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City of Muskegon,
Michigan
Comprehensive Annual
Financial Report
For The Fiscal Year Ended June 30, 2012
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CITY OF MUSKEGON,
MICHIGAN
COMPREHENSIVE
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED
JUNE 30, 2012
Prepared By
FINANCIAL SERVICES DIVISION
Timothy Paul Derrick Smith
Director of Finance City Treasurer
Elizabeth Lewis James Maurer
Assistant Finance Director Information Systems Director
Kenneth Grant Kathy Coleman
Income Tax Administrator Finance & Payroll Coordinator
Cover Photo: September rainbow at Muskegon’s Pere Marquette Beach.
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City of Muskegon
TABLE OF CONTENTS
INTRODUCTORY SECTION
Letter of Transmittal .................................................................................................................................. 5
Certificate of Achievement for Excellence in Financial Reporting ......................................................... 12
Organization Chart ................................................................................................................................... 13
List of Principal Officials......................................................................................................................... 14
FINANCIAL SECTION
Independent Auditors’ Report.................................................................................................................. 17
Management’s Discussion and Analysis.................................................................................................. 19
Basic Financial Statements
Government-wide Financial Statements
Statement of Net Assets (Deficits) .................................................................................................... 32
Statement of Activities ...................................................................................................................... 33
Fund Financial Statements
Governmental Funds
Balance Sheet ................................................................................................................................. 34
Reconciliation of the Governmental Funds Balance Sheet
to the Statement of Net Assets .................................................................................................... 35
Statement of Revenues, Expenditures and Changes
in Fund Balances ......................................................................................................................... 36
Reconciliation of the Governmental Funds Statement of Revenues,
Expenditures and Changes in Fund Balances to the Statement of
Activities ..................................................................................................................................... 37
Proprietary Funds
Statement of Net Assets ................................................................................................................. 38
Statement of Revenues, Expenses and Changes in Fund Net Assets ............................................. 39
Statement of Cash Flows ................................................................................................................ 40
Fiduciary Funds
Statement of Fiduciary Assets and Liabilities ................................................................................ 41
Component Units
Statement of Net Assets (Deficits) .................................................................................................... 42
Statement of Activities ...................................................................................................................... 43
Notes to Financial Statements .............................................................................................................. 44
Required Supplementary Information
Budgetary Comparison Schedule—General Fund ................................................................................ 70
Budgetary Comparison Schedule—Major Street and Trunkline Fund ................................................. 76
Schedule of Funding Progress .............................................................................................................. 77
1
City of Muskegon
TABLE OF CONTENTS
Other Supplemental Information
Other Governmental Funds
Description of Other Governmental Funds ....................................................................................... 80
Combining Balance Sheet ................................................................................................................. 82
Combining Statement of Revenues, Expenditures and Changes in
Fund Balances ................................................................................................................................ 83
Other Special Revenue Funds
Combining Balance Sheet .............................................................................................................. 84
Combining Statement of Revenues, Expenditures and Changes in
Fund Balances ............................................................................................................................. 85
Budgetary Comparison Schedule—Other Special Revenue Funds ............................................... 86
Other Capital Projects Funds
Combining Balance Sheet .............................................................................................................. 88
Combining Statement of Revenues, Expenditures and Changes in
Fund Balances (Deficits)............................................................................................................. 89
Internal Service Funds
Description of Internal Service Funds ............................................................................................... 91
Combining Statement of Net Assets.................................................................................................. 92
Combining Statement of Revenues, Expenses and
Changes in Fund Net Assets (Deficit) ............................................................................................ 93
Combining Statement of Cash Flows ................................................................................................ 94
Fiduciary Funds
Description of Fiduciary Funds ......................................................................................................... 95
Agency Funds
Combining Statement of Assets and Liabilities ............................................................................. 96
Statement of Changes in Assets and Liabilities ............................................................................. 97
Component Units
Description of Component Units ....................................................................................................... 99
Combining Balance Sheet ............................................................................................................... 100
Reconciliation of the Governmental Funds Balance Sheet
to the Statement of Net Assets (Deficits) ..................................................................................... 101
Combining Statement of Revenues, Expenditures and Changes
in Fund Balances (Deficit) ........................................................................................................... 102
Reconciliation of the Governmental Funds Statement of Revenues,
Expenditures and Changes in Fund Balances (Deficit) to the Statement
of Activities .................................................................................................................................. 103
Schedule of Indebtedness ................................................................................................................... 105
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City of Muskegon
TABLE OF CONTENTS
STATISTICAL SECTION
Financial Trends
Net Assets by Component .................................................................................................................. 110
Changes in Net Assets ........................................................................................................................ 111
Fund Balances of Governmental Funds .............................................................................................. 113
Changes in Fund Balances of Governmental Funds ........................................................................... 114
Revenue Capacity
Governmental Activities Revenues by Source ................................................................................... 115
Taxable, Assessed and Equalized and Estimated Actual Valuation of Property ................................ 116
Principal Property Taxpayers ............................................................................................................. 117
Property Tax Rates – Direct and Overlapping Government Units ..................................................... 118
Property Tax Levies and Collections .................................................................................................. 119
Segmented Data on Income Tax Filers, Rates and Liability .............................................................. 120
Debt Capacity
Ratio of Outstanding Debt by Type .................................................................................................... 121
Direct and Overlapping Debt .............................................................................................................. 122
Legal Debt Margin Information.......................................................................................................... 123
Revenue Bond Coverage .................................................................................................................... 124
Demographic and Economic Information
Demographic and Economic Statistics ............................................................................................... 125
Principal Employers............................................................................................................................ 126
Operation Information
Full-time Equivalent Government Employees ................................................................................... 127
Operating Indicators by Function/Program ........................................................................................ 128
Capital Asset Statistics by Function/Program .................................................................................... 129
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 ..................................................................................................... 132
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 .......................................................................................... 134
Schedule of Expenditures of Federal Awards ...................................................................................... 136
Notes to Schedule of Expenditures of Federal Awards ....................................................................... 138
Schedule of Findings and Responses ................................................................................................... 139
Client Documents
Summary Schedule of Prior Audit Findings ................................................................................... 142
Corrective Action Plan .................................................................................................................... 143
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Affirmative
Action
(231)724-6703
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1214
Cemetery
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5617
City Manager
(231)724-6724
FAX (231)722-
1214
October 23, 2012
Civil Service
(231)724-6716
FAX (231)724-
4405
Clerk
(231)724-6705 Honorable Mayor and Members of the
FAX (231)724- City Commission
4178
City of Muskegon
Comm. &
Neigh. Services
Muskegon, Michigan 49443
(231)724-6717
FAX (231)726-
2501
Finance
(231)724-6713 Ladies and Gentlemen:
FAX (231)724-
6768
Fire Department We are pleased to present to you the Comprehensive Annual Financial Report (CAFR) for
(231)724-6792
FAX (231)724- the City of Muskegon, Michigan, for the fiscal year ended June 30, 2012. This report
6985
includes the City’s audited financial statements in accordance with the requirements of
Income Tax state law. The financial statements are presented in conformity with accounting principles
(231)724-6770
FAX (231)724- generally accepted in the United States of America (GAAP), and audited in accordance
6768 with generally accepted auditing standards by a firm of licensed certified public
Inspection accountants. This annual report is formatted to comply with the financial reporting model
Services developed by the Government Accounting Standards Board (GASB) Statement 34.
(231)724-6715
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4371
GAAP requires that management provide a narrative introduction, overview, and analysis
Leisure Services to accompany the basic financial statements in the form of Management’s Discussion and
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FAX (231)724- Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and
1196 should be read in conjunction with the financial statements. The City of Muskegon’s
Mayor’s Office MD&A can be found immediately following the independent auditor’s report.
(231)724-6701
FAX (231)722-
1214
The Comprehensive Annual Financial Report is prepared by the City’s Finance
Planning/Zoning
(231)724-6702
Department and responsibility for both the accuracy of the data presented and the
FAX (231)724- completeness and fairness of the presentation, including all disclosures, rests with the
6790
City. We believe the data as presented is accurate in all material respects; that it is
Police presented in a manner designed to set forth fairly the financial position and results of
Department
(231)724-6750 operation of the City as measured by the financial activity of its various funds and
FAX (231)722- component units; and that all disclosures necessary to enable the reader to gain the
5140
maximum understanding of the City’s finances have been included. Brickley DeLong,
Public Works P.C., Certified Public Accountants, performed the independent audit of all accounts of the
(231)724-4100
FAX (231)722- City as required by state law and their report and unqualified opinion is presented as the
4188
first component of the financial section of this report.
Treasurer
(231)724-6720
FAX (231)724-
6768
City of Muskegon, 933 Terrace Street, P.O. Box 536, Muskegon, MI 49443-0536
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5
THE CITY AND THE REGION
The City of Muskegon is located in Western Michigan on the shores of Lake Michigan. The City covers
eighteen square miles and, with a 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. 2012 marks the ferry service’s ninth 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 the Bike Time festival which attracts motorcycle enthusiasts to the City
each July, the Unity Christian Music Festival and Irish Fest.
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
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.
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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.
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. Even though these institutions are exempt from paying property taxes, local income tax
withholdings remitted by these employers provide stability to City finances in times of economic
weakness.
In December 2011 Consumers Energy, the City’s largest property taxpayer, announced plans to close
its sixty-four year-old B.C. Cobb electric generating facility in January 2015 due to age, stricter pollution
regulations and slowing electric demand. The facility accounts for about 10% of total City property tax
revenues so the closure will have a significant impact on municipal operations. During the fiscal year
the City also settled a major tax appeal on the B.C. Cobb plant resulting in a tax refund payment of
more than $900,000. The City has reforecast its FY 2012-13 budgets to account for the short-term loss
of property tax revenue and is actively planning longer-term strategies to deal with the ultimate closure
of the plant.
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On a more positive note, the local economy saw measurable improvement in FY2012 as reflected in the
growth of city income tax revenues which were up more than twelve percent from the prior fiscal year.
Most recently, the State of Michigan reopened the West Shore Correctional Facility bringing 250 state
jobs back to the City. This facility is also a major user of water and sewer services.
The City fully recognizes the magnitude of financial challenges it faces due to the pending loss of its
largest property tax payer. We have worked to position ourselves to be in as strong position as possible
to face this challenge: the City’s General Fund balance has never been healthier, pension and retiree
healthcare costs are under control and debt levels are manageable.
MAJOR INITIATIVES AND ACCOMPLISHMENTS
Among the City's major initiatives and accomplishments in fiscal year 2011-12 were the following:
Economic development activity picked up dramatically from recent years as evidenced by
several new projects:
A new Social Security Office center was constructed in the downtown;
A $20 million, 70,000 square foot manufacturing addition at ADAC Automotive was started
that will create 130 new jobs;
A $15 million expansion of the Betten Auto dealerships was completed;
65 new jobs were created through expansion of the Port City Group’s manufacturing
facilities;
The State of Michigan announced reopening of the West Shore Correctional Facility
bringing back 250 jobs.
Major steps were taken to ensure the future stability and viability of the City’s critical water
treatment operation:
The City reached a new 40-year water supply agreement with its current municipal
customers. The agreement calls for the City to provide water to these customers at a rate
equal to 1.25 times the rate charged to in-City customers;
The City also concluded a water supply agreement with two new large municipal
customers it previously had not served – the City of Norton Shores and Fruitport Charter
Township. Service to these two municipal customers will start in 2015 and their addition
will allow the spreading of water treatment costs over a larger customer base while
remaining well within the plant’s rated treatment capacity.
The City successfully replaced its sixteen year-old financial management systems with newer,
more cost effective software. Implementation of the new software systems was accomplished on
schedule and well within budget.
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The City replaced its aging phone systems with state-of-the-art voice over internet protocol
(VOIP) technology that will dramatically reduce future telecommunications costs.
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.
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, 2012, the total of City bonds and contractual debt outstanding (including discretely
presented component unit debt) was $31,795,140. Presently there are no plans to issue new debt.
Standard & Poor’s rates the City’s general obligation debt A+. The City’s water revenue bonds carry
the AA- rating.
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PENSIONS AND OTHER POST-EMPLOYMENT BENEFITS
The City’s defined benefit retirement benefits are administered by the statewide Municipal Employees
Retirement System (MERS) of Michigan. The defined benefit program is closed to new employees and
all hires since 2007 are covered by a defined contribution retirement program. As of the most recent
actuarial report (December 31, 2011), the City’s defined benefit retirement program is 97% funded.
The City also provides post-employment 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. The City has 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, 2011), the City’s retiree healthcare program is 76% 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 year ended June 30, 2011. This marked the twenty-
sixth 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.
10
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
11
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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, CATV
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, 2012
ELECTED OFFICIALS
Mayor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stephen J. Gawron
At Large
Vice Mayor-Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lawrence O. Spataro
Ward 3
Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Eric Hood
Ward 1
Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Willie German
Ward 2
Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Byron Turnquist
Ward 4
Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Lea Markowski
At Large
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
15
16
BRICKLEY DELONG
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS’ REPORT
October 23, 2012
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, 2012, 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, 2012, 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 19 - 30 and 70 - 77 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.
678 Front Ave., NW Suite 230 316 Morris Ave., Suite 500, P.O. Box 999 907 S. State St., P.O. Box 331
Grand Rapids, MI 49504 Muskegon, MI 49443 Hart, MI 49420
PHONE (616) 742-1300 PHONE (231) 726-5800 PHONE (231) 873-1040
FAX (616) 742-1318 FAX (231) 722-0260 FAX (231) 873-0602
www.brickleydelong.com
17
BRICKLEY DELONG
City Commission
October 23, 2012
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,
2012. Please read it in conjunction with the City’s financial statements, which follow this
section.
FINANCIAL HIGHLIGHTS
The assets of the City of Muskegon exceeded its liabilities by $133,007,035 as of
June 30, 2012. Of the total net assets, $21,798,286 (16.4%) was unrestricted and
may be used to meet the City’s ongoing obligations to citizens and creditors.
The City’s total combined net assets decreased by $1,495,867 during the year
ended June 30, 2012 mostly due to normal depreciation of capital assets.
The City’s governmental funds reported combined ending fund balance of
$13,438,058, an increase of $2,511,718 (23%) from the prior year. The increase
is attributable to the receipt of proceeds from a $2.0 million bond issue for street
projects and to favorable General Fund operating results.
The City’s General Fund reported a total fund balance of $6,520,045, an increase
of $508,663 from the prior year balance of $6,011,382. The favorable increase is
the result of higher than anticipated local income tax and state-shared revenues
combined with tight budget controls.
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.
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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
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,
20
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.
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
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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 $133,007,035 as of June 30, 2012. This is
a decrease of $1,495,867 from reported net assets for the prior year. An overview of
the City’s net assets follows:
City's Net Assets
(In Thousands of Dollars)
Governmental Business-Type
Activities Activities Total Percentage
6/30/2012 6/30/2011 6/30/2012 6/30/2011 6/30/2012 6/30/2011 Change
Current and other assets $22,690 $20,011 $10,581 $10,904 $33,271 $30,915 7.62%
Capital assets 72,726 74,097 55,407 56,942 128,133 131,038 -2.22%
Total Assets 95,416 94,108 65,988 67,846 161,404 161,954 -0.34%
Long-term liabilities 8,452 6,919 14,115 15,423 22,567 22,342 1.01%
Other liabilities 3,738 2,990 2,092 2,120 5,830 5,110 14.09%
Total Liabilities 12,190 9,909 16,207 17,543 28,397 27,452 3.44%
Net Assets
Invested in capital assets,
net of related debt 66,863 67,945 40,148 40,420 107,011 108,365 -1.25%
Restricted 3,526 3,656 672 672 4,198 4,328 -3.00%
Unrestricted 12,837 12,598 8,961 9,211 21,798 21,809 -0.05%
Total Net Assets $83,226 $84,199 $49,781 $50,303 $133,007 $134,502 -1.11%
The bulk of the City’s net assets ($107,010,406 or 80%) represent investments in
capital infrastructure assets, less the remaining balance of debt issued to acquire those
assets. These infrastructure assets are used to provide public services to citizens and
are not available for spending.
Another 3.2% ($4,198,343) of the City’s net assets are legally restricted as to use.
Remaining net assets ($21,798,286) are unrestricted and may be used to meet the
City’s operating needs and ongoing obligations. The City’s unrestricted net assets
decreased slightly ($11,521) during the year.
22
Changes in net assets. The City’s total revenues were $42,686,094 for the year ended
June 30, 2012. This represents a 5.2% decrease from total revenues collected during
the prior fiscal year. About 38% of the City’s revenue stream came from charges to
users of specific services such as water or sewer. Another 15% came from grants from
the state and federal governments and 38% 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, 2012 was
$44,181,961. This represents a 1% decrease from reported expenses for the last fiscal
year ended June 30, 2011. 72% of the City’s expenses were for governmental activities
such as police and fire protection, streets, parks, and general administration. The
remaining 28% represents the costs of the City’s business-type activities, specifically,
water, sewer and marina operations.
The table on the following page (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.
As can be seen, net assets for governmental activities decreased $973,842 while net
assets for business-type activities decreased by $522,025. These changes represent
the downsizing of municipal operations in response to demographic and fiscal realities
faced by the City.
23
Changes in City’s Net Assets
(In thousands of dollars)
Governmental Business-Type
Activities Activities Total Percentage
6/30/2012 6/30/2011 6/30/2012 6/30/2011 6/30/2012 6/30/2011 Change
Program revenues
Charges for services $4,246 $4,418 $11,918 $12,302 $16,164 $16,720 -3.33%
Operating grants and contributions 4,652 5,425 - - 4,652 5,425 -14.25%
Capital grants and contributions 1,568 2,257 - 20 1,568 2,277 -31.14%
General revenues
Property taxes 8,383 8,844 - - 8,383 8,844 -5.21%
Income taxes 7,664 6,867 - - 7,664 6,867 11.61%
State shared revenues 3,578 3,847 - - 3,578 3,847 -6.99%
All other 631 1,014 46 24 677 1,038 -34.78%
Total revenues 30,722 32,672 11,964 12,346 42,686 45,018 -5.18%
Governmental activities expenses
Public representation 867 854 - - 867 854 1.52%
Administrative services 566 646 - - 566 646 -12.38%
Financial services 2,399 2,373 - - 2,399 2,373 1.10%
Public safety 13,213 13,391 - - 13,213 13,391 -1.33%
Public w orks 2,958 3,471 - - 2,958 3,471 -14.78%
Highw ays, streets and bridges 6,569 7,013 - - 6,569 7,013 -6.33%
Community and economic development 2,447 2,831 - - 2,447 2,831 -13.56%
Culture and recreation 1,601 1,524 - - 1,601 1,524 5.05%
General administration 792 794 - - 792 794 -0.25%
Interest on long-term debt 283 273 - - 283 273 3.66%
Business-type activities expenses
Water - - 5,974 5,869 5,974 5,869 1.79%
Sew er - - 6,202 5,289 6,202 5,289 17.26%
Marina and Launch Ramp - - 310 293 310 293 5.80%
Total expenses 31,695 33,170 12,486 11,451 44,181 44,621 -0.99%
Change in net assets before transfers (973) (498) (522) 895 (1,495) 397 -476.57%
Transfers - - - - - - -
Change in net assets (973) (498) (522) 895 (1,495) 397 -476.57%
Net assets at beginning of year 84,199 84,697 50,303 49,408 134,502 134,105 0.30%
Net assets at end of year $83,226 $84,199 $49,781 $50,303 $133,007 $134,502 -1.11%
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,
2012 was $31,695,255.
The net cost that City taxpayers paid for these activities through local property
taxes and income taxes was $16,046,758, or 51% of the total.
24
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
6/30/2012 6/30/2011 % Change 6/30/2012 6/30/2011 % Change
Governmental activities
Public safety $13,213 $13,391 -1.33% $11,910 $12,046 -1.13%
Community and economic development 2,447 2,831 -13.56% 388 106 266.04%
Culture and recreation 1,601 1,524 5.05% 1,280 1,147 11.60%
Highw ays, streets and bridges 6,569 7,013 -6.33% 1,826 1,770 3.16%
Public w orks 2,958 3,471 -14.78% 2,468 2,817 -12.39%
All other 4,907 4,940 -0.67% 3,358 3,184 5.46%
Total governmental activities $31,695 $33,170 -4.45% $21,230 $21,070 0.76%
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,
2012, the City’s total business-type activities realized an overall decrease in net assets
of $522,025.
Sewer Fund net assets increased $319,140 primarily as result of lower and more stable
wholesale sewage treatment costs paid to Muskegon County. The Water Fund saw net
assets decrease $677,279. This falloff is attributable to lower consumption levels.
Water rates were increased by 10% effective July 1, 2012 to offset this impact of this
trend. Marina and Launch Ramp Fund net assets decreased $98,293 due to lower
operating revenues resulting from the impact of the economic downturn on recreational
boating.
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, 2012
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.
25
Fund Balance as a %
Prior Year’s
Year Year-End Fund Year‐to‐Year % of Prior Year
Ended Balance Expenditures and Expenditures (Policy
Change
Other Uses Target=13%)
6/30/2012 $6,520,045 8.46% $25,556,758 25.51%
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%
* 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 large one-time increase to the General Fund fund
balance due to the fact that annual property taxes are collected in full during this period.
For the year ended June 30, General Fund revenues 2012 were $353,135 higher than
the final amended budget estimate. This positive revenue variance is due to higher than
expected local income tax and state shared revenues.
General Fund expenditures were $297,286 less than projected in the amended budget.
Most 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, 2012, the fund balance of the Major
Street and Trunkline Fund increased $1,966,337 which is attributable to the receipt of
proceeds from a $2.0 million bond issue for street projects.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
As of June 30, 2012, the City and its component units had invested $130,849,479 in a
variety of capital assets, including land, streets, equipment, buildings, water and sewer
lines, and vehicles. This is a decrease of $3,078,029 from capital assets reported as of
June 30, 2011. 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.
26
Long-Term Debt
Bond Ratings
At June 30, 2012, the City had $24,430,208 in bonds and
The City’s limited full faith and
other long-term obligations outstanding. This represents a credit bonds (bonds guaranteed
1.7% increase from the prior year. During the year the City by the City’s taxing powers) are
issued $2.0 million in street improvement bonds to provide rated “A+” by Standard & Poor’s.
The City’s Water System
local matching funds for state and federal highway grants. revenue bonds carry the “AA-“
S&P 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
6/30/2012 6/30/2011 6/30/2012 6/30/2011 6/30/2012 6/30/2011 Change
Due w ithin one year $592 $421 $1,271 $1,256 $1,863 $1,677 11.09%
Due in more than one year 8,452 6,919 14,115 15,423 22,567 22,342 1.01%
Total bonds & other obligations $9,044 $7,340 $15,386 $16,679 $24,430 $24,019 1.71%
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 $7,364,932 at year-end as shown in the table below. This represents a
decrease of 1.5% from the prior year.
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.
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)
Dow ntow n Development Local Development
Total Percentage
Finance Authority Finance Authority
6/30/2012 6/30/2011 6/30/2012 6/30/2011 6/30/2012 6/30/2011 Change
Due w ithin one year $275 $265 $180 $80 $455 $345 31.88%
Due in more than one year 2,534 2,813 4,376 4,321 6,910 7,134 -3.14%
Total bonds & other obligations $2,809 $3,078 $4,556 $4,401 $7,365 $7,479 -1.52%
During the year, Local Development Finance Authority (LDFA) bonds were refunded
resulting in net present value savings of $405,546 or about 10% of the total bonds
refunded.
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ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
The City’s fiscal year 2012-13 capital budget anticipates spending $7,593,000 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 2012-13 budget will entail continued program
downsizing to better balance the City’s operating expenses with recurring revenue
streams:
Through attrition the full-time personnel complement will be reduced from 241
positions to 233 positions.
The Senior Transit program will be eliminated or a new funding source found to
make it self-sufficient.
New contracts for streetlighting and sanitation services will reduce costs by
$150,000.
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%
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 $6,599,753 for the year ended June 30, 2011 to
$7,412,804 for the year ended June 30, 2012 – a healthy 12.3% increase. For 2012-13,
the City has conservatively estimated income tax revenue to be $7,100,000.
28
City Income Percent
Year
Tax Revenues Change
6/30/2012 $7,412,804 12.3%
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%
* 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 2012-13, the City tax levy remains at 9.5 mills for general operations and 2.5 mills
for sanitation service. We project that $7,006,440 in total property tax revenue will be
collected during fiscal year 2012-13.
It should be noted that several significant property tax appeals are pending. The impact
of these appeals on City finances is being monitored closely.
State Shared Revenues
State shared sales tax revenues represent about 15% of total General Fund revenue.
The City’s state shared revenue allocation is made up of two parts. The constitutional
component is a fixed percentage of total state sales tax collections that is allocated to
cities on a per capita basis and that cannot be reduced by the legislature. The non-
constitutional component is determined by a complex formula and is subject to
adjustment through the State’s annual budget process. Both 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
6/30/2012 $3,577,848 -7.0%
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%
* 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.
29
For the 2012-13 fiscal year, the City has projected $3,592,422 in state shared revenues.
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 been more stable than general state sales tax state-shared revenues
have been:
Street Revenues
from State Percent
Year
Change
6/30/2012 $3,176,984 -2.4%
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%
* Six‐month fiscal period
For 2012-13, the City is projecting no material change in street revenues from the State
of Michigan.
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 $11,709,729 during the year ended
June 30, 2012. 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 2012-13.
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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FINANCIAL STATEMENTS
31
City of Muskegon
STATEMENT OF NET ASSETS (DEFICITS)
June 30, 2012
Governmental Business-type Component
activities activities Total units
CURRENT ASSETS
Cash and investments $ 15,993,001 $ 6,075,414 $ 22,068,415 $ 457,790
Receivables 2,502,230 2,080,362 4,582,592 -
Due from other governmental units 1,779,946 49,635 1,829,581 -
Internal balances (1,361,094) 1,361,094 - -
Inventories 39,587 149,259 188,846 -
Prepaid items 427,862 107,367 535,229 61,149
Total current assets 19,381,532 9,823,131 29,204,663 518,939
NONCURRENT ASSETS
Restricted assets - 672,000 672,000 -
Capital assets, net
Nondepreciable 18,980,797 1,801,129 20,781,926 400,000
Depreciable 53,744,956 53,606,235 107,351,191 2,316,362
Due from component units 1,660,000 - 1,660,000 -
Bond issuance costs, net 105,889 85,467 191,356 158,843
Special assessments receivable 388,403 - 388,403 -
Net pension asset 996,641 - 996,641 -
Notes receivable 158,114 - 158,114 -
Total noncurrent assets 76,034,800 56,164,831 132,199,631 2,875,205
Total assets 95,416,332 65,987,962 161,404,294 3,394,144
LIABILITIES AND NET ASSETS (DEFICITS)
32
CURRENT LIABILITIES
Accounts payable and accrued liabilities 1,696,539 381,012 2,077,551 100,815
Due to other governmental units 1,037,810 439,401 1,477,211 -
Unearned revenue 412,289 - 412,289 -
Bonds and other obligations, due within one year 591,800 1,271,100 1,862,900 455,000
Total current liabilities 3,738,438 2,091,513 5,829,951 555,815
NONCURRENT LIABILITIES
Due to primary government - - - 1,660,000
Bonds and other obligations, less amounts due within one year 8,452,172 14,115,136 22,567,308 6,909,932
Total noncurrent liabilities 8,452,172 14,115,136 22,567,308 8,569,932
Total liabilities 12,190,610 16,206,649 28,397,259 9,125,747
NET ASSETS (DEFICITS)
Invested in capital assets, net of related debt 66,862,806 40,147,600 107,010,406 (1,839,834)
Restricted for:
Streets and highways 1,974,304 - 1,974,304 -
Debt service - 672,000 672,000 -
Law enforcement 149,174 - 149,174 -
Perpetual care
Expendable 25,466 - 25,466 -
Non-expendable 1,372,400 - 1,372,400 -
Other purposes 4,999 - 4,999 -
Unrestricted 12,836,573 8,961,713 21,798,286 (3,891,769)
Total net assets (deficits) $ 83,225,722 $ 49,781,313 $ 133,007,035 $ (5,731,603)
The accompanying notes are an integral part of this statement.
City of Muskegon
STATEMENT OF ACTIVITIES
For the year ended June 30, 2012
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 $ 866,809 $ 196,886 $ - $ - $ (669,923) $ - $ (669,923) $ -
Administrative services 566,161 270,886 10,000 - (285,275) - (285,275) -
Financial services 2,399,147 881,229 50,000 23,400 (1,444,518) - (1,444,518) -
Public safety 13,213,251 1,136,942 166,595 - (11,909,714) - (11,909,714) -
Public works 2,958,367 480,487 - 9,478 (2,468,402) - (2,468,402) -
Highways, streets and bridges 6,568,448 230,241 3,133,453 1,378,999 (1,825,755) - (1,825,755) -
Community and economic development 2,447,373 617,379 1,285,652 156,128 (388,214) - (388,214) -
Culture and recreation 1,601,316 315,010 5,876 - (1,280,430) - (1,280,430) -
General administration 791,197 116,690 - - (674,507) - (674,507) -
Interest on long-term debt 283,186 - - - (283,186) - (283,186) -
Total governmental activities 31,695,255 4,245,750 4,651,576 1,568,005 (21,229,924) - (21,229,924) -
Business-type activities
Sewer 6,202,359 6,455,634 - - - 253,275 253,275 -
Water 5,974,173 5,254,095 - - - (720,078) (720,078) -
Marina and Launch Ramp 310,174 208,370 - - - (101,804) (101,804) -
Total business-type activities 12,486,706 11,918,099 - - - (568,607) (568,607) -
Total primary government $ 44,181,961 $ 16,163,849 $ 4,651,576 $ 1,568,005 (21,229,924) (568,607) (21,798,531) -
33
Component units
Local Development Finance Authority III $ 493,903 $ - $ - $ 175,000 - - - (318,903)
Downtown Development Authority 130,462 - - - - - - (130,462)
Tax Increment Finance Authority 50,000 - - - - - - (50,000)
Brownfield Redevelopment Authority 1,711,849 - - - - - - (1,711,849)
Total component units $ 2,386,214 $ - $ - $ 175,000 - - - (2,211,214)
General revenues
Property taxes 8,383,224 - 8,383,224 584,703
Income taxes 7,663,534 - 7,663,534 -
Cable franchises 342,376 - 342,376 -
Grants and contributions not restricted to specific programs 3,577,848 - 3,577,848 -
Unrestricted investment earnings 100,073 46,582 146,655 6,853
Miscellaneous 154,531 - 154,531 -
Gain on sale of capital asset 34,496 - 34,496 -
Total general revenues 20,256,082 46,582 20,302,664 591,556
Change in net assets (973,842) (522,025) (1,495,867) (1,619,658)
Net assets (deficit) at July 1, 2011 84,199,564 50,303,338 134,502,902 (4,111,945)
Net assets (deficit) at June 30, 2012 $ 83,225,722 $ 49,781,313 $ 133,007,035 $ (5,731,603)
The accompanying notes are an integral part of this statement.
City of Muskegon
BALANCE SHEET
Governmental Funds
June 30, 2012
Major Street Other Total
General and Trunkline governmental governmental
Fund Fund funds funds
ASSETS
Cash and investments $ 5,811,348 $ 2,185,590 $ 3,805,840 $ 11,802,778
Receivables
Accounts and loans 184,033 6,053 567,920 758,006
Property taxes 103,595 - - 103,595
Income taxes 739,865 - - 739,865
Special assessments - 379,120 341,283 720,403
Due from other governmental units 653,339 432,531 694,076 1,779,946
Due from other funds 782,150 - - 782,150
Advances to component units - - 553,334 553,334
Prepaid items 168,468 22,792 5,633 196,893
Total assets $ 8,442,798 $ 3,026,086 $ 5,968,086 $ 17,436,970
LIABILITIES AND FUND BALANCES
Liabilities
Accounts payable $ 718,223 $ 55,526 $ 66,843 $ 840,592
Accrued liabilities 188,462 3,757 10,341 202,560
Due to other governmental units 945,139 80,675 - 1,025,814
34
Due to other funds - - 782,150 782,150
Deferred revenue 70,929 379,120 697,747 1,147,796
Total liabilities 1,922,753 519,078 1,557,081 3,998,912
Fund balances
Nonspendable:
Prepaid items 168,468 22,792 5,633 196,893
Long-term loans receivable - - 177,493 177,493
Perpetual care 10,000 - 1,362,400 1,372,400
Restricted for:
Streets and highways - 2,484,216 821,218 3,305,434
Law enforcement - - 149,174 149,174
Perpetual care - - 25,466 25,466
Other purposes - - 4,999 4,999
Assigned for:
Capital projects and public improvements 1,500,000 - 2,055,904 3,555,904
Fiscal year 2013 budget 575,738 - - 575,738
Unassigned 4,265,839 - (191,282) 4,074,557
Total fund balances 6,520,045 2,507,008 4,411,005 13,438,058
Total liabilities and fund balances $ 8,442,798 $ 3,026,086 $ 5,968,086 $ 17,436,970
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, 2012
Total fund balance—governmental funds $ 13,438,058
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 $ 130,509,598
Accumulated depreciation (59,543,443) 70,966,155
Bond issuance costs are not capitalized and amortized in the governmental funds.
Bond issuance costs 160,106
Accumulated amortization (54,217) 105,889
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. 996,641
Other receivables in governmental activities are not reported in the
35
governmental funds. 640,000
Accrued interest in governmental activities is not reported in the
governmental funds. (63,000)
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. 720,506
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 (7,862,947)
Compensated absences (1,092,533) (8,955,480)
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. 5,376,953
Net assets of governmental activities in the Statement of Net Assets $ 83,225,722
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, 2012
Major Street Other Total
General and Trunkline governmental governmental
Fund Fund funds funds
REVENUES
Taxes $ 15,506,668 $ - $ - $ 15,506,668
Licenses and permits 1,223,034 - - 1,223,034
Intergovernmental revenues
Federal 152,300 1,020,000 1,285,652 2,457,952
State 3,592,143 2,895,328 903,956 7,391,427
Local 50,000 - - 50,000
Charges for services 2,407,792 97,842 90,694 2,596,328
Fines and forfeitures 447,979 - 11,422 459,401
Interest and rental income 202,300 34,829 70,762 307,891
Other 540,544 168,897 537,422 1,246,863
Total revenues 24,122,760 4,216,896 2,899,908 31,239,564
EXPENDITURES
Current
Public representation services 867,762 - - 867,762
Administrative services 470,489 - - 470,489
Financial services 2,407,131 - - 2,407,131
Public safety 12,958,910 - 4,212 12,963,122
Public works 2,835,000 - - 2,835,000
Highways, streets and bridges - 4,250,559 1,235,481 5,486,040
36
Community and economic development 934,580 - - 934,580
Culture and recreation 1,263,386 - 2,357 1,265,743
Other governmental functions 770,910 - - 770,910
Debt service
Principal 70,000 - 219,597 289,597
Interest and fees 211,954 25,330 31,031 268,315
Capital outlay 244,280 - 1,935,812 2,180,092
Total expenditures 23,034,402 4,275,889 3,428,490 30,738,781
Excess of revenues over (under) expenditures 1,088,358 (58,993) (528,582) 500,783
OTHER FINANCING SOURCES (USES)
Proceeds from sale of capital assets - - 113,981 113,981
Long-term debt issued - 2,000,000 - 2,000,000
Transfers in 3,351 - 507,556 510,907
Transfers out (583,046) - (30,907) (613,953)
Total other financing sources (uses) (579,695) 2,000,000 590,630 2,010,935
Net change in fund balances 508,663 1,941,007 62,048 2,511,718
Fund balances at July 1, 2011 6,011,382 566,001 4,348,957 10,926,340
Fund balances at June 30, 2012 $ 6,520,045 $ 2,507,008 $ 4,411,005 $ 13,438,058
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, 2012
Net change in fund balances—total governmental funds $ 2,511,718
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 $ (4,403,141)
Capital outlay 2,948,610 (1,454,531)
Governmental funds report the entire proceeds from the sale of capital assets as revenue,
but the Statement of Activities reports only the gain or loss on the sale of the capital assets. (15,557)
Debt proceeds are other financing source in the governmental funds, but the proceeds
increase long-term debt in the Statement of Net Assets. (2,000,000)
Revenue reported in the Statement of Activities that does not provide current
37
financial resources are not reported as revenue in the governmental funds. (35,621)
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. 288,658
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. (6,300)
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.
Decrease in net pension asset (3,359)
Decrease in compensated absences 1,167 (2,192)
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. (328,023)
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. 68,006
Change in net assets of governmental activities $ (973,842)
The accompanying notes are an integral part of this statement.
City of Muskegon
STATEMENT OF NET ASSETS
Proprietary Funds
June 30, 2012
ASSETS
Governmental
Activities -
Business-type Activities - Enterprise Funds Internal
Marina and Service
Sewer Water Ramp Total Funds
CURRENT ASSETS
Cash and investments $ 3,701,462 $ 2,110,590 $ 263,362 $ 6,075,414 $ 4,190,223
Accounts receivable 1,021,398 1,055,347 3,617 2,080,362 101,879
Due from other governmental units - 48,790 845 49,635 -
Inventories 42,173 107,086 - 149,259 39,587
Prepaid items 43,720 61,443 2,204 107,367 230,969
Total current assets 4,808,753 3,383,256 270,028 8,462,037 4,562,658
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 20,580,862 64,458,393 2,322,488 87,361,743 1,559,334
Machinery and equipment 39,722 2,800,566 - 2,840,288 7,381,412
Construction in progress 356,994 1,301,885 - 1,658,879 -
Less accumulated depreciation (7,990,463) (28,033,209) (2,461,089) (38,484,761) (7,437,020)
Net capital assets 13,003,303 40,631,135 1,772,926 55,407,364 1,759,598
Advances to component units - - - - 1,106,666
38
Bond issuance costs, net - 85,467 - 85,467 -
Total noncurrent assets 13,003,303 41,388,602 1,772,926 56,164,831 2,866,264
Total assets 17,812,056 44,771,858 2,042,954 64,626,868 7,428,922
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES
Accounts payable 9,396 241,938 15,762 267,096 574,332
Accrued liabilities 9,742 103,903 271 113,916 16,055
Due to other governmental units 439,401 - - 439,401 11,996
Bonds and other obligations, due within one year 7,300 1,263,600 200 1,271,100 14,800
Total current liabilities 465,839 1,609,441 16,233 2,091,513 617,183
NONCURRENT LIABILITIES
Bonds and other obligations, less amounts due within one year 36,465 14,077,650 1,021 14,115,136 73,692
Total liabilities 502,304 15,687,091 17,254 16,206,649 690,875
NET ASSETS
Invested in capital assets, net of related debt 13,003,303 25,371,371 1,772,926 40,147,600 1,759,598
Restricted for debt service - 672,000 - 672,000 -
Unrestricted 4,306,449 3,041,396 252,774 7,600,619 4,978,449
Total net assets $ 17,309,752 $ 29,084,767 $ 2,025,700 48,420,219 $ 6,738,047
Adjustment to reflect the consolidation of internal service fund activities
related to enterprise funds 1,361,094
Net assets of business-type activities $ 49,781,313
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, 2012
Governmental
Activities -
Business-type Activities - Enterprise Funds Internal
Marina and Service
Sewer Water Ramp Total Funds
OPERATING REVENUES
Charges for services $ 6,308,525 $ 5,010,924 $ 198,418 $ 11,517,867 $ 7,943,478
Other 147,109 243,171 9,952 400,232 89,599
Total operating revenues 6,455,634 5,254,095 208,370 11,918,099 8,033,077
OPERATING EXPENSES
Administration 333,857 537,845 17,376 889,078 360,000
Insurance premiums and claims - - - - 4,277,725
Wastewater treatment 5,405,696 - - 5,405,696 -
Filtration plant operations - 1,385,191 - 1,385,191 -
Water distribution - 1,518,042 - 1,518,042 -
Other operations - - 177,038 177,038 3,064,260
Depreciation and amortization 421,949 2,137,578 114,198 2,673,725 494,365
Total operating expenses 6,161,502 5,578,656 308,612 12,048,770 8,196,350
39
Operating income (loss) 294,132 (324,561) (100,242) (130,671) (163,273)
NONOPERATING REVENUES (EXPENSES)
Investment earnings 25,008 19,625 1,949 46,582 33,677
Gain on sale of capital assets - - - - 28,963
Interest expense - (372,343) - (372,343) -
Total nonoperating revenue (expenses) 25,008 (352,718) 1,949 (325,761) 62,640
Income (loss) before contributions and transfers 319,140 (677,279) (98,293) (456,432) (100,633)
Transfers in - - - - 103,046
Change in net assets 319,140 (677,279) (98,293) (456,432) 2,413
Net assets at July 1, 2011 16,990,612 29,762,046 2,123,993 6,735,634
Net assets at June 30, 2012 $ 17,309,752 $ 29,084,767 $ 2,025,700 $ 6,738,047
Adjustments to reflect the consolidation of internal service fund activities
related to enterprise funds (65,593)
Change in net assets of business-type activities $ (522,025)
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, 2012
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 $ 6,431,827 $ 5,024,918 $ 209,808 $ 11,666,553 $ 161,099
Receipts from interfund services provided 13,814 93,679 - 107,493 7,943,478
Payments to suppliers (4,855,616) (1,517,384) (166,482) (6,539,482) (4,607,163)
Payments to employees (420,403) (1,278,702) (14,225) (1,713,330) (1,490,276)
Payments for interfund services used (468,796) (733,118) (11,540) (1,213,454) (858,405)
Net cash provided by operating activities 700,826 1,589,393 17,561 2,307,780 1,148,733
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers in - - - - 103,046
Advances to component units - - - - (1,106,666)
Net cash used for noncapital financing activities - - - - (1,003,620)
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Purchases of capital assets (344,591) (771,410) - (1,116,001) (589,536)
Principal paid on capital debt - (1,230,000) - (1,230,000) -
Interest paid on capital debt - (410,187) - (410,187) -
Proceeds from sale of capital assets - - - - 32,486
Net cash used for capital and related financing activities (344,591) (2,411,597) - (2,756,188) (557,050)
40
CASH FLOW FROM INVESTING ACTIVITIES
Investment earnings 25,008 19,625 1,949 46,582 33,677
Net increase (decrease) in cash and investments 381,243 (802,579) 19,510 (401,826) (378,260)
Cash and investments July 1, 2011 3,320,219 3,585,169 243,852 7,149,240 4,568,483
Cash and investments at June 30, 2012 $ 3,701,462 $ 2,782,590 $ 263,362 $ 6,747,414 $ 4,190,223
Reconciliation of cash and investments to the statement of net assets
Cash and investments $ 3,701,462 $ 2,110,590 $ 263,362 $ 6,075,414 $ 4,190,223
Restricted cash and investments - 672,000 - 672,000 -
$ 3,701,462 $ 2,782,590 $ 263,362 $ 6,747,414 $ 4,190,223
Reconciliation of operating income (loss) to net cash provided by
operating activities
Operating income (loss) $ 294,132 $ (324,561) $ (100,242) $ (130,671) $ (163,273)
Adjustments to reconcile operating income (loss) to net cash provided by
(used for) operating activities
Depreciation and amortization expense 421,949 2,137,578 114,198 2,673,725 494,365
Bad debt expense 19,221 17,683 - 36,904 -
Change in assets and liabilities
Receivables, net (29,214) (153,181) 1,438 (180,957) 71,500
Inventories (9,787) (9,585) - (19,372) (9,751)
Prepaid items (987) (2,933) 413 (3,507) 517,353
Accounts payable 23,487 (23,550) 901 838 372,496
Accrued liabilities (17,975) (52,058) 853 (69,180) (40,537)
Due to other funds - - - - (93,420)
Net cash provided by operating activities $ 700,826 $ 1,589,393 $ 17,561 $ 2,307,780 $ 1,148,733
The accompanying notes are an integral part of this statement.
City of Muskegon
STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES
Fiduciary Funds
June 30, 2012
Agency
Funds
ASSETS
Cash and investments $ 705,640
Accounts receivable 1,867
Total assets $ 707,507
LIABILITIES
Accounts payable $ 228,052
Due to other governmental units 390,092
Deposits held for others 89,363
Total liabilities $ 707,507
41
The accompanying notes are an integral part of this statement.
City of Muskegon
STATEMENT OF NET ASSETS (DEFICITS)
Discretely Presented Component Units
June 30, 2012
ASSETS
Local Tax
Development Downtown Increment Brownfield
Finance Development Finance Redevelopment
Authority III Authority Authority Authority Total
CURRENT ASSETS
Cash and investments $ 35,595 $ 245,957 $ 19,638 $ 156,600 $ 457,790
Prepaid items 61,149 - - - 61,149
Total current assets 96,744 245,957 19,638 156,600 518,939
NONCURRENT ASSETS
Capital assets, net
Nondepreciable 400,000 - - - 400,000
Depreciable 2,316,362 - - - 2,316,362
Net capital assets 2,716,362 - - - 2,716,362
Bond issuance costs, net 114,766 44,077 - - 158,843
Total noncurrent assets 2,831,128 44,077 - - 2,875,205
42
Total assets 2,927,872 290,034 19,638 156,600 3,394,144
LIABILITIES AND NET ASSETS (DEFICITS)
CURRENT LIABILITIES
Accounts payable - 59,185 - 59,185
Accrued liabilities 36,700 4,930 - - 41,630
Bonds and other obligations, due within one year 180,000 275,000 - - 455,000
Total current liabilities 216,700 339,115 - - 555,815
NONCURRENT LIABILITIES
Advances from primary government - - - 1,660,000 1,660,000
Bonds and other obligations, less amounts due
within one year 4,376,196 2,533,736 - - 6,909,932
Total noncurrent liabilities 4,376,196 2,533,736 - 1,660,000 8,569,932
Total liabilities 4,592,896 2,872,851 - 1,660,000 9,125,747
NET ASSETS (DEFICITS)
Invested in capital assets, net of related debt (1,839,834) - - - (1,839,834)
Unrestricted 174,810 (2,582,817) 19,638 (1,503,400) (3,891,769)
Total net assets (deficits) $ (1,665,024) $ (2,582,817) $ 19,638 $ (1,503,400) $ (5,731,603)
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, 2012
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 $ 266,731 $ - $ (266,731) $ - $ - $ - $ (266,731)
Interest on long-term debt 227,172 175,000 (52,172) - - - (52,172)
Total Local Development Finance Authority III 493,903 175,000 (318,903) - - - (318,903)
Downtown Development Authority
Economic development 6,562 - - (6,562) - - (6,562)
Distributions to other taxing authorities 59,185 - - (59,185) - - (59,185)
Interest on long-term debt 64,715 - - (64,715) - - (64,715)
Total Downtown Development Authority 130,462 - - (130,462) - - (130,462)
Tax Increment Finance Authority
43
Economic development 50,000 - - - (50,000) - (50,000)
Brownfield Redevelopment Authority
Economic development 1,711,849 - - - - (1,711,849) (1,711,849)
Total discretely presented component units $ 2,386,214 $ 175,000 (318,903) (130,462) (50,000) (1,711,849) (2,211,214)
General revenues
Property taxes 83,420 305,797 53,057 142,429 584,703
Unrestricted investment income 3,568 2,478 136 671 6,853
Total general revenues 86,988 308,275 53,193 143,100 591,556
Change in net assets (231,915) 177,813 3,193 (1,568,749) (1,619,658)
Net assets (deficits) at July 1, 2011 (1,433,109) (2,760,630) 16,445 65,349 (4,111,945)
Net assets (deficits) at June 30, 2012 $ (1,665,024) $ (2,582,817) $ 19,638 $ (1,503,400) $ (5,731,603)
The accompanying notes are an integral part of this statement.
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
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.
44
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
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, 2012, 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, 2011, the date
of its latest audited financial statements is as follows:
Total assets $ 5,646,184
Total liabilities (212,771)
Total net assets $ 5,433,413
Total operating income $ 1,750,345
Total operating expenses (1,962,016)
Total nonoperating revenues 39,989
Capital contributions 231,934
Change in net assets $ 60,252
45
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Government-Wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net assets and the statement of changes in net
assets) report information on all of the nonfiduciary activities of the primary government and its component
units. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are
reported separately from business-type activities, which rely to a significant extent on fees and charges for
support. Likewise, the primary government is reported separately from certain legally separate component
units for which the primary government is financially accountable.
The statement of activities demonstrates the degree to which the direct expenses of a given function or
segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific
function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or
directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and
contributions that are restricted to meeting the operational or capital requirement of a particular function or
segment. Taxes and other items not properly included among program revenues are reported instead as
general revenues.
Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds,
even though the latter are excluded from the government-wide financial statements. Major individual
governmental funds and major individual enterprise funds are reported as separate columns in the fund
financial statements.
Measurement Focus, Basis of Accounting and Financial Statement Presentation
The government-wide financial statements are reported using the economic resources measurement focus and
the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements excepting
agency funds which have no measurement focus. Revenues are recorded when earned and expenses are
recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are
recognized as revenues in the year for which they are levied. Grants and similar items are recognized as
revenue as soon as all eligibility requirements imposed by the provider have been met.
Governmental fund financial statements are reported using the current financial resources measurement focus
and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable
and available. Revenues are considered to be available when they are collectible within the current period or
soon enough thereafter to pay liabilities of the current period. For this purpose, the government considers
revenues to be available if they are collected within 60 days of the end of the current fiscal period.
Reimbursements due for expenditure-driven grants are accrued as revenue at the time the expenditures are
made, or when received in advance, deferred until expenditures are made. Expenditures generally are
recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as
well as expenditures related to compensated absences and claims and judgments, are recorded only when
payment is due.
Income taxes, property taxes, franchise taxes, licenses and interest associated with the current fiscal period are
all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal
period. Only the portion of special assessments receivable due within 60 days of the end of the current fiscal
period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are
considered to be measurable and available only when cash is received by the government.
46
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Measurement Focus, Basis of Accounting and Financial Statement Presentation—Continued
The City reports the following major governmental funds:
The General Fund is the government's primary operating fund. It accounts for all financial
resources of the general government, except those required to be accounted for in another fund.
The Major Street and Trunkline Fund accounts for gas and weight tax allocations to the City by
the Michigan Department of Transportation for construction and maintenance of major streets
within the City.
The City reports the following three major proprietary funds:
The Sewer Fund accounts for user charges and for operating expenses and debt service of the
City’s sewer system.
The Water Fund accounts for user charges and for operating expenses and debt service of the
City’s water system.
The Marina and Launch Ramp Fund accounts for user fees collected and operating expenses for
the Hartshorn Marina and boat launch ramp facilities.
Additionally, the City reports the following fund types:
Internal Service Funds account for internal engineering services for City projects; the purchase,
operation, and depreciation of all City owned equipment; the payment of insurance claims and
benefits; and the operation, maintenance, and depreciation of the City’s public service building to
other funds of the government on a cost reimbursement basis.
The Agency Funds are used to account for assets held by the City as an agent for another
organization or individual.
Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally
are followed in both the government-wide and proprietary fund financial statements to the extent that those
standards do not conflict with or contradict guidance of the Government Accounting Standards Board.
Governments also have the option of following subsequent private-sector guidance for their business-type
activities and enterprise funds, subject to this same limitation. The City has elected not to follow
subsequent private-sector guidance.
As a general rule the effect of interfund activity has been eliminated from the government-wide financial
statements. Exceptions to this general rule are payments-in-lieu of taxes and other charges between the City's
water and sewer function and various other functions of the government. Elimination of these charges would
distort the direct costs and program revenues reported for the various functions concerned.
47
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
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.
48
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
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.
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 2011 state taxable value for real/personal property of the City totaled approximately $667,015,000 of
which approximately $8,200,000 was captured by the component units. The ad valorem taxes levied
consisted of 9.5, 2.5, and .0749 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.
49
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
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.
50
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
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.
51
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
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 2011 financial statements have been reclassified to conform to
the 2012 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.
52
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
NOTE B—STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY—Continued
Excess of Expenditures Over Appropriations
During the year ended June 30, 2012, actual expenditures exceeded appropriations for:
Amended
budget Actual
General Fund
Public safety
Police department $ 8,630,989 $ 8,680,770
Fire department 3,564,399 3,674,677
These over-expenditures were funded with available fund balance.
Fund Deficits
As of June 30, 2012, the HOME Fund had an unassigned fund deficit of $182,501, and the State Grants Fund
had an unassigned fund deficit of $8,781. The deficits will be eliminated through future operations.
NOTE C—DEPOSITS AND INVESTMENTS
As of June 30, 2012, the City had the following investments:
Weighted
average
maturity
Fair value (Months) Moody's Percent
Investment Type
Money market funds $ 2,491,269 1 AAA 16.5%
US Agency obligations 4,465,116 227 AA+ 22.3%
Certificate of Deposit Account
Registry Service (CDARS) 8,002,533 2 not rated 61.2%
Total fair value $ 14,958,918 100.0%
Portfolio weighted average maturity 52
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.
53
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
NOTE C—DEPOSITS AND INVESTMENTS—Continued
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 22.37 percent of the City’s
investments.
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, 2012, $8,168,427 of the City’s bank balance of
$8,676,713 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, 2012, 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, 2012 was as follows:
Balance Balance
July 1, June 30,
2011 Additions Deductions 2012
Governmental activities:
Capital assets, no being depreciated:
Land $ 12,396,713 $ - $ 15,557 $ 12,381,156
Construction in progress 7,893,371 2,730,030 4,023,760 6,599,641
Total capital assets, not being depreciated 20,290,084 2,730,030 4,039,317 18,980,797
Capital assets, being depreciated:
Land improvements 4,215,004 - - 4,215,004
Leasehold improvements 473,114 43,491 - 516,605
Buildings and improvements 21,332,236 13,458 - 21,345,694
Furniture, vehicle and equipement 12,066,485 751,167 394,278 12,423,374
Infrastructure 72,624,081 4,023,760 - 76,647,841
Shared improvements 5,576,901 - - 5,576,901
Total capital assets, being depreciated 116,287,821 4,831,876 394,278 120,725,419
54
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
NOTE D—CAPITAL ASSETS—Continued
Balance Balance
July 1, June 30,
2011 Additions Deductions 2012
Governmental activities─ Continued
Less accumulated depreciation:
Land improvements $ 866,673 $ 142,250 $ - $ 1,008,923
Leasehold improvements 195,741 53,535 - 249,276
Buildings and improvements 14,017,054 470,170 - 14,487,224
Furniture, vehicle and equipement 9,809,836 582,346 390,755 10,001,427
Infrastructure 35,255,799 3,362,729 - 38,618,528
Shared improvements 2,336,240 278,845 - 2,615,085
Total accumulated depreciation 62,481,343 4,889,875 390,755 66,980,463
Total capital assets, being
depreciated, net 53,806,478 (57,999) 3,523 53,744,956
Capital assets, net $ 74,096,562 $ 2,672,031 $ 4,042,840 $ 72,725,753
Business-type activities:
Capital assets, not being depreciated:
Land $ 142,250 $ - $ - $ 142,250
Construction in progress 1,509,732 1,103,591 954,444 1,658,879
Total capital assets, not being depreciated 1,651,982 1,103,591 954,444 1,801,129
Capital assets, being depreciated:
Land improvements 1,888,965 - - 1,888,965
Buildings and improvements 86,407,299 954,444 - 87,361,743
Machinery and equipment 2,827,878 12,410 - 2,840,288
Total capital assets, being depreciated 91,124,142 966,854 - 92,090,996
Less accumulated depreciation:
Land improvements 1,697,265 21,225 - 1,718,490
Buildings and improvements 32,686,384 2,309,864 - 34,996,248
Machinery and equipment 1,450,539 319,484 - 1,770,023
Total accumulated depreciation 35,834,188 2,650,573 - 38,484,761
Total capital assets, being
depreciated, net 55,289,954 (1,683,719) - 53,606,235
Capital assets, net $ 56,941,936 $ (580,128) $ 954,444 $ 55,407,364
55
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
NOTE D—CAPITAL ASSETS—Continued
Depreciation
Depreciation expense was charged to functions as follows:
Governmental activities:
Adminstrative services $ 52,454
Public safety 146,956
Public works 75,449
Highways, streets and bridges 3,722,474
Community and economic development 75,717
Culture and recreation 302,174
General administration 20,286
Internal Service Fund depreciation 494,365
$ 4,889,875
Business-type activities:
Sewer $ 421,949
Water 2,114,426
Marina and Launch Ramp 114,198
$ 2,650,573
Balance Balance
July 1, June 30,
2011 Additions Deductions 2012
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 1,309,248 172,648 - 1,481,896
Total capital assets, being
depreciated, net 2,489,010 (172,648) - 2,316,362
Capital assets, net $ 2,889,010 $ (172,648) $ - $ 2,716,362
Depreciation
Depreciation expense was charged to economic development.
56
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
NOTE E—BOND ISSUANCE COSTS
Bond issuance cost activity for the year ended June 30, 2012 was as follows:
Balance Balance
July 1, June 30,
2011 Additions Deductions 2012
Governmental activities:
Bond issuance costs $ 160,106 $ - $ - $ 160,106
Less accumulated amortization 46,586 7,631 - 54,217
Bond issuance costs, net $ 113,520 $ (7,631) $ - $ 105,889
Business-type activities:
Bond issuance costs $ 134,250 $ - $ - $ 134,250
Less accumulated amortization 25,631 23,152 - 48,783
Bond issuance costs, net $ 108,619 $ (23,152) $ - $ 85,467
Amortization
Amortization expense was charge to functions as follows:
Governmental Activities:
Interest on long-term debt $ 7,631
Business-type Activities:
Water $ 23,152
NOTE F—INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS
The composition of interfund balances as of June 30, 2012 is as follows:
Due to/from other funds:
Receivable Fund Payable Fund Amount
General Fund Community Development Block Grant Fund $ 506,163
General Fund HOME Rehabilitiation Fund 195,829
General Fund Neighborhood Stabilization Fund 80,158
$ 782,150
The outstanding balances between funds result from the payable funds having negative positions in the
City’s cash and investment pool.
57
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
NOTE F—INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS—Continued
Component unit advance:
The Cemetery Perpetual Care Fund, Equipment Fund, and General Insurance Fund advanced the BRA
$1,660,000 to enable the BRA to retire a redevelopment commitment early. The advance will be repaid
with future tax captures.
Interfund transfers:
Transfers in Amount Transfers out Amount
General Fund $ 3,351 Nonmajor Governmental Funds
State Grant Fund $ 1,125
Cemetery Fund 2,226
3,351 3,351
Nonmajor Governmental Funds
Local Street Fund 480,000 General Fund 480,000
Nonmajor Governmental Funds Nonmajor Governmental Funds
HOME Rehabilitation Fund 27,556 Community Development
Block Grant Fund 27,556
Internal Service Funds
Engineering Fund 75,000 General Fund 103,046
General Insurance Fund 28,046
103,046 103,046
$ 613,953 $ 613,953
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.
58
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
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 $ 17,240 $ 410,049
Special assessments 720,507 -
Total deferred revenue for governmental funds $ 737,747 $ 410,049
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, 2012.
Balance Balance
July 1, June 30, Due within
2011 Additions Deductions 2012 one year
Governmental activities:
General obligation debt $ 5,221,755 $ 2,000,000 $ 69,061 $ 7,152,694 $ 245,000
Intergovernmental
contractual obligations 244,850 - 94,597 150,253 20,000
Special assessment obligations 685,000 - 125,000 560,000 130,000
Compensated absences 1,188,476 1,397,420 1,404,871 1,181,025 196,800
Governmental activity
long-term liabilities $ 7,340,081 $ 3,397,420 $ 1,693,529 $ 9,043,972 $ 591,800
Business-type activities:
Revenue obligations $ 16,522,208 $ - $ 1,262,444 $ 15,259,764 $ 1,250,000
Compensated absences 157,153 108,409 139,090 126,472 21,100
Business-type activity
long-term liabilities $ 16,679,361 $ 108,409 $ 1,401,534 $ 15,386,236 $ 1,271,100
Component units:
Revenue obligations $ 1,000,000 $ - $ - $ 1,000,000 $ -
General obligation debt 6,478,681 4,376,196 4,489,945 6,364,932 455,000
Component unit long-
term liabilities $ 7,478,681 $ 4,376,196 $ 4,489,945 $ 7,364,932 $ 455,000
59
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
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% $ 5,165,000
Less bond discount (12,306)
$2,000,000 Capital Improvement Bonds of 2011
payable in annual installments of $175,000 to
$230,000 through September 2021; interest at 2.98% 2,000,000
Intergovernmental contractual obligations:
$500,000 State of Michigan Brownfield Redevelopment loan
of 2008 payable in annual installments of $23,216 through
March 2019; including interest at 2% 150,253
Special assessment obligations:
$1,575,000 Capital improvement bonds of 2003 payable
in annual installments of $130,000 to $150,000
through June 2016; interest at 3.8% to 4.05% 560,000
7,862,947
Compensated absences 1,181,025
$ 9,043,972
Business-type activities:
Revenue obligations:
$5,995,000 Water supply system refunding bonds of 2010
payable in annual installments of $610,000 to $770,000
through May 2019; interest at 3.00% to 4.25% $ 4,815,000
Add bond premium 119,764
$13,900,000 Drinking Water State Revolving Fund loan
of 2004 payable in annual installments of $640,000 to
$840,000 through October 2025; interest at 2.13% 10,325,000
15,259,764
Compensated absences 126,472
$ 15,386,236
60
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
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
$275,000 to $330,000 through June 2018; interest at 2% to 4% 1,780,000
Add bond premium 28,736
$4,725,000 Local Development Finance Authority tax
increment bonds of 2002; final payment of $180,000 due
November 2012; interest at 4% 180,000
$4,100,000 Local Development Finance Authority tax increment
refunding bonds of 2012 payable in annual installments of
$260,000 to $396,000 through June 2025; interest at 2% to 4% 4,100,000
Add bond premium 276,196
$ 7,364,932
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 20, 2012, the City issued $4,100,000 of Local Development Finance Authority Refunding Bonds
of 2012 to refund the outstanding balance of the Local Development Finance Authority Refunding Bonds
2002. The City refunded the Local Development Finance Authority Refunding Bonds 2002 to reduce its total
debt service payments over the next 13 years by $479,145 and to obtain an economic gain (difference
between the present values of the debt service payments on the old and new debt) of $405,546.
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, 2012 was approximately $5,032,000. The City is unaware of any
circumstances that would cause a shortfall in the near future.
The Local Development Finance Authority (LDFA) tax increment bonds 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, 2012.
61
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
NOTE H—LONG-TERM DEBT—Continued
Annual debt service requirements to maturity for debt outstanding as of June 30, 2012 follow:
Year ending Governmental activites Business-type activities Component units
June 30, Principal Interest Principal Interest Principal Interest
2013 $ 395,211 $ 290,423 $ 1,250,000 $ 384,694 $ 455,000 $ 205,228
2014 405,615 276,989 1,295,000 352,635 540,000 177,588
2015 421,027 263,073 1,330,000 320,857 605,000 164,088
2016 431,448 248,465 1,370,000 283,360 635,000 148,276
2017 286,877 233,425 1,405,000 246,434 655,000 129,251
2018-2022 2,175,075 985,756 5,225,000 642,822 3,090,000 341,425
2023-2027 1,665,000 604,628 3,265,000 140,514 1,080,000 66,300
2028-2032 1,745,000 255,573 - - - -
2033 350,000 7,350 - - - -
$ 7,875,253 $ 3,165,682 $ 15,140,000 $ 2,371,316 $ 7,060,000 $ 1,232,156
Annual debt service requirements to maturity by type of debt as of June 30, 2012 follow:
General Obligation Debt Revenue Obligations
Year ending Governmental Component Business-type Component
June 30, activities units activities units
2013 $ 510,338 $ 660,228 $ 1,634,694 $ -
2014 507,248 717,588 1,647,635 -
2015 504,010 769,088 1,650,857 -
2016 500,622 783,276 1,653,360 -
2017 497,086 784,251 1,651,434 -
2018-2022 3,114,399 2,431,425 5,867,822 1,000,000
2023-2027 2,269,625 1,146,300 3,405,517 -
2028-2032 2,000,572 - - -
2033 357,350 - - -
$ 10,261,250 $ 7,292,156 $ 17,511,319 $ 1,000,000
Special
Intergovernmental Assessment
Year ending Governmental Governmental
June 30, activities activities
2013 $ 23,216 $ 152,080
2014 23,216 152,140
2015 23,216 156,875
2016 23,216 156,075
2017 23,216 -
2018-2022 46,432 -
2023-2027 - -
2028-2032 - -
2033 - -
$ 162,512 $ 617,170
62
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
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 2012 and 2011 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, 2012 $ 83,745 $ 113,079 $ 72,103 $ 124,721
June 30, 2011 178,552 61,897 156,704 83,745
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, 2012, the claims liability including incurred but
not reported claims was $81,702. 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 2012 and 2011
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, 2012 $ 15,462 $ 1,199,682 $ 1,133,442 $ 81,702
June 30, 2011 7,040 970,245 961,823 15,462
63
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
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.
Commitments
The City has various contract agreements for street projects as of June 30, 2012 of approximately
$1,111,000. Approximately $481,000 of these costs are being financed by grants with the remainder
coming from the Major Street and Trunkline Fund. The City also has contract agreements for water and
sewer improvements for approximately $836,000 with $193,000 of the costs being paid by the Sewer
Fund and $643,000 of the costs being paid by the Water Fund.
Leases
The City leases an office facility under a noncancelable operating lease that expires June 2017 with the
option by the tenant to renew the term of the lease for four successive periods of five years each. The
City received rental income (including pro-rata utility usage) of $43,526 for the year ended June 30, 2012.
The future minimum rental income for this lease is as follows:
Year ending
June 30, Amount
2013 $ 35,192
2014 34,854
2015 34,202
2016 33,864
2017 33,841
$ 171,953
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
64
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
NOTE J—PENSION PLANS—Continued
Defined Benefit Pension Plan—Continued
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 5.11 to 16.09 percent of annual covered payroll depending on the plan. The
contributions requirements of plan members and the City are established and may be amended by MERS.
Annual Pension Cost. For the year ended June 30, 2012, the City’s annual pension cost of approximately
$1,159,000 was equal to the City’s required and actual contribution.
Trend Information
Approximate Percentage
Annual Pension of APC Net Pension
Year ended Cost (APC) Contributed Obligation
June 30, 2010* $ 605,000 100 % $ -
June 30, 2011 1,228,000 181 -
June 30, 2012 1,159,000 100 -
* Six month fiscal period
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) 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, 2011 was 17 years.
The net pension asset is calculated as follows:
Annual required contribution $ 1,158,637
Interest on net pension asset (80,000)
Adjustment to annual required contribution 83,359
Net pension cost 1,161,996
Contributions made 1,158,637
Decrease in net pension asset (3,359)
Net pension asset at beginning of year 1,000,000
Net pension asset at end of year $ 996,641
65
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
NOTE J—PENSION PLANS—Continued
Defined Benefit Pension Plan—Continued
Funding Status and Funding Progress. As of December 31, 2011, the most recent actuarial valuation
date, the plan was 97 percent funded. The actuarial accrued liability for benefits was approximately
$92,614,000, and the actuarial value of assets was approximately $89,501,000, resulting in an unfunded
actuarial accrued liability (UAAL) of approximately $3,113,000. The covered payroll (annual payroll of
active employees covered by the plan) was approximately $10,651,000, and the ratio of the UAAL to the
covered payroll was 29 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.
Defined Contribution Pension Plan
The City also maintains a defined contribution plan offered by MERS. 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, 2012, City and employee contributions were
approximately $157,000 and $88,000, 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. Payments from the deferred compensation plan are not available to
participants until termination, retirement, death, or unforeseeable emergency. Active participants are allowed
to borrow from their accumulated assets for limited purposes such as family education costs, medical costs, or
down payment for a new home. The City must approve program loans.
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
66
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2012
NOTE K—OTHER POST-EMPLOYMENT BENEFITS—Continued
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 3.35 to 6.84 percent of covered wages. The ARC represents a
level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize
any unfunded liabilities (or funding excess) over a period not to exceed thirty years. The contribution
requirements of plan members and the City are established and may be amended by MERS.
Annual OPEB Cost. For the year ended June 30, 2012, the City’s OPEB cost (expense) of approximately
$833,000 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
June 30, 2010* $ 530,000 100 % $ -
June 30, 2011 1,079,000 100 -
June 30, 2012 833,000 100 -
* 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, 2011 is 26 years.
Funded Status and Progress. As of December 31, 2011, the most recent actuarial valuation date, the plan was
76 percent funded. The actuarial accrued liability for benefits was approximately $20,168,000, and the
actuarial value of assets was approximately $15,331,000, resulting in an unfunded actuarial liability (UAAL)
of approximately $4,837,000. The covered payroll (annual payroll of active employees covered by the plan)
was approximately $12,365,000, and the ratio of the UAAL to the covered payroll was 39 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.
67
68
REQUIRED SUPPLEMENTARY INFORMATION
69
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
General Fund
For the year ended June 30, 2012
(with comparative actual amounts for the year ended June 30, 2011)
2012 2011
Variance with
final budget-
Budgeted amounts positive
Original Final Actual (negative) Actual
REVENUES
Taxes
City income tax $ 6,500,000 $ 7,000,000 $ 7,412,804 $ 412,804 $ 6,599,753
Property taxes 7,968,182 7,968,182 7,913,724 (54,458) 8,357,640
Industrial facilities taxes 93,463 93,463 84,332 (9,131) 93,618
Payments in lieu of taxes 91,000 95,000 95,805 805 95,402
Delinquent chargeback collected 5,000 1,000 3 (997) 17
Total taxes 14,657,645 15,157,645 15,506,668 349,023 15,146,430
Licenses and permits
Business licenses 28,000 28,000 30,642 2,642 31,110
Liquor licenses 61,000 57,000 56,039 (961) 61,955
70
Cable TV fees 340,000 340,000 342,376 2,376 362,103
Rental property registration 120,000 130,000 162,990 32,990 115,598
Burial permits 110,000 110,000 87,768 (22,232) 93,483
Building permits 200,000 250,000 264,201 14,201 255,906
Electrical permits 75,000 80,000 84,907 4,907 78,852
Plumbing permits 30,000 30,000 26,884 (3,116) 29,961
Mechanical permits 60,000 60,000 55,169 (4,831) 61,611
Vacant building fees 75,000 100,000 112,058 12,058 89,060
Total licenses and permits 1,099,000 1,185,000 1,223,034 38,034 1,179,639
Intergovernmental revenues
Federal grants 169,889 159,405 152,300 (7,105) 192,842
State
Grants 20,000 20,000 14,295 (5,705) 42,458
State shared revenue 3,050,000 3,540,888 3,577,848 36,960 3,846,859
Total intergovernmental revenues - State 3,070,000 3,560,888 3,592,143 31,255 3,889,317
Local 50,000 50,000 50,000 - 75,000
City of Muskegon
BUDGETARY COMPARISON SCHEDULE—CONTINUED
General Fund
For the year ended June 30, 2012
(with comparative actual amounts for the year ended June 30, 2011)
2012 2011
Variance with
final budget-
Budgeted amounts positive
Original Final Actual (negative) Actual
Charges for services
Tax administration fees $ 289,500 $ 289,500 $ 289,361 $ (139) $ 297,326
Utility administration fees 225,000 225,000 225,000 - 225,000
Reimbursement for elections 15,500 13,000 13,640 640 12,672
Brownfield authority admin fee - 13,828 13,828 - -
Indirect cost reimbursements 1,144,018 1,144,018 1,144,020 2 1,144,020
Site plan review fee 3,000 3,000 3,400 400 2,800
Sale of cemetery lots 25,500 25,500 24,671 (829) 32,290
Police miscellaneous 59,000 59,000 57,893 (1,107) 84,553
Police impound fees 40,000 42,000 40,920 (1,080) 39,100
Landlord's alert fee 40 40 40 - 40
Fire protection-state property 80,000 108,094 137,127 29,033 120,210
71
Zoning fees 8,000 10,500 12,055 1,555 6,158
Clerk fees 3,500 1,500 1,365 (135) 2,039
Clerk fees - passport fees 5,000 3,500 3,790 290 4,115
Tax abatement application fees 2,000 4,000 3,439 (561) 810
Treasurer fees 65,000 65,000 61,682 (3,318) 60,358
False alarm fees 13,000 13,000 10,680 (2,320) 12,960
Miscellaneous cemetery income 18,000 63,000 61,645 (1,355) 20,398
Senior transit program fees 9,000 11,000 11,123 123 10,401
Fire miscellaneous 2,000 2,000 703 (1,297) 4,985
Sanitation stickers 80,000 80,000 87,303 7,303 79,762
Lot cleanup fees 50,000 35,000 43,028 8,028 29,493
Reimbursements - lot mowing and demolitions 50,000 50,000 58,740 8,740 49,760
Special events reimbursements 100,000 100,000 95,788 (4,212) 104,937
Recreation program fees - 6,000 6,551 551 20,831
Total charges for services 2,287,058 2,367,480 2,407,792 40,312 2,365,018
City of Muskegon
BUDGETARY COMPARISON SCHEDULE—CONTINUED
General Fund
For the year ended June 30, 2012
(with comparative actual amounts for the year ended June 30, 2011)
2012 2011
Variance with
final budget-
Budgeted amounts positive
Original Final Actual (negative) Actual
Fines and forfeitures
Income tax - penalty and interest $ 180,000 $ 180,000 $ 191,679 $ 11,679 $ 156,339
Late fees on current taxes 40,000 40,000 24,051 (15,949) 30,875
Interest on late invoices 2,000 3,500 2,328 (1,172) 2,011
Parking fines 125,000 110,000 105,995 (4,005) 100,885
Court fines 170,000 140,000 123,926 (16,074) 142,764
Total fines and forfeitures 517,000 473,500 447,979 (25,521) 432,874
Interest and rental income
Investment earnings 50,000 75,000 (25,284) (100,284) 85,120
Flea market 29,000 35,000 28,664 (6,336) 27,233
72
Farmers' market 35,000 40,000 47,805 7,805 43,471
City right of way rental 8,561 8,561 6,800 (1,761) 6,800
Fire station lease - Central Dispatch 42,000 45,000 43,526 (1,474) 47,895
Great Lakes Naval Memorial lease 5,000 10,000 15,000 5,000 2,500
McGraft park rentals 45,000 47,000 48,213 1,213 52,475
Other park rentals 45,200 52,200 37,576 (14,624) 49,525
Total interest and rental income 259,761 312,761 202,300 (110,461) 315,019
Other
Sale of land and assets 1,000 1,000 - (1,000) -
Police sale and auction proceeds - 4,010 10,598 6,588 -
CDBG program reimbursements 382,870 386,470 424,549 38,079 324,393
Fisherman's Landing reimbursement 14,500 16,775 16,775 - 16,106
Contributions 11,000 11,000 3,876 (7,124) 12,455
Contribution - Veteran's Park maintenance 19,500 18,502 18,502 - 19,402
Community Foundation for Muskegon County 1,500 1,500 10,000 8,500 12,005
Miscellaneous reimbursements 1,000 1,000 - (1,000) -
Miscellaneous and sundry 70,000 62,689 56,244 (6,445) 46,829
Total other 501,370 502,946 540,544 37,598 431,190
Total revenues 22,611,723 23,769,625 24,122,760 353,135 24,027,329
City of Muskegon
BUDGETARY COMPARISON SCHEDULE—CONTINUED
General Fund
For the year ended June 30, 2012
(with comparative actual amounts for the year ended June 30, 2011)
2012 2011
Variance with
final budget-
Budgeted amounts positive
Original Final Actual (negative) Actual
EXPENDITURES
Current
Public representation services
City commission $ 84,952 $ 89,952 $ 82,906 $ 7,046 $ 84,146
City promotions and public relations 11,350 11,350 7,214 4,136 4,191
City manager 270,116 270,316 273,309 (2,993) 264,410
Contributions to outside agencies 161,824 160,824 149,468 11,356 167,296
City attorney 322,508 322,508 354,865 (32,357) 331,875
Total public representation services 850,750 854,950 867,762 (12,812) 851,918
Administrative services
City clerk 290,181 290,981 288,959 2,022 286,050
73
Civil service 90,000 102,600 98,543 4,057 126,050
Affirmative action 84,812 84,812 82,987 1,825 80,231
Total administrative services 464,993 478,393 470,489 7,904 492,331
Financial services
Finance administration 417,677 429,867 421,130 8,737 412,551
Assessing 351,675 401,675 425,160 (23,485) 420,148
Arena administration 235,000 236,599 240,091 (3,492) 242,923
Income tax administration 424,488 424,488 432,397 (7,909) 407,907
Information systems 391,716 391,346 371,201 20,145 376,995
City treasurer 463,128 504,707 517,152 (12,445) 492,185
Total financial services 2,283,684 2,388,682 2,407,131 (18,449) 2,352,709
Public safety
Police department 8,777,989 8,630,989 8,680,770 (49,781) 8,711,831
Fire department 3,522,260 3,564,399 3,674,677 (110,278) 3,711,381
Fire safety inspections 594,720 576,680 603,463 (26,783) 656,408
Total public safety 12,894,969 12,772,068 12,958,910 (186,842) 13,079,620
City of Muskegon
BUDGETARY COMPARISON SCHEDULE—CONTINUED
General Fund
For the year ended June 30, 2012
(with comparative actual amounts for the year ended June 30, 2011)
2012 2011
Variance with
final budget-
Budgeted amounts positive
Original Final Actual (negative) Actual
Public works
Street lighting $ 760,000 $ 705,000 $ 560,199 $ 144,801 $ 784,399
Community event support 23,600 23,600 20,212 3,388 20,205
Senior citizen transit 69,078 77,100 76,309 791 68,341
General sanitation 1,680,000 1,580,050 1,561,378 18,672 1,609,780
Storm water management 17,786 18,086 13,270 4,816 17,029
City hall maintenance 276,892 279,602 235,086 44,516 243,582
Cemeteries maintenance 360,522 369,022 368,546 476 336,006
Total public works 3,187,878 3,052,460 2,835,000 217,460 3,079,342
Community and economic development
Planning, zoning and economic development 299,261 299,661 292,915 6,746 333,610
74
Environmental services 532,266 547,966 541,665 6,301 411,784
Edison Landing subsidy 100,000 100,000 100,000 - 100,000
Total community and economic development 931,527 947,627 934,580 13,047 845,394
Culture and recreation
Parks maintenance 1,138,857 1,100,207 1,050,464 49,743 979,028
McGraft park maintenance 43,651 44,951 39,876 5,075 47,132
General and inner city recreation programs 96,000 96,600 109,065 (12,465) 90,962
Graffiti removal 4,861 9,461 5,090 4,371 3,247
Parking operations 3,000 4,000 4,484 (484) 7,204
Farmers' market and flea market 60,090 58,590 54,407 4,183 51,209
Total culture and recreation 1,346,459 1,313,809 1,263,386 50,423 1,178,782
Other governmental functions
Insurance premiums 275,000 224,982 257,320 (32,338) 259,907
Other 250,000 550,000 513,590 36,410 515,221
Contribution to MERS pension plan - - - - 1,000,000
Total other governmental functions 525,000 774,982 770,910 4,072 1,775,128
City of Muskegon
BUDGETARY COMPARISON SCHEDULE—CONTINUED
General Fund
For the year ended June 30, 2012
(with comparative actual amounts for the year ended June 30, 2011)
2012 2011
Variance with
final budget-
Budgeted amounts positive
Original Final Actual (negative) Actual
Debt service
Principal $ 70,000 $ 70,000 $ 70,000 $ - $ 1,024,605
Interest and fees 211,145 211,954 211,954 - 228,190
Total debt service 281,145 281,954 281,954 - 1,252,795
Capital outlay 273,000 266,763 244,280 22,483 -
Total expenditures 23,039,405 23,131,688 23,034,402 97,286 24,908,019
Excess of revenues over (under) expenditures (427,682) 637,937 1,088,358 450,421 (880,690)
OTHER FINANCING SOURCES (USES)
75
Transfers in 50,000 10,000 3,351 (6,649) 2,357
Transfers out (508,046) (583,046) (583,046) - (648,739)
Total other financing sources (uses) (458,046) (573,046) (579,695) (6,649) (646,382)
Net change in fund balance $ (885,728) $ 64,891 508,663 $ 443,772 (1,527,072)
Fund balance at beginning of year 6,011,382 7,538,454
Fund balance at end of year $ 6,520,045 $ 6,011,382
Note: Both budgets and actual figures are prepared in accordance with generally accepted accounting principles.
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
Major Street and Trunkline Fund
For the year ended June 30, 2012
Variance with
final budget-
Budgeted amounts positive
Original Final Actual (negative)
REVENUES
Intergovernmental revenues
Federal $ 1,756,000 $ 1,561,000 $ 1,020,000 $ (541,000)
State 2,856,364 3,020,444 2,895,328 (125,116)
Charges for services - - 97,842 97,842
Investment earnings 25,000 25,000 34,829 9,829
Other 175,000 150,000 168,897 18,897
Total revenues 4,812,364 4,756,444 4,216,896 (539,548)
EXPENDITURES
Current
Highways, streets and bridges 6,036,482 4,878,600 4,250,559 628,041
76
Excess of revenues over (under) expenditures (1,224,118) (122,156) (33,663) 88,493
OTHER FINANCING SOURCES (USES)
Long-term debt issued 2,040,000 2,020,000 2,000,000 (20,000)
Transfers out (40,000) (25,000) - 25,000
Total other financing sources (uses) 2,000,000 1,995,000 2,000,000 5,000
Net change in fund balance $ 775,882 $ 1,872,844 1,966,337 $ 93,493
Fund balance at July 1, 2011 566,001
Fund balance at June 30, 2012 $ 2,532,338
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, 2012
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
12/31/09 $ 86,682 $ 87,395 $ 713 99 % $ 12,614 6 %
12/31/10 88,810 88,391 (419) 100 11,533 (4)
12/31/11 89,501 92,614 3,113 97 10,651 29
77
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 47 % $ 13,290 120 %
12/31/09 13,260 24,024 10,764 55 13,293 81
12/31/11 15,331 20,168 4,837 76 12,365 39
78
OTHER SUPPLEMENTAL INFORMATION
79
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.
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 assets 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.
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.
80
DESCRIPTION OF
OTHER GOVERNMENTAL FUNDS—CONTINUED
Capital Projects Funds—Continued
Arena Capital Improvements – to account for ticket revenue collections earmarked for large capital
improvements and repairs to the L.C. Walker Arena.
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.
81
City of Muskegon
COMBINING BALANCE SHEET
Other Governmental Funds
June 30, 2012
Permanent
Total other Special Capital Fund -
governmental Revenue Projects Cemetery
funds Funds Funds Perpetual Care
ASSETS
Cash and investments $ 3,805,840 $ 900,110 $ 2,076,276 $ 829,454
Receivables
Accounts and loans (net of allowance for uncollectibles) 567,920 852 561,990 5,078
Special assessments 341,283 261,325 79,958 -
Due from other governmental units 694,076 105,480 588,596 -
Advances to component units 553,334 - - 553,334
Prepaid items 5,633 5,633 - -
Total assets $ 5,968,086 $ 1,273,400 $ 3,306,820 $ 1,387,866
LIABILITIES AND FUND BALANCES
Liabilities
Accounts payable $ 66,843 $ 25,362 $ 41,481 $ -
Accrued liabilities 10,341 5,689 4,652 -
82
Due to other funds 782,150 - 782,150 -
Deferred revenue 697,747 261,325 436,422 -
Total liabilities 1,557,081 292,376 1,264,705 -
Fund balances
Nonspendable
Prepaid items 5,633 5,633 - -
Long-term loans receivable 177,493 - 177,493 -
Perpetual care 1,362,400 - - 1,362,400
Restricted for:
Streets and highways 821,218 821,218 - -
Law enforcement 149,174 149,174 - -
Perpetual care 25,466 - - 25,466
Other purposes 4,999 4,999 - -
Assigned for capital projects 2,055,904 - 2,055,904 -
Unassigned (191,282) - (191,282) -
Total fund balances 4,411,005 981,024 2,042,115 1,387,866
Total liabilities and fund balances $ 5,968,086 $ 1,273,400 $ 3,306,820 $ 1,387,866
City of Muskegon
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
Other Governmental Funds
For the year ended June 30, 2012
Permanent
Total other Special Capital Fund -
governmental Revenue Projects Cemetery
funds Funds Funds Perpetual Care
REVENUES
Intergovernmental revenues
Federal $ 1,285,652 $ - $ 1,285,652 $ -
State 903,956 782,326 121,630 -
Charges for services 90,694 1,279 63,300 26,115
Fines and forfeitures 11,422 11,422 - -
Investment earnings 70,762 28,264 33,868 8,630
Other 537,422 110,496 426,926 -
Total revenues 2,899,908 933,787 1,931,376 34,745
EXPENDITURES
Current
Public safety 4,212 4,212 - -
Highways, streets and bridges 1,235,481 1,235,481 - -
83
Culture and recreation 2,357 2,357 - -
Debt service
Principal 219,597 - 219,597 -
Interest and fees 31,031 - 31,031 -
Capital outlay 1,935,812 - 1,935,812 -
Total expenditures 3,428,490 1,242,050 2,186,440 -
Excess of revenues over (under) expenditures (528,582) (308,263) (255,064) 34,745
OTHER FINANCING SOURCES (USES)
Proceeds from sale of capital assets 113,981 - 113,981 -
Transfers in 507,556 480,000 27,556 -
Transfers out (30,907) - (28,681) (2,226)
Total other financing sources (uses) 590,630 480,000 112,856 (2,226)
Net change in fund balances 62,048 171,737 (142,208) 32,519
Fund balances at July 1, 2011 4,348,957 809,287 2,184,323 1,355,347
Fund balances at June 30, 2012 $ 4,411,005 $ 981,024 $ 2,042,115 $ 1,387,866
City of Muskegon
COMBINING BALANCE SHEET
Other Special Revenue Funds
June 30, 2012
Total other
special revenue Local Criminal Tree
funds Street Forfeitures Replacement
ASSETS
Cash and investments $ 900,110 $ 745,937 $ 149,174 $ 4,999
Receivables
Accounts (net of allowance for uncollectibles) 852 852 - -
Special assessments 261,325 261,325 - -
Due from other governmental units 105,480 105,480 - -
Prepaid items 5,633 5,633 - -
Total assets $ 1,273,400 $ 1,119,227 $ 149,174 $ 4,999
LIABILITIES AND FUND BALANCES
Liabilities
84
Accounts payable $ 25,362 $ 25,362 $ - $ -
Accrued liabilities 5,689 5,689 - -
Deferred revenue 261,325 261,325 - -
Total liabilities 292,376 292,376 - -
Fund balances
Nonspendable - prepaid items 5,633 5,633 - -
Restricted for:
Streets and highways 821,218 821,218 - -
Law enforcement 149,174 - 149,174 -
Other purposes 4,999 - - 4,999
Total fund balances 981,024 826,851 149,174 4,999
Total liabilities and fund balances $ 1,273,400 $ 1,119,227 $ 149,174 $ 4,999
City of Muskegon
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
Other Special Revenue Funds
For the year ended June 30, 2012
Total other
special revenue Local Criminal Tree
funds Street Forfeitures Replacement
REVENUES
Intergovernmental revenues - State $ 782,326 $ 780,326 $ - $ 2,000
Charges for services 1,279 1,079 - 200
Fines and forfeitures 11,422 - 11,422 -
Investment earnings 28,264 27,091 1,136 37
Other 110,496 110,496 - -
Total revenues 933,787 918,992 12,558 2,237
EXPENDITURES
Current
Public safety 4,212 - 4,212 -
85
Highways, streets and bridges 1,235,481 1,235,481 - -
Culture and recreation 2,357 - - 2,357
Total expenditures 1,242,050 1,235,481 4,212 2,357
Excess of revenues over (under) expenditures (308,263) (316,489) 8,346 (120)
OTHER FINANCING SOURCES
Transfers in 480,000 480,000 - -
Net change in fund balances 171,737 163,511 8,346 (120)
Fund balances at July 1, 2011 809,287 663,340 140,828 5,119
Fund balances at June 30, 2012 $ 981,024 $ 826,851 $ 149,174 $ 4,999
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
Other Special Revenue Funds
For the year ended June 30, 2012
Local Street Criminal Forfeitures
Variance - Variance -
Final positive Final positive
budget Actual (negative) budget Actual (negative)
REVENUES
Intergovernmental revenues
Federal $ 20,000 $ - $ (20,000) $ - $ - $ -
State 770,988 780,326 9,338 - - -
Charges for services - 1,079 1,079 - - -
Fines and forfeitures - - - 12,000 11,422 (578)
Investment earnings 20,000 27,091 7,091 1,000 1,136 136
Other 90,000 110,496 20,496 - - -
Total revenues 900,988 918,992 18,004 13,000 12,558 (442)
EXPENDITURES
Current
Public safety - - - 5,000 4,212 788
86
Highways, streets and bridges 1,309,890 1,235,481 74,409 - - -
Total expenditures 1,309,890 1,235,481 74,409 5,000 4,212 788
Excess of revenues over (under) expenditures (408,902) (316,489) 92,413 8,000 8,346 346
OTHER FINANCING SOURCES
Transfers in 480,000 480,000 - - - -
Net change in fund balances $ 71,098 163,511 $ 92,413 $ 8,000 8,346 $ 346
Fund balances at July 1, 2011 663,340 140,828
Fund balances at June 30, 2012 $ 826,851 $ 149,174
City of Muskegon
BUDGETARY COMPARISON SCHEDULE─CONTINUED
Other Special Revenue Funds
For the year ended June 30, 2012
Tree Replacement
Variance -
Final positive
budget Actual (negative)
REVENUES
Intergovernmental revenues - State $ 2,000 $ 2,000 $ -
Charges for services - 200 200
Investment earnings 50 37 (13)
Total revenues 2,050 2,237 187
EXPENDITURES
Current
Culture and recreation 2,500 2,357 143
87
Net change in fund balances $ (450) (120) $ 330
Fund balances at July 1, 2011 5,119
Fund balances at June 30, 2012 $ 4,999
City of Muskegon
COMBINING BALANCE SHEET
Other Capital Projects Funds
June 30, 2012
Total other EDC Community Arena Economic
capital projects Public Sidewalk Michcon Revolving Development State HOME Capital Neighborhood Development -
funds Improvement Replacement Remediation Loan Block Grant Grants Rehabilitation Improvements Stabilization Sappi
ASSETS
Cash and investments $ 2,076,276 $ 557,159 $ 575,878 $ 217,452 $ 166,084 $ - $ 29,331 $ - $ 23,779 $ - $ 506,593
Receivables
Accounts and loans (net of
allowance for uncollectibles) 561,990 18,478 - - 20,946 362,101 156,547 - - 3,918 -
Special assessments 79,958 - 79,958 - - - - - - - -
Due from other governmental units 588,596 - - - - 452,380 31,359 19,254 - 85,603 -
Total assets $ 3,306,820 $ 575,637 $ 655,836 $ 217,452 $ 187,030 $ 814,481 $ 217,237 $ 19,254 $ 23,779 $ 89,521 $ 506,593
LIABILITIES AND FUND BALANCES (DEFICITS)
Liabilities
Accounts payable $ 41,481 $ - $ - $ - $ - $ 29,206 $ 5,728 $ 4,742 $ - $ 1,805 $ -
Accrued liabilities 4,652 - - - - 2,495 - 1,184 - 973 -
Due to other funds 782,150 - - - - 506,163 - 195,829 - 80,158 -
Deferred revenue 436,422 16,000 80,062 - - 276,617 63,743 - - - -
Total liabilities 1,264,705 16,000 80,062 - - 814,481 69,471 201,755 - 82,936 -
Fund balances (deficits)
Nonspendable - long-term loans receivable 177,493 - - - 20,946 - 156,547 - - - -
Assigned for capital projects 2,055,904 559,637 575,774 217,452 166,084 - - - 23,779 6,585 506,593
Unassigned (191,282) - - - - - (8,781) (182,501) - - -
Total fund balances (deficits) 2,042,115 559,637 575,774 217,452 187,030 - 147,766 (182,501) 23,779 6,585 506,593
88
Total liabilities and fund balances (deficits) $ 3,306,820 $ 575,637 $ 655,836 $ 217,452 $ 187,030 $ 814,481 $ 217,237 $ 19,254 $ 23,779 $ 89,521 $ 506,593
City of Muskegon
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICITS)
Other Capital Projects Funds
For the year ended June 30, 2012
Total other EDC Community Arena Economic
capital projects Public Sidewalk Michcon Revolving Development State HOME Capital Neighborhood Development -
funds Improvement Replacement Remediation Loan Block Grant Grants Rehabilitation Improvements Stabilization Sappi
REVENUES
Intergovernmental revenues
Federal $ 1,285,652 $ - $ - $ - $ - $ 1,010,777 $ - $ 274,875 $ - $ - $ -
State 121,630 - - - - - 121,630 - - - -
Charges for services 63,300 40,416 - - - - - - 22,884 - -
Investment earnings 33,868 5,700 11,581 1,711 1,473 53 9,250 - 116 - 3,984
Other 426,926 37,659 55,668 - 34,498 2,682 - - 23,400 273,019 -
Total revenues 1,931,376 83,775 67,249 1,711 35,971 1,013,512 130,880 274,875 46,400 273,019 3,984
EXPENDITURES
Debt service
Principal 219,597 - 125,000 - - - 94,597 - - - -
Interest and fees 31,031 - 26,705 - - - 4,326 - - - -
Capital outlay 1,935,812 96,734 5,311 240 25,583 1,026,759 120,505 370,846 23,400 266,434 -
Total expenditures 2,186,440 96,734 157,016 240 25,583 1,026,759 219,428 370,846 23,400 266,434 -
Excess of revenues over (under) expenditures (255,064) (12,959) (89,767) 1,471 10,388 (13,247) (88,548) (95,971) 23,000 6,585 3,984
OTHER FINANCING SOURCES (USES)
Proceeds from sale of capital assets 113,981 21,090 - - - 40,803 - 52,088 - - -
Transfers in 27,556 - - - - - - 27,556 - - -
Transfers out (28,681) - - - - (27,556) (1,125) - - - -
89
Total other financing sources (uses) 112,856 21,090 - - - 13,247 (1,125) 79,644 - - -
Net change in fund balances (142,208) 8,131 (89,767) 1,471 10,388 - (89,673) (16,327) 23,000 6,585 3,984
Fund balances (deficits) at July 1, 2011 2,184,323 551,506 665,541 215,981 176,642 - 237,439 (166,174) 779 - 502,609
Fund balances (deficits) at June 30, 2012 $ 2,042,115 $ 559,637 $ 575,774 $ 217,452 $ 187,030 $ - $ 147,766 $ (182,501) $ 23,779 $ 6,585 $ 506,593
90
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.
91
City of Muskegon
COMBINING STATEMENT OF NET ASSETS
Internal Service Funds
June 30, 2012
ASSETS
Total internal Engineering General Public Service
service funds Services Equipment Insurance Building
CURRENT ASSETS
Cash and investments $ 4,190,223 $ 53,417 $ 1,819,863 $ 1,933,642 $ 383,301
Accounts receivable 101,879 13,593 8,172 80,114 -
Inventories 39,587 - 39,587 - -
Prepaid items 230,969 2,695 54,501 169,097 4,676
Total current assets 4,562,658 69,705 1,922,123 2,182,853 387,977
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 7,381,412 26,355 7,308,408 - 46,649
Less accumulated depreciation (7,437,020) (26,355) (6,139,025) - (1,271,640)
92
Net capital assets 1,759,598 - 1,169,383 - 590,215
Advances to component units 1,106,666 - 553,333 553,333 -
Total noncurrent assets 2,866,264 - 1,722,716 553,333 590,215
Total assets 7,428,922 69,705 3,644,839 2,736,186 978,192
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES
Accounts payable 574,332 1,018 48,737 509,680 14,897
Accrued liabilities 16,055 3,783 4,944 472 6,856
Due to other governmental units 11,996 11,996 - - -
Bonds and other obligations, due within one year 14,800 2,700 4,600 300 7,200
Total current liabilities 617,183 19,497 58,281 510,452 28,953
NONCURRENT LIABILITIES
Bonds and other obligations, less amounts due within one year 73,692 13,481 22,920 1,411 35,880
Total liabilities 690,875 32,978 81,201 511,863 64,833
NET ASSETS
Invested in capital assets 1,759,598 - 1,169,383 - 590,215
Unrestricted 4,978,449 36,727 2,394,255 2,224,323 323,144
Total net assets $ 6,738,047 $ 36,727 $ 3,563,638 $ 2,224,323 $ 913,359
City of Muskegon
COMBINING STATEMENT OF REVENUE, EXPENSES AND CHANGES IN FUND NET ASSETS (DEFICIT)
Internal Service Funds
For the year ended June 30, 2012
Total internal Engineering General Public Service
service funds Services Equipment Insurance Building
OPERATING REVENUES
Charges for services $ 7,943,478 $ 428,481 $ 2,033,929 $ 4,511,726 $ 969,342
Other 89,599 30,783 53,417 5,399 -
Total operating revenues 8,033,077 459,264 2,087,346 4,517,125 969,342
OPERATING EXPENSES
Administration 360,000 96,000 126,108 81,096 56,796
Insurance premiums and claims 4,277,725 - - 4,277,725 -
Other operations 3,064,260 366,409 1,903,553 32,969 761,329
Depreciation 494,365 - 424,394 - 69,971
Total operating expenses 8,196,350 462,409 2,454,055 4,391,790 888,096
Operating income (loss) (163,273) (3,145) (366,709) 125,335 81,246
NONOPERATING REVENUES
93
Investment earnings 33,677 4 20,707 10,395 2,571
Gain on sale of capital assets 28,963 - 28,963 - -
Total nonoperating revenues 62,640 4 49,670 10,395 2,571
Income (loss) before transfers (100,633) (3,141) (317,039) 135,730 83,817
Transfers in 103,046 75,000 - 28,046 -
Change in net assets 2,413 71,859 (317,039) 163,776 83,817
Net assets (deficit) at July 1, 2011 6,735,634 (35,132) 3,880,677 2,060,547 829,542
Net assets at June 30, 2012 $ 6,738,047 $ 36,727 $ 3,563,638 $ 2,224,323 $ 913,359
City of Muskegon
COMBINING STATEMENT OF CASH FLOWS
Internal Service Funds
For the year ended June 30, 2012
Total internal Engineering General Public Service
service funds Services Equipment Insurance Building
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 161,099 $ 108,215 $ 51,375 $ 1,509 $ -
Receipts from interfund services provided 7,943,478 428,481 2,033,929 4,511,726 969,342
Payments to suppliers (4,607,163) (124,249) (1,155,952) (3,083,748) (243,214)
Payments to employees (1,490,276) (248,310) (339,863) (397,355) (504,748)
Payments for interfund services used (858,405) (185,724) (572,161) (3,772) (96,748)
Net cash provided by (used for) operating activities 1,148,733 (21,587) 17,328 1,028,360 124,632
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers in 103,046 75,000 - 28,046 -
Advances to component units (1,106,666) - (553,333) (553,333) -
Net cash provided by (used for) noncapital financing activities (1,003,620) 75,000 (553,333) (525,287) -
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Purchases of capital assets (589,536) - (577,576) - (11,960)
Proceeds from sale of capital assets 32,486 - 32,486 - -
Net cash used for capital and related financing activities (557,050) - (545,090) - (11,960)
94
CASH FLOW FROM INVESTING ACTIVITIES
Investment earnings 33,677 4 20,707 10,395 2,571
Net increase (decrease) in cash and investments (378,260) 53,417 (1,060,388) 513,468 115,243
Cash and investments at July 1, 2011 4,568,483 - 2,880,251 1,420,174 268,058
Cash and investments at June 30, 2012 $ 4,190,223 $ 53,417 $ 1,819,863 $ 1,933,642 $ 383,301
Reconciliation of operating income (loss) to net cash provided by (used for)
operating activities
Operating income (loss) $ (163,273) $ (3,145) $ (366,709) $ 125,335 $ 81,246
Adjustments to reconcile operating income (loss) to net cash provided by
(used for) operating activities
Depreciation expense 494,365 - 424,394 - 69,971
Change in assets and liabilities
Receivables, net 71,500 77,432 (2,042) (3,890) -
Inventories (9,751) - (9,751) - -
Prepaid items 517,353 (966) 7,234 510,313 772
Accounts payable 372,496 12,168 (31,145) 397,305 (5,832)
Accrued liabilities (40,537) (13,656) (4,653) (703) (21,525)
Due to other funds (93,420) (93,420) - - -
Net cash provided by (used for) operating activities $ 1,148,733 $ (21,587) $ 17,328 $ 1,028,360 $ 124,632
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.
95
City of Muskegon
COMBINING STATEMENT OF ASSETS AND LIABILITIES
Agency Funds
June 30, 2012
Total Current Rehab Loan
funds Collector tax Escrow
ASSETS
Cash and investments $ 705,640 $ 705,475 $ 165 $ -
Accounts receivable 1,867 1,867 - -
Total assets $ 707,507 $ 707,342 $ 165 $ -
LIABILITIES
Accounts payable $ 228,052 $ 228,052 $ - $ -
Due to other governmental units 390,092 389,927 165 -
Deposits held for others 89,363 89,363 - -
Total liabilities $ 707,507 $ 707,342 $ 165 $ -
96
City of Muskegon
STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
Agency Funds
For the year ended June 30, 2012
Balance Balance
July 1, June 30,
COLLECTOR FUND 2011 Additions Deductions 2012
ASSETS
Cash and investments $ 742,906 $ 15,110,400 $ 15,147,831 $ 705,475
Accounts receivable 1,867 152,217 152,217 1,867
Total assets $ 744,773 $ 15,262,617 $ 15,300,048 $ 707,342
LIABILITIES
Accounts payable $ 213,981 $ 9,877,066 $ 9,862,995 $ 228,052
Due to other governmental units 462,345 2,162,382 2,234,800 389,927
Deposits held for others 68,447 2,536,100 2,515,184 89,363
Total liabilities $ 744,773 $ 14,575,548 $ 14,612,979 $ 707,342
CURRENT TAX FUND
ASSETS
Cash and investments $ - $ 30,962,144 $ 30,961,979 $ 165
LIABILITIES
Due to other governmental units $ - $ 21,917,176 $ 21,917,011 $ 165
Due to other funds - 8,285,061 8,285,061 -
97
Due to component units - 584,703 584,703 -
Deposits held for others - 175,204 175,204 -
Total liabilities $ - $ 30,962,144 $ 30,961,979 $ 165
REHAB LOAN ESCROW FUND
ASSETS
Cash and investments $ - $ 1,686 $ 1,686 $ -
LIABILITIES
Accounts payable $ - $ 1,686 $ 1,686 $ -
ALL AGENCY FUNDS
ASSETS
Cash and investments $ 742,906 $ 46,074,230 $ 46,111,496 $ 705,640
Accounts receivable 1,867 152,217 152,217 1,867
Total assets $ 744,773 $ 46,226,447 $ 46,263,713 $ 707,507
LIABILITIES
Accounts payable $ 213,981 $ 9,878,752 $ 9,864,681 $ 228,052
Due to other governmental units 462,345 24,079,558 24,151,811 390,092
Due to other funds - 8,285,061 8,285,061 -
Due to component units - 584,703 584,703 -
Deposits held for others 68,447 2,711,304 2,690,388 89,363
Total liabilities $ 744,773 $ 45,539,378 $ 45,576,644 $ 707,507
98
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.
99
City of Muskegon
COMBINING BALANCE SHEET
Discretely Presented Component Units
June 30, 2012
Total discretely Local
presented Development Downtown Tax Increment Brownfield
component Finance Development Finance Redevelopment
units Authority III Authority Authority Authority
ASSETS
Cash and investments $ 457,790 $ 35,595 $ 245,957 $ 19,638 $ 156,600
Prepaid items 61,149 61,149 - - -
Total assets $ 518,939 $ 96,744 $ 245,957 $ 19,638 $ 156,600
LIABILITIES AND FUND BALANCES
Liabilities
Accounts payable $ 59,185 $ - $ 59,185 $ - $ -
Advances from primary government 1,660,000 - - - 1,660,000
Total liabilities 1,719,185 - 59,185 - 1,660,000
100
Fund balances
Nonspendable - prepaid items 61,149 61,149 - - -
Unassigned (1,261,395) 35,595 186,772 19,638 (1,503,400)
Total fund balances (1,200,246) 96,744 186,772 19,638 (1,503,400)
Total liabilities and fund balances $ 518,939 $ 96,744 $ 245,957 $ 19,638 $ 156,600
City of Muskegon
RECONCILIATION OF THE GOVERNMENTAL FUNDS
BALANCE SHEET TO THE STATEMENT OF NET ASSETS (DEFICITS)
Discretely Presented Component Units
June 30, 2012
Total fund balance—governmental funds $ (1,200,246)
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 (1,481,896) 2,716,362
Bond issuance costs are not capitalized and amortized in the
governmental funds.
Bond issuance costs 165,405
101
Accumulated amortization (6,562) 158,843
Accrued interest in governmental activities is not reported in the
governmental funds. (41,630)
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. (7,364,932)
Net assets of governmental activities in the Statement of Net Assets (Deficits) $ (5,731,603)
City of Muskegon
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICIT)
Discretely Presented Component Units
For the year ended June 30, 2012
Total discretely Local
presented Development Downtown Tax Increment Brownfield
component Finance Development Finance Redevelopment
units Authority III Authority Authority Authority
REVENUES
Property taxes $ 584,703 $ 83,420 $ 305,797 $ 53,057 $ 142,429
Intergovernmental revenues - Local 100,000 100,000 - - -
Investment earnings 6,853 3,568 2,478 136 671
Other 75,000 75,000 - - -
Total revenues 766,556 261,988 308,275 53,193 143,100
EXPENDITURES
Current
Community and economic development 1,821,284 250 59,185 50,000 1,711,849
Debt service
Principal 345,000 80,000 265,000 - -
102
Interest and fees 292,235 222,772 69,463 - -
Bond issuance costs 114,766 114,766 - - -
Total expenditures 2,573,285 417,788 393,648 50,000 1,711,849
Excess of revenues over (under) expenditures (1,806,729) (155,800) (85,373) 3,193 (1,568,749)
OTHER FINANCING SOURCES (USES)
Refunding long-term debt issued 4,100,000 4,100,000 - - -
Premium on refunding long-term debt issued 276,196 276,196 - - -
Payment on refunding of long-term debt (4,145,000) (4,145,000) - - -
Total other financing sources (uses) 231,196 231,196 - - -
Net change in fund balances (1,575,533) 75,396 (85,373) 3,193 (1,568,749)
Fund balances at July 1, 2011 375,287 21,348 272,145 16,445 65,349
Fund balances (deficit) at June 30, 2012 $ (1,200,246) $ 96,744 $ 186,772 $ 19,638 $ (1,503,400)
City of Muskegon
RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES
AND CHANGE IN FUND BALANCES (DEFICIT) TO THE STATEMENT OF ACTIVITIES
Discretely Presented Component Units
For the year ended June 30, 2012
Net change in fund balances—total governmental funds $ (1,575,533)
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 $ (268,710)
Bond issuance costs 114,766 (153,944)
Debt proceeds are other financing sources in the governmental funds, but the proceeds
increase long-term debt in the Statement of Net Assets (4,376,196)
103
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. 4,489,945
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. (3,930)
Change in net assets of governmental activities $ (1,619,658)
104
SCHEDULE OF INDEBTEDNESS
105
City of Muskegon
SCHEDULE OF INDEBTEDNESS
June 30, 2012
Annual
Date Amount Interest Date of Interest
of Issue of Issue Rate Maturity 6/30/2011 6/30/2012 Payable
Business-Type Activities Bonds and Loans Payable:
Water supply system bonds 4/1/2010 $ 5,995,000 2.00% 05/01/12 $ 600,000 $ - $ -
($119,764 unamortized premium) 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
5,415,000 4,815,000 760,725
Drinking Water State Revolving 3/2/2004 $ 13,900,000 2.13% 10/01/11 630,000 - -
Fund (DWSRF) 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
10,955,000 10,325,000 1,610,591
TOTAL BUSINESS-TYPE ACTIVITIES BONDS AND LOANS PAYABLE $ 16,370,000 $ 15,140,000 $ 2,371,316
106
City of Muskegon
SCHEDULE OF INDEBTEDNESS - CONTINUED
June 30, 2012
Annual
Date Amount Interest Date of Interest
of Issue of Issue Rate Maturity 6/30/2011 6/30/2012 Payable
Governmental Activities Bonds and Loans Payable:
Capital improvement bonds 3/1/2003 $ 1,575,000 3.70% 06/01/12 125,000 - -
of 2003 (sidewalks) 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
685,000 560,000 57,170
Capital improvement bonds 10/24/2006 $ 5,400,000 4.00% 10/01/11 70,000 - -
of 2006 (fire station, recreation) 4.00% 10/01/12 70,000 70,000 208,345
($12,306 unamortized discount) 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
5,235,000 5,165,000 2,783,498
Capital improvement bonds 9/30/2011 $ 2,000,000 2.98% 09/01/12 - 175,000 56,993
of 2011 (streets) 2.98% 09/01/13 - 180,000 51,703
2.98% 09/01/14 - 185,000 46,265
2.98% 09/01/15 - 190,000 40,677
2.98% 09/01/16 - 195,000 34,941
2.98% 09/01/17 - 200,000 29,056
2.98% 09/01/18 - 210,000 22,947
2.98% 09/01/19 - 215,000 16,614
2.98% 09/01/20 - 220,000 10,132
2.98% 09/01/21 - 230,000 3,427
- 2,000,000 312,755
State of Michigan 6/18/2010 $ 500,000 2.00% 03/18/12 28,527 - -
environmental assessment loan 2.00% 03/18/13 29,098 20,211 3,005
2.00% 03/18/14 29,680 20,615 2,601
2.00% 03/18/15 30,274 21,027 2,189
2.00% 03/18/16 30,879 21,448 1,768
2.00% 03/18/17 31,497 21,877 1,339
2.00% 03/18/18 32,126 22,314 902
2.00% 03/18/19 32,769 22,761 455
244,850 150,253 12,259
TOTAL GOVERNMENTAL ACTIVITIES BONDS AND LOANS PAYABLE $ 6,164,850 $ 7,875,253 $ 3,165,682
TOTAL PRIMARY GOVERNMENT BONDS AND LOANS PAYABLE $ 22,534,850 $ 23,015,253 $ 5,536,997
107
City of Muskegon
SCHEDULE OF INDEBTEDNESS - CONTINUED
June 30, 2012
Annual
Date Amount Interest Date of Interest
of Issue of Issue Rate Maturity 6/30/2011 6/30/2012 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 3/22/2011 $ 2,045,000 2.00% 06/01/12 265,000 - -
refunding bonds 2.50% 06/01/13 275,000 275,000 59,162
($28,736 unamortized premium) 2.75% 06/01/14 280,000 280,000 52,288
3.25% 06/01/15 285,000 285,000 44,588
3.50% 06/01/16 300,000 300,000 35,326
3.75% 06/01/17 310,000 310,000 24,826
4.00% 06/01/18 330,000 330,000 13,200
2,045,000 1,780,000 229,390
Local Development Finance Authority 11/1/2002 $ 4,725,000 3.88% 11/01/11 80,000 - -
Smartzone Bonds 4.00% 11/01/12 180,000 180,000 3,600
3.90% 11/01/13 240,000 - -
4.05% 11/01/14 305,000 - -
4.05% 11/01/15 325,000 - -
4.15% 11/01/16 340,000 - -
4.25% 11/01/17 355,000 - -
4.35% 11/01/18 375,000 - -
4.45% 11/01/19 395,000 - -
4.60% 11/01/20 400,000 - -
4.60% 11/01/21 255,000 - -
4.60% 11/01/22 265,000 - -
4.85% 11/01/23 280,000 - -
4.85% 11/01/24 295,000 - -
4.85% 11/01/25 315,000 - -
4,405,000 180,000 3,600
Local Development Finance Authority 3/20/2012 $ 4,100,000 0.00% 11/01/12 - - 142,466
Smartzone Refunding Bonds 0.00% 11/01/13 - 260,000 125,300
($276,196 unamortized premium) 2.00% 11/01/14 - 320,000 119,500
2.00% 11/01/15 - 335,000 112,950
2.00% 11/01/16 - 345,000 104,425
3.00% 11/01/17 - 355,000 93,925
3.00% 11/01/18 - 375,000 81,100
4.00% 11/01/19 - 390,000 65,800
4.00% 11/01/20 - 395,000 50,100
4.00% 11/01/21 - 245,000 37,300
4.00% 11/01/22 - 255,000 28,575
3.00% 11/01/23 - 265,000 20,775
3.00% 11/01/24 - 275,000 12,675
3.00% 11/01/25 - 285,000 4,275
- 4,100,000 999,166
TOTAL DISCRETELY PRESENTED COMPONENT UNIT BONDS AND LOANS PAYABLE $ 7,450,000 $ 7,060,000 $ 1,232,156
TOTAL REPORTING ENTITY BONDS AND LOANS PAYABLE $ 29,984,850 $ 30,075,253 $ 6,769,153
108
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. 110
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. 115
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. 121
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. 125
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. 127
Sources: Unless otherwise noted, the information in these schedules is derived form the Comprehensive Annual
Financial Reports for the relevant year.
109
City of Muskegon
NET ASSETS BY COMPONENT
Last Ten Fiscal Years
December 31 June 30
2003 2004 2005 (a) 2006 2007 2008 2009 2010 2011 2012
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 $ 66,862,806
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 3,526,343
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 12,836,573
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 $ 83,225,722
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 $ 40,147,600
Restricted 822,559 822,559 822,559 822,559 822,559 822,559 672,000 672,000 672,000 672,000
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 8,961,713
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 $ 49,781,313
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 $ 107,010,406
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 4,198,343
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 21,798,286
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 $ 133,007,035
110
(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.
City of Muskegon
CHANGES IN NET ASSETS
Last Ten Fiscal Years
Period Ended
Year Ended December 31 June 30 Year Ended June 30
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
EXPENSES
Governmental Activities
Public representation $ 887,496 $ 866,669 $ 885,365 $ 904,109 $ 925,124 $ 986,696 $ 923,911 $ 445,251 $ 854,249 $ 866,809
Administrative services 1,227,407 1,132,229 803,783 732,715 783,713 782,362 698,022 317,873 645,585 566,161
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 2,399,147
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 13,213,251
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 2,958,367
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 6,568,448
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 2,447,373
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 1,601,316
General administration 1,601,112 1,725,225 1,608,108 1,143,963 358,225 574,955 451,651 210,117 794,115 791,197
Interest on long-term debt 223,717 193,021 170,814 206,768 343,106 324,076 288,073 139,006 272,940 283,186
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 31,695,255
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 5,974,173
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 6,202,359
Marina and launch ramp 325,401 351,705 343,599 332,826 392,994 347,642 310,773 150,055 292,889 310,174
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 12,486,706
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 $ 44,181,961
PROGRAM REVENUES
111
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 $ 196,886
Administrative services 292,665 314,028 311,529 306,964 287,011 257,850 271,117 129,630 263,473 270,886
Financial services 591,174 645,166 537,445 728,332 744,109 726,572 818,845 475,031 879,905 881,229
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 1,136,942
Public works 266,045 452,606 467,849 588,566 407,569 382,072 383,733 209,203 642,082 480,487
Highways, streets and bridges 273,893 555,018 267,689 263,423 372,133 301,955 251,840 139,009 451,473 230,241
Community and economic development 977,448 414,543 815,980 762,220 356,051 297,854 249,241 186,572 457,952 617,379
Culture and recreation 1,026,822 1,151,687 1,141,865 809,228 454,154 405,520 445,891 129,025 300,367 315,010
General administration 122,447 200,434 314,658 170,240 64,366 99,494 123,426 59,373 116,690 116,690
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 4,651,576
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 1,568,005
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 10,465,331
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 5,254,095
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 6,455,634
Marina and launch ramp 274,258 266,981 248,460 267,412 281,679 250,266 242,055 156,767 194,311 208,370
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 11,918,099
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 $ 22,383,430
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) (21,229,924)
Business-type Activities 439,780 1,765,730 2,931,447 2,283,867 775,036 165,350 33,911 855,943 871,244 (568,607)
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) $ (21,798,531)
City of Muskegon
CHANGES IN NET ASSETS - CONTINUED
Last Ten Fiscal Years
Period Ended
Year Ended December 31 June 30 Year Ended June 30
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 $ 8,383,224
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 7,663,534
Franchise fees 265,532 - 286,265 285,124 297,200 304,812 321,852 178,239 362,103 342,376
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 3,577,848
Unrestricted investment earnings 281,492 170,094 420,595 832,300 1,247,520 730,142 185,436 104,086 193,435 100,073
Miscellaneous 109,620 68,405 70,402 64,645 88,035 160,460 226,124 51,638 432,880 154,531
Gain on sale of capital asset 62,992 70,886 300,037 81,372 1,604 323,048 123,258 65,155 25,815 34,496
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 20,256,082
Business-type Activities
Unrestricted investment earnings 71,628 51,768 138,053 122,060 170,594 108,990 23,843 15,990 23,959 46,582
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 46,582
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 $ 20,302,664
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) (973,842)
Business-type Activities 422,641 1,959,918 3,149,500 2,945,927 985,630 314,340 57,754 875,693 895,203 (522,025)
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 $ (1,495,867)
112
SOURCE: The information in these schedules (unless otherwise noted) is derived from the comprehensive annual financial reports for the relevant year.
City of Muskegon
FUND BALANCE OF GOVERNMENTAL FUNDS
Last Ten Fiscal Years
December 31 June 30
2003 2004 2005 2006 2007 2008 2009 2010 2011 (a) 2012
General fund
Reserved $ 110,642 $ 74,349 $ 79,356 $ 177,076 $ 180,410 $ 214,819 $ 187,633 $ 300,969 $ - $ -
Nonspendable - - - - - - - - 251,173 178,468
Restricted - - - - - - - - - -
Assigned - - - - - - - - 2,385,728 2,075,738
Unassigned - - - - - - - - 3,374,481 4,265,839
Unreserved 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 $ 2,431,418 $ 2,445,191 $ 2,519,605 $ 2,690,039 $ 2,920,632 $ 2,383,725 $ 1,638,662 $ 6,038,454 $ 6,011,382 $ 6,520,045
All other governmental funds
Reserved $ 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 1,568,318
Restricted 1,375,779 3,485,073
Assigned 2,073,027 2,055,904
Unassigned (238,104) (191,282)
Unreserved, reported in:
Special revenue funds 3,254,746 2,692,431 2,910,285 3,030,096 4,462,015 2,768,886 2,060,117 2,163,041 - -
113
Debt service 153,955 - - - - - - - - -
Capital project funds 3,849,868 2,187,667 1,239,763 390,282 635,676 675,898 554,273 6,035 - -
Permanent funds 63,798 22,896 22,890 77,300 84,413 60,813 15,613 16,979 - -
Total all other governmental funds $ 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 $ 6,918,013
(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.
City of Muskegon
CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS
Last Ten Fiscal Years
Period Ended Year Ended Year Ended
Year Ended December 31 June 30 June 30 June 30
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Revenues
Taxes $ 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 $ 15,506,668
Intergovernmental 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 9,899,379
Charges for services 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 2,596,328
Other 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 3,237,189
Total revenues 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 31,239,564
Expenditures
Public representation 889,188 869,342 886,717 903,895 927,320 987,229 923,923 448,703 851,918 867,762
Administrative services 785,966 704,667 748,588 669,789 644,913 632,513 645,704 303,555 586,328 515,988
Financial services 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 2,407,131
Public safety 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 12,963,122
Public works 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 2,835,000
Highways, streets and bridges 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 2,756,010
Community and economic development 987,097 797,072 784,396 763,211 894,879 1,077,312 4,440,687 1,330,794 3,109,693 2,850,593
Culture and recreation 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 1,265,743
Other governmental functions 1,589,572 1,708,868 1,603,292 1,139,148 350,385 562,341 438,292 200,623 1,775,128 770,910
114
Debt service
Principal 1,270,000 1,335,000 1,115,000 1,189,785 1,241,921 999,148 663,371 303,466 1,345,183 289,597
Interest and issuance costs 230,907 201,447 166,071 271,233 324,577 310,432 282,174 136,013 267,258 268,315
Capital outlay 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 2,948,610
Total expenditure 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 30,738,781
Excess of revenues over (under) expenditures (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) 500,783
Other financing sources (uses)
Transfers in 2,740,742 3,342,612 1,839,631 2,358,509 1,926,538 1,477,717 1,359,608 342,188 1,348,694 510,907
Transfers out (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) (613,953)
Bonds issued 1,578,009 - 1,061,900 5,626,331 - 500,000 - - - 2,000,000
Sale of capital assets 282,080 483,544 827,141 1,120,341 286,152 375,723 68,452 75,465 120,118 113,981
Total other financing sources (uses) 1,860,089 592,787 1,780,995 6,178,627 218,106 943,949 118,150 57,682 92,072 2,010,935
Net change in fund balances $ 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) $ 2,511,718
Debt service as a percentage of noncapital
expenditures 4.15% 4.63% 3.74% 4.44% 5.05% 4.06% 2.97% 3.01% 5.22% 2.01%
SOURCE: The information in these schedules (unless otherwise noted) is derived from the
comprehensive annual financial reports for the relevant 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
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%
2012 8,093,864 25.9% 7,412,804 23.7% 9,899,379 31.7% 2,596,328 8.3% 1,223,034 3.9% 459,401 1.5% 307,891 1.0% 1,246,863 4.0% 31,239,564 -5.1%
* 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.
115
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
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%
2011 331,901,631 - 144,675,509 87,261,346 563,838,486 93,465,537 657,304,023 3,071,654 9,129,000 - 12,200,654 669,504,677 12.0749 94.95%
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
Year Residential Agriculture Commercial Industrial Property Property Ad Valorem Property Property Property IFT and CFT Valuation Value
116
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
2011 354,307,945 - 154,700,200 90,467,700 599,475,845 93,456,700 692,932,545 3,080,900 9,129,000 - 12,209,900 705,142,445 1,410,284,890
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, 2012
6/30/2012 12/31/2002
Percent of Percent of
Taxable Total Taxable Taxable Total Taxable
Taxpayer Valuation Rank Valuation Valuation Rank Valuation
Consumers Energy $ 53,088,067 1 7.9% $ 66,317,118 1 9.3%
ESCO Company 6,793,300 2 1.0% 6,034,949 10 0.8%
GE Aviation 6,695,200 3 1.0% 8,454,728 4 1.2%
ADAC Plastics Inc 5,648,200 4 0.8% 9,395,760 3 1.3%
DTE Energy (formerly MichCon) 5,026,600 5 0.8% 7,577,700 7 1.1%
Muskegon SC Holdings LLC 4,503,400 6 0.7% 0.0%
Michigan Electric Transmission 4,381,900 7 0.7% - 0.0%
117
Glen Oaks Apartments LLC 4,280,600 8 0.6% - 0.0%
Melching Inc (formerly Sappi) 3,943,179 9 0.6% 62,260,158 2 8.7%
Lorin Industries 3,825,278 10 0.6% 7,233,210 9 1.0%
Terrace Partners LLC - 0.0% 7,754,826 5 1.1%
Brunswick Corp - 0.0% 7,584,890 6 1.1%
Neway Anchorlok International - 0.0% 7,509,500 8 1.1%
Total - 10 Largest 98,185,724 14.7% 190,122,839 26.6%
Total - All Other 571,318,953 85.3% 523,441,136 73.4%
$ 669,504,677 100.0% $ 713,563,975 100.0%
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
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
2011 9.5000 0.0749 2.5000 12.0749 2.4000
Overlapping - County-Wide Rates
Muskegon Intermediate Special Vocational Community
Year County School Education Education College
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
2011 6.6957 0.4597 2.2987 0.9996 2.2037
Overlapping - School District Grand Total
State Non-
Year Operating Debt Total Education Homestead Homestead
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
2011 18.0000 6.2500 24.2500 6.0000 39.3823 57.3823
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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
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%
2011 8,583,284 7,457,610 86.9% 1,030,902 8,488,512 98.9% 54,707 80,068 12,935 1.72%
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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, 2012 Year Ended December 31, 2002
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 1,124 6% $ 1,037,000 $ 10,370 0% 1,036 4% $ 1,131,500 $ 11,315 0%
$2,501-$7,500 617 3% 5,420,800 54,208 1% 1,013 4% 6,299,800 62,998 1%
$7,501-$25,000 1,606 9% 43,916,400 439,164 6% 2,631 11% 54,334,100 543,341 8%
$25,001-$50,000 1,364 7% 85,936,300 859,363 12% 2,281 9% 102,797,600 1,027,976 15%
$50,001-$100,000 825 4% 96,252,900 962,529 13% 956 4% 79,918,900 799,189 12%
More than $100,000 154 1% 42,944,500 429,445 6% 127 1% 25,941,500 259,415 4%
Subtotal 5,690 30% $ 275,507,900 $ 2,755,079 37% 8,044 32% $ 270,423,400 $ 2,704,234 40%
Non-Residents Taxpayers:
(Non-residents are taxed at a rate of 0.5% on income earned within the City.)
120
$2,500 or less 1,684 9% $ 998,400 $ 7,722 0% 2,111 9% $ 1,410,000 $ 9,553 0%
$2,501-$7,500 1,120 6% 5,345,200 41,342 1% 1,566 6% 7,466,400 49,014 1%
$7,501-$25,000 2,603 14% 42,342,800 327,494 4% 3,957 16% 65,716,900 441,234 7%
$25,001-$50,000 3,061 16% 111,985,400 866,134 12% 4,707 19% 171,193,410 1,145,516 17%
$50,001-$100,000 2,169 12% 144,811,000 1,120,019 15% 2,055 8% 135,855,800 897,073 13%
More than $100,000 622 3% 129,889,000 1,004,607 14% 533 2% 113,504,946 762,783 11%
Subtotal 11,259 60% $ 435,371,800 $ 3,367,318 45% 14,929 60% $ 495,147,456 $ 3,305,173 49%
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% $ 1,290,407 17% 1,850 7% $ 683,202 10%
Total 18,699 100% $ 7,412,804 100% 24,823 100% $ 6,692,609 100%
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.
City of Muskegon
RATIO OF OUTSTANDING DEBT BY TYPE
Last Ten Fiscal Years
Governmental Activities Business-Type Activities
General
Obligation Special Total
Limited Tax Assessment Governmental Revenue Intergovernmental Total Business- Total Primary Per
Year Bonds Bonds State Loans Activities Bonds Contactual Debt State Loans Type Activities Government Capita
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 $ 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 28,005,322 703
2005 3,615,824 865,000 1,282,976 5,763,800 8,490,000 3,606,017 13,900,000 25,996,017 31,759,817 797
2006 8,246,039 615,000 1,356,900 10,217,939 8,035,000 2,454,101 13,335,000 23,824,101 34,042,040 855
2007 7,444,118 395,000 1,136,900 8,976,018 7,565,000 1,221,207 12,760,000 21,546,207 30,522,225 766
2008 6,844,970 215,000 1,416,900 8,476,870 7,075,000 - 12,170,000 19,245,000 27,721,870 696
2009 6,623,499 70,000 1,120,000 7,813,499 6,565,000 - 11,570,000 18,135,000 25,948,499 659
2010* 6,444,605 - 1,065,428 7,510,033 5,995,000 - 11,570,000 17,565,000 25,075,033 639
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2011 5,920,000 - 244,850 6,164,850 5,415,000 - 10,955,000 16,370,000 22,534,850 587
2012 7,725,000 - 150,253 7,875,253 4,815,000 - 10,325,000 15,140,000 23,015,253 599
* 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.
City of Muskegon
DIRECT AND OVERLAPPING DEBT
June 30, 2012
Debt Supported by
Total Debt City General
Name of Governmental Unit Outstanding Self Supporting Revenues
Direct Debt
City of Muskegon:
Revenue Bonds $ 15,140,000 $ 15,140,000 $ -
Capital Improvement Bonds 7,725,000 - 7,725,000
Intergovernmental Bonds 150,253 - 150,253
Component Unit Debt:
Downtown Development Authority 2,780,000 2,780,000 -
Local Development Finance Authority 4,280,000 4,280,000 -
Total City Direct Debt $ 30,075,253 $ 22,200,000 $ 7,875,253
City Share as
Gross Percent of Gross Net
Overlapping Debt
Muskegon School Distict $ 28,895,000 95.04% $ 27,461,808
Orchard View School Distict 43,357,548 25.85% 11,207,926
Reeths Puffer School Distict 75,857,061 6.20% 4,703,138
Muskegon Intermediate School District - -
Muskegon County 35,005,000 14.12% 4,942,706
Muskegon Community College 13,230,000 14.12% 1,868,076
Total Overlapping Debt $ 196,344,609 50,183,654
Total City Direct and Overlapping Debt $ 58,058,907
NOTE: None of the debt issued by the City is payable through the levy of property tax millages
The percentage of overlapping debt is estimated using taxable property values. Applicable percentages were estimated
by detrmining the portion of the City's taxable value that is within each overalapping governemnt unit's boundaries. 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.
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City of Muskegon
LEGAL DEBT MARGIN INFORMATION
Last Ten Fiscal Years
2003 2004 2005 2006 2007 2008 2009 2010* 2011 2012
Debt Limit $ 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 $ 73,585,150
Total net debt applicable to limit 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 14,375,253
Legal debt margin $ 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 $ 59,209,897
Total net debt applicable to the limit as 12.74% 12.15% 13.01% 20.49% 18.52% 18.02% 17.98% 17.56% 16.51% 19.54%
a percentage of debt limit
Legal Debt Margin Calculation for 2012:
Assessed Valuation: $ 735,851,500
Legal Debt Limit (10% ) 73,585,150
Total Indebtedness:
Debt not Subject to Limitation: $ 30,075,253
Paid by Special Assessment (560,000)
Revenue Bonds (15,140,000)
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Debt Subject to Limitation 14,375,253
Legal Debt Margin $ 59,209,897
* 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.
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
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
2012 5,273,720 3,441,078 1,832,642 1,230,000 410,187 1,640,187 1.12
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
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
2012 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.
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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
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%
2012 38,225 752,622,470 19,689 34.1 5,428 891 21,932,738 8.5%
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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
2012 2003
Percentage Percentage
of total of total
City City
Employer Employees Rank employment Employees Rank employment
Mercy General Health Partners 3,657 1 24.7% 2,400 1 14.1%
Muskegon Public Schools 1,570 2 10.6% 940 4 5.5%
County of Muskegon 980 3 6.6% 1,300 2 7.6%
State of Michigan 772 4 5.2% 0.0%
ADAC Plastics 592 5 4.0% 210 10 1.2%
Knoll Group 450 6 3.0% - 0.0%
Muskegon Community College 446 7 3.0% - 0.0%
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Baker College 400 8 2.7% - 0.0%
SAF Holland USA 335 9 2.3% 400 7 2.3%
GE Aviation formerly Johnson Technology 327 10 2.2% 490 6 2.9%
Verizon - - 0.0% 350 9 2.1%
Brunswick - - 0.0% 400 7 2.3%
Sappi/S.D. Warren Company - - 0.0% 610 5 3.6%
Hackley Hospital - 0.0% 1,300 2 7.6%
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 2003 2004 2005 2006 2007 2008 2009 2010* 2011 2012
Administration 1.50 1.50 1.50 1.50 1.50 1.50 - - 0.40 0.40
Affirmative Action 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.10 1.10
Cemetaries 3.52 3.52 3.25 3.00 3.25 3.25 3.25 2.50 2.20 1.75
City Assessors Office - - - - - - - - - -
City Clerk & Elections 4.00 4.00 4.00 4.00 4.00 4.00 4.00 3.00 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 1.20 1.00 1.00 1.00 1.00 1.00 1.00 1.00 0.55 0.55
City Manager's Office 1.75 1.75 1.75 1.75 1.75 1.75 3.25 2.25 2.25 2.25
City Treasurer's Office 6.00 5.00 5.00 5.00 4.00 5.00 5.00 5.00 5.00 5.00
Civil Service 3.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 1.00 -
Community Event Support 0.20 - - - - - - - - -
Environmental Services 4.00 3.50 2.00 2.00 2.00 2.00 2.00 2.00 2.00 5.00
Farmers Market 0.12 0.12 - - - - 0.05 0.05 0.05 0.05
Finance Administration 4.00 4.00 4.00 4.00 4.00 4.00 4.00 3.00 3.00 3.00
Fire 43.00 41.00 40.00 38.00 38.00 38.00 38.00 36.00 33.00 35.00
Fire Safety Inspections 13.00 12.00 10.00 12.00 12.00 12.00 12.00 9.00 8.00 6.00
Forestry 1.93 0.93 - - - - - - - -
General Recreation 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
127
Information Systems 4.00 4.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
Parking 0.30 - - - - - - - - -
Parks 10.53 9.68 8.48 8.25 8.15 8.15 7.99 7.15 6.00 6.05
Planning, Zoning & Economic Development 7.50 6.50 6.00 6.00 6.00 6.00 6.00 5.00 4.00 3.00
Police 96.00 94.00 94.00 94.00 94.00 94.00 94.00 88.00 88.00 88.00
Sanitation 1.25 1.10 1.10 1.00 1.00 1.00 1.00 - 0.30 0.20
Senior Transit - - - - - - - - - 0.05
MVH-Major Streets 15.30 15.45 15.25 16.00 17.75 15.75 13.75 12.00 12.00 11.70
MVH-Local Streets 7.20 7.00 7.00 7.00 7.00 6.00 8.00 7.00 7.00 6.70
MVH-State Trunklines 1.60 2.00 2.00 2.00 - - - - - -
Walker Arena 0.12 0.12 - - - - - - - -
Community Development 5.00 5.00 4.00 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 0.25 0.25 -
Lead Program - - - - - - - 0.75 0.75 -
Sewer Maintenance 15.15 14.55 15.05 16.00 16.20 15.20 13.20 10.20 10.20 9.75
Water Filtration 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 9.00
Water Maintenance 15.65 15.15 14.65 13.00 12.50 13.50 15.40 12.40 12.40 11.75
Hartshorn Marina Fund 0.79 0.79 0.67 0.73 0.67 0.34 0.05 0.05 0.05 0.30
Public Service Building 3.30 3.65 3.85 3.45 3.45 3.45 3.70 8.95 8.05 7.95
Engineering 9.40 7.70 7.70 7.45 7.45 7.45 7.45 5.45 4.95 4.95
Equipment 7.70 8.00 8.00 8.95 8.25 8.25 8.50 7.25 6.25 6.25
308.00 294.00 284.00 284.00 282.00 280.00 280.00 256.00 244.00 241.00
* 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 2003 2004 2005 2006 2007 2008 2009 2010* 2011 2012
Administrative Services
Elections
Number of registered voters 23,904 25,261 25,918 26,028 26,345 27,678 26,136 26,136 26,330 26,324
Number of votes cast:
Last general election 8,916 14,169 14,169 10,410 10,410 15,271 15,271 15,271 8,106 1,933
Last city election 4,325 4,325 4,022 4,022 1,101 1,101 2,254 2,254 8,106 1,933
Percentage of registered voters voting:
Last general election 37% 56% 55% 40% 40% 55% 58% 58% 31% 7%
Last city election 18% 17% 16% 15% 4% 4% 9% 9% 31% 7%
Financial Services
Property Tax Bills 15,428 15,403 15,404 15,354 15,376 15,350 15,435 - 15,351 15,261
Income Tax Returns 25,043 24,378 23,884 23,493 23,141 22,598 21,071 19,963 19,688 18,699
Paper Check Issued to Vendors 3,784 3,405 3,205 3,248 3,347 3,346 3,113 1,486 2,986 3,746
Electronic Payments to Vendors 746 752 828 800 772 763 963 450 884 1,334
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Public Safety
Fire Protection
Number of firefighter and officer positions 42 41 41 41 41 41 37 37 37 36
Number of emergency calls 3,656 4,116 4,206 4,092 4,171 4,298 4,220 2,062 4,402 4,676
Police Protection
Number of sworn officer positions 83 83 83 84 84 84 79 79 79 79
Part I (Major) Crimes 2,971 3,360 3,303 3,495 2,997 3,107 3,071 1,305 2,859 2,772
Public Works
Refuse Collected (Tons per Year) 11,780 11,925 11,074 11,192 10,375 10,401 10,526 6,042 12,703 10,153
Recyclables Collected (Tons per Year) 775 779 588 559 629 626 309 - - -
Water & Sewer
Number of consumers 14,917 14,917 14,455 14,412 14,364 13,131 12,987 12,966 13,037 13,109
Average daily water consumption (GPD) 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 7,700,000
Water main breaks repaired 19 10 5 13 21 34 17 6 12 5
Sewer flows (Millions Gallons per Year) 1,387 1,475 1,700 2,040 1,945 2,181 1,979 965 1,625 1,695
Sewer Service Calls 624 568 638 605 598 533 508 263 591 522
* 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 2003 2004 2005 2006 2007 2008 2009 2010* 2011 2012
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 197.96 196.95 196.95 197.48 197.79 197.79 196.95 196.95 196.95 196.95
Number of streetlights 3,123 3,111 3,159 3,159 3,134 3,134 3,192 3,125 3,065 2,838
Culture and Recreation
Number of parks (acres) 701 701 701 701 701 701 701 701 701 701
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) 175.33 178.02 179.41 175.74 177.04 177.04 177.04 177.04 177.04 177.04
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Storm sewers (miles) 178.57 178.61 179.23 180.48 183.25 183.60 184.35 184.35 184.35 184.35
Water
Water mains (miles) 193.66 194.14 194.14 194.15 195.63 195.58 195.69 195.69 195.69 195.40
* The City changed its fiscal year end from December 31 to June 30. 2010 figures are for six months.
SOURCE: City of Muskegon Departments
130
SINGLE AUDIT OF FEDERAL FINANCIAL ASSISTANCE PROGRAMS
131
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 23, 2012
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, 2012 and
have issued our report thereon dated October 23, 2012. 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
Management of the City of Muskegon is responsible for establishing and maintaining effective 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 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
2012-1.
678 Front Ave., NW Suite 230 316 Morris Ave., Suite 500, P.O. Box 999 907 S. State St., P.O. Box 331
Grand Rapids, MI 49504 Muskegon, MI 49443 Hart, MI 49420
PHONE (616) 742-1300 PHONE (231) 726-5800 PHONE (231) 873-1040
FAX (616) 742-1318 FAX (231) 722-0260 FAX (231) 873-0602
www.brickleydelong.com
132
BRICKLEY DELONG
City Commission
October 23, 2012
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.
133
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 23, 2012
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, 2012. 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, 2012.
678 Front Ave., NW Suite 230 316 Morris Ave., Suite 500, P.O. Box 999 907 S. State St., P.O. Box 331
Grand Rapids, MI 49504 Muskegon, MI 49443 Hart, MI 49420
PHONE (616) 742-1300 PHONE (231) 726-5800 PHONE (231) 873-1040
FAX (616) 742-1318 FAX (231) 722-0260 FAX (231) 873-0602
www.brickleydelong.com
134
BRICKLEY DELONG
City Commission
October 23, 2012
Page 2
Internal Control Over Compliance
Management of the City of Muskegon is responsible for establishing and maintaining effective internal control
over compliance with the 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 the 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.
Schedule of Expenditures of Federal Awards
We have audited the financial statements of the City of Muskegon as of and for the year ended June 30, 2012, and
have issued our report thereon dated October 23, 2012, which contained an unqualified opinion on those financial
statements. Our audit was conducted for the purpose of forming an opinion on the financial statements. The
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 not a required part of the financial statements. Such information is the responsibility of
management and was derived from and relates directly to the underlying accounting and other records 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 records 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 States of America. In our opinion, the information is fairly stated in all material
respects in relation to the financial statements as a whole.
This report is intended solely for the information and use of the City Commission, management, and federal
awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other
than these specified parties.
135
City of Muskegon
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
For the year ended June 30, 2012
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 2011 (cash basis) expenditures 2012 Notes
U.S. Department of Housing and Urban Development
Direct programs
Community Development Block Grant 14.218
B-10-MC-26-0026 $ 1,086,413 $ 171,102 $ 293,025 $ 121,923 $ -
B-11-MC-26-0026 911,340 - 436,474 888,854 452,380
Program Income 43,538 - 43,538 43,538 -
Total Community Development Block Grant 2,041,291 171,102 773,037 1,054,315 452,380 4
Home Investment Partnership Program 14.239
M-10-MC-26-0215 320,710 16,619 98,994 82,375 -
M-11-MC-26-0216 284,337 - 173,246 192,500 19,254
Program Income 52,088 - 52,088 52,088 -
136
Total Home Investment Partnership Program 657,135 16,619 324,328 326,963 19,254
Total direct programs 2,698,426 187,721 1,097,365 1,381,278 471,634
Passed through Michigan State Housing Development Authority
Community Development Block Grant 14.218
Neighborhood Stabilization Program
NSP-2008-0280-ENT 1,450,000 353,938 268,335 - 85,603
Program Income - 3,918 273,019 273,019 3,918
Total Neighborhood Stabilization Program 1,450,000 357,856 541,354 273,019 89,521 4
Total U.S. Department of Housing and
Urban Development 4,148,426 545,577 1,638,719 1,654,297 561,155
City of Muskegon
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS—Continued
For the year ended June 30, 2012
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 2011 (cash basis) expenditures 2012 Notes
U.S. Department of Justice
Direct programs
Bulletproof Vest Partnership Grant 16.607
2010 Grant $ 1,110 $ - $ - $ 1,110 $ 1,110
Justice Assistance Grant 16.738
2010-DJ-BX-0887 72,886 - 26,127 26,127 -
2011-DJ-BX-2380 55,831 - 34,698 34,698 -
128,717 - 60,825 60,825 -
Total direct programs 129,827 - 60,825 61,935 1,110
Passed through Ottawa County
137
WEMET Multi-Jurisdictional Drug Enforcement CO-OP 16.738
70834-311B 34,911 6,273 6,273 - -
70834-412B 29,923 - 29,923 29,923 -
64,834 6,273 36,196 29,923 -
Passed through Muskegon County
ARRA - Justice Assistance Grant 16.804
2009-SB-B9-1824 218,169 14,436 67,929 60,442 6,949
Total U.S. Department of Justice 412,830 20,709 164,950 152,300 8,059
TOTAL FEDERAL ASSISTANCE $ 4,561,256 $ 566,286 $ 1,803,669 $ 1,806,597 $ 569,214
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, 2012
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, 2012 and federal expenditures per the Schedule of Expenditures of Federal Awards.
Federal revenues per City of Muskegon financial statements
General Fund $ 152,300
Major Street and Trunkline Fund 1,020,000
Other governmental funds 1,285,652
2,457,952
Plus program income 368,645
Less MDOT contracted projects as shown below (1,020,000)
Federal expenditures per the Schedule of Expenditures of Federal Awards $ 1,806,597
138
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, 2012
the federal aid received and expended by the City of Muskegon was $1,020,000 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
of Muskegon administers the grant and either performs the work or contracts it out.
Federal
CFDA Revenue Federal
number Recognized Expenditures
U.S Department of Transportation, Federal Highway Administration (contracted projects)
Passed through the Michigan Department of Transportation
Highway Planning and Construction Program 20.205
Proj STP 1161(015) Fed Item HH7267 Contract 11-5251 $ 560,000 $ 560,000
Proj STP 1161(011) Fed Item HH7221 Contract 11-5164 300,000 300,000
Proj HPSL 1161(023) Fed Item RR 7806 Contract 11-5527 160,000 160,000
Total U.S. Department of Transportation,
Federal Highway Administration (contracted projects) $ 1,020,000 $ 1,020,000
4. Community Development Block Grant
City of Muskegon
SCHEDULE OF FINDINGS AND RESPONSES
Year ended June 30, 2012
SECTION I—SUMMARY OF AUDITORS’ RESULTS
A. Financial Statements
1. Type of auditors' report issued: Unqualified
2. Internal control over financial reporting:
• Material weakness(es) identified? X yes no
• Significant deficiency(ies) identified that are not considered to
be material weaknesses? yes X none reported
3. Noncompliance material to financial statements noted? yes X no
B. Federal Awards
1. Internal control over major programs:
• Material weakness(es) identified? yes X no
• Significant deficiency(ies) identified that are not considered to
be material weaknesses? yes X none reported
2. Type of auditors' report issued on compliance for major programs: Unqualified
3. Any audit findings disclosed that are required to be reported in
accordance with section 510(a) of OMB Circular A-133? yes X no
4. Identification of major programs:
CFDA Number(s) Name of Federal Program/Cluster
U.S. Department of Housing and Urban Development
14.218 • Community Development Block Grant
14.239 • Home Investment Partnership Program
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
139
City of Muskegon
SCHEDULE OF FINDINGS AND RESPONSES
Year ended June 30, 2012
SECTION II – FINANCIAL STATEMENT FINDINGS
Finding 2012-1: 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: Three material audit adjustments were required to correct general ledger balances at year-end.
Context: These were the only three material adjustments noted during the audit of the City for the year ended
June 30, 2012
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 the finding and
continues to work toward improving its year-end review process as it adjusts its procedures to cope with staff
reductions/turnover. The City notes that the number of material audit adjustments that arose from the audit
was significantly less than in the prior audit.
SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
There were no findings in relation to major federal award programs.
140
CLIENT DOCUMENTS
141
City of Muskegon
933 Terrace Street
Muskegon, MI 49440
Phone: 231-724-6709
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS
October 23, 2012
U.S. Department of Housing and Urban Development
Washington D.C.
The City of Muskegon respectfully submits the following summary of the current status of prior audit
findings contained in the single audit report for the year ended June 30, 2011 dated October 21, 2011.
SECTION II – FINANCIAL STATEMENT FINDINGS
Finding 2011-1: MATERIAL WEAKNESS—Year-end Procedures Should be Improved to
Condition: Several material audit adjustments were required to correct general ledger balances at year-
end.
Recommendation: The City should improve its year-end procedures to ensure that its general ledger is
properly adjusted.
Current Status: See Finding 2012-1 for similar finding reported during the single audit for the fiscal year
ended June 30, 2012.
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
Condition: Internal control procedures requiring a documented review and approval of eligibility
determination were not performed for the CDBG Entitlement Grant cluster programs.
Recommendation: Documented review and approval procedures should be implemented for the CDBG
Entitlement Grant cluster programs eligibility function.
Current Status: Recommendation was implemented during the fiscal year ended June 30, 2012. No
similar finding was reported during the single audit for the fiscal year ended June 30, 2012.
Sincerely,
Timothy J. Paul
Finance Director
142
City of Muskegon
933 Terrace Street
Muskegon, MI 49440
Phone: 231-724-6709
CORRECTIVE ACTION PLAN
October 23, 2012
U.S. Department of Housing and Urban Development
Washington D.C.
The City of Muskegon respectfully submits the following Corrective Action Plan for the year ended June 30,
2012.
Name and address of independent public accounting firm:
Brickley DeLong, P.C.
P.O. Box 999
Muskegon, Michigan 49443
Audit period: June 30, 2012
The findings from the Schedule of Findings and Responses for the year ended June 30, 2012 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 continues to make changes to its closing procedures to better ensure that
accounts are properly adjusted in future year-end closings.
SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
There were no findings in relation to major federal award programs.
If the U.S. Department of Housing and Urban Development has questions regarding this plan, please call
Timothy J. Paul at (231) 724-6709.
Sincerely,
Timothy J. Paul
Finance Director
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