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City of Muskegon,
Michigan
Comprehensive Annual
Financial Report
For The Fiscal Year Ended June 30, 2011
www.shorelinecity.com
CITY OF MUSKEGON,
MICHIGAN
COMPREHENSIVE
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED
JUNE 30, 2011
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
Finance & Payroll Coordinator
Cover Photo: Hot Rod Magazine’s seven-day Hot Rod Power Tour includes a scheduled stop in Downtown Muskegon. The Power Tour
brings thousands of high-end hot rods, street rods, muscle cars and custom trucks to town. (Photo courtesy of Ann Becker)
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) .................................................................................................... 34
Statement of Activities ...................................................................................................................... 35
Fund Financial Statements
Governmental Funds
Balance Sheet ................................................................................................................................. 36
Reconciliation of the Governmental Funds Balance Sheet
to the Statement of Net Assets .................................................................................................... 37
Statement of Revenues, Expenditures and Changes
in Fund Balances ......................................................................................................................... 38
Reconciliation of the Governmental Funds Statement of Revenues,
Expenditures and Changes in Fund Balances to the Statement of
Activities ..................................................................................................................................... 39
Proprietary Funds
Statement of Net Assets ................................................................................................................. 40
Statement of Revenues, Expenses and Changes in Fund Net Assets ............................................. 41
Statement of Cash Flows ................................................................................................................ 42
Fiduciary Funds
Statement of Fiduciary Assets and Liabilities ................................................................................ 43
Component Units
Statement of Net Assets (Deficits) .................................................................................................... 44
Statement of Activities ...................................................................................................................... 45
Notes to Financial Statements .............................................................................................................. 46
Required Supplementary Information
Budgetary Comparison Schedule—General Fund ................................................................................ 74
Budgetary Comparison Schedule—Major Street and Trunkline Fund ................................................. 80
Schedule of Funding Progress .............................................................................................................. 81
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City of Muskegon
TABLE OF CONTENTS
Other Supplemental Information
Other Governmental Funds
Description of Other Governmental Funds ....................................................................................... 84
Combining Balance Sheet ................................................................................................................. 86
Combining Statement of Revenues, Expenditures and Changes in
Fund Balances ................................................................................................................................ 87
Other Special Revenue Funds
Combining Balance Sheet .............................................................................................................. 88
Combining Statement of Revenues, Expenditures and Changes in
Fund Balances ............................................................................................................................. 89
Budgetary Comparison Schedule—Other Special Revenue Funds ............................................... 90
Other Capital Projects Funds
Combining Balance Sheet .............................................................................................................. 92
Combining Statement of Revenues, Expenditures and Changes in
Fund Balances (Deficit) .............................................................................................................. 93
Internal Service Funds
Description of Internal Service Funds ............................................................................................... 95
Combining Statement of Net Assets (Deficits) ................................................................................. 96
Combining Statement of Revenues, Expenses and
Changes in Fund Net Assets (Deficits) .......................................................................................... 97
Combining Statement of Cash Flows ................................................................................................ 98
Fiduciary Funds
Description of Fiduciary Funds ......................................................................................................... 99
Agency Funds
Combining Statement of Assets and Liabilities ........................................................................... 100
Statement of Changes in Assets and Liabilities ........................................................................... 101
Component Units
Description of Component Units ..................................................................................................... 103
Combining Balance Sheet ............................................................................................................... 104
Reconciliation of the Governmental Funds Balance Sheet
to the Statement of Net Assets (Deficits) ..................................................................................... 105
Combining Statement of Revenues, Expenditures and Changes
in Fund Balances (Deficits) .......................................................................................................... 106
Reconciliation of the Governmental Funds Statement of Revenues,
Expenditures and Changes in Fund Balances to the Statement of
Activities ..................................................................................................................................... 107
Schedule of Indebtedness ................................................................................................................... 109
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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
That Could Have a Direct and Material Effect on Each Major
Program and on Internal Control over Compliance in
Accordance with OMB Circular A-133 .......................................................................................... 136
Schedule of Expenditures of Federal Awards ...................................................................................... 138
Notes to Schedule of Expenditures of Federal Awards ....................................................................... 141
Schedule of Findings and Responses ................................................................................................... 142
Client Documents
Summary Schedule of Prior Audit Findings ................................................................................... 146
Corrective Action Plan .................................................................................................................... 147
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Affirmative
Action
(231)724-6703
FAX (231)722-
1214
Cemetery
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FAX (231)726-
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City Manager
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FAX (231)722-
1214
October 21, 2011
Civil Service
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FAX (231)724-
4405
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
(231)724-6717
FAX (231)726-
2501
Ladies and Gentlemen:
Finance
(231)724-6713
FAX (231)724- We are pleased to present to you the Comprehensive Annual Financial Report (CAFR) for
6768
the City of Muskegon, Michigan, for the fiscal year ended June 30, 2011. In November
Fire Department 2009, voters approved City Charter amendments allowing the City Commission to set a
(231)724-6792
FAX (231)724- fiscal year other than the calendar year that had previously been specified by Charter.
6985
The Commission subsequently implemented this authority setting June 30 as the City’s
Income Tax new fiscal period end date. This CAFR report covers the first full twelve-month period
(231)724-6770
FAX (231)724- (July 1, 2010 through June 30, 2011) completed since this change was made.
6768
Inspection This report includes the City’s audited financial statements in accordance with the
Services requirements of state law. The financial statements are presented in conformity with
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FAX (231)728- accounting principles generally accepted in the United States of America (GAAP), and
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audited in accordance with generally accepted auditing standards by a firm of licensed
Leisure Services certified public accountants. This annual report is formatted to comply with the financial
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FAX (231)724- reporting model developed by the Government Accounting Standards Board (GASB)
1196 Statement 34.
Mayor’s Office
(231)724-6701
FAX (231)722-
GAAP requires that management provide a narrative introduction, overview, and analysis
1214 to accompany the basic financial statements in the form of Management’s Discussion and
Planning/Zoning Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and
(231)724-6702 should be read in conjunction with the financial statements. The City of Muskegon’s
FAX (231)724-
6790 MD&A can be found immediately following the independent auditor’s report.
Police
Department
(231)724-6750 The Comprehensive Annual Financial Report is prepared by the City’s Finance
FAX (231)722- Department and responsibility for both the accuracy of the data presented and the
5140
completeness and fairness of the presentation, including all disclosures, rests with the
Public Works City. We believe the data as presented is accurate in all material respects; that it is
(231)724-4100
FAX (231)722- presented in a manner designed to set forth fairly the financial position and results of
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operation of the City as measured by the financial activity of its various funds and
Treasurer component units; and that all disclosures necessary to enable the reader to gain the
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FAX (231)724-
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City of Muskegon, 933 Terrace Street, P.O. Box 536, Muskegon, MI 49443-0536
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maximum understanding of the City’s finances have been included. Brickley DeLong, P.C., Certified
Public Accountants, performed the independent audit of all accounts of the City as required by state law
and their report and unqualified opinion is presented as the first component of the financial section of
this report.
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 2010 census population of 38,401, 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, located north of the City, is the largest amusement park complex in
Michigan. The City provides water to both the amusement park and the water park located on the
site.
Muskegon is the eastern terminus for the high speed cross-lake ferry. Connecting Muskegon
with Milwaukee, Wisconsin, the Lake Express service ferries 100,000-plus passengers each season
between the two cities. 2011 marks the ferry service’s eighth successful year of operations.
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 thousands of visitors to the
community. These include Muskegon Summer Celebration which brings top name musical groups
to town for several days of waterfront music celebration and the Bike Time festival which attracts
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 of Muskegon 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) 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 from development within the Authority’s boundaries.
The Tax Increment Finance Authority (TIFA) 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 (LDFA) 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 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 its boundaries.
LOCAL ECONOMIC CONDITION AND OUTLOOK
Muskegon has a diverse local economy. The manufacturing sector is strong in the areas of aerospace,
chemicals, plastics, defense, 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.
Still, Muskegon has been heavily impacted by the current economic recession. Area unemployment
remains high and the resultant impact in City income tax revenue has been severe. There are signs,
though, that recovery has started. The W.E. Upjohn Institute for Employment Research publishes a
regular local economic forecast. Their most recent quarterly forecast (September 2011) gives an
independent assessment of the local economy:
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“Total employment in Muskegon County increased by 0.4 percent, which marked the second consecutive
quarter of modest growth. Strong gains in the goods-producing sector and an uptick in government
employment erased modest losses in the service-providing sector. The job growth helped push the region’s
unemployment rate down to 10.5 percent from 10.9 percent the previous quarter, although the overall level
remained higher than for any other metro area in west Michigan. Unfortunately, the region’s limited economic
indicators suggest that conditions will not be as rosy over the next few months.”
MAJOR INITIATIVES AND ACCOMPLISHMENTS
Among the City's major initiatives and accomplishments in fiscal year 2010-11 were the following:
Muskegon hosted the Hot Rod Power Tour an event sponsored by Hot Rod Magazine that
brought nearly 6,000 high-end hot rods, street rods, muscle cars and custom trucks to downtown
Muskegon in early summer. The event was extremely successful for the community and will
return in 2012.
The Lake House Waterfront Grille re-opened capping a very successful comeback of a major
downtown waterfront development that includes the Shoreline Inn Hotel & Conference Center
and the Terrace Point Marina. The development had been in foreclosure proceedings.
Development activity in the City’s downtown continued with several additional condominiums in
the Heritage Square “live-work” development completed or started. A total of twenty-two units
are planned for this downtown development.
Work progressed on transforming the Russell Block Market building into a downtown market
hosting eighteen to thirty start-up and small retailers of clothing, artwork and food.
Work was completed on a major $12 million auto dealership expansion encompassing GM,
Honda and Hyundai brands. The developer has purchased additional land and plans further
expansion. The City assisted in this project with the creation of a Brownfield Redevelopment
Authority and securing a low-interest state loan to help finance environmental work.
Significant improvements were made to the LC Walker Arena including installation of a video
scoreboard, complete renovation of locker and training rooms and installation of new lighting and
sound systems. These improvements were financed by the private company that operates the
Arena under contract with the City.
Mercy Health Partners undertook several renovation and expansion projects at its two Muskegon
hospital campuses including expansion of the acute care facilities.
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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
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 June 30, 2011, the total of City bonds and contractual debt outstanding (including discretely
presented component unit debt) was $31,498,123.
Standard & Poor’s rates the City’s general obligation debt A+. The City’s water revenue bonds carry a
AA- rating, affirmed in March 2010.
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. All new
employees hired by the City since 2007 are covered by a defined contribution retirement program. As
of the most recent actuarial report (December 31, 2010), the City’s defined benefit retirement program
is 100.5% funded.
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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
regularly 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.” As of the
most recent actuarial report (December 31, 2009), the City’s retiree healthcare program is 55.2%
funded.
SINGLE AUDIT
The City is required to have a 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 six months ended June 30, 2010. This marked the
twenty-fifth 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
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.
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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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Mayor & City
Commission
City Manager City Attorney
Various Boards &
Commissions
Administrative Services Community & Economic
Finance Division Public Safety Division Public Works Division
Division Development Division
Planning, Zoning & Code
City Clerk & Elections Finance Administration Police Engineering Compliance
Enforcement
Water & Sewer Community &
Civil Service City Treasurer Fire
Maintenance Neighborhood Services
Income Tax
Building Inspections Water Filtration Recreation Services
Administration
Information Technology Streets & Highways
Contract Oversight:
Assessing, Walker
Parks & Cemeteries
Arena, Fisherman's
Landing
Sanitation
Streetlights
Marina & Launch Ramps
Farmers' Market
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COMPREHENSIVE ANNUAL FINANCIAL REPORT
CITY OF MUSKEGON, MICHIGAN
LIST OF PRINCIPAL OFFICIALS
June 30, 2011
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
October 21, 2011
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 June 30, 2011, 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 June 30, 2011, 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.
Accounting principles generally accepted in the United States of America require that the management's
discussion and analysis and required supplementary information on pages XX - XX and XX - XX be
presented to supplement the basic financial statements. Such information, although not a part of the basic
financial statements, is required by the Governmental Accounting Standards Board, who considers it to be
an essential part of financial reporting for placing the basic financial statements in an appropriate
operational, economic, or historical context. We have applied certain limited procedures to the required
supplementary information in accordance with auditing standards generally accepted in the United States of
America, which consisted of inquiries of management about the methods of preparing the information and
comparing the information for consistency with management's responses to our inquiries, the basic financial
statements, and other knowledge we obtained during our audit of the basic financial statements. We do not
express an opinion or provide any assurance on the information because the limited procedures do not
provide us with sufficient evidence to express an opinion or provide any assurance.
316 Morris Ave., Suite 500 • P.O. Box 999 • Muskegon, MI 49443 907 S. State Street • P.O. Box 331 • Hart, MI 49420
PHONE (231) 726-5800 • FAX (231) 722-0260 PHONE (231) 873-1040 • FAX (231) 873-0602
17
BRICKLEY DELONG
City Commission
October 21, 2011
Page 2
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City of Muskegon’s financial statements as a whole. The introductory section, combining and
individual nonmajor fund financial statements, budgetary comparison information for nonmajor funds,
schedule of indebtedness, and statistical section, are presented for purposes of additional analysis and are not
a required part of the 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 financial statements. The combining and individual nonmajor fund financial statements, budgetary
comparison information for nonmajor funds, schedule of indebtedness, and the schedule of expenditures of
federal awards are the responsibility of management and were derived from and relate directly to the
underlying accounting and other record used to prepare the financial statements. The information has been
subjected to the auditing procedures applied in the audit of the financial statements and certain additional
procedures, including comparing and reconciling such information directly to the underlying accounting and
other record used to prepare the financial statements or to the financial statements themselves, and other
additional procedures in accordance with auditing standards generally accepted in the United State of
America. In our opinion, the information is fairly stated in all material respects in relation to the financial
statements 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 do not express an
opinion or provide any assurance 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 June 30,
2011. Please read it in conjunction with the City’s financial statements, which follow this
section.
FINANCIAL HIGHLIGHTS
The City completed its first full 12-month fiscal year with a June 30 year-end on
June 30, 2011. The City changed from a December 31 fiscal year end in 2010
and the prior financial report was for a six-month transition period ended June 30,
2010.
The assets of the City of Muskegon exceeded its liabilities by $134,502,902 as of
June 30, 2011. Of the total net assets, $21,809,807 (16.2%) was unrestricted and
may be used to meet the City’s ongoing obligations to citizens and creditors.
The City’s total combined net assets changed only slightly, increasing by $397,698
during the year ended June 30, 2011.
The City’s governmental funds reported combined ending fund balance of
$10,926,340, a decrease of $1,185,458 (9.8%) from the prior year. The decrease
is primarily attributable to a $1.0 million, one-time supplemental contribution made
to the City’s defined benefit program to keep the program at a 100% actuarial
funding level.
The City’s General Fund reported a total fund balance of $6,011,382, a decrease
of $1,527,072 from the prior year restated balance of $7,538,454. A series of one-
time factors account for the changes in fund balance:
Compliance with GASB Statement 54 required elimination of the $1.5 million
Budget Stabilization Fund and recording this amount as part of the City’s
General Fund. This necessitated restatement of the prior year’s fund balance
from $6,038,454 to $7,538,454;
As noted above, $1.0 million was contributed to the City’s defined benefit
pension program above and beyond the City’s regular annual actuarial
required contribution;
$620,000 was used to retire an outstanding economic development loan from
the State of Michigan; and,
$334,605 was used to retire an outstanding lease-purchase contract for two
City fire trucks.
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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.
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 financial statements and provide additional data. The statements are
followed by a section of required supplementary information that further explains and
supports the information in the financial statements. The figure above shows how the
required parts of this annual report are arranged and related to one another.
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
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of net assets includes all of the government’s assets and liabilities. All of the current
year’s revenues and expenses are accounted for in the statement of activities
regardless of when cash is received or paid.
The two government-wide statements report the City’s net assets and how they have
changed. Net assets—the difference between the City’s assets and liabilities—is one
way to measure the City’s overall financial health or position. Over time, increases or
decreases in the City’s net assets are an indicator of whether its financial health is
improving or deteriorating, respectively. However, to assess the overall health of the
City, one needs to consider additional nonfinancial factors such as changes in the City’s
tax base.
The government-wide financial statements include not only the City of Muskegon itself
(known as the primary government), but also legally separate component units for which
the City is financially accountable. Financial information for these component units is
reported separately from the financial information presented for the primary government
itself.
The government-wide financial statements of the City include the governmental
activities. Most of the City’s basic services are included here, such as general
government, public safety, highways and streets, sanitation, economic development,
parks and recreation, and interest on long-term debt. Income taxes, federal grants,
property taxes and revenues from the State of Michigan finance most of these activities.
Also included in the government-wide statements are the City’s business-type activities:
water, sewer and marina operations.
Fund Financial Statements
The fund financial statements provide more detailed information about the City’s major
funds—not the City as a whole. Funds are accounting devices that the City uses to
keep track of specific sources of funding and spending for particular purposes.
The City has the following kinds of funds:
Governmental funds—Most of the City’s basic services are included in
governmental funds, which focus on (1) how cash and other financial assets that
can readily be converted to cash flow in and out and (2) the balances left at year-
end that are available for spending. Consequently, the governmental fund
statements provide a detailed short-term view that helps the user determine
whether there are more or fewer financial resources that can be spent in the near
future to finance the City’s programs. Because this information does not
encompass the additional long-term focus of the government-wide statements, we
provide additional information on the subsequent page of the governmental funds
statements that explain the relationship (or differences) between them.
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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 four component units: the Downtown Development
Authority (DDA), the Tax Increment Finance Authority (TIFA), the Local
Development Finance Authority (LDFA) and, the 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 $134,502,902 as of June 30, 2011. This is
a slight increase of $397,698 from reported net assets for the prior year. An overview of
the City’s net assets follows:
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City's Net Assets
(In Thousands of Dollars)
Governmental Business-Type
Activities Activities Total Percentage
6/30/2011 6/30/2010* 6/30/2011 6/30/2010* 6/30/2011 6/30/2010* Change
Current and other assets $20,011 $20,026 $10,904 $8,985 $30,915 $29,011 6.56%
Capital assets 74,097 75,306 56,942 58,859 131,038 134,165 -2.33%
Total Assets 94,108 95,332 67,846 67,844 161,953 163,177 -0.75%
Long-term liabilities 6,919 8,229 15,423 16,702 22,342 24,931 -10.38%
Other liabilities 2,990 2,406 2,120 1,734 5,110 4,140 23.43%
Total Liabilities 9,909 10,635 17,543 18,436 27,452 29,071 -5.57%
Net Assets
Invested in capital assets,
net of related debt 67,945 67,810 40,420 41,106 108,365 108,916 -0.51%
Restricted 3,656 3,059 672 672 4,328 3,731 16.01%
Unrestricted 12,598 13,828 9,211 7,630 21,809 21,458 1.64%
Total Net Assets $84,199 $84,697 $50,303 $49,408 $134,502 $134,105 0.30%
The bulk of the City’s net assets ($108,364,685 or 81%) 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 3.2% ($4,328,410) of the City’s net assets are legally
restricted as to use. Remaining net assets ($21,809,807) are unrestricted and may be
used to meet the City’s operating needs and ongoing obligations. The City’s
unrestricted net assets increased slightly ($351,180) during the year.
Changes in net assets. The City’s total revenues were $45,018,833 for the year ended
June 30, 2011. This represents a 71% increase over total revenues collected during the
six-month fiscal year ended June 30, 2010 and a 2% increase over total revenues
collected during the prior twelve-month reporting period ended December 31, 2009.
About 37% of the City’s revenue stream came from charges to users of specific services
such as water or sewer. Another seventeen 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
franchise fees and investment income.
The total cost of all City programs and services for the year ended June 30, 2011 was
$44,621,135. This represents a 106% increase over total expenses incurred during the
six-month fiscal year ended June 30, 2010 and a five percent decrease from reported
expenses for the last twelve-month fiscal year ended December 31, 2009. Seventy-four
percent of the City’s expenses were for governmental activities such as police and fire
protection, streets, parks, and general administration. The remaining twenty-six percent
represents the costs of the City’s business-type activities, specifically, water, sewer and
marina operations.
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The difference between the City’s total revenues and expenses ($397,698) represents
the decrease in total net assets realized in the fiscal year ended June 30, 2011. The
following table (Changes in City’s Net Assets) further breaks down the change in total
net assets into period-to-period changes in individual revenue and expense categories:
Changes in City’s Net Assets
(In thousands of dollars)
Governmental Business-Type
Activities Activities Total Percentage
6/30/2011 6/30/2010* 6/30/2011 6/30/2010* 6/30/2011 6/30/2010* Change
Program revenues
Charges for services $4,418 $1,964 $12,302 $6,490 $16,720 $8,454 97.78%
Operating grants and contributions 5,425 3,132 - - 5,425 3,132 73.21%
Capital grants and contributions 2,257 255 20 - 2,277 255 792.94%
General revenues
Property taxes 8,844 8,681 - - 8,844 8,681 1.88%
Income taxes 6,867 3,505 - - 6,867 3,505 95.92%
State shared revenues 3,847 1,832 - - 3,847 1,832 109.99%
All other 1,014 400 24 17 1,038 417 148.92%
Total revenues 32,672 19,769 12,346 6,507 45,018 26,276 71.33%
Governmental activities expenses
Public representation 854 445 - - 854 445 91.91%
Administrative services 646 318 - - 646 318 103.14%
Financial services 2,373 1,210 - - 2,373 1,210 96.12%
Public safety 13,391 6,333 - - 13,391 6,333 111.45%
Public works 3,471 1,641 - - 3,471 1,641 111.52%
Highways, streets and bridges 7,013 3,680 - - 7,013 3,680 90.57%
Community and economic development 2,831 1,275 - - 2,831 1,275 122.04%
Culture and recreation 1,524 760 - - 1,524 760 100.53%
General administration 794 210 - - 794 210 278.10%
Interest on long-term debt 273 139 - - 273 139 96.40%
Business-type activities expenses
Water - - 5,869 2,959 5,869 2,959 98.34%
Sewer - - 5,289 2,525 5,289 2,525 109.47%
Marina and Launch Ramp - - 293 150 293 150 95.33%
Total expenses 33,170 16,011 11,451 5,634 44,621 21,645 106.15%
Change in net assets before transfers (498) 3,758 895 873 397 4,631 -91.43%
Transfers - (3) - 3 - - -
Change in net assets (498) 3,755 895 876 397 4,631 -91.43%
Net assets at beginning of year 84,697 80,942 49,408 48,532 134,105 129,474 3.58%
Net assets at end of year $84,199 $84,697 $50,303 $49,408 $134,502 $134,105 0.30%
* Six‐month fiscal period
Net assets for governmental activities decreased $497,505 while net assets for
business-type activities increased by $895,203.
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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 the year ended June 30,
2011 was $33,170,383.
The net cost that City taxpayers paid for these activities through local property
taxes and income taxes was $15,710,971, or 47% of the total.
The remaining cost was paid by user charges to those directly benefitting from the
programs or by state and federal grants and contributions
Net Cost of Selected City Functions
(in thousands of dollars)
Total Cost of Services Net Cost of Services
6/30/2011 6/30/2010* % Change 6/30/2011 6/30/2010* % Change
Governmental activities
Public safety $13,391 $6,333 111.45% $12,046 $5,666 112.60%
Community and economic development 2,831 1,275 122.04% 106 (482) -121.99%
Culture and recreation 1,524 760 100.53% 1,147 611 87.73%
Highways, streets and bridges 7,013 3,680 90.57% 1,770 1,919 -7.76%
Public works 3,471 1,641 111.52% 2,817 1,416 98.94%
All other 4,940 2,322 112.75% 3,184 1,529 108.24%
Total governmental activities $33,170 $16,010 107.18% $21,070 $10,659 97.67%
* Six‐month fiscal period
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 the fiscal year ended June 30,
2011, the City’s total business-type activities realized an overall increase in net assets
of $895,203.
Sewer Fund net assets increased $1,400,447 primarily as result of lower and more
stable wholesale sewage treatment costs paid to Muskegon County. The Water Fund
saw net assets fall $330,504. This falloff is attributable to reduced consumption levels.
Marina and Launch Ramp Fund net assets decreased $96,735 due to lower operating
revenues resulting from the ongoing economic downturn.
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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 the fiscal year ended June 30, 2011
were the General Fund and the Major Street and Trunkline Fund.
General Fund Highlights
The General Fund receives 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
taking into account changing economic conditions and policy priorities. The following
table shows the General Fund year-end fund balance for the last five years.
Prior Year’s Fund Balance as a % of
Year-End Fund Year‐to‐Year %
Year Ended
Balance
Expenditures and Prior Year Expenditures
Change (Policy Target=10%)
Other Uses
6/30/2011 $6,011,382 -0.45% $24,850,082 24.19%
6/30/2010* 6,038,454 268.50% 24,850,082 24.30%
12/31/2009 1,638,662 -31.26% 26,100,530 6.28%
12/31/2008 2,383,725 -18.38% 24,800,810 9.61%
12/31/2007 2,920,632 8.57% 24,498,778 11.92%
* Six‐month fiscal period
The City changed its fiscal year transitioning with a six-month fiscal period ended June
30, 2010. This change resulted in a significant one-time increase to the General Fund
fund balance due to the fact that annual property taxes are collected in full during this
period.
General Fund revenues for the year ended June 30, 2011 were $205,365 higher than
the final amended budget estimate. The positive revenue variance is mostly due to
higher than expected state shared revenues.
General Fund expenditures were $406,489 less than projected in the amended budget.
Almost all city departments spent less than expected due to a combination of 1) tight
budget controls, 2) conservative budget projections and, 3) cost savings realized from
budget cuts made in the prior year.
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. For the year ended June 30, 2011, the fund balance of the Major
Street and Trunkline Fund increased $206,844.
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CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
As of June 30, 2011, the City and its component units had invested $133,927,508 in a
variety of capital assets, including land, streets, equipment, buildings, water and sewer
lines, and vehicles. This is a decrease of $3,298,490 from capital assets reported as of
June 30, 2010. The decrease is due to normal depreciation. Note D of the notes to the
basic financial statements provides detailed information on the City’s capital asset
investment.
Long-Term Debt
Bond Ratings
At June 30, 2011, the City had $24,019,442 in bonds and
The City’s limited full faith and
other long-term obligations outstanding. This represents a credit bonds (bonds guaranteed
ten percent decrease from the prior year. In addition to by the City’s taxing powers)
making all regularly scheduled debt service payments, the were upgraded by Standard &
Poor’s from a rating of “A” to
City fully retired a $334,605 installment lease purchase “A+” in early 2010. The City’s
contract and $620,000 state economic development loan Water System revenue bonds
during the year. carry the “AA-“ rating.
Additional information concerning the City’s long-term debt is presented in Note H to the
basic financial statements.
City’s Long Term Debt – Bonds and Other Obligations
(In thousands of dollars)
Governmental Business-Type
Activities Activities Total Percentage
6/30/2011 6/30/2010* 6/30/2011 6/30/2010* 6/30/2011 6/30/2010* Change
Due within one year $421 $527 $1,256 $1,223 $1,677 $1,750 -4.17%
Due in more than one year 6,919 8,230 15,423 16,702 22,342 24,932 -10.39%
Total bonds & other obligations $7,340 $8,757 $16,679 $17,925 $24,019 $26,682 -9.98%
* Six‐month fiscal period
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 $7,478,681 at year-end as shown in the table below. This represents a
decrease of 3.2% from the prior year. On March 22, 2011, $2,005,000 of outstanding
Downtown Development Authority bonds were refunded with new bonds issued at lower
interest rates. The net present value savings from the refunding are $72,474 or 3.6% of
the refunded principal amount.
Debt issued by 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.
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Additional information concerning component units’ long-term debt is presented in Note
H to the basic financial statements and is summarized as follows:
Component Unit Long Term Debt – Bonds and Other Obligations
(In thousands of dollars)
Downtown Development Local Development
Total Percentage
Finance Authority Finance Authority
6/30/2011 6/30/2010* 6/30/2011 6/30/2010* 6/30/2011 6/30/2010* Change
Due within one year $265 $240 $80 $80 $345 $320 7.81%
Due in more than one year 2,813 3,005 4,321 4,400 7,134 7,405 -3.66%
Total bonds & other obligations $3,078 $3,245 $4,401 $4,480 $7,479 $7,725 -3.18%
* Six‐month fiscal period
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
The City’s fiscal year 2011-12 capital budget anticipates spending $6,925,400 for capital
projects, consisting of street improvements, water and sewer system improvements,
and scheduled equipment replacements. These improvements will be funded through
grants and revenues generated from operations. On September 30, 2011, the City
issued $2.0 million in bonds for the purpose of providing local matching funds for
several significant street projects for which state and federal matching grants are
available.
From an operating standpoint, the City’s 2011-12 budget will entail further program and
position cuts to better balance the City’s operating expenses with recurring revenue
streams:
Several firefighter positions will be vacated through retirements during the year.
The City will fill these positions with part-time firefighters under an innovative
agreement with the firefighters’ union.
Other service cuts including elimination of lifeguards at Pere Marquette Beach,
removal of some mid-block streetlights and reductions in the use of seasonal
workers in parks and cemeteries are also scheduled.
City operations depend 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 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%
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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 workers at not-for-profit hospitals,
churches, government agencies, colleges and other institutions that are traditionally
exempt from paying local property taxes. This is particularly important for Muskegon
since it is the regional center for many such institutions.
Income tax revenues increased from $3,368,057 in the six-month period ended June
30, 2010 to $6,599,753 for the year ended June 30, 2011. The 2011 fiscal year
collections represent a 1.8% increase over the $6,482,200 collected during the most
recent 12-month fiscal period ended December 31, 2009. For 2011-12, the City has
conservatively estimated income tax revenue to be $6,500,000.
City Income Tax Percent
Year Revenues Change
6/30/2011 $6,599,753 96.0%
6/30/2010* 3,368,057 -48.0%
12/31/2009 6,482,290 -15.8%
12/31/2008 7,694,780 1.0%
12/31/2007 7,618,461 2.6%
* Six‐month fiscal period
Local Property Tax
City charter and state law authorize the City to levy a general operating millage up to 10
mills and 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.
For 2011-12, the City tax levy is 9.5 mills for general operations and 2.5 mills for
sanitation service. We project that $7,968,182 in property tax revenue will be collected
during fiscal year 2011-12.
It should be noted that several significant property tax appeals are pending. The impact
of these appeals on City finances is being monitored closely. At June 30, 2011 the City
has recorded a $500,000 estimated liability for potential refunds resulting from these tax
appeals.
State Shared Revenues
State shared sales tax revenues represent about sixteen percent of total General Fund
revenue. The City’s state shared revenue allocation is made up of two parts. The
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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
Revenues
Year Change
6/30/2011 $3,846,859 110.0%
6/30/2010* 1,832,066 -52.3%
12/31/2009 3,841,922 -14.4%
12/31/2008 4,487,698 0.3%
12/31/2007 4,475,462 -0.8%
* Six‐month fiscal period
Erosion of state shared revenues (both from economic factors and from legislative
action) constitutes a major on-going concern for City finances.
For the 2011-12 fiscal year, the City has projected $3,050,000 in state shared revenues.
Recent information from the state indicate that this estimate may be able to be
increased 10-15%.
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
from State Percent
Year
Change
6/30/2011 $3,256,430 87.0%
6/30/2010* 1,741,233 -45.2%
12/31/2009 3,177,862 -0.7%
12/31/2008 3,199,930 -2.7%
12/31/2007 3,288,098 -0.3%
* Six‐month fiscal period
For 2011-12, the City is projecting no material change in street revenues from the State
of Michigan.
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Water and Sewer Fees
From a government-wide entity perspective, combined water and sewer fees represent
one of the City’s largest income streams, totaling $12,107,611 during the year ended
June 30, 2011. Charges to customers are based on the amount of metered services
used times rates periodically set by the City Commission. Water rates will be adjusted
in 2011-12.
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).
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32
FINANCIAL STATEMENTS
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City of Muskegon
STATEMENT OF NET ASSETS (DEFICITS)
June 30, 2011
ASSETS
Governmental Business-type Component
activities activities Total units
CURRENT ASSETS
Cash and investments $ 13,652,992 $ 6,477,240 $ 20,130,232 $ 375,287
Receivables 2,507,312 1,926,340 4,433,652 -
Due from other governmental units 2,030,496 59,604 2,090,100 -
Internal balances (1,426,687) 1,426,687 - -
Inventories 29,836 129,887 159,723 -
Prepaid items 1,008,067 103,860 1,111,927 -
Total current assets 17,802,016 10,123,618 27,925,634 375,287
NONCURRENT ASSETS
Restricted assets - 672,000 672,000 -
Capital assets, net
Nondepreciable 20,317,545 1,651,982 21,969,527 400,000
Depreciable 53,779,017 55,289,954 109,068,971 2,489,010
Bond issuance costs, net 113,520 108,619 222,139 140,139
Special assessments receivable 743,750 - 743,750 -
Net pension asset 1,000,000 - 1,000,000 -
Notes receivable 352,763 - 352,763 -
Total noncurrent assets 76,306,595 57,722,555 134,029,150 3,029,149
Total assets 94,108,611 67,846,173 161,954,784 3,404,436
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LIABILITIES AND NET ASSETS (DEFICITS)
CURRENT LIABILITIES
Accounts payable and accrued liabilities 1,844,129 383,208 2,227,337 37,700
Due to other governmental units 65,888 480,266 546,154 -
Unearned revenue 658,949 - 658,949 -
Bonds and other obligations, due within one year 421,000 1,256,000 1,677,000 345,000
Total current liabilities 2,989,966 2,119,474 5,109,440 382,700
NONCURRENT LIABILITIES
Bonds and other obligations, less amounts due within one year 6,919,081 15,423,361 22,342,442 7,133,681
Total liabilities 9,909,047 17,542,835 27,451,882 7,516,381
NET ASSETS (DEFICITS)
Invested in capital assets, net of related debt 67,944,957 40,419,728 108,364,685 (1,511,657)
Restricted for:
Streets and highways 2,145,116 - 2,145,116 -
Debt service - 672,000 672,000 -
Law enforcement 140,828 - 140,828 -
Perpetual care
Expendable 19,063 - 19,063 -
Non-expendable 1,346,284 - 1,346,284 -
Other purposes 5,119 - 5,119 -
Unrestricted 12,598,197 9,211,610 21,809,807 (2,600,288)
Total net assets (deficits) $ 84,199,564 $ 50,303,338 $ 134,502,902 $ (4,111,945)
The accompanying notes are an integral part of this statement.
City of Muskegon
STATEMENT OF ACTIVITIES
For the year ended June 30, 2011
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 $ 854,249 $ 196,886 $ - $ - $ (657,363) $ - $ (657,363) $ -
Administrative services 645,585 263,473 12,005 - (370,107) - (370,107) -
Financial services 2,373,141 879,905 75,000 - (1,418,236) - (1,418,236) -
Public safety 13,390,888 1,109,659 235,300 - (12,045,929) - (12,045,929) -
Public works 3,471,051 642,082 - 12,199 (2,816,770) - (2,816,770) -
Highways, streets and bridges 7,013,216 451,473 3,104,865 1,686,944 (1,769,934) - (1,769,934) -
Community and economic development 2,830,867 457,952 1,985,540 493,520 106,145 - 106,145 -
Culture and recreation 1,524,331 300,367 12,455 64,500 (1,147,009) - (1,147,009) -
General administration 794,115 116,690 - - (677,425) - (677,425) -
Interest on long-term debt 272,940 - - - (272,940) - (272,940) -
Total governmental activities 33,170,383 4,418,487 5,425,165 2,257,163 (21,069,568) - (21,069,568) -
Business-type activities
Sewer 5,288,622 6,652,851 - - - 1,364,229 1,364,229 -
Water 5,869,241 5,454,760 - 20,074 - (394,407) (394,407) -
Marina and Launch Ramp 292,889 194,311 - - - (98,578) (98,578) -
Total business-type activities 11,450,752 12,301,922 - 20,074 - 871,244 871,244 -
Total primary government $ 44,621,135 $ 16,720,409 $ 5,425,165 $ 2,277,237 (21,069,568) 871,244 (20,198,324) -
35
Component units
Local Development Finance Authority III $ 374,163 $ - $ - $ 175,000 - - - (199,163)
Downtown Development Authority 119,555 - - - - - - (119,555)
Tax Increment Finance Authority 75,000 - - - - - - (75,000)
Brownfield Redevelopment Authority - - - - - - - -
Total component units $ 568,718 $ - $ - $ 175,000 - - - (393,718)
General revenues
Property taxes 8,844,004 - 8,844,004 494,334
Income taxes 6,866,967 - 6,866,967 -
Cable franchises 362,103 - 362,103 -
Grants and contributions not restricted to specific programs 3,846,859 - 3,846,859 -
Unrestricted investment earnings 193,435 23,959 217,394 2,094
Miscellaneous 432,880 - 432,880 -
Gain on sale of capital asset 25,815 - 25,815 -
Total general revenues 20,572,063 23,959 20,596,022 496,428
Change in net assets (497,505) 895,203 397,698 102,710
Net assets (deficit) at July 1, 2010 84,697,069 49,408,135 134,105,204 (4,214,655)
Net assets (deficit) at June 30, 2011 $ 84,199,564 $ 50,303,338 $ 134,502,902 $ (4,111,945)
The accompanying notes are an integral part of this statement.
City of Muskegon
BALANCE SHEET
Governmental Funds
June 30, 2011
Major Street Other Total
General and Trunkline governmental governmental
Fund Fund funds funds
ASSETS
Cash and investments $ 4,339,329 $ 586,839 $ 4,158,343 $ 9,084,511
Receivables
Accounts and loans 235,655 1,374 737,951 974,980
Property taxes 79,413 - - 79,413
Income taxes 735,302 - - 735,302
Special assessments - 541,538 509,211 1,050,749
Due from other governmental units 872,880 449,182 708,434 2,030,496
Due from other funds 987,326 - - 987,326
Prepaid items 241,173 13,162 5,410 259,745
Total assets $ 7,491,078 $ 1,592,095 $ 6,119,349 $ 15,202,522
LIABILITIES AND FUND BALANCES
Liabilities
Accounts payable $ 871,802 $ 41,539 $ 53,137 $ 966,478
Accrued liabilities 521,469 13,340 22,002 556,811
Due to other governmental units 10,804 55,084 - 65,888
Due to other funds - - 893,906 893,906
36
Deferred revenue 75,621 916,131 801,347 1,793,099
Total liabilities 1,479,696 1,026,094 1,770,392 4,276,182
Fund balances
Nonspendable:
Prepaid items 241,173 13,162 5,410 259,745
Long-term loans receivable - - 349,400 349,400
Perpetual care 10,000 - 1,336,284 1,346,284
Restricted for:
Streets and highways - 552,839 657,930 1,210,769
Law enforcement - 140,828 140,828
Perpetual care - 19,063 19,063
Other purposes - - 5,119 5,119
Assigned for:
Capital projects and public improvements 1,500,000 - 2,073,027 3,573,027
Fiscal year 2012 budget 885,728 - - 885,728
Unassigned 3,374,481 - (238,104) 3,136,377
Total fund balances 6,011,382 566,001 4,348,957 10,926,340
Total liabilities and fund balances $ 7,491,078 $ 1,592,095 $ 6,119,349 $ 15,202,522
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
June 30, 2011
Total fund balance—governmental funds $ 10,926,340
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 $ 127,576,545
Accumulated depreciation (55,147,933) 72,428,612
Bond issuance costs are not capitalized and amortized in the governmental funds.
Bond issuance costs 160,106
Accumulated amortization (46,586) 113,520
Net pension costs are recorded as expenditures in the fund statements when paid,
but are recorded as an expense in the government-wide statements when incurred. 1,000,000
Other receivables in governmental activities are not reported in the
37
governmental funds. 675,621
Accrued interest in governmental activities is not reported in the
governmental funds. (56,700)
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. 1,048,529
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 (6,151,605)
Compensated absences (1,093,700) (7,245,305)
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. 5,308,947
Net assets of governmental activities in the Statement of Net Assets $ 84,199,564
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 June 30, 2011
Major Street Other Total
General and Trunkline governmental governmental
Fund Fund funds funds
REVENUES
Taxes $ 15,146,430 $ - $ - $ 15,146,430
Licenses and permits 1,179,639 - - 1,179,639
Intergovernmental revenues
Federal 192,842 1,457,137 2,143,552 3,793,531
State 3,889,317 2,704,187 1,061,214 7,654,718
Local 75,000 - 2,500 77,500
Charges for services 2,365,018 64,370 339,816 2,769,204
Fines and forfeitures 432,874 - 14,380 447,254
Interest and rental income 315,019 36,626 60,853 412,498
Other 431,190 523,552 467,159 1,421,901
Total revenues 24,027,329 4,785,872 4,089,474 32,902,675
EXPENDITURES
Current
Public representation services 851,918 - - 851,918
Administrative services 492,331 - - 492,331
Financial services 2,352,709 - - 2,352,709
Public safety 13,079,620 - 8,356 13,087,976
Public works 3,079,342 - - 3,079,342
Highways, streets and bridges - 4,179,028 1,523,013 5,702,041
38
Community and economic development 845,394 - - 845,394
Culture and recreation 1,178,782 - 18,238 1,197,020
Other governmental functions 1,775,128 - - 1,775,128
Debt service
Principal 1,024,605 - 320,578 1,345,183
Interest and fees 228,190 - 39,068 267,258
Capital outlay - - 3,183,905 3,183,905
Total expenditures 24,908,019 4,179,028 5,093,158 34,180,205
Excess of revenues over (under) expenditures (880,690) 606,844 (1,003,684) (1,277,530)
OTHER FINANCING SOURCES (USES)
Proceeds from sale of capital assets - - 120,118 120,118
Transfers in 2,357 - 1,346,337 1,348,694
Transfers out (648,739) (400,000) (328,001) (1,376,740)
Total other financing sources (uses) (646,382) (400,000) 1,138,454 92,072
Net change in fund balances (1,527,072) 206,844 134,770 (1,185,458)
Fund balances at July 1, 2010, as restated 7,538,454 359,157 4,214,187 12,111,798
Fund balances at June 30, 2011 $ 6,011,382 $ 566,001 $ 4,348,957 $ 10,926,340
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 June 30, 2011
Net change in fund balances—total governmental funds $ (1,185,458)
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 $ (4,375,774)
Capital outlay 3,301,273 (1,074,501)
Revenue reported in the Statement of Activities that does not provide current
financial resources are not reported as revenue in the governmental funds. 104,321
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. 1,344,231
39
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. 2,900
Some items are reported on the accrual method in the Statement of Activities and reported
as expenditures when financial resources are used in the governmental funds.
Increase in net pension asset 1,000,000
Decrease in compensated absences 65,926 1,065,926
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. (344,175)
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. (410,749)
Change in net assets of governmental activities $ (497,505)
The accompanying notes are an integral part of this statement.
City of Muskegon
STATEMENT OF NET ASSETS
Proprietary Funds
June 30, 2011
ASSETS
Governmental
Activities -
Business-type Activities - Enterprise Funds Internal
Marina and Service
Sewer Water Ramp Total Funds
CURRENT ASSETS
Cash and investments $ 3,320,219 $ 2,913,169 $ 243,852 $ 6,477,240 $ 4,568,483
Receivables
Accounts receivable 1,011,405 910,827 4,108 1,926,340 173,379
Due from other governmental units - 57,812 1,792 59,604 -
Inventories 32,386 97,501 - 129,887 29,836
Prepaid items 42,733 58,510 2,617 103,860 748,322
Total current assets 4,406,743 4,037,819 252,369 8,696,931 5,520,020
NONCURRENT ASSETS
Restricted assets - 672,000 - 672,000 -
Capital assets
Land 16,188 103,500 22,562 142,250 65,000
Land improvements - - 1,888,965 1,888,965 190,872
Buildings, improvements and systems 20,282,596 63,802,215 2,322,488 86,407,299 1,559,334
Machinery and equipment 39,722 2,788,156 - 2,827,878 7,186,154
Construction in progress 310,669 1,199,063 - 1,509,732 -
Less accumulated depreciation (7,568,514) (25,918,783) (2,346,891) (35,834,188) (7,333,410)
Net capital assets 13,080,661 41,974,151 1,887,124 56,941,936 1,667,950
40
Bond issuance costs, net - 108,619 - 108,619 -
Total noncurrent assets 13,080,661 42,754,770 1,887,124 57,722,555 1,667,950
Total assets 17,487,404 46,792,589 2,139,493 66,419,486 7,187,970
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES
Accounts payable 44,440 166,092 14,861 225,393 213,832
Accrued liabilities 15,764 142,005 46 157,815 50,308
Due to other governmental units 380,870 99,396 - 480,266 -
Due to other funds - - - - 93,420
Bonds and other obligations, due within one year 9,000 1,247,000 - 1,256,000 16,000
Total current liabilities 450,074 1,654,493 14,907 2,119,474 373,560
NONCURRENT LIABILITIES
Bonds and other obligations, less amounts due within one year 46,718 15,376,050 593 15,423,361 78,776
Total liabilities 496,792 17,030,543 15,500 17,542,835 452,336
NET ASSETS
Invested in capital assets, net of related debt 13,080,661 25,451,943 1,887,124 40,419,728 1,667,950
Restricted for debt service - 672,000 - 672,000 -
Unrestricted 3,909,951 3,638,103 236,869 7,784,923 5,067,684
Total net assets $ 16,990,612 $ 29,762,046 $ 2,123,993 48,876,651 $ 6,735,634
Adjustment to reflect the consolidation of internal service fund activities
related to enterprise funds 1,426,687
Net assets of business-type activities $ 50,303,338
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 June 30, 2011
Governmental
Activities -
Business-type Activities - Enterprise Funds Internal
Marina and Service
Sewer Water Ramp Total Funds
OPERATING REVENUES
Charges for services $ 6,499,376 $ 5,221,839 $ 184,394 $ 11,905,609 $ 7,162,116
Other 153,475 232,921 9,917 396,313 215,192
Total operating revenues 6,652,851 5,454,760 194,311 12,301,922 7,377,308
OPERATING EXPENSES
Administration 334,890 541,950 17,376 894,216 360,000
Insurance premiums and claims - - - - 3,983,943
Wastewater treatment 4,520,630 - - 4,520,630 -
Filtration plant operations - 1,367,569 - 1,367,569 -
Water distribution - 1,385,011 - 1,385,011 -
Other operations - - 160,584 160,584 3,058,546
Depreciation and amortization 406,706 2,119,038 114,198 2,639,942 534,711
Total operating expenses 5,262,226 5,413,568 292,158 10,967,952 7,937,200
41
Operating income (loss) 1,390,625 41,192 (97,847) 1,333,970 (559,892)
NONOPERATING REVENUES (EXPENSES)
Investment earnings 9,822 13,025 1,112 23,959 22,093
Gain on sale of capital assets - - - - 20,999
Interest expense - (404,795) - (404,795) -
Total nonoperating revenue (expenses) 9,822 (391,770) 1,112 (380,836) 43,092
Income (loss) before contributions and transfers 1,400,447 (350,578) (96,735) 953,134 (516,800)
Capital contributions - 20,074 - 20,074 -
Transfers in - - - - 28,046
Change in net assets 1,400,447 (330,504) (96,735) 973,208 (488,754)
Net assets at July 1, 2010 15,590,165 30,092,550 2,220,728 7,224,388
Net assets at June 30, 2011 $ 16,990,612 $ 29,762,046 $ 2,123,993 $ 6,735,634
Adjustments to reflect the consolidation of internal service fund activities
related to enterprise funds (78,005)
Change in net assets of business-type activities $ 895,203
The accompanying notes are an integral part of this statement.
City of Muskegon
STATEMENT OF CASH FLOWS
Proprietary Funds
For the year ended June 30, 2011
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 $ 6,711,360 $ 5,482,175 $ 197,769 $ 12,391,304 $ 495,597
Receipts from interfund services provided 19,954 79,369 - 99,323 7,162,116
Payments to suppliers (3,848,244) (1,313,652) (116,535) (5,278,431) (5,125,868)
Payments to employees (390,071) (1,169,562) (47,163) (1,606,796) (1,739,210)
Payments for interfund services used (483,516) (595,652) (10,706) (1,089,874) (684,827)
Net cash provided by operating activities 2,009,483 2,482,678 23,365 4,515,526 107,808
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers in - - - - 28,046
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Capital contributions - 20,074 - 20,074 -
Purchases of capital assets (284,965) (412,408) - (697,373) (395,734)
Principal paid on capital debt - (1,195,000) - (1,195,000) -
Interest paid on capital debt - (451,323) - (451,323) -
Proceeds from sale of capital assets - - - - 24,055
Net cash used for capital and related financing activities (284,965) (2,038,657) - (2,323,622) (371,679)
CASH FLOW FROM INVESTING ACTIVITIES
42
Investment earnings 9,822 13,025 1,112 23,959 22,093
Net increase (decrease) in cash and investments 1,734,340 457,046 24,477 2,215,863 (213,732)
Cash and investments July 1, 2010 1,585,879 3,128,123 219,375 4,933,377 4,782,215
Cash and investments at June 30, 2011 $ 3,320,219 $ 3,585,169 $ 243,852 $ 7,149,240 $ 4,568,483
Reconciliation of cash and investments to the statement of net assets
Cash and investments $ 3,320,219 $ 2,913,169 $ 243,852 $ 6,477,240 $ 4,568,483
Restricted cash and investments - 672,000 - 672,000 -
$ 3,320,219 $ 3,585,169 $ 243,852 $ 7,149,240 $ 4,568,483
Reconciliation of operating income (loss) to net cash provided by
operating activities
Operating income (loss) $ 1,390,625 $ 41,192 $ (97,847) $ 1,333,970 $ (559,892)
Adjustments to reconcile operating income (loss) to net cash provided by
(used for) operating activities
Depreciation and amortization expense 406,706 2,119,038 114,198 2,639,942 534,711
Bad debt expense 41,609 27,999 - 69,608 -
Change in assets and liabilities
Receivables, net 36,854 78,785 3,458 119,097 280,405
Inventories (1,153) (53) - (1,206) (1,125)
Prepaid items 655 5,489 (125) 6,019 18,706
Accounts payable 121,326 183,725 5,068 310,119 (192,855)
Accrued liabilities 12,861 26,503 (1,387) 37,977 33,330
Due to other funds - - - - (5,472)
Net cash provided by operating activities $ 2,009,483 $ 2,482,678 $ 23,365 $ 4,515,526 $ 107,808
The accompanying notes are an integral part of this statement.
City of Muskegon
STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES
Fiduciary Funds
June 30, 2011
Agency
Funds
ASSETS
Cash and investments $ 742,906
Accounts receivable 1,867
Total assets $ 744,773
LIABILITIES
Accounts payable $ 213,981
Due to other governmental units 462,345
Deposits held for others 68,447
Total liabilities $ 744,773
43
The accompanying notes are an integral part of this statement.
City of Muskegon
STATEMENT OF NET ASSETS (DEFICITS)
Discretely Presented Component Units
June 30, 2011
ASSETS
Local Tax
Development Downtown Increment Brownfield
Finance Development Finance Redevelopment
Authority III Authority Authority Authority Total
CURRENT ASSETS
Cash and investments $ 21,348 $ 272,145 $ 16,445 $ 65,349 $ 375,287
NONCURRENT ASSETS
Capital assets, net
Nondepreciable 400,000 - - - 400,000
Depreciable 2,489,010 - - - 2,489,010
Net capital assets 2,889,010 - - - 2,889,010
Bond issuance costs, net 89,500 50,639 - - 140,139
Total noncurrent assets 2,978,510 50,639 - - 3,029,149
44
Total assets 2,999,858 322,784 16,445 65,349 3,404,436
LIABILITIES AND NET ASSETS (DEFICITS)
CURRENT LIABILITIES
Accrued liabilities 32,300 5,400 - - 37,700
Bonds and other obligations, due within one year 80,000 265,000 - - 345,000
Total current liabilities 112,300 270,400 - - 382,700
NONCURRENT LIABILITIES
Bonds and other obligations, less amounts due
within one year 4,320,667 2,813,014 - - 7,133,681
Total liabilities 4,432,967 3,083,414 - - 7,516,381
NET ASSETS (DEFICITS)
Invested in capital assets, net of related debt (1,511,657) - - - (1,511,657)
Unrestricted 78,548 (2,760,630) 16,445 65,349 (2,600,288)
Total net assets (deficits) $ (1,433,109) $ (2,760,630) $ 16,445 $ 65,349 $ (4,111,945)
The accompanying notes are an integral part of this statement.
City of Muskegon
STATEMENT OF ACTIVITIES
Discretely Presented Component Units
For the year ended June 30, 2011
Program
Revenue Net (Expense) Revenue and Changes in Net Assets
Local Tax
Capital grants Development Downtown Increment Brownfield
and Finance Development Finance Redevelopment
Functions/Programs Expenses contributions Authority III Authority Authority Authority Total
Local Development Finance Authority III
Economic development $ 178,821 $ - $ (178,821) $ - $ - $ - $ (178,821)
Interest on long-term debt 195,342 175,000 (20,342) - - - (20,342)
Total Local Development Finance Authority III 374,163 175,000 (199,163) - - - (199,163)
Downtown Development Authority
Interest on long-term debt 119,555 - - (119,555) - - (119,555)
Tax Increment Finance Authority
Economic development 75,000 - - - (75,000) - (75,000)
Brownfield Redevelopment Authority
45
Economic development - - - - - - -
Total discretely presented component units $ 568,718 $ 175,000 (199,163) (119,555) (75,000) - (393,718)
General revenues
Property taxes 84,658 281,424 53,769 74,483 494,334
Unrestricted investment income 153 1,716 142 83 2,094
Total general revenues 84,811 283,140 53,911 74,566 496,428
Change in net assets (114,352) 163,585 (21,089) 74,566 102,710
Net assets (deficit) at July 1, 2010 (1,318,757) (2,924,215) 37,534 (9,217) (4,214,655)
Net assets (deficit) at June 30, 2011 $ (1,433,109) $ (2,760,630) $ 16,445 $ 65,349 $ (4,111,945)
The accompanying notes are an integral part of this statement.
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
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 June 30 fiscal
year end.
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.
46
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
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 June 30, 2011, 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, 2010, the date
of its latest audited financial statements is as follows:
Total assets $ 5,608,614
Total liabilities (259,484)
Total net assets $ 5,349,130
Total operating income $ 1,736,893
Total operating expenses (1,996,901)
Total nonoperating revenues 44,464
Capital contributions 99,359
Change in net assets $ (116,185)
47
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
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.
48
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
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.
49
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
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.
In the government-wide financial statements and proprietary fund types in the fund financial statements, 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.
In the fund financial statements, when expenditures are incurred in governmental fund types for purposes for
which both restricted and unrestricted (committed, assigned, or unassigned) amounts are available, it is the
City’s policy to consider that restricted amounts have been reduced first. When an expenditure is incurred for
purposes for which amounts in any of the unrestricted fund balance classification could be used, it is the
City’s policy that committed amounts would be reduced first, followed by assigned amounts and then
unassigned amounts.
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.
50
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
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. The City recognizes all available revenue from the current tax levy.
Available means collected within the current period or expected to be collected soon enough thereafter to be
used to pay liabilities of the current period (60 days).
The 2010 state taxable value for real/personal property of the City totaled approximately $702,096,000 of
which approximately $7,494,000 was captured by the component units. The ad valorem taxes levied
consisted of 9.5, 2.5, and .068 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, DDA, and BRA component units.
Inventories and Prepaid Items
All inventories are valued at cost using the first-in/first-out (FIFO) method. Inventories of business-type
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.
51
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
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
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.
52
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Assets, Liabilities and Net Assets or Equity—Continued
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 fund balance is presented in five possible categories:
a. Nonspendable—resources which cannot be spent because they are either 1) not in spendable form or; 2)
legally or contractually required to be maintained intact.
b. Restricted—resources with constraints placed on the use of resources which are either 1) externally
imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of
other governments; or 2) imposed by law through constitutional provisions or enabling legislation.
c. Committed—resources which are subject to limitations the City imposes upon itself by action of the
City Commission, and that remain binding unless the limitations are removed in the same manner.
d. Assigned—resources neither restricted nor committed for which a City has a stated intended use as
established by the City Commission or the City Manager to which the City Commission has delegated
the authority to assign amounts for specific purposes.
e. Unassigned—resources which cannot be properly classified in one of the other four categories. The
General Fund is the only fund that reports a positive unassigned fund balance amount. Unassigned
balances also include negative balances in the governmental funds reporting resources restricted for
specific programs.
The City has a minimum fund balance policy requiring unassigned fund balance be at least 13% of prior year
actual revenues.
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.
53
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
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 2010 financial statements have been reclassified to conform to
the 2011 presentation.
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. On or before the second regular City Commission meeting in May, the City Manager
submits to the City Commission a proposed operating budget for the fiscal year
commencing the following July 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. Not later than the last regular City Commission meeting in June, 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.
54
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
NOTE B—STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY—Continued
Excess of Expenditures Over Appropriations
During the year ended June 30, 2011, actual expenditures exceeded appropriations for:
Amended
budget Actual
General Fund
Financial services
Arena administration $ 176,855 $ 242,923
City treasurer 463,707 492,185
Public safety
Fire department 3,667,567 3,711,381
Public works
Street lighting 750,000 784,399
Community and economic development
Environmental services 374,422 411,784
Other governmental functions
Other 250,000 515,221
Transfers out 408,046 648,739
These over-expenditures were funded with available fund balance.
Fund Deficits
As of June 30, 2011, the Engineering Services Fund had an unrestricted fund deficit of $35,132, the HOME
Fund had an unassigned fund deficit of $166,174, and the State Grants Fund had an unassigned fund deficit of
$71,930. The deficits will be eliminated through future operations.
55
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
NOTE C—DEPOSITS AND INVESTMENTS
As of June 30, 2011, the City had the following investments:
Weighted
average
maturity
Fair value (Months) Moody's Percent
Investment Type
Money market funds $ 1,970,653 1.4 AAA 13.7%
US Agency obligations 4,465,116 166 AA+ 30.9%
CDARs 8,002,533 2 not rated 55.4%
Total fair value $ 14,438,302 100.0%
Portfolio weighted average maturity 52.9
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.
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 National Mortgage Association which are 27.49 percent of the City’s
investments.
56
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
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 June 30, 2011, $7,146,916 of the City’s bank balance of
$7,653,918 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 June 30, 2011, restricted
cash and investments in the Water Fund of $672,000 were restricted by bond ordinance.
NOTE D—CAPITAL ASSETS
Capital asset activity for the year ended June 30, 2011 was as follows:
Balance Balance
July 1, June 30,
2010 Additions Deductions 2011
Governmental activities:
Capital assets, no being depreciated:
Land $ 12,424,174 $ - $ - $ 12,424,174
Construction in progress 6,704,543 2,931,696 1,742,868 7,893,371
Total capital assets, not being depreciated 19,128,717 2,931,696 1,742,868 20,317,545
Capital assets, being depreciated:
Land improvements 4,118,319 69,224 - 4,187,543
Leasehold improvements 343,614 129,500 - 473,114
Buildings and improvements 21,092,159 240,077 - 21,332,236
Furniture, vehicle and equipement 11,902,751 326,510 162,776 12,066,485
Infrastructure 70,881,213 1,742,868 - 72,624,081
Shared improvements 5,576,901 - - 5,576,901
Total capital assets, being depreciated 113,914,957 2,508,179 162,776 116,260,360
57
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
NOTE D—CAPITAL ASSETS—Continued
Balance Balance
July 1, June 30,
2010 Additions Deductions 2011
Governmental activities─ Continued
Less accumulated depreciation:
Land improvements $ 725,961 $ 140,712 $ - $ 866,673
Leasehold improvements 151,992 43,749 - 195,741
Buildings and improvements 13,565,955 451,099 - 14,017,054
Furniture, vehicle and equipement 9,347,411 622,145 159,720 9,809,836
Infrastructure 31,889,494 3,366,305 - 35,255,799
Shared improvements 2,057,395 278,845 - 2,336,240
Total accumulated depreciation 57,738,208 4,902,855 159,720 62,481,343
Total capital assets, being
depreciated, net 56,176,749 (2,394,676) 3,056 53,779,017
Capital assets, net $ 75,305,466 $ 537,020 $ 1,745,924 $ 74,096,562
Business-type activities:
Capital assets, not being depreciated:
Land $ 142,250 $ - $ - $ 142,250
Construction in progress 2,325,794 668,867 1,484,929 1,509,732
Total capital assets, not being depreciated 2,468,044 668,867 1,484,929 1,651,982
Capital assets, being depreciated:
Land improvements 1,888,965 - - 1,888,965
Buildings and improvements 84,893,864 1,513,435 - 86,407,299
Machinery and equipment 2,827,878 - - 2,827,878
Total capital assets, being depreciated 89,610,707 1,513,435 - 91,124,142
Less accumulated depreciation:
Land improvements 1,676,040 21,225 - 1,697,265
Buildings and improvements 30,412,852 2,273,532 - 32,686,384
Machinery and equipment 1,130,985 319,554 - 1,450,539
Total accumulated depreciation 33,219,877 2,614,311 - 35,834,188
Total capital assets, being
depreciated, net 56,390,830 (1,100,876) - 55,289,954
Capital assets, net $ 58,858,874 $ (432,009) $ 1,484,929 $ 56,941,936
58
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
NOTE D—CAPITAL ASSETS—Continued
Depreciation
Depreciation expense was charged to functions as follows:
Governmental activities:
Adminstrative services $ 52,454
Public safety 144,743
Public works 75,449
Highways, streets and bridges 3,726,050
Community and economic development 75,717
Culture and recreation 274,744
General administration 18,987
Internal Service Fund depreciation 534,711
$ 4,902,855
Business-type activities:
Water $ 2,093,407
Sewer 406,706
Marina and Launch Ramp 114,198
$ 2,614,311
Balance Balance
July 1, June 30,
2010 Additions Deductions 2011
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:
Building and improvements 1,136,600 172,648 - 1,309,248
Total capital assets, being
depreciated, net 2,661,658 (172,648) - 2,489,010
Capital assets, net $ 3,061,658 $ (172,648) $ - $ 2,889,010
Depreciation
Depreciation expense was charged to economic development.
59
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
NOTE E—BOND ISSUANCE COSTS
Bond issuance cost activity for the year ended June 30, 2011 was as follows:
Balance Balance
July 1, June 30,
2010 Additions Deductions 2011
Governmental activities:
Bond issuance costs $ 160,106 $ - $ - $ 160,106
Less accumulated amortization 38,956 7,630 - 46,586
Bond issuance costs, net $ 121,150 $ (7,630) $ - $ 113,520
Business-type activities:
Bond issuance costs $ 134,250 $ - $ - $ 134,250
Less accumulated amortization - 25,631 - 25,631
Bond issuance costs, net $ 134,250 $ (25,631) $ - $ 108,619
Amortization
Amortization expense was charge to functions as follows:
Governmental Activities:
Interest on long-term debt $ 7,630
Business-type Activities:
Water $ 25,631
NOTE F—INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS
The composition of interfund balances as of June 30, 2011 is as follows:
Due to/from other funds:
Receivable Fund Payable Fund Amount
General Fund Community Development Block Grant Fund $ 231,980
General Fund State Grants Fund 137,913
General Fund HOME Rehabilitiation Fund 178,118
General Fund Neighborhood Stabilization Fund 345,895
General Fund Engineering Services Fund 93,420
$ 987,326
60
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
NOTE F—INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS—Continued
The outstanding balances between funds result from the payable funds having negative positions in the City’s
cash and investment pool.
Interfund transfers:
Transfers in Amount Transfers out Amount
General Fund $ 2,357 Nonmajor Governmental Funds
Cemetery Fund $ 2,357
Nonmajor Governmental Funds
Farmers' Market General Fund 140,693
Improvement Fund 18
Sidewalk Replacement Fund 100,000
State Grants Fund 34,675
Arena Capital
Improvements Fund 6,000
140,693 140,693
Nonmajor Governmental Funds General Fund 480,000
Local Street Fund 880,000 Major Street and Trunkline Fund 400,000
880,000 880,000
Nonmajor Governmental Funds Nonmajor Governmental Funds
Public Improvement Fund 54,572 Public Improvement Fund 202,429
State Grants Fund 202,429 CDBG Fund 3,643
Arena Capital State Grants Fund 119,572
Improvements Fund 65,000
Lead Abatement Fund 3,643
325,644 325,644
Internal Service Fund
General Insurance Fund 28,046 General Fund 28,046
$ 1,376,740 $ 1,376,740
The General Fund and Major Street and Trunkline Fund transferred funds to the Local Street Fund to
finance capital improvements. Other transfers between funds are made to meet grant matching
requirements or other operational needs.
61
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
NOTE G—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 period, the various components of deferred revenue reported in the governmental funds were as follows:
Unavailable Unearned
Receivables $ 85,621 $ 658,949
Special assessments 1,048,529 -
Total deferred revenue for governmental funds $ 1,134,150 $ 658,949
NOTE H—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 June 30, 2011.
Balance Balance
July 1, June 30, Due within
2010 Additions Deductions 2011 one year
Governmental activities:
General obligation debt $ 5,290,803 $ - $ 69,048 $ 5,221,755 $ 70,000
Intergovernmental
contractual obligations 1,065,428 - 820,578 244,850 29,000
Special assessment obligations 805,000 - 120,000 685,000 125,000
Installment purchase
agreement 334,605 - 334,605 - -
Compensated absences 1,260,900 1,232,764 1,305,188 1,188,476 197,000
Governmental activity
long-term liabilities $ 8,756,736 $ 1,232,764 $ 2,649,419 $ 7,340,081 $ 421,000
Business-type activities:
Revenue obligations $ 17,753,136 $ - $ 1,230,928 $ 16,522,208 $ 1,230,000
Compensated absences 171,892 112,380 127,119 157,153 26,000
Business-type activity
long-term liabilities $ 17,925,028 $ 112,380 $ 1,358,047 $ 16,679,361 $ 1,256,000
Component units:
Revenue obligations $ 1,000,000 $ - $ - $ 1,000,000 $ -
General obligation debt 6,725,122 2,078,014 2,324,455 6,478,681 345,000
Component unit long-
term liabilities $ 7,725,122 $ 2,078,014 $ 2,324,455 $ 7,478,681 $ 345,000
62
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
NOTE H—LONG-TERM DEBT—Continued
Summary of Changes in Long-Term Liabilities—Continued
Governmental activities:
General obligation debt:
$5,400,000 Limited Tax General Obligation Bonds of
2006 payable in annual installments of $70,000 to
$350,000 through October 2032; interest at 4% to 4.2% $ 5,235,000
Less bond discount (13,245)
Intergovernmental contractual obligations:
$500,000 State of Michigan Brownfield Redevelopment loan
of 2008 payable in annual installments of $33,424 through
March 2019; including interest at 2% 244,850
Special assessment obligations:
$1,575,000 Capital improvement bonds of 2003 payable
in annual installments of $125,000 to $150,000
through June 2016; interest at 3.7% to 4.05% 685,000
6,151,605
Compensated absences 1,188,476
$ 7,340,081
Business-type activities:
Revenue obligations:
$5,995,000 Water supply system refunding bonds of 2010
payable in annual installments of $600,000 to $770,000
through May 2019; interest at 2.00% to 4.25% $ 5,415,000
Add bond premium 152,208
$13,900,000 Drinking Water State Revolving Fund loan
of 2004 payable in annual installments of $630,000 to
$840,000 through October 2025; interest at 2.13% 10,955,000
16,522,208
Compensated absences 157,153
$ 16,679,361
63
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
NOTE H—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 2019 $ 1,000,000
General obligation debt:
$2,045,000 Downtown Development Authority tax increment
refunding bonds of 2011 payable in annual installments of
$265,000 to $330,000 through June 2018; interest at 2% to 4% 2,045,000
Add bond premium 33,014
$4,725,000 Local Development Finance Authority tax
increment bonds of 2002 payable in annual installments of
$240,000 to $335,000 through November 2025; interest
at 3.88% to 4.85% 4,405,000
Less bond discount (4,333)
$ 7,478,681
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.
On March 22, 2011, the City issued $2,045,000 of Downtown Development Authority Refunding Bonds of
2011 to refund the outstanding balance of the Downtown Development Authority Refunding Bonds 2002.
The City refunded the Downtown Development Authority Refunding Bonds 2002 to reduce its total debt
service payments over the next 7 years by $82,384 and to obtain an economic gain (difference between the
present values of the debt service payments on the old and new debt) of $72,474.
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 June 30, 2011 was approximately $5,345,000. The City is unaware of any
circumstances that would cause a shortfall in the near future.
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 June 30, 2011.
64
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
NOTE H—LONG-TERM DEBT—Continued
Annual debt service requirements to maturity for debt outstanding as of June 30, 2011 follow:
Year ending Governmental activites Business-type activities Component units
June 30, Principal Interest Principal Interest Principal Interest
2012 $ 223,527 $ 242,747 $ 1,230,000 $ 410,188 $ 345,000 $ 256,659
2013 229,098 234,751 1,250,000 384,694 455,000 246,210
2014 234,680 226,429 1,295,000 352,635 520,000 231,056
2015 245,274 217,771 1,330,000 320,857 590,000 212,499
2016 250,879 208,565 1,370,000 283,360 625,000 190,480
2017-2021 906,392 943,406 5,855,000 811,640 3,505,000 588,241
2022-2026 1,635,000 670,625 4,040,000 218,133 1,410,000 176,925
2027-2031 1,740,000 327,368 - - - -
2032-2033 700,000 29,400 - - - -
$ 6,164,850 $ 3,101,062 $ 16,370,000 $ 2,781,507 $ 7,450,000 $ 1,902,070
Annual debt service requirements to maturity by type of debt as of June 30, 2011 follow:
General Obligation Debt Revenue Obligations
Year ending Governmental Component Business-type Component
June 30, activities units activities units
2012 $ 281,145 $ 601,659 $ 1,640,188 $ -
2013 278,345 701,210 1,634,694 -
2014 275,545 751,056 1,647,635 -
2015 272,745 802,499 1,650,857 -
2016 269,945 815,480 1,653,360 -
2017-2021 1,749,525 3,093,241 6,666,640 1,000,000
2022-2026 2,305,625 1,586,925 4,258,133 -
2027-2031 2,067,368 - - -
2032-2033 729,400 - - -
$ 8,229,643 $ 8,352,070 $ 19,151,507 $ 1,000,000
Special
Intergovernmental Assessment
Year ending Governmental Governmental
June 30, activities activities
2012 $ 33,424 $ 151,705
2013 33,424 152,080
2014 33,424 152,140
2015 33,425 156,875
2016 33,424 156,075
2017-2021 100,273 -
2022-2026 - -
2027-2031 - -
2032-2033 - -
$ 267,394 $ 768,875
65
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
NOTE I—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 $150,000 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 2011 and 2010 were as
follows:
Current year
Balance claims and Balance
at beginning changes in Claims at end
Year ended of year estimates payments of year
June 30, 2011 $ 178,552 $ 61,897 $ 156,704 $ 83,745
June 30, 2010* 186,566 73,015 81,029 178,552
* Six month fiscal period
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 June 30, 2011, the claims liability including incurred but
not reported claims was $15,462. 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 2011 and 2010
were as follows:
Current year
Balance claims and Balance
at beginning changes in Claims at end
Year ended of year estimates payments of year
June 30, 2011 $ 7,040 $ 970,245 $ 961,823 $ 15,462
June 30, 2010* 50,267 410,382 453,609 7,040
* Six month fiscal period
66
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
NOTE I—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 with the exception of a tax appeal. The City’s
management and counsel estimate a loss of $500,000 for this tax appeal which has been recorded as a
liability on the City’s financial statements.
Commitments
The City has various contract agreements for street projects as of June 30, 2011 of approximately
$1,477,000. Approximately $1,064,000 of these costs are being financed by grants with the remainder
coming from the Major Streets Fund. The City also has a contract agreement for water and sewer
improvements for approximately $137,000 which with the costs being paid for by the Water and Sewer
funds.
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 $47,895 for the year ended June 30, 2011. The future minimum rental income
for this lease for the year ended June 30, 2012 is $33,889.
NOTE J—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 6.53 to 18.19 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.
67
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
NOTE J—PENSION PLANS—Continued
Defined Benefit Pension Plan—Continued
Annual Pension Cost. For the year ended June 30, 2011, the City’s annual pension cost of approximately
$1,228,000 was equal to the City’s required contribution. The City’s actual contribution was $1,000,000
greater than the required contribution.
Trend Information
Approximate Percentage
Annual Pension of APC Net Pension
Year ended Cost (APC) Contributed Obligation
December 31, 2009 $ 888,000 100 % $ -
June 30, 2010* 605,000 100 -
June 30, 2011 1,228,000 181 -
* Six month fiscal period
The required contribution was determined as part of the December 31, 2008 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 8.4
percent, and (c) 1 percent to 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 a closed basis. The
remaining amortization period at December 31, 2010 was 5 years.
Funding Status and Funding Progress. As of December 31, 2010, the most recent actuarial valuation
date, the plan was 100 percent funded. The actuarial accrued liability for benefits was approximately
$88,391,000, and the actuarial value of assets was approximately $88,810,000, resulting in an unfunded
actuarial accrued liability (UAAL) of approximately a negative $419,000. The covered payroll (annual
payroll of active employees covered by the plan) was approximately $11,533,000, and the ratio of the
UAAL to the covered payroll was a negative 4 percent.
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.
68
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
NOTE J—PENSION PLANS—Continued
Defined Contribution Pension Plan
The City also maintains a defined contribution plan offered by MERS and administered by the ICMA
Retirement Corporation, 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 authority for establishing or amending the plan’s provisions
and for establishing or amending contribution requirements rests with the City Commission as determined
by negotiated labor contracts. 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 June 30, 2011, City and employee contributions were approximately $127,000 and
$71,000, 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).
NOTE K—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 3.4 to 12.5 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.
69
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
NOTE K—OTHER POST-EMPLOYMENT BENEFITS—Continued
Annual OPEB Cost. For the year ended June 30, 2011, the City’s OPEB cost (expense) of approximately
$1,079,000 was equal to the City’s ARC and actual contribution.
Trend Information
Approximate
Annual
Required Percentage of
Contribution ARC Net ARC
Period Ended (ARC) Contributed Obligaion
December 31, 2009 $ 1,698,000 100 % $ -
June 30, 2010* 530,000 100 -
June 30, 2011 1,079,000 100 -
* Six month fiscal period
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, 2009 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 9 percent initially, reduced
by decrements to an ultimate rate of 4.5 percent after 10 years. Both rates 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, 2009 is 28 years.
Funded Status and Progress. As of December 31, 2009, the most recent actuarial valuation date, the plan was
55.2 percent funded. The actuarial accrued liability for benefits was approximately $24,024,000, and the
actuarial value of assets was approximately $13,260,000, resulting in an unfunded actuarial liability (UAAL)
of approximately $10,764,000. The covered payroll (annual payroll of active employees covered by the plan)
was approximately $13,293,000, and the ratio of the UAAL to the covered payroll was 81 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.
70
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2011
NOTE L—PRIOR PERIOD ADJUSTMENT
On July 1, 2010, the City adopted Governmental Accounting Standards Board (GASB) Statement No. 54,
Fund Balance Reporting and Governmental Fund Type Definitions. Under GASB 54, the Budget
Stabilization Fund no longer qualifies as a special revenue fund type and all Budget Stabilization revenues
and expenditures are reported in the General Fund. The June 30, 2010 Budget Stabilization Fund fund
balance is required to be reclassified to the General Fund. The City's restated General Fund and Other
governmental funds beginning fund balances are as follows:
Other
governmental
General Fund funds
Fund balance at July 1, 2010 $ 6,038,454 $ 1,500,000
Reclassification of Budget Stabilization Fund fund balance 1,500,000 (1,500,000)
Fund balance at July 1, 2010, restated $ 7,538,454 $ -
NOTE M—SUBSEQUENT EVENT
On September 30, 2011, the City issued $2,000,000 of capital improvement bonds to finance various street
improvements throughout the City. The bonds have an interest rate of 2.98 percent.
71
72
REQUIRED SUPPLEMENTARY INFORMATION
73
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
General Fund
For the year ended June 30, 2011
(with comparative actual amounts for the six months ended June 30, 2010)
2011 2010
Variance with
final budget-
Budgeted amounts positive
Original Final Actual (negative) Actual
REVENUES
Taxes
City income tax $ 6,000,000 $ 6,700,000 $ 6,599,753 $ (100,247) $ 3,368,057
Property taxes 8,334,919 8,334,919 8,357,640 22,721 7,927,575
Industrial facilities taxes 289,960 93,000 93,618 618 468,369
Payments in lieu of taxes 91,000 91,000 95,402 4,402 91,181
Delinquent chargeback collected 5,000 5,000 17 (4,983) -
Total taxes 14,720,879 15,223,919 15,146,430 (77,489) 11,855,182
Licenses and permits
Business licenses 32,500 26,000 31,110 5,110 25,934
Liquor licenses 47,000 67,000 61,955 (5,045) 22,739
74
Cable TV fees 320,000 340,000 362,103 22,103 178,239
Rental property registration 100,000 110,000 115,598 5,598 47,367
Burial permits 110,000 110,000 93,483 (16,517) 39,624
Building permits 225,000 225,000 255,906 30,906 135,155
Electrical permits 85,000 72,000 78,852 6,852 43,576
Plumbing permits 35,000 28,000 29,961 1,961 20,254
Mechanical permits 50,000 60,000 61,611 1,611 26,204
Vacant building fees 27,000 75,000 89,060 14,060 45,070
Total licenses and permits 1,031,500 1,113,000 1,179,639 66,639 584,162
Intergovernmental revenues
Federal grants 77,713 180,626 192,842 12,216 122,965
State
Grants 28,000 20,894 42,458 21,564 7,805
State shared revenue 3,774,813 3,594,813 3,846,859 252,046 1,832,066
Total intergovernmental revenues - State 3,802,813 3,615,707 3,889,317 273,610 1,839,871
Local 75,000 75,000 75,000 - 25,000
City of Muskegon
BUDGETARY COMPARISON SCHEDULE—CONTINUED
General Fund
For the year ended June 30, 2011
(with comparative actual amounts for the six months ended June 30, 2010)
2011 2010
Variance with
final budget-
Budgeted amounts positive
Original Final Actual (negative) Actual
Charges for services
Tax administration fees $ 298,300 $ 295,000 $ 297,326 $ 2,326 $ 194,131
Utility administration fees 225,000 225,000 225,000 - 110,000
Reimbursement for elections - 12,600 12,672 72 79
Indirect cost reimbursements 1,152,992 1,152,992 1,144,020 (8,972) 582,084
Site plan review fee 4,000 3,000 2,800 (200) 1,500
Sale of cemetery lots 27,400 25,950 32,290 6,340 12,914
Police miscellaneous 99,000 80,185 84,553 4,368 31,375
Police impound fees 40,000 40,000 39,100 (900) 23,300
Landlord's alert fee 300 40 40 - 155
Fire protection-state property 80,000 120,210 120,210 - 35,212
Zoning fees 8,000 8,000 6,158 (1,842) 3,290
75
Clerk fees 3,500 2,000 2,039 39 197
Clerk fees - passport fees 5,000 3,500 4,115 615 3,555
Tax abatement application fees 10,000 2,000 810 (1,190) -
Treasurer fees 90,000 65,000 60,358 (4,642) 62,523
False alarm fees 10,000 13,000 12,960 (40) 6,125
Miscellaneous cemetery income 22,000 18,000 20,398 2,398 6,571
Senior transit program fees 9,000 9,000 10,401 1,401 5,082
Fire miscellaneous 3,000 2,000 4,985 2,985 560
Sanitation stickers 80,000 80,000 79,762 (238) 38,809
Lot cleanup fees 70,000 50,000 29,493 (20,507) 18,349
Reimbursements - lot mowing and demolitions 70,000 60,000 49,760 (10,240) 20,102
Special events reimbursements 100,000 118,760 104,937 (13,823) 30,546
Recreation program fees 35,000 19,156 20,831 1,675 19,754
Total charges for services 2,442,492 2,405,393 2,365,018 (40,375) 1,206,213
City of Muskegon
BUDGETARY COMPARISON SCHEDULE—CONTINUED
General Fund
For the year ended June 30, 2011
(with comparative actual amounts for the six months ended June 30, 2010)
2011 2010
Variance with
final budget-
Budgeted amounts positive
Original Final Actual (negative) Actual
Fines and forfeitures
Income tax - penalty and interest $ 200,000 $ 180,000 $ 156,339 $ (23,661) $ 109,441
Late fees on current taxes 40,000 40,000 30,875 (9,125) 42,766
Interest on late invoices 2,000 2,500 2,011 (489) 247
Parking fines 100,000 110,000 100,885 (9,115) 71,160
Court fines 170,000 170,000 142,764 (27,236) 72,929
Total fines and forfeitures 512,000 502,500 432,874 (69,626) 296,543
Interest and rental income
Investment earnings 50,000 50,000 85,120 35,120 (2,349)
Flea market 29,000 29,000 27,233 (1,767) 11,346
Farmers' market 35,000 35,000 43,471 8,471 18,484
76
City right of way rental 8,561 8,561 6,800 (1,761) 6,800
Fire station lease - Central Dispatch 42,000 42,000 47,895 5,895 20,879
Great Lakes Naval Memorial lease 15,000 5,000 2,500 (2,500) -
McGraft park rentals 45,000 49,995 52,475 2,480 13,844
Other park rentals 37,200 45,200 49,525 4,325 23,334
Total interest and rental income 261,761 264,756 315,019 50,263 92,338
Other
Sale of land and assets 1,000 1,000 - (1,000) 500
Police sale and auction proceeds - - - - 1,823
CDBG program reimbursements 393,534 332,387 324,393 (7,994) 48,030
Fisherman's Landing reimbursement 14,500 16,106 16,106 - -
Sanitation reimbursements - - - - 43,030
Contributions 14,000 11,000 12,455 1,455 19,740
Contribution - Veteran's Park maintenance 18,500 19,402 19,402 - -
Community Foundation for Muskegon County 1,500 1,500 12,005 10,505 2,394
Miscellaneous reimbursements 1,000 1,000 - (1,000) -
Miscellaneous and sundry 59,000 58,668 46,829 (11,839) 2,786
Total other 503,034 441,063 431,190 (9,873) 118,303
Total revenues 23,427,192 23,821,964 24,027,329 205,365 16,140,577
City of Muskegon
BUDGETARY COMPARISON SCHEDULE—CONTINUED
General Fund
For the year ended June 30, 2011
(with comparative actual amounts for the six months ended June 30, 2010)
2011 2010
Variance with
final budget-
Budgeted amounts positive
Original Final Actual (negative) Actual
EXPENDITURES
Current
Public representation services
City commission $ 79,739 $ 83,539 $ 84,146 $ (607) $ 44,724
City promotions and public relations 11,350 11,650 4,191 7,459 3,044
City manager 274,945 274,945 264,410 10,535 142,878
Contributions to outside agencies 165,824 168,024 167,296 728 98,026
City attorney 322,508 322,508 331,875 (9,367) 160,031
Total public representation services 854,366 860,666 851,918 8,748 448,703
Administrative services
City clerk 305,247 308,859 286,050 22,809 123,748
77
Civil service 87,123 121,000 126,050 (5,050) 91,460
Affirmative action 84,484 84,484 80,231 4,253 39,958
Total administrative services 476,854 514,343 492,331 22,012 255,166
Financial services
Finance administration 399,605 403,190 412,551 (9,361) 233,852
Assessing 465,723 438,423 420,148 18,275 240,136
Arena administration 235,000 176,855 242,923 (66,068) 101,867
Income tax administration 425,244 421,684 407,907 13,777 217,821
Information systems 394,350 393,322 376,995 16,327 196,816
City treasurer 461,128 463,707 492,185 (28,478) 250,938
Total financial services 2,381,050 2,297,181 2,352,709 (55,528) 1,241,430
Public safety
Police department 9,013,330 8,896,024 8,711,831 184,193 4,289,770
Fire department 3,467,928 3,667,567 3,711,381 (43,814) 1,860,345
Fire safety inspections 705,015 705,015 656,408 48,607 372,009
Total public safety 13,186,273 13,268,606 13,079,620 188,986 6,522,124
City of Muskegon
BUDGETARY COMPARISON SCHEDULE—CONTINUED
General Fund
For the year ended June 30, 2011
(with comparative actual amounts for the six months ended June 30, 2010)
2011 2010
Variance with
final budget-
Budgeted amounts positive
Original Final Actual (negative) Actual
Public works
Street lighting $ 775,000 $ 750,000 $ 784,399 $ (34,399) $ 428,615
Community event support 17,466 23,600 20,205 3,395 14,560
Senior citizen transit 68,287 69,287 68,341 946 31,899
General sanitation 1,830,278 1,873,347 1,609,780 263,567 789,587
Storm water management 17,786 17,786 17,029 757 4,000
City hall maintenance 269,847 286,115 243,582 42,533 136,435
Cemeteries maintenance 384,215 384,215 336,006 48,209 183,994
Total public works 3,362,879 3,404,350 3,079,342 325,008 1,589,090
Community and economic development
Planning, zoning and economic development 376,765 376,765 333,610 43,155 203,414
78
Environmental services 317,424 374,422 411,784 (37,362) 166,120
Edison Landing subsidy 100,000 100,000 100,000 - 50,000
Total community and economic development 794,189 851,187 845,394 5,793 419,534
Culture and recreation
Parks maintenance 1,076,452 1,075,256 979,028 96,228 495,147
McGraft park maintenance 54,197 54,197 47,132 7,065 14,396
General and inner city recreation programs 75,000 117,835 90,962 26,873 101,357
Graffiti removal 4,861 6,861 3,247 3,614 2,454
Parking operations 3,000 5,500 7,204 (1,704) 2,445
Farmers' market and flea market 52,242 52,242 51,209 1,033 20,853
Total culture and recreation 1,265,752 1,311,891 1,178,782 133,109 636,652
Other governmental functions
Insurance premiums 300,000 273,489 259,907 13,582 133,527
Other 250,000 250,000 515,221 (265,221) 67,096
Contribution to MERS pension plan - 1,000,000 1,000,000 - -
Total other governmental functions 550,000 1,523,489 1,775,128 (251,639) 200,623
City of Muskegon
BUDGETARY COMPARISON SCHEDULE—CONTINUED
General Fund
For the year ended June 30, 2011
(with comparative actual amounts for the six months ended June 30, 2010)
2011 2010
Variance with
final budget-
Budgeted amounts positive
Original Final Actual (negative) Actual
Debt service
Principal $ 90,000 $ 1,024,605 $ 1,024,605 $ - $ -
Interest and fees 203,945 228,190 228,190 - 109,174
Total debt service 293,945 1,252,795 1,252,795 - 109,174
Capital outlay - 30,000 - 30,000 13,722
Total expenditures 23,165,308 25,314,508 24,908,019 406,489 11,436,218
Excess of revenues over (under) expenditures 261,884 (1,492,544) (880,690) 611,854 4,704,359
OTHER FINANCING SOURCES (USES)
Transfers in 50,000 50,000 2,357 (47,643) 2,188
79
Transfers out (308,046) (408,046) (648,739) (240,693) (257,783)
Total other financing sources (uses) (258,046) (358,046) (646,382) (288,336) (255,595)
Net change in fund balance $ 3,838 $ (1,850,590) (1,527,072) $ 323,518 4,448,764
Fund balance at beginning of year, as restated 7,538,454 3,138,662
Fund balance at end of year $ 6,011,382 $ 7,587,426
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
Major Street and Trunkline Fund
For the year ended June 30, 2011
Variance with
final budget-
Budgeted amounts positive
Original Final Actual (negative)
REVENUES
Intergovernmental revenues
Federal $ 2,592,000 $ 1,639,000 $ 1,457,137 $ (181,863)
State 2,686,841 2,686,841 2,704,187 17,346
Charges for services - - 64,370 64,370
Investment earnings 25,000 25,000 36,626 11,626
Other 240,000 204,514 523,552 319,038
Total revenues 5,543,841 4,555,355 4,785,872 230,517
EXPENDITURES
Current
Highways, streets and bridges 5,786,057 4,447,057 4,179,028 268,029
80
Excess of revenues over (under) expenditures (242,216) 108,298 606,844 498,546
OTHER FINANCING SOURCES (USES)
Long-term debt issued 2,000,000 - - -
Transfers out (400,000) (400,000) (400,000) -
Total other financing sources (uses) 1,600,000 (400,000) (400,000) -
Net change in fund balance $ 1,357,784 $ (291,702) 206,844 $ 498,546
Fund balance at July 1, 2010 359,157
Fund balance at June 30, 2011 $ 566,001
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 June 30, 2011
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
12/31/08 $ 86,928 $ 86,794 $ (134) 100 % $ 13,107 (1) %
12/31/09 86,682 87,395 713 99 12,614 6
12/31/10 88,810 88,391 (419) 100 11,533 (4)
81
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 %
12/31/09 13,260 24,024 10,764 55.2 13,293 81
Additional actuarial data is not available from MERS and will be provided in subsequent years.
82
OTHER SUPPLEMENTAL INFORMATION
83
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.
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.
84
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.
Neighborhood Stabilization Fund – to account for grant revenues received from the US Department of
Housing and Urban Development for the purpose of stabilizing neighborhoods that have suffered from
foreclosure and abandonment.
Economic Development - Sappi Fund – to account for funds contributed to the City for economic
redevelopment of vacated industrial property sites.
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.
85
City of Muskegon
COMBINING BALANCE SHEET
Other Governmental Funds
June 30, 2011
Permanent
Total other Special Capital Fund -
governmental Revenue Projects Cemetery
funds Funds Funds Perpetual Care
ASSETS
Cash and investments $ 4,158,343 $ 740,039 $ 2,065,863 $ 1,352,441
Receivables
Accounts and loans (net of allowance for uncollectibles) 737,951 2,207 732,838 2,906
Special assessments 509,211 374,644 134,567 -
Due from other governmental units 708,434 100,792 607,642 -
Prepaid items 5,410 5,410 - -
Total assets $ 6,119,349 $ 1,223,092 $ 3,540,910 $ 1,355,347
LIABILITIES AND FUND BALANCES
Liabilities
Accounts payable $ 53,137 $ 25,554 $ 27,583 $ -
Accrued liabilities 22,002 13,607 8,395 -
Due to other funds 893,906 - 893,906 -
86
Deferred revenue 801,347 374,644 426,703 -
Total liabilities 1,770,392 413,805 1,356,587 -
Fund balances
Nonspendable
Prepaid items 5,410 5,410 - -
Long-term loans receivable 349,400 - 349,400 -
Perpetual care 1,336,284 - - 1,336,284
Restricted for:
Streets and highways 657,930 657,930 - -
Law enforcement 140,828 140,828 - -
Perpetual care 19,063 - - 19,063
Other purposes 5,119 5,119 - -
Assigned for capital projects 2,073,027 - 2,073,027 -
Unassigned (238,104) - (238,104) -
Total fund balances 4,348,957 809,287 2,184,323 1,355,347
Total liabilities and fund balances $ 6,119,349 $ 1,223,092 $ 3,540,910 $ 1,355,347
City of Muskegon
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
Other Governmental Funds
For the year ended June 30, 2011
Permanent
Total other Special Capital Fund -
governmental Revenue Projects Cemetery
funds Funds Funds Perpetual Care
REVENUES
Intergovernmental revenues
Federal $ 2,143,552 $ - $ 2,143,552 $ -
State 1,061,214 761,426 299,788 -
Local 2,500 - 2,500 -
Charges for services 339,816 197,011 113,065 29,740
Fines and forfeitures 14,380 14,380 - -
Investment earnings 60,853 30,188 26,224 4,441
Other 467,159 138,025 329,134 -
Total revenues 4,089,474 1,141,030 2,914,263 34,181
EXPENDITURES
Current
Public safety 8,356 8,356 - -
87
Highways, streets and bridges 1,523,013 1,523,013 - -
Culture and recreation 18,238 18,238 - -
Debt service
Principal 320,578 - 320,578 -
Interest and fees 39,068 - 39,068 -
Capital outlay 3,183,905 - 3,183,905 -
Total expenditures 5,093,158 1,549,607 3,543,551 -
Excess of revenues over (under) expenditures (1,003,684) (408,577) (629,288) 34,181
OTHER FINANCING SOURCES (USES)
Proceeds from sale of capital assets 120,118 - 120,118 -
Transfers in 1,346,337 880,018 466,319 -
Transfers out (328,001) - (325,644) (2,357)
Total other financing sources (uses) 1,138,454 880,018 260,793 (2,357)
Net change in fund balances 134,770 471,441 (368,495) 31,824
Fund balances at July 1, 2010, as restated 4,214,187 337,846 2,552,818 1,323,523
Fund balances at June 30, 2011 $ 4,348,957 $ 809,287 $ 2,184,323 $ 1,355,347
City of Muskegon
COMBINING BALANCE SHEET
Other Special Revenue Funds
June 30, 2011
Total other Farmers'
special revenue Local Criminal Market Tree
funds Street Forfeitures Improvement Replacement
ASSETS
Cash and investments $ 740,039 $ 594,004 $ 140,828 $ - $ 5,207
Receivables
Accounts (net of allowance for uncollectibles) 2,207 2,207 - - -
Special assessments 374,644 374,644 - - -
Due from other governmental units 100,792 100,792 - - -
Prepaid items 5,410 5,410 - - -
Total assets $ 1,223,092 $ 1,077,057 $ 140,828 $ - $ 5,207
LIABILITIES AND FUND BALANCES
Liabilities
Accounts payable $ 25,554 $ 25,466 $ - $ - $ 88
Accrued liabilities 13,607 13,607 - - -
Deferred revenue 374,644 374,644 - - -
88
Total liabilities 413,805 413,717 - - 88
Fund balances
Nonspendable - prepaid items 5,410 5,410 - - -
Restricted for:
Streets and highways 657,930 657,930 - - -
Law enforcement 140,828 - 140,828 - -
Other purposes 5,119 - - - 5,119
Total fund balances 809,287 663,340 140,828 - 5,119
Total liabilities and fund balances $ 1,223,092 $ 1,077,057 $ 140,828 $ - $ 5,207
City of Muskegon
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
Other Special Revenue Funds
For the year ended June 30, 2011
Total other Farmers'
special revenue Local Criminal Market Tree
funds Street Forfeitures Improvement Replacement
REVENUES
Intergovernmental revenues - State $ 761,426 $ 761,426 $ - $ - $ -
Charges for services 197,011 197,011 - - -
Fines and forfeitures 14,380 - 14,380 - -
Investment earnings 30,188 29,411 688 65 24
Other 138,025 138,025 - - -
Total revenues 1,141,030 1,125,873 15,068 65 24
EXPENDITURES
Current
Public safety 8,356 - 8,356 - -
Highways, streets and bridges 1,523,013 1,523,013 - - -
Culture and recreation 18,238 - - 17,897 341
Total expenditures 1,549,607 1,523,013 8,356 17,897 341
89
Excess of revenues over (under) expenditures (408,577) (397,140) 6,712 (17,832) (317)
OTHER FINANCING SOURCES
Transfers in 880,018 880,000 - 18 -
Net change in fund balances 471,441 482,860 6,712 (17,814) (317)
Fund balances at July 1, 2010, as restated 337,846 180,480 134,116 17,814 5,436
Fund balances at June 30, 2011 $ 809,287 $ 663,340 $ 140,828 $ - $ 5,119
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
Other Special Revenue Funds
For the year ended June 30, 2011
Local Street Criminal Forfeitures
Variance - Variance -
Final positive Final positive
budget Actual (negative) budget Actual (negative)
REVENUES
Intergovernmental revenues
Federal $ 120,000 $ - $ (120,000) $ - $ - $ -
State 764,181 761,426 (2,755) - - -
Charges for services - 197,011 197,011 - - -
Fines and forfeitures - - - 10,000 14,380 4,380
Investment earnings 10,000 29,411 19,411 500 688 188
Other 93,143 138,025 44,882 - - -
Total revenues 987,324 1,125,873 138,549 10,500 15,068 4,568
EXPENDITURES
Current
Public safety - - - 45,000 8,356 36,644
Highways, streets and bridges 1,685,556 1,523,013 162,543 - - -
90
Culture and recreation - - - - - -
Total expenditures 1,685,556 1,523,013 162,543 45,000 8,356 36,644
Excess of revenues over (under) expenditures (698,232) (397,140) 301,092 (34,500) 6,712 41,212
OTHER FINANCING SOURCES
Transfers in 880,000 880,000 - - - -
Net change in fund balances $ 181,768 482,860 $ 301,092 $ (34,500) 6,712 $ 41,212
Fund balances at July 1, 2010 180,480 134,116
Fund balances at June 30, 2011 $ 663,340 $ 140,828
City of Muskegon
BUDGETARY COMPARISON SCHEDULE─CONTINUED
Other Special Revenue Funds
For the year ended June 30, 2011
Farmers' Market Improvement Tree Replacement
Variance - Variance -
Final positive Final positive
budget Actual (negative) budget Actual (negative)
REVENUES
Intergovernmental revenues
Federal $ - $ - $ - $ - $ - $ -
State - - - - - -
Charges for services - - - 400 - (400)
Fines and forfeitures - - - - - -
Investment earnings 100 65 (35) 100 24 (76)
Other - - - - - -
Total revenues 100 65 (35) 500 24 (476)
EXPENDITURES
Current
Public safety - - - - - -
Highways, streets and bridges - - - - - -
91
Culture and recreation 22,000 17,897 4,103 3,900 341 3,559
Total expenditures 22,000 17,897 4,103 3,900 341 3,559
Excess of revenues over (under) expenditures (21,900) (17,832) 4,068 (3,400) (317) 3,083
OTHER FINANCING SOURCES
Transfers in 4,086 18 (4,068) - - -
Net change in fund balances $ (17,814) (17,814) $ - $ (3,400) (317) $ 3,083
Fund balances at July 1, 2010 17,814 5,436
Fund balances at June 30, 2011 $ - $ 5,119
City of Muskegon
COMBINING BALANCE SHEET
Other Capital Projects Funds
June 30, 2011
Total other EDC Community Arena Economic
capital projects Public Sidewalk Michcon Revolving Development State HOME Capital Lead Neighborhood Development -
funds Improvement Replacement Remediation Loan Block Grant Grants Rehabilitation Improvements Abatement Stabilization Sappi
ASSETS
Cash and investments $ 2,065,863 $ 546,155 $ 663,728 $ 215,981 $ 136,611 $ - $ - $ - $ 779 $ - $ - $ 502,609
Receivables
Accounts and loans (net of
allowance for uncollectibles) 732,838 21,555 - - 40,031 357,965 309,369 - - - 3,918 -
Special assessments 134,567 - 134,567 - - - - - - - - -
Due from other governmental units 607,642 - - - - 171,102 65,983 16,619 - - 353,938 -
Total assets $ 3,540,910 $ 567,710 $ 798,295 $ 215,981 $ 176,642 $ 529,067 $ 375,352 $ 16,619 $ 779 $ - $ 357,856 $ 502,609
LIABILITIES AND FUND BALANCES (DEFICIT)
Liabilities
Accounts payable $ 27,583 $ 204 $ - $ - $ - $ 15,577 $ - $ 3,407 $ - $ - $ 8,395 $ -
Accrued liabilities 8,395 - - - - 3,561 - 1,268 - - 3,566 -
Due to other funds 893,906 - - - - 231,980 137,913 178,118 - - 345,895 -
Deferred revenue 426,703 16,000 132,754 - - 277,949 - - - - - -
Total liabilities 1,356,587 16,204 132,754 - - 529,067 137,913 182,793 - - 357,856 -
Fund balances (deficit)
Nonspendable - long-term loans receivable 349,400 - - - 40,031 - 309,369 - - - - -
Assigned for capital projects 2,073,027 551,506 665,541 215,981 136,611 - - - 779 - - 502,609
Unassigned (238,104) - - - - - (71,930) (166,174) - - - -
Total fund balances (deficit) 2,184,323 551,506 665,541 215,981 176,642 - 237,439 (166,174) 779 - - 502,609
92
Total liabilities and fund balances (deficit) $ 3,540,910 $ 567,710 $ 798,295 $ 215,981 $ 176,642 $ 529,067 $ 375,352 $ 16,619 $ 779 $ - $ 357,856 $ 502,609
City of Muskegon
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICIT)
Other Capital Projects Funds
For the year ended June 30, 2011
Total other EDC Community Arena Economic
capital projects Public Sidewalk Michcon Revolving Development State HOME Capital Lead Neighborhood Development -
funds Improvement Replacement Remediation Loan Block Grant Grants Rehabilitation Improvements Abatement Stabilization Sappi
REVENUES
Intergovernmental revenues
Federal $ 2,143,552 $ - $ - $ - $ - $ 922,014 $ 162,729 $ 139,524 $ - $ - $ 919,285 $ -
State 299,788 - - - - - 299,788 - - - - -
Local 2,500 2,500 - - - - - - - - - -
Charges for services 113,065 94,428 - - - - - - 18,637 - - -
Investment earnings 26,224 6,974 13,596 1,080 1,098 141 613 - 217 - - 2,505
Other 329,134 3,305 75,715 - 28,502 28,172 - - 64,500 27,743 101,197 -
Total revenues 2,914,263 107,207 89,311 1,080 29,600 950,327 463,130 139,524 83,354 27,743 1,020,482 2,505
EXPENDITURES
Debt service
Principal 320,578 - 120,000 - - - 200,578 - - - - -
Interest and fees 39,068 - 30,905 - - - 8,163 - - - - -
Capital outlay 3,183,905 109,292 4,861 178 19,725 986,755 634,622 139,524 225,826 42,640 1,020,482 -
Total expenditures 3,543,551 109,292 155,766 178 19,725 986,755 843,363 139,524 225,826 42,640 1,020,482 -
Excess of revenues over (under) expenditures (629,288) (2,085) (66,455) 902 9,875 (36,428) (380,233) - (142,472) (14,897) - 2,505
OTHER FINANCING SOURCES (USES)
Proceeds from sale of capital assets 120,118 4,817 - - - 40,071 - 75,230 - - - -
Transfers in 466,319 54,572 100,000 - - - 237,104 - 71,000 3,643 - -
Transfers out (325,644) (202,429) - - - (3,643) (119,572) - - - - -
93
Total other financing sources (uses) 260,793 (143,040) 100,000 - - 36,428 117,532 75,230 71,000 3,643 - -
Net change in fund balances (368,495) (145,125) 33,545 902 9,875 - (262,701) 75,230 (71,472) (11,254) - 2,505
Fund balances (deficit) at July 1, 2010 2,552,818 696,631 631,996 215,079 166,767 - 500,140 (241,404) 72,251 11,254 - 500,104
Fund balances (deficit) at June 30, 2011 $ 2,184,323 $ 551,506 $ 665,541 $ 215,981 $ 176,642 $ - $ 237,439 $ (166,174) $ 779 $ - $ - $ 502,609
94
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.
95
City of Muskegon
COMBINING STATEMENT OF NET ASSETS (DEFICITS)
Internal Service Funds
June 30, 2011
ASSETS
Total internal Engineering General Public Service
service funds Services Equipment Insurance Building
CURRENT ASSETS
Cash and investments $ 4,568,483 $ - $ 2,880,251 $ 1,420,174 $ 268,058
Accounts receivable 173,379 91,025 6,130 76,224 -
Inventories 29,836 - 29,836 - -
Prepaid items 748,322 1,729 61,735 679,410 5,448
Total current assets 5,520,020 92,754 2,977,952 2,175,808 273,506
NONCURRENT ASSETS
Capital assets
Land 65,000 - - - 65,000
Land improvements 190,872 - - - 190,872
Buildings and improvements 1,559,334 - - - 1,559,334
Machinery and equipment 7,186,154 26,355 7,125,110 - 34,689
Less accumulated depreciation (7,333,410) (26,355) (6,105,386) - (1,201,669)
96
Total noncurrent assets 1,667,950 - 1,019,724 - 648,226
Total assets 7,187,970 92,754 3,997,676 2,175,808 921,732
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES
Accounts payable 213,832 846 79,882 112,375 20,729
Accrued liabilities 50,308 11,465 14,339 1,237 23,267
Due to other funds 93,420 93,420 - - -
Bonds and other obligations, due within one year 16,000 4,000 4,000 - 8,000
Total current liabilities 373,560 109,731 98,221 113,612 51,996
NONCURRENT LIABILITIES
Bonds and other obligations, less amounts due within one year 78,776 18,155 18,778 1,649 40,194
Total liabilities 452,336 127,886 116,999 115,261 92,190
NET ASSETS (DEFICITS)
Invested in capital assets 1,667,950 - 1,019,724 - 648,226
Unrestricted 5,067,684 (35,132) 2,860,953 2,060,547 181,316
Total net assets (deficits) $ 6,735,634 $ (35,132) $ 3,880,677 $ 2,060,547 $ 829,542
City of Muskegon
COMBINING STATEMENT OF REVENUE, EXPENSES AND CHANGES IN FUND NET ASSETS (DEFICITS)
Internal Service Funds
For the year ended June 30, 2011
Total internal Engineering General Public Service
service funds Services Equipment Insurance Building
OPERATING REVENUES
Charges for services $ 7,162,116 $ 410,022 $ 2,211,835 $ 3,770,919 $ 769,340
Other 215,192 128,631 75,412 11,081 68
Total operating revenues 7,377,308 538,653 2,287,247 3,782,000 769,408
OPERATING EXPENSES
Administration 360,000 96,000 126,108 81,096 56,796
Insurance premiums and claims 3,983,943 - - 3,983,943 -
Other operations 3,058,546 375,467 1,789,815 34,117 859,147
Depreciation 534,711 - 466,232 - 68,479
Total operating expenses 7,937,200 471,467 2,382,155 4,099,156 984,422
Operating income (loss) (559,892) 67,186 (94,908) (317,156) (215,014)
NONOPERATING REVENUES
97
Investment earnings 22,093 - 13,822 6,057 2,214
Gain on sale of capital assets 20,999 - 20,999 - -
Total nonoperating revenues 43,092 - 34,821 6,057 2,214
Income (loss) before transfers (516,800) 67,186 (60,087) (311,099) (212,800)
Transfers in 28,046 - - 28,046 -
Change in net assets (488,754) 67,186 (60,087) (283,053) (212,800)
Net assets (deficit) at July 1, 2010 7,224,388 (102,318) 3,940,764 2,343,600 1,042,342
Net assets (deficit) at June 30, 2011 $ 6,735,634 $ (35,132) $ 3,880,677 $ 2,060,547 $ 829,542
City of Muskegon
COMBINING STATEMENT OF CASH FLOWS
Internal Service Funds
For the year ended June 30, 2011
Total internal Engineering General Public Service
service funds Services Equipment Insurance Building
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 495,597 $ 55,629 $ 74,133 $ 365,767 $ 68
Receipts from interfund services provided 7,162,116 410,022 2,211,835 3,770,919 769,340
Payments to suppliers (5,125,868) (59,740) (1,022,031) (3,885,128) (158,969)
Payments to employees (1,739,210) (288,983) (388,948) (442,379) (618,900)
Payments for interfund services used (684,827) (116,928) (461,986) (4,511) (101,402)
Net cash provided by (used for) operating activities 107,808 - 413,003 (195,332) (109,863)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers in 28,046 - - 28,046 -
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Purchases of capital assets (395,734) - (326,510) - (69,224)
Proceeds from sale of capital assets 24,055 - 24,055 - -
Net cash used for capital and related financing activities (371,679) - (302,455) - (69,224)
CASH FLOW FROM INVESTING ACTIVITIES
Investment earnings 22,093 - 13,822 6,057 2,214
98
Net increase (decrease) in cash and investments (213,732) - 124,370 (161,229) (176,873)
Cash and investments at July 1, 2010 4,782,215 - 2,755,881 1,581,403 444,931
Cash and investments at June 30, 2011 $ 4,568,483 $ - $ 2,880,251 $ 1,420,174 $ 268,058
Reconciliation of operating income (loss) to net cash provided by (used for)
operating activities
Operating income (loss) $ (559,892) $ 67,186 $ (94,908) $ (317,156) $ (215,014)
Adjustments to reconcile operating income (loss) to net cash provided by
(used for) operating activities
Depreciation expense 534,711 - 466,232 - 68,479
Change in assets and liabilities
Receivables, net 280,405 (73,002) (1,279) 354,686 -
Inventories (1,125) - (1,125) - -
Prepaid items 18,706 1,164 (7,605) 26,191 (1,044)
Accounts payable (192,855) 159 48,298 (260,136) 18,824
Accrued liabilities 33,330 9,965 3,390 1,083 18,892
Due to other funds (5,472) (5,472) - - -
Net cash provided by (used for) operating activities $ 107,808 $ - $ 413,003 $ (195,332) $ (109,863)
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.
99
City of Muskegon
COMBINING STATEMENT OF ASSETS AND LIABILITIES
Agency Funds
June 30, 2011
Total Current Rehab Loan
funds Collector tax Escrow
ASSETS
Cash and investments $ 742,906 $ 742,906 $ - $ -
Accounts receivable 1,867 1,867 - -
Total assets $ 744,773 $ 744,773 $ - $ -
LIABILITIES
Accounts payable $ 213,981 $ 213,981 $ - $ -
Due to other governmental units 462,345 462,345 - -
Deposits held for others 68,447 68,447 - -
Total liabilities $ 744,773 $ 744,773 $ - $ -
100
City of Muskegon
STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
Agency Funds
For the year ended June 30, 2011
Balance Balance
July 1, June 30,
COLLECTOR FUND 2010 Additions Deductions 2011
ASSETS
Cash and investments $ 724,878 $ 15,840,497 $ 15,822,469 $ 742,906
Accounts receivable 1,867 125,612 125,612 1,867
Total assets $ 726,745 $ 15,966,109 $ 15,948,081 $ 744,773
LIABILITIES
Accounts payable $ 70,826 $ 10,700,913 $ 10,557,758 $ 213,981
Due to other governmental units 396,210 1,939,668 1,873,533 462,345
Deposits held for others 259,709 2,689,796 2,881,058 68,447
Total liabilities $ 726,745 $ 15,330,377 $ 15,312,349 $ 744,773
CURRENT TAX FUND
ASSETS
Cash and investments $ - $ 31,893,215 $ 31,893,215 $ -
LIABILITIES
Due to other governmental units $ - $ 22,522,095 $ 22,522,095 $ -
Due to other funds - 8,748,563 8,748,563 -
Due to component units - 494,334 494,334 -
Deposits held for others - 128,223 128,223 -
101
Total liabilities $ - $ 31,893,215 $ 31,893,215 $ -
REHAB LOAN ESCROW FUND
ASSETS
Cash and investments $ 245 $ 1,274 $ 1,519 $ -
LIABILITIES
Accounts payable $ 245 $ 1,274 $ 1,519 $ -
ALL AGENCY FUNDS
ASSETS
Cash and investments $ 725,123 $ 47,734,986 $ 47,717,203 $ 742,906
Accounts receivable 1,867 125,612 125,612 1,867
Total assets $ 726,990 $ 47,860,598 $ 47,842,815 $ 744,773
LIABILITIES
Accounts payable $ 71,071 $ 10,702,187 $ 10,559,277 $ 213,981
Due to other governmental units 396,210 24,461,763 24,395,628 462,345
Due to other funds - 8,748,563 8,748,563 -
Due to component units - 494,334 494,334 -
Deposits held for others 259,709 2,818,019 3,009,281 68,447
Total liabilities $ 726,990 $ 47,224,866 $ 47,207,083 $ 744,773
102
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 III – to account for the collection of tax increment revenues and
the construction of public facilities 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.
103
City of Muskegon
COMBINING BALANCE SHEET
Discretely Presented Component Units
June 30, 2011
Total discretely Local
presented Development Downtown Tax Increment Brownfield
component Finance Development Finance Redevelopment
units Authority III Authority Authority Authority
ASSETS
Cash and investments $ 375,287 $ 21,348 $ 272,145 $ 16,445 $ 65,349
FUND BALANCES
Unassigned $ 375,287 $ 21,348 $ 272,145 $ 16,445 $ 65,349
104
City of Muskegon
RECONCILIATION OF THE GOVERNMENTAL FUNDS
BALANCE SHEET TO THE STATEMENT OF NET ASSETS (DEFICITS)
Discretely Presented Component Units
June 30, 2011
Total fund balance—governmental funds $ 375,287
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 (1,309,248) 2,889,010
Bond issuance costs are not capitalized and amortized in the
governmental funds.
Bond issuance costs 192,605
105
Accumulated amortization (52,466) 140,139
Accrued interest in governmental activities is not reported in the
governmental funds. (37,700)
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. (7,478,681)
Net assets of governmental activities in the Statement of Net Assets (Deficits) $ (4,111,945)
City of Muskegon
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICITS)
Discretely Presented Component Units
For the year ended June 30, 2011
Total discretely Local
presented Development Downtown Tax Increment Brownfield
component Finance Development Finance Redevelopment
units Authority III Authority Authority Authority
REVENUES
Property taxes $ 494,334 $ 84,658 $ 281,424 $ 53,769 $ 74,483
Intergovernmental revenues - Local 100,000 100,000 - - -
Investment earnings 2,094 153 1,716 142 83
Other 75,000 75,000 - - -
Total revenues 671,428 259,811 283,140 53,911 74,566
EXPENDITURES
Current
Community and economic development 75,000 - - 75,000 -
Debt service
Principal 320,000 80,000 240,000 - -
Interest and fees 318,252 195,297 122,955 - -
106
Bond issuance costs 50,639 - 50,639 - -
Total expenditures 763,891 275,297 413,594 75,000 -
Excess of revenues over (under) expenditures (92,463) (15,486) (130,454) (21,089) 74,566
OTHER FINANCING SOURCES (USES)
Refunding long-term debt issued 2,045,000 - 2,045,000 - -
Premium on refunding long-term debt issued 33,014 - 33,014 - -
Payment on refunding of long-term debt (2,005,000) - (2,005,000) - -
Total other financing sources (uses) 73,014 - 73,014 - -
Net change in fund balances (19,449) (15,486) (57,440) (21,089) 74,566
Fund balances (deficit) at July 1, 2010 394,736 36,834 329,585 37,534 (9,217)
Fund balances at June 30, 2011 $ 375,287 $ 21,348 $ 272,145 $ 16,445 $ 65,349
City of Muskegon
RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES
AND CHANGE IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES
Discretely Presented Component Units
For the year ended June 30, 2011
Net change in fund balances—total governmental funds $ (19,449)
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)
Bond issuance costs 50,639 (128,182)
Debt proceeds are other financing sources in the governmental funds, but the proceeds
increase long-term debt in the Statement of Net Assets (2,078,014)
107
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. 2,324,455
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. 3,900
Change in net assets of governmental activities $ 102,710
108
SCHEDULE OF INDEBTEDNESS
109
City of Muskegon
SCHEDULE OF INDEBTEDNESS
June 30, 2011
Annual
Date Amount Interest Date of Interest
of Issue of Issue Rate Maturity 6/30/2010 6/30/2011 Payable
Business-Type Activities Bonds and Loans Payable:
Water supply system bonds 4/1/2010 $ 5,995,000 2.00% 05/01/11 $ 580,000 $ - $ -
($152,208 unamortized premium) 2.00% 05/01/12 600,000 600,000 184,088
3.00% 05/01/13 610,000 610,000 172,088
2.77% 05/01/14 640,000 640,000 153,788
3.50% 05/01/15 660,000 660,000 136,088
3.25% 05/01/16 685,000 685,000 112,988
4.00% 05/01/17 710,000 710,000 90,725
4.00% 05/01/18 740,000 740,000 62,325
4.25% 05/01/19 770,000 770,000 32,725
5,995,000 5,415,000 944,813
Drinking Water State Revolving 3/2/2004 $ 13,900,000 2.13% 10/01/10 615,000 - -
Fund (DWSRF) 2.13% 10/01/11 630,000 630,000 226,100
2.13% 10/01/12 640,000 640,000 212,606
2.13% 10/01/13 655,000 655,000 198,847
2.13% 10/01/14 670,000 670,000 184,769
2.13% 10/01/15 685,000 685,000 170,372
2.13% 10/01/16 695,000 695,000 155,709
2.13% 10/01/17 710,000 710,000 140,781
2.13% 10/01/18 725,000 725,000 125,534
2.13% 10/01/19 745,000 745,000 109,916
2.13% 10/01/20 760,000 760,000 93,925
2.13% 10/01/21 775,000 775,000 77,616
2.13% 10/01/22 790,000 790,000 60,988
2.13% 10/01/23 810,000 810,000 43,988
2.13% 10/01/24 825,000 825,000 26,616
2.13% 10/01/25 840,000 840,000 8,925
11,570,000 10,955,000 1,836,691
TOTAL BUSINESS-TYPE ACTIVITIES BONDS AND LOANS PAYABLE $ 17,565,000 $ 16,370,000 $ 2,781,503
110
City of Muskegon
SCHEDULE OF INDEBTEDNESS - CONTINUED
June 30, 2011
Annual
Date Amount Interest Date of Interest
of Issue of Issue Rate Maturity 6/30/2010 6/30/2011 Payable
Governmental Activities Bonds and Loans Payable:
Installment purchase contract 7/26/2005 $ 605,824 3.83% 04/01/11 $ 61,420 $ - $ -
of 2005 (firetrucks) 3.83% 04/01/12 64,055 - -
3.83% 04/01/13 66,803 - -
3.83% 04/01/14 69,669 - -
3.83% 04/01/15 72,658 - -
334,605 - -
Capital improvement bonds 3/1/2003 $ 1,575,000 3.50% 06/01/11 120,000 - -
of 2003 (sidewalks) 3.70% 06/01/12 125,000 125,000 26,705
3.80% 06/01/13 130,000 130,000 22,080
3.90% 06/01/14 135,000 135,000 17,140
4.00% 06/01/15 145,000 145,000 11,875
4.05% 06/01/16 150,000 150,000 6,075
805,000 685,000 83,875
Capital improvement bonds 10/24/2006 $ 5,400,000 4.00% 10/01/10 70,000 - -
of 2006 (fire station, recreation) 4.00% 10/01/11 70,000 70,000 211,145
($13,245 unamortized discount) 4.00% 10/01/12 70,000 70,000 208,345
4.00% 10/01/13 70,000 70,000 205,545
4.00% 10/01/14 70,000 70,000 202,745
4.00% 10/01/15 70,000 70,000 199,945
4.00% 10/01/16 70,000 70,000 197,145
4.00% 10/01/17 70,000 70,000 194,345
4.00% 10/01/18 70,000 70,000 191,545
4.00% 10/01/19 295,000 295,000 184,245
4.00% 10/01/20 305,000 305,000 172,245
4.00% 10/01/21 315,000 315,000 159,845
4.00% 10/01/22 315,000 315,000 147,245
4.00% 10/01/23 320,000 320,000 134,545
4.00% 10/01/24 340,000 340,000 121,345
4.00% 10/01/25 345,000 345,000 107,645
4.00% 10/01/26 345,000 345,000 93,845
4.10% 10/01/27 345,000 345,000 79,873
4.10% 10/01/28 350,000 350,000 65,625
4.10% 10/01/29 350,000 350,000 51,275
4.20% 10/01/30 350,000 350,000 36,750
4.20% 10/01/31 350,000 350,000 22,050
4.20% 10/01/32 350,000 350,000 7,350
5,305,000 5,235,000 2,994,643
State of Michigan urban land 8/1/2005 $ 700,000 0.00% 09/01/10 20,000 - -
assembly loan 0.00% 09/01/11 120,000 - -
0.00% 09/01/12 120,000 - -
0.00% 09/01/13 120,000 - -
0.00% 09/01/14 120,000 - -
0.00% 09/01/15 120,000 - -
620,000 - -
State of Michigan 6/18/2010 $ 500,000 2.00% 03/18/11 45,663 - -
environmental assessment loan 2.00% 03/18/12 46,577 28,527 4,897
2.00% 03/18/13 47,508 29,098 4,326
2.00% 03/18/14 48,458 29,680 3,744
2.00% 03/18/15 49,427 30,274 3,151
2.00% 03/18/16 50,416 30,879 2,545
2.00% 03/18/17 51,424 31,497 1,928
2.00% 03/18/18 52,453 32,126 1,298
2.00% 03/18/19 53,502 32,769 655
445,428 244,850 22,544
TOTAL GOVERNMENTAL ACTIVITIES BONDS AND LOANS PAYABLE $ 7,510,033 $ 6,164,850 $ 3,101,062
TOTAL PRIMARY GOVERNMENT BONDS AND LOANS PAYABLE $ 25,075,033 $ 22,534,850 $ 5,882,565
111
City of Muskegon
SCHEDULE OF INDEBTEDNESS - CONTINUED
June 30, 2011
Annual
Date Amount Interest Date of Interest
of Issue of Issue Rate Maturity 6/30/2010 6/30/2011 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 4.35% 06/01/11 240,000 - -
refunding bonds 4.45% 06/01/12 245,000 - -
4.55% 06/01/13 260,000 - -
4.65% 06/01/14 270,000 - -
4.75% 06/01/15 280,000 - -
4.85% 06/01/16 300,000 - -
5.00% 06/01/17 315,000 - -
5.00% 06/01/18 335,000 - -
2,245,000 - -
Downtown Development Authority 3/22/2011 $ 2,045,000 2.00% 06/01/12 - 265,000 64,462
refunding bonds 2.50% 06/01/13 - 275,000 59,162
($33,014 unamortized premium) 2.75% 06/01/14 - 280,000 52,288
3.25% 06/01/15 - 285,000 44,588
3.50% 06/01/16 - 300,000 35,326
3.75% 06/01/17 - 310,000 24,826
4.00% 06/01/18 - 330,000 13,200
- 2,045,000 293,852
Local Development Finance Authority 11/1/2002 $ 4,725,000 3.88% 11/01/10 80,000 - -
Smartzone Bonds 3.88% 11/01/11 80,000 80,000 192,197
($4,333 unamortized discount) 4.00% 11/01/12 180,000 180,000 187,048
3.90% 11/01/13 240,000 240,000 178,768
4.05% 11/01/14 305,000 305,000 167,911
4.05% 11/01/15 325,000 325,000 155,154
4.15% 11/01/16 340,000 340,000 141,518
4.25% 11/01/17 355,000 355,000 126,919
4.35% 11/01/18 375,000 375,000 111,219
4.45% 11/01/19 395,000 395,000 94,274
4.60% 11/01/20 400,000 400,000 76,285
4.60% 11/01/21 255,000 255,000 61,220
4.60% 11/01/22 265,000 265,000 49,260
4.85% 11/01/23 280,000 280,000 36,375
4.85% 11/01/24 295,000 295,000 22,431
4.85% 11/01/25 315,000 315,000 7,639
4,485,000 4,405,000 1,608,216
TOTAL DISCRETELY PRESENTED COMPONENT UNIT BONDS AND LOANS PAYABLE $ 7,730,000 $ 7,450,000 $ 1,902,068
TOTAL REPORTING ENTITY BONDS AND LOANS PAYABLE $ 32,805,033 $ 29,984,850 $ 7,784,632
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 Nine Fiscal Years
December 31 June 30
2003 2004 2005 (a) 2006 2007 2008 2009 2010 2011
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 $ 69,064,800 $ 67,809,630 $ 67,944,957
Restricted 5,674,787 5,209,654 5,420,482 5,378,669 5,485,703 3,557,678 2,956,449 3,059,208 3,656,410
Unrestricted 9,286,551 7,407,355 7,811,489 8,778,786 10,162,425 10,708,529 8,920,621 13,828,231 12,598,197
Total Governmental Net Assets $ 47,081,472 $ 53,280,853 $ 80,351,629 $ 82,346,476 $ 83,707,754 $ 83,831,142 $ 80,941,870 $ 84,697,069 $ 84,199,564
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 $ 41,876,507 $ 41,105,739 $ 40,419,728
Restricted 822,559 822,559 822,559 822,559 822,559 822,559 672,000 672,000 672,000
Unrestricted 10,488,022 8,647,716 6,663,563 6,910,247 7,980,823 6,775,508 5,983,935 7,630,396 9,211,610
Total Business-type Activities Net Assets $ 39,119,373 $ 41,079,291 $ 44,228,791 $ 47,174,718 $ 48,160,348 $ 48,474,688 $ 48,532,442 $ 49,408,135 $ 50,303,338
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 $ 110,941,307 $ 108,915,369 $ 108,364,685
Restricted 6,497,346 6,032,213 6,243,041 6,201,228 6,308,262 4,380,237 3,628,449 3,731,208 4,328,410
Unrestricted 19,774,573 16,055,071 14,475,052 15,689,033 18,143,248 17,484,037 14,904,556 21,458,627 21,809,807
114
Total Primary Government Net Assets $ 86,200,845 $ 94,360,144 $ 124,580,420 $ 129,521,194 $ 131,868,102 $ 132,305,830 $ 129,474,312 $ 134,105,204 $ 134,502,902
(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 Nine Fiscal Years
Period Ended Year Ended June
Year Ended December 31 June 30 30
2003 2004 2005 2006 2007 2008 2009 2010 2011
EXPENSES
Governmental Activities
Public representation $ 887,496 $ 866,669 $ 885,365 $ 904,109 $ 925,124 $ 986,696 $ 923,911 $ 445,251 $ 854,249
Administrative services 1,227,407 1,132,229 803,783 732,715 783,713 782,362 698,022 317,873 645,585
Financial services 1,842,653 1,809,136 1,872,159 2,061,836 2,205,041 2,292,430 2,406,517 1,209,694 2,373,141
Public safety 11,583,282 12,164,389 12,481,826 13,059,358 12,802,488 13,955,811 13,614,112 6,332,728 13,390,888
Public works 2,947,194 2,847,755 2,853,497 3,089,522 2,989,433 3,019,411 2,986,747 1,640,946 3,471,051
Highways, streets and bridges 3,483,032 3,879,462 5,910,307 5,672,590 7,272,288 7,265,438 7,160,797 3,680,196 7,013,216
Community and economic development 3,371,472 2,652,497 3,693,187 3,383,157 3,054,087 3,174,508 4,139,765 1,275,026 2,830,867
Culture and recreation 3,042,315 2,468,059 2,504,692 2,464,567 2,433,020 2,623,501 2,463,375 759,392 1,524,331
General administration 1,601,112 1,725,225 1,608,108 1,143,963 358,225 574,955 451,651 210,117 794,115
Interest on long-term debt 223,717 193,021 170,814 206,768 343,106 324,076 288,073 139,006 272,940
Total Governmental Activities Expenses 30,209,680 29,738,442 32,783,738 32,718,585 33,166,525 34,999,188 35,132,970 16,010,229 33,170,383
Business-type Activities
Water 4,538,186 4,122,822 4,181,855 4,500,578 5,795,279 5,800,977 6,080,230 2,958,795 5,869,241
Sewer 3,416,372 3,745,156 3,953,838 5,006,594 5,066,693 5,503,144 5,426,321 2,525,067 5,288,622
Marina and launch ramp 325,401 351,705 343,599 332,826 392,994 347,642 310,773 150,055 292,889
Total Business-type Activities Expenses 8,279,959 8,219,683 8,479,292 9,839,998 11,254,966 11,651,763 11,817,324 5,633,917 11,450,752
Total Primary Government Expenses $ 38,489,639 $ 37,958,125 $ 41,263,030 $ 42,558,583 $ 44,421,491 $ 46,650,951 $ 46,950,294 $ 21,644,146 $ 44,621,135
PROGRAM REVENUES
Governmental Activities
Charges for Services
Public representation $ 204,435 $ 210,238 $ 195,316 $ 202,939 $ 199,759 $ 188,467 $ 213,885 $ 100,177 $ 196,886
Administrative services 292,665 314,028 311,529 306,964 287,011 257,850 271,117 129,630 263,473
Financial services 591,174 645,166 537,445 728,332 744,109 726,572 818,845 475,031 879,905
Public safety 1,162,175 1,098,793 1,116,755 1,134,686 1,224,062 1,217,616 1,117,476 536,419 1,109,659
Public works 266,045 452,606 467,849 588,566 407,569 382,072 383,733 209,203 642,082
Highways, streets and bridges 273,893 555,018 267,689 263,423 372,133 301,955 251,840 139,009 451,473
Community and economic development 977,448 414,543 815,980 762,220 356,051 297,854 249,241 186,572 457,952
Culture and recreation 1,026,822 1,151,687 1,141,865 809,228 454,154 405,520 445,891 129,025 300,367
General administration 122,447 200,434 314,658 170,240 64,366 99,494 123,426 59,373 116,690
Operating grants and contributions 5,613,628 6,008,978 6,017,421 5,093,355 5,229,279 5,367,152 6,443,223 3,131,811 5,425,165
Capital grants and contributions 10,494,617 5,785,604 5,894,358 5,360,014 3,347,680 3,444,957 2,105,557 255,234 2,257,163
Total Governmental Program Revenues 21,025,349 16,837,095 17,080,865 15,419,967 12,686,173 12,689,509 12,424,234 5,351,484 12,100,815
Business-type Activities
Water 4,131,126 4,977,320 6,912,719 6,342,110 6,569,228 6,240,060 5,883,830 2,891,169 5,454,760
Sewer 4,057,743 4,083,591 4,149,187 4,803,702 5,179,095 5,326,787 5,720,171 3,441,924 6,652,851
Marina and launch ramp 274,258 266,981 248,460 267,412 281,679 250,266 242,055 156,767 194,311
Operating grants and contributions - - - - - - - - -
Capital grants and contributions 256,612 657,521 100,373 710,641 - - 5,179 - 20,074
Total Business-type program revenues 8,719,739 9,985,413 11,410,739 12,123,865 12,030,002 11,817,113 11,851,235 6,489,860 12,321,996
Total Primary Government program revenues $ 29,745,088 $ 26,822,508 $ 28,491,604 $ 27,543,832 $ 24,716,175 $ 24,506,622 $ 24,275,469 $ 11,841,344 $ 24,422,811
NET (EXPENSE) REVENUE
Governmental Activities (9,184,331) (12,901,347) (15,702,873) (17,298,618) (20,480,352) (22,309,679) (22,708,736) (10,658,745) (21,069,568)
Business-type Activities 439,780 1,765,730 2,931,447 2,283,867 775,036 165,350 33,911 855,943 871,244
Total Primary Government net expense $ (8,744,551) $ (11,135,617) $ (12,771,426) $ (15,014,751) $ (19,705,316) $ (22,144,329) $ (22,674,825) $ (9,802,802) $ (20,198,324)
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 $ 8,492,507 $ 8,681,256 $ 8,844,004
Income taxes 6,644,708 7,326,811 7,238,552 7,673,696 7,757,707 8,117,566 6,628,365 3,505,264 6,866,967
Franchise fees 265,532 - 286,265 285,124 297,200 304,812 321,852 178,239 362,103
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 3,841,922 1,832,066 3,846,859
Unrestricted investment earnings 281,492 170,094 420,595 832,300 1,247,520 730,142 185,436 104,086 193,435
Miscellaneous 109,620 68,405 70,402 64,645 88,035 160,460 226,124 51,638 432,880
Gain on sale of capital asset 62,992 70,886 300,037 81,372 1,604 323,048 123,258 65,155 25,815
Transfers - (142,420) (80,000) (540,000) (40,000) (40,000) - (3,760) -
Total Governmental Program Revenues 19,332,598 19,101,577 20,534,150 20,918,001 21,841,630 22,433,067 19,819,464 14,413,944 20,572,063
Business-type Activities
Unrestricted investment earnings 71,628 51,768 138,053 122,060 170,594 108,990 23,843 15,990 23,959
Gain on sale of capital asset (88,767) - - - - - - - -
Transfers - 142,420 80,000 540,000 40,000 40,000 - 3,760 -
Total Business-type program revenues (17,139) 194,188 218,053 662,060 210,594 148,990 23,843 19,750 23,959
Total Primary Government program revenues $ 19,315,459 $ 19,295,765 $ 20,752,203 $ 21,580,061 $ 22,052,224 $ 22,582,057 $ 19,843,307 $ 14,433,694 $ 20,596,022
CHANGE IN NET ASSETS
Governmental Activities 10,148,267 6,200,230 4,831,277 3,619,383 1,361,278 123,388 (2,889,272) 3,755,199 (497,505)
Business-type Activities 422,641 1,959,918 3,149,500 2,945,927 985,630 314,340 57,754 875,693 895,203
Total Primary Government $ 10,570,908 $ 8,160,148 $ 7,980,777 $ 6,565,310 $ 2,346,908 $ 437,728 $ (2,831,518) $ 4,630,892 $ 397,698
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
December 31 June 30
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 (a)
General fund
Reserved $ 173,696 $ 110,642 $ 74,349 $ 79,356 $ 177,076 $ 180,410 $ 214,819 $ 187,633 $ 300,969 $ -
Nonspendable 251,173
Restricted
Assigned 2,385,728
Unassigned 3,374,481
Unreserved 2,634,300 2,320,776 2,370,842 2,440,249 2,512,963 2,740,222 2,168,906 1,451,029 5,737,485 -
Total general fund $ 2,807,996 $ 2,431,418 $ 2,445,191 $ 2,519,605 $ 2,690,039 $ 2,920,632 $ 2,383,725 $ 1,638,662 $ 6,038,454 $ 6,011,382
All other governmental funds
Reserved $ 2,309,214 $ 1,159,364 $ 1,187,662 $ 2,915,106 $ 7,044,394 $ 4,130,995 $ 4,382,118 $ 3,613,858 $ 3,887,289 $ -
Nonspendable 1,704,256
Restricted 1,375,779
Assigned 2,073,027
Unassigned (238,104)
Unreserved, reported in:
Special revenue funds 3,785,857 3,254,746 2,692,431 2,910,285 3,030,096 4,462,015 2,768,886 2,060,117 2,163,041 -
Debt service - 153,955 - - - - - - - -
116
Capital project funds 1,614,636 3,849,868 2,187,667 1,239,763 390,282 635,676 675,898 554,273 6,035 -
Permanent funds 102,837 63,798 22,896 22,890 77,300 84,413 60,813 15,613 16,979 -
Total all other governmental funds $ 7,812,544 $ 8,481,731 $ 6,090,656 $ 7,088,044 $ 10,542,072 $ 9,313,099 $ 7,887,715 $ 6,243,861 $ 6,073,344 $ 4,914,958
(a) In fiscal 2011, the City adopted GASB 54 which changed fund balance classifications.
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
CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS
Last Ten Fiscal Years
Period Ended Year Ended
Year Ended December 31 June 30 June 30
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Revenues
Taxes $ 13,607,863 $ 13,306,798 $ 13,767,040 $ 14,521,769 $ 15,052,708 $ 15,420,032 $ 15,728,859 $ 14,673,012 $ 11,855,182 $ 15,146,430
Intergovernmental 15,473,320 18,879,071 15,448,865 15,445,949 14,703,371 12,752,363 13,012,035 12,400,408 4,785,494 11,525,749
Charges for services 3,010,798 3,307,607 3,437,220 3,147,066 2,938,246 2,722,894 2,463,975 2,620,372 1,338,194 2,769,204
Other 3,872,459 3,629,983 3,828,223 4,134,604 3,758,956 4,618,149 3,624,579 3,177,522 1,768,895 3,461,292
Total revenues 35,964,440 39,123,459 36,481,348 37,249,388 36,453,281 35,513,438 34,829,448 32,871,314 19,747,765 32,902,675
Expenditures
Public representation 985,107 889,188 869,342 886,717 903,895 927,320 987,229 923,923 448,703 851,918
Administrative services 816,581 785,966 704,667 748,588 669,789 644,913 632,513 645,704 303,555 586,328
Financial services 1,797,662 1,846,558 1,829,276 1,905,714 2,056,580 2,231,519 2,298,830 2,406,623 1,241,430 2,352,709
Public safety 11,514,151 11,439,487 12,277,677 12,624,532 13,002,233 12,902,815 13,754,394 13,567,101 6,578,735 13,087,976
Public works 2,680,695 2,731,241 2,543,512 2,661,073 2,730,415 2,768,906 2,831,177 2,860,510 1,589,090 3,079,342
Highways, streets and bridges 8,816,305 11,800,017 8,654,931 9,531,840 8,023,539 6,504,915 6,414,453 3,436,069 1,823,089 3,226,377
Community and economic development 971,335 987,097 797,072 784,396 763,211 894,879 1,077,312 4,440,687 1,330,794 3,109,693
Culture and recreation 2,610,935 2,624,275 2,259,699 2,197,276 2,190,835 2,254,117 2,394,031 2,196,186 639,852 1,197,020
Other governmental functions 1,798,345 1,589,572 1,708,868 1,603,292 1,139,148 350,385 562,341 438,292 200,623 1,775,128
Debt service
117
Principal 1,345,000 1,270,000 1,335,000 1,115,000 1,189,785 1,241,921 999,148 663,371 303,466 1,345,183
Interest and issuance costs 316,255 230,907 201,447 166,071 271,233 324,577 310,432 282,174 136,013 267,258
Capital outlay 4,721,155 4,496,631 6,139,597 3,734,082 6,066,783 5,683,657 5,473,828 3,517,741 980,822 3,301,273
Total expenditure 38,373,526 40,690,939 39,321,088 37,958,581 39,007,446 36,729,924 37,735,688 35,378,381 15,576,172 34,180,205
Excess of revenues over (under) expenditures (2,409,086) (1,567,480) (2,839,740) (709,193) (2,554,165) (1,216,486) (2,906,240) (2,507,067) 4,171,593 (1,277,530)
Other financing sources (uses)
Transfers in 2,059,336 2,740,742 3,342,612 1,839,631 2,358,509 1,926,538 1,477,717 1,359,608 342,188 1,348,694
Transfers out (2,047,491) (2,740,742) (3,233,369) (1,947,677) (2,926,554) (1,994,584) (1,409,491) (1,309,910) (359,971) (1,376,740)
Bonds issued 106,807 1,578,009 - 1,061,900 5,626,331 - 500,000 - - -
Sale of capital assets 400,280 282,080 483,544 827,141 1,120,341 286,152 375,723 68,452 75,465 120,118
Total other financing sources (uses) 518,932 1,860,089 592,787 1,780,995 6,178,627 218,106 943,949 118,150 57,682 92,072
Net change in fund balances $ (1,890,154) $ 292,609 $ (2,246,953) $ 1,071,802 $ 3,624,462 $ (998,380) $ (1,962,291) $ (2,388,917) $ 4,229,275 $ (1,185,458)
Debt service as a percentage of noncapital
expenditures 4.94% 4.15% 4.63% 3.74% 4.44% 5.05% 4.06% 2.97% 3.01% 5.22%
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
Fiscal 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
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%
2009 8,190,722 24.9% 6,482,290 19.7% 12,400,408 37.7% 2,620,372 8.0% 1,032,681 3.1% 582,394 1.8% 400,900 1.2% 1,161,547 3.5% 32,871,314 -5.6%
2010* 8,487,125 43.0% 3,368,057 17.1% 4,785,494 24.2% 1,338,194 6.8% 584,162 3.0% 297,043 1.5% 193,873 1.0% 693,817 3.5% 19,747,765 -39.9%
2011 8,546,677 26.0% 6,599,753 20.1% 11,525,749 35.0% 2,769,204 8.4% 1,179,639 3.6% 447,254 1.4% 412,498 1.3% 1,421,901 4.3% 32,902,675 66.6%
* The City changed its fiscal year end from December 31 to June 30. 2010 figures are for six months.
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 Total As a Percent
Year Residential Agriculture Commercial Industrial Property Property Ad Valorem Property Property Property IFT and CFT Valuation City Actual
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 10.0792 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 10.0786 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 10.0774 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 11.0768 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 11.0755 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 11.0732 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 11.0685 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 11.0682 86.71%
2009 376,545,791 157,682 147,276,887 114,185,691 638,166,051 111,493,852 749,659,903 5,259,649 25,616,400 - 30,876,049 780,535,952 11.0680 91.48%
2010 332,105,030 - 144,721,736 109,507,141 586,333,907 104,029,037 690,362,944 4,111,154 9,129,000 - 13,240,154 703,603,098 12.0680 94.04%
Assessed and Equalized Valuation of Property
Ad Valorem Assessment Roll Industrial and Commercial Facilities Assessment Roll
Total Industrial Industrial Commercial Total Estimated
Real Personal Total Real Personal Real Total Assessed Actual
119
Year Residential Agriculture Commercial Industrial Property Property Ad Valorem Property Property Property IFT and CFT Valuation Value
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
2009 426,002,850 191,100 161,996,600 122,301,800 710,492,350 111,497,300 821,989,650 5,606,100 25,616,400 - 31,222,500 853,212,150 1,706,424,300
2010 354,044,700 - 154,185,000 122,703,400 630,933,100 104,020,200 734,953,300 4,120,400 9,129,000 - 13,249,400 748,202,700 1,496,405,400
Property is assessed at 50% of true cash value. The assessed and equalized valuation of taxable property is determined as of December 31st of each year and is the basis upon which taxes are levied during the succeeding fiscal year. The passage of Proposal A in May,
1994 altered how tax values are determined. Beginning in the 1995-1996 fiscal year, property taxes are based on taxable value instead of state equalized value. Proposal A also capped taxable value of each parcel of property, adjusted for additions and losses, at the
previous year's rate of inflation or 5% whichever is less, until the property is sold or transferred. When ownership of a parcel of property is transferred, the taxable value becomes 50% of true cash value, or the state equalized valuation. The industrial and Commercial
Facilities Tax Acts permit certain property to be taxed at one-half the tax rate for a period up to twelve years.
City of Muskegon
Principal Property Taxpayers
June 30, 2011
6/30/2011 12/31/2001
Percent of Percent of
Taxable Total Taxable Taxable Total Taxable
Taxpayer Valuation Rank Valuation Valuation Rank Valuation
Consumers Energy $ 83,566,362 1 11.9% $ 75,994,362 1 10.5%
ADAC Plastics Inc 7,312,700 2 1.0% - 0.0%
ESCO Company 6,793,300 3 1.0% 6,269,963 10 0.9%
GE Aviation 6,695,200 4 1.0% 7,886,862 5 1.1%
DTE Energy (formerly MichCon) 6,387,800 5 0.9% 9,889,104 4 1.4%
Sappi/S.D. Warren Company 5,786,779 6 0.8% 61,860,841 2 8.6%
Muskegon SC Holdings LLC 4,503,400 7 0.6% - 0.0%
Michigan Electric Transmission 4,381,900 8 0.6% - 0.0%
120
Glen Oaks Apartments LLC 4,280,600 9 0.6% - 0.0%
Faram Muskegon LLC 3,927,000 10 0.6% - 0.0%
Anglo-American Clays Corporation - 0.0% 15,005,200 3 2.1%
Terrace Partners LLC - 0.0% 7,514,367 7 1.0%
Brunswick Corp - 0.0% 7,491,320 8 1.0%
Lorin Industries - 0.0% 7,805,275 6 1.1%
Neway Anchorlok International - 0.0% 6,726,295 9 0.9%
Total - 10 Largest 133,635,041 19.0% 206,443,589 28.6%
Total - All Other 569,968,057 81.0% 514,953,537 71.4%
$ 703,603,098 100.0% $ 721,397,126 100.0%
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
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
2009 8.9000 0.0680 2.1000 11.0680 2.4000
2010 9.5000 0.0680 2.5000 12.0680 2.4000
Overlapping - County-Wide Rates
Muskegon Intermediate Special Vocational Community
Year County School Education Education College
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
2009 6.6957 0.4597 2.2987 0.9996 2.2037
2010 6.6957 0.4597 2.2987 0.9996 2.2037
Overlapping - School District Grand Total
State Non-
Year Operating Debt Total Education Homestead Homestead
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
2009 18.0000 5.6000 23.6000 6.0000 37.7254 55.7254
2010 18.0000 5.7500 23.7500 6.0000 38.8754 56.8754
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City of Muskegon
PROPERTY TAX LEVIES AND COLLECTIONS
Last Ten Fiscal Years
Charge backs
Total Current Percent Delinquent Total Tax On Uncollected Outstanding Outstanding Percent of
Fiscal Tax Tax Of Levy Tax Total Tax Collections Delinquent Delinquent Delinquent Delinquent
Year Levy Collections Collected Collections Collections as % of Levy Taxes Personal Specific Taxes to Levy
2001 $ 7,449,191 $ 6,625,670 88.9% $ 88,768 $ 6,714,438 90.1% $ 24,866 $ 184,894 $ 5,496 2.89%
2002 7,922,898 7,036,846 88.8% 123,906 7,160,752 90.4% 30,056 168,666 15,700 2.71%
2003 8,095,194 7,201,599 89.0% 710,353 7,911,952 97.7% 27,338 154,843 20,856 2.51%
2004 8,292,451 7,230,231 87.2% 772,545 8,002,776 96.5% 36,179 82,305 22,655 1.70%
2005 8,121,734 6,920,960 85.2% 1,027,932 7,948,892 97.9% 28,156 78,641 21,100 1.57%
2006 8,207,019 7,231,508 88.1% 885,675 8,117,183 98.9% 13,461 65,297 24,539 1.26%
2007 8,542,477 7,509,102 87.9% 949,754 8,458,856 99.0% - 67,586 20,748 1.03%
2008 8,466,096 7,219,540 85.3% 1,135,738 8,355,278 98.7% 36,917 73,430 37,388 1.75%
2009 8,700,017 7,522,462 86.5% 1,102,891 8,625,353 99.1% 25,755 73,440 34,758 1.54%
2010 8,945,500 7,784,052 87.0% 1,077,056 8,861,108 99.1% 58,027 70,745 13,647 1.59%
122
SOURCE: City of Muskegon Treasurer' Office
City of Muskegon
SEGMENTED DATA ON INCOME TAX FILERS, RATES AND LIABILITY
Most recent Year and Ten Years Previous
Year Ended June 30, 2011 Year Ended December 31, 2001
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 1,211 6% $ 879,100 $ 8,791 0% 1,179 5% $ 1,029,474 $ 10,295 0%
$2,501-$7,500 779 4% 5,882,700 58,827 1% 1,169 5% 6,827,297 68,273 1%
$7,501-$25,000 1,834 9% 43,197,400 431,974 7% 2,704 10% 52,426,935 524,269 7%
$25,001-$50,000 1,487 8% 81,324,900 813,249 12% 2,394 9% 101,907,814 1,019,078 14%
$50,001-$100,000 850 4% 85,743,500 857,435 13% 986 4% 88,566,998 885,670 13%
More than $100,000 165 1% 39,592,200 395,922 6% 142 1% 40,253,382 402,534 6%
Subtotal 6,326 32% $ 256,619,800 $ 2,566,198 39% 8,574 33% $ 291,011,900 $ 2,910,119 41%
Non-Residents Taxpayers:
(Non-residents are taxed at a rate of 0.5% on income earned within the City.)
123
$2,500 or less 1,770 9% $ 1,000,800 $ 7,246 0% 1,939 8% $ 1,428,558 $ 9,525 0%
$2,501-$7,500 1,122 6% 5,458,800 39,523 1% 1,665 6% 7,901,142 52,677 1%
$7,501-$25,000 2,684 14% 43,704,000 316,426 5% 4,208 16% 68,958,300 459,742 6%
$25,001-$50,000 3,219 16% 117,950,960 853,989 13% 4,917 19% 177,165,226 1,181,151 17%
$50,001-$100,000 2,229 11% 148,571,800 1,075,298 16% 2,102 8% 135,900,236 906,039 13%
More than $100,000 588 3% 116,569,000 843,982 13% 527 2% 118,501,368 790,042 11%
Subtotal 11,612 59% $ 433,255,360 $ 3,136,464 48% 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 1,750 9% $ 897,091 14% 1,850 7% $ 769,276 11%
Total 19,688 100% $ 6,599,753 100% 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
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
2009 6,623,499 70,000 1,120,000 7,813,499 6,565,000 - 11,570,000 18,135,000 25,948,499 3.8% 659
2010* 6,444,605 - 1,065,428 7,510,033 5,995,000 - 11,570,000 17,565,000 25,075,033 3.7% 639
2011 5,920,000 - 244,850 6,164,850 5,415,000 - 10,955,000 16,370,000 22,534,850 3.3% 587
124
* The City changed its fiscal year end from December 31 to June 30. 2010 figures are for six months.
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
June 30, 2011
Debt Supported by
Total Debt City General
Name of Governmental Unit Outstanding Self Supporting Revenues
Direct Debt
City of Muskegon:
Revenue Bonds $ 16,370,000 $ 16,370,000 $ -
Special Assessment Bonds - - -
Capital Improvement Bonds 5,920,000 - 5,920,000
Intergovernmental Bonds 244,850 - 244,850
Act 99 Installment Purchase - -
Component Unit Debt:
Downtown Development Authority 3,045,000 3,045,000 -
Local Development Finance Authority 4,405,000 4,405,000 -
Total City Direct Debt $ 29,984,850 $ 23,820,000 $ 6,164,850
City Share as
Gross Percent of Gross Net
Overlapping Debt
Muskegon School Distict $ 31,620,000 94.43% $ 29,858,766
Orchard View School Distict 46,225,659 26.22% 12,120,368
Reeths Puffer School Distict 63,789,840 10.97% 6,997,745
Muskegon Intermediate School District - 15.44% -
Muskegon County 26,445,000 15.46% 4,088,397
Muskegon Community College 14,090,000 15.46% 2,178,314
Total Overlapping Debt $ 182,170,499 55,243,590
Total City Direct and Overlapping Debt $ 61,408,440
NOTE: None of the debt issued by the City is payable through the levy of property tax millages
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
2002 2003 2004 2005 2006 2007 2008 2009 2010* 2011
Debt Limit $ 74,726,405 $ 76,377,881 $ 75,663,530 $ 76,252,738 $ 78,773,640 $ 84,174,359 $ 85,933,940 $ 82,198,965 $ 82,198,965 $ 78,308,925
Total net debt applicable to limit 11,066,900 9,726,900 9,191,900 9,918,800 16,142,939 15,591,018 15,481,870 14,778,499 14,435,033 12,929,850
Legal debt margin $ 63,659,505 $ 66,650,981 $ 66,471,630 $ 66,333,938 $ 62,630,701 $ 68,583,341 $ 70,452,070 $ 67,420,466 $ 67,763,932 $ 65,379,075
Total net debt applicable to the limit as 14.81% 12.74% 12.15% 13.01% 20.49% 18.52% 18.02% 17.98% 17.56% 16.51%
a percentage of debt limit
Legal Debt Margin Calculation for 2011:
Assessed Valuation: $ 783,089,250
Legal Debt Limit (10% ) 78,308,925
Total Indebtedness: $ 29,984,850
Debt not Subject to Limitation:
Paid by Special Assessment (685,000)
Revenue Bonds (16,370,000)
126
Debt Subject to Limitation 12,929,850
Legal Debt Margin $ 65,379,075
* The City changed its fiscal year end from December 31 to June 30. 2010 figures are for six months.
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
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
2009 5,906,313 3,498,263 2,408,050 1,110,000 567,462 1,677,462 1.44
2010* 2,904,735 1,575,275 1,329,460 535,000 271,522 806,522 1.65
2011 5,467,785 3,294,530 2,173,255 1,195,000 451,323 1,646,323 1.32
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
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
2009 No System Indebtedness
2010* No System Indebtedness
2011 No System Indebtedness
* The City changed its fiscal year end from December 31 to June 30. 2010 figures are for six months.
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
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%
2009 39,401 720,386,117 18,283 32.8 5,931 909 18,417,289 16.2%
2010 39,259 735,734,614 18,741 32.8 5,931 374 11,900,915 17.8%
2011 38,401 737,646,617 19,209 34.1 5,162 835 18,829,825 13.8%
128
SOURCE: US Census Bureau, Muskegon Area Intermediate School Distrct (MAISD), City of Muskegon Inspections Department, Michigan Department of Technology,
Management, & Budget
City of Muskegon
PRINCIPAL EMPLOYERS
Current Year and Ten Years Ago
2011 2002
Percentage Percentage
of total of total
City City
Employer Employees Rank employment Employees Rank employment
Mercy General Health Partners 3,532 1 23.9% 1,300 1 7.6%
County of Muskegon 1,211 2 8.2% 650 4 3.8%
State of Michigan 1,064 3 7.2% - - 0.0%
Muskegon Public Schools 931 4 6.3% 555 7 3.3%
ADAC Plastics 500 5 3.4% 480 8 2.8%
Johnson Technology 425 6 2.9% 560 6 3.3%
Frontier 350 8 2.4% 350 10 2.1%
129
City of Muskegon 243 9 1.6% - - 0.0%
Michigan Steel 208 10 1.4% - - 0.0%
Baker College 355 7 2.4% - - 0.0%
Hackley Hospital - - 0.0% 1,000 2 5.9%
Brunswick - - 0.0% 400 9 2.3%
Holland Neway - - 0.0% 565 5 3.3%
Sappi/S.D. Warren Company - - 0.0% 740 3 4.3%
SOURCE: City of Muskegon; Muskegon Area First; Michigan Department of Energy, Labor & Economic Growth
City of Muskegon
BUDGETED FULL-TIME CITY GOVERNMENT POSITIONS BY DEPARTMENT
Last Ten Fiscal Years
Department 2002 2003 2004 2005 2006 2007 2008 2009 2010* 2011
Administration 1.50 1.50 1.50 1.50 1.50 1.50 1.50 - - 0.40
Affirmative Action 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.10
Cemetaries 3.52 3.52 3.52 3.25 3.00 3.25 3.25 3.25 2.50 2.20
City Assessors Office - - - - - - - - - -
City Clerk & Elections 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 3.00 3.00
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 1.25 1.20 1.00 1.00 1.00 1.00 1.00 1.00 1.00 0.55
City Manager's Office 2.75 1.75 1.75 1.75 1.75 1.75 1.75 3.25 2.25 2.25
City Treasurer's Office 6.00 6.00 5.00 5.00 5.00 4.00 5.00 5.00 5.00 5.00
Civil Service 3.00 3.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 1.00
Community Event Support 0.20 0.20 - - - - - - - -
Environmental Services 4.00 4.00 3.50 2.00 2.00 2.00 2.00 2.00 2.00 2.00
Farmers Market 0.12 0.12 0.12 - - - - 0.05 0.05 0.05
Finance Administration 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 3.00 3.00
Fire 44.00 43.00 41.00 40.00 38.00 38.00 38.00 38.00 36.00 33.00
Fire Safety Inspections 12.00 13.00 12.00 10.00 12.00 12.00 12.00 12.00 9.00 8.00
Forestry 2.18 1.93 0.93 - - - - - - -
General Recreation 0.78 2.24 1.24 1.00 1.17 1.33 1.66 1.66 2.00 -
Income Tax Administration 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00
130
Information Systems 4.00 4.00 4.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
Inner City Recreation 1.46 - - - - - - - - -
Parking 0.30 0.30 - - - - - - - -
Parks 11.53 10.53 9.68 8.48 8.25 8.15 8.15 7.99 7.15 6.00
Planning, Zoning & Economic Development 7.50 7.50 6.50 6.00 6.00 6.00 6.00 6.00 5.00 4.00
Police 102.00 96.00 94.00 94.00 94.00 94.00 94.00 94.00 88.00 88.00
Sanitation 1.25 1.25 1.10 1.10 1.00 1.00 1.00 1.00 - 0.30
MVH-Major Streets 14.70 15.30 15.45 15.25 16.00 17.75 15.75 13.75 12.00 12.00
MVH-Local Streets 7.20 7.20 7.00 7.00 7.00 7.00 6.00 8.00 7.00 7.00
MVH-State Trunklines 1.60 1.60 2.00 2.00 2.00 - - - - -
Street Lighting 0.10 - - - - - - - - -
Walker Arena 0.12 0.12 0.12 - - - - - - -
Community Development 5.00 5.00 5.00 4.00 4.00 4.00 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 0.25 0.25
Lead Program - - - - - - - - 0.75 0.75
Sewer Maintenance 14.40 15.15 14.55 15.05 16.00 16.20 15.20 13.20 10.20 10.20
Water Filtration 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00
Water Maintenance 15.65 15.65 15.15 14.65 13.00 12.50 13.50 15.40 12.40 12.40
Hartshorn Marina Fund 0.79 0.79 0.79 0.67 0.73 0.67 0.34 0.05 0.05 0.05
Public Service Building 3.30 3.30 3.65 3.85 3.45 3.45 3.45 3.70 8.95 8.05
Engineering 9.35 9.40 7.70 7.70 7.45 7.45 7.45 7.45 5.45 4.95
Equipment 7.70 7.70 8.00 8.00 8.95 8.25 8.25 8.50 7.25 6.25
315.00 308.00 294.00 284.00 284.00 282.00 280.00 280.00 256.00 244.00
* The City changed its fiscal year end from December 31 to June 30. 2010 figures are for six months.
SOURCE: City of Muskegon Finance Department
City of Muskegon
OPERATING INDICATORS BY FUNCTION/PROGRAM
Last Ten Fiscal Years
Function/Program 2002 2003 2004 2005 2006 2007 2008 2009 2010* 2011
Administrative Services
Elections
Number of registered voters 23,931 23,904 25,261 25,918 26,028 26,345 27,678 26,136 26,136 26,330
Number of votes cast:
Last general election 8,916 8,916 14,169 14,169 10,410 10,410 15,271 15,271 15,271 8,106
Last city election 3,840 4,325 4,325 4,022 4,022 1,101 1,101 2,254 2,254 8,106
Percentage of registered voters voting:
Last general election 37% 37% 56% 55% 40% 40% 55% 58% 58% 31%
Last city election 16% 18% 17% 16% 15% 4% 4% 9% 9% 31%
Financial Services
Property Tax Bills 15,586 15,428 15,403 15,404 15,354 15,376 15,350 15,435 - 15,351
Income Tax Returns 25,135 25,043 24,378 23,884 23,493 23,141 22,598 21,071 19,963 19,688
Paper Check Issued to Vendors 4,012 3,784 3,405 3,205 3,248 3,347 3,346 3,113 1,486 2,986
Electronic Payments to Vendors 651 746 752 828 800 772 763 963 450 884
131
Public Safety
Fire Protection
Number of firefighter and officer positions 44 42 41 41 41 41 41 37 37 37
Number of emergency calls 3,878 3,656 4,116 4,206 4,092 4,171 4,298 4,220 2,062 4,402
Police Protection
Number of sworn officer positions 85 83 83 83 84 84 84 79 79 79
Part I (Major) Crimes 3,504 2,971 3,360 3,303 3,495 2,997 3,107 3,071 1,305 2,859
Public Works
Refuse Collected (Tons per Year) 11,420 11,780 11,925 11,074 11,192 10,375 10,401 10,526 6,042 12,703
Recyclables Collected (Tons per Year) 808 775 779 588 559 629 626 309 - -
Water & Sewer
Number of consumers 14,917 14,917 14,917 14,455 14,412 14,364 13,131 12,987 12,966 13,037
Average daily water consumption (GPD) 9,453,000 9,453,000 8,870,000 9,582,000 8,998,000 9,314,000 8,879,000 7,976,000 7,163,000 8,417,000
Water main breaks repaired 12 19 10 5 13 21 34 17 6 12
Sewer flows (Millions Gallons per Year) 1,477 1,387 1,475 1,700 2,040 1,945 2,181 1,979 965 1,625
Sewer Service Calls 661 624 568 638 605 598 533 508 263 591
* The City changed its fiscal year end from December 31 to June 30.
SOURCE: City of Muskegon Departments
City of Muskegon
CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM
Last Ten Fiscal Years
Function/Program 2002 2003 2004 2005 2006 2007 2008 2009 2010* 2011
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 197.39 197.96 196.95 196.95 197.48 197.79 197.79 196.95 196.95 196.95
Number of streetlights 3,114 3,123 3,111 3,159 3,159 3,134 3,134 3,192 3,125 3,065
Culture and Recreation
Number of parks (acres) 612 701 701 701 701 701 701 701 701 701
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) 175.33 175.33 178.02 179.41 175.74 177.04 177.04 177.04 177.04 177.04
132
Storm sewers (miles) 178.57 178.57 178.61 179.23 180.48 183.25 183.60 184.35 184.35 184.35
Water
Water mains (miles) 193.09 193.66 194.14 194.14 194.15 195.63 195.58 195.69 195.69 195.69
* The City changed its fiscal year end from December 31 to June 30. 2010 figures are for six months.
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
October 21, 2011
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 June 30, 2011 and
have issued our report thereon dated October 21, 2011. 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 was not designed to identify all deficiencies in internal control over financial reporting
that might be significant deficiencies or material weaknesses and therefore, there can be no assurance that all
deficiencies, significant deficiencies, or material weaknesses have been identified. However, as described in the
accompanying Schedule of Findings and Responses, we identified a certain deficiency in internal control over
financial reporting that we consider to be a material weakness.
A deficiency in internal control 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 and correct
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in
internal control such that there is a reasonable possibility that a material misstatement of the entity's financial
statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiency
described in the accompanying Schedule of Findings and Responses to be a material weakness, as Finding
2011-1.
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
October 21, 2011
Page 2
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 response to the finding identified in our audit is described in the accompanying Schedule
of Findings and Responses. We did not audit the City of Muskegon’s response and, accordingly, we express no
opinion on it.
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
THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR
PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE
IN ACCORDANCE WITH OMB CIRCULAR A-133
October 21, 2011
City Commission
City of Muskegon
Muskegon, Michigan
Compliance
We have audited the City of Muskegon's compliance with the types of compliance requirements described in the
OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of the City of
Muskegon's major federal programs for the year ended June 30, 2011. 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 of the
City of Muskegon’s compliance with those requirements.
In our opinion, the City of Muskegon complied, in all material respects, with the compliance requirements
referred to above that could have a direct and material effect on each of its major federal programs for the year
ended June 30, 2011.
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
October 21, 2011
Page 2
Internal Control Over Compliance
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 to determine the auditing
procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over
compliance in accordance with OMB Circular A-133, 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.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance
does not allow management or employees, in the normal course of performing their assigned functions, to
prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a
timely basis. A material weakness in internal control over compliance is a deficiency, or combination of
deficiencies, in internal control over compliance, such that there is a reasonable possibility that material
noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and
corrected, on a timely basis.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph
of this section and was not designed to identify all deficiencies in internal control over compliance that might be
deficiencies, 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. However, we identified a
deficiency in internal control over compliance that we consider to be a significant deficiency as described in the
accompanying Schedule of Findings and Responses, as Finding 2011-2. A significant deficiency in internal
control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with
a type of compliance requirement of a federal program that is less severe than a material weakness in internal
control over compliance, yet important enough to merit attention by those charged with governance.
The City of Muskegon’s response to the finding identified in our audit is described in the accompanying Schedule
of Findings and Responses. We did not audit the City of Muskegon’s response and, accordingly, we express no
opinion on it.
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 June 30, 2011
Accrued Accrued
Entitlement (deferred) Cash or (deferred)
Federal program or revenue payments in Amount of revenue
Federal grantor/pass-through CFDA award July 1, kind received grant June 30,
grantor/program title number amount 2010 (cash basis) expenditures 2011 Notes
U.S. Department of Housing and Urban Development
Direct programs
CDBG - Entitlement Cluster
Community Development Block Grant 14.218
B-09-MC-26-0026 $ 1,001,885 $ 24,582 $ 24,582 $ - $ -
B-10-MC-26-0026 1,086,413 143,898 793,388 820,592 171,102
Program Income 68,384 - 68,384 68,384 -
Total Community Development Block Grant 2,156,682 168,480 886,354 888,976 171,102 4
ARRA - Community Development Block Grant - Recovery 14.253
B-09-MY-26-0026 267,182 118,277 219,699 101,422 - 4
Total CDBG - Entitlement Cluster 2,423,864 286,757 1,106,053 990,398 171,102
Home Investment Partnership Program 14.239
138
M-09-MC-26-0215 322,469 70,016 70,016 - -
M-10-MC-26-0215 320,710 - 122,905 139,524 16,619
Program Income 82,114 6,884 82,114 75,230 -
Total Home Investment Partnership Program 725,293 76,900 275,035 214,754 16,619
Lead-Based Paint Hazard Control in Privately-Owned Housing 14.900
FR-5100-N-20A 2,079,492 938 938 - -
Program Income 42,640 - 42,640 42,640 -
Total Lead-Based Paint Hazard Control in Privately-Owned Housing 2,122,132 938 43,578 42,640 -
Total direct programs 5,271,289 364,595 1,424,666 1,247,792 187,721
Passed through Michigan Department of Housing Development Authority
Community Development Block Grant 14.218
Neighborhood Stabilization Program
NSP-2008-0280-ENT 1,450,000 326,655 892,001 919,285 353,939
Program Income 101,197 - 97,279 101,197 3,918
Total Neighborhood Stabilization Program 1,551,197 326,655 989,280 1,020,482 357,857 4
Total U.S. Department of Housing and
Urban Development 6,822,486 691,250 2,413,946 2,268,274 545,578
City of Muskegon
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS─CONTINUED
For the year ended June 30, 2011
Accrued Accrued
Entitlement (deferred) Cash or (deferred)
Federal program or revenue payments in Amount of revenue
Federal grantor/pass-through CFDA award July 1, kind received grant June 30,
grantor/program title number amount 2010 (cash basis) expenditures 2011 Notes
U.S. Department of Justice
Direct programs
Bulletproof Vest Partnership Grant 16.607
2007 Grant $ 7,788 $ 53 $ 53 $ - $ -
2008 Grant 5,563 5,479 5,561 82 -
2009 Grant 4,851 - 2,962 2,962 -
18,202 5,532 8,576 3,044 -
Justice Assistance Grant 16.738
2009-DJ-BX-0692 81,109 - 5,329 5,329 -
2010-DJ-BX-0887 72,866 - 46,759 46,759 -
153,975 - 52,088 52,088 -
Total direct programs 172,177 5,532 60,664 55,132 -
Passed through Ottawa County
139
WEMET Multi-Jurisdictional Drug
Enforcement CO-OP 16.738
70834-210B 36,799 9,130 10,484 1,354 -
70834-311B 34,911 - 28,638 34,911 6,273
71,710 9,130 39,122 36,265 6,273
Passed through Muskegon County
ARRA - Justice Assistance Grant 16.804
2009-SB-B9-1824 218,169 3,536 46,960 57,860 14,436
Total U.S. Department of Justice 462,056 18,198 146,746 149,257 20,709
U.S. Department of Energy
Direct programs
Energy Efficiency and Conservation Block Grant 81.128
041714125 181,600 (162,729) - 162,729 -
City of Muskegon
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS─CONTINUED
For the year ended June 30, 2011
Accrued Accrued
Entitlement (deferred) Cash or (deferred)
Federal program or revenue payments in Amount of revenue
Federal grantor/pass-through CFDA award July 1, kind received grant June 30,
grantor/program title number amount 2010 (cash basis) expenditures 2011 Notes
U.S. Department of Homeland Security
Direct programs
Assistance to Firefighters 97.044
EMW-2009-FO-09926 $ 29,815 $ - $ 29,815 $ 29,815 $ -
Fire Prevention and Safety 97.083
EMW-2007-FP-01502 13,770 - 13,770 13,770 -
EMW-2009-FP-00389 9,000 9,000 9,000 - -
22,770 9,000 22,770 13,770 -
Total U.S. Department of Homeland Security 52,585 9,000 52,585 43,585 -
TOTAL FEDERAL ASSISTANCE $ 7,518,727 $ 555,719 $ 2,613,277 $ 2,623,845 $ 566,287
140
The accompanying notes are an integral part of this schedule.
City of Muskegon
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
For the year ended June 30, 2011
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 June 30, 2011 and federal expenditures per the Schedule of Expenditures of Federal Awards.
Federal revenues per City of Muskegon financial statements
General Fund $ 192,842
Major Street and Trunkline Fund 1,457,137
Other governmental funds 2,143,552
3,793,531
Plus program income 287,451
Less MDOT contracted projects as shown below (1,457,137)
Federal expenditures per the Schedule of Expenditures of Federal Awards $ 2,623,845
3. The Michigan Department of Transportation (MDOT) requires that cities report all federal and state grants pertaining to their city. During the year ended June 30, 2011,
the federal aid received and expended by the City was $1,457,137 for contracted projects as shown below. 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.
141
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 STP 1061(334) Fed Item HH6583 Contract 10-5473 $ 495,500 $ 495,500
Proj STP 1061 (321) Fed Item HH6430 Contract 10-5305 310,500 310,500
Proj ARRA 1061(349) Fed Item JJ49292 Contract 10-5654 102,632 102,632
Proj STP 0761 (011) Fed Item HH4997 Contract 07-5131 3,502 3,502
Proj CMG 0761 (024) Fed Item RR5822 Contract 07-5379 125 125
Proj CMG 0761 (025) Fed Item JJ2804 Contract 07-5379 957 957
Proj CMG 0961 (127) Fed Item JJ3202 Contract 09-5110 29,338 29,338
Proj STP 1061(323) Fed Item RR7175 Contract 10-5473 303,583 303,583
Proj STP 1061(348) Fed Item RR7391 Contract 10-5320 211,000 211,000
Total U.S. Department of Transportation,
Federal Highway Administration (contracted projects) $ 1,457,137 $ 1,457,137
4. Community Development Block Grant cluster
City of Muskegon
SCHEDULE OF FINDINGS AND RESPONSES
Year ended June 30, 2011
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? X yes 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/Cluster
U.S. Department of Housing and Urban Development
14.218 and 14.253 · CDBG Entitlement Grant Cluster
5. Dollar threshold used to distinguish between type A and type B programs: $300,000
6. Auditee qualified as low-risk auditee? yes X no
142
City of Muskegon
SCHEDULE OF FINDINGS AND RESPONSES
Year ended June 30, 2011
SECTION II – FINANCIAL STATEMENT FINDINGS
Finding 2011-1: MATERIAL WEAKNESS—Year-end Procedures Should be Improved to Enhance
Year-end Financial Reporting
Criteria: The City’s general ledger should be in agreement with detailed balances and other supporting
documentation at year-end.
Condition: Several material audit adjustments were required to correct general ledger balances at year-end.
Cause: City personnel did not record all of the adjustments necessary to have the general ledger in
agreement with detailed balances and other supporting documentation at year-end.
Effect: The City records required material year-end audit adjustments.
Recommendation: The City should improve its year-end procedures to ensure that its general ledger is
properly adjusted.
Views of Responsible Officials and Planned Corrective Actions: The City agrees with this finding and will
implement a better review process to ensure better year-end accuracy. Several of the needed adjustments
arose from staff reductions/turnover and resulting unfamiliarity with year-end procedures.
143
City of Muskegon
SCHEDULE OF FINDINGS AND RESPONSES
Year ended June 30, 2011
SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Finding 2011-2: Eligibility Documented Review and Approval Procedures
U.S. Department of Housing and Urban Development
CDBG Entitlement Grant Cluster
CFDA: 14.218 and 14.253
Award Number: B-10-MC-26-0026, NSP-2008-0280-ENT
Award Year End: June 30, 2011
Criteria: Per OMB Circular A-133 § .105 Definitions, internal control is a process, affected by an
entity’s management and other personnel, designed to provide reasonable assurance regarding the
achievement of objectives in the following categories: 1) Effectiveness and efficiency of operations, 2)
Reliability of financial reporting, and 3) Compliance with applicable laws and regulations.
Condition: Internal control procedures requiring a documented review and approval of eligibility
determination were not performed for the CDBG Entitlement Grant cluster programs.
Context: Eight of eighteen files tested for eligibility lacked documented review and approval. However, the
auditor found no instances of individuals not being eligible for participation in the program.
Cause: Turnover in the Community and Neighborhood Services Department caused this control procedure
to be overlooked.
Effect: The lack of documented review and approval could allow errors in eligibility determination to go
undetected.
Questioned Costs: None.
Recommendation: Documented review and approval procedures should be implemented for the CDBG
Entitlement Grant cluster programs eligibility function.
Views of Responsible Officials and Planned Corrective Actions: The City agrees with this finding.
Documented review and approval procedures will be implemented for the CDBG Entitlement Grant cluster
eligibility function.
144
CLIENT DOCUMENTS
145
City of Muskegon
933 Terrace Street
Muskegon, MI 49440
Phone: (231) 724-6709
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS
October 21, 2011
U.S. Department of Housing and Urban Development
Washington D.C.
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 June 30, 2010 dated November 5, 2010.
SECTION II – FINANCIAL STATEMENT FINDINGS
There were no findings in relation to the financial statements.
SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
U.S. Department of Housing and Urban Development
Finding 2010-1: CDBG Entitlement Grant Cluster
CFDA: 14.218 and 14.253
Award Number: B-09-MC-26-0215, B-09-MY-26-0215, NSP-2008-0280-ENT
Award Year End: June 30, 2010
Home Investment Partnership
CFDA: 14.239
Award Number: M-09-MC-26-0215
Award Year End: June 30, 2010
Specific Requirement: Allowable Costs/Cost Principles
Condition: During our detailed testing, we noted that none of the employees whose wages and benefits
were charged to either grant had proper time and effort documentation.
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.
Current Status: This recommendation was implemented during the year ended June 30, 2011. No similar
finding was reported during the single audit for the year ended June 30, 2011.
Sincerely,
Timothy J. Paul
Finance Director
146
City of Muskegon
933 Terrace Street
Muskegon, MI 49440
Phone: (231) 724-6709
CORRECTIVE ACTION PLAN
October 21, 2011
U.S. Department of Housing and Urban Development
Washington D.C.
City of Muskegon respectfully submits the following Corrective Action Plan for the year ended June 30,
2011.
Name and address of independent public accounting firm:
Brickley DeLong, P.C.
P.O. Box 999
Muskegon, Michigan 49443
Audit period: June 30, 2011
The findings from the Schedule of Findings and Responses for the year ended June 30, 2011 are discussed
below. The findings are numbered consistently with the numbers assigned in the schedule.
SECTION II – FINANCIAL STATEMENT FINDINGS
Finding 2011-1: MATERIAL WEAKNESS─ Year-end Procedures Should be Improved to
Enhance Year-end Financial Reporting
Recommendation: The City should improve its year-end procedures to ensure that its general ledger is
properly adjusted.
Action Taken: The City is making changes to its closing procedures to better ensure that accounts are
properly adjusted in future year-end closings.
147
U.S. Department of Housing and Urban Development
October 21, 2011
Page 2
SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Finding 2011-2: Eligibility Documented Review and Approval Procedures
U.S. Department of Housing and Urban Development
CDBG Entitlement Grant Cluster
CFDA: 14.218 and 14.253
Award Number: B-10-MC-26-0026, NSP-2008-0280-ENT
Award Year End: June 30, 2011
Recommendation: Documented review and approval procedures should be implemented for the CDBG
Entitlement Grant cluster programs eligibility function.
Action Taken: The City is changing its procedures to ensure that reviews of eligibility are properly
documented.
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
148
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