts, and grants applicable to federal
programs. In planning and performing our audit, we considered the City of Muskegon’s internal control over
compliance with requirements that could have a direct and material effect on a major federal program in order
to determine our auditing procedures for the purpose of expressing our opinion on compliance, but not for the
purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we
do not express an opinion on the effectiveness of the City of Muskegon’s internal control over compliance.
316 Morris Ave., Suite 500 • P.O. Box 999 • Muskegon, MI 49443 907 S. State St. • P.O. Box 331 • Hart, MI 49420
PHONE (231) 726-5800 • FAX (231) 722-0260 PHONE (231) 873-1040 • FAX (231) 873-0602
136
BRICKLEY DELONG
City Commission
April 8, 2009
Page 2
Internal Control Over Compliance—Continued
A control deficiency in an entity’s internal control over compliance exists when the design or operation of a
control does not allow management or employees, in the normal course of performing their assigned
functions, to prevent or detect noncompliance with a type of compliance requirement of a federal program on
a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that
adversely affects the entity’s ability to administer a federal program such that there is more than a remote
likelihood that noncompliance with a type of compliance requirement of a federal program that is more than
inconsequential will not be prevented or detected by the entity’s internal control.
A material weakness is a significant deficiency, or combination of significant deficiencies, that results in
more than a remote likelihood that material noncompliance with a type of compliance requirement of a
federal program will not be prevented or detected by the entity’s internal control.
Our consideration of internal control over compliance was for the limited purpose described in the first
paragraph and would not necessarily identify all deficiencies in the entity’s internal control that might be
significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over
compliance that we consider to be material weaknesses, as defined above.
The City of Muskegon’s responses to the findings identified in our audit are described in the accompanying
Schedule of Findings and Responses. We did not audit the City of Muskegon’s responses and, accordingly,
we express no opinion on them.
Schedule of Expenditures of Federal Awards
We have audited the financial statements of the City of Muskegon as of and for the year ended December 31,
2008 and have issued our report thereon dated April 8, 2009. Our audit was performed for the purpose of
forming an opinion on the financial statements taken as a whole. The accompanying Schedule of
Expenditures of Federal Awards is presented for purposes of additional analysis as required by OMB
Circular A-133 and is not a required part of the financial statements. Such information has been subjected to
the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly stated, in
all material respects, in relation to the financial statements taken as a whole.
This report is intended solely for the information and use of the City Commission, management, and federal
awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other
than these specified parties.
137
City of Muskegon
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
For the year ended December 31, 2008
Accrued Accrued
Entitlement (deferred) Cash or (deferred)
Federal program or revenue payments in Amount of revenue
Federal grantor/pass-through CFDA award January 1, kind received grant December 31,
grantor/program title number amount 2008 (cash basis) expenditures 2008
U.S Department of Agriculture
Passed through Michigan Department of Natural Resources
Urban & Community Forestry Program 10.664
08-19 $ 3,000 $ - $ 3,000 $ 3,000 $ -
U.S. Department of Housing and Urban Development
Direct programs
Community Development Block Grant 14.218
B-07-MC-26-0026 1,018,704 472,725 721,382 248,657 -
B-08-MC-26-0026 984,207 - 143,492 622,294 478,802
Program Income 72,087 - 72,087 72,087 -
Total Community Development Block Grant 2,074,998 472,725 936,961 943,038 478,802
138
Direct programs
Home Investment Partnership Program 14.239
M-04-MC-26-0215 337,937 1,638 1,638 - -
M-05-MC-26-0215 320,839 - 3,811 3,811 -
M-06-MC-26-0215 301,767 7,000 21,027 24,817 10,790
M-07-MC-26-0215 298,923 98,591 208,365 109,774 -
M-08-MC-26-0215 290,049 - 2,915 80,852 77,937
Program Income 36,196 - 36,196 36,196 -
Total Home Investment Partnership Program 1,585,711 107,229 273,952 255,450 88,727
Direct programs
Lead-Based Paint Hazard Control in Privately-Owned Housing 14.900
FR-5100-N-20A 2,079,492 7,655 693,652 903,666 217,669
Total U.S. Department of Housing and
Urban Development 5,740,201 587,609 1,904,565 2,102,154 785,198
City of Muskegon
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS—CONTINUED
For the year ended December 31, 2008
Accrued Accrued
Entitlement (deferred) Cash or (deferred)
Federal program or revenue payments in Amount of revenue
Federal grantor/pass-through CFDA award January 1, kind received grant December 31,
grantor/program title number amount 2008 (cash basis) expenditures 2008
U.S. Department of Justice
Direct programs
Bulletproof Vest Partnership Grant 16.607
2006 Grant $ 2,821 $ - $ 2,821 $ 2,821 $ -
2007 Grant 7,788 - 1,648 1,648 -
Total Bulletproof Vest Partnership Grant 10,609 - 4,469 4,469 -
Passed through the Ottawa County
WEMET Multi-Jurisdictional Drug 16.738
Enforcement CO-OP
70834-908B 36,825 10,578 36,824 26,246 -
70834-109B 31,188 - - 9,907 9,907
139
Total WEMET Multi-Jurisdictional
Drug Enforcement CO-OP 68,013 10,578 36,824 36,153 9,907
Total U.S. Department of Justice 78,622 10,578 41,293 40,622 9,907
U.S Department of Transportation, Federal Highway Administration
Passed through the Michigan Department of Transportation
Highway Planning and Construction Program 20.205
Proj HPSL0661 (016) Fed Item RR5086 Contract 06-5195 960,000 396,474 396,474 - -
TOTAL FEDERAL ASSISTANCE $ 6,781,823 $ 994,661 $ 2,345,332 $ 2,145,776 $ 795,105
City of Muskegon
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
For the year ended December 31, 2008
1. See the notes to the financial statements for significant accounting policies used in preparing this schedule.
2. The following is a reconciliation of federal revenues as reported on the Statement of Revenues, Expenditures and Changes in Fund Balances of the City of Muskegon
financial statements for the year ended December 31, 2008 and federal expenditures per the Schedule of Expenditures of Federal Awards.
Federal revenues per City of Muskegon financial statements
for the year ended December 31, 2008
General Fund $ 40,622
Major Street and Trunkline Fund 1,662,437
Other governmental funds 2,744,798
4,447,857
Plus program income 108,283
Less MDOT contracted projects as shown below (2,410,364)
Federal expenditures per the Schedule of Expenditures of Federal Awards $ 2,145,776
3.
140
The Michigan Department of Transportation (MDOT) requires that cities report all federal and state grants pertaining to their city. During the year ended December 31,
2008, the federal aid received and expended by the City was $2,410,364 for contracted projects as shown below. The City also received $396,474 for expenditures in the
prior year on negotiated projects. Contracted projects are defined as projects performed by private contractors and paid for and administrated by MDOT (they are
included in MDOT's single audit). Negotiated projects are projects where the City administers the grant and either performs the work or contracts it out.
Federal
CFDA Revenue Federal
number Recognized Expenditures
U.S Department of Transportation, Federal Highway Administration (contracted projects)
Passed through the Michigan Department of Transportation
Highway Planning and Construction Program 20.205
Proj CM0861 (386) Fed Item RR6338/RR6026 Contract 07-5722 $ 197,100 $ 197,100
Proj STP0761 (018) Fed Item RR5750 Contract 07-5303 197,558 197,558
Proj STP0761 (026) Fed Item RR5836 Contract 07-5402 252,875 252,875
Proj STP0761 (029) Fed Item RR5931 Contract 07-5474 209,800 209,800
Proj STP0861 (377) Fed Item RR6169 Contract 07-5693 230,026 230,026
Proj HPSL0861 (383) Fed Item RR6325 Contract 08-5123 575,078 575,078
Proj HPSL0761 (012) Fed Item RR5629 Contract 07-5158 747,927 747,927
Total U.S. Department of Transportation,
Federal Highway Administration (contracted projects) $ 2,410,364 $ 2,410,364
City of Muskegon
SCHEDULE OF FINDINGS AND RESPONSES
Year ended December 31, 2008
SECTION I—SUMMARY OF AUDITORS’ RESULTS
A. Financial Statements
1. Type of auditors' report issued: Unqualified
2. Internal control over financial reporting:
• Material weakness(es) identified? X yes no
• Significant deficiency(ies) identified that are not considered to
be material weaknesses? yes X none reported
3. Noncompliance material to financial statements noted? yes X no
B. Federal Awards
1. Internal control over major programs:
• Material weakness(es) identified? yes X no
• Significant deficiency(ies) identified that are not considered to
be material weaknesses? yes X none reported
2. Type of auditors' report issued on compliance for major programs: Unqualified
3. Any audit findings disclosed that are required to be reported in
accordance with section 510(a) of OMB Circular A-133? X yes no
4. Identification of major programs:
CFDA Number(s) Name of Federal Program
U.S. Department of Housing and Urban Development
14.900 Lead-Based Paint Hazard Control in Privately-Owned Housing
5. Dollar threshold used to distinguish between type A and type B programs: $300,000
6. Auditee qualified as low-risk auditee? X yes no
141
City of Muskegon
SCHEDULE OF FINDINGS AND RESPONSES—CONTINUED
Year ended December 31, 2008
SECTION II – FINANCIAL STATEMENT FINDINGS
COMPLIANCE
NONE
SIGNIFICANT DEFICIENCIES
2008 Finding No. 1: MATERIAL WEAKNESS—Capital Asset Recordkeeping Procedures
Criteria: Capital asset additions should be identified and maintained in detailed capital asset records.
Condition: During our detailed testing of capital outlay expenditures, we noted items which qualified as
capital assets within the City’s capitalization policy, which were not recorded in the City’s detailed capital
asset records. We also noted that some street infrastructure managed by the Michigan Department of
Transportation (MDOT) was not recorded in the City’s detailed capital asset records.
Cause: The City personnel inadvertently overlooked capital assets within capital outlay expenditure general
ledger accounts and did not record all MDOT projects.
Effect: Capital assets reported in the government-wide (full accrual) financial statements would have been
understated. However, after the assets were identified, the City properly reported the additional capital assets.
Recommendation: Capital assets for governmental activities should be more carefully identified and included
in the government-wide (full accrual) financial statements.
City Response: We concur with this finding and will train staff to further improve capital expenditure
recording and review procedures.
2008 Finding No. 2: MATERIAL WEAKNESS—Investment Function Segregation of Duties
Criteria: Effective segregation of duties is an important part of controls for investment transactions to ensure
that errors and misappropriation of assets are timely detected.
Condition: During our testing of investment procedures, we noted that the same individual is responsible for
oversight of investments, making day-to-day investment decisions, opening and reviewing investment
statements, transferring funds between accounts, and participating in recording of investment activity in the
City’s accounting records.
Cause: The City’s current alignment of responsibilities affords uninterrupted processing of transactions, if
performed by one individual.
Effect: An error or misappropriation of assets could occur and not be detected in a timely manner by City
staff.
Recommendation: Responsibilities within the investment function should be further segregated.
City Response: The City believes adequate controls are in place for the investment function, given the limited
staffing resources available. Investments are regularly reviewed and reconciled by a second individual.
142
City of Muskegon
SCHEDULE OF FINDINGS AND RESPONSES—CONTINUED
Year ended December 31, 2008
SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
COMPLIANCE
U.S. Department of Housing and Urban Development
2008 Finding No. 3: Lead-Based Paint Hazard Control in Privately-Owned Housing
CFDA: 14.900
Award Number: FR-5100-N-20A
Award Year End: December 31, 2008
Specific Requirement: Allowable Costs/Cost Principles
Criteria: The cost principle of OMB Circular A-87 requires, “…Where employees are expected to work
solely on a single federal award or cost objective, charges for their salaries and wages will be supported by
periodic certifications that the employees worked solely on that program for the period covered by the
certification. These certifications will be prepared at least semi-annually and will be signed by the employee
or supervisory official having first hand knowledge of the work performed by the employee. …Where
employees work on multiple activities or cost objectives, a distribution of their salaries or wages will be
supported by personnel activity reports or equivalent documentation. Personnel activity reports must be
prepared at least monthly and must coincide with one or more pay periods and they must be signed by the
employee.”
Condition: During our detailed testing, we noted one employee whose wages and benefits were charged
partially to the grant that did not have proper time and effort documentation.
Cause: The City was unaware of the time documentation requirements.
Questioned Costs: $34,985, which represents the portion of salaries and benefits charged to the grant for all
employees that did not have adequate documentation.
Context: One employee, for which personnel activity reports or semi-annual certifications were required, did
not have adequate documentation.
Effect: The salaries and benefits charged to the Lead-Based Paint grant for the one employee could be
disallowed.
Recommendation: The City should require all employees, who fall under OMB Circular A-87 requirements
for documenting time charged to federal award programs, to prepare the required documentation.
City Response: The City recognizes this federal requirement and will put in place procedures to better
document employee time allocations.
SIGNIFICANT DEFICIENCIES
NONE
143
City of Muskegon
933 Terrace Street
Muskegon, MI 49440
Phone: (231) 724-6709
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS
April 8, 2008
U.S. Department of Housing and Urban Development
Washington, D.C.
The City of Muskegon respectfully submits the following summary of the current status of prior audit
findings contained in the single audit report for the year ended December 31, 2007 dated June 24,
2008.
SECTION II – FINANCIAL STATEMENT FINDINGS
COMPLIANCE
There were no compliance findings in relation to the financial statement audit.
SIGNIFICANT DEFICIENCIES
Fiscal 2007 Finding No. 1: Capital Asset Recordkeeping Procedures
Condition: During the year ended December 31, 2007, we noted items which qualified as capital
assets within the City’s capitalization policy which were not recorded in the City’s detailed
capital asset records.
Recommendation: Capital assets for governmental activities should be more carefully identified
and included in the government-wide (full accrual) financial statements.
Current Status: See 2008 Finding No. 1 for a similar finding noted during the single audit for the
year ended December 31, 2008.
SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
COMPLIANCE
There were no compliance findings reported in relation to major federal award programs.
SIGNIFICANT DEFICIENCIES
There were no significant deficiencies reported in relation to major federal award programs.
Sincerely,
Timothy J. Paul
Finance Director
144
City of Muskegon
933 Terrace Street
Muskegon, MI 49440
Phone: (231) 724-6709
CORRECTIVE ACTION PLAN
April 8, 2009
U.S. Department of Housing and Urban Development
Washington, D.C.
The City of Muskegon respectfully submits the following Corrective Action Plan for the year ended
December 31, 2008.
Name and address of independent public accounting firm:
Brickley DeLong, P.C.
P.O. Box 999
Muskegon, Michigan 49443
Audit period: December 31, 2008
The findings from the Schedule of Findings and Responses for the year ended December 31, 2008 are
discussed below. The findings are numbered consistently with the numbers assigned in the schedule.
SECTION II – FINANCIAL STATEMENT FINDINGS
COMPLIANCE
There were no compliance findings in relation to the financial statement audit.
SIGNIFICANT DEFICIENCIES
2008 Finding No. 1: MATERIAL WEAKNESS—Capital Asset Recordkeeping Procedures
Recommendation: Capital assets for governmental activities should be more carefully identified and
included in the government-wide (full accrual) financial statements.
Action Taken: We concur with this finding and will train staff to further improve capital expenditure
recording and review procedures.
145
U.S. Department of Housing and Urban Development
April 8, 2009
Page 2
SECTION II – FINANCIAL STATEMENT FINDINGS—Continued
SIGNIFICANT DEFICIENCIES—Continued
2008 Finding No. 2: MATERIAL WEAKNESS—Investment Function Segregation of Duties
Recommendation: Responsibilities within the investment function should be further segregated.
Action Taken: The City believes adequate controls are in place for the investment function, given the
limited staffing resources available. Investments are regularly reviewed and reconciled by a second
individual. Nonetheless, opportunities for further segregation will be explored.
SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
COMPLIANCE
U.S. Department of Housing and Urban Development
2008 Finding No. 3: Lead-Based Paint Hazard Control in Privately-Owned Housing
Recommendation: The City should require all employees, who fall under OMB Circular A-87 requirements
for documenting time charged to federal award programs, to prepare the required documentation.
Action Taken: Procedures have been put in place to document employee time in accordance with the
federal regulation.
SIGNIFICANT DEFICIENCIES
There were no significant deficiencies reported in relation to major federal award programs.
If the U.S. Department of Housing and Urban Development has questions regarding this plan, please call
Timothy J. Paul at (231) 724-6709.
Sincerely,
Timothy J. Paul
Finance Director
146
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