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City of Muskegon,
Michigan
Comprehensive Annual
Financial Report
For The Fiscal Year Ended June 30, 2016
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CITY OF MUSKEGON,
MICHIGAN
COMPREHENSIVE
ANNUAL FINANCIAL REPORT
FOR THE YEAR ENDED
JUNE 30, 2016
Prepared By
FINANCIAL SERVICES DIVISION
Derrick Smith James Maurer
Finance Director Information Systems Director
Elizabeth Lewis Kathy Coleman
Assistant Finance Director Management Assistant
Kenneth Grant
City Treasurer
Cover Photo: “Sails Ablaze” courtesy of Derrick Smith
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City of Muskegon
TABLE OF CONTENTS
INTRODUCTORY SECTION
Letter of Transmittal .................................................................................................................................. 5
Certificate of Achievement for Excellence in Financial Reporting ......................................................... 11
Organization Chart ................................................................................................................................... 12
List of Principal Officials......................................................................................................................... 13
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 ................................................................................ 78
Budgetary Comparison Schedule—Major Street and Trunkline Fund ................................................. 83
Schedule of Changes in Net Pension Liability and Related Ratios ...................................................... 84
Pension System Schedule of Contributions .......................................................................................... 85
Schedule of Funding Progress – Retiree Healthcare Plan .................................................................... 86
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City of Muskegon
TABLE OF CONTENTS
Other Supplemental Information
Other Governmental Funds
Description of Other Governmental Funds ....................................................................................... 88
Combining Balance Sheet ................................................................................................................. 90
Combining Statement of Revenues, Expenditures and Changes in
Fund Balances ................................................................................................................................ 91
Other Special Revenue Funds
Combining Balance Sheet .............................................................................................................. 92
Combining Statement of Revenues, Expenditures and Changes in
Fund Balances ............................................................................................................................. 93
Budgetary Comparison Schedule—Other Special Revenue Funds ............................................... 94
Other Capital Projects Funds
Combining Balance Sheet .............................................................................................................. 97
Combining Statement of Revenues, Expenditures and Changes in
Fund Balances ............................................................................................................................. 98
Internal Service Funds
Description of Internal Service Funds ............................................................................................... 99
Combining Statement of Net Position ............................................................................................. 100
Combining Statement of Revenues, Expenses and
Changes in Fund Net Position ...................................................................................................... 101
Combining Statement of Cash Flows .............................................................................................. 102
Fiduciary Funds
Description of Fiduciary Funds ....................................................................................................... 103
Agency Funds
Combining Statement of Assets and Liabilities ........................................................................... 104
Statement of Changes in Assets and Liabilities ........................................................................... 105
Component Units
Description of Component Units ..................................................................................................... 107
Combining Balance Sheet ............................................................................................................... 108
Reconciliation of the Governmental Funds Balance Sheet
to the Statement of Net Position ................................................................................................... 109
Combining Statement of Revenues, Expenditures and Changes
in Fund Balances (Deficits) .......................................................................................................... 110
Reconciliation of the Governmental Funds Statement of Revenues,
Expenditures and Changes in Fund Balances (Deficits) to the Statement
of Activities .................................................................................................................................. 111
Schedule of Indebtedness ................................................................................................................... 113
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City of Muskegon
TABLE OF CONTENTS
STATISTICAL SECTION
Financial Trends
Net Assets/Net Position by Component.............................................................................................. 118
Changes in Net Assets/Net Position ................................................................................................... 119
Fund Balances of Governmental Funds .............................................................................................. 121
Changes in Fund Balances of Governmental Funds ........................................................................... 122
Revenue Capacity
Governmental Activities Revenues by Source ................................................................................... 123
Taxable, Assessed and Equalized and Estimated Actual Valuation of Property ................................ 124
Principal Property Taxpayers ............................................................................................................. 125
Property Tax Rates – Direct and Overlapping Government Units ..................................................... 126
Property Tax Levies and Collections .................................................................................................. 127
Segmented Data on Income Tax Filers, Rates and Liability .............................................................. 128
Debt Capacity
Ratio of Outstanding Debt by Type .................................................................................................... 129
Direct and Overlapping Debt .............................................................................................................. 130
Legal Debt Margin Information.......................................................................................................... 131
Revenue Bond Coverage .................................................................................................................... 132
Demographic and Economic Information
Demographic and Economic Statistics ............................................................................................... 133
Principal Employers............................................................................................................................ 134
Operation Information
Full-time Equivalent Government Employees ................................................................................... 135
Operating Indicators by Function/Program ........................................................................................ 136
Capital Asset Statistics by Function/Program .................................................................................... 137
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 ..................................................................................................... 140
Independent Auditors’ Report on Compliance for Each Major
Program and on Internal Control over Compliance Required by
OMB Circular A-133 ...................................................................................................................... 142
Schedule of Expenditures of Federal Awards ...................................................................................... 144
Notes to Schedule of Expenditures of Federal Awards ....................................................................... 146
Schedule of Findings and Responses ................................................................................................... 147
Client Documents
Summary Schedule of Prior Audit Findings ................................................................................... 150
Corrective Action Plan .................................................................................................................... 151
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Affirmative
Action
(231)724-6703
FAX (231)722-
1214
Cemetery
(231)724-6783
FAX (231)726-
5617
City Manager
(231)724-6724
FAX (231)722-
1214 December 5, 2016
Civil Service
(231)724-6716
FAX (231)724-
4405
To the Honorable Mayor, Members of the City Commission and Citizens of the City of
Clerk
(231)724-6705 Muskegon:
FAX (231)724-
4178
Comm. &
Neigh. Services
State law requires that every general purpose local government publish, within six months
(231)724-6717 of the close of each fiscal year, a complete set of audited financial statements. This report
FAX (231)726-
2501 is published to fulfill that requirement for the fiscal year ended June 30, 2016.
Finance
(231)724-6713 Management assumes full responsibility for the completeness and reliability of the
FAX (231)724- information contained in this report, based upon a comprehensive framework of internal
6768
control that it has established for this purpose. Because the cost of internal control should
Fire Department
(231)724-6792
not exceed anticipated benefits, the objective is to provide reasonable, rather than
FAX (231)724- absolute, assurance that the financial statements are free of any material misstatements.
6985
Income Tax Brickley Delong, PC, Certified Public Accountants, have issued an unmodified (“clean”)
(231)724-6770
FAX (231)724- opinion on the City of Muskegon’s financial statements for the year ended June 30, 2016.
6768 The independent auditor’s report is located at the front of the financial section of this
Inspection report.
Services
(231)724-6715
FAX (231)728-
4371 Management’s discussion and analysis (MD&A) immediately follows the independent
Leisure Services
auditor’s report and provides a narrative introduction, overview, and analysis of the basic
(231)724-6704 financial statements. MD&A complements this letter of transmittal and should be read in
FAX (231)724-
1196 conjunction with it.
Mayor’s Office
(231)724-6701
FAX (231)722-
1214
Planning/Zoning
Profile of the government
(231)724-6702
FAX (231)724- The City of Muskegon operates under a commission-manager form of government and
6790 provides a full range of traditional municipal services. Policy-making and legislative
Police authority are vested in the governing board (Commission) consisting of the mayor and six
Department commissioners. Two commissioners are elected at large and each of the four ward
(231)724-6750
FAX (231)722- commissioners is elected by the voters of their respective wards. Commission members
5140
serve four-year terms, with the two at large members elected every four years in odd
Public Works years and the four ward commissioners elected every four years in even years. The
(231)724-4100
FAX (231)722- Mayor is also elected for a four-year term. The Mayor and Commission appoint the City of
4188 Muskegon’s manager.
Treasurer
(231)724-6720
FAX (231)724-
6768
City of Muskegon, 933 Terrace Street, P.O. Box 536, Muskegon, MI 49443-0536
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5
The City of Muskegon provides a full range of services, including police and fire protection; solid waste
collection; parks and recreation activities; the construction and maintenance of streets and roadways;
street snowplowing; traffic control; building inspections; licenses and permits; water distribution and
sewer disposal services; community development; and general administrative support services. The
City also provides treated water to several surrounding communities.
The Commission is required to adopt an initial budget for the fiscal year no later than the last regular
meeting in June preceding the beginning of the fiscal year on July 1. This annual budget serves as the
foundation for the City of Muskegon’s financial planning and control. The budget is prepared by fund,
function (e.g., public safety), and department (e.g., police). The City Manager and department heads
may transfer resources within a department as they see fit. Transfers between departments, however,
need special approval from the Commission.
Local economy
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 Metropolitan Statistical Area (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. 2016 marks the ferry service’s thirteenth 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 Rebel Road, which attracts motorcycle enthusiasts to the City in July, the
Unity Christian Music Festival in August, the Burning Foot Beer Fest and the Irish Fest in
September.
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• 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
age. The Fire Barn Museum takes visitors back to an 1890’s 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.
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, closed its sixty-seven year-old B.C. Cobb
electric generating facility in April 2016 due to age, federal pollution regulations and slowing electric
demand. Although this closure will have an important impact on City revenues and municipal
operations, the taxable values of the property have been tapered over the last several years to help
minimize the impact on the City’s finances.
The local economy has seen a reduction in the unemployment rate which stood at 4.8 percent at the
end of the second quarter of 2015 compared with 5.8 percent at the end of the second quarter of 2015.
According to the September 2016 Business Outlook prepared by the W.E. Upjohn Institute for
Employment Research:
“Nonfarm employment in Muskegon increased by a modest 0.5 percent in the second quarter, driven
by goods-producing employment. The unemployment rate held steady at 4.8 percent. The area’s
economic indicators were mixed, suggesting flat employment conditions into the next quarter.”
The City fully recognizes the magnitude of financial challenges it faces due to the pending loss of its
largest property tax payer. Thus, we have attempted to position ourselves to be in as strong of a
position as possible considering this impending challenge by maintaining a healthy fund balance in the
General Fund.
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Long-term financial planning and major initiatives
Unrestricted fund balance (the total of the assigned and unassigned components of fund balance) in the
general fund at year end was 30.2 percent of total general fund revenues. This amount was well above
the policy guidelines set by the Commission for budgetary and planning purposes (i.e., 13% of total
actual general fund revenue for the preceding year). Adequate fund balances are maintained to allow
the City to continue providing services to the community in case of unexpected emergencies or
requirements and/or economic downturns.
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 closure of the B.C
Cobb electric generation facility. As noted earlier, this facility is the City’s single largest taxpayer and
was closed in April 2016. The City continues actively planning for the revenue loss accompany this
closure and has already made numerous budget adjustments to ensure that high-quality municipal
services will continue to be provided.
Among the City's major initiatives and accomplishments in fiscal year 2015-16 were the following:
• Work was completed to reconstruct both Muskegon Avenue and Webster Avenue (from Ninth
Street to Spring Street). The 10-block stretch of both streets was redone to narrow and add
aesthetic improvements while enhancing the ride quality of the pavement. The road was
removed and replaced and water service lines were also replaced. $3.1 million of the $4.4
million dollar project was paid for with a grant the City received from the state;
• After several years of perseverance, an agreement was reached between various parties and
deed restrictions were lifted by Sappi to allow for development on property formerly owned by
Sappi. Members of Pure Muskegon LLC, a Muskegon investor group, purchased the 120-acre
former Sappi site on Muskegon Lake and plan to redevelop it into residential, recreational and
commercial uses;
• The City created a Downtown Business Improvement District (BID) which aids downtown
businesses with marketing and promotions as well as beautification, lawn maintenance and
sidewalk snow plowing in the downtown;
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• Construction of Midtown Square, which consists of nine new market rate homes in the Nelson
neighborhood, was completed. It is anticipated that these new homes will help to revitalize the
area and increase surrounding property values. One house has been sold and the new owners
have moved in while the other eight houses are actively being marketed for sale;
• Reconstruction of the county’s Muskegon Area Transit System station located in downtown
Muskegon was completed with the official opening of the station in August 2015;
• The City purchased the former Ameribank building in downtown Muskegon and issued a request
for proposals to developers to purchase and redevelop the property for mixed-use. The City has
accepted a proposal from a local developer who is finalizing plans for the project.
Relevant financial policies
The City of Muskegon has adopted a comprehensive set of financial policies used to ensure adequate
protection of the City’s assets from loss, theft, or misuse, and provide adequate accounting data to
allow for preparation of financial statements in conformity with generally accepted accounting principles.
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.
Awards and Acknowledgements
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 (CAFR) for the fiscal year ended June 30, 2015. This was the
30th consecutive year that the City has received this award. In order to be awarded a Certificate of
Achievement, a government must publish an easily readable and efficiently organized CAFR that
satisfies both generally accepted accounting principles and applicable program requirements.
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A Certificate of Achievement for Excellence in Financial Reporting is valid for a period of one year only.
However, we believe our current CAFR continues to meet the Certificate of Achievement for Excellence
in Financial Reporting Program’s requirements, and we are submitting it to the GFOA to determine its
eligibility for another certificate.
The preparation of this report would not have been possible without the skill, effort, and dedication of
the Finance Division, Assistant Finance Director Elizabeth Lewis and the entire city staff. We express
appreciation to those staff members who assisted and contributed to the preparation of this report.
Credit also must be given to the Mayor and Commissioners for their support for maintaining the highest
standards of professionalism in the management of the City of Muskegon’s finances.
Respectfully submitted,
Frank Peterson Derrick Smith
City Manager Finance Director
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CITY OF MUSKEGON
Organization Chart – June 30, 2016
Mayor &
City Commission
City Manager City Attorney
Various Boards &
Commissions
Administrative Public Safety Public Works Community & Economic
Finance Division
Services Division Division Division Development Division
City Clerk & Finance Planning, Zoning &
Police Engineering Code Compliance
Elections Administration Enforcement
Community &
Water & Sewer
Civil Service City Treasurer Fire Neighborhood
Maintenance
Services
Affirmatiave Action Income Tax Building Recreation
Water Filtration
& Risk Management Administration Inspections Services
Information Streets &
Technology Highways
Contract Oversight: Parks &
Assessing, Walker Cemeteries
Arena, Fisherman's
Landing, CATV
Sanitation
Streetlights
Marina & Launch
Ramps
Farmers' Market
Equipment
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COMPREHENSIVE ANNUAL FINANCIAL REPORT
CITY OF MUSKEGON, MICHIGAN
LIST OF PRINCIPAL OFFICIALS
June 30, 2016
ELECTED OFFICIALS
Mayor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stephen J. Gawron
At Large
Vice Mayor-Commissioner. . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . Eric Hood
Ward 1
Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Willie German
Ward 2
Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Debra Warren
Ward 3
Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Byron Turnquist
Ward 4
Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ken Johnson
At Large
Commissioner. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Dan Rinsema-Sybenga
At Large
APPOINTED OFFICIALS
City Manager. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Frank Peterson
City Attorney. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . John C. Schrier
Finance Director. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Derrick Smith
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FINANCIAL SECTION
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BRICKLEY DELONG
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS’ REPORT
December 5, 2016
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, 2016, 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
December 5, 2016
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, 2016, 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 schedules, schedule of changes in net pension liability and related
ratios, pension system schedule of contributions, and schedule of funding progress – retiree healthcare plan on
pages 20 through 32 and 76 through 84 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 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 Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is also not a
required part of the basic financial statements.
18
BRICKLEY DELONG
City Commission
December 5, 2016
Page 3
Other Matters—Continued
Other 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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2016 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,
2016. Please read it in conjunction with the City’s financial statements, which follow this
section.
FINANCIAL HIGHLIGHTS
• The assets/deferred outflows of resources of the City of Muskegon exceeded its
liabilities/deferred inflows of resources by $109,700,415 as of June 30, 2016. Of
the City’s total net position, $1,620,153 (1.5%) 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 $5,367,984 during the year
ended June 30, 2016.
• The City’s governmental funds reported combined ending fund balance of
$13,997,959, a decrease of $1,184,464 (7.8%) from the prior year.
• The City’s General Fund reported a total fund balance of $8,031,309, an increase
of $227,813 from the prior year balance of $7,803,496. The favorable increase is
primarily the result of conservative budgeting.
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 public
representation services, administrative services, financial services, public safety, public
21
works, highways, streets and bridges, community and economic development, culture
and recreation, general administration, and interest on long-term debt. Income taxes,
federal grants, property taxes and revenues from the State of Michigan finance most of
these activities.
Also included in the government-wide statements are the City’s business-type activities:
water, sewer and marina operations.
Fund Financial Statements
The fund financial statements provide more detailed information about the City’s major
funds—not the City as a whole. Funds are accounting devices that the City uses to
keep track of specific sources of funding and spending for particular purposes.
The City has the following kinds of funds:
• Governmental funds—Most of the City’s basic services are included in
governmental funds, which focus on (1) how cash and other financial assets that
can readily be converted to cash flow in and out and (2) the balances left at year-
end that are available for spending. Consequently, the governmental fund
statements provide a detailed short-term view that helps the user determine
whether there are more or fewer financial resources that can be spent in the near
future to finance the City’s programs. Because this information does not
encompass the additional long-term focus of the government-wide statements, we
provide additional information on the subsequent page of the governmental funds
statements that explain the relationship (or differences) between them.
• Proprietary funds—Services for which the City charges customers a fee and are
intended to be self-supporting are generally reported in proprietary funds. The
City uses three proprietary funds: water, sewer, and marina and launch ramp.
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.
22
• 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
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 $109,700,415 as of June 30, 2016. This is a decrease of
$5,367,984 from reported net position for the prior year. An overview of the City’s net
position follows:
City's Net Position
(In Thousands of Dollars)
Governmental Business-Type
Activities Activities Total Percentage
6/30/2016 6/30/2015 6/30/2016 6/30/2015 6/30/2016 6/30/2015 Change
Current and other assets $20,864 $24,046 $9,237 $9,160 $30,101 $33,206 -9.35%
Capital assets 70,647 70,165 48,935 50,541 119,582 120,706 -0.93%
Deferred outflow s of resources 9,758 1,575 678 109 10,436 1,684 519.71%
Total Assets and Deferred Outflow s of Resources 101,269 95,786 58,850 59,810 160,119 155,596 2.91%
Long-term liabilities 32,798 20,897 10,420 10,990 43,218 31,887 35.53%
Other liabilities 3,844 6,075 3,034 2,566 6,878 8,641 -20.40%
Deferred inflow s of resources 302 - 21 - 323 - 100.00%
Total Liabilities and Deferred Outflow s of Resources 36,944 26,972 13,475 13,556 50,419 40,528 24.41%
Net Position
Net investment in capital assets 64,327 63,515 39,014 39,231 103,341 102,746 0.58%
Restricted 4,140 4,807 599 600 4,739 5,407 -12.35%
Unrestricted -4,142 492 5,762 6,423 1,620 6,915 -76.57%
Total Net Position $64,325 $68,814 $45,375 $46,254 $109,700 $115,068 -4.67%
The bulk of the City’s net position ($103,340,420 or 94%) represents investments in
capital assets net of accumulated 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 4.3% ($4,739,842) of the City’s net position are legally restricted as to use.
Unrestricted net position ($1,620,153) represents assets that may be used to meet the
23
City’s operating needs and ongoing obligations. The City’s unrestricted net position
decreased ($5,295,301) during the year.
Effective July 1, 2014, the City implemented Governmental Accounting Standards
Board (GASB) Statement No. 68 which is an accounting change that requires the
recording of a net pension liability to be reported in the financial statements of state and
local governmental employers. For the fiscal year ended June 30, 2016, the second
year of the accounting change, the impact of GASB 68 on the City’s financial
statements was an additional liability of $12,796,540 which was added to the liability of
$14,607,785 that was recorded in the prior year for a total of $27,404,325 being
recorded as a net pension liability. See Note J of the notes to the basic financial
statements for additional information on the impact of this accounting change on the
City’s financial statements.
Changes in net position. The City’s total revenues were $51,311,883 for the year
ended June 30, 2016. This represents a 6.5% increase over total revenues collected
during the prior fiscal year. About 38% of the City’s revenue stream came from charges
to users of specific services such as water or sewer. Another 10% came from grants
from the state and federal governments and 33% 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, 2016 was
$56,679,867. This represents a 16% increase from reported expenses for the last fiscal
year ended June 30, 2015. 72% of the City’s expenses were for governmental activities
such as police and fire protection, streets, parks, and general administration. The
remaining 28% represents the costs of the City’s business-type activities, specifically,
water, sewer and marina operations.
The table on the following page (Changes in City’s Net Position) 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 $4,489,022 while net
position for business-type activities decreased by $878,962. For governmental
activities, most of these changes are related to the increased net pension liability. For
business-type activities, the changes similarly represent the impact of the increased net
pension liability.
24
Changes in City’s Net Position
(In thousands of dollars)
Governmental Business-Type
Activities Activities Total Percentage
6/30/2016 6/30/2015 6/30/2016 6/30/2015 6/30/2016 6/30/2015 Change
Program revenues
Charges for services $5,217 $4,470 $14,078 $12,995 $19,295 $17,465 10.48%
Operating grants and contributions 5,331 5,071 - - 5,331 5,071 5.13%
Capital grants and contributions 3,805 3,497 765 475 4,570 3,972 15.06%
General revenues
Property taxes 8,366 7,894 - - 8,366 7,894 5.98%
Income taxes 8,387 8,478 - - 8,387 8,478 -1.07%
State shared revenues 4,051 3,989 - - 4,051 3,989 1.55%
All other 1,286 1,296 26 30 1,312 1,326 -1.06%
Total revenues 36,443 34,695 14,869 13,500 51,312 48,195 6.47%
Governmental activities expenses
Public representation 1,108 940 - - 1,108 940 17.87%
Administrative services 663 615 - - 663 615 7.80%
Financial services 2,331 2,548 - - 2,331 2,548 -8.52%
Public safety 17,119 14,243 - - 17,119 14,243 20.19%
Public w orks 3,109 3,184 - - 3,109 3,184 -2.36%
Highw ays, streets and bridges 7,252 7,166 - - 7,252 7,166 1.20%
Community and economic development 5,223 2,712 - - 5,223 2,712 92.59%
Culture and recreation 3,552 1,807 - - 3,552 1,807 96.57%
General administration 327 389 - - 327 389 -15.94%
Interest on long-term debt 248 271 - - 248 271 -8.49%
Business-type activities expenses
Sew er - - 8,669 8,461 8,669 8,461 2.46%
Water - - 6,751 6,047 6,751 6,047 11.64%
Marina and launch ramp - - 328 306 328 306 7.19%
Total expenses 40,932 33,875 15,748 14,814 56,680 48,689 16.41%
Change in net position (4,489) 820 (879) (1,314) (5,368) (494) 986.64%
Net position at beginning of year 68,814 67,994 46,254 47,568 115,068 115,562 -0.43%
Net position at end of year $64,325 $68,814 $45,375 $46,254 $109,700 $115,068 -4.67%
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,
2016 was $40,931,740.
• The net cost that City taxpayers paid for these activities through local property
taxes and income taxes was $16,752,987, or about 41% 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.
25
Net Cost of Selected City Functions
(in thousands of dollars)
Total Cost of Services Net Cost of Services
6/30/2016 6/30/2015 % Change 6/30/2016 6/30/2015 % Change
Governmental activities
Public safety $17,119 $14,243 20.19% $15,706 $12,926 21.51%
Public w orks 3,109 3,184 -2.36% 2,720 2,612 4.13%
Highw ays, streets and bridges 7,252 7,166 1.20% 887 (79) -1222.78%
Community and economic development 5,223 2,712 92.59% 3,421 997 243.13%
Culture and recreation 3,552 1,807 96.57% 911 1,424 -36.03%
All other 4,677 4,763 -1.81% 2,935 2,957 -0.74%
Total governmental activities $40,932 $33,875 20.83% $26,580 $20,837 27.56%
Business-Type Activities
The financial goal of the City’s business-type activities (i.e. water, sewer and marina
and launch ramp operations) is to operate on a self-supporting basis without making
significant profit or needing general tax subsidies. For the fiscal year ended June 30,
2016, the City’s total business-type activities realized an overall decrease in net position
of $878,962.
Sewer Fund net position decreased $1,534,681 primarily as result of increased County
wastewater treatment costs. The Water Fund saw a net position increase of $792,377.
This is primarily attributable to the managing costs and achieving economies of scale
with the addition of Fruitport Township and the City of Norton Shores as wholesale
customers. Marina and Launch Ramp Fund net position decreased $37,974 due to the
higher costs of operations.
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, 2016
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 unassigned fund balance for the last five years.
26
Unassigned Fund
Year-End
Year-to-Year % Prior Year’s Balance as a % of
Year Ended Unassigned
Fund Balance Change Revenues Prior Year Revenues
(Policy TargeP=13%)
6C30C2016 $6,098,977 3.67% $24,890,399 24.50%
6C30C2015 5,883,318 7.06% 23,960,758 24.55%
6C30C2014 5,495,145 19.10% 23,407,409 23.48%
6C30C2013 4,613,722 15.92% 24,122,760 19.13%
6C30C2012* 3,980,191 17.95% 24,027,329 16.57%
*As restated
For the year ended June 30, 2016, General Fund revenues were $186,388 lower than
the final amended budget estimate. This variance is primarily due to lower than
expected local income tax revenues.
General Fund expenditures were $1,519,509 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) position turnover and
the accompanying lag in replacement hiring time.
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, 2016, the fund balance of the Major
Street and Trunkline Fund increased $38,978 which is attributable to a reduction in
expenditures for street projects during the year.
CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital Assets
As of June 30, 2016, the City had invested $119,582,794 in a variety of capital assets,
including land, streets, equipment, buildings, water and sewer lines, and vehicles. This
is a decrease of $1,122,632 from capital assets reported as of June 30, 2015. The
decrease is due to normal depreciation of assets offset by current year additions. Note
F of the notes to the basic financial statements provides detailed information on the
City’s capital asset investment.
27
Long-Term Debt
Bond Ratings
At June 30, 2016, the City had $17,753,461 in bonds and
The City’s limited full faith and
other long-term obligations outstanding. This represents credit bonds (bonds guaranteed
an 8.0% decrease from the prior year. The City did not by the City’s taxing powers)
issue any new debt during the fiscal year. were upgraded by Standard &
Poor’s from a rating of “A+” to
“AA-“ in early 2016. The City’s
Additional information concerning the City’s long-term debt Water System revenue bonds
is presented in Note H to the basic financial statements. carry the “AA-“ S&P rating.
City’s Long Term Debt – Bonds and Other Obligations
(In thousands of dollars)
Governmental Business-Type
Activities Activities Total Percentage
6/30/2016 6/30/2015 6/30/2016 6/30/2015 6/30/2016 6/30/2015 Change
Due w ithin one year $511 $632 $1,429 $1,390 $1,940 $2,022 -4.06%
Due in more than one year 7,175 7,239 8,638 10,041 15,813 17,280 -8.49%
Total bonds & other obligations $7,686 $7,871 $10,067 $11,431 $17,753 $19,302 -8.03%
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 $4,966,420 at year-end as shown in the table below. This represents a
decrease of 11.9% from the prior year.
Debt issued by component units typically is secured by the limited full faith and credit of
the City and so is an important consideration in assessing the City’s overall fiscal health.
Additional information concerning component units’ long-term debt is presented in Note
H to the basic financial statements and is summarized as follows:
Component Unit Long Term Debt – Bonds and Other Obligations
(In thousands of dollars)
Downtown Development Local Development
Total Percentage
Authority Finance Authority
6/30/2016 6/30/2015 6/30/2016 6/30/2015 6/30/2016 6/30/2014 Change
Due w ithin one year $310 $300 $345 $335 $655 $635 3.15%
Due in more than one year 1,340 1,655 2,971 3,348 4,311 5,003 -13.83%
Total bonds & other obligations $1,650 $1,955 $3,316 $3,683 $4,966 $5,638 -11.92%
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ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES
The City’s fiscal year 2016-17 capital budget anticipates spending $12,041,050 for
capital projects, consisting of street improvements, water and sewer system
improvements, scheduled equipment replacements, improvements to the L. C. Walker
Arena, the construction of additional market rate houses in a city neighborhood and the
replacement of fire department rescue equipment. These improvements will be funded
by anticipated grants ($3,999,070), revenues generated from operations, contemplated
debt financing ($1,750,000), and fund balance.
From an operating standpoint, the City’s 2016-17 budget will be relatively stable while
the City attempts to maintain a healthy fund balance and allow time to plan for and
address economic challenges with a long-term solution:
• The full-time personnel complement will be increased from 231 positions to 232
positions for a net gain of 1.
• Some user fees will be increased and new fees recommended during the course
of the year.
• The City will continue to look for opportunities to partner with other entities to
deliver quality services in a cost effective manner (e.g. Farmers’ Market kitchen
management, Marsh Field and recreation programs).
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 decreased 1.5% from $8,274,666 for the year ended June 30,
2015 to $8,151,902 for the year ended June 30, 2016. For 2016-17, the City has
estimated income tax revenue to be $8,850,000.
29
City Income Percent
Year
Tax Revenues Change
6/30/2016 $8,151,902 -1.5%
6/30/2015 8,274,666 5.7%
6/30/2014 7,831,423 4.3%
6/30/2013 7,506,472 1.3%
6/30/2012 7,412,804 12.3%
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 2016-17, the City tax levy will be at 10 mills for general operations and 3 mills for
sanitation service. We project that $7,092,000 in total property tax revenue will be
collected during fiscal year 2016-17.
Based on recent data from the County Equalization Department, there is a decrease of
about 4% in taxable values for 2016. The B.C. Cobb Plant which was placed out of
service in April 2016 is a component of the property tax decline along with the state’s
phase out of personal property taxes.
It should be noted that several property tax appeals are currently 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 as follows:
30
State Shared Percent
Revenues Change
Year
6/30/2016 $3,886,514 -0.1%
6/30/2015 3,889,178 2.0%
6/30/2014 3,813,221 3.0%
6/30/2013 3,700,971 3.4%
6/30/2012 3,577,848 -7.0%
Erosion of state shared revenues (both from economic factors and from legislative
action) constitutes a major on-going concern for City finances.
For 2016-17, the City projects $4,022,925 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 Percent
Year from State Change
6/30/2016 $3,981,345 10.8%
6/30/2015 3,592,756 1.0%
6/30/2014 3,556,507 10.8%
6/30/2013 3,208,769 1.0%
6/30/2012 3,176,984 -2.4%
During the year, the state legislature considered an overhaul of the transportation
funding system. Based on recent legislative changes, the City may expect to begin
seeing changes that will increase street funding in future years. However, at this time,
the City is not projecting any significant increase in street revenues for fiscal year 2016-
17.
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 $13,399,400 during the year ended
31
June 30, 2016. Charges to customers are based on the amount of metered services
used times rates periodically set by the City Commission. Water rates are currently
planned to remain unchanged. The City began providing treated water to the City of
Norton Shores and Fruitport Charter Township in May 2015. The addition of these two
new large municipal customers allows the spreading of water treatment costs over a
larger customer base while remaining well within the plant’s rated treatment capacity.
Due to the impact of continued increases in wastewater treatment charges from the
Muskegon County Wastewater Treatment System, the City Commission passed a
resolution effective July 1, 2016, which ties the sewer rate the City will charge to its
customers to a multiplier of the rate that the county bills the City for wastewater
treatment. This rate change is expected to help maintain the financial viability of the
City’s sewer system.
CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, and
investors and creditors with a general overview of the City’s finances and to
demonstrate the City’s accountability for the money it receives. If you have questions
about this report, need additional financial information, or wish to obtain separate
financial statements for the City’s component units, contact the City’s Finance
Department at (231) 724-6713 or by e-mail (finance@shorelinecity.com).
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FINANCIAL STATEMENTS
33
City of Muskegon
STATEMENT OF NET POSITION
June 30, 2016
Governmental Business-type Component
Activities Activities Total Units
ASSETS
Current assets
Cash and investments $ 15,033,083 $ 4,611,411 $ 19,644,494 $ 228,990
Assets managed by others 1,035,781 - 1,035,781 -
Receivables 2,145,329 2,427,460 4,572,789 -
Due from other governmental units 1,918,051 319,602 2,237,653 -
Internal balances (1,070,842) 1,070,842 - -
Inventories 20,857 103,997 124,854 -
Prepaid items 473,750 103,332 577,082 -
Total current assets 19,556,009 8,636,644 28,192,653 228,990
Noncurrent assets
Restricted cash and investments - 599,500 599,500 -
Advances to component units 1,221,119 - 1,221,119 -
Special assessments receivable, less amounts due within one year 1,804 - 1,804 -
Notes receivable, less amounts due within one year 84,837 - 84,837 -
Capital assets, net
Nondepreciable 17,116,523 1,330,887 18,447,410 400,000
Depreciable 53,530,780 47,604,604 101,135,384 1,625,770
Total noncurrent assets 71,955,063 49,534,991 121,490,054 2,025,770
Total assets 91,511,072 58,171,635 149,682,707 2,254,760
DEFERRED OUTFLOWS OF RESOURCES
Related to pension 9,758,362 678,389 10,436,751 -
Total assets and deferred outflows of resources 101,269,434 58,850,024 160,119,458 2,254,760
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities 3,154,483 534,785 3,689,268 20,336
Due to other governmental units 26,797 1,070,051 1,096,848 -
Unearned revenues - unused Farmers Market tokens 107,310 - 107,310 -
Unearned revenues - expenditure-driven grants 44,323 - 44,323 -
Bonds and other obligations, due within one year 511,163 1,429,300 1,940,463 655,000
Total current liabilities 3,844,076 3,034,136 6,878,212 675,336
Noncurrent liabilities
Advances from primary government - - - 1,221,119
Bonds and other obligations, less amounts due within one year 7,174,720 8,638,278 15,812,998 4,311,420
Net pension liability 25,623,044 1,781,281 27,404,325 -
Total noncurrent liabilities 32,797,764 10,419,559 43,217,323 5,532,539
Total liabilities 36,641,840 13,453,695 50,095,535 6,207,875
DEFERRED INFLOWS OF RESOURCES
Related to pension 302,480 21,028 323,508 -
Total liabilities and deferred inflows of resources 36,944,320 13,474,723 50,419,043 6,207,875
NET POSITION
Net investment in capital assets 64,326,891 39,013,529 103,340,420 (1,290,318)
Restricted
Highways, streets and bridges 2,146,769 - 2,146,769 -
Debt service - 599,500 599,500 -
L.C. Walker Arena 247,028 - 247,028 -
Law enforcement 138,827 - 138,827 -
Perpetual care
Expendable 104,603 - 104,603 -
Non-expendable 1,486,593 - 1,486,593 -
Other purposes 16,522 - 16,522 -
Unrestricted (4,142,119) 5,762,272 1,620,153 (2,662,797)
Total net position $ 64,325,114 $ 45,375,301 $ 109,700,415 $ (3,953,115)
The accompanying notes are an integral part of this statement.
34
City of Muskegon
STATEMENT OF ACTIVITIES
For the year ended June 30, 2016
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 $ 1,107,551 $ 226,559 $ - $ - $ (880,992) $ - $ (880,992) $ -
Administrative services 663,077 474,737 26,500 - (161,840) - (161,840) -
Financial services 2,331,236 925,474 36,000 - (1,369,762) - (1,369,762) -
Public safety 17,118,742 1,248,911 163,936 - (15,705,895) - (15,705,895) -
Public works 3,109,454 379,877 10,000 - (2,719,577) - (2,719,577) -
Highways, streets and bridges 7,251,882 234,861 3,984,222 2,146,058 (886,741) - (886,741) -
Community and economic development 5,223,431 444,632 1,095,831 261,717 (3,421,251) - (3,421,251) -
Culture and recreation 3,551,692 1,229,067 14,336 1,396,881 (911,408) - (911,408) -
General administration 326,452 52,512 - - (273,940) - (273,940) -
Interest on long-term debt 248,223 - - - (248,223) - (248,223) -
Total governmental activities 40,931,740 5,216,630 5,330,825 3,804,656 (26,579,629) - (26,579,629) -
Business-type activities
Sewer 8,669,469 6,305,554 - 765,363 - (1,598,552) (1,598,552) -
Water 6,750,826 7,485,013 - - - 734,187 734,187 -
Marina and launch ramp 327,832 287,547 - - - (40,285) (40,285) -
Total business-type activities 15,748,127 14,078,114 - 765,363 - (904,650) (904,650) -
35
Total primary government $ 56,679,867 $ 19,294,744 $ 5,330,825 $ 4,570,019 (26,579,629) (904,650) (27,484,279) -
Component units
Local Development Finance Authority - SmartZone $ 252,924 $ - $ - $ 340,000 - - - 87,076
Downtown Development Authority 29,607 - - 175,000 - - - 145,393
Tax Increment Finance Authority 36,000 - - - - - - (36,000)
Brownfield Redevelopment Authority I 34,696 - - - - - - (34,696)
Brownfield Redevelopment Authority II 142,745 - - - - - - (142,745)
Total component units $ 495,972 $ - $ - $ 515,000 - - - 19,028
General revenues
Property taxes 8,366,212 - 8,366,212 653,974
Income taxes 8,386,775 - 8,386,775 -
Cable franchise agreement 372,117 - 372,117 -
Grants and contributions not restricted to specific programs 4,051,050 - 4,051,050 -
Unrestricted investment earnings 189,408 25,688 215,096 1,042
Miscellaneous 626,014 - 626,014 -
Gain on sale of capital asset 99,031 - 99,031 -
Total general revenues 22,090,607 25,688 22,116,295 655,016
Change in net position (4,489,022) (878,962) (5,367,984) 674,044
Net position at July 1, 2015 68,814,136 46,254,263 115,068,399 (4,627,159)
Net position at June 30, 2016 $ 64,325,114 $ 45,375,301 $ 109,700,415 $ (3,953,115)
The accompanying notes are an integral part of this statement.
City of Muskegon
BALANCE SHEET
Governmental Funds
June 30, 2016
Major Street Other Total
General and Trunkline Governmental Governmental
Fund Fund Funds Funds
ASSETS
Cash and investments $ 7,738,415 $ 1,798,091 $ 2,444,498 $ 11,981,004
Assets managed by others - - 1,035,781 1,035,781
Receivables
Accounts and loans (net of allowance for uncollectibles) 145,879 5,040 192,122 343,041
Property taxes 60,593 - - 60,593
Income taxes 1,533,533 - - 1,533,533
Special assessments - 48,824 32,981 81,805
Due from other governmental units 768,158 607,040 542,853 1,918,051
Due from other funds 263,951 - - 263,951
Advances to component units - - 407,041 407,041
Prepaid items 222,332 35,752 4,848 262,932
Total assets $ 10,732,861 $ 2,494,747 $ 4,660,124 $ 17,887,732
LIABILITIES
Accounts payable $ 1,596,897 $ 145,306 $ 618,396 $ 2,360,599
Accrued liabilities 317,793 8,921 20,860 347,574
Due to other governmental units 14,552 - - 14,552
Due to other funds - - 263,951 263,951
Unearned revenues - unused Farmers Market tokens 107,310 - - 107,310
Unearned revenues - expenditure-driven grants - - 44,323 44,323
Total liabilities 2,036,552 154,227 947,530 3,138,309
DEFERRED INFLOWS OF RESOURCES
Unavailable revenues - income taxes 665,000 - - 665,000
Unavailable revenues - special assessments - 48,824 32,981 81,805
Unavailable revenues - other long-term receivables - - 4,659 4,659
Total deferred inflows of resources 665,000 48,824 37,640 751,464
FUND BALANCES
Nonspendable
Prepaid items 222,332 35,752 4,848 262,932
Long-term loans receivable - - 80,178 80,178
Perpetual care 10,000 - 1,476,593 1,486,593
Restricted
Highways, streets and bridges - 2,255,944 232,686 2,488,630
L.C. Walker Arena - - 247,028 247,028
Law enforcement - - 138,827 138,827
Perpetual care - - 104,603 104,603
Other purposes - - 16,522 16,522
Assigned for capital projects and public improvements 1,700,000 - 1,373,669 3,073,669
Unassigned 6,098,977 - - 6,098,977
Total fund balances 8,031,309 2,291,696 3,674,954 13,997,959
Total liabilities, deferred inflows of
resources and fund balances $ 10,732,861 $ 2,494,747 $ 4,660,124 $ 17,887,732
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, 2016
Total fund balance—governmental funds $ 13,997,959
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 $ 128,455,817
Accumulated depreciation (59,942,137) 68,513,680
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 665,000
Special assessments 81,804
Other long-term receivables 4,659 751,463
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 (46,651)
Bonds and notes payable (6,320,412)
Compensated absences (1,263,543)
Net pension liability and related deferred outflows/inflows of resources (15,475,518) (23,106,124)
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 5,238,978
Internal balances representing the cumulative difference between
actual costs and amounts charged to business-type activities (1,070,842) 4,168,136
Net position of governmental activities $ 64,325,114
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, 2016
Major Street Other Total
General and Trunkline Governmental Governmental
Fund Fund Funds Funds
REVENUES
Taxes $ 16,178,761 $ - $ - $ 16,178,761
Licenses and permits 1,443,144 - - 1,443,144
Intergovernmental revenues
Federal 72,521 239,952 1,111,421 1,423,894
State 4,042,465 5,165,137 1,044,292 10,251,894
Local 36,000 - - 36,000
Charges for services 2,533,448 47,127 888,363 3,468,938
Fines and forfeitures 459,181 - - 459,181
Interest and rental income 383,925 12,828 33,926 430,679
Income from assets managed by others - - 24,992 24,992
Other 671,669 83,086 756,207 1,510,962
Total revenues 25,821,114 5,548,130 3,859,201 35,228,445
EXPENDITURES
Current
Public representation services 1,064,503 - - 1,064,503
Administrative services 577,454 - - 577,454
Financial services 2,068,208 - - 2,068,208
Public safety 13,456,299 - 20,258 13,476,557
Public works 2,833,029 - 31,849 2,864,878
Highways, streets and bridges - 5,277,781 1,400,236 6,678,017
Community and economic development 1,878,328 - - 1,878,328
Culture and recreation 1,662,570 - 1,437,768 3,100,338
Other governmental functions 305,807 - - 305,807
Debt service
Principal 70,000 190,000 168,199 428,199
Interest and fees 208,176 41,371 7,969 257,516
Bond issuance costs 97,578 - - 97,578
Capital outlay 185,895 - 3,643,166 3,829,061
Total expenditures 24,407,847 5,509,152 6,709,445 36,626,444
Excess of revenues over (under) expenditures 1,413,267 38,978 (2,850,244) (1,397,999)
OTHER FINANCING SOURCES (USES)
Proceeds from sale of capital assets - - 190,957 190,957
Refunding bonds issued 4,535,000 - - 4,535,000
Premium on refunding bonds issued 368,903 - - 368,903
Payment to refunded bond escrow agent (4,806,325) - - (4,806,325)
Transfers in 35,132 - 1,527,962 1,563,094
Transfers out (1,318,164) - (319,930) (1,638,094)
Total other financing sources (uses) (1,185,454) - 1,398,989 213,535
Net change in fund balances 227,813 38,978 (1,451,255) (1,184,464)
Fund balances at July 1, 2015 7,803,496 2,252,718 5,126,209 15,182,423
Fund balances at June 30, 2016 $ 8,031,309 $ 2,291,696 $ 3,674,954 $ 13,997,959
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, 2016
Net change in fund balances—total governmental funds $ (1,184,464)
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 $ (4,593,912)
Capital outlay 3,867,579 (726,333)
Donations of capital assets increase net position in the Statement of Activities, but do
not appear in the governmental funds because they are not financial resources. 1,396,881
Revenues reported in the Statement of Activities that do not provide current
financial resources are not reported as revenues in the governmental funds. (95,716)
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.
Issuance of long-term debt (4,535,000)
Premium on long-term debt issued (368,903)
Repayment of principal on long-term debt 5,243,199 339,296
Changes in accrual of interest and amortization of premiums and discounts
Change in accrued interest payable 10,182
Amortization of premiums and discounts (9,564) 618
Some expenses 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 compensated absences (132,650)
Change in net pension liability and related deferred outflows/inflows of resources (3,908,779) (4,041,429)
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 (276,559)
Change in internal balances representing the current year difference
between actual costs and amounts charged to business-type activities 98,684 (177,875)
Change in net position of governmental activities $ (4,489,022)
The accompanying notes are an integral part of this statement.
39
City of Muskegon
STATEMENT OF NET POSITION
Proprietary Funds
June 30, 2016
Governmental
Activities -
Business-type Activities - Enterprise Funds Internal
Marina and Service
Sewer Water Launch Ramp Total Funds
ASSETS
Current assets
Cash and investments $ 1,428,302 $ 2,780,192 $ 402,917 $ 4,611,411 $ 3,052,079
Accounts receivable 1,040,325 1,358,669 28,466 2,427,460 212,998
Due from other governmental units 277,420 42,182 - 319,602 -
Inventories 17,751 86,246 - 103,997 20,857
Prepaid items 42,566 58,435 2,331 103,332 210,818
Total current assets 2,806,364 4,325,724 433,714 7,565,802 3,496,752
Noncurrent assets
Restricted cash and investments - 599,500 - 599,500 -
Advances to component units - - - - 814,078
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 21,524,875 67,795,895 2,322,488 91,643,258 1,559,334
Machinery and equipment 83,643 2,881,519 39,080 3,004,242 8,363,879
Construction in progress - 1,188,637 - 1,188,637 -
Less accumulated depreciation (9,763,260) (36,256,735) (2,911,866) (48,931,861) (8,156,305)
Net capital assets 11,861,446 35,712,816 1,361,229 48,935,491 2,133,623
Total noncurrent assets 11,861,446 36,312,316 1,361,229 49,534,991 2,947,701
Total assets 14,667,810 40,638,040 1,794,943 57,100,793 6,444,453
DEFERRED OUFLOWS OF RESOURCES
Related to pension 156,551 521,838 - 678,389 417,470
Total assets and deferred outflows of resources 14,824,361 41,159,878 1,794,943 57,779,182 6,861,923
LIABILITIES
Current liabilities
Accounts payable 136,244 269,371 19,274 424,889 370,767
Accrued liabilities 12,885 96,455 556 109,896 28,892
Due to other governmental units 1,070,051 - - 1,070,051 12,244
Bonds and other obligations, due within one year 7,700 1,421,300 300 1,429,300 17,000
Total current liabilities 1,226,880 1,787,126 20,130 3,034,136 428,903
Noncurrent liabilities
Bonds and other obligations, less amounts due within one year 38,274 8,598,287 1,717 8,638,278 84,928
Net pension liability 411,065 1,370,216 - 1,781,281 1,096,173
Total noncurrent liabilities 449,339 9,968,503 1,717 10,419,559 1,181,101
Total liabilities 1,676,219 11,755,629 21,847 13,453,695 1,610,004
DEFERRED INFLOWS OF RESOURCES
Related to pension 4,853 16,175 - 21,028 12,941
Total liabilities and deferred inflows of resources 1,681,072 11,771,804 21,847 13,474,723 1,622,945
NET POSITION
Net investment in capital assets 11,861,446 25,790,854 1,361,229 39,013,529 2,133,623
Restricted for debt service - 599,500 - 599,500 -
Unrestricted 1,281,843 2,997,720 411,867 4,691,430 3,105,355
Total net position $ 13,143,289 $ 29,388,074 $ 1,773,096 44,304,459 $ 5,238,978
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 1,070,842
Net position of business-type activities $ 45,375,301
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, 2016
Governmental
Activities -
Business-type Activities - Enterprise Funds Internal
Marina and Service
Sewer Water Launch Ramp Total Funds
OPERATING REVENUES
Charges for services $ 6,183,805 $ 7,215,595 $ 273,635 $ 13,673,035 $ 8,194,396
Other 121,749 269,418 13,912 405,079 66,905
Total operating revenues 6,305,554 7,485,013 287,547 14,078,114 8,261,301
OPERATING EXPENSES
Administration 438,534 897,399 4,959 1,340,892 367,517
Insurance premiums and claims - - - - 4,416,046
Wastewater treatment 5,749,839 - - 5,749,839 -
Wastewater maintenance 1,972,093 - - 1,972,093 -
Filtration plant operations - 1,731,553 - 1,731,553 -
Water distribution - 1,831,124 - 1,831,124 -
Other operations - - 211,303 211,303 3,500,037
Depreciation 455,546 1,987,319 111,170 2,554,035 380,993
Total operating expenses 8,616,012 6,447,395 327,432 15,390,839 8,664,593
Operating income (loss) (2,310,458) 1,037,618 (39,885) (1,312,725) (403,292)
NONOPERATING REVENUES (EXPENSES)
Investment earnings 10,414 13,363 1,911 25,688 43,109
Gain on sale of capital assets - - - - 8,624
Interest expense - (258,604) - (258,604) -
Total nonoperating revenue (expenses) 10,414 (245,241) 1,911 (232,916) 51,733
Income (loss) before contributions and transfers (2,300,044) 792,377 (37,974) (1,545,641) (351,559)
CAPITAL CONTRIBUTIONS AND TRANSFERS
Capital contributions 765,363 - - 765,363 -
Transfers in - - - - 75,000
Total capital contributions and transfers 765,363 - - 765,363 75,000
Change in net position (1,534,681) 792,377 (37,974) (780,278) (276,559)
Net position at July 1, 2015 14,677,970 28,595,697 1,811,070 5,515,537
Net position at June 30, 2016 $ 13,143,289 $ 29,388,074 $ 1,773,096 $ 5,238,978
Adjustment for the net effect of the current year activity between
the internal service funds and the enterprise funds (98,684)
Change in net position of business-type activities $ (878,962)
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, 2016
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 $ 5,956,865 $ 6,806,070 $ 283,786 $ 13,046,721 $ 56,501
Receipts from interfund services provided 12,872 146,146 - 159,018 7,016,833
Other receipts - - - - 1,210,258
Payments to suppliers (6,549,469) (2,253,091) (173,042) (8,975,602) (6,119,862)
Payments to employees (517,936) (1,358,685) (22,822) (1,899,443) (1,302,293)
Payments for interfund services used (498,300) (648,665) (23,824) (1,170,789) (851,912)
Net cash provided by (used for) operating activities (1,595,968) 2,691,775 64,098 1,159,905 9,525
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers in - - - - 75,000
Advances to component units - - - - 76,722
Net cash provided by noncapital financing activities - - - - 151,722
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Capital contributions 765,363 - - 765,363 -
Purchases of capital assets (91,256) (818,599) (39,080) (948,935) (192,913)
Principal paid on capital debt - (1,370,000) - (1,370,000) -
Interest paid on capital debt - (283,360) - (283,360) -
Proceeds from sale of capital assets - - - - 8,624
Net cash provided by (used for) capital and related financing activities 674,107 (2,471,959) (39,080) (1,836,932) (184,289)
CASH FLOW FROM INVESTING ACTIVITIES
Investment earnings 10,414 13,363 1,911 25,688 43,109
Net increase (decrease) in cash and investments (911,447) 233,179 26,929 (651,339) 20,067
Cash and investments July 1, 2015 2,339,749 3,146,513 375,988 5,862,250 3,032,012
Cash and investments at June 30, 2016 $ 1,428,302 $ 3,379,692 $ 402,917 $ 5,210,911 $ 3,052,079
Reconciliation of cash and investments to the Statement of Net Position
Cash and investments $ 1,428,302 $ 2,780,192 $ 402,917 $ 4,611,411 $ 3,052,079
Restricted cash and investments - 599,500 - 599,500 -
$ 1,428,302 $ 3,379,692 $ 402,917 $ 5,210,911 $ 3,052,079
Reconciliation of operating income (loss) to net cash provided by (used for)
operating activities
Operating income (loss) $ (2,310,458) $ 1,037,618 $ (39,885) $ (1,312,725) $ (403,292)
Adjustments to reconcile operating income (loss) to net cash provided by
(used for) operating activities
Depreciation expense 455,546 1,987,319 111,170 2,554,035 380,993
Bad debt expense 8,969 5,981 - 14,950 -
Change in assets and liabilities
Receivables (344,786) (538,778) (3,761) (887,325) 22,291
Inventories 19,648 28,810 - 48,458 3,303
Prepaid items 130 (1,972) (167) (2,009) 79,705
Accounts payable 507,390 (81,830) (3,846) 421,714 (265,539)
Accrued liabilities 67,593 254,627 587 322,807 192,064
Net cash provided by (used for) operating activities $ (1,595,968) $ 2,691,775 $ 64,098 $ 1,159,905 $ 9,525
The accompanying notes are an integral part of this statement.
42
City of Muskegon
STATEMENT OF FIDUCIARY ASSETS AND LIABILITIES
Fiduciary Funds
June 30, 2016
Agency
Funds
ASSETS
Cash and investments $ 913,108
Accounts receivable 10,675
Total assets $ 923,783
LIABILITIES
Accounts payable $ 756,087
Due to other governmental units 87,995
Deposits held for others 79,701
Total liabilities $ 923,783
The accompanying notes are an integral part of this statement.
43
City of Muskegon
STATEMENT OF NET POSITION
Discretely Presented Component Units
June 30, 2016
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 $ 21,030 $ 118,840 $ 454 $ 70,699 $ 17,967 $ 228,990
Noncurrent assets
Capital assets, net
Nondepreciable 400,000 - - - - 400,000
Depreciable 1,625,770 - - - - 1,625,770
Total noncurrent assets 2,025,770 - - - - 2,025,770
Total assets 2,046,800 118,840 454 70,699 17,967 2,254,760
LIABILITIES
Current liabilities
Accrued liabilities 18,267 2,069 - - - 20,336
Bonds and other obligations, due within one year 345,000 310,000 - - - 655,000
Total current liabilities 363,267 312,069 - - - 675,336
Noncurrent liabilities
Advances from primary government - - - 1,221,119 - 1,221,119
Bonds and other obligations, less amounts due
within one year 2,971,088 1,340,332 - - - 4,311,420
Total noncurrent liabilities 2,971,088 1,340,332 - 1,221,119 - 5,532,539
Total liabilities 3,334,355 1,652,401 - 1,221,119 - 6,207,875
NET POSITION
Net investment in capital assets (1,290,318) - - - - (1,290,318)
Unrestricted 2,763 (1,533,561) 454 (1,150,420) 17,967 (2,662,797)
Total net position $ (1,287,555) $ (1,533,561) $ 454 $ (1,150,420) $ 17,967 $ (3,953,115)
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, 2016
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
Community and economic development $ 172,648 $ - $ (172,648) $ - $ - $ - $ - $ (172,648)
Interest on long-term debt 80,276 340,000 259,724 - - - - 259,724
Total Local Development Finance Authority - SmartZone 252,924 340,000 87,076 - - - - 87,076
Downtown Development Authority
Interest on long-term debt 29,607 175,000 - 145,393 - - - 145,393
Tax Increment Finance Authority
Community and economic development 36,000 - - - (36,000) - - (36,000)
Brownfield Redevelopment Authority I
Interest on long-term debt 34,696 - - - - (34,696) - (34,696)
45
Brownfield Redevelopment Authority II
Community and economic development 142,745 - - - - - (142,745) (142,745)
Total discretely presented component units $ 495,972 $ 515,000 87,076 145,393 (36,000) (34,696) (142,745) 19,028
General revenues
Property taxes 95,372 227,201 34,398 136,555 160,448 653,974
Unrestricted investment income 87 522 5 274 154 1,042
Total general revenues 95,459 227,723 34,403 136,829 160,602 655,016
Change in net position 182,535 373,116 (1,597) 102,133 17,857 674,044
Net position at July 1, 2015 (1,470,090) (1,906,677) 2,051 (1,252,553) 110 (4,627,159)
Net position at June 30, 2016 $ (1,287,555) $ (1,533,561) $ 454 $ (1,150,420) $ 17,967 $ (3,953,115)
The accompanying notes are an integral part of this statement.
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
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 DDA’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 TIFA’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 (SmartZone).
Currently only the SmartZone is active. 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, 2016
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, 2016, 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, 2015, the date
of its latest audited financial statements is as follows:
Total assets and deferred outflows of resources $ 4,490,802
Total liabilities and deferred inflows of resources (432,206)
Total net position $ 4,058,596
Total operating income $ 1,604,765
Total operating expenses (2,063,265)
Total nonoperating revenues 596
Capital contributions 174,638
Change in net assets $ (283,266)
47
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
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, 2016
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, operating expenses and debt service of the City’s sewer
system.
The Water Fund accounts for user charges, 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 employee payroll withholdings, property taxes collected by the
City on behalf of other governments, and deposits made by housing rehabilitation program participants.
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, 2016
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.
Income taxes, property taxes, franchise taxes, licenses, and interest associated with the current fiscal period
are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal
period. 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.
50
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
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
The component unit’s cash and investments are maintained within the City’s investment pool.
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:
51
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position/Fund Balance—Continued
Capital Assets—Continued
Capital Asset Classes Years
Land improvements 5-25
Leasehold improvements 10-25
Buildings and improvements 25-50
Utility buildings, improvements and systems 40-100
Furniture, vehicles and equipment 5-20
Infrastructure 15-50
Shared improvements 20
Defined Benefit Plan
For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of
resources related to pensions, and pension expense, information about the fiduciary net position of the Plan
and additions to/deductions from the Plan fiduciary net position have been determined on the same basis as
they are reported by the Municipal Employees Retirement System (MERS) of Michigan. For this purpose,
benefit payments (including refunds of employee contributions) are recognized when due and payable in
accordance with the benefit terms. Investments are reported at fair value.
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.
52
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES—Continued
Assets, Liabilities, Deferred Outflows/Inflows of Resources, and Net Position/Fund Balance—Continued
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 adoption of a resolution prior to the
end of the fiscal year, commit fund balance. Once adopted, the limitation imposed by the resolution remains
in place until a similar action is taken (the adoption of another resolution) to remove or revise the limitation.
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 percent 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 2015 state taxable value for real/personal property of the City totaled approximately $576,498,000 of
which approximately $11,689,000 was captured by the component units. The ad valorem taxes levied
consisted of 10.0, 3.0 and .0869 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, 2016
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 2015 financial statements have been reclassified to conform to the
2016 presentation.
NOTE B—STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
Budgetary Information
Annual budgets are adopted on a basis consistent with generally accepted accounting principles for the
General Fund and special revenue funds.
The appropriated budget is prepared by fund, function and department. The City Manager and department
heads 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, 2016
NOTE B—STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY—Continued
Excess of Expenditures Over Appropriations
During the year ended June 30, 2016, actual expenditures exceeded appropriations for:
Final
Budget Actual
General Fund
Public works
Cemeteries maintenance $ 387,371 $ 406,444
Community and economic development
Planning, zoing and economic development 399,495 422,267
Edison Landing subsidy 250,000 265,000
Culture and recreation
Parks maintenance 1,187,215 1,284,097
General and inner city recreation programs 100,500 126,580
Farmers' market and flea market 170,375 188,214
Other financing uses
Transfers out 25,000 1,318,164
L.C. Walker Arena
Culture and recreation 1,305,000 1,435,878
These overexpenditures were funded with available fund balance.
NOTE C—DEPOSITS AND INVESTMENTS
As of June 30, 2016, the City had the following investments:
Weighted
Average
Maturity
Fair Value (Months) S&P Percent
Investment Type
Money market funds $ 337,320 1 AAA 4.6 %
Negotiable certificates of deposit 1,513,313 47 not rated 20.7
US Agency obligations 4,919,636 221 AA+ 67.4
Local units of government obligations 533,045 46 AAA 7.3
Total fair value $ 7,303,314 100.0 %
Portfolio weighted average maturity 162
55
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
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 percent 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 percent each of the
total portfolio. More than 5 percent of the City’s investments are in various U.S. Agency obligations
including Financial Home Loan Mortgage Corporation, Federal Home Loan Bank System, and Government
National Mortgage Association obligations. These investments are 30 percent, 21 percent, and 6 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, 2016, $13,793,257 of the City’s bank balance of $14,293,257 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, 2016, 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, 2016
NOTE D—ASSETS MANAGED BY OTHERS
As allowed by MCL 123.874 and MCL 128.4, the City is permitted to place monies in community foundations.
The Funds
The City has two funds with the Community Foundation of Muskegon County (Community Foundation).
Lakeshore Trails Improvement Fund
The Lakeshore Trails Improvement Fund was established by the City primarily to be used for the general
support of the bike trails which are located in the City of Muskegon. The agreement with the Community
Foundation allows the use of the Fund’s income in accordance with the Community Foundation’s spending
policy and principal in certain circumstances.
Cemetery Perpetual Care Fund
The City of Muskegon Cemetery Perpetual Care Fund was established by the City primarily to be used for the
care and maintenance of the cemeteries that are operated by the City. The agreement with the Community
Foundation allows the use of the Fund’s income in accordance with the Community Foundation’s spending
policy and principal in certain circumstances.
The Community Foundation invests the contributions to the funds in various types of marketable equity and debt
securities, U.S. Treasuries, commercial paper, and certificates of deposit. The majority of investments are
uninsured and uncollateralized.
Reporting of the Assets of the Funds
The investments held at the Community Foundation, which were contributed by the City to the funds along with
the earnings on these investments, are reported at fair value as assets of the City. The contributions to these funds
made by third party donors directly to the Community Foundation have been excluded from the assets of the City.
57
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
NOTE D—ASSETS MANAGED BY OTHERS—Continued
Summary of the Community Foundation Funds
A summary of revenues, expenses, and changes in the assets at fair value of the funds for the year ended June 30,
2016 follows:
Lakeshore
Trails Cemetery
Improvement Perpetual
Fund Care Fund Totals
Revenues
Contributions $ 1,552 $ - $ 1,552
Dividends and interest 734 18,283 19,017
Realized and unrealized loss on investments 443 10,666 11,109
2,729 28,949 31,678
Expenses
Administration fees 198 4,936 5,134
Revenues over expenses 2,531 24,013 26,544
Total assets at beginning of year 39,162 1,000,000 1,039,162
Total assets at end of year 41,693 1,024,013 1,065,706
Less assets recorded as those of the Foundation (29,925) - (29,925)
Assets reported on the Balance Sheet/
Statement of Net Position $ 11,768 $ 1,024,013 $ 1,035,781
The Board of Trustees of the Community Foundation has the power to modify any restriction or condition on the
distribution of funds for any specified charitable purpose or to a specified organization if, in the sole judgment of
the Board, such restriction or condition becomes, in effect, unnecessary, incapable of fulfillment, or inconsistent
with the charitable needs of the community served. The authority to modify restrictions is sometimes referred to
as “variance power” and is a legal standard imposed on all community foundations.
58
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
NOTE E—FAIR VALUE MEASUREMENTS
The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in
active markets for identical assets or liabilities (level 1) and the lowest priority to unobservable inputs (level
3). The three levels of the fair value hierarchy are described below:
Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical
assets or liabilities in active markets that the City the ability to access.
Level 2 Inputs to the valuation methodology include the following:
- Quoted prices for similar assets or liabilities in active markets;
- Quoted prices for identical or similar assets or liabilities in inactive markets;
- Inputs other than quoted prices that are observable for the asset or liability;
- Inputs that are derived principally from or corroborated by observable
market data by correlation or other means.
If the asset or liability has a specified (contractual) term, the level 2 input must be
observable for substantially the full term of the asset or liability.
Level 3 Inputs to the valuation methodology are unobservable and significant to the fair
value measurement.
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest
level of any input that is significant to the fair value measurement. Valuation techniques used need to
maximize the use of observable inputs and minimize the use of unobservable inputs.
Following is a description of the valuation methodologies used for assets measured at fair value. There have
been no changes in the methodologies used at June 30, 2016.
Money market funds: Valued at amortized cost which approximates fair value.
Negotiable certificates of deposit, US agency obligations, Local units of government obligations:
Valued at the closing price reported on the active market on which the individual securities are traded.
59
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
NOTE E—FAIR VALUE MEASUREMENTS—Continued
Assets managed by others: The assets are valued based upon the City’s allocable share of the
Community Foundation of Muskegon County (Community Foundation) pooled investment portfolio. The
allocable share is based on the value of the underlying assets owned by the fund, minus its liabilities.
The assets managed by others are valued monthly by the Community Foundation and are allocated based
upon each organization’s calculated share of the Community Foundation’s pooled investment portfolio.
Each entity with an interest within the pooled investments receives a statement from the Community
Foundation indicating the additions to the investment (via contributions), withdrawals from the
investment (via grants), and the investment returns allocated via a unitization process. The City
calculates the fair value of its beneficial interest in the pooled investment assets held by the Community
Foundation based on the estimated fair value of the underlying assets. The Community Foundation
controls the investments and makes all management and investment decisions.
The preceding methods described may produce a fair value calculation that may not be indicative of net
realizable value or reflective of future fair values. Furthermore, while the City believes its valuation methods
are appropriate and consistent with other market participants, the use of different methodologies or
assumptions to determine the fair value of certain financial instruments could result in a different fair value
measurement at the reporting date.
The following table sets forth by level, within the fair value hierarchy, the City’s assets at fair value on a
recurring basis as of June 30, 2016:
Assets at Fair Value as of June 30, 2016
Level 1 Level 2 Level 3 Total
Money market funds $ - $ 337,320 $ - $ 337,320
Negotiable certificates of deposit 1,513,313 - - 1,513,313
US Agency obligations 4,919,636 - - 4,919,636
Local units of government
obligations 533,045 - - 533,045
Total assets at fair value $ 6,965,994 $ 337,320 $ - $ 7,303,314
60
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
NOTE F—CAPITAL ASSETS
Capital asset activity for the year ended June 30, 2016 was as follows:
Balance Balance
July 1, 2015 Additions Deductions June 30, 2016
Governmental activities:
Capital assets, not being depreciated:
Land $ 12,179,985 $ 73,575 $ - $ 12,253,560
Construction in progress 3,986,271 3,575,626 2,698,934 4,862,963
Total capital assets, not being depreciated 16,166,256 3,649,201 2,698,934 17,116,523
Capital assets, being depreciated:
Land improvements 4,503,686 181,431 - 4,685,117
Leasehold improvements 534,821 - - 534,821
Buildings and improvements 22,186,477 1,245,080 - 23,431,557
Furniture, vehicle and equipment 13,897,224 381,660 119,914 14,158,970
Infrastructure 78,398,523 1,728,451 8,213,509 71,913,465
Shared improvements 5,934,809 970,484 - 6,905,293
Total capital assets, being depreciated 125,455,540 4,507,106 8,333,423 121,629,223
Less accumulated depreciation:
Land improvements 1,453,358 159,813 - 1,613,171
Leasehold improvements 401,954 30,403 - 432,357
Buildings and improvements 15,949,073 490,618 - 16,439,691
Furniture, vehicle and equipment 10,774,665 549,997 119,914 11,204,748
Infrastructure 39,408,395 3,447,334 8,213,509 34,642,220
Shared improvements 3,469,516 296,740 - 3,766,256
Total accumulated depreciation 71,456,961 4,974,905 8,333,423 68,098,443
Total capital assets, being
depreciated, net 53,998,579 (467,799) - 53,530,780
Capital assets, net $ 70,164,835 $ 3,181,402 $ 2,698,934 $ 70,647,303
Business-type activities:
Capital assets, not being depreciated:
Land $ 142,250 $ - $ - $ 142,250
Construction in progress 463,110 909,855 184,328 1,188,637
Total capital assets, not being depreciated 605,360 909,855 184,328 1,330,887
Capital assets, being depreciated:
Land improvements 1,888,965 - - 1,888,965
Buildings, improvements and systems 91,497,498 145,760 - 91,643,258
Machinery and equipment 2,926,594 77,648 - 3,004,242
Total capital assets, being depreciated 96,313,057 223,408 - 96,536,465
Less accumulated depreciation:
Land improvements 1,779,177 18,196 - 1,797,373
Buildings, improvements and systems 42,103,769 2,439,612 - 44,543,381
Machinery and equipment 2,494,880 96,227 - 2,591,107
Total accumulated depreciation 46,377,826 2,554,035 - 48,931,861
Total capital assets, being
depreciated, net 49,935,231 (2,330,627) - 47,604,604
Capital assets, net $ 50,540,591 $ (1,420,772) $ 184,328 $ 48,935,491
61
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
NOTE F—CAPITAL ASSETS—Continued
Depreciation
Depreciation expense was charged to functions as follows:
Governmental activities:
Adminstrative services $ 43,215
Financial services 33,106
Public safety 189,488
Public works 2,126
Highways, streets and bridges 3,867,856
Community and economic development 75,717
Culture and recreation 361,759
General administration 20,645
Internal Service Fund depreciation 380,993
$ 4,974,905
Business-type activities:
Sewer $ 455,546
Water 1,987,319
Marina and Launch Ramp 111,170
$ 2,554,035
Balance Balance
July 1, 2015 Additions Deductions June 30, 2016
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 1,999,840 172,648 - 2,172,488
Total capital assets, being
depreciated, net 1,798,418 (172,648) - 1,625,770
Capital assets, net $ 2,198,418 $ (172,648) $ - $ 2,025,770
Depreciation
Depreciation expense was charged to economic development.
62
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
NOTE G—INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS
The composition of interfund balances as of June 30, 2016 is as follows:
Due To/From Other Funds:
Receivable Fund Payable Fund Amount
General Fund Community Development Block Grant Fund $ 127,220
General Fund State Grants Fund 135,949
General Fund HOME Rehabilitation 782
$ 263,951
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
$1,221,119 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
Nonmajor Governmental Funds
General Fund $ 35,132 Sidewalk Replacement Fund $ 35,132
Nonmajor Governmental Funds
L.C. Walker Arena Fund 485,000 General Fund 1,243,164
Public Improvement Fund 750,000
Community Development Fund 8,164
1,243,164 1,243,164
Nonmajor Governmental Funds Nonmajor Governmental Funds
Home Rehabilitation Fund 4,966 Community Development Fund 4,966
Arena Capital
L.C. Walker Arena Fund 279,832 Improvements Fund 279,832
284,798 284,798
Internal Service Funds
Engineering Services Fund 75,000 General Fund 75,000
$ 1,638,094 $ 1,638,094
The General Fund transferred funds to the L.C. Walker Arena Fund and other funds for operation subsidies.
Other transfers between funds were made to meet grant matching requirements or other operational needs.
63
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
NOTE H—LONG-TERM DEBT
Summary of Changes in Long-Term Liabilities
The following is a summary of long-term liabilities activity for the City for the year ended June 30, 2016.
Balance Balance Due Within
July 1, 2015 Additions Deductions June 30, 2016 One Year
Governmental activities:
General obligation debt $ 6,565,000 $ 4,535,000 $ 5,225,000 $ 5,875,000 $ 265,000
Discount (9,564) - (9,564) - -
Premium - 368,903 - 368,903 -
Intergovernmental obligations 94,708 - 18,199 76,509 18,563
Compensated absences 1,220,308 1,562,875 1,417,712 1,365,471 227,600
Governmental activities
long-term liabilities $ 7,870,452 $ 6,466,778 $ 6,651,347 $ 7,685,883 $ 511,163
Business-type activities:
Revenue obligations $ 11,265,000 $ - $ 1,370,000 $ 9,895,000 $ 1,405,000
Premium 44,368 - 17,406 26,962 -
Compensated absences 121,806 182,574 158,764 145,616 24,300
Business-type activities
long-term liabilities $ 11,431,174 $ 182,574 $ 1,546,170 $ 10,067,578 $ 1,429,300
Component units:
Intergovernmental obligations $ 1,000,000 $ - $ - $ 1,000,000 $ -
General obligation debt 4,460,000 - 635,000 3,825,000 655,000
Premium 177,821 - 36,401 141,420 -
Component unit long-
term liabilities $ 5,637,821 $ - $ 671,401 $ 4,966,420 $ 655,000
General Obligation Debt
The City has issued general obligation debt to provide funds for the acquisition and construction of major
capital facilities. General obligation debt is a direct obligation and pledges the full faith and credit of the City.
This debt is generally issued as serial bonds with varying amounts of principal maturing each year. Certain
debt issued by the City’s component units is also backed by the full faith and credit of the City if there is a
shortfall in tax increment revenues. General obligation debt outstanding as of June 30, 2016 is as follows:
Original Date of
Borrowing Interest Rate Maturity Balance
General obligation debt:
Governmental activities:
2006 Limited Tax General Obligation Bonds $ 5,400,000 4% October 2016 $ 70,000
2011 Capital Improvement Bonds 2,000,000 2.98% September 2021 1,270,000
2016 Limited Tax General Obligation
Refunding Bonds 4,535,000 2% - 4% October 2032 4,535,000
$ 5,875,000
Component units:
2011 DDA Tax Increment Refunding Bonds $ 2,045,000 3.75% - 4% June 2018 $ 640,000
2012 LDFA Tax Increment Refunding Bonds 4,100,000 3% - 4% November 2025 3,185,000
$ 3,825,000
64
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
NOTE H—LONG-TERM DEBT—Continued
General Obligation Debt—Continued
The LDFA Tax Increment Refunding 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 shortfalls, up to $75,000 annually. This commitment
extends through December 31, 2016.
Intergovernmental Obligations
The City has long-term contractual obligations with other governmental entities for program purposes.
Intergovernmental contractual obligations outstanding as of June 30, 2016 are as follows:
Original Date of
Borrowing Interest Rate Maturity Balance
Intergovernmental Contractual Obligations:
Governmental activities:
2008 State of Michigan Brownfield
Redevelopment Loan $ 500,000 2% March 2020 $ 76,509
Component units:
1989 DDA Promissory Note to
Muskegon County $ 1,000,000 0% August 2019 $ 1,000,000
Revenue Obligations
The City has issued bonds where the income derived from the acquired or constructed assets is pledged to pay
debt service. Revenue obligations outstanding as of June 30, 2016 are as follows:
Original Date of
Borrowing Interest Rate Maturity Balance
Business-type activities:
Revenue obligations:
2004 Drinking Water State Revolving Fund $ 13,900,000 2.13% October 2025 $ 7,675,000
2010 Water Supply System Refunding Bonds 5,995,000 4% - 4.25% May 2019 2,220,000
$ 9,895,000
The City has pledged future water customer revenues, net of specified operating expenses, to repay the 2004
Drinking Water State Revolving Fund Loan and 2010 Water Supply System Refunding Bonds. Proceeds
from both issuances were used to make improvements to the City’s water supply system. The bonds are
payable solely from water customer net revenues and are payable through 2025 and 2019, respectively.
Annual principal and interest payments on the bonds are expected to require less than 54 percent of net
revenues through 2019 and less than 28 percent after 2019 through 2025. The total principal and interest
remaining to be paid on the bonds is $10,924,773. Principal and interest paid for the year ended June 30,
2016 and total customer net revenues were $1,653,360 and $3,038,300, respectively.
The City was in compliance in all material respects with all the revenue bond ordinances at June 30, 2016.
For governmental activities, claims and judgments and compensated absences are generally liquidated by the
General Fund.
65
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
NOTE H—LONG-TERM DEBT—Continued
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, 2016 was approximately $3,793,000. The City is unaware of any
circumstances that would cause a shortfall in the near future.
On March 9, 2016, the City issued $4,535,000 of 2016 Limited Tax General Obligation Refunding Bonds
with interest rates ranging from 2 to 4 percent. The proceeds were used to advance refund $4,815,000 of the
outstanding 2006 Limited Tax General Obligation Bonds which had interest rates ranging from 4 to 4.2
percent. The net proceeds of $4,806,325 (including a $368,903 premium and after payment of $97,578 in
underwriting fees and other issuance costs) were deposited in an irrevocable trust with an escrow agent to
provide funds for the future debt service payments of the refunded bonds. As a result, the 2006 Limited Tax
General Obligation Bonds are considered defeased and the liability for those bonds has been removed from
long-term obligations with the exception of the October 2016 payment.
The City advance refunded the 2006 Limited Tax General Obligation Bonds to reduce its total debt service
payments over 16 years by $519,499 and to obtain an economic gain (difference between the present values
of the debt service payments on the old and new debt) of $409,941.
Annual debt service requirements to maturity for debt outstanding as of June 30, 2016 follow:
Year Ending Governmental Activites Business-type Activities Component Units
June 30, Principal Interest Principal Interest Principal Interest
2017 $ 283,563 $ 202,818 $ 1,405,000 $ 246,434 $ 655,000 $ 129,251
2018 288,934 196,314 1,450,000 203,106 685,000 107,125
2019 294,313 188,476 1,495,000 158,259 375,000 81,100
2020 524,699 176,758 745,000 109,916 1,390,000 65,800
2021 515,000 161,107 760,000 93,925 395,000 50,100
2022-2026 1,780,000 607,802 4,040,000 218,133 1,325,000 103,600
2027-2031 1,625,000 290,500 - - - -
2032-2033 640,000 25,600 - - - -
$ 5,951,509 $ 1,849,375 $ 9,895,000 $ 1,029,773 $ 4,825,000 $ 536,976
Annual debt service requirements to maturity by type of debt as of June 30, 2016 follow:
Revenue
General Obligation Debt Obligations Intergovernmental
Year Ending Governmental Component Business-type Governmental Component
June 30, Activities Units Activities Activities Units
2017 $ 466,288 $ 784,251 $ 1,651,434 $ 20,093 $ -
2018 465,155 792,125 1,653,106 20,093 -
2019 462,696 456,100 1,653,259 20,093 -
2020 681,364 455,800 854,916 20,093 1,000,000
2021 676,107 445,100 853,925 - -
2022-2026 2,387,802 1,428,600 4,258,133 - -
2027-2031 1,915,500 - - - -
2032-2033 665,600 - - - -
$ 7,720,512 $ 4,361,976 $ 10,924,773 $ 80,372 $ 1,000,000
66
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
NOTE I—OTHER INFORMATION
Risk Management
The City is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets;
errors and omissions; injuries to employees and natural disasters. The City manages its liability and property
risk by participating in the Michigan Municipal Risk Management Authority (MMRMA), a public entity risk
pool providing property and liability coverage to its participating members. The City pays an annual
premium to MMRMA for its insurance coverage. The MMRMA is self-sustaining through member
premiums and provides, subject to certain deductibles, occurrence-based casualty coverage for each incident
and occurrence-based property coverage to its members by internally assuring certain risks and reinsuring
risks through commercial companies. A $150,000 deductible is maintained to place the responsibility for
small charges with the City. Settled claims resulting from these risks have not exceeded insurance coverage
in any of the past three fiscal years. Changes in the fund’s claim liability amount in 2016 and 2015 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, 2016 $ 137,902 $ (6,455) $ 101,747 $ 29,700
June 30, 2015 104,900 158,000 124,998 137,902
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, 2016, the claims liability including incurred but
not reported claims was $34,064. 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 2016 and 2015
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, 2016 $ 49,144 $ 1,267,781 $ 1,282,861 $ 34,064
June 30, 2015 47,960 1,186,633 1,185,449 49,144
67
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
NOTE I—OTHER INFORMATION—Continued
Contingencies
Amounts received or receivable from grant agencies are subject to audit and adjustment by grantor agencies,
principally the federal government. Any disallowed claims, including amounts already collected, may
constitute a liability to the applicable funds. The amount, if any, of expenditures that may be disallowed by
the grantor cannot be determined at this time, although the City expects such amounts, if any, to be
immaterial.
The City is a defendant in various lawsuits. Although the outcome of these lawsuits is not presently
determinable, in the opinion of the City's counsel the resolution of these matters will not have a material
adverse effect on the financial condition of the City.
Commitments
The City has a contract agreement for a street project as of June 30, 2016 of approximately $1,345,000.
Approximately $400,000 of these costs is being financed by a grant, with the remainder being paid by 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 $44,695 for the year ended June 30, 2016. The future
minimum rental income for this lease is as follows:
Year Ending
June 30, Amount
2017 $ 33,841
NOTE J—EMPLOYEE RETIREMENT SYSTEM AND PENSION PLAN
Defined Benefit Pension Plan
Plan Description
The City participates in the Municipal Employees Retirement System (MERS) of Michigan. MERS is an
agent multiple-employer, statewide public employee pension plan established by the Michigan Legislature
under Public Act 135 of 1945 and administered by a nine member Retirement Board. MERS issues a publicly
available financial report that includes financial statements and required supplementary information. This
report may be obtained accessing the MERS website at www.mersofmich.com.
68
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
NOTE J—EMPLOYEE RETIREMENT SYSTEM AND PENSION PLAN—Continued
Defined Benefit Pension Plan—Continued
Benefits Provided
The City’s defined benefit pension plan provides certain retirement, disability and death benefits to plan
members and beneficiaries. Public Act 427 of 1984, as amended, established and amends the benefit
provisions of the participants in MERS. The Plan covers all full-time employees hired prior to January 2005.
Beginning in January 2005, the various employee divisions began to be closed. By July 2006, all employee
divisions were closed.
Benefits provided are based on the following by employee division:
Normal Reduced
Vesting Retirement Early Early
Mulitplier Period Age Retirement Retirement
Non-Union General 2.25% 5 years 60 55/25 50/25 or 55/15
Non-Union Police 3.00% 10 years 55 53/25 50/25
Clerical 2.25% 5 years 60 55/30 50/25 or 55/15
Department of Public Works 2.25% 10 years 60 55/30 50/25 or 55/15
Police Patrol 3.00% 10 years 55 50/25 Not applicable
Police Command 3.00% 10 years 55 50/25 Not applicable
Fire 2.75% 10 years 55 53/25 50/25
Final average compensation is calculated based on 3 years.
Employees Covered by Benefit Terms
At December 31, 2015 valuation date, the following employees were covered by the benefit terms:
Inactive employees or beneficiaries currently receiving benefits 307
Inactive employees entitled to but not yet receiving benefits 29
Active employees 143
Total employees covered by MERS 479
Contributions
The City is required to contribute amounts at least equal to the actuarially determined rate, as established by
the MERS Retirement Board. The actuarially determined rate is the estimated amount necessary to finance
the cost of benefits earned by employees during the year, with an additional amount to finance any unfunded
accrued liability. The City may establish contribution rates to be paid by its covered employees.
For the year ended June 30, 2016, the City had a flat-dollar employer contribution to the Plan of $1,546,440
in lieu of a percentage of covered employee payroll, as the Plan is closed to new employees. Member
contributions range from 5 percent to 6.5 percent.
Net Pension Liability
The City’s net pension liability was measured as of December 31, 2015, and the total pension liability used to
calculate the net pension liability was determined by an annual actuarial valuation as of that date.
69
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
NOTE J—EMPLOYEE RETIREMENT SYSTEM AND PENSION PLAN—Continued
Defined Benefit Pension Plan—Continued
Actuarial Assumptions
The total pension liability in the December 31, 2015 actuarial valuation was determined using the following
actuarial assumptions, applied to all periods included in the measurement:
Inflation 2.5 percent
Salary increases 3.75 percent, in the long-term
Investment rate of return 7.75 percent, net of administrative and investment expenses
Although no specific price inflation assumptions are needed for the valuation, the 2.5 percent long-term wage
inflation assumption would be consistent with a price inflation of 3-4 percent. Mortality rates used were
based on the RP-2014 Group Annuity Mortality Table of a 50 percent Male and 50 percent Female blend.
The actuarial assumptions used in valuation were based on the results of the most recent actuarial experience
study of 2009 through 2013.
The long-term expected rate of return on pension plan investments was determined using a model method in
which the best-estimate ranges of expected future real rates of return (expected returns, net of investment and
administrative expenses and inflation) are developed for each major asset class. These ranges are combined
to produce the long-term expected rate of return by weighting the expected future real rates of return by the
target asset allocation percentage and by adding expected inflation. The target allocation and best estimates
of arithmetic real rates of return for each major asset class are summarized in the following table:
Long-Term
Target Expected Real
Asset Class Allocation Rate of Return
Global equity 57.5% 5.02%
Global fixed income 20.0% 2.18%
Real assets 12.5% 4.23%
Diversifying strategies 10.0% 6.56%
Discount Rate
The discount rate used to measure the total pension liability was 8.25 percent for 2015. The projection of
cash flows used to determine the discount rate assumed that employee contributions will be made at the
current contribution rate and that City contributions will be made at rates equal to the difference between
actuarially determined contribution rates and the employee rate. Based on those assumptions, the pension
plan's fiduciary net position was projected to be available to pay all projected future benefit payments of
current active and inactive employees. Therefore, the long-term expected rate of return on pension plan
investments was applied to all periods of projected benefit payments to determine the total pension liability.
70
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
NOTE J—EMPLOYEE RETIREMENT SYSTEM AND PENSION PLAN—Continued
Defined Benefit Pension Plan—Continued
Changes in the Net Pension Liability
Increase (Decrease)
Plan Net Pension
Total Pension Fiduciary Liability
Liability (a) Position (b) (a)-(b)
Balance at December 31, 2014 $ 99,966,407 $ 85,358,622 $ 14,607,785
Changes for the year
Service cost 1,194,909 - 1,194,909
Interest 8,034,035 - 8,034,035
Difference between expected and
actual experience (647,017) - (647,017)
Changes in assumptions 4,779,382 - 4,779,382
Contributions - employer - 1,420,218 (1,420,218)
Contributions - employee - 566,045 (566,045)
Net investment income - (1,237,895) 1,237,895
Administrative expenses - (183,599) 183,599
Benefit payments including refund of
employee contributions (6,363,249) (6,363,249) -
Net changes 6,998,060 (5,798,480) 12,796,540
Balance at December 31, 2015 $ 106,964,467 $ 79,560,142 $ 27,404,325
Sensitivity of the Net Pension Liability to Changes in the Discount Rate
The following presents the net pension liability of the City, calculated using the discount rate of 8.25 percent,
as well as what the City's net pension liability would be if it were calculated using a discount rate that is 1-
percentage-point lower (7.25 percent) or 1-percentage-point higher (9.25 percent) than the current rate:
Current
1% Decrease Discount Rate 1% Increase
(7.25%) (8.25%) (9.25%)
City's net pension liability $39,280,835 $ 27,404,325 $17,337,757
Note: The current discount rate shown for GASB 68 purposes is higher than the MERS assumed rate of
return. This is because for GASB 68 purposes, the discount rate must be gross of administrative expenses,
whereas for funding purposes, it is net of administrative expense.
71
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
NOTE J—EMPLOYEE RETIREMENT SYSTEM AND PENSION PLAN—Continued
Defined Benefit Pension Plan—Continued
Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions
For the year ended June 30, 2016, the City recognized pension expense of $6,120,623. At June 30, 2016, the
City reported deferred outflows of resources and deferred inflows of resources related to pensions from the
following sources:
Deferred Outflows Deferred Inflows
of Resources of Resources
Differences in experience $ - $ 323,508
Differences in assumptions 2,389,691 -
Net differences between projected
and actual net investment income 7,067,008 -
Contributions subsequent to the
measurement date* 980,052 -
Total $ 10,436,751 $ 323,508
*The amount reported as deferred outflows of resources resulting from contributions subsequent to the
measurement date will be recognized as a reduction in the net pension liability for the year ending June 30,
2017.
Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will
be recognized in pension expense as follows:
Year Ending
June 30, Amount
2017 $ 3,897,751
2018 1,831,568
2019 1,831,568
2020 1,572,304
Payables to the Pension Plan
At June 30, 2016, the City reported a payable of $376,708 for the outstanding amount of contributions to the
pension plan required for the year ended June 30, 2016 and an additional contribution approved by the City
Commission.
72
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
NOTE J—EMPLOYEE RETIREMENT SYSTEM AND PENSION PLAN—Continued
Defined Contribution Pension Plan
The City also maintains a defined contribution plan offered by MERS for its full-time employees hired after
the defined benefit plan was closed to new participants.
Benefit terms, including contribution requirements, for the MERS defined contribution plan are established
and may be amended by the City Commission as determined by negotiated labor contracts. The City is
required to contribute 3 percent to 10.5 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, 2016, City and employee
contributions were $291,513 and $156,449, respectively.
Employees are immediately vested in their own contributions and earnings on those contributions and become
vested in City contributions and earnings on City contributions by 20 percent for each full year of service,
leaving employees fully vested after five years of service. Nonvested City contributions are forfeited upon
termination of employment. Such forfeitures are used to cover a portion of the pension plan’s administrative
expenses. For the year ended June 30, 2016, forfeitures reduced the City’s pension expense by $13,120.
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).
73
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
NOTE K—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 3.82 to 7.44 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, 2016, the City’s OPEB cost (expense) of $639,428 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, 2014 $ 696,634 100 % $ -
June 30, 2015 659,451 100 -
June 30, 2016 639,428 100 -
74
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
NOTE K—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, 2013 actuarial valuation using the
entry age actuarial cost method. The actuarial assumptions included (a) 7.5 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 percent after 10 years. Both rates include a 4 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, 2013 is 24 years.
Funded Status and Progress
As of December 31, 2013, the most recent actuarial valuation date, the plan was 87 percent funded. The
actuarial accrued liability for benefits was approximately $21,102,000, and the actuarial value of assets was
approximately $18,261,000, resulting in an unfunded actuarial liability (UAAL) of approximately $2,841,000.
The covered payroll (annual payroll of active employees covered by the plan) was approximately
$10,005,000, and the ratio of the UAAL to the covered payroll was 28 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, 2016,
City and employee contributions were $46,380 and $197,218, respectively.
75
City of Muskegon
NOTES TO FINANCIAL STATEMENTS
June 30, 2016
NOTE L—UPCOMING ACCOUNTING PRONOUNCEMENTS
GASB Statement 75—Accounting and Financial Reporting for Postemployment Benefits other than Pensions
was issued by the GASB in June 2015 and will be effective for the City’s 2018 fiscal year. The statement
requires governments that participate in postemployment benefits other than pensions (OPEB) to report in
their Statement of Net Position a net OPEB liability. The net OPEB liability is the difference between the
total OPEB 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. The net OPEB liability recorded in the Statement of
Net Position on July 1, 2017 will be significant.
GASB Statement 77—Tax Abatement Disclosures was issued by the GASB in August 2015 and will be
effective for the City’s 2017 fiscal year. This Statement requires the City to disclose the following
information about tax abatement agreements entered into to foster economic growth or otherwise benefit the
City or its citizens: a brief description of the arrangement including the taxes being abated, the gross dollars of
the taxes abated during the period, and any additional commitments made by the City as part of the
agreement.
76
REQUIRED SUPPLEMENTARY INFORMATION
77
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
General Fund
For the year ended June 30, 2016
(with comparative actual amounts for the year ended June 30, 2015)
2016 2015
Variance with
Final Budget-
Budgeted Amounts Positive
Original Final Actual (Negative) Actual
REVENUES
Taxes
City income taxes $ 7,830,000 $ 8,650,000 $ 8,151,902 $ (498,098) $ 8,274,666
Property taxes 7,739,000 7,389,000 7,381,555 (7,445) 7,357,107
Industrial facilities taxes 95,000 95,000 99,363 4,363 104,247
Payments in lieu of taxes 543,290 543,290 545,941 2,651 94,117
Total taxes 16,207,290 16,677,290 16,178,761 (498,529) 15,830,137
Licenses and permits
Business licenses 50,000 55,000 63,182 8,182 62,495
Liquor licenses 58,000 48,000 48,790 790 63,136
Cable TV fees 350,000 350,000 372,117 22,117 369,965
Rental property registration 170,000 170,000 152,380 (17,620) 145,777
Burial permits 82,000 82,000 81,095 (905) 83,922
Building permits 373,000 383,000 371,692 (11,308) 333,370
Electrical permits 98,000 93,000 84,912 (8,088) 88,524
Plumbing permits 41,000 41,000 34,316 (6,684) 29,269
Mechanical permits 74,000 71,000 69,070 (1,930) 67,930
Vacant building fees 95,000 150,000 165,590 15,590 117,258
Police gun registration - - - - 75
Total licenses and permits 1,391,000 1,443,000 1,443,144 144 1,361,721
Intergovernmental revenues
Federal grants 69,862 66,729 72,521 5,792 84,296
State
Grants 15,000 114,000 155,951 41,951 14,546
State shared revenue 4,011,659 4,011,659 3,886,514 (125,145) 3,889,178
Total intergovernmental revenues - State 4,026,659 4,125,659 4,042,465 (83,194) 3,903,724
Local 25,000 25,000 36,000 11,000 38,000
78
City of Muskegon
BUDGETARY COMPARISON SCHEDULE—CONTINUED
General Fund
For the year ended June 30, 2016
(with comparative actual amounts for the year ended June 30, 2015)
2016 2015
Variance with
Final Budget-
Budgeted Amounts Positive
Original Final Actual (Negative) Actual
Charges for services
Tax administration fees $ 298,800 $ 298,800 $ 339,353 $ 40,553 $ 338,718
Utility administration fees 310,000 310,000 310,000 - 250,000
Reimbursement for elections 33,000 42,182 26,702 (15,480) 14,796
Brownfield authority admin fee 120,000 120,000 153,000 33,000 121,925
Indirect cost reimbursements 1,025,618 1,025,618 1,025,618 - 958,040
Site plan review fee 2,000 2,000 8,300 6,300 4,600
Sale of cemetery lots 21,000 21,000 25,987 4,987 21,108
Police miscellaneous 110,000 142,900 142,854 (46) 127,981
Police impound fees 38,500 37,500 34,005 (3,495) 43,850
Fire protection-state property 81,000 80,000 81,249 1,249 80,227
Zoning fees 12,000 13,000 12,962 (38) 11,680
Muskegon Heights zoning 3,000 3,000 11,095 8,095 4,900
Clerk fees 2,800 17,000 16,789 (211) 4,219
Clerk fees - passport fees 8,000 25,000 27,199 2,199 12,025
Tax abatement application fees 3,000 3,000 600 (2,400) 3,822
Treasurer fees 92,000 92,000 69,743 (22,257) 54,289
False alarm fees 10,500 10,500 6,435 (4,065) 10,020
Miscellaneous cemetery income 15,000 15,000 17,128 2,128 15,462
Fire miscellaneous 7,300 9,300 11,413 2,113 8,610
Sanitation stickers 71,100 75,100 82,840 7,740 80,521
Lot cleanup fees 60,000 58,000 84,143 26,143 80,019
Reimbursements - lot mowing and demolitions 7,000 7,000 9,728 2,728 18,185
Special events reimbursements 25,000 25,000 30,877 5,877 69,791
Recreation program fees 3,500 3,500 5,201 1,701 4,844
Other charges for services - - 227 227 -
Total charges for services 2,360,118 2,436,400 2,533,448 97,048 2,339,632
Fines and forfeitures
Income tax - penalty and interest 170,000 170,000 204,792 34,792 198,995
Late fees on current taxes 25,000 25,000 35,081 10,081 14,570
Interest on late invoices 2,000 2,000 4,252 2,252 3,769
Parking fines 90,000 75,000 73,390 (1,610) 98,052
Court fines 100,000 105,000 129,764 24,764 126,913
Civil infractions 15,000 9,900 11,902 2,002 9,000
Total fines and forfeitures 402,000 386,900 459,181 72,281 451,299
Interest and rental income
Interest income 12,000 12,000 92,890 80,890 19,477
Net increase (decrease) in the fair value of investments - - (7,428) (7,428) (12,892)
Flea market 26,000 26,000 25,580 (420) 27,352
Farmers' market 60,300 60,300 74,754 14,454 77,197
City right of way rental 6,800 6,800 6,800 - 6,800
Fire station lease - Central Dispatch 45,000 45,000 44,695 (305) 46,666
Great Lakes Naval Memorial lease 15,000 15,000 7,500 (7,500) 15,000
McGraft park rentals 45,000 45,000 76,761 31,761 51,051
Other park rentals 45,000 45,000 62,373 17,373 55,540
Total interest and rental income 255,100 255,100 383,925 128,825 286,191
79
City of Muskegon
BUDGETARY COMPARISON SCHEDULE—CONTINUED
General Fund
For the year ended June 30, 2016
(with comparative actual amounts for the year ended June 30, 2015)
2016 2015
Variance with
Final Budget-
Budgeted Amounts Positive
Original Final Actual (Negative) Actual
Other
Sale of land and assets $ - $ - $ 100 $ 100 $ -
Police sale and auction proceeds 2,000 2,000 832 (1,168) 1,676
CDBG program reimbursements 453,124 368,124 422,840 54,716 352,332
Fisherman's Landing reimbursement 13,500 11,300 11,320 20 13,951
Contributions 117,000 117,000 111,650 (5,350) 119,400
Contributions - Veteran's Park maintenance 16,500 18,500 18,504 4 19,081
Community Foundation for Muskegon County 10,000 22,000 32,096 10,096 17,969
Miscellaneous and sundry 51,000 52,500 74,327 21,827 70,990
Total other 663,124 591,424 671,669 80,245 595,399
Total revenues 25,400,153 26,007,502 25,821,114 (186,388) 24,890,399
EXPENDITURES
Current
Public representation services
City commission 100,270 100,270 95,107 5,163 72,039
City promotions and public relations 29,900 58,900 63,880 (4,980) 40,059
City manager 270,739 284,339 279,956 4,383 232,984
Contributions to outside agencies 271,260 280,260 273,572 6,688 270,749
City attorney 357,410 357,410 351,988 5,422 314,957
Total public representation services 1,029,579 1,081,179 1,064,503 16,676 930,788
Administrative services
City clerk 385,113 385,113 365,993 19,120 378,948
Civil service 90,300 118,300 117,219 1,081 97,499
Affirmative action 89,735 97,865 94,242 3,623 77,883
Total administrative services 565,148 601,278 577,454 23,824 554,330
Financial services
Finance administration 416,592 444,222 445,076 (854) 410,688
Assessing 303,500 303,500 294,656 8,844 298,290
Arena administration 239,600 239,600 944 238,656 373,613
Income tax administration 321,937 321,937 309,817 12,120 315,390
Information systems 426,217 492,776 459,375 33,401 414,218
City treasurer 583,279 583,279 558,340 24,939 557,627
Total financial services 2,291,125 2,385,314 2,068,208 317,106 2,369,826
Public safety
Police department 9,600,286 9,621,886 8,980,698 641,188 8,942,447
Fire department 3,924,370 4,079,932 3,996,694 83,238 3,886,325
Fire safety inspections 485,000 485,000 478,907 6,093 454,852
Total public safety 14,009,656 14,186,818 13,456,299 730,519 13,283,624
80
City of Muskegon
BUDGETARY COMPARISON SCHEDULE—CONTINUED
General Fund
For the year ended June 30, 2016
(with comparative actual amounts for the year ended June 30, 2015)
2016 2015
Variance with
Final Budget-
Budgeted Amounts Positive
Original Final Actual (Negative) Actual
Public works
Street lighting $ 710,000 $ 642,900 $ 566,743 $ 76,157 $ 623,463
Community event support 25,775 25,775 19,424 6,351 24,335
General sanitation 1,666,103 1,666,103 1,605,393 60,710 1,590,080
Storm water management 10,000 10,000 13,755 (3,755) 13,365
City hall maintenance 284,098 284,098 221,270 62,828 226,704
Cemeteries maintenance 387,371 387,371 406,444 (19,073) 398,629
Total public works 3,083,347 3,016,247 2,833,029 183,218 2,876,576
Community and economic development
Planning, zoning and economic development 368,507 399,495 422,267 (22,772) 373,658
Environmental services 980,349 1,124,659 1,016,061 108,598 1,000,167
Edison Landing subsidy 250,000 250,000 265,000 (15,000) 227,000
Downtown Development Authority subsidy 175,000 175,000 175,000 - 70,000
Total community and economic development 1,773,856 1,949,154 1,878,328 70,826 1,670,825
Culture and recreation
Parks maintenance 1,187,215 1,187,215 1,284,097 (96,882) 1,007,912
McGraft park maintenance 48,089 61,950 56,969 4,981 43,975
General and inner city recreation programs 100,500 100,500 126,580 (26,080) 97,212
Forestry - - - - 26
Graffiti removal 9,026 9,026 1,101 7,925 3,794
Parking operations 5,882 6,300 5,609 691 12,612
Farmers' market and flea market 145,775 170,375 188,214 (17,839) 147,185
Total culture and recreation 1,496,487 1,535,366 1,662,570 (127,204) 1,312,716
Other governmental functions
Insurance premiums 256,811 287,000 261,419 25,581 289,370
Other 200,000 200,000 44,388 155,612 80,038
Total other governmental functions 456,811 487,000 305,807 181,193 369,408
Debt service
Principal 70,000 70,000 70,000 - 70,000
Interest and fees 201,000 209,000 208,176 824 211,935
Bond issuance costs - 98,000 97,578 422 -
Total debt service 271,000 377,000 375,754 1,246 281,935
Capital outlay 133,000 308,000 185,895 122,105 75,298
Total expenditures 25,110,009 25,927,356 24,407,847 1,519,509 23,725,326
Excess of revenues over (under) expenditures 290,144 80,146 1,413,267 1,333,121 1,165,073
81
City of Muskegon
BUDGETARY COMPARISON SCHEDULE—CONTINUED
General Fund
For the year ended June 30, 2016
(with comparative actual amounts for the year ended June 30, 2015)
2016 2015
Variance with
Final Budget-
Budgeted Amounts Positive
Original Final Actual (Negative) Actual
OTHER FINANCING SOURCES (USES)
Refunding bonds issued $ - $ 4,535,000 $ 4,535,000 $ - $ -
Premium on refunding bonds issued - 369,000 368,903 (97) -
Payment to refunded bond escrow agent - (4,806,000) (4,806,325) (325) -
Transfers in - - 35,132 35,132 31,349
Transfers out (208,046) (25,000) (1,318,164) (1,293,164) (889,023)
Total other financing sources (uses) (208,046) 73,000 (1,185,454) (1,258,454) (857,674)
Net change in fund balance $ 82,098 $ 153,146 227,813 $ 74,667 307,399
Fund balance at beginning of year 7,803,496 7,496,097
Fund balance at end of year $ 8,031,309 $ 7,803,496
Note: Both budgets and actual figures are prepared in accordance with generally accepted accounting principles.
82
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
Major Street and Trunkline Fund
For the year ended June 30, 2016
Variance with
Final Budget-
Budgeted Amounts Positive
Original Final Actual (Negative)
REVENUES
Intergovernmental revenues
Federal $ 240,000 $ 240,000 $ 239,952 $ (48)
State 3,597,844 5,094,344 5,165,137 70,793
Charges for services - - 47,127 47,127
Investment earnings 9,100 9,100 12,828 3,728
Other 90,000 89,777 83,086 (6,691)
Total revenues 3,936,944 5,433,221 5,548,130 114,909
EXPENDITURES
Current
Highways, streets and bridges 6,446,668 5,839,668 5,277,781 561,887
Debt service
Principal 190,000 190,000 190,000 -
Interest and fees 41,000 41,000 41,371 (371)
Total expenditures 6,677,668 6,070,668 5,509,152 561,516
Net change in fund balance $ (2,740,724) $ (637,447) 38,978 $ 676,425
Fund balance at July 1, 2015 2,252,718
Fund balance at June 30, 2016 $ 2,291,696
Note: Both budgets and actual figures are prepared in accordance with generally accepted accounting principles.
83
City of Muskegon
Required Supplemental Information
SCHEDULE OF CHANGES IN NET PENSION LIAIBILITY AND RELATED RATIOS
Last Ten Fiscal Years (Amounts were determined as of December 31 of each fiscal year)
2015 2014
TOTAL PENSION LIABILITY
Service cost $ 1,194,909 $ 1,190,507
Interest 8,034,035 7,817,503
Differences between expected and actual experience (647,017) -
Changes in assumptions 4,779,382 -
Benefit payments, including refunds of employee contributions (6,363,249) (6,407,932)
Net change in total pension liability 6,998,060 2,600,078
Total pension liability at beginning of year 99,966,407 97,366,329
Total pension liability at end of year (a) $ 106,964,467 $ 99,966,407
PLAN FIDUCIARY NET POSITION
Contributions-employer $ 1,420,218 $ 1,166,652
Contributions-employee 566,045 564,409
Net investment income (1,237,895) 5,282,031
84
Benefit payments, including refunds or employee contributions (183,599) (6,407,932)
Administrative expense (6,363,249) (193,139)
Net change in plan fiduciary net position (5,798,480) 412,021
Plan fiduciary net position at beginning of year 85,358,622 84,946,601
Plan fiduciary net position at end of year (b) $ 79,560,142 $ 85,358,622
City's net pension liability at end of year (a)-(b) $ 27,404,325 $ 14,607,785
Plan fiduciary net position as a percentage of the total pension liability 74.38% 85.39%
Covered employee payroll $ 9,108,948 $ 9,171,511
City's net pension liability as a percentage of covered employee payroll 300.85% 159.27%
Notes to Schedule
Additional actuarial data is not available and will be provided in subsequent years.
City of Muskegon
Required Supplemental Information
PENSION SYSTEM SCHEDULE OF CONTRIBUTIONS
Last Ten Fiscal Years
Period Ended
Year Ended June 30 June 30 Year Ended December 31
2016 2015 2014 2013 2012 2011 2010 2009 2008 2007
Actuarially determined contribution $ 1,546,440 $ 1,293,996 $ 1,043,040 $ 1,035,772 $ 1,160,870 $ 1,211,612 $ 688,832 $ 801,898 $ 1,067,853 $ 819,258
Contributions in relation to the actuarially
determined contribution 1,753,272 1,293,996 1,543,040 1,035,772 1,160,870 2,211,612 688,832 801,898 1,067,853 819,258
Contribution deficiency (excess) $ (206,832) $ - $ (500,000) $ - $ - $ (1,000,000) $ - $ - $ - $ -
Covered employee payroll $ 9,108,948 $ 9,171,511 $ 9,198,938 $10,185,425 $10,650,990 $ 11,533,186 $12,613,654 $13,107,179 $12,684,083 $12,684,000
Contributions as percentage of covered
employee payroll 19.2% 14.1% 16.8% 10.2% 10.9% 19.2% 5.5% 6.1% 8.4% 6.5%
Notes to Schedule
Valuation Date:
Actuarially determined contribution rates are calculated as of December 31, two years prior to the end of the fiscal year in which contributions are reported.
Methods and assumptions used to determine contribution rates:
85
Actuarial cost method Entry age
Amortization method Level percentage of payroll, Closed
Remaining amortization period 23 years
Asset valuation method 5-year smoothed market
Inflation 2.5 percent
Salary increases 3.75 percent
Investment rate of return 7.75 percent, net of investment and administrative expenses
Retirement age Varies depending on plan adoption
Mortality 50 percent Female/50 percent Male RP-2014 Group Annuity Mortality Table
City of Muskegon
Required Supplemental Information
SCHEDULE OF FUNDING PROGRESS – RETIREE HEALTHCARE PLAN
For the year ended June 30, 2016
(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
12/31/09 $ 13,260 $ 24,024 $ 10,764 55 % $ 13,293 81 %
12/31/11 15,331 20,168 4,837 76 12,365 39
12/31/13 18,261 21,102 2,841 87 10,005 28
Actuarial data for 12/31/15 is not available and will be provided in subsequent years.
86
OTHER SUPPLEMENTAL INFORMATION
87
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.
L.C. Walker Arena – to account for revenues received for the operation and maintenance of L.C.Walker
Arena.
Criminal Forfeitures – to account for receipts generated through the sale of assets seized through criminal
court proceedings.
Downtown BID – to account for the collection of special assessment revenue in the downtown to be used
for improvement and maintenance of downtown public infrastructure.
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.
88
DESCRIPTION OF
OTHER GOVERNMENTAL FUNDS—CONTINUED
Capital Projects Funds—Continued
HOME Rehabilitation – to account for grant revenues received from the U. S. Department of Housing and
Urban Development for the purpose of providing housing assistance to low and moderate income
households in the City.
Arena Capital Improvements – to account for ticket revenue collections earmarked for large capital
improvements and repairs to the L.C. Walker Arena.
Economic Development - Sappi – 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.
89
City of Muskegon
COMBINING BALANCE SHEET
Other Governmental Funds
June 30, 2016
Other Other Permanent
Total Other Special Capital Fund -
Governmental Revenue Projects Cemetery
Funds Funds Funds Perpetual Care
ASSETS
Cash and investments $ 2,444,498 $ 903,768 $ 1,393,552 $ 147,178
Assets managed by others 1,035,781 - 11,768 1,024,013
Receivables
Accounts and loans (net of allowance for uncollectibles) 192,122 7,592 181,566 2,964
Special assessments 32,981 32,981 - -
Due from other governmental units 542,853 280,856 261,997 -
Advances to component units 407,041 - - 407,041
Prepaid items 4,848 4,848 - -
Total assets $ 4,660,124 $ 1,230,045 $ 1,848,883 $ 1,581,196
LIABILITIES
Accounts payable $ 618,396 $ 543,930 $ 74,466 $ -
Accrued liabilities 20,860 11,920 8,940 -
Due to other funds 263,951 - 263,951 -
Unearned revenues - expenditure-driven grants 44,323 1,303 43,020 -
Total liabilities 947,530 557,153 390,377 -
DEFERRED INFLOWS OF RESOURCES
Unavailable revenues - special assessments 32,981 32,981 - -
Unavailable revenues - other long-term receivables 4,659 - 4,659 -
Total deferred inflows of resources 37,640 32,981 4,659 -
FUND BALANCES
Nonspendable
Prepaid items 4,848 4,848 - -
Long-term loans receivable 80,178 - 80,178 -
Perpetual care 1,476,593 - - 1,476,593
Restricted
Highways, streets and bridges 232,686 232,686 - -
L.C. Walker Arena 247,028 247,028 - -
Law enforcement 138,827 138,827 - -
Perpetual care 104,603 - - 104,603
Other purposes 16,522 16,522 - -
Assigned for capital projects and public improvements 1,373,669 - 1,373,669 -
Total fund balances 3,674,954 639,911 1,453,847 1,581,196
Total liabilities, deferred inflows of
resources and fund balances $ 4,660,124 $ 1,230,045 $ 1,848,883 $ 1,581,196
90
City of Muskegon
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
Other Governmental Funds
For the year ended June 30, 2016
Other Other Permanent
Total Other Special Capital Fund -
Governmental Revenue Projects Cemetery
Funds Funds Funds Perpetual Care
REVENUES
Intergovernmental revenues
Federal $ 1,111,421 $ - $ 1,111,421 $ -
State 1,044,292 879,502 164,790 -
Charges for services 888,363 856,876 5,500 25,987
Investment earnings 33,926 8,674 10,608 14,644
Income from assets managed by others 24,992 - 979 24,013
Other 756,207 147,465 608,742 -
Total revenues 3,859,201 1,892,517 1,902,040 64,644
EXPENDITURES
Current
Public safety 20,258 20,258 - -
Public works 31,849 31,849 - -
Highways, streets and bridges 1,400,236 1,400,236 - -
Culture and recreation 1,437,768 1,437,768 - -
Debt service
Principal 168,199 - 168,199 -
Interest and fees 7,969 - 7,969 -
Capital outlay 3,643,166 - 3,643,166 -
Total expenditures 6,709,445 2,890,111 3,819,334 -
Excess of revenues over (under) expenditures (2,850,244) (997,594) (1,917,294) 64,644
OTHER FINANCING SOURCES (USES)
Proceeds from sale of capital assets 190,957 6,313 184,644 -
Transfers in 1,527,962 764,832 763,130 -
Transfers out (319,930) - (319,930) -
Total other financing sources (uses) 1,398,989 771,145 627,844 -
Net change in fund balances (1,451,255) (226,449) (1,289,450) 64,644
Fund balances at July 1, 2015 5,126,209 866,360 2,743,297 1,516,552
Fund balances at June 30, 2016 $ 3,674,954 $ 639,911 $ 1,453,847 $ 1,581,196
91
City of Muskegon
COMBINING BALANCE SHEET
Other Special Revenue Funds
June 30, 2016
Total Other
Special Revenue Local L.C. Walker Criminal Downtown Tree
Funds Street Arena Forfeitures BID Replacement
ASSETS
Cash and investments $ 903,768 $ 438,671 $ 304,699 $ 138,827 $ 19,151 $ 2,420
Receivables
Accounts 7,592 7,592 - - - -
Special assessments 32,981 32,981 - - - -
Due from other governmental units 280,856 280,856 - - - -
Prepaid items 4,848 4,848 - - - -
Total assets $ 1,230,045 $ 764,948 $ 304,699 $ 138,827 $ 19,151 $ 2,420
LIABILITIES
Accounts payable $ 543,930 $ 482,513 $ 57,671 $ - $ 3,700 $ 46
Accrued liabilities 11,920 11,920 - - - -
92
Unearned revenues - expenditure-driven grants 1,303 - - - - 1,303
Total liabilities 557,153 494,433 57,671 - 3,700 1,349
DEFERRED INFLOWS OF RESOURCES
Unavailable revenues - special assessments 32,981 32,981 - - - -
FUND BALANCES
Nonspendable - prepaid items 4,848 4,848 - - - -
Restricted
Highways, streets and bridges 232,686 232,686 - - - -
L.C. Walker Arena 247,028 - 247,028 - - -
Law enforcement 138,827 - - 138,827 - -
Other purposes 16,522 - - - 15,451 1,071
Total fund balances 639,911 237,534 247,028 138,827 15,451 1,071
Total liabilities, deferred inflows of
resources and fund balances $ 1,230,045 $ 764,948 $ 304,699 $ 138,827 $ 19,151 $ 2,420
City of Muskegon
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
Other Special Revenue Funds
For the year ended June 30, 2016
Total Other
Special Revenue Local L.C. Walker Criminal Downtown Tree
Funds Street Arena Forfeitures BID Replacement
REVENUES
Intergovernmental revenues - State $ 879,502 $ 877,912 $ - $ - $ - $ 1,590
Charges for services 856,876 16,362 840,514 - - -
Investment earnings 8,674 7,365 529 764 7 9
Other 147,465 29,454 70,718 - 47,293 -
Total revenues 1,892,517 931,093 911,761 764 47,300 1,599
EXPENDITURES
Current
Public safety 20,258 - - 20,258 - -
Public works 31,849 - - - 31,849 -
Highways, streets and bridges 1,400,236 1,400,236 - - - -
93
Culture and recreation 1,437,768 - 1,435,878 - - 1,890
Total expenditures 2,890,111 1,400,236 1,435,878 20,258 31,849 1,890
Excess of revenues over (under) expenditures (997,594) (469,143) (524,117) (19,494) 15,451 (291)
OTHER FINANCING SOURCES
Proceeds from sale of capital assets 6,313 - 6,313 - - -
Transfers in 764,832 - 764,832 - - -
Total other financing sources 771,145 - 771,145 - - -
Net change in fund balances (226,449) (469,143) 247,028 (19,494) 15,451 (291)
Fund balances at July 1, 2015 866,360 706,677 - 158,321 - 1,362
Fund balances at June 30, 2016 $ 639,911 $ 237,534 $ 247,028 $ 138,827 $ 15,451 $ 1,071
City of Muskegon
BUDGETARY COMPARISON SCHEDULE
Other Special Revenue Funds
For the year ended June 30, 2016
Local Street L.C. Walker Arena
Variance - Variance -
Final Positive Final Positive
Budget Actual (Negative) Budget Actual (Negative)
REVENUES
Intergovernmental revenues - State $ 797,838 $ 877,912 $ 80,074 $ - $ - $ -
Charges for services - 16,362 16,362 795,700 840,514 44,814
Investment earnings 2,900 7,365 4,465 - 529 529
Other 47,000 29,454 (17,546) - 70,718 70,718
Total revenues 847,738 931,093 83,355 795,700 911,761 116,061
EXPENDITURES
Current
Highways, streets and bridges 1,486,843 1,400,236 86,607 - - -
94
Culture and recreation - - - 1,305,000 1,435,878 (130,878)
Total expenditures 1,486,843 1,400,236 86,607 1,305,000 1,435,878 (130,878)
Excess of revenues over (under) expenditures (639,105) (469,143) 169,962 (509,300) (524,117) (14,817)
OTHER FINANCING SOURCES
Proceeds from sale of capital assets - - - - 6,313 6,313
Transfers in - - - 235,000 764,832 529,832
Total other financing sources - - - 235,000 771,145 536,145
Net change in fund balances $ (639,105) (469,143) $ 169,962 $ (274,300) 247,028 $ 521,328
Fund balances at July 1, 2015 706,677 -
Fund balances at June 30, 2016 $ 237,534 $ 247,028
City of Muskegon
BUDGETARY COMPARISON SCHEDULE─CONTINUED
Other Special Revenue Funds
For the year ended June 30, 2016
Criminal Forfeitures Downtown BID
Variance - Variance -
Final Positive Final Positive
budget Actual (Negative) Budget Actual (Negative)
REVENUES
Fines and forfeitures $ 16,000 $ - $ (16,000) $ - $ - $ -
Investment earnings 700 764 64 - 7 7
Other - - - 64,234 47,293 (16,941)
Total revenues 16,700 764 (15,936) 64,234 47,300 (16,934)
EXPENDITURES
Current
Public safety 21,000 20,258 742 - - -
Public works - - - 64,234 31,849 32,385
95
Total expenditures 21,000 20,258 742 64,234 31,849 32,385
Net change in fund balances $ (4,300) (19,494) $ (15,194) $ - 15,451 $ 15,451
Fund balance at July 1, 2015 158,321 -
Fund balance at June 30, 2016 $ 138,827 $ 15,451
City of Muskegon
BUDGETARY COMPARISON SCHEDULE─CONTINUED
Other Special Revenue Funds
For the year ended June 30, 2016
Tree Replacement
Variance -
Final Positive
Budget Actual (Negative)
REVENUES
Intergovernmental revenues - State $ 2,900 $ 1,590 $ (1,310)
Investment earnings 5 9 4
Total revenues 2,905 1,599 (1,306)
EXPENDITURES
Current
Culture and recreation 2,500 1,890 610
Net change in fund balances $ 405 (291) $ (696)
96
Fund balance at July 1, 2015 1,362
Fund balance at June 30, 2016 $ 1,071
City of Muskegon
COMBINING BALANCE SHEET
Other Capital Projects Funds
June 30, 2016
Total Other EDC Community Arena Economic
Capital Projects Public Sidewalk Michcon Revolving Development State HOME Capital Development -
Funds Improvement Replacement Remediation Loan Block Grant Grants Rehabilitation Improvements Sappi
ASSETS
Cash and investments $ 1,393,552 $ 333,395 $ - $ 221,931 $ 323,543 $ - $ - $ - $ - $ 514,683
Assets managed by others 11,768 11,768 - - - - - - - -
Receivables
Accounts and loans (net of
allowance for uncollectibles) 181,566 5,559 - - 28,735 85,129 51,443 10,700 - -
Due from other governmental units 261,997 - - - - 50,991 206,731 4,275 - -
Total assets $ 1,848,883 $ 350,722 $ - $ 221,931 $ 352,278 $ 136,120 $ 258,174 $ 14,975 $ - $ 514,683
LIABILITIES
Accounts payable $ 74,466 $ 51,347 $ - $ - $ - $ 709 $ 8,712 $ 13,698 $ - $ -
Accrued liabilities 8,940 317 - - - 8,191 - 432 - -
Due to other funds 263,951 - - - - 127,220 135,949 782 - -
Unearned revenues - expenditure-driven grants 43,020 - - - - - 43,020 - - -
Total liabilities 390,377 51,664 - - - 136,120 187,681 14,912 - -
DEFERRED INFLOWS OF RESOURCES
Unavailable revenues - other long-term receivables 4,659 4,659 - - - - - - - -
97
FUND BALANCES
Nonspendable - long-term loans receivable 80,178 - - - 28,735 - 51,443 - - -
Assigned for capital projects and public improvements 1,373,669 294,399 - 221,931 323,543 - 19,050 63 - 514,683
Total fund balances 1,453,847 294,399 - 221,931 352,278 - 70,493 63 - 514,683
Total liabilities, deferred inflows of
resources and fund balances $ 1,848,883 $ 350,722 $ - $ 221,931 $ 352,278 $ 136,120 $ 258,174 $ 14,975 $ - $ 514,683
City of Muskegon
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
Other Capital Projects Funds
For the year ended June 30, 2016
Total Other EDC Community Arena Economic
Capital Projects Public Sidewalk Michcon Revolving Development State HOME Capital Development -
Funds Improvement Replacement Remediation Loan Block Grant Grants Rehabilitation Improvements Sappi
REVENUES
Intergovernmental revenues
Federal $ 1,111,421 $ - $ - $ - $ - $ 825,063 $ 32,733 $ 253,625 $ - $ -
State 164,790 - - - - - 164,790 - - -
Charges for services 5,500 - - - 5,500 - - - - -
Investment earnings 10,608 4,146 889 1,105 1,560 762 1,228 - - 918
Income from assets managed by others 979 979 - - - - - - - -
Other 608,742 510,736 - - 64,194 33,812 - - - -
Total revenues 1,902,040 515,861 889 1,105 71,254 859,637 198,751 253,625 - 918
EXPENDITURES
Debt service
Principal 168,199 - 150,000 - - - 18,199 - - -
Interest and fees 7,969 - 6,075 - - - 1,894 - - -
Capital outlay 3,643,166 2,125,591 1,035 - 24,963 901,737 197,523 392,317 - -
Total expenditures 3,819,334 2,125,591 157,110 - 24,963 901,737 217,616 392,317 - -
Excess of revenues over (under) expenditures (1,917,294) (1,609,730) (156,221) 1,105 46,291 (42,100) (18,865) (138,692) - 918
98
OTHER FINANCING SOURCES (USES)
Proceeds from sale of capital assets 184,644 87,751 - - - 38,902 - 57,991 - -
Transfers in 763,130 750,000 - - - 8,164 - 4,966 - -
Transfers out (319,930) - (35,132) - - (4,966) - - (279,832) -
Total other financing sources (uses) 627,844 837,751 (35,132) - - 42,100 - 62,957 (279,832) -
Net change in fund balances (1,289,450) (771,979) (191,353) 1,105 46,291 - (18,865) (75,735) (279,832) 918
Fund balances at July 1, 2015 2,743,297 1,066,378 191,353 220,826 305,987 - 89,358 75,798 279,832 513,765
Fund balances at June 30, 2016 $ 1,453,847 $ 294,399 $ - $ 221,931 $ 352,278 $ - $ 70,493 $ 63 $ - $ 514,683
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.
99
City of Muskegon
COMBINING STATEMENT OF NET POSITION
Internal Service Funds
June 30, 2016
Total Internal Engineering General Public Service
Service Funds Services Equipment Insurance Building
ASSETS
Current assets
Cash and investments $ 3,052,079 $ 36,081 $ 699,089 $ 1,702,109 $ 614,800
Accounts receivable 212,998 - 18,462 194,536 -
Inventories 20,857 - 20,857 - -
Prepaid items 210,818 1,305 63,289 139,228 6,996
Total current assets 3,496,752 37,386 801,697 2,035,873 621,796
Noncurrent assets
Advances to component units 814,078 - 407,039 407,039 -
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 8,363,879 26,355 8,243,160 - 94,364
Less accumulated depreciation (8,156,305) (26,355) (6,563,307) - (1,566,643)
Net capital assets 2,133,623 - 1,679,853 - 453,770
Total noncurrent assets 2,947,701 - 2,086,892 407,039 453,770
Total assets 6,444,453 37,386 2,888,589 2,442,912 1,075,566
DEFERRED OUFLOWS OF RESOURCES
Related to pension 417,470 - 156,551 - 260,919
Total assets and deferred outflows of resources 6,861,923 37,386 3,045,140 2,442,912 1,336,485
LIABILITIES
Current liabilities
Accounts payable 370,767 1,313 58,037 296,124 15,293
Accrued liabilities 28,892 4,058 9,445 955 14,434
Due to other governmental units 12,244 12,244 - - -
Bonds and other obligations, due within one year 17,000 2,000 4,800 600 9,600
Total current liabilities 428,903 19,615 72,282 297,679 39,327
Noncurrent liabilities
Bonds and other obligations, less amounts due within one year 84,928 10,271 24,003 2,852 47,802
Net pension liability 1,096,173 - 411,065 - 685,108
Total noncurrent liabilities 1,181,101 10,271 435,068 2,852 732,910
Total liabilities 1,610,004 29,886 507,350 300,531 772,237
DEFERRED INFLOWS OF RESOURCES
Related to pension 12,941 - 4,853 - 8,088
Total liabilities and deferred inflows of resources 1,622,945 29,886 512,203 300,531 780,325
NET POSITION
Net investment in capital assets 2,133,623 - 1,679,853 - 453,770
Unrestricted 3,105,355 7,500 853,084 2,142,381 102,390
Total net position $ 5,238,978 $ 7,500 $ 2,532,937 $ 2,142,381 $ 556,160
100
City of Muskegon
COMBINING STATEMENT OF REVENUE, EXPENSES AND CHANGES IN NET POSITION
Internal Service Funds
For the year ended June 30, 2016
Total Internal Engineering General Public Service
Service Funds Services Equipment Insurance Building
OPERATING REVENUES
Charges for services $ 8,194,396 $ 236,514 $ 2,359,699 $ 4,621,423 $ 976,760
Other 66,905 - 52,102 8,973 5,830
Total operating revenues 8,261,301 236,514 2,411,801 4,630,396 982,590
OPERATING EXPENSES
Administration 367,517 69,192 89,488 81,144 127,693
Insurance premiums and claims 4,416,046 - - 4,416,046 -
Other operations 3,500,037 265,364 2,166,199 53,006 1,015,468
Depreciation 380,993 - 316,276 - 64,717
Total operating expenses 8,664,593 334,556 2,571,963 4,550,196 1,207,878
Operating income (loss) (403,292) (98,042) (160,162) 80,200 (225,288)
NONOPERATING REVENUES
Investment earnings 43,109 29 17,343 22,402 3,335
Gain on sale of capital assets 8,624 - 8,624 - -
Total nonoperating revenues 51,733 29 25,967 22,402 3,335
Income (loss) before transfers (351,559) (98,013) (134,195) 102,602 (221,953)
TRANSFERS
Transfers in 75,000 75,000 - - -
Change in net position (276,559) (23,013) (134,195) 102,602 (221,953)
Net position at July 1, 2015 5,515,537 30,513 2,667,132 2,039,779 778,113
Net position at June 30, 2016 $ 5,238,978 $ 7,500 $ 2,532,937 $ 2,142,381 $ 556,160
101
City of Muskegon
COMBINING STATEMENT OF CASH FLOWS
Internal Service Funds
For the year ended June 30, 2016
Total Internal Engineering General Public Service
Service Funds Services Equipment Insurance Building
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 56,501 $ 13,813 $ 33,715 $ 8,973 $ -
Receipts from interfund services provided 7,016,833 236,514 2,359,699 3,443,860 976,760
Other receipts 1,210,258 - - 1,079,451 130,807
Payments to suppliers (6,119,862) (122,341) (1,224,409) (4,303,012) (470,100)
Payments to employees (1,302,293) (122,792) (341,301) (279,203) (558,997)
Payments for interfund services used (851,912) (72,004) (638,155) (3,667) (138,086)
Net cash provided by (used for) operating activities 9,525 (66,810) 189,549 (53,598) (59,616)
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
Transfers in 75,000 75,000 - - -
Collections on advances to component units 76,722 - 38,361 38,361 -
Net cash provided by noncapital financing activities 151,722 75,000 38,361 38,361 -
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Purchases of capital assets (192,913) - (172,023) - (20,890)
Proceeds from sale of capital assets 8,624 - 8,624 - -
102
Net cash used for capital and related financing activities (184,289) - (163,399) - (20,890)
CASH FLOW FROM INVESTING ACTIVITIES
Investment earnings 43,109 29 17,343 22,402 3,335
Net increase (decrease) in cash and investments 20,067 8,219 81,854 7,165 (77,171)
Cash and investments at July 1, 2015 3,032,012 27,862 617,235 1,694,944 691,971
Cash and investments at June 30, 2016 $ 3,052,079 $ 36,081 $ 699,089 $ 1,702,109 $ 614,800
Reconciliation of operating income (loss) to net cash provided by (used for)
operating activities
Operating income (loss) $ (403,292) $ (98,042) $ (160,162) $ 80,200 $ (225,288)
Adjustments to reconcile operating income (loss) to net cash provided by
(used for) operating activities
Depreciation expense 380,993 - 316,276 - 64,717
Change in assets and liabilities
Receivables 22,291 13,813 (18,387) (98,112) 124,977
Inventories 3,303 - 3,303 - -
Prepaid items 79,705 1,017 (753) 80,416 (975)
Accounts payable (265,539) 11,321 (22,469) (116,976) (137,415)
Accrued liabilities 192,064 5,081 71,741 874 114,368
Net cash provided by (used for) operating activities $ 9,525 $ (66,810) $ 189,549 $ (53,598) $ (59,616)
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, public school districts, and other governmental entities.
Rehab Loan Escrow – to account for deposits made by housing rehabilitation program participants and
their expenditures for the intended purposes.
103
City of Muskegon
COMBINING STATEMENT OF ASSETS AND LIABILITIES
Agency Funds
June 30, 2016
Total Current Rehab Loan
Agency Funds Collector Tax Escrow
ASSETS
Cash and investments $ 913,108 $ 912,727 $ - $ 381
Accounts receivable 10,675 10,675 - -
Total assets $ 923,783 $ 923,402 $ - $ 381
LIABILITIES
Accounts payable $ 756,087 $ 755,706 $ - $ 381
Due to other governmental units 87,995 87,995 - -
Deposits held for others 79,701 79,701 - -
Total liabilities $ 923,783 $ 923,402 $ - $ 381
104
City of Muskegon
STATEMENT OF CHANGES IN ASSETS AND LIABILITIES
Agency Funds
For the year ended June 30, 2016
Balance Balance
July 1, June 30,
COLLECTOR FUND 2015 Additions Deductions 2016
ASSETS
Cash and investments $ 1,013,889 $ 8,204,773 $ 8,305,935 $ 912,727
Accounts receivable 1,867 307,500 298,692 10,675
Total assets $ 1,015,756 $ 8,512,273 $ 8,604,627 $ 923,402
LIABILITIES
Accounts payable $ 221,862 $ 4,263,144 $ 3,729,300 $ 755,706
Due to other governmental units 713,717 1,059,718 1,685,440 87,995
Deposits held for others 80,177 2,480,019 2,480,495 79,701
Total liabilities $ 1,015,756 $ 7,802,881 $ 7,895,235 $ 923,402
CURRENT TAX FUND
ASSETS
Cash and investments $ - $ 20,714,913 $ 20,714,913 $ -
LIABILITIES
Due to other governmental units $ - $ 20,082,346 $ 20,082,346 $ -
Due to component units - 648,370 648,370 -
Deposits held for others - 65,522 65,522 -
Total liabilities $ - $ 20,796,238 $ 20,796,238 $ -
REHAB LOAN ESCROW FUND
ASSETS
Cash and investments $ 581 $ 200 $ 400 $ 381
LIABILITIES
Accounts payable $ 581 $ 200 $ 400 $ 381
ALL AGENCY FUNDS
ASSETS
Cash and investments $ 1,014,470 $ 28,919,886 $ 29,021,248 $ 913,108
Accounts receivable 1,867 307,500 298,692 10,675
Total assets $ 1,016,337 $ 29,227,386 $ 29,319,940 $ 923,783
LIABILITIES
Accounts payable $ 222,443 $ 4,263,344 $ 3,729,700 $ 756,087
Due to other governmental units 713,717 21,142,064 21,767,786 87,995
Due to component units - 648,370 648,370 -
Deposits held for others 80,177 2,545,541 2,546,017 79,701
Total liabilities $ 1,016,337 $ 28,599,319 $ 28,691,873 $ 923,783
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106
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.
107
City of Muskegon
COMBINING BALANCE SHEET
Discretely Presented Component Units
June 30, 2016
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 $ 228,990 $ 21,030 $ 118,840 $ 454 $ 70,699 $ 17,967
LIABILITIES
Advances from primary government $ 1,221,119 $ - $ - $ - $ 1,221,119 $ -
FUND BALANCES (DEFICITS)
Unassigned (992,129) 21,030 118,840 454 (1,150,420) 17,967
Total liabilities and fund
balances (deficits) $ 228,990 $ 21,030 $ 118,840 $ 454 $ 70,699 $ 17,967
108
City of Muskegon
RECONCILIATION OF THE GOVERNMENTAL FUNDS
BALANCE SHEET TO THE STATEMENT OF NET POSITION
Discretely Presented Component Units
June 30, 2016
Total fund balances (deficits)—governmental funds $ (992,129)
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 (2,172,488) 2,025,770
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 (20,336)
Bonds and notes payable (4,966,420) (4,986,756)
Net position of governmental activities $ (3,953,115)
109
City of Muskegon
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES (DEFICITS)
Discretely Presented Component Units
For the year ended June 30, 2016
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 $ 653,974 $ 95,372 $ 227,201 $ 34,398 $ 136,555 $ 160,448
Intergovernmental revenues - Local 440,000 265,000 175,000 - - -
Investment earnings 1,042 87 522 5 274 154
Other 75,000 75,000 - - - -
Total revenues 1,170,016 435,459 402,723 34,403 136,829 160,602
EXPENDITURES
Current
Community and economic development 178,745 - - 36,000 - 142,745
110
Debt service
Principal 635,000 335,000 300,000 - - -
Interest and fees 182,971 112,950 35,325 - 34,696 -
Total expenditures 996,716 447,950 335,325 36,000 34,696 142,745
Net change in fund balances (deficits) 173,300 (12,491) 67,398 (1,597) 102,133 17,857
Fund balances (deficits) at July 1, 2015 (1,165,429) 33,521 51,442 2,051 (1,252,553) 110
Fund balances (deficits) at June 30, 2016 $ (992,129) $ 21,030 $ 118,840 $ 454 $ (1,150,420) $ 17,967
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, 2016
Net change in fund balances—total governmental funds $ 173,300
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 635,000
Changes in accrual of interest and amortization of premiums and discounts
Change in accrued interest payable $ 1,991
Amortization of premiums 36,401 38,392
Change in net position of governmental activities $ 674,044
111
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112
SCHEDULE OF INDEBTEDNESS
113
City of Muskegon
SCHEDULE OF INDEBTEDNESS
June 30, 2016
Annual
Date Amount Interest Date of Interest
of Issue of Issue Rate Maturity 6/30/2015 6/30/2016 Payable
Business-Type Activities Bonds and Loans Payable:
Water supply system bonds 4/1/2010 $ 5,995,000 3.25% 05/01/16 $ 685,000 $ - $ -
($26,962 unamortized premium) 4.00% 05/01/17 710,000 710,000 90,725
4.00% 05/01/18 740,000 740,000 62,325
Type of debt: revenue bond 4.25% 05/01/19 770,000 770,000 32,725
Revenue pledged: water system net revenues 2,905,000 2,220,000 185,775
Drinking Water State Revolving 3/2/2004 $ 13,900,000 2.13% 10/01/15 $ 685,000 $ - $ -
Fund 2.13% 10/01/16 695,000 695,000 155,709
2.13% 10/01/17 710,000 710,000 140,781
Type of debt: state loan 2.13% 10/01/18 725,000 725,000 125,534
Revenue pledged: water system net revenues 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
8,360,000 7,675,000 843,998
TOTAL BUSINESS-TYPE ACTIVITIES BONDS AND LOANS PAYABLE $ 11,265,000 $ 9,895,000 $ 1,029,773
114
City of Muskegon
SCHEDULE OF INDEBTEDNESS - CONTINUED
June 30, 2016
Annual
Date Amount Interest Date of Interest
of Issue of Issue Rate Maturity 6/30/2015 6/30/2016 Payable
Governmental Activities Bonds and Loans Payable:
Capital improvement bonds 3/1/2003 $ 1,575,000 4.05% 06/01/16 $ 150,000 $ - $ -
of 2003 (sidewalks) 150,000 - -
Type of debt: limited G.O. bond
Revenue pledged: special assessments, general revenues
Capital improvement bonds 10/24/2006 $ 5,400,000 4.00% 10/01/15 $ 70,000 $ - $ -
of 2006 (fire station, recreation) 4.00% 10/01/16 70,000 70,000 1,400
4.00% 10/01/17 70,000 - -
4.00% 10/01/18 70,000 - -
Type of debt: limited G.O. bond 4.00% 10/01/19 295,000 - -
Revenue pledged: general revenues 4.00% 10/01/20 305,000 - -
4.00% 10/01/21 315,000 - -
4.00% 10/01/22 315,000 - -
4.00% 10/01/23 320,000 - -
4.00% 10/01/24 340,000 - -
4.00% 10/01/25 345,000 - -
4.00% 10/01/26 345,000 - -
4.10% 10/01/27 345,000 - -
4.10% 10/01/28 350,000 - -
4.10% 10/01/29 350,000 - -
4.20% 10/01/30 350,000 - -
4.20% 10/01/31 350,000 - -
4.20% 10/01/32 350,000 - -
4,955,000 70,000 1,400
Capital Improvement refunding bonds 3/8/2016 $ 4,815,000 4.00% 10/01/16 $ - $ - $ 164,947
of 2016 2.00% 10/01/17 - 70,000 166,100
2.00% 10/01/18 - 65,000 164,750
Type of debt: limited G.O. bonds 3.00% 10/01/19 - 290,000 159,750
Revenue pledged: general revenue 3.00% 10/01/20 - 295,000 150,975
3.00% 10/01/21 - 305,000 141,975
3.00% 10/01/22 - 300,000 132,900
4.00% 10/01/23 - 300,000 122,400
4.00% 10/01/24 - 320,000 110,000
4.00% 10/01/25 - 325,000 97,100
4.00% 10/01/26 - 325,000 84,100
4.00% 10/01/27 - 325,000 71,100
4.00% 10/01/28 - 325,000 58,100
4.00% 10/01/29 - 325,000 45,100
4.00% 10/01/30 - 325,000 32,100
4.00% 10/01/31 - 320,000 19,200
4.00% 10/01/32 - 320,000 6,400
- 4,535,000 1,726,997
Capital improvement bonds 9/30/2011 $ 2,000,000
of 2011 (streets)
2.98% 09/01/15 $ 190,000 $ - $ -
2.98% 09/01/16 195,000 195,000 34,941
Type of debt: limited G.O. bond 2.98% 09/01/17 200,000 200,000 29,055
Revenue pledged: gas tax, general revenues 2.98% 09/01/18 210,000 210,000 22,946
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
1,460,000 1,270,000 117,115
State of Michigan 6/18/2010 $ 500,000
environmental assessment loan
2.00% 03/18/16 $ 18,199 $ - $ -
Type of debt: state loan 2.00% 03/18/17 18,563 18,563 1,530
Revenue pledged: general revenues 2.00% 03/18/18 18,934 18,934 1,159
2.00% 03/18/19 19,313 19,313 780
2.00% 03/18/20 19,699 19,699 394
94,708 76,509 3,863
TOTAL GOVERNMENTAL ACTIVITIES BONDS AND LOANS PAYABLE $ 6,659,708 $ 5,951,509 $ 1,849,375
TOTAL PRIMARY GOVERNMENT BONDS AND LOANS PAYABLE $ 17,924,708 $ 15,846,509 $ 2,879,148
115
City of Muskegon
SCHEDULE OF INDEBTEDNESS - CONTINUED
June 30, 2016
Annual
Date Amount Interest Date of Interest
of Issue of Issue Rate Maturity 6/30/2015 6/30/2016 Payable
Discretely Presented Component Unit Bonds and Loans Payable:
Downtown Development Authority 8/10/1989 $ 1,000,000
promissory note to Muskegon County 0.00% 08/30/19 $ 1,000,000 $ 1,000,000 $ -
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
refunding bonds
($10,332 unamortized premium) 3.50% 06/01/16 $ 300,000 $ - $ -
3.75% 06/01/17 310,000 310,000 24,826
Type of debt: limited G.O. bond 4.00% 06/01/18 330,000 330,000 13,200
Revenue pledged: DDA tax increments, general revenues 940,000 640,000 38,026
Local Development Finance Authority 3/20/2012 $ 4,100,000
Smartzone Refunding Bonds
($131,088 unamortized premium) 2.00% 11/01/15 $ 335,000 $ - $ -
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
TOTAL DISCRETELY PRESENTED COMPONENT UNIT BONDS AND LOANS PAYABLE 3,520,000 3,185,000 498,950
$ 5,460,000 $ 4,825,000 $ 536,976
TOTAL REPORTING ENTITY BONDS AND LOANS PAYABLE
$ 23,384,708 $ 20,671,509 $ 3,416,124
116
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. 118
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. 123
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. 129
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. 133
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. 135
Sources: Unless otherwise noted, the information in these schedules is derived form the Comprehensive Annual
Financial Reports for the relevant year.
117
City of Muskegon
NET ASSETS/NET POSITION BY COMPONENT
Last Ten Fiscal Years
December 31 June 30
2007 2008 2009 2010 2011 2012 2013 (a) 2014 2015 (b) 2016
Governmental Activities
Net Investment in Capital Assets $ 68,059,626 $ 69,564,935 $ 69,064,800 $ 67,809,630 $ 67,944,957 $ 66,862,806 $ 63,842,092 $ 63,731,255 $ 63,514,691 $ 64,326,891
Restricted 5,485,703 3,557,678 2,956,449 3,059,208 3,656,410 3,526,343 4,572,848 4,023,895 4,807,531 4,140,342
Unrestricted 10,162,425 10,708,529 8,920,621 13,828,231 12,598,197 12,836,573 13,299,523 12,811,852 491,914 (4,142,119)
Total Governmental Net Assets/Net Position $ 83,707,754 $ 83,831,142 $ 80,941,870 $ 84,697,069 $ 84,199,564 $ 83,225,722 $ 81,714,463 $ 80,567,002 $ 68,814,136 $ 64,325,114
Business-type Activities
Net Investment in Capital Assets $ 39,356,966 $ 40,876,621 $ 41,876,507 $ 41,105,739 $ 40,419,728 $ 40,147,600 $ 40,032,858 $ 39,365,043 $ 39,231,223 $ 39,013,529
Restricted 822,559 822,559 672,000 672,000 672,000 672,000 599,500 599,500 599,500 599,500
Unrestricted 7,980,823 6,775,508 5,983,935 7,630,396 9,211,610 8,961,713 8,491,848 8,377,093 6,423,540 5,762,272
Total Business-type Activities Net Assets/Net Position $ 48,160,348 $ 48,474,688 $ 48,532,442 $ 49,408,135 $ 50,303,338 $ 49,781,313 $ 49,124,206 $ 48,341,636 $ 46,254,263 $ 45,375,301
Primary Government
Net Investment in Capital Assets $ 107,416,592 $ 110,441,556 $ 110,941,307 $ 108,915,369 $ 108,364,685 $ 107,010,406 $ 103,874,950 $ 103,096,298 $ 102,745,914 $ 103,340,420
Restricted 6,308,262 4,380,237 3,628,449 3,731,208 4,328,410 4,198,343 5,172,348 4,623,395 5,407,031 4,739,842
118
Unrestricted 18,143,248 17,484,037 14,904,556 21,458,627 21,809,807 21,798,286 21,791,371 21,188,945 6,915,454 1,620,153
Total Primary Government Net Assets/Net Position $ 131,868,102 $ 132,305,830 $ 129,474,312 $ 134,105,204 $ 134,502,902 $ 133,007,035 $ 130,838,669 $ 128,908,638 $ 115,068,399 $ 109,700,415
(a) In 2013, the City implemented GASB 63 and 65 which changed the elements of the financial statements.
(b) In 2015, the City implemented GASB 68 and 71 which changed how governments measure and report pension liabilities.
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
2007 2008 2009 2010 2011 2012 2013 (a) 2014 2015 (b) 2016
EXPENSES
Governmental Activities
Public representation $ 925,124 $ 986,696 $ 923,911 $ 445,251 $ 854,249 $ 866,809 $ 893,981 $ 1,030,006 $ 939,907 $ 1,107,551
Administrative services 783,713 782,362 698,022 317,873 645,585 566,161 565,307 543,425 614,757 663,077
Financial services 2,205,041 2,292,430 2,406,517 1,209,694 2,373,141 2,399,147 2,241,061 2,171,958 2,547,766 2,331,236
Public safety 12,802,488 13,955,811 13,614,112 6,332,728 13,390,888 13,213,251 12,987,842 12,946,466 14,243,233 17,118,742
Public works 2,989,433 3,019,411 2,986,747 1,640,946 3,471,051 2,958,367 3,201,806 3,361,422 3,183,627 3,109,454
Highways, streets and bridges 7,272,288 7,265,438 7,160,797 3,680,196 7,013,216 6,568,448 6,672,374 7,053,326 7,165,703 7,251,882
Community and economic development 3,054,087 3,174,508 4,139,765 1,275,026 2,830,867 2,447,373 2,499,404 2,417,518 2,712,131 5,223,431
Culture and recreation 2,433,020 2,623,501 2,463,375 759,392 1,524,331 1,601,316 1,592,358 1,671,185 1,806,790 3,551,692
General administration 358,225 574,955 451,651 210,117 794,115 791,197 322,348 366,634 389,248 326,452
Interest on long-term debt 343,106 324,076 288,073 139,006 272,940 283,186 291,535 277,345 271,607 248,223
Total Governmental Activities Expenses 33,166,525 34,999,188 35,132,970 16,010,229 33,170,383 31,695,255 31,268,016 31,839,285 33,874,769 40,931,740
Business-type Activities
Water 5,795,279 5,800,977 6,080,230 2,958,795 5,869,241 5,974,173 6,228,788 6,016,192 6,047,244 6,750,826
Sewer 5,066,693 5,503,144 5,426,321 2,525,067 5,288,622 6,202,359 7,226,839 7,582,602 8,460,509 8,669,469
Marina and launch ramp 392,994 347,642 310,773 150,055 292,889 310,174 426,553 503,997 305,990 327,832
Total Business-type Activities Expenses 11,254,966 11,651,763 11,817,324 5,633,917 11,450,752 12,486,706 13,882,180 14,102,791 14,813,743 15,748,127
Total Primary Government Expenses $ 44,421,491 $ 46,650,951 $ 46,950,294 $ 21,644,146 $ 44,621,135 $ 44,181,961 $ 45,150,196 $ 45,942,076 $ 48,688,512 $ 56,679,867
119
PROGRAM REVENUES
Governmental Activities
Charges for Services
Public representation $ 199,759 $ 188,467 $ 213,885 $ 100,177 $ 196,886 $ 196,886 $ 173,739 $ 189,444 $ 188,638 $ 226,559
Administrative services 287,011 257,850 271,117 129,630 263,473 270,886 268,535 325,937 415,308 474,737
Financial services 744,109 726,572 818,845 475,031 879,905 881,229 830,919 871,632 823,547 925,474
Public safety 1,224,062 1,217,616 1,117,476 536,419 1,109,659 1,136,942 1,133,666 1,407,722 1,218,644 1,248,911
Public works 407,569 382,072 383,733 209,203 642,082 480,487 671,494 796,739 571,426 379,877
Highways, streets and bridges 372,133 301,955 251,840 139,009 451,473 230,241 245,609 351,962 258,475 234,861
Community and economic development 356,051 297,854 249,241 186,572 457,952 617,379 432,240 477,486 576,863 444,632
Culture and recreation 454,154 405,520 445,891 129,025 300,367 315,010 606,818 535,211 368,168 1,229,067
General administration 64,366 99,494 123,426 59,373 116,690 116,690 287,729 50,728 48,764 52,512
Operating grants and contributions 5,229,279 5,367,152 6,443,223 3,131,811 5,425,165 4,651,576 4,681,345 4,664,098 5,071,239 5,330,825
Capital grants and contributions 3,347,680 3,444,957 2,105,557 255,234 2,257,163 1,568,005 886,108 1,408,424 3,496,623 3,804,656
Total Governmental Program Revenues 12,686,173 12,689,509 12,424,234 5,351,484 12,100,815 10,465,331 10,218,202 11,079,383 13,037,695 14,352,111
Business-type Activities
Water 6,569,228 6,240,060 5,883,830 2,891,169 5,454,760 5,254,095 5,890,614 6,099,480 6,375,869 7,485,013
Sewer 5,179,095 5,326,787 5,720,171 3,441,924 6,652,851 6,455,634 7,058,315 6,633,911 6,363,808 6,305,554
Marina and launch ramp 281,679 250,266 242,055 156,767 194,311 208,370 234,229 228,339 255,638 287,547
Operating grants and contributions - - - - - - 6,188 - - -
Capital grants and contributions - - 5,179 - 20,074 - 88,046 327,240 474,681 765,363
Total Business-type program revenues 12,030,002 11,817,113 11,851,235 6,489,860 12,321,996 11,918,099 13,277,392 13,288,970 13,469,996 14,843,477
Total Primary Government program revenues $ 24,716,175 $ 24,506,622 $ 24,275,469 $ 11,841,344 $ 24,422,811 $ 22,383,430 $ 23,495,594 $ 24,368,353 $ 26,507,691 $ 29,195,588
NET (EXPENSE) REVENUE
Governmental Activities $ (20,480,352) $ (22,309,679) $ (22,708,736) $ (10,658,745) $ (21,069,568) $ (21,229,924) $ (21,049,814) $ (20,759,902) $ (20,837,074) $ (26,579,629)
Business-type Activities 775,036 165,350 33,911 855,943 871,244 (568,607) (604,788) (813,821) (1,343,747) (904,650)
Total Primary Government net expense $ (19,705,316) $ (22,144,329) $ (22,674,825) $ (9,802,802) $ (20,198,324) $ (21,798,531) $ (21,654,602) $ (21,573,723) $ (22,180,821) $ (27,484,279)
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
2007 2008 2009 2010 2011 2012 2013 (a) 2014 2015 (b) 2016
GENERAL REVENUES AND OTHER CHANGES IN NET ASSETS/NET POSITION
Governmental Activities
Property taxes $ 8,014,102 $ 8,349,341 $ 8,492,507 $ 8,681,256 $ 8,844,004 $ 8,383,224 $ 7,592,847 $ 7,383,236 $ 7,894,189 $ 8,366,212
Income taxes 7,757,707 8,117,566 6,628,365 3,505,264 6,866,967 7,663,534 8,057,145 7,762,719 8,478,231 8,386,775
Franchise fees 297,200 304,812 321,852 178,239 362,103 342,376 358,785 358,754 369,965 372,117
Grants and contributions not restricted for specific programs 4,475,462 4,487,698 3,841,922 1,832,066 3,846,859 3,577,848 3,700,871 3,813,221 3,989,178 4,051,050
Unrestricted investment earnings 1,247,520 730,142 185,436 104,086 193,435 100,073 73,157 146,590 99,733 189,408
Miscellaneous 88,035 160,460 226,124 51,638 432,880 154,531 102,388 124,085 805,432 626,014
Gain on sale of capital asset 1,604 323,048 123,258 65,155 25,815 34,496 44,899 23,836 20,302 99,031
Transfers (40,000) (40,000) - (3,760) - - - - - -
Total Governmental Program Revenues 21,841,630 22,433,067 19,819,464 14,413,944 20,572,063 20,256,082 19,930,092 19,612,441 21,657,030 22,090,607
Business-type Activities
Unrestricted investment earnings 170,594 108,990 23,843 15,990 23,959 46,582 33,148 31,251 29,879 25,688
Gain on sale of capital asset - - - - - - - - - -
Transfers 40,000 40,000 - 3,760 - - - - - -
Total Business-type program revenues 210,594 148,990 23,843 19,750 23,959 46,582 33,148 31,251 29,879 25,688
Total Primary Government program revenues $ 22,052,224 $ 22,582,057 $ 19,843,307 $ 14,433,694 $ 20,596,022 $ 20,302,664 $ 19,963,240 $ 19,643,692 $ 21,686,909 $ 22,116,295
CHANGE IN NET ASSETS/NET POSITION
Governmental Activities $ 1,361,278 $ 123,388 $ (2,889,272) $ 3,755,199 $ (497,505) $ (973,842) $ (1,119,722) $ (1,147,461) $ 819,956 $ (4,489,022)
Business-type Activities 985,630 314,340 57,754 875,693 895,203 (522,025) (571,640) (782,570) (1,313,868) (878,962)
120
Total Primary Government $ 2,346,908 $ 437,728 $ (2,831,518) $ 4,630,892 $ 397,698 $ (1,495,867) $ (1,691,362) $ (1,930,031) $ (493,912) $ (5,367,984)
(a) In 2013, the City implemented GASB 63 and 65 which changed the elements of the financial statements.
(b) In 2015, the City implemented GASB 68 and 71 which changed how governments measure and report pension liabilities.
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
2007 2008 2009 2010 2011 (a) 2012 2013 2014 2015 2016
General fund
Reserved $ 180,410 $ 214,819 $ 187,633 $ 300,969 $ - $ - $ - $ - $ - $ -
Nonspendable - - - - 251,173 178,468 447,341 300,952 220,178 232,332
Restricted - - - - - - - - - -
Assigned - - - - 2,385,728 2,075,738 2,292,495 1,700,000 1,700,000 1,700,000
Unassigned - - - - 3,374,481 4,265,839 4,613,722 5,495,145 5,883,318 6,098,977
Unreserved 2,740,222 2,168,906 1,451,029 5,737,485 - - - - - -
Total general fund $ 2,920,632 $ 2,383,725 $ 1,638,662 $ 6,038,454 $ 6,011,382 $ 6,520,045 $ 7,353,558 $ 7,496,097 $ 7,803,496 $ 8,031,309
All other governmental funds
Reserved $ 4,130,995 $ 4,382,118 $ 3,613,858 $ 3,887,289 $ - $ - $ - $ - $ - $ -
Nonspendable - - - - 1,704,256 1,568,318 1,547,793 1,556,347 2,073,747 1,597,371
Restricted - - - - 1,375,779 3,485,073 2,749,396 2,305,385 3,159,130 2,995,610
Assigned - - - - 2,073,027 2,055,904 2,087,359 1,729,457 2,146,050 1,373,669
Unassigned - - - - (238,104) (191,282) (82,048) (100,054) - -
121
Unreserved, reported in:
Special revenue funds 4,462,015 2,768,886 2,060,117 2,163,041 - - - - - -
Capital project funds 635,676 675,898 554,273 6,035 - - - - - -
Permanent funds 84,413 60,813 15,613 16,979 - - - - - -
Total all other governmental funds $ 9,313,099 $ 7,887,715 $ 6,243,861 $ 6,073,344 $ 4,914,958 $ 6,918,013 $ 6,302,500 $ 5,491,135 $ 7,378,927 $ 5,966,650
(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 BALANCES OF GOVERNMENTAL FUNDS
Last Ten Fiscal Years
Period Ended
Year Ended December 31 June 30 Year Ended June 30
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Revenues
Taxes $ 15,420,032 $ 15,728,859 $ 14,673,012 $ 11,855,182 $ 15,146,430 $ 15,506,668 $ 14,832,027 $ 14,954,904 $ 15,830,137 $ 16,178,761
Intergovernmental 12,752,363 13,012,035 12,400,408 4,785,494 11,525,749 9,899,379 9,403,554 9,945,065 12,301,594 11,711,788
Charges for services 2,722,894 2,463,975 2,620,372 1,338,194 2,769,204 2,596,328 2,769,227 2,569,335 2,468,889 3,468,938
Other 4,618,149 3,624,579 3,177,522 1,768,895 3,461,292 3,237,189 2,795,952 3,256,324 4,003,105 3,868,958
Total revenues 35,513,438 34,829,448 32,871,314 19,747,765 32,902,675 31,239,564 29,800,760 30,725,628 34,603,725 35,228,445
Expenditures
Public representation 927,320 987,229 923,923 448,703 851,918 867,762 892,113 1,031,984 930,788 1,064,503
Administrative services 644,913 632,513 645,704 303,555 586,328 515,988 508,130 497,025 554,330 577,454
Financial services 2,231,519 2,298,830 2,406,623 1,241,430 2,352,709 2,407,131 2,196,917 2,197,651 2,476,740 2,068,208
Public safety 12,902,815 13,754,394 13,567,101 6,578,735 13,087,976 12,963,122 12,724,094 12,987,898 13,285,004 13,476,557
Public works 2,768,906 2,831,177 2,860,510 1,589,090 3,079,342 2,835,000 2,878,328 2,918,305 2,876,576 2,864,878
Highways, streets and bridges 6,504,915 6,414,453 3,436,069 1,823,089 3,226,377 2,756,010 2,815,337 3,011,611 2,986,909 3,102,391
Community and economic development 894,879 1,077,312 4,440,687 1,330,794 3,109,693 2,850,593 2,578,073 2,687,933 2,957,071 5,415,436
Culture and recreation 2,254,117 2,394,031 2,196,186 639,852 1,197,020 1,265,743 1,248,174 1,308,481 1,444,471 3,100,338
122
Other governmental functions 350,385 562,341 438,292 200,623 1,775,128 770,910 299,812 643,666 369,408 305,807
Debt service
Principal 1,241,921 999,148 663,371 303,466 1,345,183 289,597 395,211 402,492 417,842 428,199
Interest and issuance costs 324,577 310,432 282,174 136,013 267,258 268,315 292,554 278,412 272,946 355,094
Capital outlay 5,683,657 5,473,828 3,517,741 980,822 3,301,273 2,948,610 3,230,586 3,577,837 3,992,111 3,867,579
Total expenditure 36,729,924 37,735,688 35,378,381 15,576,172 34,180,205 30,738,781 30,059,329 31,543,295 32,564,196 36,626,444
Excess of revenues over (under) expenditures (1,216,486) (2,906,240) (2,507,067) 4,171,593 (1,277,530) 500,783 (258,569) (817,667) 2,039,529 (1,397,999)
Other financing sources (uses)
Transfers in 1,926,538 1,477,717 1,359,608 342,188 1,348,694 510,907 1,356,229 743,035 853,910 1,563,094
Transfers out (1,994,584) (1,409,491) (1,309,910) (359,971) (1,376,740) (613,953) (784,275) (771,081) (942,933) (1,638,094)
Bonds issued - 500,000 - - - 2,000,000 - - - 97,578
Sale of capital assets 286,152 375,723 68,452 75,465 120,118 113,981 190,263 176,887 244,685 190,957
Total other financing sources (uses) 218,106 943,949 118,150 57,682 92,072 2,010,935 762,217 148,841 155,662 213,535
Net change in fund balances $ (998,380) $ (1,962,291) $ (2,388,917) $ 4,229,275 $ (1,185,458) $ 2,511,718 $ 503,648 $ (668,826) $ 2,195,191 $ (1,184,464)
Debt service as a percentage of noncapital
expenditures 5.05% 4.06% 2.97% 3.01% 5.22% 2.01% 2.56% 2.43% 2.42% 2.39%
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
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%
2014 7,123,481 23.2% 7,831,423 25.5% 9,945,065 32.4% 2,569,335 8.4% 1,570,137 5.1% 418,691 1.4% 352,153 1.1% 915,343 3.0% 30,725,628 3.1%
2015 7,555,471 21.8% 8,274,666 23.9% 12,301,594 35.5% 2,468,889 7.1% 1,361,721 3.9% 452,004 1.3% 343,105 1.0% 1,846,275 5.3% 34,603,725 12.6%
2016 8,026,859 22.8% 8,151,902 23.1% 11,711,788 33.2% 3,468,938 9.8% 1,443,144 4.1% 459,181 1.3% 455,671 1.3% 1,510,962 4.3% 35,228,445 1.8%
* The City changed its fiscal year end from December 31 to June 30. 2010 figures are for six months.
123
SOURCE: The information in these schedules (unless otherwise noted) is derived from the comprehensive annual financial reports for the relevant year.
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 Millage Rate Actual
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%
2013 310,252,865 - 118,856,014 76,331,458 505,440,337 91,730,093 597,170,430 6,677,737 7,472,900 - 14,150,637 611,321,067 12.0865 96.97%
2014 312,031,296 - 115,070,943 61,196,955 488,299,194 91,020,452 579,319,646 3,874,303 6,512,600 - 10,386,903 589,706,549 13.0875 96.26%
2015 314,055,244 - 116,448,947 54,898,389 485,402,580 95,098,912 580,501,492 3,149,352 7,772,000 - 10,921,352 591,422,844 13.0869 95.28%
Assessed and Equalized Valuation of Property
Ad Valorem Assessment Roll Industrial and Commercial Facilities Assessment Roll
124
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
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
2013 321,604,220 - 123,831,400 79,037,400 524,473,020 91,720,300 616,193,320 6,766,000 7,472,900 - 14,238,900 630,432,220 1,260,864,440
2014 326,690,900 - 120,803,800 63,704,200 511,198,900 91,004,400 602,203,300 3,877,300 6,512,600 - 10,389,900 612,593,200 1,225,186,400
2015 335,445,400 - 122,235,800 57,024,100 514,705,300 95,084,900 609,790,200 3,149,800 7,772,000 - 10,921,800 620,712,000 1,241,424,000
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, 2016
6/30/2016 12/31/2006
Percent of Percent of
Taxable Total Taxable Taxable Total Taxable
Taxpayer Valuation Rank Valuation Valuation Rank Valuation
Consumers Energy $ 32,085,934 1 5.6% $ 73,427,881 1 10.8%
DTE Gas Company 6,989,800 2 1.2% 9,049,818 3 1.3%
ADAC Plastics 6,550,900 3 1.1% 0.0%
Esco Company 6,240,000 4 1.1% 5,833,749 6 0.9%
Fleet Engineers Inc 4,790,700 5 0.8% 0.0%
GE Aviation (Johnson Technology) 4,595,700 6 0.8% 8,147,615 4 1.2%
Ameriform Acquisition Co LLC 4,260,600
125
7 0.7%
Muskegon SC Holdings LLC 3,942,791 8 0.7% 0.0%
Lorin Industries 3,906,313 9 0.7% 5,107,151 9 0.7%
Mercy General 3,665,660 10 0.6%
Sappi (S.D. Warren Co.) 41,547,186 2 6.1%
Honeywell Inc 5,306,979 8 0.8%
Brunswick 7,100,200 5 1.0%
Hinman Lake LLC 5,449,900 7 0.8%
Coles Quality Foods 4,834,501 10 0.7%
Total - 10 Largest 77,028,398 13.4% 165,804,980 24.3%
Total - All Other 499,469,809 86.6% 515,932,015 75.7%
$ 576,498,207 100.0% $ 681,736,995 100.0%
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 Library
Year Operating Promotion Sanitation City District Debt
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 -
2013 9.5000 0.0865 2.5000 12.0865 2.4000 -
2014 10.0000 0.0875 3.0000 13.0875 2.4000 -
2015 10.0000 0.0869 3.0000 13.0869 2.4000 0.5611
Overlapping - County-Wide Rates
Muskegon Intermediate Special Vocational Community MAISD Community
Year County School Education Education College Gen Ed College Debt
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 - -
2013 6.6957 0.4597 2.2987 0.9996 2.2037 - -
2014 6.6557 0.4597 2.2987 0.9996 2.2037 1.0000 0.3400
2015 6.6357 0.4597 2.2987 0.9996 2.2037 1.0000 0.3400
Overlapping - School District Grand Total
State Non-
Year Operating Debt Total Education Homestead Homestead
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
2013 18.0000 7.1000 25.1000 6.0000 40.2439 58.2439
2014 18.0000 7.6000 25.6000 6.0000 43.0449 61.0449
2015 18.0000 6.8000 24.8000 6.0000 42.7854 60.7854
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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
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%
2013 7,668,166 6,703,147 87.4% 912,362 7,615,509 99.3% 102,713 45,361 7,296 2.03%
127
2014 8,032,955 7,069,804 88.0% 917,806 7,987,610 99.4% 57,680 41,074 2,788 1.26%
2015 8,132,782 7,247,701 89.1% 848,266 8,095,967 99.5% 62,345 33,407 1,862 1.20%
SOURCE: City of Muskegon Treasurer's Office
City of Muskegon
SEGMENTED DATA ON INCOME TAX FILERS, RATES AND LIABILITY
Most recent Year and Ten Years Previous
Year Ended June 30, 2016 Year Ended December 31, 2006
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 818 5% $ 679,600 $ 6,796 0% 1,060 5% $ 1,024,320 $ 10,244 0%
$2,501-$7,500 575 3% 5,103,500 51,035 1% 958 4% 6,793,111 67,931 1%
$7,501-$25,000 1,490 8% 42,418,800 424,188 5% 2,306 10% 52,164,415 521,644 7%
$25,001-$50,000 1,433 8% 91,213,200 912,132 11% 1,975 8% 101,397,525 1,013,975 14%
$50,001-$100,000 821 5% 98,858,900 988,589 12% 940 4% 88,123,511 881,235 12%
More than $100,000 200 1% 54,229,600 542,296 7% 169 1% 40,051,819 400,518 5%
Subtotal 5,337 30% $ 292,503,600 $ 2,925,036 36% 7,408 32% $ 289,554,701 $ 2,895,547 39%
Non-Residents Taxpayers:
128
(Non-residents are taxed at a rate of 0.5% on income earned within the City.)
$2,500 or less 1,588 9% $ 859,000 $ 6,817 0% 2,176 9% $ 1,356,400 $ 9,663 0%
$2,501-$7,500 1,032 6% 4,935,400 39,167 0% 1,430 6% 6,776,800 48,280 1%
$7,501-$25,000 2,292 13% 37,316,600 296,141 4% 3,515 15% 57,272,600 408,028 5%
$25,001-$50,000 2,886 16% 105,492,400 837,178 10% 4,129 18% 151,385,000 1,078,514 15%
$50,001-$100,000 2,220 12% 148,117,600 1,175,448 14% 2,407 10% 158,686,800 1,130,534 15%
More than $100,000 695 4% 153,768,600 1,220,294 15% 578 2% 120,280,400 856,915 12%
Subtotal 10,713 60% $ 450,489,600 $ 3,575,045 44% 14,235 61% $ 495,758,000 $ 3,531,934 48%
All Other Returns
(Mostly corporate returns which pay at a rate of 1% on income earned in City and partnerships which pay based on partners residence status.)
Subtotal 1,750 10% $ 1,651,821 20% 1,850 8% $ 997,692 13%
Total 17,800 100% $ 8,151,902 100% 23,493 100% $ 7,425,173 100%
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
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
2012 7,725,000 - 150,253 7,875,253 4,815,000 - 10,325,000 15,140,000 23,015,253 599
129
2013 7,350,000 - 130,042 7,480,042 4,205,000 - 9,685,000 13,890,000 21,370,042 577
2014 6,954,535 - 112,550 7,067,085 3,630,728 - 9,030,000 12,660,728 19,727,813 533
2015 6,555,436 - 94,708 6,650,144 2,949,368 - 8,360,000 11,309,368 17,959,512 483
2016 6,243,903 - 76,509 6,320,412 2,246,962 - 7,675,000 9,921,962 16,242,374 436
* 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, 2016
Total Debt Debt Supported by City
Name of Governmental Unit Outstanding Self Supporting General Revenues
Direct Debt
City of Muskegon:
Revenue Bonds $ 9,921,962 $ 9,921,962 $ -
Capital Improvement Bonds 6,243,903 - 6,243,903
Intergovernmental Bonds 76,509 - 76,509
Component Unit Debt:
Downtown Development Authority 1,650,332 1,650,332 -
Local Development Finance Authority 3,316,088 3,316,088 -
Total City Direct Debt $ 21,208,794 $ 14,888,382 $ 6,320,412
City Share as
Gross Percent of Gross Net
Overlapping Debt
Muskegon School District $ 17,640,000 95.08% $ 16,772,112
Orchard View School District 43,496,963 24.95% 10,852,492
Reeths Puffer School District 71,693,222 2.89% 2,071,934
Muskegon Intermediate School District - -
Hackley Public Library 2,998,728 95.08% 2,851,191
Muskegon County 72,485,000 13.36% 9,683,996
Muskegon Community College 28,350,000 13.36% 3,787,560
Total Overlapping Debt $ 236,663,913 46,019,285
Total City Direct and Overlapping Debt $ 52,339,697
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
determining the portion of the City's taxable value that is within each overlapping government 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.
130
City of Muskegon
LEGAL DEBT MARGIN INFORMATION
Last Ten Fiscal Years
2007 2008 2009 2010* 2011 2012 2013 2014 2015 2016
Debt Limit $ 84,174,359 $ 85,933,940 $ 82,198,965 $ 82,198,965 $ 78,308,925 $ 73,585,150 $ 68,555,700 $ 61,706,477 $ 61,510,980 $ 60,962,090
Total net debt applicable to limit 15,591,018 15,481,870 14,778,499 14,435,033 12,929,850 14,375,253 13,655,042 12,847,550 11,313,794 10,776,509
Legal debt margin $ 68,583,341 $ 70,452,070 $ 67,420,466 $ 67,763,932 $ 65,379,075 $ 59,209,897 $ 54,900,658 $ 48,858,927 $ 50,197,186 $ 50,185,581
Total net debt applicable to the limit as 18.52% 18.02% 17.98% 17.56% 16.51% 19.54% 19.92% 20.82% 18.39% 17.68%
a percentage of debt limit
Legal Debt Margin Calculation for 2016:
Assessed Valuation: $ 609,620,900
Legal Debt Limit (10% ) 60,962,090
Total Indebtedness: $ 21,208,794
Debt not Subject to Limitation:
131
Paid by Special Assessment -
Revenue Bonds (9,895,000)
Debt Subject to Limitation 11,313,794
Legal Debt Margin $ 49,648,296
* 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
Last Ten Fiscal Years
Water Supply System
Direct Net Revenue
Fiscal Gross Operating Available For Debt Service Requirements
Year Revenue (a) Expenses (b) Debt Service Principal Interest Total Coverage
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
2014 6,109,144 3,511,477 2,597,667 1,295,000 352,634 1,647,634 1.58
2015 6,388,474 3,774,508 2,613,966 1,330,000 320,857 1,650,857 1.58
2016 7,498,376 4,460,076 3,038,300 1,370,000 283,360 1,653,360 1.84
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
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
2014 No Direct System Indebtedness
2015 No Direct System Indebtedness
2016 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 position 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.
132
City of Muskegon
DEMOGRAPHIC AND ECONOMIC STATISTICS
Last Ten Fiscal Years
Fiscal Personal Per Capita Median Public School Building Permits
Year Population Income Income Age Enrollment Number Value Unemployment
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%
2014 37,213 769,789,707 20,686 34.1 4,808 1,108 54,065,115 9.6%
133
2015 37,213 789,034,450 21,203 35.8 4,387 1,102 46,541,966 10.3%
2016 37,213 808,760,311 21,733 35.8 4,206 1,112 58,924,856 8.3%
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
2016 2006
Percentage Percentage
of total of total
City City
Employer Employees Rank employment Employees Rank employment
Mercy General Health Partners* 4,114 1 27.4% 2,000 1 11.9%
ADAC Plastics 970 2 6.5% 500 6 3.0%
County of Muskegon 755 3 5.0% 1,280 3 7.6%
Port City Group 667 4 4.4%
Muskegon Public Schools 565 5 3.8% 1,050 5 6.3%
134
SAF Holland USA 345 6 2.3%
G.E. Aviation 341 7 2.3%
Betten Automotive Group 232 8 1.5%
Muskegon Community College 198 9 1.3%
Cole's Quality Foods 180 10 1.2% 1,610 2 9.6%
State of Michigan 1,175 4 7.0%
Verizon 350 8 2.1%
Johnson Technology Inc. 425 7 2.5%
Sappi Fine Paper (formerly SD Warren) 250 10 1.5%
City of Muskegon 270 9 1.6%
* Hackley Hospital merged with the former Mercy Hospital to become Mercy General Health Partners.
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 2006 2007 2008 2009 2010* 2011 2012 2013 2014 2015 2016
Administration 1.50 1.50 1.50 - - 0.40 0.40 0.40 0.40 - -
Affirmative Action 1.50 1.50 1.50 1.50 1.50 1.10 1.10 1.10 1.10 1.30 1.30
Cemetaries 3.00 3.25 3.25 3.25 2.50 2.20 1.75 1.25 1.25 1.25 1.25
City Clerk & Elections 4.00 4.00 4.00 4.00 3.00 3.00 3.00 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 0.25
City Hall Maintenance 1.00 1.00 1.00 1.00 1.00 0.55 0.55 0.55 0.55 0.55 0.55
City Manager's Office 1.75 1.75 1.75 3.25 2.25 2.25 2.25 2.25 2.25 2.05 2.05
City Treasurer's Office 5.00 4.00 5.00 5.00 5.00 5.00 5.00 5.00 4.50 5.50 5.50
Civil Service 2.00 2.00 2.00 2.00 2.00 1.00 - - - - -
Environmental Services 2.00 2.00 2.00 2.00 2.00 2.00 5.00 5.00 5.00 2.00 2.00
Farmers Market - - - 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05
Finance Administration 4.00 4.00 4.00 4.00 3.00 3.00 3.00 2.00 2.00 3.00 3.00
Fire 38.00 38.00 38.00 38.00 36.00 33.00 35.00 28.00 28.83 32.00 35.00
Fire Safety Inspections 12.00 12.00 12.00 12.00 9.00 8.00 6.00 6.00 0.83 - -
Forestry - - - - - - - - - - -
General Recreation 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 4.50 3.50 3.50
135
Information Systems 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
Parks 8.25 8.15 8.15 7.99 7.15 6.00 6.05 6.05 6.00 6.00 6.00
Planning, Zoning & Economic Development 6.00 6.00 6.00 6.00 5.00 4.00 3.00 3.00 3.00 3.40 3.40
Police 94.00 94.00 94.00 94.00 88.00 88.00 88.00 88.00 87.34 88.00 88.00
Sanitation 1.00 1.00 1.00 1.00 - 0.30 0.20 0.20 0.20 0.20 0.20
Senior Transit - - - - - - 0.05 0.05 0.05 - -
MVH-Major Streets 16.00 17.75 15.75 13.75 12.00 12.00 11.70 10.70 10.70 10.70 10.70
MVH-Local Streets 7.00 7.00 6.00 8.00 7.00 7.00 6.70 6.70 6.70 6.70 6.70
MVH-State Trunklines 2.00 - - - - - - - - - -
Walker Arena - - - - - - - - - - -
Community Development 4.00 4.00 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 0.25 0.25 - - - - -
Lead Program - - - - 0.75 0.75 - - - - -
Sewer Maintenance 16.00 16.20 15.20 13.20 10.20 10.20 9.75 9.75 9.80 9.80 9.80
Water Filtration 10.00 10.00 10.00 10.00 10.00 10.00 9.00 10.00 10.00 10.00 10.00
Water Maintenance 13.00 12.50 13.50 15.40 12.40 12.40 11.75 11.75 11.75 11.75 11.75
Hartshorn Marina Fund 0.73 0.67 0.34 0.05 0.05 0.05 0.30 0.30 0.30 0.30 0.30
Public Service Building 3.45 3.45 3.45 3.70 8.95 8.05 7.95 8.45 8.45 8.50 8.50
Engineering 7.45 7.45 7.45 7.45 5.45 4.95 4.95 4.95 4.95 4.95 4.95
Equipment 8.95 8.25 8.25 8.50 7.25 6.25 6.25 6.25 6.25 6.25 6.25
284.00 282.00 280.00 280.00 256.00 244.00 241.00 233.00 227.00 228.00 231.00
* 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 2007 2008 2009 2010* 2011 2012 2013 2014 2015 2016
Administrative Services
Elections
Number of registered voters 26,345 27,678 26,136 26,136 26,330 26,324 26,098 26,025 24,014 24,005
Number of votes cast:
Last general election 10,410 15,271 15,271 15,271 8,106 1,933 13,487 3,029 7,763 2,547
Last city election 1,101 1,101 2,254 2,254 8,106 1,933 2,131 3,029 7,763 2,547
Percentage of registered voters voting:
Last general election 40% 55% 58% 58% 31% 7% 52% 12% 32% 11%
Last city election 4% 4% 9% 9% 31% 7% 8% 12% 32% 11%
Financial Services
Property Tax Bills 15,376 15,350 15,435 - 15,351 15,261 15,291 15,211 14,528 14,611
Income Tax Returns 23,141 22,598 21,071 19,963 19,688 18,699 17,857 18,222 17,839 17,800
Paper Check Issued to Vendors 3,347 3,346 3,113 1,486 2,986 3,746 1,677 1,404 1,527 1,608
Electronic Payments to Vendors 772 763 963 450 884 1,334 1,251 1,579 1,471 1,849
136
Public Safety
Fire Protection
Number of firefighter and officer positions 41 41 37 37 37 36 41 38 35 35
Number of emergency calls 4,171 4,298 4,220 2,062 4,402 4,676 4,563 4,354 4,881 4,938
Police Protection
Number of sworn officer positions 84 84 79 79 79 79 79 76 76 76
Part I (Major) Crimes 2,997 3,107 3,071 1,305 2,859 2,772 2,647 2,240 2,107 1,989
Public Works
Refuse Collected (Tons per Year) 10,375 10,401 10,526 6,042 12,703 10,153 9,958 10,217 10,512 10,994
Recyclables Collected (Tons per Year) 629 626 309 - - - - - - -
Water & Sewer
Number of consumers 14,364 13,131 12,987 12,966 13,037 13,109 13,144 13,086 13,223 13,307
Average daily water consumption (GPD) 9,314,000 8,879,000 7,976,000 7,163,000 8,417,000 7,700,000 7,651,000 7,666,000 8,293,570 11,027,945
Water main breaks repaired 21 34 17 6 12 5 11 30 15 16
Sewer flows (Millions Gallons per Year) 1,945 2,181 1,979 965 1,625 1,695 1,777 1,833 2,013 1,794
Sewer Service Calls 598 533 508 263 591 522 508 532 501 521
* 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 2007 2008 2009 2010* 2011 2012 2013 2014 2015 2016
Public Safety
Fire Protection
Number of stations 3 3 3 3 3 3 3 3 3 3
Police Protection
Number of stations 1 1 1 1 1 1 1 1 1 1
Highways, Streets and Bridges
Miles of Streets 197.79 197.79 196.95 196.95 196.95 196.95 196.95 196.95 196.95 196.95
Number of streetlights 3,134 3,134 3,192 3,125 3,065 2,838 2,838 2,838 2,838 2,900
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
137
Sewer
Sanitary sewers (miles) 177.04 177.04 177.04 177.04 177.04 177.04 177.04 177.04 177.04 177.04
Storm sewers (miles) 183.25 183.60 184.35 184.35 184.35 184.35 184.35 184.25 184.35 184.35
Water
Water mains (miles) 195.63 195.58 195.69 195.69 195.69 195.40 195.95 195.95 195.95 195.95
* The City changed its fiscal year end from December 31 to June 30. 2010 figures are for six months.
SOURCE: City of Muskegon Departments
[This page was intentionally left blank.]
138
SINGLE AUDIT OF FEDERAL FINANCIAL ASSISTANCE PROGRAMS
139
BRICKLEY DELONG
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITOR’S 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
December 5, 2016
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, 2016, 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 December 5, 2016.
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) 608-8500 PHONE (231) 726-5800 PHONE (231) 873-1040
FAX (616) 608-8559 FAX (231) 722-0260 FAX (231) 873-0602
www.brickleydelong.com
140
BRICKLEY DELONG
City Commission
City of Muskegon
December 5, 2016
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
141
BRICKLEY DELONG
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL
PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE; AND REPORT ON
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY THE UNIFORM
GUIDANCE
December 5, 2016
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 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, 2016. 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 federal statutes, regulations, and the terms and conditions of its
federal awards 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 the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200,
Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform
Guidance). Those standards and the Uniform Guidance 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.
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) 608-8500 PHONE (231) 726-5800 PHONE (231) 873-1040
FAX (616) 608-8559 FAX (231) 722-0260 FAX (231) 873-0602
www.brickleydelong.com
142
BRICKLEY DELONG
City Commission
City of Muskegon
December 5, 2016
Page 2
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, 2016.
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 the
Uniform Guidance, 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 requirements of the Uniform
Guidance. Accordingly, this report is not suitable for any other purpose.
Muskegon, Michigan
143
City of Muskegon
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
For the year ended June 30, 2016
Accrued Cash or Accrued
Federal Program or (Unearned) Adjustments Payments In- Amount of (Unearned) Passed
Federal Grantor/Pass-Through Grantor/ CFDA Award Revenue and Kind Received Grant Revenue Through to
Program or Cluster Title/Identifying Number Number Amount July 1, 2015 Transfers (Cash Basis) Expenditures June 30, 2016 Subrecipents
U.S. Department of Agriculture
Direct programs
Farmers Market Promotion Program 10.168
15FMPPMI0088 $ 75,000 $ - $ - $ 3,094 $ 12,000 $ 8,906 $ -
U.S. Department of Housing and Urban Development
Direct programs
Community Development Block Grants/Entitlement Grants 14.218
B-14-MC-26-0026 897,025 308,564 (70,347) 238,217 - - -
B-15-MC-26-0026 895,410 - 70,347 844,419 825,063 50,991 3,339
Program Income 73,476 - - 73,476 73,476 - -
Total Community Development Block Grants/
Entitlement Grants 1,865,911 308,564 - 1,156,112 898,539 50,991 3,339
HOME Investment Partnerships Program 14.239
M-13-MC-26-0215 282,526 - - 27,452 27,452 - -
144
M-14-MC-26-0215 275,421 - - 164,236 164,236 - -
M-15-MC-26-0215 268,639 - - 57,662 61,937 4,275 -
Program Income 133,726 (75,798) - 47,291 133,726 10,637 -
Total HOME Investment Partnerships Program 960,312 (75,798) - - 296,641 387,351 14,912 -
Total U.S. Department of Housing and Urban Development 2,826,223 232,766 - 1,452,753 1,285,890 65,903 3,339
City of Muskegon
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS—Continued
For the year ended June 30, 2016
Accrued Cash or Accrued
Federal Program or (Unearned) Adjustments Payments In- Amount of (Unearned) Passed
Federal Grantor/Pass-Through Grantor/ CFDA Award Revenue and Kind Received Grant Revenue Through to
Program or Cluster Title/Identifying Number Number Amount July 1, 2015 Transfers (Cash Basis) Expenditures June 30, 2016 Subrecipents
U.S. Department of Justice
Direct programs
Bulletproof Vest Partnership Grant 16.607
2014 Grant $ 9,076 $ - $ - $ 1,264 $ 4,740 $ 3,476 $ -
Edward Byrne Memorial Justice Assistance Grant 16.738
Program
2015-DJ-BX-0773 43,531 - - 43,531 43,531 - -
Total direct programs 52,607 - - 44,795 48,271 3,476 -
Passed through Ottawa County
Edward Byrne Memorial Justice Assistance Grant 16.738
Program
2015-MU-BX-0964 12,250 - - 12,250 12,250 - -
145
Total U.S. Department of Justice 64,857 - - 57,045 60,521 3,476 -
U.S. Environmental Protection Agency
Direct programs
Great Lakes Program 64.469
00E01414 110,449 - - - 2,616 2,616 -
Brownfields Assessment and Cleanup 66.818
Cooperative Agreements
00E01538 400,000 - - - 30,117 30,117 -
.
Total U.S. Environmental Protection Agency 510,449 - - - 32,733 32,733 -
TOTAL FEDERAL ASSISTANCE $ 3,476,529 $ 232,766 $ - $ 1,512,892 $ 1,391,144 $ 111,018 $ 3,339
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, 2016
1. The accompanying Schedule of Expenditures of Federal Awards (the “schedule”) includes the federal award activity of the City under programs of the federal government for the year
ended June 30, 2016. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). 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 the Uniform Guidance, 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. The City is not using the ten-percent de minimis indirect cost rate as allowed under
the Uniform Guidance.
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's financial
statements for the year ended June 30, 2016 and federal expenditures per the Schedule of Expenditures of Federal Awards.
Federal revenues per City of Muskegon financial statements
General Fund $ 72,521
Major Street and Trunkline Fund 239,952
Other governmental funds 1,111,421
1,423,894
146
Plus program income 207,202
Less MDOT contracted projects as shown below (239,952)
Federal expenditures per the Schedule of Expenditures of Federal Awards $ 1,391,144
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, 2016 the federal aid
received and expended by the City of Muskegon was $239,952 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 1561(010) Fed Item HK 0325 Contract 15-5281 $ 239,532 $ 239,532
City of Muskegon
SCHEDULE OF FINDINGS AND RESPONSES
Year ended June 30, 2016
SECTION I—SUMMARY OF AUDITOR’S RESULTS
A. Financial Statements
1. Type of report the auditor issued on whether the financial statements audited were prepared in
accordance with GAAP: Unmodified
2. Internal control over financial reporting:
Material weakness(es) identified? yes X no
Significant deficiency(ies) identified? yes X none reported
3. Noncompliance material to financial statements noted? yes X no
B. Federal Awards
1. Internal control over major federal programs:
Material weakness(es) identified? yes X no
Significant deficiency(ies) identified? yes X none reported
2. Type of auditors' report issued on compliance for major federal programs: Unmodified
3. Any audit findings disclosed that are required to be reported in
accordance with 2 CFR 200.516(a)? 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
5. Dollar threshold used to distinguish between type A and type B programs: $750,000
6. Auditee qualified as low-risk auditee? X yes no
SECTION II – FINANCIAL STATEMENT FINDINGS
NONE
SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
NONE
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CLIENT DOCUMENTS
149
City of Muskegon
933 Terrace Street
Muskegon, MI 49440
Phone: (231) 724-6709
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS
December 5, 2016
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, 2015 dated October 29, 2015.
SECTION II – FINANCIAL STATEMENT FINDINGS
There were no findings in relation to the financial statement audit.
SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Finding 2015-001: Community Development Block Grants/Entitlement Grants – Time and Effort
Documentation Procedures
U.S. Department of Housing and Urban Development
Community Development Block Grants/Entitlement Grants
CFDA: 14.218
Award Numbers: B-13-MC-26-0026 and B-14-MC-26-0026
Award year ends: June 30, 2015
Specific Requirement: Allowable Costs/Cost Principles
Condition: During our detailed testing of the Community Development Block Grants/Entitlement Grants
time and effort documentation, we noted that adequate personnel activity reports were not prepared in
accordance with the federal requirements for all employees whose wages and benefits were charged to the
federal program. In addition, we noted that the City did not properly summarize personnel activity reports on
their reconciliations for all personnel activity reports.
Recommendation: The City should educate all employees working in federal programs of the requirements
for documenting time and effort under OMB Circular A-87, and the City should require appropriate time and
effort documentation and necessary reconciliations to be properly prepared and reviewed.
Current Status: The recommendation was implemented during the year ended June 30, 2016. No findings
were noted during the single audit for the year ended June 30, 2016.
Sincerely,
Derrick Smith
Finance Director
150
City of Muskegon
933 Terrace Street
Muskegon, MI 49440
Phone: (231) 724-6709
CORRECTIVE ACTION PLAN
December 5, 2016
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,
2016.
Name and address of independent public accounting firm:
Brickley DeLong, P.C.
P.O. Box 999
Muskegon, Michigan 49443
Audit period: June 30, 2016
The findings from the Schedule of Findings and Responses for the year ended June 30, 2016 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 findings in relation to the financial statement audit.
SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
There were no findings 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 Derrick
Smith at (231) 724-6709.
Sincerely,
Derrick Smith
Finance Director
151
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