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City of Muskegon,
Michigan
Comprehensive Annual
Financial Report
For The Fiscal Year Ended June 30, 2013
www.shorelinecity.com
CITY OF MUSKEGON,
MICHIGAN
COMPREHENSIVE
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED
JUNE 30, 2013
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: Downtown wall mural located on the Russell Block building.
www.shorelinecity.com
City of Muskegon
TABLE OF CONTENTS
INTRODUCTORY SECTION
Letter of Transmittal .................................................................................................................................. 5
Certificate of Achievement for Excellence in Financial Reporting ......................................................... 12
Organization Chart ................................................................................................................................... 13
List of Principal Officials......................................................................................................................... 14
FINANCIAL SECTION
Independent Auditors’ Report.................................................................................................................. 17
Management’s Discussion and Analysis.................................................................................................. 20
Basic Financial Statements
Government-wide Financial Statements
Statement of Net Position .................................................................................................................. 34
Statement of Activities ...................................................................................................................... 35
Fund Financial Statements
Governmental Funds
Balance Sheet ................................................................................................................................. 36
Reconciliation of the Governmental Funds Balance Sheet
to the Statement of Net Position ................................................................................................. 37
Statement of Revenues, Expenditures and Changes
in Fund Balances ......................................................................................................................... 38
Reconciliation of the Governmental Funds Statement of Revenues,
Expenditures and Changes in Fund Balances to the Statement of
Activities ..................................................................................................................................... 39
Proprietary Funds
Statement of Net Position............................................................................................................... 40
Statement of Revenues, Expenses and Changes in Net Position ................................................... 41
Statement of Cash Flows ................................................................................................................ 42
Fiduciary Funds
Statement of Fiduciary Assets and Liabilities ................................................................................ 43
Component Units
Statement of Net Position .................................................................................................................. 44
Statement of Activities ...................................................................................................................... 45
Notes to Financial Statements .............................................................................................................. 46
Required Supplementary Information
Budgetary Comparison Schedule—General Fund ................................................................................ 72
Budgetary Comparison Schedule—Major Street and Trunkline Fund ................................................. 77
Schedule of Funding Progress .............................................................................................................. 78
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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 Position ............................................................................................... 92
Combining Statement of Revenues, Expenses and
Changes in Fund Net Position ........................................................................................................ 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 Position ................................................................................................... 101
Combining Statement of Revenues, Expenditures and Changes
in Fund Balances (Deficits) .......................................................................................................... 102
Reconciliation of the Governmental Funds Statement of Revenues,
Expenditures and Changes in Fund Balances (Deficits) 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/Net Position by Component.............................................................................................. 110
Changes in Net Assets/Net Position ................................................................................................... 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 for Each Major
Program and on Internal Control over Compliance Required by
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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City Manager
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1214
October 25, 2013
Civil Service
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4405
Clerk
(231)724-6705 Honorable Mayor and Members of the
FAX (231)724- City Commission
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City of Muskegon
Comm. &
Neigh. Services
Muskegon, Michigan 49443
(231)724-6717
FAX (231)726-
2501
Finance
(231)724-6713 Ladies and Gentlemen:
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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, 2013. 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
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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.
Services
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FAX (231)728- GAAP requires that management provide a narrative introduction, overview, and analysis
4371
to accompany the basic financial statements in the form of Management’s Discussion and
Leisure Services Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and
(231)724-6704
FAX (231)724- should be read in conjunction with the financial statements. The City of Muskegon’s
1196 MD&A can be found immediately following the independent auditor’s report.
Mayor’s Office
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FAX (231)722- The Comprehensive Annual Financial Report is prepared by the City’s Finance
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Department and responsibility for both the accuracy of the data presented and the
Planning/Zoning
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completeness and fairness of the presentation, including all disclosures, rests with the
FAX (231)724- City. We believe the data as presented is accurate in all material respects; that it is
6790
presented in a manner designed to set forth fairly the financial position and results of
Police operation of the City as measured by the financial activity of its various funds and
Department
(231)724-6750 component units; and that all disclosures necessary to enable the reader to gain the
FAX (231)722- maximum understanding of the City’s finances have been included. Brickley DeLong,
5140
P.C., Certified Public Accountants, performed the independent audit of all accounts of the
Public Works City as required by state law and their report and unqualified opinion is presented as the
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FAX (231)722- first component of the financial section of this report.
4188
Treasurer
(231)724-6720
FAX (231)724-
6768
City of Muskegon, 933 Terrace Street, P.O. Box 536, Muskegon, MI 49443-0536
http://www.shorelinecity.com
5
THE CITY AND THE REGION
The City of Muskegon is located in Western Michigan on the shores of Lake Michigan. The City covers
eighteen square miles and, with a 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. 2013 marks the ferry service’s tenth 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.
Consumers Energy, the City’s largest property taxpayer, has announced it plans to close its sixty-four
year-old B.C. Cobb electric generating facility in spring 2016 due to age, federal pollution regulations
and slowing electric demand. The closure will have a significant impact on City revenues and municipal
operations. The City is actively planning longer-term strategies to deal with the ultimate closure of the
plant.
On a more positive note, the local economy has seen improvement as reflected in higher employment
levels. According to the September 2013 Business Outlook prepared by the W.E. Upjohn Institute for
Employment Research:
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“Total employment in Muskegon County increased by a robust 4.1 percent during the second quarter
because of a huge 26.1 percent employment gain in its leisure and hospitality sector. The quarter’s
gain of nearly 2,500 jobs pushed the county’s unemployment rate down to 8.6 percent. Moreover,
both of the county’s economic indicators were strongly positive during the quarter, which suggests
that employment conditions could continue to improve during the fall.”
The City fully recognizes the magnitude of financial challenges it faces due to the pending loss of its
largest property tax payer. We have 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 moderate.
MAJOR INITIATIVES AND ACCOMPLISHMENTS
Among the City's major initiatives and accomplishments in fiscal year 2012-13 were the following:
Construction started on a new $4 million Farmers’ Market facility in downtown Muskegon. The
new market will be open for business in spring 2014, anchoring a key entrance into the
downtown area. The facility is financed through private donations and grants and has been
deeded to the City, who will be responsible for its operation;
The City entered into a development agreement with Harris Hospitality Group for construction of
a $1.5 million food and entertainment facility at Pere Marquette beach. The venue, which will
open May 2014, will include a beach restaurant and bar, a banquet center, a self-serve ice
cream outlet, a corn-dog stand and beach rental business;
Ground was broken for new waterfront development featuring seventy-five single family homes in
downtown Muskegon. The 10.75 acre site is a former industrial site. The City’s Brownfield
Redevelopment Authority assisted this project;
The City’s former central fire station was sold to a private developer for reuse as a historically
preserved office suite. The architecturally unique building dates to 1927 and had been vacant
since the new central fire station opened in 2006;
Work was completed on a $20 million, 70,000 square-foot manufacturing addition at ADAC
Automotive. 130 new jobs are expected to be created.
The Michigan Energy + Technology Center consortium of companies was formed to focus on
developing Muskegon’s deep water port facilities. The consortium includes Consumers Energy,
Michigan State University, Verplank Dock Co., and Rockford Berge Co. Muskegon is widely
recognized as having the best deep water port facilities along the Lake Michigan’s eastern shore.
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OTHER INFORMATION
INTERNAL ACCOUNTING CONTROLS
The City’s management is responsible for establishing and maintaining an internal control structure that
is designed to ensure adequate protection of the City’s assets from loss, theft, or misuse, and adequate
accounting data to allow for preparation of financial statements in conformity with generally accepted
accounting principles. The internal control structure is designed to provide reasonable, but not absolute
assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the
costs of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and
benefits requires estimates and judgments by management.
All internal control evaluations occur within the above framework. We believe that the City’s internal
accounting controls adequately safeguard assets and provide reasonable assurances of proper
recording of financial transactions.
BUDGETARY CONTROL
Budgetary control is maintained through an annual budget resolution passed by the City Commission.
Budgetary control at the functional level is maintained by review of estimated expenditures prior to
making purchases. Encumbrances are not recorded in the City’s funds. The City does, however, utilize
an informal monitoring system to facilitate budgetary control over proposed purchases. Essentially, this
system entails the use of on-line budgetary information that details year-to-date “actual versus
budgeted” expenditure comparisons by budget category. This information is accessible to appropriate
personnel to enable them to ascertain the budget status of an expenditure category prior to authorizing
additional purchases.
LONG TERM FINANCIAL PLANNING
The City incorporates a five-year fiscal forecast into its yearly budget process. The forecast is a macro-
level projection of major revenue sources, expenses and fund balances, taking into account identifiable
factors, recent trends and management’s judgment as to future developments.
The current five-year forecast is focused on the projected financial impact from the announced closure
of the B.C Cobb electric generation facility. As noted earlier, this facility is the City’s single largest
taxpayer and is scheduled to close spring 2016. The City is actively planning for the revenue loss that
will accompany this closure and has already made numerous budget adjustments to ensure that high-
quality municipal services will continue to be provided.
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DEBT ADMINISTRATION
At June 30, 2013, the total of City bonds and contractual debt outstanding (including discretely
presented component unit debt) was $29,492,003. Presently there are no plans to issue new debt in
the next two years. Standard & Poor’s rates the City’s general obligation debt A+. The City’s water
revenue bonds carry the AA- rating.
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, 2012), the City’s defined benefit retirement program is 94% funded.
The City also provides post-employment healthcare benefits for retirees and their dependents. Since
1986, 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-143, “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, 2012. This marked the twenty-
seventh 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.
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A Certificate of Achievement is valid for a period of one year only. We believe our current report
continues to conform to the Certificate of Achievement Program requirements, and we are submitting it
to the GFOA to determine its eligibility for another certificate.
ACKNOWLEDGEMENTS
We would like to thank the members of the City Commission for their continued interest and support in
conducting the financial affairs of the City in a responsible and progressive manner and for their efforts
in working for the betterment of the Muskegon community. We would also like to thank the many City
employees who participate in the preparation of this report.
Respectfully submitted,
Frank Peterson Timothy J. Paul
City Manager Director of Finance
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Mayor & City
Commission
City Manager City Attorney
Various Boards &
Commissions
Administrative Services Community & Economic
Finance Division Public Safety Division Public Works Division
Division Development Division
Planning, Zoning & Code
City Clerk & Elections Finance Administration Police Engineering Compliance
Enforcement
Water & Sewer Community &
Civil Service City Treasurer Fire
Maintenance Neighborhood Services
Income Tax
Building Inspections Water Filtration Recreation Services
Administration
Information Technology Streets & Highways
Contract Oversight:
Assessing, Walker
Parks & Cemeteries
Arena, Fisherman's
Landing, 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, 2013
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Frank Peterson
City Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . John C. Schrier
Director of Finance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Timothy J. Paul
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FINANCIAL SECTION
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BRICKLEY DELONG
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS’ REPORT
October 25, 2013
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, Michigan as of and for the year ended June 30, 2013, and the related notes
to the financial statements, which collectively comprise the City's basic financial statements as listed in the table
of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance
with accounting principles generally accepted in the United States of America. This includes the design,
implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial
statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
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 from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the
risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no
such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinions.
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 25, 2013
Page 2
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,
Michigan, as of June 30, 2013, and the respective changes in financial position and, where applicable, cash flows
thereof for the year then ended in accordance with accounting principles generally accepted in the United States
of America.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s
discussion and analysis, budgetary comparison information, and schedule of funding progress on pages 20
through 31 and 72 through 78 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.
Other Supplemental Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the City of Muskegon's basic financial statements. The introductory section, combining and individual
nonmajor fund financial statements, 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 basic 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 also not a required part of the basic financial statements.
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BRICKLEY DELONG
City Commission
October 25, 2013
Page 3
Other Matters—Continued
Other Supplemental Information—Continued
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
records used to prepare the basic financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and certain additional procedures, including
comparing and reconciling such information directly to the underlying accounting and other records used to
prepare the basic financial statements or to the basic financial statements themselves, and other additional
procedures in accordance with auditing standards generally accepted in the United States of America. In our
opinion, 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 fairly stated in
all material respects in relation to the basic 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.
Muskegon, Michigan
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2013 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,
2013. 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 $130,838,669 as of
June 30, 2013. Of the City’s total net position, $21,791,371 (16.7%) was
unrestricted and may be used to meet the City’s ongoing obligations to citizens
and creditors.
The City’s total combined net position decreased by $1,691,362 during the year
ended June 30, 2013 mostly due to normal depreciation of capital assets.
The City’s governmental funds reported combined ending fund balance of
$13,656,058, an increase of $503,648 (3.8%) from the prior year.
The City’s General Fund reported a total fund balance of $7,353,558, an increase
of $1,119,161 from the restated prior year balance of $6,234,397. The favorable
increase is the result of sharply reduced costs due to position eliminations, tight
budget controls and lower required contributions to fund legacy costs.
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 position includes all of the government’s assets/deferred outflows of resources
and liabilities/deferred inflows of resources. 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 position and how they have
changed. Net position—the difference between the City’s assets/deferred outflows of
resources and liabilities/deferred inflow of resources—is one way to measure the City’s
overall financial health or position. Over time, increases or decreases in the City’s net
position 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, streets and bridges, public works, community and
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economic development, culture 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 and launch ramp 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.
The City uses 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 position
and a statement of changes in fiduciary net position. We exclude these activities
from the City’s government-wide financial statements because the City cannot use
these assets to finance its operations.
Component units – Finally, the City of Muskegon’s Comprehensive Annual
Financial report includes five component units: the Downtown Development
Authority (DDA), the Tax Increment Finance Authority (TIFA), the Local
Development Finance Authority (LDFA) and, the Brownfield Redevelopment
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Authority (BRA 1 and BRA 2). Component units are separate legal entities for
which the City of Muskegon has some level of financial accountability. The
component units of the City exist primarily for the issuance and repayment of debt
to finance projects in specific areas of the City. Accordingly, they are discussed
below under the Capital Assets and Debt Administration heading.
FINANCIAL ANALYSIS OF THE CITY AS A WHOLE
Net position. The Statement of Net Position provides an overview of the City’s
assets/deferred outflows of resources, liabilities/deferred inflow of resources and net
position. Over time this can provide a good indicator of the City’s fiscal health. The total
net position of the City was $130,838,669 as of June 30, 2013. This is a decrease of
$1,691,362 from reported net position for the prior year. An overview of the City’s net
position follows:
City's Net Position/Net Assets
(In Thousands of Dollars)
Governmental Business-Type
Activities Activities Total Percentage
6/30/2013 6/30/2012 6/30/2013 6/30/2012 6/30/2013 6/30/2012 Change
Current and other assets $21,670 $22,690 $10,227 $10,581 $31,897 $33,271 -4.13%
Capital assets 71,311 72,726 54,014 55,407 125,325 128,133 -2.19%
Total Assets 92,981 95,416 64,241 65,988 157,222 161,405 -2.59%
Long-term liabilities 7,940 8,452 12,790 14,115 20,730 22,567 -8.14%
Other liabilities 3,326 3,738 2,327 2,092 5,653 5,830 -3.04%
Total Liabilities 11,266 12,190 15,117 16,207 26,383 28,397 -7.09%
Net Position/Net assets
Net investment in capital assets 63,842 66,863 40,033 40,148 103,875 107,011 -2.93%
Restricted 4,573 3,526 599 672 5,172 4,198 23.19%
Unrestricted 13,300 12,837 8,492 8,961 21,792 21,798 -0.03%
Total Net Position/Net Assets $81,715 $83,226 $49,124 $49,781 $130,839 $133,007 -1.63%
The bulk of the City’s net position ($103,874,950 or 79%) represents investments in
capital infrastructure assets (net of depreciation), 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 4.0% ($5,172,348) of the City’s net position are legally restricted as to use.
Unrestricted net position ($21,791,371) represents assets that may be used to meet the
City’s operating needs and ongoing obligations. The City’s unrestricted net position/net
assets decreased very slightly ($6,915) during the year.
Changes in net position/net assets. The City’s total revenues were $43,458,834 for
the year ended June 30, 2013. This represents a 1.8% increase over total revenues
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collected during the prior fiscal year. About 41% of the City’s revenue stream came
from charges to users of specific services such as water or sewer. Another 11% came
from grants from the state and federal governments and 36% 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, 2013 was
$45,150,196. This represents a 2% increase from reported expenses for the last fiscal
year ended June 30, 2012. 69% of the City’s expenses were for governmental activities
such as police and fire protection, streets, parks, and general administration. The
remaining 31% 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 Position/Net Assets) further
breaks down the change in total net position into period-to-period changes in individual
revenue and expense categories.
As can be seen, net position for governmental activities decreased $1,119,722 while net
position for business-type activities decreased by $571,640. These changes represent
the downsizing of municipal operations in response to demographic and fiscal realities
faced by the City.
See Note J of the Notes to the Basic Financial Statements of this report for additional
information on the restatement of beginning net position for the governmental and
business type activities.
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Changes in City’s Net Position/Net Assets
(In thousands of dollars)
Governmental Business-Type
Activities Activities Total Percentage
6/30/2013 6/30/2012 6/30/2013 6/30/2012 6/30/2013 6/30/2012 Change
Program revenues
Charges for services $4,651 $4,246 $13,183 $11,918 $17,834 $16,164 10.33%
Operating grants and contributions 4,681 4,652 6 - 4,687 4,652 0.75%
Capital grants and contributions 886 1,568 88 - 974 1,568 -37.88%
General revenues
Property taxes 7,593 8,383 - - 7,593 8,383 -9.42%
Income taxes 8,057 7,664 - - 8,057 7,664 5.13%
State shared revenues 3,701 3,578 - - 3,701 3,578 3.44%
All other 580 631 33 46 613 677 -9.45%
Total revenues 30,149 30,722 13,310 11,964 43,459 42,686 1.81%
Governmental activities expenses
Public representation 894 867 - - 894 867 3.11%
Administrative services 565 566 - - 565 566 -0.18%
Financial services 2,241 2,399 - - 2,241 2,399 -6.59%
Public safety 12,988 13,213 - - 12,988 13,213 -1.70%
Public w orks 3,202 2,958 - - 3,202 2,958 8.25%
Highw ays, streets and bridges 6,672 6,569 - - 6,672 6,569 1.57%
Community and economic development 2,499 2,447 - - 2,499 2,447 2.13%
Culture and recreation 1,593 1,601 - - 1,593 1,601 -0.50%
General administration 322 792 - - 322 792 -59.34%
Interest on long-term debt 292 283 - - 292 283 3.18%
Business-type activities expenses
Water - - 7,227 5,974 7,227 5,974 20.97%
Sew er - - 6,229 6,202 6,229 6,202 0.44%
Marina and Launch Ramp - - 426 310 426 310 37.42%
Total expenses 31,268 31,695 13,882 12,486 45,150 44,181 2.19%
Change in net position/assets (1,119) (973) (572) (522) (1,691) (1,495) 13.11%
Net position/assets at beginning of year, as restated 82,834 84,199 49,696 50,303 132,530 134,502 -1.47%
Net position/assets at end of year $81,715 $83,226 $49,124 $49,781 $130,839 $133,007 -1.63%
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,
2013 was $31,268,016.
The net cost that City taxpayers paid for these activities through local property
taxes and income taxes was $15,649,992, or 50% of the total.
The remaining cost was paid by user charges to those directly benefitting from the
programs or by state and federal grants and contributions.
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Net Cost of Selected City Functions
(in thousands of dollars)
Total Cost of Services Net Cost of Services
6/30/2013 6/30/2012 % Change 6/30/2013 6/30/2012 % Change
Governmental activities
Public safety $12,988 $13,213 -1.70% $11,723 $11,910 -1.57%
Community and economic development 2,499 2,447 2.13% 655 388 68.81%
Culture and recreation 1,592 1,601 -0.56% 968 1,280 -24.38%
Highw ays, streets and bridges 6,672 6,569 1.57% 2,484 1,826 36.04%
Public w orks 3,202 2,958 8.25% 2,527 2,468 2.39%
All other 4,315 4,907 -12.06% 2,693 3,358 -19.80%
Total governmental activities $31,268 $31,695 -1.35% $21,050 $21,230 -0.85%
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,
2013, the City’s total business-type activities realized an overall decrease in net position
of $571,640.
Sewer Fund net position decreased $124,124 primarily as result of higher treatment
costs caused by extremely heavy rainfalls in the last three months of the fiscal year.
The Water Fund saw net position decrease $303,170. This falloff is attributable to lower
consumption levels. Water rates will increase 10% effective October 1, 2013. Marina
and Launch Ramp Fund net position decreased $100,829 due to emergency dredging
costs needed to keep launch ramps accessible in light of record low lake levels during
2012-13.
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, 2013
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.
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Fund Balance as a %
Prior Year’s
Year-End Fund Year‐to‐Year % of Prior Year
Year Ended
Balance Expenditures and Expenditures (Policy
Change
Other Uses Target=13%)
6/30/2013 $7,353,558 17.95% $23,617,448 31.14%
6/30/2012* 6,234,397 3.71% 25,556,758 24.39%
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%
*As restated ** 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 were collected in full during this
period.
For the year ended June 30, General Fund revenues 2013 were $201,735 lower than
the final amended budget estimate. This variance is due to lower than expected local
income tax and interest revenues.
General Fund expenditures were $590,784 lower than projected in the final 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, 2013, the fund balance of the Major
Street and Trunkline Fund decreased $353,324 which is attributable to the scheduled
use of fund balance reserves for street projects.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
As of June 30, 2013, the City had invested $125,324,535 in a variety of capital assets,
including land, streets, equipment, buildings, water and sewer lines, and vehicles. This
is a decrease of $2,808,582 from capital assets reported as of June 30, 2012. The
decrease is due to normal depreciation of assets. Additionally, component units have
$2,543,714 invested in capital assets. Note D of the notes to the basic financial
statements provides detailed information on capital asset investments.
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Long-Term Debt
Bond Ratings
At June 30, 2013, the City had $22,627,134 in bonds and
The City’s limited full faith and
other long-term obligations outstanding. This represents a credit bonds (bonds guaranteed
7.4% decrease from the prior year. The City did not issue by the City’s taxing powers) are
any new debt during the fiscal year. rated “A+” by Standard & Poor’s.
The City’s Water System
revenue bonds carry the “AA-“
Additional information concerning the City’s long-term debt S&P rating.
is presented in Note F 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
6/30/2013 6/30/2012 6/30/2013 6/30/2012 6/30/2013 6/30/2012 Change
Due w ithin one year $582 $592 $1,316 $1,271 $1,898 $1,863 1.88%
Due in more than one year 7,940 8,452 12,789 14,115 20,729 22,567 -8.14%
Total bonds & other obligations $8,522 $9,044 $14,105 $15,386 $22,627 $24,430 -7.38%
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 $6,864,869 at year-end as shown in the table below. This represents a
decrease of 6.8% 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
F 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
6/30/2013 6/30/2012 6/30/2013 6/30/2012 6/30/2013 6/30/2012 Change
Due w ithin one year $280 $275 $260 $180 $540 $455 18.68%
Due in more than one year 2,249 2,534 4,076 4,376 6,325 6,910 -8.47%
Total bonds & other obligations $2,529 $2,809 $4,336 $4,556 $6,865 $7,365 -6.79%
ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
The City’s fiscal year 2013-14 capital budget anticipates spending $6,491,000 for capital
projects, consisting of street improvements, water and sewer system improvements,
28
and scheduled equipment replacements. These improvements will be funded by
anticipated grants ($2,187,000) and revenues generated from operations. No new debt
issuance is anticipated.
From an operating standpoint, the City’s 2013-14 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 233
positions to 227 positions.
Staff will explore possible outsourcing of the code enforcement inspections
function to SafeBuilt, Inc. In 2012, building and trade inspection functions were
outsourced to Safebuilt and this has proven to be a successful venture.
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.
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 1.3% from $7,412,804 for the year ended June 30,
2012 to $7,506,472 for the year ended June 30, 2013. For 2013-14, the City has
estimated income tax revenue to be $7,600,000.
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City Income Percent
Year
Tax Revenues Change
6/30/2013 $7,506,472 1.3%
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%
* 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 2013-14, the City tax levy remains at 9.5 mills for general operations and 2.5 mills
for sanitation service. We project that $6,859,131 in total property tax revenue will be
collected during fiscal year 2013-14.
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
6/30/2013 $3,700,871 3.4%
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%
* 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.
30
For 2013-14, the City projects $3,776,201 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
6/30/2013 $3,208,769 1.0%
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%
* Six‐month fiscal period
The state is presently considering a major overhaul of the transportation funding
system. However, at this time, the City is not projecting any significant change in street
revenues for fiscal year 2013-14.
Water and Sewer Fees
From a government-wide entity perspective, combined water and sewer fees represent
one of the City’s largest income streams, totaling $12,100,914 during the year ended
June 30, 2013. Charges to customers are based on the amount of metered services
used times rates periodically set by the City Commission. Water rates will be increased
10% effective October 1, 2013. Sewer rates may need to be increased during the year
as well, depending on whether Muskegon County increases its wastewater treatment
charges.
CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, and
investors and creditors with a general overview of the City’s finances and to
demonstrate the City’s accountability for the money it receives. If you have questions
about this report, need additional financial information, or wish to obtain separate
financial statements for the City’s component units, contact the City’s Finance
Department at (231) 724-6713 or by e-mail (finance@shorelinecity.com).
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32
FINANCIAL STATEMENTS
33
City of Muskegon
STATEMENT OF NET POSITION
June 30, 2013
Governmental Business-type Component
Activities Activities Total Units
ASSETS
Current assets
Cash and investments $ 15,277,164 $ 6,068,650 $ 21,345,814 $ 358,407
Receivables 2,448,800 1,898,116 4,346,916 -
Due from other governmental units 1,567,449 109,745 1,677,194 -
Internal balances (1,317,577) 1,317,577 - -
Inventories 20,577 134,532 155,109 -
Prepaid items 850,476 98,842 949,318 -
Total current assets 18,846,889 9,627,462 28,474,351 358,407
Noncurrent assets
Restricted cash and investments - 599,500 599,500 -
Advances to component units 1,555,528 - 1,555,528 -
Special assessments receivable, less amounts due within one year 136,870 - 136,870 -
Notes receivable, less amounts due within one year 137,431 - 137,431 -
Net pension asset 993,293 - 993,293 -
Capital assets, net
Nondepreciable 18,425,840 1,350,788 19,776,628 400,000
Depreciable 52,884,915 52,662,992 105,547,907 2,143,714
Total noncurrent assets 74,133,877 54,613,280 128,747,157 2,543,714
Total assets 92,980,766 64,240,742 157,221,508 2,902,121
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 2,163,988 273,287 2,437,275 25,674
Due to other governmental units 476,324 738,167 1,214,491 -
Unearned revenues - unused Farmers Market tokens 60,196 - 60,196 -
Unearned revenues - expenditure-driven grants 43,743 - 43,743 -
Bonds and other obligations, due within one year 581,600 1,315,700 1,897,300 540,000
Total current liabilities 3,325,851 2,327,154 5,653,005 565,674
Noncurrent liabilities
Advances from primary government - - - 1,555,528
Bonds and other obligations, less amounts due within one year 7,940,452 12,789,382 20,729,834 6,324,869
Total noncurrent liabilities 7,940,452 12,789,382 20,729,834 7,880,397
Total liabilities 11,266,303 15,116,536 26,382,839 8,446,071
NET POSITION
Net investment in capital assets 63,842,092 40,032,858 103,874,950 (1,791,858)
Restricted
Highways, streets and bridges 2,964,094 - 2,964,094 -
Debt service - 599,500 599,500 -
Law enforcement 172,578 - 172,578 -
Perpetual care
Expendable 25,816 - 25,816 -
Non-expendable 1,408,881 - 1,408,881 -
Other purposes 1,479 - 1,479 -
Unrestricted 13,299,523 8,491,848 21,791,371 (3,752,092)
Total net position $ 81,714,463 $ 49,124,206 $ 130,838,669 $ (5,543,950)
The accompanying notes are an integral part of this statement.
34
City of Muskegon
STATEMENT OF ACTIVITIES
For the year ended June 30, 2013
Net (Expense) Revenue and Changes in Net Position
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 $ 893,981 $ 173,739 $ - $ - $ (720,242) $ - $ (720,242) $ -
Administrative services 565,307 268,535 10,000 - (286,772) - (286,772) -
Financial services 2,241,061 830,919 50,000 - (1,360,142) - (1,360,142) -
Public safety 12,987,842 1,133,666 131,143 - (11,723,033) - (11,723,033) -
Public works 3,201,806 671,494 - 3,624 (2,526,688) - (2,526,688) -
Highways, streets and bridges 6,672,374 245,609 3,145,344 797,320 (2,484,101) - (2,484,101) -
Community and economic development 2,499,404 432,240 1,326,823 85,164 (655,177) - (655,177) -
Culture and recreation 1,592,358 606,818 18,035 - (967,505) - (967,505) -
General administration 322,348 287,729 - - (34,619) - (34,619) -
Interest on long-term debt 291,535 - - - (291,535) - (291,535) -
Total governmental activities 31,268,016 4,650,749 4,681,345 886,108 (21,049,814) - (21,049,814) -
Business-type activities
Sewer 7,226,839 7,058,315 - - - (168,524) (168,524) -
Water 6,228,788 5,890,614 6,188 - - (331,986) (331,986) -
Marina and Launch Ramp 426,553 234,229 - 88,046 - (104,278) (104,278) -
Total business-type activities 13,882,180 13,183,158 6,188 88,046 - (604,788) (604,788) -
35
Total primary government $ 45,150,196 $ 17,833,907 $ 4,687,533 $ 974,154 (21,049,814) (604,788) (21,654,602) -
Component units
Local Development Finance Authority - SmartZone $ 323,896 $ - $ - $ 235,000 - - - (88,896)
Downtown Development Authority 54,150 - - - - - - (54,150)
Tax Increment Finance Authority 50,000 - - - - - - (50,000)
Brownfield Redevelopment Authority I 63,108 - - - - - - (63,108)
Brownfield Redevelopment Authority II 42,995 - - - - - - (42,995)
Total component units $ 534,149 $ - $ - $ 235,000 - - - (299,149)
General revenues
Property taxes 7,592,847 - 7,592,847 643,258
Income taxes 8,057,145 - 8,057,145 -
Cable franchise agreement 358,785 - 358,785 -
Grants and contributions not restricted to specific programs 3,700,871 - 3,700,871 -
Unrestricted investment earnings 73,157 33,148 106,305 2,387
Miscellaneous 102,388 - 102,388 -
Gain on sale of capital asset 44,899 - 44,899 -
Total general revenues 19,930,092 33,148 19,963,240 645,645
Change in net position (1,119,722) (571,640) (1,691,362) 346,496
Net position at July 1, 2012, as restated 82,834,185 49,695,846 132,530,031 (5,890,446)
Net position at June 30, 2013 $ 81,714,463 $ 49,124,206 $ 130,838,669 $ (5,543,950)
The accompanying notes are an integral part of this statement.
City of Muskegon
BALANCE SHEET
Governmental Funds
June 30, 2013
Major Street Other Total
General and Trunkline Governmental Governmental
Fund Fund Funds Funds
ASSETS
Cash and investments $ 6,102,486 $ 2,213,220 $ 3,700,323 $ 12,016,029
Receivables
Accounts and loans 163,650 2,693 240,133 406,476
Property taxes 85,565 - - 85,565
Income taxes 1,716,009 - - 1,716,009
Special assessments - 254,328 174,542 428,870
Due from other governmental units 635,303 424,189 507,957 1,567,449
Due from other funds 488,857 - - 488,857
Advances to component units - - 518,510 518,510
Prepaid items 437,341 21,610 4,710 463,661
Total assets $ 9,629,211 $ 2,916,040 $ 5,146,175 $ 17,691,426
LIABILITIES
Accounts payable 1,046,516 $ 69,409 $ 223,069 $ 1,338,994
Accrued liabilities 186,094 5,451 7,986 199,531
Due to other governmental units 12,847 433,168 30,309 476,324
Due to other funds - - 488,857 488,857
Unearned revenues - unused Farmers Market tokens 60,196 - - 60,196
Unearned revenues - expenditure-driven grants - - 43,743 43,743
Total liabilities 1,305,653 508,028 793,964 2,607,645
DEFERRED INFLOWS OF RESOURCES
Unavailable revenues - income taxes 970,000 - - 970,000
Unavailable revenues - special assessments - 254,328 174,645 428,973
Unavailable revenues - other long-term receivables - - 28,750 28,750
Total deferred inflows of resources 970,000 254,328 203,395 1,427,723
FUND BALANCES
Nonspendable
Prepaid items 437,341 21,610 4,710 463,661
Long-term loans receivable - - 122,592 122,592
Perpetual care 10,000 - 1,398,881 1,408,881
Restricted
Highways, streets and bridges - 2,132,074 417,449 2,549,523
Law enforcement - - 172,578 172,578
Perpetual care - - 25,816 25,816
Other purposes - - 1,479 1,479
Assigned
Capital projects and public improvements 1,700,000 - 2,087,359 3,787,359
Subsequent year's budget appropriation of fund balance 592,495 - - 592,495
Unassigned 4,613,722 - (82,048) 4,531,674
Total fund balances 7,353,558 2,153,684 4,148,816 13,656,058
Total liabilities, deferred inflows of
resources and fund balances $ 9,629,211 $ 2,916,040 $ 5,146,175 $ 17,691,426
The accompanying notes are an integral part of this statement.
36
City of Muskegon
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET POSITION
June 30, 2013
Total fund balance—governmental funds $ 13,656,058
Amounts reported for governmental activities in the Statement of Net Position
are different because:
The net pension asset is not an available resource and, therefore, is not
reported in the governmental funds. 993,293
Capital assets used in governmental activities are not financial resources
and, therefore, are not reported in the governmental funds.
Cost of capital assets $ 130,393,096
Accumulated depreciation (60,914,278) 69,478,818
Other long-term assets are not available to pay for current period
expenditures and, therefore, are reported as unavailable revenues
in the governmental funds.
Income taxes 970,000
Special assessments 428,973
Other long-term receivables 28,750 1,427,723
Long-term liabilities in governmental activities are not due and payable in the
current period and, therefore, are not reported in the governmental funds.
Accrued interest payable (61,054)
Bonds and notes payable (7,468,663)
Compensated absences (970,809) (8,500,526)
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 Position.
Net position of the internal service funds 5,976,674
Internal balances representing the cumulative difference between
actual costs and amounts charged to business-type activities (1,317,577) 4,659,097
Net position of governmental activities $ 81,714,463
The accompanying notes are an integral part of this statement.
37
City of Muskegon
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
Governmental Funds
For the year ended June 30, 2013
Major Street Other Total
General and Trunkline Governmental Governmental
Fund Fund Funds Funds
REVENUES
Taxes $ 14,832,027 $ - $ - $ 14,832,027
Licenses and permits 1,238,285 - - 1,238,285
Intergovernmental revenues
Federal 117,324 794,000 1,317,788 2,229,112
State 3,714,690 2,566,615 843,137 7,124,442
Local 50,000 - - 50,000
Charges for services 2,375,255 27,885 366,087 2,769,227
Fines and forfeitures 410,978 - 24,915 435,893
Interest and rental income 185,974 24,246 57,177 267,397
Other 482,876 133,583 237,918 854,377
Total revenues 23,407,409 3,546,329 2,847,022 29,800,760
EXPENDITURES
Current
Public representation services 892,113 - - 892,113
Administrative services 508,130 - - 508,130
Financial services 2,196,917 - - 2,196,917
Public safety 12,587,265 - 2,351 12,589,616
Public works 2,878,328 - - 2,878,328
Highways, streets and bridges - 3,916,862 2,024,312 5,941,174
Community and economic development 1,001,715 - - 1,001,715
Culture and recreation 1,201,246 - 11,030 1,212,276
Other governmental functions 299,812 - - 299,812
Debt service
Principal 70,000 175,000 150,211 395,211
Interest and fees 209,678 57,791 25,085 292,554
Capital outlay 105,651 - 1,745,832 1,851,483
Total expenditures 21,950,855 4,149,653 3,958,821 30,059,329
Excess of revenues over (under) expenditures 1,456,554 (603,324) (1,111,799) (258,569)
OTHER FINANCING SOURCES (USES)
Proceeds from sale of capital assets - - 190,263 190,263
Transfers in 420,653 250,000 685,576 1,356,229
Transfers out (758,046) - (26,229) (784,275)
Total other financing sources (uses) (337,393) 250,000 849,610 762,217
Net change in fund balances 1,119,161 (353,324) (262,189) 503,648
Fund balances at July 1, 2012, as restated 6,234,397 2,507,008 4,411,005 13,152,410
Fund balances at June 30, 2013 $ 7,353,558 $ 2,153,684 $ 4,148,816 $ 13,656,058
The accompanying notes are an integral part of this statement.
38
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, 2013
Net change in fund balances—total governmental funds $ 503,648
Amounts reported for governmental activities in the Statement of Activities are
different because:
Governmental funds report outlays for capital assets as expenditures. However,
in the Statement of Activities, the cost of these assets is allocated over their
estimated useful lives and reported as depreciation expense.
Depreciation expense $ (4,542,411)
Capital outlay 3,230,586 (1,311,825)
In the Statement of Activities, only the gain or loss on the sale of capital
assets is reported. However, in the governmental funds, the proceeds
from the sale increase financial resources. Thus, the change in net
position differs from the change in fund balance by the remaining
undepreciated cost of the capital assets sold. (175,512)
Revenue reported in the Statement of Activities that does not provide current
financial resources are not reported as revenue in the governmental funds. 67,217
The issuance of long-term debt provides current financial resources to
governmental funds, but increases liabilities in the Statement of Net Position.
Repayment of debt is an expenditure in the governmental funds, but reduces
long-term liabilities in the Statement of Net Position.
Repayment of principal on long-term debt 395,211
Changes in accrual of interest and amortization of premiums and discounts
Change in accrued interest payable 1,946
Amortization of premiums and discounts (927) 1,019
Some expenses are reported in the Statement of Activities do not require the use
of current financial resources and, therefore, are not reported as expenditures
in the governmental funds.
Change in net pension asset (3,348)
Change in compensated absences 121,724 118,376
The internal service funds are used by management to charge the costs of
certain activities used to individual funds. The net revenue of certain activities
of the internal service fund is reported with governmental activities.
Change in net position of the internal service funds (761,373)
Change in internal balances representing the current year difference
between actual costs and amounts charged to business-type activities 43,517 (717,856)
Change in net position of governmental activities $ (1,119,722)
The accompanying notes are an integral part of this statement.
39
City of Muskegon
STATEMENT OF NET POSITION
Proprietary Funds
June 30, 2013
Governmental
Activities -
Business-type Activities - Enterprise Funds Internal
Marina and Service
Sewer Water Ramp Total Funds
ASSETS
Current assets
Cash and investments $ 4,158,969 $ 1,703,674 $ 206,007 $ 6,068,650 $ 3,261,135
Accounts receivable 975,036 907,066 16,014 1,898,116 86,181
Due from other governmental units - 42,842 66,903 109,745 -
Inventories 35,391 99,141 - 134,532 20,577
Prepaid items 41,848 54,739 2,255 98,842 386,815
Total current assets 5,211,244 2,807,462 291,179 8,309,885 3,754,708
Noncurrent assets
Restricted cash and investments - 599,500 - 599,500 -
Advances to component units - - - - 1,037,018
Capital assets
Land 16,188 103,500 22,562 142,250 65,000
Land improvements - - 1,888,965 1,888,965 301,715
Buildings, improvements and systems 20,787,414 65,932,429 2,322,488 89,042,331 1,559,334
Machinery and equipment 50,082 2,842,951 - 2,893,033 7,540,942
Construction in progress 168,019 1,040,519 - 1,208,538 -
Less accumulated depreciation (8,420,733) (30,165,452) (2,575,152) (41,161,337) (7,635,054)
Net capital assets 12,600,970 39,753,947 1,658,863 54,013,780 1,831,937
Total noncurrent assets 12,600,970 40,353,447 1,658,863 54,613,280 2,868,955
Total assets 17,812,214 43,160,909 1,950,042 62,923,165 6,623,663
LIABILITIES
Current liabilities
Accounts payable 12,911 132,330 23,667 168,908 545,036
Accrued liabilities 7,250 96,898 231 104,379 19,373
Due to other governmental units 562,732 175,435 - 738,167 -
Bonds and other obligations, due within one year 7,300 1,308,200 200 1,315,700 13,800
Total current liabilities 590,193 1,712,863 24,098 2,327,154 578,209
Noncurrent liabilities
Bonds and other obligations, less amounts due within one year 36,393 12,751,916 1,073 12,789,382 68,780
Total liabilities 626,586 14,464,779 25,171 15,116,536 646,989
NET POSITION
Net investment in capital assets 12,600,970 25,773,025 1,658,863 40,032,858 1,831,937
Restricted for debt service - 599,500 - 599,500 -
Unrestricted 4,584,658 2,323,605 266,008 7,174,271 4,144,737
Total net position $ 17,185,628 $ 28,696,130 $ 1,924,871 47,806,629 $ 5,976,674
Adjustment to report the cumulative internal balance for the net effect of the activity
between the internal service funds and the enterprise funds over time 1,317,577
Net position of business-type activities $ 49,124,206
The accompanying notes are an integral part of this statement.
40
City of Muskegon
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
Proprietary Funds
For the year ended June 30, 2013
Governmental
Activities -
Business-type Activities - Enterprise Funds Internal
Marina and Service
Sewer Water Ramp Total Funds
OPERATING REVENUES
Charges for services $ 6,502,293 $ 5,598,621 $ 219,341 $ 12,320,255 $ 7,308,020
Other 556,022 298,181 14,888 869,091 330,758
Total operating revenues 7,058,315 5,896,802 234,229 13,189,346 7,638,778
OPERATING EXPENSES
Administration 304,916 555,273 11,160 871,349 429,264
Insurance premiums and claims - - - - 3,925,426
Wastewater treatment 5,286,893 - - 5,286,893 -
Wastewater maintenance 1,181,143 - - 1,181,143 -
Filtration plant operations - 1,499,233 - 1,499,233 -
Water distribution - 1,674,770 - 1,674,770 -
Other operations - - 299,264 299,264 3,142,838
Depreciation 430,270 2,132,243 114,063 2,676,576 434,997
Total operating expenses 7,203,222 5,861,519 424,487 13,489,228 7,932,525
Operating income (loss) (144,907) 35,283 (190,258) (299,882) (293,747)
NONOPERATING REVENUES (EXPENSES)
Investment earnings 20,783 10,982 1,383 33,148 54,339
Gain on sale of capital assets - - - - 49,989
Interest expense - (349,435) - (349,435) -
Total nonoperating revenue (expenses) 20,783 (338,453) 1,383 (316,287) 104,328
Income (loss) before contributions and transfers (124,124) (303,170) (188,875) (616,169) (189,419)
CAPITAL CONTRIBUTIONS AND TRANSFERS
Capital contributions - - 88,046 88,046 -
Transfers in - - - - 28,046
Transfers out - - - - (600,000)
Total capital contributions and transfers - - 88,046 88,046 (571,954)
Change in net position (124,124) (303,170) (100,829) (528,123) (761,373)
Net position at July 1, 2012, as restated 17,309,752 28,999,300 2,025,700 6,738,047
Net position at June 30, 2013 $ 17,185,628 $ 28,696,130 $ 1,924,871 $ 5,976,674
Adjustment for the net effect of the current year activity between
the internal service funds and the enterprise funds. (43,517)
Change in net position of business-type activities $ (571,640)
The accompanying notes are an integral part of this statement.
41
City of Muskegon
STATEMENT OF CASH FLOWS
Proprietary Funds
For the year ended June 30, 2013
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 $ 7,090,991 $ 5,929,616 $ 155,774 $ 13,176,381 $ 346,456
Receipts from interfund services provided 13,686 121,415 - 135,101 7,308,020
Payments to suppliers (5,743,350) (1,650,384) (258,859) (7,652,593) (5,567,039)
Payments to employees (430,126) (1,286,556) (23,650) (1,740,332) (1,275,567)
Payments for interfund services used (466,540) (714,740) (20,049) (1,201,329) (835,644)
Net cash provided by (used for) operating activities 464,661 2,399,351 (146,784) 2,717,228 (23,774)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers in - - - - 28,046
Transfers out - - - - (600,000)
Advances to component units - - - - 69,648
Net cash used for noncapital financing activities - - - - (502,306)
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Capital contributions - - 88,046 88,046 -
Purchases of capital assets (27,937) (1,255,055) - (1,282,992) (512,549)
Principal paid on capital debt - (1,250,000) - (1,250,000) -
Interest paid on capital debt - (384,694) - (384,694) -
Proceeds from sale of capital assets - - - - 55,202
Net cash provided by (used for) capital and related financing activities (27,937) (2,889,749) 88,046 (2,829,640) (457,347)
CASH FLOW FROM INVESTING ACTIVITIES
Investment earnings 20,783 10,982 1,383 33,148 54,339
Net increase (decrease) in cash and investments 457,507 (479,416) (57,355) (79,264) (929,088)
Cash and investments July 1, 2012 3,701,462 2,782,590 263,362 6,747,414 4,190,223
Cash and investments at June 30, 2013 $ 4,158,969 $ 2,303,174 $ 206,007 $ 6,668,150 $ 3,261,135
Reconciliation of cash and investments to the Statement of Net Position
Cash and investments $ 4,158,969 $ 1,703,674 $ 206,007 $ 6,068,650 $ 3,261,135
Restricted cash and investments - 599,500 - 599,500 -
$ 4,158,969 $ 2,303,174 $ 206,007 $ 6,668,150 $ 3,261,135
Reconciliation of operating income (loss) to net cash provided by (used for)
operating activities
Operating income (loss) $ (144,907) $ 35,283 $ (190,258) $ (299,882) $ (293,747)
Adjustments to reconcile operating income (loss) to net cash provided by
(used for) operating activities
Depreciation expense 430,270 2,132,243 114,063 2,676,576 434,997
Bad debt expense 13,278 18,707 - 31,985 -
Change in assets and liabilities
Receivables 33,084 135,522 (78,455) 90,151 15,698
Inventories 6,782 7,945 - 14,727 19,010
Prepaid items 1,872 6,704 (51) 8,525 (155,846)
Accounts payable 126,846 65,827 7,905 200,578 (41,292)
Accrued liabilities (2,564) (2,880) 12 (5,432) (2,594)
Net cash provided by (used for) operating activities $ 464,661 $ 2,399,351 $ (146,784) $ 2,717,228 $ (23,774)
The accompanying notes are an integral part of this statement.
42
City of Muskegon
STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES
Fiduciary Funds
June 30, 2013
Agency
Funds
ASSETS
Cash and investments $ 799,080
Accounts receivable 1,867
Total assets $ 800,947
LIABILITIES
Accounts payable $ 352,700
Due to other governmental units 316,760
Deposits held for others 131,487
Total liabilities $ 800,947
The accompanying notes are an integral part of this statement.
43
City of Muskegon
STATEMENT OF NET POSITION
Discretely Presented Component Units
June 30, 2013
Local
Development Tax
Finance Downtown Increment Brownfield Brownfield
Authority - Development Finance Redevelopment Redevelopment
SmartZone Authority Authority Authority I Authority II Total
ASSETS
Current assets
Cash and investments $ 30,266 $ 167,477 $ 14,163 $ 146,501 $ - $ 358,407
Noncurrent assets
Capital assets, net
Nondepreciable 400,000 - - - - 400,000
Depreciable 2,143,714 - - - - 2,143,714
Total noncurrent assets 2,543,714 - - - - 2,543,714
Total assets 2,573,980 167,477 14,163 146,501 - 2,902,121
LIABILITIES
Current liabilities
Accrued liabilities 21,317 4,357 - - - 25,674
Bonds and other obligations, due within one year 260,000 280,000 - - - 540,000
Total current liabilities 281,317 284,357 - - - 565,674
Noncurrent liabilities
Advances from primary government - - - 1,555,528 - 1,555,528
Bonds and other obligations, less amounts due
within one year 4,075,572 2,249,297 - - - 6,324,869
Total noncurrent liabilities 4,075,572 2,249,297 - 1,555,528 - 7,880,397
Total liabilities 4,356,889 2,533,654 - 1,555,528 - 8,446,071
NET POSITION
Net investment in capital assets (1,791,858) - - - - (1,791,858)
Unrestricted 8,949 (2,366,177) 14,163 (1,409,027) - (3,752,092)
Total net position $ (1,782,909) $ (2,366,177) $ 14,163 $ (1,409,027) $ - $ (5,543,950)
The accompanying notes are an integral part of this statement.
44
City of Muskegon
STATEMENT OF ACTIVITIES
Discretely Presented Component Units
For the year ended June 30, 2013
Program
Revenue Net (Expense) Revenue and Changes in Net Position
Local
Development Tax
Capital Finance Downtown Increment Brownfield Brownfield
Grants and Authority - Development Finance Redevelopment Redevelopment
Functions/Programs Expenses Contributions SmartZone Authority Authority Authority I Authority II Total
Local Development Finance Authority - SmartZone
Economic development $ 172,648 $ - $ (172,648) $ - $ - $ - $ - $ (172,648)
Interest on long-term debt 151,248 235,000 83,752 - - - - 83,752
Total Local Development Finance Authority - SmartZone 323,896 235,000 (88,896) - - - - (88,896)
Downtown Development Authority
Interest on long-term debt 54,150 - - (54,150) - - - (54,150)
Tax Increment Finance Authority
Economic development 50,000 - - - (50,000) - - (50,000)
Brownfield Redevelopment Authority I
Economic development 10,000 - - - - (10,000) - (10,000)
45
Interest on long-term debt 53,108 - - - - (53,108) - (53,108)
Total Brownfield Redevelopment Authority I 63,108 - - - - (63,108) - (63,108)
Brownfield Redevelopment Authority II
Economic development 42,995 - - - - - (42,995) (42,995)
Total discretely presented component units $ 534,149 $ 235,000 (88,896) (54,150) (50,000) (63,108) (42,995) (299,149)
General revenues
Property taxes 85,627 313,432 44,439 156,765 42,995 643,258
Unrestricted investment income 150 1,435 86 716 - 2,387
Total general revenues 85,777 314,867 44,525 157,481 42,995 645,645
Change in net position (3,119) 260,717 (5,475) 94,373 - 346,496
Net position at July 1, 2012, as restated (1,779,790) (2,626,894) 19,638 (1,503,400) - (5,890,446)
Net position at June 30, 2013 $ (1,782,909) $ (2,366,177) $ 14,163 $ (1,409,027) $ - $ (5,543,950)
The accompanying notes are an integral part of this statement.
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
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 City and its component units, entities for which the government is considered
to be financially accountable. Blended component units, are, in substance, part of the primary government's
operations, even though they are legally separate entities. Thus, blended component units are appropriately
presented as funds of the primary government. 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 City.
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.
Brownfield Redevelopment Authority (BRA). There are two separate designated areas under the aegis of the
BRA – the Betten-Henry Street site and former downtown mall site. 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 areas are presented as governmental fund types.
46
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Reporting Entity—Continued
Discretely Presented Component Units—Continued
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, 2013, 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
47
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Basis of Presentation—Government-wide and Fund Financial Statements
The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities)
report information on all of the nonfiduciary activities of the primary government and its component units.
All fiduciary activities are reported only in the fund financial statements. Governmental activities, which
normally are supported by taxes, intergovernmental revenues, and other nonexchange transactions, are
reported separately from business-type activities, which rely to a significant extent on fees and charges to
external customers for support. Likewise, the primary government is reported separately from certain legally
separate component units for which the primary government is financially accountable.
While separate government-wide and fund financial statements are presented, they are interrelated. The
governmental activities column incorporates data from governmental funds and internal service funds, while
business-type activities incorporate data from the City’s enterprise funds. 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.
As discussed earlier, the City’s discretely presented component units are reported in a separate column in the
government-wide financial statements.
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 where the amounts are reasonably
equivalent in value to the interfund services provided and other charges between the City's water and sewer
functions 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.
The fund financial statements provide information about the City’s funds, including its fiduciary funds and
blended component units. Separate statements for each fund category – governmental, proprietary, and
fiduciary – are presented. The emphasis of fund financial statements is on major governmental and enterprise
funds, each displayed in a separate column. All remaining governmental and enterprise funds are aggregated
and reported as nonmajor funds. Major individual governmental and enterprise funds are reported as separate
columns in the fund financial statements.
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.
48
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Basis of Presentation—Government-wide and Fund Financial Statements—Continued
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.
During the course of operations the City has activity between funds for various purposes. Any residual
balances outstanding at year-end are reported as due from/to other funds and advances to/from other funds.
While these balances are reported in fund financial statements, certain eliminations are made in the
preparation of the government-wide financial statements. Balances between funds included in governmental
activities (i.e., the governmental and internal service funds) are eliminated so that only the net amount is
included as internal balances in the governmental activities column. Similarly, balances between the funds
included in business-type activities (i.e., enterprise funds) are eliminated so that only the net amount is
included as internal balances in the business-type activities column.
Further, certain activity occurs during the year involving transfers of resources between funds. In fund
financial statements these amounts are reported at gross amounts as transfers in/out. While reported in fund
financial statements, certain eliminations are made in the preparation of the government-wide financial
statements. Transfers between the funds included in governmental activities are eliminated so that only the
net amount is included as transfers in the governmental activities column. Similarly, balances between funds
included in business-type activities are eliminated so that only the net amount is included as transfers in the
business-type activities column.
Measurement Focus and Basis of Accounting
The accounting and financial reporting treatment is determined by the applicable measurement focus and
basis of accounting. Measurement focus indicates the type of resources being measured such as current
financial resources or economic resources. The basis of accounting indicates the timing of transactions or
events for recognition in the financial statements.
49
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Measurement Focus and Basis of Accounting—Continued
The government-wide financial statements are reported using the economic resources measurement focus and
the accrual basis of accounting. 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.
The 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 City
considers revenues to be available if they are collected within 60 days of the end of the current fiscal period.
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. General capital asset acquisitions are reported as expenditures in
governmental funds. Issuance of long-term debt and acquisitions under capital leases are reported as other
financing sources.
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.
Entitlements are recorded as revenues when all eligibility requirements are met, including any time
requirements, and the amount is received during the period or within the availability period for this revenue
source (within 60 days of year-end). Expenditure-driven grants are recognized as revenue when the
qualifying expenditures have been incurred and all other eligibility requirements have been met. Only the
portion of special assessments receivable 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.
The proprietary funds are reported using the economic resources measurement focus and the accrual basis of
accounting. The agency fund has no measurement focus but utilizes the accrual basis of accounting for
reporting its assets and liabilities.
Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position/Fund Balance
Cash 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.
Investments for the City are reported at fair value (generally based on quoted market prices).
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 component unit’s cash and investments are maintained within the City’s investment pool.
50
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position/Fund Balance—Continued
Cash 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.
Inventories and Prepaid Items
All inventories are valued at cost using the first-in/first-out (FIFO) method. The cost of such inventories is
recorded as expenses when consumed rather than when purchased in the business-type activities.
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. The cost of prepaid items is recorded as
expenditures/expenses when consumed rather than when purchased.
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 column
in the government-wide financial statements. Capital assets are defined by the City as assets with an initial,
individual cost of more than $10,000 and an estimated useful life in excess of two years.
In the case of 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.
As the City constructs or acquires additional capital assets each period, including infrastructure assets, they
are capitalized and reported at historical cost. The reported value excludes normal maintenance and repairs
which are essentially amounts spent in relation to capital assets that do not increase the capacity or efficiency
of the item or increase its estimated useful life. Donated capital assets are recorded at their estimated fair
value at the date of donation.
Interest incurred during the construction phase of capital assets of enterprise funds is included as part of the
capitalized value of the assets constructed. The amount of interest capitalized depends on the specific
circumstances.
Land and construction in progress are not depreciated. The other property, plant, equipment, and
infrastructure of the City are depreciated using the straight-line method over the following estimated useful
lives:
Capital Asset Classes Years
Land improvements 5-25
Leasehold improvements 10-25
Buildings and improvements 25-50
Water and sewage buildings, improvements and systems 40-100
Furniture, vehicles and equipment 5-20
Infrastructure 15-50
Shared improvements 20
51
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position/Fund Balance—Continued
Deferred Outflows/Inflows of Resources
In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred
outflows of resources. This separate financial statement element, deferred outflows of resources, represents a
consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of
resources (expense/expenditures) until then.
In addition to liabilities, the Statement of Net Position will sometimes report a separate section for deferred
inflows of resources. This separate financial statement element, deferred inflows of resources, represents an
acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of
resources (revenue) until that time.
Net Position Flow Assumption
Sometimes the government will fund outlays for a particular purpose from both restricted (e.g., restricted
bond or grant proceeds) and unrestricted resources. In order to calculate the amounts of net position to report
as restricted and unrestricted in the government-wide and proprietary fund financial statements, a flow
assumption must be made about the order in which the resources are considered to be applied. It is the City’s
policy to consider restricted net position to have been depleted before unrestricted net position is applied.
Fund Balance Flow Assumptions
Sometimes the City will fund outlays for a particular purpose from both restricted and unrestricted resources
(the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as
restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements a
flow assumption must be made about the order in which the resources are considered to be applied. It is the
City’s policy to consider restricted fund balance to have been depleted before using any of the components of
unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the
same purpose, committed fund balance is depleted first, followed by assigned fund balance. Unassigned fund
balance is applied last.
Fund Balance Policies
Fund balance of governmental funds is reported in various categories based on the nature of any limitations
requiring the use of resources for specific purposes. The City itself can establish limitation on the use of
resources through either a commitment (committed fund balance) or an assignment (assigned fund balance).
The committed fund balance classification includes amounts that can be used only for the specific purposes
determined by a formal action of the City’s highest level of decision-making authority. The City Commission
is the highest level of decision-making authority for the City that can, by formal action prior to the end of the
fiscal year, commit fund balance. Once adopted, the limitation imposed by formal action remains in place
until a similar action is taken (another formal action) to remove or revise the limitation.
52
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position/Fund Balance—Continued
Fund Balance Policies—Continued
Amounts in the assigned fund balance classification are intended to be used by the City for specific purposes
but do not meet the criteria to be classified as committed. The City Commission has by resolution authorized
the city manager to assign fund balance. The City Commission may also assign fund balance as it does when
appropriating fund balance to cover a gap between estimated revenue and appropriations in the subsequent
year’s appropriated budget. Unlike commitments, assignments generally only exist temporarily. In other
words, an additional action does not normally have to be taken for the removal of an assignment. Conversely,
as discussed above, an additional action is essential to either remove or revise a commitment.
The City has a minimum fund balance policy requiring unassigned fund balance be at least 13% of prior year
actual revenues.
Revenues and Expenditures/Expenses
Program Revenues
Amounts reported as 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 (including special assessments) that are restricted to meeting the operational or capital
requirements of a particular function or segment. All taxes, including those dedicated for specific purposes,
and other internally dedicated resources are reported as general revenues rather than as program revenues.
Property Taxes
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 and liened on 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. Uncollected 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 of 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 2012 state taxable value for real/personal property of the City totaled approximately $606,327,000 of
which approximately $8,191,000 was captured by the component units. The ad valorem taxes levied
consisted of 9.5, 2.5 and .0789 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 SmartZone, DDA, BRA I, and BRA II component units.
53
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Revenues and Expenditures/Expenses—Continued
Compensated Absences
City employees are granted vacation and sick leave in varying amounts based on length of service and
employee group. Unused vacation and sick leave days are paid to employees upon termination under limits
that vary by employee group. The liability for these compensated absences is accrued when incurred in the
government-wide and proprietary fund financial statements. The current portion of this debt is estimated
based on historical trends. A liability for these amounts is reported in the governmental funds only if they
have matured, for example, as a result of employee resignations and retirements.
Proprietary Funds Operating and Nonoperating Revenues and Expenses
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 enterprise
funds and internal service 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.
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 2012 financial statements have been reclassified to conform to
the 2013 presentation.
NOTE B—STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
Budgetary Information
Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all
governmental funds.
The appropriated budget is prepared by fund, function and department. The City Manager may make
transfers of appropriations within a department. 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.
Appropriations in all budgeted funds lapse at the end of the fiscal year.
54
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE B—STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY—Continued
Excess of Expenditures Over Appropriations
During the year ended June 30, 2013, actual expenditures exceeded appropriations for:
Amended
Budget Actual
General Fund
Public safety
City clerk $ 316,769 $ 337,252
Fire department 3,441,651 3,472,038
These overexpenditures were funded with available fund balance.
Fund Deficits
As of June 30, 2013, the HOME Fund had an unassigned fund deficit of $43,281 and the Neighborhood
Stabilization Fund had an unassigned fund deficit of $38,767. The deficits will be eliminated through future
operations.
NOTE C—DEPOSITS AND INVESTMENTS
As of June 30, 2013, the City had the following investments:
Weighted
Average
Maturity
Fair value (Months) Moody's Percent
Investment Type
Money market funds $ 753,060 1 AAA 8.8%
Negotiable certificates of deposit 996,623 4 not rated 11.6%
US Agency obligations 4,231,132 184 AA+ 49.1%
Certificate of Deposit Account
Registry Service (CDARS) 2,619,444 3 not rated 30.5%
Total fair value $ 8,600,259 100.0%
Portfolio weighted average maturity 92
55
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE C—DEPOSITS AND INVESTMENTS—Continued
Deposit and Investment Risks
Interest rate risk
The City has a formal investment policy that limits investment maturities as a means of managing its
exposure to fair value losses arising from increasing interest rates. At least 10% of the City’s total portfolio
must be in instruments maturing in 30 days.
Credit risk
State law limits investments in commercial paper and corporate bonds to the two highest classifications issued
by nationally recognized statistical rating organizations. The City has no investment policy that would further
limit its investment choices.
Concentration of credit risk
Concentration of credit risk is the risk of loss attributed to the magnitude of the City investment in a single
issuer, by diversifying the investment portfolio so that the impact of potential losses from any one type of
security or issuer will be minimized. The City has a concentration of credit risk policy that limits investment
in commercial paper, eligible bankers’ acceptances and time certificates of deposit to 25% each of the total
portfolio. More than 5 percent of the City’s investments are in various U.S. Agency obligations including
Federal National Mortgage Association, Federal Home Loan Bank System and Government National
Mortgage Association. These investments are 21 percent, 17 percent and 11 percent, respectively 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, 2013, $14,031,893 of the City’s bank balance of $14,531,893 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, 2013, restricted
cash and investments in the Water Fund of $599,500 were restricted by bond ordinance.
56
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE D—CAPITAL ASSETS
Capital asset activity for the year ended June 30, 2013 was as follows:
Balance Balance
July 1, 2012 Additions Deductions June 30, 2013
Governmental activities:
Capital assets, no being depreciated:
Land $ 12,381,156 $ - $ 164,621 $ 12,216,535
Construction in progress 6,599,641 3,125,837 3,516,173 6,209,305
Total capital assets, not being depreciated 18,980,797 3,125,837 3,680,794 18,425,840
Capital assets, being depreciated:
Land improvements 4,215,004 141,864 - 4,356,868
Leasehold improvements 516,605 18,216 - 534,821
Buildings and improvements 21,345,694 840,386 16,755 22,169,325
Furniture, vehicle and equipment 12,423,374 401,706 242,176 12,582,904
Infrastructure 76,647,841 2,731,299 3,165,712 76,213,428
Shared improvements 5,576,901 - - 5,576,901
Total capital assets, being depreciated 120,725,419 4,133,471 3,424,643 121,434,247
Less accumulated depreciation:
Land improvements 1,008,923 145,086 - 1,154,009
Leasehold improvements 249,276 54,628 - 303,904
Buildings and improvements 14,487,224 491,242 5,864 14,972,602
Furniture, vehicle and equipment 10,001,427 544,323 236,963 10,308,787
Infrastructure 38,618,528 3,463,284 3,165,712 38,916,100
Shared improvements 2,615,085 278,845 - 2,893,930
Total accumulated depreciation 66,980,463 4,977,408 3,408,539 68,549,332
Total capital assets, being
depreciated, net 53,744,956 (843,937) 16,104 52,884,915
Capital assets, net $ 72,725,753 $ 2,281,900 $ 3,696,898 $ 71,310,755
Business-type activities:
Capital assets, not being depreciated:
Land $ 142,250 $ - $ - $ 142,250
Construction in progress 1,658,879 1,230,247 1,680,588 1,208,538
Total capital assets, not being depreciated 1,801,129 1,230,247 1,680,588 1,350,788
Capital assets, being depreciated:
Land improvements 1,888,965 - - 1,888,965
Buildings, improvements and systems 87,361,743 1,680,588 - 89,042,331
Machinery and equipment 2,840,288 52,745 - 2,893,033
Total capital assets, being depreciated 92,090,996 1,733,333 - 93,824,329
Less accumulated depreciation:
Land improvements 1,718,490 21,089 - 1,739,579
Buildings, improvements and systems 34,996,248 2,332,962 - 37,329,210
Machinery and equipment 1,770,023 322,525 - 2,092,548
Total accumulated depreciation 38,484,761 2,676,576 - 41,161,337
Total capital assets, being
depreciated, net 53,606,235 (943,243) - 52,662,992
Capital assets, net $ 55,407,364 $ 287,004 $ 1,680,588 $ 54,013,780
57
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE D—CAPITAL ASSETS—Continued
Depreciation
Depreciation expense was charged to functions as follows:
Governmental activities:
Adminstrative services $ 52,455
Financial services 29,855
Public safety 146,086
Public works 64,818
Highways, streets and bridges 3,828,597
Community and economic development 75,717
Culture and recreation 322,347
General administration 22,536
Internal Service Fund depreciation 434,997
$ 4,977,408
Business-type activities:
Sewer $ 430,270
Water 2,132,243
Marina and Launch Ramp 114,063
$ 2,676,576
Balance Balance
July 1, 2012 Additions Deductions June 30, 2013
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 1,481,896 172,648 - 1,654,544
Total capital assets, being
depreciated, net 2,316,362 (172,648) - 2,143,714
Capital assets, net $ 2,716,362 $ (172,648) $ - $ 2,543,714
Depreciation
Depreciation expense was charged to economic development.
58
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE E—INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS
The composition of interfund balances as of June 30, 2013 is as follows:
Due to/from other funds:
Receivable Fund Payable Fund Amount
General Fund Community Development Block Grant Fund $ 268,432
General Fund HOME Rehabilitiation Fund 52,011
General Fund Neighborhood Stabilization Fund 168,414
$ 488,857
The outstanding balances between funds result from the payable funds having negative positions in the
City’s cash and investment pool.
Component unit advance:
The Cemetery Perpetual Care Fund, Equipment Fund, and General Insurance Fund advanced the BRA I
$1,555,528 to enable the BRA I 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 $ 420,653 Nonmajor Governmental Funds
Cemetery Fund $ 20,653
Internal Service Funds
General Insurance Fund 400,000
420,653 420,653
Major Street and Trunkline Fund 250,000 General Fund 250,000
Nonmajor Governmental Funds
Local Street Fund 680,000 General Fund 480,000
Internal Service Funds
General Insurance Fund 200,000
680,000 680,000
Nonmajor Governmental Funds Nonmajor Governmental Funds
Community Development
HOME Rehabilitation Fund 5,576 Block Grant Fund 5,576
Internal Service Funds
General Insurance Fund 28,046 General Fund 28,046
$ 1,384,275 $ 1,384,275
The General Fund transferred funds to the Local Street Fund to finance capital improvements. Other
transfers between funds were made to meet grant matching requirements or other operational needs.
59
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE F—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, 2013.
Balance Balance Due Within
July 1, 2012 Additions Deductions June 30, 2013 One Year
Governmental activities:
General obligation debt $ 7,152,694 $ - $ 244,073 $ 6,908,621 $ 250,000
Intergovernmental
contractual obligations 150,253 - 20,211 130,042 21,000
Special assessment obligations 560,000 - 130,000 430,000 135,000
Compensated absences 1,181,025 1,092,684 1,220,320 1,053,389 175,600
Governmental activities
long-term liabilities $ 9,043,972 $ 1,092,684 $ 1,614,604 $ 8,522,052 $ 581,600
Business-type activities:
Revenue obligations $ 15,259,764 $ - $ 1,278,842 $ 13,980,922 $ 1,295,000
Compensated absences 126,472 156,043 158,355 124,160 20,700
Business-type activities
long-term liabilities $ 15,386,236 $ 156,043 $ 1,437,197 $ 14,105,082 $ 1,315,700
Component units:
Intergovernmental obligations $ 1,000,000 $ - $ - $ 1,000,000 $ -
General obligation debt 6,364,932 - 500,063 5,864,869 540,000
Component unit long-
term liabilities $ 7,364,932 $ - $ 500,063 $ 6,864,869 $ 540,000
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% $ 5,095,000
Less bond discount (11,379)
$2,000,000 Capital Improvement Bonds of 2011
payable in annual installments of $180,000 to
$230,000 through September 2021; interest at 2.98% 1,825,000
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% 130,042
Special assessment obligations:
$1,575,000 Capital improvement bonds of 2003 payable
in annual installments of $135,000 to $150,000
through June 2016; interest at 3.9% to 4.05% 430,000
Compensated absences 1,053,389
$ 8,522,052
60
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE F—LONG-TERM DEBT—Continued
Summary of Changes in Long-Term Liabilities—Continued
Business-type activities:
Revenue obligations:
$5,995,000 Water supply system refunding bonds of 2010
payable in annual installments of $640,000 to $770,000
through May 2019; interest at 2.77% to 4.25% $ 4,205,000
Add bond premium 90,922
$13,900,000 Drinking Water State Revolving Fund loan
of 2004 payable in annual installments of $655,000 to
$840,000 through October 2025; interest at 2.13% 9,685,000
Compensated absences 124,160
$ 14,105,082
Component units:
Intergovernmental 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
$280,000 to $330,000 through June 2018; interest at 2.75% to 4% 1,505,000
Add bond premium 24,297
$4,100,000 Local Development Finance Authority tax increment
refunding bonds of 2012 payable in annual installments of
$320,000 to $396,000 through June 2025; interest at 2% to 4% 4,100,000
Add bond premium 235,572
$ 6,864,869
For governmental activities, claims and judgments and compensated absences are generally liquidated by the
General Fund.
The special assessment obligations are backed by the limited full faith and credit of the City.
In 2005, the County of Muskegon began making improvements to the regional sewer treatment facilities. The
project was funded with $17,500,000 bonds issued through the State of Michigan Clean Water Revolving
Fund Loan Program. The County operates the system and makes payments on the bonds with user charges to
the local units. The City has pledged its limited tax full faith and credit for the payment of its portion of the
debt should user charges collected by the County be insufficient to make the debt payments. The City’s
portion of the debt on June 30, 2013 was approximately $4,733,000. The City is unaware of any
circumstances that would cause a shortfall in the near future.
61
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE F—LONG-TERM DEBT—Continued
Summary of Changes in Long-Term Liabilities—Continued
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, 2013.
Annual debt service requirements to maturity for debt outstanding as of June 30, 2013 follow:
Year Ending Governmental Activites Business-type Activities Component Units
June 30, Principal Interest Principal Interest Principal Interest
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 292,314 224,302 1,450,000 203,106 685,000 107,125
2019-2023 2,197,761 908,699 4,565,000 500,704 2,660,000 262,875
2024-2028 1,695,000 537,256 2,475,000 79,526 825,000 37,725
2029-2033 1,750,000 183,050 - - - -
$ 7,480,042 $ 2,875,259 $ 13,890,000 $ 1,986,622 $ 6,605,000 $ 1,026,928
Annual debt service requirements to maturity by type of debt as of June 30, 2013 follow:
Revenue Special
General Obligation Debt Obligations Intergovernmental Assessment
Year Ending Governmental Component Business-type Governmental Component Governmental
June 30, Activities Units Activities Activities Units Activities
2014 $ 507,248 $ 717,588 $ 1,647,635 $ 23,216 $ - $ 152,140
2015 504,010 769,088 1,650,857 23,215 - 156,875
2016 500,622 783,276 1,653,360 23,216 - 156,075
2017 497,086 784,251 1,651,434 23,216 - -
2018 493,400 792,125 1,653,106 23,216 - -
2019-2023 3,083,244 1,922,875 5,065,704 23,216 1,000,000 -
2024-2028 2,232,253 862,725 2,554,529 - - -
2029-2033 1,933,050 - - - - -
$ 9,750,913 $ 6,631,928 $ 15,876,625 $ 139,295 $ 1,000,000 $ 465,090
62
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE G—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 2013 and 2012 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, 2013 $ 124,721 $ 70,391 $ 129,140 $ 65,972
June 30, 2012 83,745 113,079 72,103 124,721
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 up to
$500,000 per covered individual’s lifetime. As of June 30, 2013, the claims liability including incurred but
not reported claims was $12,005. 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 2013 and 2012
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, 2013 $ 81,702 $ 844,407 $ 914,104 $ 12,005
June 30, 2012 15,462 1,199,682 1,133,442 81,702
63
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE G—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, 2013 of approximately
$1,584,000. The cost of the projects will be paid with available fund balance in the Major Street and
Trunkline 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 $44,938 for the year ended June 30, 2013.
The future minimum rental income for this lease is as follows:
Year Ending
June 30, Amount
2014 $ 34,854
2015 34,202
2016 33,864
2017 33,841
$ 136,761
NOTE H—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, 2013
NOTE H—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 5.80
to 19.80 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 the City depending on the MERS
contribution program adopted by the City.
Annual Pension Cost and Net Pension Asset
For the year ended June 30, 2013, the City’s annual pension cost of approximately $1,159,000 was equal
to the City’s required and actual contribution. The following table shows the components of the City’s
annual pension cost for the year, the amount actually contributed, and changes in the City’s net pension
asset:
Annual required contribution $ 1,188,934
Interest on net pension asset (79,731)
Adjustment to annual required contribution 83,079
Annual pension cost 1,192,282
Contributions made 1,188,934
Decrease in net pension asset (3,348)
Net pension asset at beginning of year 996,641
Net pension asset at end of year $ 993,293
Trend Information
Approximate Percentage Net Pension
Annual Pension of APC Obligation
Year Ended Cost (APC) Contributed (Asset)
June 30, 2011 $ 1,228,000 181 % $ (1,000,000)
June 30, 2012 1,159,000 100 (996,641)
June 30, 2013 1,189,000 100 (993,293)
The required contribution was determined as part of the December 31, 2010 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.
65
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE H—PENSION PLANS—Continued
Defined Benefit Pension Plan—Continued
Funding Status and Funding Progress
As of December 31, 2012, the most recent actuarial valuation date, the plan was 94 percent funded. The
actuarial accrued liability for benefits was approximately $95,220,000, and the actuarial value of assets
was approximately $89,199,000, resulting in an unfunded actuarial accrued liability (UAAL) of
approximately $6,021,000. The covered payroll (annual payroll of active employees covered by the plan)
was approximately $10,185,000, and the ratio of the UAAL to the covered payroll was 59 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 investment earnings. 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, 2013, City and employee contributions were
approximately $179,000 and $100,000, 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).
66
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE I—OTHER POST-EMPLOYMENT BENEFITS
Retiree Healthcare Plan
Plan Description
The City has a retiree healthcare funding vehicle administered Municipal Employees Retirement System
(MERS), an agent multiple-employer postemployment healthcare plan (OPEB). The retiree healthcare
funding vehicle is established under the authority of section 115 of the IRS code and is exempt from
taxation. The Plan provides health insurance to eligible retirees and their spouses. Act No. 149 of the
Public Acts of 1999 of the State of Michigan assigns the authority to establish and amend the benefit
provisions of the plans that participate in MERS to the respective employer entities; that authority rests
with the City. A copy of the complete financial report and required supplemental information can be
obtained by writing to:
City of Muskegon
933 Terrace Street
Muskegon, MI 49443
Funding Policy
Plan members are not required to contribute to the Plan. The City is required to contribute the annual
required contribution of the employer (ARC) at an actuarially-determined rate which varies upon
employee group from 3.35 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 depending on the benefits
program adopted by the City.
Annual OPEB Cost
For the year ended June 30, 2013, the City’s OPEB cost (expense) of approximately $739,000 was equal
to the City’s ARC and actual contribution.
Trend Information
Percentage of
Annual
Annual OPEB OPEB Cost Net OPEB
Year Ended Cost Contributed Obligation
June 30, 2011 $ 1,079,000 100 % $ -
June 30, 2012 833,000 100 -
June 30, 2013 739,000 100 -
67
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE I—OTHER POST-EMPLOYMENT BENEFITS—Continued
Retiree Healthcare Plan—Continued
Actuarial Methods and Assumptions
Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and
assumptions about the probability of occurrence of events far into the future. Examples include
assumptions about future employment, mortality, and the healthcare cost trend. Actuarially determined
amounts are subject to continual revision as actual results are compared with past expectations and new
estimates are made about the future.
Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as
understood by the employer and Plan members) and include the types of benefits provided at the time of each
valuation and the historical pattern of Plan members not contributing to the Plan. The actuarial methods and
assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial
accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the
calculations.
The required contribution was determined as part of the December 31, 2011 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.
Healthcare Saving Plan
The City also maintains a defined contribution Health Care Savings Plan offered by MERS. In this plan,
post-employment healthcare benefits depend solely on amounts contributed to the plan plus investment
earnings. Depending on employee group, the Plan covers all City employees hired after January 2009 to
December 2012 in lieu of the traditional retiree healthcare 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 1 or 2 percent of
a qualified employees’ annual compensation each year depending on employee group. Qualified employees
are also required to contribute 1 or 2 percent of annual compensation. Additionally, some employees,
regardless of hire date, may make voluntary contributions to the HCSP. For the year ended June 30, 2013,
City and employee contributions were approximately $11,000 and $135,000, respectively.
68
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE J—PRIOR PERIOD ADJUSTMENTS
The net position of the governmental activities, business-type activities (Water Fund), and component units
were restated to reflect the implementation of GASB Statement No. 63, Financial Reporting of Deferred
Outflows of Resources, Deferred Inflows of Resources and Net Position and GASB Statement No. 65, Items
Previously Reported as Assets and Liabilities which require that bond issuance costs be recognized as an
expense in the period incurred.
The net position of the governmental activities and fund balance of the General Fund were also restated to
reflect previously unrecorded income tax credits owed to taxpayers.
The restatement of the beginning of the year net position/fund balance is as follows:
Governmental Business-type Component
Activities Activities Units
Net position at July 1, 2012 $ 83,225,722 $ 49,781,313 $ (5,731,603)
Removal of bond issuance costs (105,889) (85,467) (158,843)
Income tax credits liability (285,648) - -
Net position at July 1, 2012, as restated $ 82,834,185 $ 49,695,846 $ (5,890,446)
LDFA -
General Fund Water Fund SmartZone DDA
Net position/fund balance at July 1, 2012 $ 6,520,045 $ 29,084,767 $ (1,665,024) $ (2,582,817)
Removal of bond issuance costs - (85,467) (114,766) (44,077)
Income tax credits liability (285,648) - - -
Net position/fund balance at July 1, 2012, as restated $ 6,234,397 $ 28,999,300 $ (1,779,790) $ (2,626,894)
The effect on the change in net position of the prior year is as follows:
Governmental Business-type Component
Activities Activities Units
Change in net position - June 30, 2012,
as previously reported $ (973,842) $ (522,025) $ (1,619,658)
Amortization of bond issuance costs 7,631 23,152 96,062
New issuance costs - - (114,766)
Change in net position - June 30, 2012,
as restated $ (966,211) $ (498,873) $ (1,638,362)
LDFA -
Water Fund SmartZone DDA
Change in net position - June 30, 2012,
as previously reported $ (677,279) $ (231,915) $ 177,813
Amortization of bond issuance costs 23,152 89,500 6,562
New issuance costs - (114,766) -
Change in net position - June 30, 2012,
as restated $ (654,127) $ (257,181) $ 184,375
69
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2013
NOTE K—SUBSEQUENT EVENTS
Subsequent to year-end, the City entered into contracts for street improvements of approximately
$1,366,000. The projects will be paid with available fund balance in the Major Street and Trunkline and
Local Street funds and approximately $705,000 in grants from the Michigan Department of
Transportation.
NOTE L—UPCOMING ACCOUNTING PRONOUNCEMENT
GASB Statement 68—Accounting and Financial Reporting for Pensions was issued by the GASB in June
2012 and will be effective for the City’s 2015 fiscal year. The statement requires governments that participate
in defined benefit pension plans to report in their Statement of Net Position a net pension liability. The net
pension liability is the difference between the total pension liability (the present value of projected benefit
payments to employees based on their past service) and the assets (mostly investments reported at fair value)
set aside in a trust and restricted to paying benefits to current employees, retirees, and their beneficiaries.
70
REQUIRED SUPPLEMENTARY INFORMATION
71
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
General Fund
For the year ended June 30, 2013
(with comparative actual amounts for the year ended June 30, 2012)
2013 2012
Variance with
Final Budget-
Budgeted Amounts Positive
Original Final Actual (Negative) Actual
REVENUES
Taxes
City income taxes $ 7,100,000 $ 7,600,000 $ 7,506,472 $ (93,528) $ 7,412,804
Property taxes 7,463,567 7,170,289 7,171,122 833 7,913,724
Industrial facilities taxes 93,463 57,614 58,087 473 84,332
Payments in lieu of taxes 95,000 95,000 96,346 1,346 95,805
Delinquent chargeback collected 1,000 200 - (200) 3
Total taxes 14,753,030 14,923,103 14,832,027 (91,076) 15,506,668
Licenses and permits
Business licenses 28,000 29,500 31,623 2,123 30,642
Liquor licenses 61,000 60,000 53,005 (6,995) 56,039
Cable TV fees 340,000 350,000 358,785 8,785 342,376
Rental property registration 130,000 168,030 163,300 (4,730) 162,990
Burial permits 110,000 110,000 89,170 (20,830) 87,768
Building permits 250,000 229,000 278,166 49,166 264,201
Electrical permits 80,000 81,000 67,128 (13,872) 84,907
Plumbing permits 30,000 26,000 26,519 519 26,884
Mechanical permits 60,000 60,000 62,305 2,305 55,169
Vacant building fees 100,000 100,000 108,284 8,284 112,058
Total licenses and permits 1,189,000 1,213,530 1,238,285 24,755 1,223,034
Intergovernmental revenues
Federal grants 155,524 134,885 117,324 (17,561) 152,300
State
Grants 20,000 55,000 13,819 (41,181) 14,295
State shared revenue 3,592,422 3,667,621 3,700,871 33,250 3,577,848
Total intergovernmental revenues - State 3,612,422 3,722,621 3,714,690 (7,931) 3,592,143
Local 50,000 50,000 50,000 - 50,000
72
City of Muskegon
BUDGETARY COMPARISON SCHEDULE—CONTINUED
General Fund
For the year ended June 30, 2013
(with comparative actual amounts for the year ended June 30, 2012)
2013 2012
Variance with
Final Budget-
Budgeted Amounts Positive
Original Final Actual (Negative) Actual
Charges for services
Tax administration fees $ 272,700 $ 267,175 $ 267,293 $ 118 $ 289,361
Utility administration fees 250,000 250,000 250,000 - 225,000
Reimbursement for elections - 250 329 79 13,640
Brownfield authority admin fee - 52,000 52,995 995 13,828
Indirect cost reimbursements 1,171,531 1,171,531 1,171,536 5 1,144,020
Site plan review fee 3,500 3,500 3,600 100 3,400
Sale of cemetery lots 25,500 29,300 33,207 3,907 24,671
Police miscellaneous 59,000 74,525 92,624 18,099 57,893
Police impound fees 42,000 42,000 38,844 (3,156) 40,920
Landlord's alert fee 40 70 - (70) 40
Fire protection-state property 84,970 84,970 117,776 32,806 137,127
Zoning fees 11,000 11,000 11,164 164 12,055
Clerk fees 1,500 2,800 2,827 27 1,365
Clerk fees - passport fees 3,500 4,000 4,160 160 3,790
Tax abatement application fees 5,000 6,000 5,904 (96) 3,439
Treasurer fees 65,000 65,000 58,648 (6,352) 61,682
False alarm fees 13,000 13,000 5,265 (7,735) 10,680
Miscellaneous cemetery income 20,000 20,000 17,369 (2,631) 61,645
Senior transit program fees - 8,382 8,382 - 11,123
Fire miscellaneous 2,000 2,000 2,843 843 703
Sanitation stickers 80,000 81,300 81,116 (184) 87,303
Lot cleanup fees 30,000 35,000 32,462 (2,538) 43,028
Reimbursements - lot mowing and demolitions 50,000 50,000 43,648 (6,352) 58,740
Special events reimbursements 50,000 75,000 66,596 (8,404) 95,788
Recreation program fees 5,000 6,500 6,667 167 6,551
Total charges for services 2,245,241 2,355,303 2,375,255 19,952 2,407,792
Fines and forfeitures
Income tax - penalty and interest 180,000 170,000 174,801 4,801 191,679
Late fees on current taxes 40,000 40,000 30,872 (9,128) 24,051
Interest on late invoices - - 2,318 2,318 2,328
Parking fines 125,000 90,000 77,803 (12,197) 105,995
Court fines 140,000 130,000 125,184 (4,816) 123,926
Total fines and forfeitures 485,000 430,000 410,978 (19,022) 447,979
Interest and rental income
Interest income 77,000 52,000 69,568 17,568 9,378
Net increase (decrease) in the fair value of investments - - (123,263) (123,263) (34,662)
Flea market 35,000 35,000 30,935 (4,065) 28,664
Farmers' market 40,000 40,000 42,599 2,599 47,805
City right of way rental 8,561 6,800 6,800 - 6,800
Fire station lease - Central Dispatch 45,000 45,000 44,938 (62) 43,526
Great Lakes Naval Memorial lease 5,000 15,000 15,000 - 15,000
McGraft park rentals 46,000 60,000 61,053 1,053 48,213
Other park rentals 52,200 60,200 38,344 (21,856) 37,576
Total interest and rental income 308,761 314,000 185,974 (128,026) 202,300
73
City of Muskegon
BUDGETARY COMPARISON SCHEDULE—CONTINUED
General Fund
For the year ended June 30, 2013
(with comparative actual amounts for the year ended June 30, 2012)
2013 2012
Variance with
Final Budget-
Budgeted Amounts Positive
Original Final Actual (Negative) Actual
Other
Sale of land and assets $ 1,000 $ 1,000 $ - $ (1,000) $ -
Police sale and auction proceeds 2,000 2,000 6,058 4,058 10,598
CDBG program reimbursements 337,870 337,870 344,568 6,698 424,549
Fisherman's Landing reimbursement 16,775 17,471 17,471 - 16,775
Contributions 11,000 16,850 10,485 (6,365) 3,876
Contributions - Veteran's Park maintenance 18,500 16,155 16,155 - 18,502
Community Foundation for Muskegon County 1,500 4,800 14,800 10,000 10,000
Miscellaneous and sundry 71,000 69,556 73,339 3,783 56,244
Total other 459,645 465,702 482,876 17,174 540,544
Total revenues 23,258,623 23,609,144 23,407,409 (201,735) 24,122,760
EXPENDITURES
Current
Public representation services
City commission 85,216 98,675 93,509 5,166 82,906
City promotions and public relations 9,350 9,800 9,832 (32) 7,214
City manager 282,961 273,259 269,910 3,349 273,309
Contributions to outside agencies 202,824 203,819 197,926 5,893 149,468
City attorney 332,000 342,000 320,936 21,064 354,865
Total public representation services 912,351 927,553 892,113 35,440 867,762
Administrative services
City clerk 312,269 316,769 337,252 (20,483) 288,959
Civil service 91,270 87,505 88,439 (934) 98,543
Affirmative action 85,439 84,378 82,439 1,939 82,987
Total administrative services 488,978 488,652 508,130 (19,478) 470,489
Financial services
Finance administration 362,253 360,228 364,146 (3,918) 421,130
Assessing 367,610 345,000 330,190 14,810 425,160
Arena administration 235,000 239,538 238,961 577 240,091
Income tax administration 459,888 442,385 388,767 53,618 432,397
Information systems 394,458 394,025 391,345 2,680 371,201
City treasurer 501,307 493,918 483,508 10,410 517,152
Total financial services 2,320,516 2,275,094 2,196,917 78,177 2,407,131
Public safety
Police department 9,450,146 8,816,000 8,642,294 173,706 8,680,770
Fire department 3,412,375 3,441,651 3,472,038 (30,387) 3,674,677
Fire safety inspections 597,301 459,000 472,933 (13,933) 603,463
Total public safety 13,459,822 12,716,651 12,587,265 129,386 12,958,910
74
City of Muskegon
BUDGETARY COMPARISON SCHEDULE—CONTINUED
General Fund
For the year ended June 30, 2013
(with comparative actual amounts for the year ended June 30, 2012)
2013 2012
Variance with
Final Budget-
Budgeted Amounts Positive
Original Final Actual (Negative) Actual
Public works
Street lighting $ 745,000 $ 655,000 $ 655,118 $ (118) $ 560,199
Community event support 20,600 16,800 19,270 (2,470) 20,212
Senior citizen transit - 38,256 41,816 (3,560) 76,309
General sanitation 1,577,048 1,553,605 1,541,931 11,674 1,561,378
Storm water management 17,786 15,000 12,994 2,006 13,270
City hall maintenance 288,983 268,131 244,296 23,835 235,086
Cemeteries maintenance 339,312 367,931 362,903 5,028 368,546
Total public works 2,988,729 2,914,723 2,878,328 36,395 2,835,000
Community and economic development
Planning, zoning and economic development 313,973 293,070 300,222 (7,152) 292,915
Environmental services 558,304 574,781 541,493 33,288 541,665
Edison Landing subsidy 160,000 160,000 160,000 - 100,000
Total community and economic development 1,032,277 1,027,851 1,001,715 26,136 934,580
Culture and recreation
Parks maintenance 1,144,761 1,117,441 1,009,455 107,986 1,050,464
McGraft park maintenance 44,600 45,200 23,461 21,739 39,876
General and inner city recreation programs 96,000 98,900 95,944 2,956 109,065
Graffiti removal 9,861 7,861 3,854 4,007 5,090
Parking operations 3,000 4,700 5,266 (566) 4,484
Farmers' market and flea market 77,093 58,013 63,266 (5,253) 54,407
Total culture and recreation 1,375,315 1,332,115 1,201,246 130,869 1,263,386
Other governmental functions
Insurance premiums 224,982 252,000 233,873 18,127 257,320
Other 250,000 200,000 65,939 134,061 513,590
Total other governmental functions 474,982 452,000 299,812 152,188 770,910
Debt service
Principal 70,000 70,000 70,000 - 70,000
Interest and fees 208,345 210,000 209,678 322 211,954
Total debt service 278,345 280,000 279,678 322 281,954
Capital outlay 257,000 127,000 105,651 21,349 244,280
Total expenditures 23,588,315 22,541,639 21,950,855 590,784 23,034,402
Excess of revenues over (under) expenditures (329,692) 1,067,505 1,456,554 389,049 1,088,358
75
City of Muskegon
BUDGETARY COMPARISON SCHEDULE—CONTINUED
General Fund
For the year ended June 30, 2013
(with comparative actual amounts for the year ended June 30, 2012)
2013 2012
Variance with
Final Budget-
Budgeted Amounts Positive
Original Final Actual (Negative) Actual
OTHER FINANCING SOURCES (USES)
Transfers in $ 262,000 $ 223,000 $ 420,653 $ 197,653 $ 3,351
Transfers out (508,046) (758,046) (758,046) - (583,046)
Total other financing sources (uses) (246,046) (535,046) (337,393) 197,653 (579,695)
Net change in fund balance $ (575,738) $ 532,459 1,119,161 $ 586,702 508,663
Fund balance at beginning of year, as restated 6,234,397 5,725,734
Fund balance at end of year $ 7,353,558 $ 6,234,397
Note: Both budgets and actual figures are prepared in accordance with generally accepted accounting principles.
76
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
Major Street and Trunkline Fund
For the year ended June 30, 2013
Variance with
Final Budget-
Budgeted Amounts Positive
Original Final Actual (Negative)
REVENUES
Intergovernmental revenues
Federal $ 1,095,000 $ 453,000 $ 794,000 $ 341,000
State 2,663,163 2,663,163 2,566,615 (96,548)
Charges for services - - 27,885 27,885
Investment earnings 25,000 25,000 24,246 (754)
Other 145,000 149,772 133,583 (16,189)
Total revenues 3,928,163 3,290,935 3,546,329 255,394
EXPENDITURES
Current
Highways, streets and bridges 5,258,258 4,449,500 3,916,862 532,638
Debt service
Principal 175,000 175,000 175,000 -
Interest 56,993 57,791 57,791 -
Total expenditures 5,490,251 4,682,291 4,149,653 532,638
Excess of revenues over (under) expenditures (1,562,088) (1,391,356) (603,324) 788,032
OTHER FINANCING SOURCES (USES)
Transfers in - 250,000 250,000 -
Transfers out (225,000) - - -
Total other financing sources (uses) (225,000) 250,000 250,000 -
Net change in fund balance $ (1,787,088) $ (1,141,356) (353,324) $ 788,032
Fund balance at July 1, 2012 2,507,008
Fund balance at June 30, 2013 $ 2,153,684
Note: Both budgets and actual figures are prepared in accordance with generally accepted accounting principles.
77
City of Muskegon
Required Supplemental Information
SCHEDULE OF FUNDING PROGRESS
For the year ended June 30, 2013
MUNICIPAL EMPLOYEES RETIREMENT SYSTEM (MERS) PENSION PLAN
SCHEDULE OF FUNDING PROGRESS
(Dollar amounts in thousands)
Actuarial
Actuarial Actuarial Accrued Unfunded UAAL as a
Valuation Value of Liability (AAL) AAL Funded Covered Percentage of
Date Assets Entry Age (UAAL) Ratio Payroll Covered Payroll
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
12/31/12 89,199 95,220 6,021 94 10,185 59
78
MUNICIPAL EMPLOYEES RETIREMENT SYSTEM (MERS) OTHER POSTEMPLOYMENT BENEFITS PLAN
SCHEDULE OF FUNDING PROGRESS
(Dollar amounts in thousands)
Actuarial
Actuarial Actuarial Accrued Unfunded UAAL as a
Valuation Value of Liability (AAL) AAL Funded Covered Percentage of
Date Assets Entry Age (UAAL) Ratio Payroll Covered 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
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, 2013
Permanent
Total Other Special Capital Fund -
Governmental Revenue Projects Cemetery
Funds Funds Funds Perpetual Care
ASSETS
Cash and investments $ 3,700,323 $ 652,775 $ 2,145,818 $ 901,730
Receivables
Accounts and loans (net of allowance for uncollectibles) 240,133 4,577 231,099 4,457
Special assessments 174,542 133,923 40,619 -
Due from other governmental units 507,957 106,728 401,229 -
Advances to component units 518,510 - - 518,510
Prepaid items 4,710 4,710 - -
Total assets $ 5,146,175 $ 902,713 $ 2,818,765 $ 1,424,697
LIABILITIES
Accounts payable $ 223,069 $ 164,292 $ 58,777 $ -
Accrued liabilities 7,986 4,625 3,361 -
Due to other governmental units 30,309 3,657 26,652 -
Due to other funds 488,857 - 488,857 -
Unearned revenues - expenditure-driven grants 43,743 - 43,743 -
Total liabilities 793,964 172,574 621,390 -
DEFERRED INFLOWS OF RESOURCES
Unavailable revenues - special assessments 174,645 133,923 40,722 -
Unavailable revenues - other long-term receivables 28,750 - 28,750 -
Total deferred inflows of resources 203,395 133,923 69,472 -
FUND BALANCES
Nonspendable
Prepaid items 4,710 4,710 - -
Long-term loans receivable 122,592 - 122,592 -
Perpetual care 1,398,881 - - 1,398,881
Restricted
Highways, streets and bridges 417,449 417,449 - -
Law enforcement 172,578 172,578 - -
Perpetual care 25,816 - - 25,816
Other purposes 1,479 1,479 - -
Assigned for capital projects 2,087,359 - 2,087,359 -
Unassigned (82,048) - (82,048) -
Total fund balances 4,148,816 596,216 2,127,903 1,424,697
Total liabilities, deferred inflows of
resources and fund balances $ 5,146,175 $ 902,713 $ 2,818,765 $ 1,424,697
82
City of Muskegon
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
Other Governmental Funds
For the year ended June 30, 2013
Permanent
Total Other Special Capital Fund -
Governmental Revenue Projects Cemetery
Funds Funds Funds Perpetual Care
REVENUES
Intergovernmental revenues
Federal $ 1,317,788 $ - $ 1,317,788 $ -
State 843,137 793,262 49,875 -
Charges for services 366,087 7,831 321,774 36,482
Fines and forfeitures 24,915 24,915 - -
Investment earnings 57,177 18,911 17,264 21,002
Other 237,918 127,966 109,952 -
Total revenues 2,847,022 972,885 1,816,653 57,484
EXPENDITURES
Current
Public safety 2,351 2,351 - -
Highways, streets and bridges 2,024,312 2,024,312 - -
Culture and recreation 11,030 11,030 - -
Debt service
Principal 150,211 - 150,211 -
Interest and fees 25,085 - 25,085 -
Capital outlay 1,745,832 - 1,745,832 -
Total expenditures 3,958,821 2,037,693 1,921,128 -
Excess of revenues over (under) expenditures (1,111,799) (1,064,808) (104,475) 57,484
OTHER FINANCING SOURCES (USES)
Proceeds from sale of capital assets 190,263 - 190,263 -
Transfers in 685,576 680,000 5,576 -
Transfers out (26,229) - (5,576) (20,653)
Total other financing sources (uses) 849,610 680,000 190,263 (20,653)
Net change in fund balances (262,189) (384,808) 85,788 36,831
Fund balances at July 1, 2012 4,411,005 981,024 2,042,115 1,387,866
Fund balances at June 30, 2013 $ 4,148,816 $ 596,216 $ 2,127,903 $ 1,424,697
83
City of Muskegon
COMBINING BALANCE SHEET
Other Special Revenue Funds
June 30, 2013
Total Other
Special Revenue Local Criminal Tree
Funds Street Forfeitures Replacement
ASSETS
Cash and investments $ 652,775 $ 478,682 $ 172,578 $ 1,515
Receivables
Accounts 4,577 4,577 - -
Special assessments 133,923 133,923 - -
Due from other governmental units 106,728 106,728 - -
Prepaid items 4,710 4,710 - -
Total assets $ 902,713 $ 728,620 $ 172,578 $ 1,515
LIABILITIES
Accounts payable $ 164,292 $ 164,256 $ - $ 36
Accrued liabilities 4,625 4,625 - -
Due to other governmental units 3,657 3,657 - -
Total liabilities 172,574 172,538 - 36
DEFERRED INFLOWS OF RESOURCES
Unavailable revenues - special assessments 133,923 133,923 - -
FUND BALANCES
Nonspendable - prepaid items 4,710 4,710 - -
Restricted
Highways, streets and bridges 417,449 417,449 - -
Law enforcement 172,578 - 172,578 -
Other purposes 1,479 - - 1,479
Total fund balances 596,216 422,159 172,578 1,479
Total liabilities, deferred inflows of
resources and fund balances $ 902,713 $ 728,620 $ 172,578 $ 1,515
84
City of Muskegon
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
Other Special Revenue Funds
For the year ended June 30, 2013
Total Other
Special Revenue Local Criminal Tree
Funds Street Forfeitures Replacement
REVENUES
Intergovernmental revenues - State $ 793,262 $ 788,262 $ - $ 5,000
Charges for services 7,831 5,335 - 2,496
Fines and forfeitures 24,915 - 24,915 -
Investment earnings 18,911 18,057 840 14
Other 127,966 127,966 - -
Total revenues 972,885 939,620 25,755 7,510
EXPENDITURES
Current
Public safety 2,351 - 2,351 -
Highways, streets and bridges 2,024,312 2,024,312 - -
Culture and recreation 11,030 - - 11,030
Total expenditures 2,037,693 2,024,312 2,351 11,030
Excess of revenues over (under) expenditures (1,064,808) (1,084,692) 23,404 (3,520)
OTHER FINANCING SOURCES
Transfers in 680,000 680,000 - -
Net change in fund balances (384,808) (404,692) 23,404 (3,520)
Fund balances at July 1, 2012 981,024 826,851 149,174 4,999
Fund balances at June 30, 2013 $ 596,216 $ 422,159 $ 172,578 $ 1,479
85
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
Other Special Revenue Funds
For the year ended June 30, 2013
Local Street Criminal Forfeitures
Variance - Variance -
Final Positive Final Positive
Budget Actual (Negative) Budget Actual (Negative)
REVENUES
Intergovernmental revenues
Federal $ 32,000 $ - $ (32,000) $ - $ - $ -
State 775,482 788,262 12,780 - - -
Charges for services - 5,335 5,335 - - -
Fines and forfeitures - - - 18,000 24,915 6,915
Investment earnings 20,000 18,057 (1,943) 700 840 140
Other 131,616 127,966 (3,650) - - -
Total revenues 959,098 939,620 (19,478) 18,700 25,755 7,055
EXPENDITURES
Current
Public safety - - - 3,155 2,351 804
Highways, streets and bridges 2,304,592 2,024,312 280,280 - - -
Total expenditures 2,304,592 2,024,312 280,280 3,155 2,351 804
Excess of revenues over (under) expenditures (1,345,494) (1,084,692) 260,802 15,545 23,404 7,859
OTHER FINANCING SOURCES
Transfers in 680,000 680,000 - - - -
Net change in fund balances $ (665,494) (404,692) $ 260,802 $ 15,545 23,404 $ 7,859
Fund balances at July 1, 2012 826,851 149,174
Fund balances at June 30, 2013 $ 422,159 $ 172,578
86
City of Muskegon
BUDGETARY COMPARISON SCHEDULE─CONTINUED
Other Special Revenue Funds
For the year ended June 30, 2013
Tree Replacement
Variance -
Final Positive
Budget Actual (Negative)
REVENUES
Intergovernmental revenues - State $ 5,000 $ 5,000 $ -
Charges for services 2,500 2,496 (4)
Investment earnings 50 14 (36)
Total revenues 7,550 7,510 (40)
EXPENDITURES
Current
Culture and recreation 11,500 11,030 470
Net change in fund balances $ (3,950) (3,520) $ 430
Fund balance at July 1, 2012 4,999
Fund balance at June 30, 2013 $ 1,479
87
City of Muskegon
COMBINING BALANCE SHEET
Other Capital Projects Funds
June 30, 2013
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 $ 2,145,818 $ 714,819 $ 469,591 $ 218,631 $ 183,510 $ - $ 45,059 $ - $ 4,867 $ - $ 509,341
Receivables
Accounts and loans (net of
allowance for uncollectibles) 231,099 15,740 - - 20,000 79,017 102,592 - 13,750 - -
Special assessments 40,619 - 40,619 - - - - - - - -
Due from other governmental units 401,229 - - - - 209,990 42,822 18,026 - 130,391 -
Total assets $ 2,818,765 $ 730,559 $ 510,210 $ 218,631 $ 203,510 $ 289,007 $ 190,473 $ 18,026 $ 18,617 $ 130,391 $ 509,341
LIABILITIES
Accounts payable $ 58,777 $ 34,941 $ - $ - $ - $ 14,019 $ 473 $ 8,733 $ - $ 611 $ -
Accrued liabilities 3,361 - - - - 2,665 - 563 - 133 -
Due to other governmental units 26,652 2,761 - - - 3,891 20,000 - - - -
Due to other funds 488,857 - - - - 268,432 - 52,011 - 168,414 -
Unearned revenues - expenditure-driven grants 43,743 - - - - - 43,743 - - - -
Total liabilities 621,390 37,702 - - - 289,007 64,216 61,307 - 169,158 -
DEFERRED INFLOWS OF RESOURCES
Unavailable revenues - special assessments 40,722 - 40,722 - - - - - - - -
Unavailable revenues - other long-term receivables 28,750 15,000 - - - - - - 13,750 - -
Total deferred inflows of resources 69,472 15,000 40,722 - - - - - 13,750 - -
88
FUND BALANCES (DEFICITS)
Nonspendable - long-term loans receivable 122,592 - - - 20,000 - 102,592 - - - -
Assigned for capital projects 2,087,359 677,857 469,488 218,631 183,510 - 23,665 - 4,867 - 509,341
Unassigned (82,048) - - - - - - (43,281) - (38,767) -
Total fund balances (deficits) 2,127,903 677,857 469,488 218,631 203,510 - 126,257 (43,281) 4,867 (38,767) 509,341
Total liabilities, deferred inflows of
resources and fund balances (deficits) $ 2,818,765 $ 730,559 $ 510,210 $ 218,631 $ 203,510 $ 289,007 $ 190,473 $ 18,026 $ 18,617 $ 130,391 $ 509,341
City of Muskegon
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICITS)
Other Capital Projects Funds
For the year ended June 30, 2013
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 $ 1,317,788 $ - $ - $ - $ - $ 800,414 $ - $ 296,483 $ - $ 220,891 $ -
State 49,875 - - - - - 49,875 - - - -
Charges for services 321,774 313,609 - - - - - - 8,165 - -
Investment earnings 17,264 3,555 6,681 1,179 944 352 1,708 - 97 - 2,748
Other 109,952 1,000 39,349 - 35,289 12,229 - - - 22,085 -
Total revenues 1,816,653 318,164 46,030 1,179 36,233 812,995 51,583 296,483 8,262 242,976 2,748
EXPENDITURES
Debt service
Principal 150,211 - 130,000 - - - 20,211 - - - -
Interest and fees 25,085 - 22,080 - - - 3,005 - - - -
Capital outlay 1,745,832 205,745 236 - 19,753 833,034 49,876 321,686 27,174 288,328 -
Total expenditures 1,921,128 205,745 152,316 - 19,753 833,034 73,092 321,686 27,174 288,328 -
Excess of revenues over (under) expenditures (104,475) 112,419 (106,286) 1,179 16,480 (20,039) (21,509) (25,203) (18,912) (45,352) 2,748
OTHER FINANCING SOURCES (USES)
Proceeds from sale of capital assets 190,263 5,801 - - - 25,615 - 158,847 - - -
89
Transfers in 5,576 - - - - - - 5,576 - - -
Transfers out (5,576) - - - - (5,576) - - - - -
Total other financing sources (uses) 190,263 5,801 - - - 20,039 - 164,423 - - -
Net change in fund balances 85,788 118,220 (106,286) 1,179 16,480 - (21,509) 139,220 (18,912) (45,352) 2,748
Fund balances (deficits) at July 1, 2012 2,042,115 559,637 575,774 217,452 187,030 - 147,766 (182,501) 23,779 6,585 506,593
Fund balances (deficits) at June 30, 2013 $ 2,127,903 $ 677,857 $ 469,488 $ 218,631 $ 203,510 $ - $ 126,257 $ (43,281) $ 4,867 $ (38,767) $ 509,341
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 POSITION
Internal Service Funds
June 30, 2013
Total Internal Engineering General Public Service
Service Funds Services Equipment Insurance Building
ASSETS
Current assets
Cash and investments $ 3,261,135 $ 123,887 $ 1,821,689 $ 880,314 $ 435,245
Accounts receivable 86,181 15,434 8,292 62,455 -
Inventories 20,577 - 20,577 - -
Prepaid items 386,815 2,738 55,740 322,964 5,373
Total current assets 3,754,708 142,059 1,906,298 1,265,733 440,618
Noncurrent assets
Advances to component units 1,037,018 - 518,509 518,509 -
Capital assets
Land 65,000 - - - 65,000
Land improvements 301,715 - - - 301,715
Buildings and improvements 1,559,334 - - - 1,559,334
Machinery and equipment 7,540,942 26,355 7,467,938 - 46,649
Less accumulated depreciation (7,635,054) (26,355) (6,262,679) - (1,346,020)
Net capital assets 1,831,937 - 1,205,259 - 626,678
Total noncurrent assets 2,868,955 - 1,723,768 518,509 626,678
Total assets 6,623,663 142,059 3,630,066 1,784,242 1,067,296
LIABILITIES
Current liabilities
Accounts payable 545,036 869 183,864 351,496 8,807
Accrued liabilities 19,373 4,328 4,876 485 9,684
Bonds and other obligations, due within one year 13,800 2,700 3,400 300 7,400
Total current liabilities 578,209 7,897 192,140 352,281 25,891
Noncurrent liabilities
Bonds and other obligations, less amounts due within one year 68,780 13,669 16,841 1,528 36,742
Total liabilities 646,989 21,566 208,981 353,809 62,633
NET POSITION
Net investment in capital assets 1,831,937 - 1,205,259 - 626,678
Unrestricted 4,144,737 120,493 2,215,826 1,430,433 377,985
Total net position $ 5,976,674 $ 120,493 $ 3,421,085 $ 1,430,433 $ 1,004,663
92
City of Muskegon
COMBINING STATEMENT OF REVENUE, EXPENSES AND CHANGES IN NET POSITION
Internal Service Funds
For the year ended June 30, 2013
Total Internal Engineering General Public Service
Service Funds Services Equipment Insurance Building
OPERATING REVENUES
Charges for services $ 7,308,020 $ 267,209 $ 2,151,279 $ 3,804,243 $ 1,085,289
Other 330,758 257,075 57,817 15,656 210
Total operating revenues 7,638,778 524,284 2,209,096 3,819,899 1,085,499
OPERATING EXPENSES
Administration 429,264 72,396 95,016 107,400 154,452
Insurance premiums and claims 3,925,426 - - 3,925,426 -
Other operations 3,142,838 368,686 1,973,590 32,998 767,564
Depreciation 434,997 - 360,617 - 74,380
Total operating expenses 7,932,525 441,082 2,429,223 4,065,824 996,396
Operating income (loss) (293,747) 83,202 (220,127) (245,925) 89,103
NONOPERATING REVENUES
Investment earnings 54,339 564 27,585 23,989 2,201
Gain on sale of capital assets 49,989 - 49,989 - -
Total nonoperating revenues 104,328 564 77,574 23,989 2,201
Income (loss) before transfers (189,419) 83,766 (142,553) (221,936) 91,304
TRANSFERS
Transfers in 28,046 - - 28,046 -
Transfers out (600,000) - - (600,000) -
Total transfers (571,954) - - (571,954) -
Change in net position (761,373) 83,766 (142,553) (793,890) 91,304
Net position at July 1, 2012 6,738,047 36,727 3,563,638 2,224,323 913,359
Net position at June 30, 2013 $ 5,976,674 $ 120,493 $ 3,421,085 $ 1,430,433 $ 1,004,663
93
City of Muskegon
COMBINING STATEMENT OF CASH FLOWS
Internal Service Funds
For the year ended June 30, 2013
Total Internal Engineering General Public Service
Service Funds Services Equipment Insurance Building
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 346,456 $ 255,234 $ 57,697 $ 33,315 $ 210
Receipts from interfund services provided 7,308,020 267,209 2,151,279 3,804,243 1,085,289
Payments to suppliers (5,567,039) (116,500) (959,335) (4,154,592) (336,612)
Payments to employees (1,275,567) (239,646) (325,277) (220,445) (490,199)
Payments for interfund services used (835,644) (96,391) (638,443) (2,708) (98,102)
Net cash provided by (used for) operating activities (23,774) 69,906 285,921 (540,187) 160,586
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers in 28,046 - - 28,046 -
Transfers out (600,000) - - (600,000) -
Collections on advances to component units 69,648 - 34,824 34,824 -
Net cash provided by (used for) noncapital financing activities (502,306) - 34,824 (537,130) -
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Purchases of capital assets (512,549) - (401,706) - (110,843)
Proceeds from sale of capital assets 55,202 - 55,202 - -
94
Net cash used for capital and related financing activities (457,347) - (346,504) - (110,843)
CASH FLOW FROM INVESTING ACTIVITIES
Investment earnings 54,339 564 27,585 23,989 2,201
Net increase (decrease) in cash and investments (929,088) 70,470 1,826 (1,053,328) 51,944
Cash and investments at July 1, 2012 4,190,223 53,417 1,819,863 1,933,642 383,301
Cash and investments at June 30, 2013 $ 3,261,135 $ 123,887 $ 1,821,689 $ 880,314 $ 435,245
Reconciliation of operating income (loss) to net cash provided by (used for)
operating activities
Operating income (loss) $ (293,747) $ 83,202 $ (220,127) $ (245,925) $ 89,103
Adjustments to reconcile operating income (loss) to net cash provided by
(used for) operating activities
Depreciation expense 434,997 - 360,617 - 74,380
Change in assets and liabilities
Receivables 15,698 (1,841) (120) 17,659 -
Inventories 19,010 - 19,010 - -
Prepaid items (155,846) (43) (1,239) (153,867) (697)
Accounts payable (41,292) (12,145) 135,127 (158,184) (6,090)
Accrued liabilities (2,594) 733 (7,347) 130 3,890
Net cash provided by (used for) operating activities $ (23,774) $ 69,906 $ 285,921 $ (540,187) $ 160,586
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, 2013
Total Current Rehab Loan
Agency Funds Collector Tax Escrow
ASSETS
Cash and investments $ 799,080 $ 799,080 $ - $ -
Accounts receivable 1,867 1,867 - -
Total assets $ 800,947 $ 800,947 $ - $ -
LIABILITIES
Accounts payable $ 352,700 $ 352,700 $ - $ -
Due to other governmental units 316,760 316,760 - -
Deposits held for others 131,487 131,487 - -
Total liabilities $ 800,947 $ 800,947 $ - $ -
96
City of Muskegon
STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
Agency Funds
For the year ended June 30, 2013
Balance Balance
July 1, June 30,
COLLECTOR FUND 2012 Additions Deductions 2013
ASSETS
Cash and investments $ 705,475 $ 7,245,370 $ 7,151,765 $ 799,080
Accounts receivable 1,867 270,362 270,362 1,867
Total assets $ 707,342 $ 7,515,732 $ 7,422,127 $ 800,947
LIABILITIES
Accounts payable $ 228,052 $ 3,283,432 $ 3,158,784 $ 352,700
Due to other governmental units 389,927 2,057,841 2,131,008 316,760
Deposits held for others 89,363 2,411,090 2,368,966 131,487
Total liabilities $ 707,342 $ 7,752,363 $ 7,658,758 $ 800,947
CURRENT TAX FUND
ASSETS
Cash and investments $ 165 $ 28,976,744 $ 28,976,909 $ -
LIABILITIES
Due to other governmental units $ 165 $ 20,017,196 $ 20,017,361 $ -
Due to other funds - 7,494,018 7,494,018 -
Due to component units - 643,259 643,259 -
Deposits held for others - 68,433 68,433 -
Total liabilities $ 165 $ 28,222,906 $ 28,223,071 $ -
REHAB LOAN ESCROW FUND
ASSETS
Cash and investments $ - $ 1,718 $ 1,718 $ -
LIABILITIES
Accounts payable $ - $ 1,718 $ 1,718 $ -
ALL AGENCY FUNDS
ASSETS
Cash and investments $ 705,640 $ 36,223,832 $ 36,130,392 $ 799,080
Accounts receivable 1,867 270,362 270,362 1,867
Total assets $ 707,507 $ 36,494,194 $ 36,400,754 $ 800,947
LIABILITIES
Accounts payable $ 228,052 $ 3,285,150 $ 3,160,502 $ 352,700
Due to other governmental units 390,092 22,075,037 22,148,369 316,760
Due to other funds - 7,494,018 7,494,018 -
Due to component units - 643,259 643,259 -
Deposits held for others 89,363 2,479,523 2,437,399 131,487
Total liabilities $ 707,507 $ 35,976,987 $ 35,883,547 $ 800,947
97
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 - SmartZone – 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. Currently there are two designated brownfield
areas capturing tax increments.
• Area I – Betten-Henry Street brownfield site.
• Area II – Former downtown mall brownfield site.
99
City of Muskegon
COMBINING BALANCE SHEET
Discretely Presented Component Units
June 30, 2013
Local
Total Discretely Development
Presented Finance Downtown Tax Increment Brownfield Brownfield
Component Authority - Development Finance Redevelopment Redevelopment
Units SmartZone Authority Authority Authority I Authority II
ASSETS
Cash and investments $ 358,407 $ 30,266 $ 167,477 $ 14,163 $ 146,501 $ -
LIABILITIES
Advances from primary government $ 1,555,528 $ - $ - $ - $ 1,555,528 $ -
FUND BALANCES (DEFICITS)
Unassigned (1,197,121) 30,266 167,477 14,163 (1,409,027) -
Total liabilities and fund
balances (deficits) $ 358,407 $ 30,266 $ 167,477 $ 14,163 $ 146,501 $ -
100
City of Muskegon
RECONCILIATION OF THE GOVERNMENTAL FUNDS
BALANCE SHEET TO THE STATEMENT OF NET POSITION
Discretely Presented Component Units
June 30, 2013
Total fund balances—governmental funds $ (1,197,121)
Amounts reported for governmental activities in the Statement of Net Position
are different because:
Capital assets used in governmental activities are not current financial
resources and, therefore, are not reported in the governmental funds.
Cost of capital assets $4,198,258
Accumulated depreciation (1,654,544) 2,543,714
Long-term liabilities in governmental activities are not due and payable in the
current period and, therefore, are not reported in the governmental funds.
Accrued interest payable (25,674)
Bonds and notes payable (6,864,869) (6,890,543)
Net position of governmental activities $ (5,543,950)
101
City of Muskegon
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICITS)
Discretely Presented Component Units
For the year ended June 30, 2013
Local
Total Discretely Development
Presented Finance Downtown Tax Increment Brownfield Brownfield
Component Authority - Development Finance Redevelopment Redevelopment
Units SmartZone Authority Authority Authority I Authority II
REVENUES
Property taxes $ 643,258 $ 85,627 $ 313,432 $ 44,439 $ 156,765 $ 42,995
Intergovernmental revenues - Local 160,000 160,000 - - - -
Investment earnings 2,387 150 1,435 86 716 -
Other 75,000 75,000 - - - -
Total revenues 880,645 320,777 314,867 44,525 157,481 42,995
EXPENDITURES
Current
Community and economic development 102,995 - - 50,000 10,000 42,995
Debt service
102
Principal 455,000 180,000 275,000 - - -
Interest and fees 319,525 207,255 59,162 - 53,108 -
Total expenditures 877,520 387,255 334,162 50,000 63,108 42,995
Net change in fund balances (deficits) 3,125 (66,478) (19,295) (5,475) 94,373 -
Fund balances (deficits) at July 1, 2012 (1,200,246) 96,744 186,772 19,638 (1,503,400) -
Fund balances (deficits) at June 30, 2013 $ (1,197,121) $ 30,266 $ 167,477 $ 14,163 $ (1,409,027) $ -
City of Muskegon
RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCES (DEFICITS)
TO THE STATEMENT OF ACTIVITIES
Discretely Presented Component Units
For the year ended June 30, 2013
Net change in fund balances—total governmental funds $ 3,125
Amounts reported for governmental activities in the Statement of Activities are
different because:
Governmental funds report outlays for capital assets as expenditures. However
in the Statement of Activities, the cost of these assets is allocated over their
estimated useful lives and reported as depreciation expense.
Depreciation expense (172,648)
The issuance of long-term debt provides current financial resources to
governmental funds, but increases liabilities in the Statement of Net Position.
Repayment of debt is an expenditure in the governmental funds, but reduces
long-term liabilities in the Statement of Net Position.
Repayment of principal on long-term debt 455,000
Changes in accrual of interest and amortization of premiums and discounts
Change in accrued interest payable $ 15,956
Amortization of premiums 45,063 61,019
Change in net position of governmental activities $ 346,496
103
104
SCHEDULE OF INDEBTEDNESS
105
City of Muskegon
SCHEDULE OF INDEBTEDNESS
June 30, 2013
Annual
Date Amount Interest Date of Interest
of Issue of Issue Rate Maturity 6/30/2012 6/30/2013 Payable
Business-Type Activities Bonds and Loans Payable:
Water supply system bonds 4/1/2010 $ 5,995,000 3.00% 05/01/13 $ 610,000 $ - $ -
($90,922 unamortized premium) 2.77% 05/01/14 640,000 640,000 153,788
3.50% 05/01/15 660,000 660,000 136,088
Type of debt: revenue bond 3.25% 05/01/16 685,000 685,000 112,988
Revenue pledged: water system net revenues 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
4,815,000 4,205,000 588,638
Drinking Water State Revolving 3/2/2004 $ 13,900,000 2.13% 10/01/12 640,000 - -
Fund 2.13% 10/01/13 655,000 655,000 198,847
2.13% 10/01/14 670,000 670,000 184,769
Type of debt: state loan 2.13% 10/01/15 685,000 685,000 170,372
Revenue pledged: water system net revenues 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
10,325,000 9,685,000 1,397,984
TOTAL BUSINESS-TYPE ACTIVITIES BONDS AND LOANS PAYABLE $ 15,140,000 $ 13,890,000 $ 1,986,622
106
City of Muskegon
SCHEDULE OF INDEBTEDNESS - CONTINUED
June 30, 2013
Annual
Date Amount Interest Date of Interest
of Issue of Issue Rate Maturity 6/30/2012 6/30/2013 Payable
Governmental Activities Bonds and Loans Payable:
Capital improvement bonds 3/1/2003 $ 1,575,000 3.80% 06/01/13 $ 130,000 $ - $ -
of 2003 (sidewalks) 3.90% 06/01/14 135,000 135,000 17,140
4.00% 06/01/15 145,000 145,000 11,875
Type of debt: limited G.O. bond 4.05% 06/01/16 150,000 150,000 6,075
Revenue pledged: special assessments, general revenues 560,000 430,000 35,090
Capital improvement bonds 10/24/2006 $ 5,400,000 4.00% 10/01/12 70,000 - -
of 2006 (fire station, recreation) 4.00% 10/01/13 70,000 70,000 205,545
($11,379 unamortized discount) 4.00% 10/01/14 70,000 70,000 202,745
4.00% 10/01/15 70,000 70,000 199,945
Type of debt: limited G.O. bond 4.00% 10/01/16 70,000 70,000 197,145
Revenue pledged: general revenues 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
5,165,000 5,095,000 2,575,153
Capital improvement bonds 9/30/2011 $ 2,000,000 2.98% 09/01/12 175,000 - -
of 2011 (streets) 2.98% 09/01/13 180,000 180,000 51,703
2.98% 09/01/14 185,000 185,000 46,265
Type of debt: limited G.O. bond 2.98% 09/01/15 190,000 190,000 40,677
Revenue pledged: gas tax, general revenues 2.98% 09/01/16 195,000 195,000 34,941
2.98% 09/01/17 200,000 200,000 29,056
2.98% 09/01/18 210,000 210,000 22,947
2.98% 09/01/19 215,000 215,000 16,614
2.98% 09/01/20 220,000 220,000 10,132
2.98% 09/01/21 230,000 230,000 3,427
2,000,000 1,825,000 255,762
State of Michigan 6/18/2010 $ 500,000 2.00% 03/18/13 20,211 - -
environmental assessment loan 2.00% 03/18/14 20,615 20,615 2,601
2.00% 03/18/15 21,027 21,027 2,189
Type of debt: state loan 2.00% 03/18/16 21,448 21,448 1,768
Revenue pledged: general revenues 2.00% 03/18/17 21,877 21,877 1,339
2.00% 03/18/18 22,314 22,314 902
2.00% 03/18/19 22,761 22,761 455
150,253 130,042 9,254
TOTAL GOVERNMENTAL ACTIVITIES BONDS AND LOANS PAYABLE $ 7,875,253 $ 7,480,042 $ 2,875,259
TOTAL PRIMARY GOVERNMENT BONDS AND LOANS PAYABLE $ 23,015,253 $ 21,370,042 $ 4,861,880
107
City of Muskegon
SCHEDULE OF INDEBTEDNESS - CONTINUED
June 30, 2013
Annual
Date Amount Interest Date of Interest
of Issue of Issue Rate Maturity 6/30/2012 6/30/2013 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 -
Type of debt: intergovernmental note
Revenue pledged: DDA tax increments
Downtown Development Authority 3/22/2011 $ 2,045,000 2.50% 06/01/13 275,000 - -
refunding bonds 2.75% 06/01/14 280,000 280,000 52,288
($24,297 unamortized premium) 3.25% 06/01/15 285,000 285,000 44,588
3.50% 06/01/16 300,000 300,000 35,326
Type of debt: limited G.O. bond 3.75% 06/01/17 310,000 310,000 24,826
Revenue pledged: DDA tax increments, general revenues 4.00% 06/01/18 330,000 330,000 13,200
1,780,000 1,505,000 170,228
Local Development Finance Authority 11/1/2002 $ 4,725,000 4.00% 11/01/12 180,000 - -
Smartzone Bonds 3.90% 11/01/13 - - -
4.05% 11/01/14 - - -
Type of debt: limited G.O. bond 4.05% 11/01/15 - - -
Revenue pledged: LDFA tax increments, general revenues 4.15% 11/01/16 - - -
4.25% 11/01/17 - - -
4.35% 11/01/18 - - -
4.45% 11/01/19 - - -
4.60% 11/01/20 - - -
4.60% 11/01/21 - - -
4.60% 11/01/22 - - -
4.85% 11/01/23 - - -
4.85% 11/01/24 - - -
4.85% 11/01/25 - - -
180,000 - -
Local Development Finance Authority 3/20/2012 $ 4,100,000 2.00% 11/01/13 260,000 260,000 125,300
Smartzone Refunding Bonds 2.00% 11/01/14 320,000 320,000 119,500
($235,572 unamortized premium) 2.00% 11/01/15 335,000 335,000 112,950
3.00% 11/01/16 345,000 345,000 104,425
Type of debt: limited G.O. bond 3.00% 11/01/17 355,000 355,000 93,925
Revenue pledged: LDFA tax increments, general revenues 4.00% 11/01/18 375,000 375,000 81,100
4.00% 11/01/19 390,000 390,000 65,800
4.00% 11/01/20 395,000 395,000 50,100
4.00% 11/01/21 245,000 245,000 37,300
3.00% 11/01/22 255,000 255,000 28,575
3.00% 11/01/23 265,000 265,000 20,775
3.00% 11/01/24 275,000 275,000 12,675
3.00% 11/01/25 285,000 285,000 4,275
4,100,000 4,100,000 856,700
TOTAL DISCRETELY PRESENTED COMPONENT UNIT BONDS AND LOANS PAYABLE $ 7,060,000 $ 6,605,000 $ 1,026,928
TOTAL REPORTING ENTITY BONDS AND LOANS PAYABLE $ 30,075,253 $ 27,975,042 $ 5,888,808
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/NET POSITION BY COMPONENT
Last Ten Fiscal Years
December 31 June 30
2004 2005 (a) 2006 2007 2008 2009 2010 2011 2012 2013 (b)
Governmental Activities
Net Investment in Capital Assets $ 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 $ 63,842,092
Restricted 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 4,572,848
Unrestricted 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 13,299,523
Total Governmental Net Assets/Net Position $ 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 $ 81,714,463
Business-type Activities
Net Investment in Capital Assets $ 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 $ 40,032,858
Restricted 822,559 822,559 822,559 822,559 822,559 672,000 672,000 672,000 672,000 599,500
Unrestricted 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 8,491,848
Total Business-type Activities Net Assets/Net Position $ 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 $ 49,124,206
Primary Government
Net Investment in Capital Assets $ 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 $ 103,874,950
Restricted 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 5,172,348
Unrestricted 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 21,791,371
Total Primary Government Net Assets/Net Position $ 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 $ 130,838,669
110
(a) In 2005, the City began reporting historic infrastructure assets as required by GASB 34.
(b) In 2013, the City implemented GASB 63 and 65 which changed the elements of the financial statements.
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/NET POSITION
Last Ten Fiscal Years
Period Ended
Year Ended December 31 June 30 Year Ended June 30
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (a)
EXPENSES
Governmental Activities
Public representation $ 866,669 $ 885,365 $ 904,109 $ 925,124 $ 986,696 $ 923,911 $ 445,251 $ 854,249 $ 866,809 $ 893,981
Administrative services 1,132,229 803,783 732,715 783,713 782,362 698,022 317,873 645,585 566,161 565,307
Financial services 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 2,241,061
Public safety 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 12,987,842
Public works 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 3,201,806
Highways, streets and bridges 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 6,672,374
Community and economic development 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 2,499,404
Culture and recreation 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 1,592,358
General administration 1,725,225 1,608,108 1,143,963 358,225 574,955 451,651 210,117 794,115 791,197 322,348
Interest on long-term debt 193,021 170,814 206,768 343,106 324,076 288,073 139,006 272,940 283,186 291,535
Total Governmental Activities Expenses 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 31,268,016
Business-type Activities
Water 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 6,228,788
Sewer 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 7,226,839
Marina and launch ramp 351,705 343,599 332,826 392,994 347,642 310,773 150,055 292,889 310,174 426,553
Total Business-type Activities Expenses 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 13,882,180
Total Primary Government Expenses $ 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 $ 45,150,196
PROGRAM REVENUES
Governmental Activities
111
Charges for Services
Public representation $ 210,238 $ 195,316 $ 202,939 $ 199,759 $ 188,467 $ 213,885 $ 100,177 $ 196,886 $ 196,886 $ 173,739
Administrative services 314,028 311,529 306,964 287,011 257,850 271,117 129,630 263,473 270,886 268,535
Financial services 645,166 537,445 728,332 744,109 726,572 818,845 475,031 879,905 881,229 830,919
Public safety 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 1,133,666
Public works 452,606 467,849 588,566 407,569 382,072 383,733 209,203 642,082 480,487 671,494
Highways, streets and bridges 555,018 267,689 263,423 372,133 301,955 251,840 139,009 451,473 230,241 245,609
Community and economic development 414,543 815,980 762,220 356,051 297,854 249,241 186,572 457,952 617,379 432,240
Culture and recreation 1,151,687 1,141,865 809,228 454,154 405,520 445,891 129,025 300,367 315,010 606,818
General administration 200,434 314,658 170,240 64,366 99,494 123,426 59,373 116,690 116,690 287,729
Operating grants and contributions 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 4,681,345
Capital grants and contributions 5,785,604 5,894,358 5,360,014 3,347,680 3,444,957 2,105,557 255,234 2,257,163 1,568,005 886,108
Total Governmental Program Revenues 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 10,218,202
Business-type Activities
Water 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 5,890,614
Sewer 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 7,058,315
Marina and launch ramp 266,981 248,460 267,412 281,679 250,266 242,055 156,767 194,311 208,370 234,229
Operating grants and contributions - - - - - - - - - 6,188
Capital grants and contributions 657,521 100,373 710,641 - - 5,179 - 20,074 - 88,046
Total Business-type program revenues 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 13,277,392
Total Primary Government program revenues $ 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 $ 23,495,594
NET (EXPENSE) REVENUE
Governmental Activities $ (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) $ (21,049,814)
Business-type Activities 1,765,730 2,931,447 2,283,867 775,036 165,350 33,911 855,943 871,244 (568,607) (604,788)
Total Primary Government net expense $ (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) $ (21,654,602)
City of Muskegon
CHANGES IN NET ASSETS/NET POSITION - CONTINUED
Last Ten Fiscal Years
Period Ended
Year Ended December 31 June 30 Year Ended June 30
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 (a)
GENERAL REVENUES AND OTHER CHANGES IN NET ASSETS/NET POSITION
Governmental Activities
Property taxes $ 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 $ 7,592,847
Income taxes 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 8,057,145
Franchise fees - 286,265 285,124 297,200 304,812 321,852 178,239 362,103 342,376 358,785
Grants and contributions not restricted for specific programs 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 3,700,871
Unrestricted investment earnings 170,094 420,595 832,300 1,247,520 730,142 185,436 104,086 193,435 100,073 73,157
Miscellaneous 68,405 70,402 64,645 88,035 160,460 226,124 51,638 432,880 154,531 102,388
Gain on sale of capital asset 70,886 300,037 81,372 1,604 323,048 123,258 65,155 25,815 34,496 44,899
Transfers (142,420) (80,000) (540,000) (40,000) (40,000) - (3,760) - - -
Total Governmental Program Revenues 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 19,930,092
Business-type Activities
Unrestricted investment earnings 51,768 138,053 122,060 170,594 108,990 23,843 15,990 23,959 46,582 33,148
Gain on sale of capital asset - - - - - - - - - -
Transfers 142,420 80,000 540,000 40,000 40,000 - 3,760 - - -
Total Business-type program revenues 194,188 218,053 662,060 210,594 148,990 23,843 19,750 23,959 46,582 33,148
Total Primary Government program revenues $ 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 $ 19,963,240
CHANGE IN NET ASSETS/NET POSITION
Governmental Activities $ 6,200,230 $ 4,831,277 $ 3,619,383 $ 1,361,278 $ 123,388 $ (2,889,272) $ 3,755,199 $ (497,505) $ (973,842) $ (1,119,722)
Business-type Activities 1,959,918 3,149,500 2,945,927 985,630 314,340 57,754 875,693 895,203 (522,025) (571,640)
Total Primary Government $ 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) $ (1,691,362)
112
(a) In 2013, the City implemented GASB 63 and 65 which changed the elements of the financial statements.
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
2004 2005 2006 2007 2008 2009 2010 2011 (a) 2012 2013
General fund
Reserved $ 74,349 $ 79,356 $ 177,076 $ 180,410 $ 214,819 $ 187,633 $ 300,969 $ - $ - $ -
Nonspendable - - - - - - - 251,173 178,468 447,341
Restricted - - - - - - - - - -
Assigned - - - - - - - 2,385,728 2,075,738 2,292,495
Unassigned - - - - - - - 3,374,481 4,265,839 4,613,722
Unreserved 2,370,842 2,440,249 2,512,963 2,740,222 2,168,906 1,451,029 5,737,485 - - -
Total general fund $ 2,445,191 $ 2,519,605 $ 2,690,039 $ 2,920,632 $ 2,383,725 $ 1,638,662 $ 6,038,454 $ 6,011,382 $ 6,520,045 $ 7,353,558
All other governmental funds
Reserved $ 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 1,547,793
Restricted 1,375,779 3,485,073 2,749,396
Assigned 2,073,027 2,055,904 2,087,359
Unassigned (238,104) (191,282) (82,048)
Unreserved, reported in:
Special revenue funds 2,692,431 2,910,285 3,030,096 4,462,015 2,768,886 2,060,117 2,163,041 - - -
113
Capital project funds 2,187,667 1,239,763 390,282 635,676 675,898 554,273 6,035 - - -
Permanent funds 22,896 22,890 77,300 84,413 60,813 15,613 16,979 - - -
Total all other governmental funds $ 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 $ 6,302,500
(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 December 31 June 30 Year Ended June 30
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Revenues
Taxes $ 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 $ 14,832,027
Intergovernmental 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 9,403,554
Charges for services 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 2,769,227
Other 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 2,795,952
Total revenues 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 29,800,760
Expenditures
Public representation 869,342 886,717 903,895 927,320 987,229 923,923 448,703 851,918 867,762 892,113
Administrative services 704,667 748,588 669,789 644,913 632,513 645,704 303,555 586,328 515,988 508,130
Financial services 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 2,196,917
Public safety 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 12,724,094
Public works 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 2,878,328
Highways, streets and bridges 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 2,815,337
Community and economic development 797,072 784,396 763,211 894,879 1,077,312 4,440,687 1,330,794 3,109,693 2,850,593 2,578,073
Culture and recreation 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 1,248,174
Other governmental functions 1,708,868 1,603,292 1,139,148 350,385 562,341 438,292 200,623 1,775,128 770,910 299,812
114
Debt service
Principal 1,335,000 1,115,000 1,189,785 1,241,921 999,148 663,371 303,466 1,345,183 289,597 395,211
Interest and issuance costs 201,447 166,071 271,233 324,577 310,432 282,174 136,013 267,258 268,315 292,554
Capital outlay 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 3,230,586
Total expenditure 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 30,059,329
Excess of revenues over (under) expenditures (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 (258,569)
Other financing sources (uses)
Transfers in 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 1,356,229
Transfers out (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) (784,275)
Bonds issued - 1,061,900 5,626,331 - 500,000 - - - 2,000,000 -
Sale of capital assets 483,544 827,141 1,120,341 286,152 375,723 68,452 75,465 120,118 113,981 190,263
Total other financing sources (uses) 592,787 1,780,995 6,178,627 218,106 943,949 118,150 57,682 92,072 2,010,935 762,217
Net change in fund balances $ (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 $ 503,648
Debt service as a percentage of noncapital
expenditures 4.63% 3.74% 4.44% 5.05% 4.06% 2.97% 3.01% 5.22% 2.01% 2.56%
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
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%
2013 7,325,555 24.6% 7,506,472 25.2% 9,403,554 31.6% 2,769,227 9.3% 1,238,285 4.2% 435,893 1.5% 267,397 0.9% 854,377 2.9% 29,800,760 -4.6%
* The City changed its fiscal year end from December 31 to June 30. 2010 figures are for six months.
SOURCE: The information in these schedules (unless otherwise noted) is derived from the comprehensive annual financial reports for the relevant year.
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
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%
2012 312,930,252 - 134,635,427 81,575,476 529,141,155 91,750,891 620,892,046 3,587,223 6,161,900 - 9,749,123 630,641,169 12.0789 96.40%
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
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
2012 327,226,000 - 141,238,834 84,084,000 552,548,834 91,740,800 644,289,634 3,719,300 6,161,900 - 9,881,200 654,170,834 1,308,341,668
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, 2013
6/30/2013 12/31/2003
Percent of Percent of
Taxable Total Taxable Taxable Total Taxable
Taxpayer Valuation Rank Valuation Valuation Rank Valuation
Consumers Energy $ 46,472,581 1 7.4% $ 67,742,451 1 9.4%
DTE Energy (formerly MichCon) 6,918,200 2 1.1% 7,504,300 7 1.0%
ESCO Company 6,798,181 3 1.1% 5,894,099 10 0.8%
GE Aviation (Johnson Technology) 6,123,500 4 1.0% 8,318,424 4 1.2%
ADAC Plastics Inc 6,079,926 5 1.0% 8,748,038 3 1.2%
Muskegon SC Holdings LLC 4,240,100 6 0.7% - 0.0%
Glen Oaks Apartments LLC 3,914,200 7 0.6% - 0.0%
Lorin Industries 3,854,731 8 0.6% 7,016,999 9 1.0%
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Coles Quality Foods 3,491,200 9 0.6% - 0.0%
P&G Holdings NY LLC 3,462,180 10 0.5% - 0.0%
Sappi (S.D. Warren Co.) - 0.0% 56,456,875 2 7.8%
Terrace Partners LLC - 0.0% 7,776,200 5 1.1%
Brunswick - 0.0% 7,358,099 6 1.0%
Holland Neway International - 0.0% 6,322,100 8 0.9%
Total - 10 Largest 91,354,799 14.5% 183,137,585 25.4%
Total - All Other 539,286,370 85.5% 538,300,070 74.6%
$ 630,641,169 100.0% $ 721,437,655 100.0%
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
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
2012 9.5000 0.0789 2.5000 12.0789 2.4000
Overlapping - County-Wide Rates
Muskegon Intermediate Special Vocational Community
Year County School Education Education College
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
2012 6.6957 0.4597 2.2987 0.9996 2.2037
Overlapping - School District Grand Total
State Non-
Year Operating Debt Total Education Homestead Homestead
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
2012 18.0000 7.1000 25.1000 6.0000 40.2363 58.2363
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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
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%
2012 7,872,541 6,882,534 87.4% 915,950 7,798,484 99.1% 27,163 68,945 5,113 1.29%
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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, 2013 Year Ended December 31, 2003
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 981 5% $ 802,331 $ 8,107 0% 1,166 5% $ 1,137,300 $ 11,373 0%
$2,501-$7,500 562 3% 5,199,570 52,538 1% 942 4% 6,332,200 63,322 1%
$7,501-$25,000 1,395 8% 41,298,132 417,286 6% 2,368 10% 54,614,300 546,143 8%
$25,001-$50,000 1,276 7% 85,392,385 862,825 11% 2,046 9% 103,327,800 1,033,278 16%
$50,001-$100,000 747 4% 92,624,938 935,905 12% 858 4% 80,331,000 803,310 12%
More than $100,000 149 1% 41,126,244 415,550 6% 147 1% 26,075,200 260,752 4%
Subtotal 5,110 29% $ 266,443,600 $ 2,692,211 36% 7,527 32% $ 271,817,800 $ 2,718,178 42%
Non-Residents Taxpayers:
(Non-residents are taxed at a rate of 0.5% on income earned within the City.)
120
$2,500 or less 1,732 10% $ 928,400 $ 7,112 0% 2,105 9% $ 1,421,600 $ 9,900 0%
$2,501-$7,500 1,049 6% 4,987,000 38,199 1% 1,382 6% 6,643,600 46,246 1%
$7,501-$25,000 2,469 14% 39,882,400 305,490 4% 3,593 15% 59,821,200 424,731 6%
$25,001-$50,000 2,969 17% 108,340,800 829,865 11% 4,193 18% 153,858,400 1,092,195 17%
$50,001-$100,000 2,169 12% 144,571,000 1,107,380 15% 2,209 9% 144,881,000 972,863 15%
More than $100,000 609 3% 130,870,000 1,002,434 13% 549 2% 111,706,652 776,283 12%
Subtotal 10,997 62% $ 429,579,600 $ 3,290,480 44% 14,031 60% $ 478,332,452 $ 3,322,218 51%
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 10% $ 1,523,781 20% 1,850 8% $ 501,959 8%
Total 17,857 100% $ 7,506,472 100% 23,408 100% $ 6,542,355 100%
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
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
2011 5,920,000 - 244,850 6,164,850 5,415,000 - 10,955,000 16,370,000 22,534,850 587
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2012 7,725,000 - 150,253 7,875,253 4,815,000 - 10,325,000 15,140,000 23,015,253 599
2013 7,350,000 - 130,042 7,480,042 4,205,000 - 9,685,000 13,890,000 21,370,042 577
* 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, 2013
Total Debt Debt Supported by City
Name of Governmental Unit Outstanding Self Supporting General Revenues
Direct Debt
City of Muskegon:
Revenue Bonds $ 13,890,000 $ 13,890,000 $ -
Capital Improvement Bonds 7,350,000 - 7,350,000
Intergovernmental Bonds 130,042 - 130,042
Component Unit Debt:
Downtown Development Authority 2,505,000 2,505,000 -
Local Development Finance Authority 4,100,000 4,100,000 -
Total City Direct Debt $ 27,975,042 $ 20,495,000 $ 7,480,042
City Share as
Gross Percent of Gross Net
Overlapping Debt
Muskegon School Distict $ 40,610,000 95.04% $ 38,595,744
Orchard View School Distict 42,852,440 25.85% 11,077,356
Reeths Puffer School Distict 75,732,825 6.20% 4,695,435
Muskegon Intermediate School District - -
Muskegon County 37,170,000 14.12% 5,248,404
Muskegon Community College 7,195,000 14.12% 1,015,934
Total Overlapping Debt $ 203,560,265 60,632,873
Total City Direct and Overlapping Debt $ 68,112,915
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
2004 2005 2006 2007 2008 2009 2010* 2011 2012 2013
Debt Limit $ 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 $ 68,555,700
Total net debt applicable to limit 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 13,655,042
Legal debt margin $ 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 $ 54,900,658
Total net debt applicable to the limit as 12.15% 13.01% 20.49% 18.52% 18.02% 17.98% 17.56% 16.51% 19.54% 19.92%
a percentage of debt limit
Legal Debt Margin Calculation for 2013:
Assessed Valuation: $ 685,557,000
Legal Debt Limit (10% ) 68,555,700
Total Indebtedness: $ 27,975,042
Debt not Subject to Limitation:
Paid by Special Assessment (430,000)
Revenue Bonds (13,890,000)
Debt Subject to Limitation 13,655,042
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Legal Debt Margin $ 54,900,658
* 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
Fiscal Gross Operating Available For Debt Service Requirements
Year Revenue (a) Expenses (b) Debt Service Principal Interest Total Coverage
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
2013 5,907,784 3,729,276 2,178,508 1,250,000 384,694 1,634,694 1.33
Sewage Disposal System
Direct Net Revenue
Fiscal Gross Operating Available For Debt Service Requirements
Year Revenue (a) Expenses (b) Debt Service Principal Interest Total Coverage
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 Direct System Indebtedness
2010* No Direct System Indebtedness
2011 No Direct System Indebtedness
2012 No Direct System Indebtedness
2013 No Direct 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
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%
2013 37,046 747,644,037 20,182 34.1 4,367 826 24,613,938 12.0%
125
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
2013 2004
Percentage Percentage
of total of total
City City
Employer Employees Rank employment Employees Rank employment
Mercy General Health Partners* 3,657 1 24.7% 2,000 1 11.7%
County of Muskegon 1,028 2 7.0% 1,200 3 7.0%
Muskegon Public Schools 941 3 6.4% 1,100 4 6.5%
State of Michigan 772 4 5.2% 900 5 5.3%
ADAC Plastics 750 5 5.1% 470 7 2.8%
GE Aviation formerly Johnson Technology 644 6 4.4% 425 8 2.5%
Port City Group 419 7 2.8% - - 0.0%
126
Knoll Group 403 8 2.7% - - 0.0%
SAF Holland USA 330 9 2.2% - - 0.0%
Muskegon Community College 211 10 1.4% - - 0.0%
Hackley Hospital* - - 0.0% 1,300 2 7.6%
Sappi/S.D. Warren Company - - 0.0% 600 6 3.5%
Verizon - - 0.0% 350 9 2.1%
Brunswick - - 0.0% 330 10 1.9%
* Hackley Hospital merged with the former Mercy Hospital.
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 2004 2005 2006 2007 2008 2009 2010* 2011 2012 2013
Administration 1.50 1.50 1.50 1.50 1.50 - - 0.40 0.40 0.40
Affirmative Action 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.10 1.10 1.10
Cemetaries 3.52 3.25 3.00 3.25 3.25 3.25 2.50 2.20 1.75 1.25
City Clerk & Elections 4.00 4.00 4.00 4.00 4.00 4.00 3.00 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 1.00 1.00 1.00 1.00 1.00 1.00 1.00 0.55 0.55 0.55
City Manager's Office 1.75 1.75 1.75 1.75 1.75 3.25 2.25 2.25 2.25 2.25
City Treasurer's Office 5.00 5.00 5.00 4.00 5.00 5.00 5.00 5.00 5.00 5.00
Civil Service 2.00 2.00 2.00 2.00 2.00 2.00 2.00 1.00 - -
Environmental Services 3.50 2.00 2.00 2.00 2.00 2.00 2.00 2.00 5.00 5.00
Farmers Market 0.12 - - - - 0.05 0.05 0.05 0.05 0.05
Finance Administration 4.00 4.00 4.00 4.00 4.00 4.00 3.00 3.00 3.00 2.00
Fire 41.00 40.00 38.00 38.00 38.00 38.00 36.00 33.00 35.00 28.00
Fire Safety Inspections 12.00 10.00 12.00 12.00 12.00 12.00 9.00 8.00 6.00 6.00
Forestry 0.93 - - - - - - - - -
General Recreation 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
Information Systems 4.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
127
Parks 9.68 8.48 8.25 8.15 8.15 7.99 7.15 6.00 6.05 6.05
Planning, Zoning & Economic Development 6.50 6.00 6.00 6.00 6.00 6.00 5.00 4.00 3.00 3.00
Police 94.00 94.00 94.00 94.00 94.00 94.00 88.00 88.00 88.00 88.00
Sanitation 1.10 1.10 1.00 1.00 1.00 1.00 - 0.30 0.20 0.20
Senior Transit - - - - - - - - 0.05 0.05
MVH-Major Streets 15.45 15.25 16.00 17.75 15.75 13.75 12.00 12.00 11.70 10.70
MVH-Local Streets 7.00 7.00 7.00 7.00 6.00 8.00 7.00 7.00 6.70 6.70
MVH-State Trunklines 2.00 2.00 2.00 - - - - - - -
Walker Arena 0.12 - - - - - - - - -
Community Development 5.00 4.00 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 0.25 0.25 - -
Lead Program - - - - - - 0.75 0.75 - -
Sewer Maintenance 14.55 15.05 16.00 16.20 15.20 13.20 10.20 10.20 9.75 9.75
Water Filtration 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 9.00 10.00
Water Maintenance 15.15 14.65 13.00 12.50 13.50 15.40 12.40 12.40 11.75 11.75
Hartshorn Marina Fund 0.79 0.67 0.73 0.67 0.34 0.05 0.05 0.05 0.30 0.30
Public Service Building 3.65 3.85 3.45 3.45 3.45 3.70 8.95 8.05 7.95 8.45
Engineering 7.70 7.70 7.45 7.45 7.45 7.45 5.45 4.95 4.95 4.95
Equipment 8.00 8.00 8.95 8.25 8.25 8.50 7.25 6.25 6.25 6.25
294.00 284.00 284.00 282.00 280.00 280.00 256.00 244.00 241.00 233.00
* 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 2004 2005 2006 2007 2008 2009 2010* 2011 2012 2013
Administrative Services
Elections
Number of registered voters 25,261 25,918 26,028 26,345 27,678 26,136 26,136 26,330 26,324 26,098
Number of votes cast:
Last general election 14,169 14,169 10,410 10,410 15,271 15,271 15,271 8,106 1,933 13,487
Last city election 4,325 4,022 4,022 1,101 1,101 2,254 2,254 8,106 1,933 2,131
Percentage of registered voters voting:
Last general election 56% 55% 40% 40% 55% 58% 58% 31% 7% 52%
Last city election 17% 16% 15% 4% 4% 9% 9% 31% 7% 8%
Financial Services
Property Tax Bills 15,403 15,404 15,354 15,376 15,350 15,435 - 15,351 15,261 15,291
Income Tax Returns 24,378 23,884 23,493 23,141 22,598 21,071 19,963 19,688 18,699 17,857
Paper Check Issued to Vendors 3,405 3,205 3,248 3,347 3,346 3,113 1,486 2,986 3,746 1,677
Electronic Payments to Vendors 752 828 800 772 763 963 450 884 1,334 1,251
128
Public Safety
Fire Protection
Number of firefighter and officer positions 41 41 41 41 41 37 37 37 36 41
Number of emergency calls 4,116 4,206 4,092 4,171 4,298 4,220 2,062 4,402 4,676 4,563
Police Protection
Number of sworn officer positions 83 83 84 84 84 79 79 79 79 79
Part I (Major) Crimes 3,360 3,303 3,495 2,997 3,107 3,071 1,305 2,859 2,772 2,647
Public Works
Refuse Collected (Tons per Year) 11,925 11,074 11,192 10,375 10,401 10,526 6,042 12,703 10,153 9,958
Recyclables Collected (Tons per Year) 779 588 559 629 626 309 - - - -
Water & Sewer
Number of consumers 14,917 14,455 14,412 14,364 13,131 12,987 12,966 13,037 13,109 13,144
Average daily water consumption (GPD) 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 7,651,000
Water main breaks repaired 10 5 13 21 34 17 6 12 5 11
Sewer flows (Millions Gallons per Year) 1,475 1,700 2,040 1,945 2,181 1,979 965 1,625 1,695 1,777
Sewer Service Calls 568 638 605 598 533 508 263 591 522 508
* 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 2004 2005 2006 2007 2008 2009 2010* 2011 2012 2013
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 196.95 196.95 197.48 197.79 197.79 196.95 196.95 196.95 196.95 196.95
Number of streetlights 3,111 3,159 3,159 3,134 3,134 3,192 3,125 3,065 2,838 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) 178.02 179.41 175.74 177.04 177.04 177.04 177.04 177.04 177.04 177.04
129
Storm sewers (miles) 178.61 179.23 180.48 183.25 183.60 184.35 184.35 184.35 184.35 184.35
Water
Water mains (miles) 194.14 194.14 194.15 195.63 195.58 195.69 195.69 195.69 195.40 195.95
* 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 25, 2013
City Commission
City of Muskegon
Muskegon, Michigan
We have audited, in accordance with the auditing standards generally accepted in the United States of America
and the standards applicable to financial audits contained in the Government Auditing Standards issued by the
Comptroller General of the United States, the 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, 2013, and the related notes to the
financial statements, which collectively comprise the City of Muskegon’s basic financial statements, and have
issued our report thereon dated October 25, 2013.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City of Muskegon’s internal
control over financial reporting (internal control) to determine the audit procedures that are appropriate in the
circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of
expressing an opinion on the effectiveness of the City of Muskegon’s internal control. Accordingly, we do not
express an opinion on the effectiveness of the City of Muskegon’s internal control.
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. A significant deficiency is a deficiency, or a
combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough
to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section
and was not designed to identify all deficiencies in internal control that might be material weaknesses or
significant deficiencies. Given these limitations, during our audit, we did not identify any deficiencies in internal
control that we consider to be material weaknesses. However, material weaknesses may exist that have not been
identified.
678 Front Ave., NW Suite 230 316 Morris Ave., Suite 500, P.O. Box 999 907 S. State St.
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 25, 2013
Page 2
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City of Muskegon’s financial statements are free
from 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.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the
results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on
compliance. This report is an integral part of an audit performed in accordance with Government Auditing
Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not
suitable for any other purpose.
Muskegon, Michigan
133
BRICKLEY DELONG
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE FOR EACH MAJOR
PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE
REQUIRED BY OMB CIRCULAR A-133
October 25, 2013
City Commission
City of Muskegon
Muskegon, Michigan
Report on Compliance for Each Major Federal Program
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, 2013. 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.
Management’s Responsibility
Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants
applicable to its federal programs.
Auditor’s Responsibility
Our responsibility is to express an opinion on compliance for each of the City of Muskegon’s major federal
programs based on our audit of the types of compliance requirements referred to above. 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 on compliance for each major federal
program. However, our audit does not provide a legal determination of the City of Muskegon’s compliance.
Opinion on Each Major Federal Program
In our opinion, the City of Muskegon complied, in all material respects, with the types of 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, 2013.
678 Front Ave., NW Suite 230 316 Morris Ave., Suite 500, P.O. Box 999 907 S. State St.
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 25, 2013
Page 2
Report on Internal Control Over Compliance
Management of the City of Muskegon is responsible for establishing and maintaining effective internal control
over compliance with the types of compliance requirements referred to above. In planning and performing our
audit of compliance, we considered the City of Muskegon’s internal control over compliance with the types of
requirements that could have a direct and material effect on each major federal program to determine the auditing
procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for
each major federal program 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. A significant deficiency in internal control over compliance is a deficiency, or a
combination of deficiencies, in internal control over compliance with a type of compliance requirement of a
federal program that is less severe than a material weakness in internal control over compliance, yet important
enough to merit attention by those charged with governance.
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
material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over
compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not
been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of
internal control over compliance and the results of that testing based on the requirement of OMB Circular A-133.
Accordingly, this report is not suitable for any other purpose.
Muskegon, Michigan
135
City of Muskegon
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
For the year ended June 30, 2013
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 2012 (Cash Basis) Expenditures 2013 Notes
U.S. Department of Housing and Urban Development
Direct programs
Community Development Block Grants/Entitlement Grants 14.218
B-11-MC-26-0026 $ 911,340 $ 452,380 $ 474,866 $ 22,486 $ -
B-12-MC-26-0026 827,856 - 567,938 777,928 209,990
Program Income 38,196 - 38,196 38,196 -
Total Community Development Block Grants/
Entitlement Grants 1,777,392 452,380 1,081,000 838,610 209,990 5
HOME Investment Partnerships Program 14.239
M-09-MC-26-0215 322,469 - 915 915 -
M-10-MC-26-0215 320,710 - 98,811 98,811 -
136
M-11-MC-26-0215 284,337 19,254 111,091 91,837 -
M-12-MC-26-0215 246,299 - 86,894 104,920 18,026
Program Income 158,847 - 158,847 158,847 -
Total HOME Investment Partnerships Program 1,332,662 19,254 456,558 455,330 18,026
Total direct programs 3,110,054 471,634 1,537,558 1,293,940 228,016
Passed through Michigan State Housing Development Authority
Community Development Block Grants/Entitlement Grants 14.218
Neighborhood Stabilization Program
NSP-2008-0280-ENT 1,670,891 85,603 176,103 220,891 130,391
Program Income 22,085 3,918 26,003 22,085 -
Total Neighborhood Stabilization Program 1,692,976 89,521 202,106 242,976 130,391 5
Total U.S. Department of Housing and
Urban Development 4,803,030 561,155 1,739,664 1,536,916 358,407
City of Muskegon
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS—Continued
For the year ended June 30, 2013
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 2012 (Cash Basis) Expenditures 2013 Notes
U.S. Department of Justice
Direct programs
Bulletproof Vest Partnership Grant 16.607
2010 Grant $ 1,110 $ 1,110 $ 1,110 $ - $ -
2012 Grant 3,500 - 825 825 -
4,610 1,110 1,935 825 -
Edward Byrne Memorial Justice Assistance Grant 16.738
Program
2011-DJ-BX-2380 55,831 - 21,133 21,133 -
2012-DJ-BX-0725 46,074 - 28,513 28,513 -
101,905 - 49,646 49,646 -
137
Total direct programs 106,515 1,110 51,581 50,471 -
Passed through Ottawa County
Edward Byrne Memorial Justice Assistance Grant 16.738
Program
70834-513B 21,585 - 21,585 21,585 -
Passed through Muskegon County
ARRA - Edward Byrne Memorial Justice Assistance 16.804
Grant (JAG) Program/Grants to Units of Local
Government
2009-SB-B9-1824 218,169 6,949 52,217 45,268 -
Total U.S. Department of Justice 346,269 8,059 125,383 117,324 -
TOTAL FEDERAL ASSISTANCE $ 5,149,299 $ 569,214 $ 1,865,047 $ 1,654,240 $ 358,407
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, 2013
1. The accompanying Schedule of Expenditures of Federal Awards (the "schedule") includes the federal grant activity of the City under programs of the federal government for the year
ended June 30, 2013. The information in this schedule is presented in accordance with the requirements of the Office of Management and Budget (OMB) Circular A-133, Audits of
States, Local Governments, and Non-Profit Organizations. Because the schedule presents only a selected portion of the operations of the City, it is not intended to and does not present
the financial position or change in net position of the City.
2. Please see the financial statement footnotes for the significant accounting policies used in preparing this schedule. Expenditures are recognized following the cost principles contained
in OMB Circular A-87, Cost Principles for State, Local and Indian Tribal Governments, wherein certain types of expenditures are not allowable or are limited as to reimbursement.
Negative amounts shown on the schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Pass-through
entity identifying numbers are presented where available.
3. 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, 2013 and federal expenditures per the Schedule of Expenditures of Federal Awards.
Federal revenues per City of Muskegon financial statements
General Fund $ 117,324
Major Street and Trunkline Fund 794,000
Other governmental funds 1,317,788
2,229,112
138
Plus program income 219,128
Less MDOT contracted projects as shown below (794,000)
Federal expenditures per the Schedule of Expenditures of Federal Awards $ 1,654,240
4. 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, 2013 the federal aid
received and expended by the City of Muskegon was $794,000 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 (Federal-Aid Highway Program) 20.205
Proj STP 1261(219) Fed Item HH7944 Contract 12-5241 $ 481,000 $ 481,000
Proj STP 1361(013) Fed Item HH8489 Contract 13-5050 313,000 313,000
Total U.S. Department of Transportation,
Federal Highway Administration (contracted projects) $ 794,000 $ 794,000
City of Muskegon
SCHEDULE OF FINDINGS AND RESPONSES
Year ended June 30, 2013
SECTION I—SUMMARY OF AUDITORS’ RESULTS
A. Financial Statements
1. Type of auditors' report issued: Unmodified
2. Internal control over financial reporting:
• Material weakness(es) identified? yes X 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: Unmodified
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
Grants/Entitlement Grants
14.239 HOME Investment Partnerships 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
SECTION II – FINANCIAL STATEMENT FINDINGS
NONE
SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
NONE
139
140
CLIENT DOCUMENTS
141
City of Muskegon
933 Terrace Street
Muskegon, MI 49440
Phone: (231) 724-6709
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS
October 25, 2013
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, 2012 dated October 23, 2012.
SECTION II – FINANCIAL STATEMENT FINDINGS
Finding 2012-1: MATERIAL WEAKNESS—Year-end Procedures Should Be Improved To
Enhance Year-end Financial Reporting
Condition: Three 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: The recommendation was implemented during the year ended June 30, 2013. No similar
finding was reported during the year ended June 30, 2013.
SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
COMPLIANCE
There were no compliance findings reported in relation to major federal award programs.
SIGNIFICANT DEFICIENCIES
There were no reportable conditions reported in relation to major federal award programs.
Sincerely,
Timothy J. Paul
Finance Director
142
City of Muskegon
933 Terrace Street
Muskegon, MI 49440
Phone: (231) 724-6709
CORRECTIVE ACTION PLAN
October 25, 2013
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,
2013.
Name and address of independent public accounting firm:
Brickley DeLong, P.C.
P.O. Box 999
Muskegon, Michigan 49443
Audit period: June 30, 2013
The findings from the Schedule of Findings and Responses for the year ended June 30, 2013 provided no findings
in either Section II or Section III. Accordingly, there are no matters requiring corrective action as shown below.
SECTION II – FINANCIAL STATEMENT FINDINGS
There were no compliance findings and no significant deficiencies in relation to the financial statement
audit.
SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
There were no compliance findings and no significant deficiencies in relation to the 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
143
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